AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 12, 1997
REGISTRATION NO. 333-_____
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
GALVESTON'S STEAKHOUSE CORP.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
5812
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
94-3248672
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
151 E. ALESSANDRO BOULEVARD
RIVERSIDE, CALIFORNIA 92508
(909) 789-7606
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES
AND PRINCIPAL PLACE OF BUSINESS)
---------------
RICHARD M. LEE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
GALVESTON'S STEAKHOUSE CORP.
151 E. ALESSANDRO BOULEVARD
RIVERSIDE, CALIFORNIA 92508
(909) 789-7606
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
---------------
COPIES TO:
HANK GRACIN, ESQ. DAVID N. FELDMAN, ESQ.
LEHMAN & EILEN LAW OFFICES OF DAVID N. FELDMAN
SUITE 505 SUITE 1201
50 CHARLES LINDBERGH BLVD. 36 W. 44TH STREET
UNIONDALE, NY 11553 NEW YORK, NEW YORK 10036
TELEPHONE: (516) 222-0888 TELEPHONE: (212) 869-7000
FACSIMILE: (516) 222-0948 FACSIMILE: (212) 997-4242
---------------
<PAGE>
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING
BOX AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER
EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. / /
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C) UNDER
THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER REGISTRATION STATEMENT FOR THE SAME
OFFERING. / /
IF THE DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE
434, PLEASE CHECK THE FOLLOWING BOX.
/ /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
Title of each class of Amount to be Proposed maximum offering Proposed maximum Amount of
securities to be registered registered price per share (1) aggregate offering price registration fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 1,725,000 shs.(2) $5.50 $9,487,500 $2,875.00
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value 245,000 shs. $5.50 $1,347,500 $ 408.33
- ------------------------------------------------------------------------------------------------------------------------------------
Underwriters' Warrants 150,000 wrts.(3) ----- ----- ------
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock Underlying
Underwriters' Warrants 150,000 shs. $6.60 $ 990,000 $ 300.00
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Total $3,583.33
====================================================================================================================================
<FN>
- ------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457.
(2) Includes 225,000 shares which may be purchased by the Underwriters to cover over-allotments, if any.
(3) To be issued for nominal consideration to the Underwriters.
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
EXPLANATORY NOTE
This Registration Statement covers the registration of (i) 1,500,000
shares, including shares to cover over-allotments, if any, of Common Stock,
$.01 par value per share ("Common Stock"), of Galveston's Steakhouse Corp., a
Delaware corporation (the "Company"), for sale by the Company in an
underwritten public offering; (ii) an additional 245,000 shares of Common
Stock for resale from time to time by the holders thereof, who acquired such
shares in the Company's prior private placements, subject to the contractual
restrictions that the holders may not sell, transfer, assign, pledge or
hypothecate their shares in any manner until one (1) year after the effective
date of this
ii
<PAGE>
Registration Statement, without the prior written consent of the Underwriters;
(iii) 150,000 shares of Common Stock held by two (2) existing stockholders who
are members of management of the Company, which together with 75,000 shares of
Common Stock to be issued by the Company, will be sold as part of the
Underwriters' over-allotment option, if the option is exercised (the
over-allotment option may only be exercised and the over-allotment shares sold
only if all 1,500,000 shares of Common Stock offered hereby are first sold);
(iv) for resale, warrants (the "Underwriters' Warrants"), exercisable to
purchase 150,000 shares of Common Stock at a price of 120% of the initial
public offering price of the Common Stock in the underwritten offering, to be
issued to the Underwriters in connection with the underwritten offering; and
(v) 150,000 shares of Common Stock underlying the Underwriters' Warrants. The
shares of Common Stock issued by the Company in its private placements being
registered hereby are referred to collectively as the "Selling Securityholders
Securities" and the holders thereof as the "Selling Securityholders."
The complete Prospectus relating to the underwritten offering follows
immediately after this Explanatory Note. Following the Prospectus for the
underwritten offering are pages of the Prospectus relating solely to the
Selling Securityholders Securities, including alternative front
and back cover pages and sections entitled "Concurrent Public Offering," "Plan
of Distribution," and "Selling Securityholders," to be used in lieu of the
sections entitled "Concurrent Offering" and "Underwriting" in the Prospectus
relating to the underwritten offering. Certain sections of the Prospectus for
the underwritten offering, such as "Use of Proceeds" and "Dilution," will not
be used in the Prospectus relating to the Selling Securityholder Securities.
iii
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRAION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 12, 1997
PROSPECTUS
1,500,000 SHARES
GALVESTON'S STEAKHOUSE CORP.
COMMON STOCK
($.01 PAR VALUE)
----------------
The 1,500,000 shares (the "Shares") of common stock, $.01 par value (the
"Common Stock"), of Galveston's Steakhouse Corp. (the "Company") offered
hereby are being sold by the Company.
It is currently anticipated that the initial public offering price of the
Shares will be approximately $5.50 per share. See "Underwriting" for information
regarding factors considered in determining the initial public offering price.
Prior to this offering (this "Offering"), there has been no public market for
the Common Stock and there can be no assurance that any significant trading
market will develop or be sustained. The Company intends to apply to have the
Shares approved for quotation on the Nasdaq SmallCap Market ("Nasdaq") under the
symbol "GALV".
The registration statement of which this Prospectus forms a part (the
"Registration Statement") also covers the offering for resale by certain
securityholders (the "Selling Securityholders") of up to 245,000 shares of
Common Stock (the "Selling Securityholders Securities"), 150,000 shares of
Common Stock held by two (2) stockholders who are members of management of the
Company, which, together with 75,000 shares of Common Stock to be issued by the
Company, will be sold as part of the Underwriters' over-allotment option, if
the option is exercised, 150,000 warrants (the "Underwriters' Warrants"),
exercisable to purchase 150,000 shares of Common Stock at a price of 120% of
the initial public offering price of the Common Stock, and the 150,000 shares
of Common Stock underlying the Underwriters' Warrants. The Selling
Securityholders have agreed not to transfer any of the Selling Securityholder
Securities until one (1) year from the effective date of the Registration
Statement of which this Prospectus forms a part, without the prior written
approval of the Underwriters. The Company will not receive any proceeds from
the sale of the Selling Securityholders Securities or over-allotment shares
held by the two (2) management stockholders. See "Concurrent Offering" and
"Underwriting."
---------------
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH DEGREE
OF RISK AND SUBSTANTIAL DILUTION. AN INVESTMENT IN THESE SECURITIES SHOULD BE
MADE ONLY BY INVESTORS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.
POTENTIAL PURCHASERS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER "RISK
FACTORS" BEGINNING ON PAGE 5 AND "DILUTION".
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Underwriting Proceeds to
Price to Discounts and Issuer or other
Public Commissions(1) persons(2)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $ $ $
- --------- --------- --------- --------
Total(3) $ $ $
--------- --------- --------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<FN>
(1) Does not include additional compensation to be received by the Underwriters
in the form of (i) a non-accountable expense allowance of 3% of the gross
proceeds of this Offering, or $ per share (for an aggregate amount of
$ , or $ if the over-allotment option described in note
<PAGE>
3 below is exercised in full); and (ii) Underwriters' warrants to purchase
150,000 shares of Common Stock to be sold to such Underwriters for nominal
consideration. In addition, the Company has agreed to indemnify the
Underwriters against certain liabilities under the Securities Act of 1933,
as amended (the "Securities Act"). See "Underwriting."
(2) Before deducting expenses of the Offering estimated at $
payable by the Company. See "Use of Proceeds" and "Underwriting."
(3) The Underwriters have been granted 30-day options to purchase up to 75,000
additional shares of Common Stock from the Company and 150,000 additional
shares from the two (2) stockholders of the Company, on the same terms
set forth above, solely to cover over-allotments, if any. If the Underwriters'
over-allotment option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company (exclusive of
the 150,000 shares to be sold by the two principal stockholders) will be $
, $ , $ and $ , respectively.
</TABLE>
---------------
The Shares are offered by the Underwriters on a "firm commitment" basis,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters and subject to the right of the Underwriters to reject any order
in whole or in part. It is expected that delivery of certificates representing
the Shares will be made at the offices of Nichols, Safina, Lerner & Co., Inc.,
800 Third Avenue, New York, New York 10022 on or about ,
1997.
---------------
NICHOLS, SAFINA, LERNER WILLIAM SCOTT
& CO., INC. & CO., L.L.C.
---------------
The date of this Prospectus is , 1997
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION NOT CONTAINED
HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO PURCHASE,
ANY OF THE SECURITIES OFFERED BY THIS PROSPECTUS, IN ANY JURISDICTION TO OR FROM
ANY PERSON TO OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OF
AN OFFER, IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE
ISSUANCE OR SALE OF ANY SECURITIES HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET
FORTH HEREIN SINCE THE DATE HEREOF.
THE INSIDE FRONT COVER OF THE PROSPECTUS CONTAINS____ PHOTOGRAPHS.
The Company currently is not a reporting company under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). As a result of the
offering made hereby, the Company will become subject to the periodic and other
informational requirements of the Exchange Act. The Company intends to
distribute to its stockholders Annual Reports containing audited financial
statements and may distribute quarterly reports as determined by the Board of
Directors of the Company. The Company's fiscal year ends December 31.
This Prospectus may be deemed to contain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). The Company desires to avail itself of certain "safe harbor"
provisions of the Reform Act and is therefore including this special note to
enable the Company to do so. Forward-looking statements in this Prospectus or
hereafter included in other publicly available documents filed with the
Commission, reports to the Company's stockholders and other publicly available
statements issued or released by the Company involve known and unknown risks,
uncertainties and other factors which could cause the Company's actual results,
performance (financial or operating) or achievements to differ from the future
results, performance (financial or operating) or achievements expressed or
implied by such forward-looking statements. Such future results are based upon
management's best estimates based upon current conditions and the most recent
results of operations. These risks include, but are not limited to, risks set
forth herein, each of which could adversely affect the Company's business and
the accuracy of the forward-looking statements contained herein.
---------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. IN CONNECTION WITH
THIS OFFERING, THE UNDERWRITERS AND SELLING GROUP MEMBERS (IF ANY) OR THEIR
RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE
COMMON STOCK ON NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE
SECURITIES EXCHANGE ACT OF 1934, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and financial
statements (including the notes thereto) appearing elsewhere in this Prospectus.
Investors should carefully consider the information set forth under the heading
"Risk Factors." Unless otherwise indicated the information presented in this
Prospectus assumes that the Underwriters' over-allotment option will not be
exercised.
THE COMPANY
The Company currently owns two (2) steakhouse restaurants and operates two
(2) others in Southern California, which together formerly comprised all of
the restaurants known as "Texas Loosey's(R) Chili Parlor & Saloon" ("Texas
Loosey's"). The Company first acquired two (2) Texas Loosey's restaurants
on August 19, 1996, and is in escrow on a December 30, 1996 agreement to
purchase the remaining two (2) Texas Loosey's restaurants. The Company
anticipates that escrow will close on these two restaurants in September 1997.
The closing of escrow is contingent upon the approval by the California
Alcoholic Beverage Control Board ("ABC") for the assumption of liquor licenses
and approval from the Small Business Administration ("SBA") for the Company to
assume the outstanding notes guaranteed by the SBA and currently in the name of
the sellers.
The Company has converted one of the owned Texas Loosey's restaurants into a
Galveston's(R) steakhouse restaurant reminiscent of the late 1950's and early
1960's, with popular rock 'n roll music from that period. Maps of Galveston
Island, Route 66 road signs, pictures of James Dean, wild beach saw grass and
other Galveston Island and Texas-style motifs decorate the restaurant's casual
setting. The Company's Galveston's restaurant offers high quality, reasonably
priced, mesquite- grilled steak, fresh fish, hamburgers, chicken and other
specialty items to a diverse clientele. The Company intends to convert its
other restaurants into Galveston's steakhouses in this same manner. After the
other three (3) existing restaurants are remodeled, the Company intends to
develop additional Galveston's Steakhouses and to identify and develop new
markets. The Company believes that the high quality, moderately priced segment
of the restaurant industry presents an opportunity for significant growth.
There can be no assurance given, however, that such growth will, in fact, be
achieved.
The Company was incorporated under the laws of the State of Delaware on June
3, 1996 under the name "Texas Loosey's Steakhouse & Saloon, Inc.". The Company
changed its name to "Galveston's Steakhouse Corp." on December 19, 1996. Its
executive offices are located at 151 E. Alessandro Boulevard, Riverside,
California 92508 and its telephone number is (909) 789-7606.
This Prospectus may be deemed to contain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). The Company desires to avail itself of certain "safe harbor"
provisions of the Reform Act and is therefore including this special note to
enable the Company to do so. Forward-looking statements in this Prospectus or
hereafter included in other publicly available documents filed with the
Commission, reports to the Company's stockholders and other publicly available
statements issued or released by the Company involve known and unknown risks,
uncertainties and other factors which could cause the Company's actual results,
performance (financial or operating) or achievements to differ from the future
results, performance (financial or operating) or achievements expressed or
implied by such forward-looking statements. Such future results are based upon
management's best estimates based upon current conditions and the most recent
results of operations. These risks include, but are not limited to, risks set
forth herein, each of which could adversely affect the Company's business and
the accuracy of the forward-looking statements contained herein.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company............................ 1,500,000 shares
Common Stock Outstanding Before the
Offering(1)(3)............................................... 1,818,685 shares
Common Stock to be Outstanding After the
Offering(2)(3)............................................... 3,318,685 shares
Proposed Nasdaq SmallCap Symbol................................ "GALV"
Use of Proceeds................................................ Open up six (6) to eight (8) additional Company-owned
restaurants, remodel three (3) of the Company's four (4)
existing restaurants (two of which are in escrow), repay
the notes payable to the Company's private placement bridge
financing investors, repay certain notes payable to the
sellers of the Texas Loosey's restaurants, repay other
notes payable, reduce accounts payable and accrued expenses,
and working capital and general corporate purposes.
Risk Factors................................................... The securities offered hereby involve a high degree of
risk and immediate and substantial dilution. Investors should
purchase the securities offered hereby only if they can afford
the loss of their entire investment. See "Risk Factors" and
"Dilution."
<FN>
- ----------
(1) Includes (i) 54,000 shares of Common Stock issued during the second
quarter 1997, related to the receipt of $225,000 in private placement
proceeds, (ii) 50,185 shares of Common Stock to be issued upon the
effective date of this Offering related to the conversion of $92,000
of convertible notes payable; and (iii) 22,500 shares of Common Stock
awarded to certain individuals.
(2) Includes 1,500,000 shares of Common Stock offered hereby.
(3) Excludes 1,000,000 outstanding shares of Series B Convertible
Preferred Stock held by Richard M. Lee which are convertible into
Common Stock, at the option of the holder, at a conversion price per
share equal to 150% of the initial public offering price of the
Company's Common Stock, upon the earlier of: (a) the date the
Company's net profits equal or exceed $3.5 million or (b) the date
which is eight (8) years from the closing date of this Offering.
See "Description of Securities."
</TABLE>
4
<PAGE>
SUMMARY OF FINANCIAL DATA
The following information is qualified by reference to, and should be read
in conjunction with, the financial statements and the notes thereto
and "Management's Discussion and Analysis or Plan Of Operation" contained
elsewhere in this Prospectus. The following information for the year ended
December 30, 1995 and the period from December 31, 1995 through August 18, 1996
were those under the ownership and operation of TLC Restaurant Management Corp.
("TLC"). The Company acquired and took over the operation of the two (2)
restaurants constituting the Texas Loosey's business from TLC effective August
19, 1996. The Company was incorporated on June 3, 1996. Also, in this
Prospectus are unaudited financial statements for the quarter ended March 31,
1997 of the Company, which have been prepared on the same basis as the audited
financial statements and in the opinion of management contain all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the information set forth therein. Interim financial information for TLC
as of and for the quarter ended March 31, 1996 has not been presented herein
because of the prohibitive costs and difficulties to obtain such information
and because the March 31, 1996 interim financial statement information would
not be comparable to the March 31, 1997 information due to the significant
amount of debt incurred by the Company to consummate the acquisition and due
to the significant purchase accounting adjustments that resulted therefrom.
STATEMENTS OF EARNINGS DATA:
<TABLE>
<CAPTION>
Unaudited
1996
Unaudited ---------- Unaudited
1995 1996 1996 Proforma 1997
---------- ---------------------------- ----------- Galveston's ------------
TLC TLC Galveston's Galveston's & TLC Galveston's
Income Year 12-31-95 6-3-96 & TLC Combined 1-1-97
Statement Ended to to Proforma Year Ended to
Caption 12-30-95 8-18-96 12-31-96 Adjustments 12-31-96 3-31-97
- ----------- ---------- ---------- --------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues $2,063,364 $1,096,262 $ 416,544 $ -- $ 1,512,806 $ 403,942
Restaurant Costs 2,166,209 1,144,538 542,963 40,585(1) 1,728,086 389,843
---------- ---------- --------- ---------- ----------- ---------
Operating Profit (Loss) (102,845) (48,276) (126,419) (40,585) (215,280) 14,099
---------- ---------- --------- ---------- ----------- ---------
Other Income/(Expenses):
Interest and financing
costs (11,605) (10,459) (271,373) (167,427)(2) (449,259) (134,810)
General & Administrative (408,179) (103,271) (136,467) -- (239,738) (80,342)
Pre-Opening & Start -Up
Costs -- -- (433,694) -- (433,694) --
Other 2,110 1,312 25,401 (47,667)(3) (20,954) (8,448)
---------- ---------- --------- ---------- ----------- ---------
(417,674) (112,418) (816,133) (215,094) (1,143,645) (223,600)
Net Loss $ (520,519) $(160,694) $(942,552) $ (255,679) $(1,358,925) $(209,501)
---------- ---------- --------- ---------- ----------- ---------
---------- ---------- --------- ---------- ----------- ---------
Net Loss per
Common Share $(52.05) $(16.07) $(0.64) $(0.86) $(0.43)
Weighted average number
of common shares
outstanding 10,000 10,000 1,480,330 1,588,000 483,167
</TABLE>
<TABLE>
<CAPTION>
GALVESTON'S
Galveston's March 31, 1997
December 31, 1996 ------------------------------------
Actual Actual As Adjusted (4)
BALANCE SHEET DATA -------------- ----------- ------------------
(unaudited)
<S> <C> <C> <C>
Working Capital $(1,533,104) $(1,697,554) $5,272,684
Total Assets 1,800,305 1,942,289 9,040,539
Long Term Debt 870,000 870,000 870,000
Notes Payable 1,469,972 1,813,852 1,941,864
Accumulated Deficit (942,552) (1,152,053) (1,380,603)
Stockholders' Equity (Deficit) (765,189) (933,098) 6,037,140
<FN>
Footnotes to Summary of Financial Data
1. The only pro forma adjustment to restaurant costs is related to depreciation
and amortization of fixed assets and leasehold improvements. Had the
Company recorded depreciation and amortization expense for a full 12 months,
additional expense in the amount of $40,585 would have been recognized.
2. The Company would have incurred an additional $167,427 in interest expense
if the debt that was raised at inception (June 3, 1996) through December 31,
1996 had been in existence for a full 12 months.
3. The only pro forma adjustment to other expenses is related to the
amortization of intangible assets. Had the Company recorded amortization
expense for a full 12 months, additional expense in the amount of $47,667
would have been recognized.
4. Gives effect to (i) net proceeds of $6,902,500 associated with the sale of
1,500,000 shares of the Company's common stock offered hereby, (ii) receipt
of $225,000 in private placement proceeds and the associated $29,250 in
financing costs, (iii) conversion of $92,000 in convertible notes payable
into shares of common stock and the related interest charge of $184,000
associated with this conversion and (iv) $15,300 compensation expense
associated with the grant of shares of the Company's Common Stock for
services rendered.
</TABLE>
5
<PAGE>
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH
DEGREE OF RISK AND SUBSTANTIAL DILUTION. AN INVESTMENT IN THESE SECURITIES
SHOULD BE MADE ONLY BY INVESTORS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. IN ADDITION TO THE FACTORS SET FORTH ELSEWHERE IN THIS PROSPECTUS,
PROSPECTIVE INVESTORS SHOULD GIVE CAREFUL CONSIDERATION TO THE FOLLOWING RISK
FACTORS IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE PURCHASING THE
SECURITIES OFFERED HEREBY.
THIS PROSPECTUS MAY BE DEEMED TO CONTAIN FORWARD-LOOKING STATEMENTS WITHIN
THE MEANING OF THE REFORM ACT. THE COMPANY DESIRES TO AVAIL ITSELF OF CERTAIN
"SAFE HARBOR" PROVISIONS OF THE REFORM ACT AND IS THEREFORE INCLUDING THIS
SPECIAL NOTE TO ENABLE THE COMPANY TO DO SO. FORWARD-LOOKING STATEMENTS IN THIS
PROSPECTUS OR HEREAFTER INCLUDED IN OTHER PUBLICLY AVAILABLE DOCUMENTS FILED
WITH THE COMMISSION, REPORTS TO THE COMPANY'S STOCKHOLDERS AND OTHER PUBLICLY
AVAILABLE STATEMENTS ISSUED OR RELEASED BY THE COMPANY INVOLVE KNOWN AND
UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE THE COMPANY'S
ACTUAL RESULTS, PERFORMANCE (FINANCIAL OR OPERATING) OR ACHIEVEMENTS TO DIFFER
FROM THE FUTURE RESULTS, PERFORMANCE (FINANCIAL OR OPERATING) OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FUTURE RESULTS
ARE BASED UPON MANAGEMENT'S BEST ESTIMATES BASED UPON CURRENT CONDITIONS AND
THE MOST RECENT RESULTS OF OPERATIONS. THESE RISKS INCLUDE, BUT ARE NOT LIMITED
TO, RISKS SET FORTH HEREIN, EACH OF WHICH COULD ADVERSELY AFFECT THE COMPANY'S
BUSINESS AND THE ACCURACY OF THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN.
GOING CONCERN UNCERTAINTY; NO HISTORY OF EARNINGS; ACCUMULATED DEFICIT;
WORKING CAPITAL DEFICIT AND STOCKHOLDERS' DEFICIT.
The Company has suffered substantial losses since inception. For the first
quarter of year 1997 ending March 31, 1997, the Company had a net loss of
$209,501. As of March 31, 1997, the Company's accumulated deficit totaled
$1,152,053. In addition, as of March 31, 1997, the Company had a working
capital deficit of $1,697,554. Moreover, as of March 31, 1997, the Company had
a stockholders' deficit of $933,098. The financial statements included in this
Prospectus have been prepared assuming that the Company will continue as a
going concern; however, the financial condition of the Company at December 31,
1996 and at the present time raises substantial doubt about the ability of the
Company to continue as a going concern. See "Report of Independent Public
Accountants". The ability of the Company to continue as a going concern is
dependent upon the Company's ability to raise sufficient capital to meet its
needs and its ability to achieve successful operations. There can be no
assurance that the Company will be successful in raising sufficient capital to
meet its needs and even if the Company does raise additional capital, there can
be no assurance that it will achieve successful operations. See "Risk Factors
- -- Business," "Risk Factors -- Proposed Expansion; Future Restaurant Capital
Financing Needs," "Business" and "Financial Statements."
LIMITED OPERATING HISTORY
The Company was organized on June 3, 1996, and, as such, has a limited
operating history on which investors may evaluate the Company's performance. In
general, the Company can provide no assurance of the success of its business
plan or management's strategies. See "Risk Factors -- Business." In view of its
lack of a significant operating history and inexperience, the Company remains
vulnerable to a variety of business risks generally associated with start-up
companies. The Company will be subject to numerous risks, expenses, problems
and difficulties typically encountered in establishing a new business. The
Company can provide no assurance that future operating results of existing
restaurants or those of future restaurants will be profitable. As stated above,
the Company has incurred substantial losses since inception. The Company
expects that it will continue to incur losses for approximately the next twelve
(12) months until the number of restaurants owned and operated by the Company
increase to between six (6) to eight (8) restaurants and, as such, are
sufficient to support its expenses. There can be no assurance, however, that
the Company will, in fact, be able to increase the number of restaurants owned
and operated by it within such time period. See "Risk Factors -- Restaurant
Industry and Competition," "Business -- Expansion," -- Marketing," and "--
Competition."
NEED FOR ADDITIONAL WORKING CAPITAL
The Company has incurred substantial operating losses since commencing
operations in June 1996. There can be no assurance if or when the Company will
achieve profitability. The Company anticipates that its capital resources,
including the net proceeds from this Offering, will be adequate to satisfy its
capital requirements for at least twelve (12) months following completion of the
Offering. There can be no assurance, however, that the Company's cash
requirements during this period will not exceed its available resources. See
"Use of Proceeds" and "Management's Discussion and Analysis or Plan of Operation
- -- Liquidity and Capital Resources." During the next twelve (12) months, the
Company intends to remodel three (3) of its existing restaurants and
expand through acquisition and enhancement of additional existing steakhouses,
which remodeling and expansion will require the expenditure of significant
working capital. The Company's future capital requirements will depend upon
many factors, including the Company's ability to operate its own stores
successfully, as well as market developments and cash flow from operations. In
the event that the net proceeds of this Offering and cash generated from
operations are insufficient to fund the Company's activities, the Company will
be required to raise additional funds through bank or other borrowings, or
equity or debt financings. There can be no assurance that additional financing,
if required, will be available at all or in amounts or on terms acceptable to
the Company. In addition, any equity financing could result in dilution to the
Company's existing stockholders. Failure to obtain additional working capital
in a timely manner or on acceptable terms could have a material adverse effect
on the Company, its operations, financial results and prospects. See
"Business," "Management's Discussion and Analysis or Plan of Operation --
Liquidity and Capital Resources" and the Financial Statements of the Company
included elsewhere herein.
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EFFECT OF POSSIBLE DEFAULT UNDER THE ASSET PURCHASE AGREEMENT.
Pursuant to an Asset Purchase Agreement (the "Asset Purchase Agreement")
with TLC, Better Business Security, Inc., River Diego Investment Corp. and
Ron Walton ("Walton") (collectively, the "TL Sellers"), on August 19, 1996,
the Company acquired two (2) restaurants known as "Texas Loosey's Chili
Parlor & Saloon" for a purchase price of $1.52 million, with the cash
portion of such purchase price being $275,000 and the remainder of such
purchase price being payable in the form of two promissory notes in the amounts
of $375,000 (the "First TL Note") and $870,000 (the "Second TL Note"),
respectively, secured by the assets acquired by the Company. The First TL Note
was originally due on the earlier of: February 19, 1997, being the date which
was six months following the closing date of the acquisition of the Texas
Loosey's restaurants (the "Six Month Date") or the date that the Company filed
a registration statement with the Commission for an initial public offering of
its securities. Pursuant to an Extension Agreement, dated March 24, 1997, the
due date for the First TL Note has since been extended to August 19, 1997. The
First TL Note bears interest at the rate of ten percent (10%) per annum from
August 19, 1996 through February 19, 1997 and at the rate of fifteen percent
(15%) per annum from February 19, 1997 through August 19, 1997. The Second TL
Note bears interest at the rate of eight percent (8%) per annum from August
19, 1996. Commencing February 19, 1997 interest only payments of $6,032
are due monthly for one year. Commencing February 19, 1998 through July 19,
2001, principal and interest payments of $10,978 are due monthly. The
remaining principal balance is due via a balloon payment on August 19, 2001.
See "Business -- Purchase of Texas Loosey's Restaurants."
As secured creditors, the TL Sellers would have the right to foreclose on
the assets of the Company comprising the two acquired restaurants if the
Company defaulted on the payment of either promissory note. The Company intends
to repay the First TL Note with the proceeds of this Offering. See "Use of
Proceeds."
BUSINESS
The Company's business plan and prospects are dependent upon, among other
things, the availability of suitable future restaurant sites, timely
development and construction of restaurants, the hiring of skilled management
and other personnel, the ability of the Company to successfully manage growth
(including monitoring its restaurants, controlling costs, and maintaining
effective quality controls), and the availability of adequate financing. The
Company has no significant experience in developing or operating restaurants or
effectuating restaurant expansion, and the lack of success or closing of any
restaurants developed or acquired by the Company (and in the case of the
closing of a restaurant, any continuing lease obligations or the resulting loss
of the Company's construction development costs), could have a material adverse
effect upon the Company. There can be no assurance that the Company will be
able to successfully implement its business plan or that unanticipated
expenses, problems or difficulties will not result in material delays in its
implementation. See "Business."
GOVERNMENT REGULATION
The Company's restaurant operations are subject to numerous national and
local, health, sanitation, employment, safety and franchising regulations and
standards, as well as local authorities and local zoning, building code and
land-use regulations. There can be no assurance that the Company will be able,
for financial reasons or otherwise, to comply with any laws or regulations or
that amendments to existing laws and regulations or new laws and regulations
will not be enacted in the future that could require the Company to alter
methods of operations in the future at costs that could be substantial. In
addition, each restaurant must obtain appropriate licenses from regulatory
authorities allowing it to sell liquor, beer and wine, and each restaurant has
food service licenses from local health authorities. Each restaurant's liquor
license must be renewed annually and may be revoked at any time for cause.
Failure to comply with any such laws or regulations, or the loss of the
Company's liquor licenses, or inability to obtain any of the same, would likely
have a material adverse effect on the Company. In California, there is a set
number of alcoholic beverage licenses available, but there is an active market
through which new licenses can be obtained at the then-applicable market price.
The failure to receive or retain, or a delay in obtaining, a liquor license in a
particular location could adversely affect the Company's ability to obtain such
a license elsewhere. See "Business -- Government Regulation."
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GEOGRAPHIC CONCENTRATION IN CALIFORNIA; RESTAURANT BASE
All of the four (4) existing restaurants owned and/or operated by the Company
are located in Southern California. Accordingly, the restaurants are susceptible
to fluctuations in their business caused by adverse economic or other conditions
in that region of the United States, including natural disasters or other acts
of God. California has only recently begun to recover from an economic
recession. Each restaurant represents a significant investment and long-term
commitment which limits the Company's ability to respond quickly or effectively
to changes in local competitive conditions or other changes that could affect
the Company's operations. In addition, the Company has a small number of
restaurants relative to its competitors. Consequently, a decline in the
profitability of an existing restaurant or the introduction of an unsuccessful
new restaurant could have a more significant effect on the combined
restaurants' results of operations than would be the case in a company with a
larger number of restaurants.
PROPOSED EXPANSION; FUTURE RESTAURANT CAPITAL FINANCING NEEDS
Although the Company intends to pursue a strategy of aggressive growth and
will seek to increase significantly the number of Company-owned restaurants, the
Company has limited experience in effectuating rapid restaurant expansion or in
managing a large number of restaurants or restaurants which are geographically
dispersed. The Company's proposed expansion may over-burden the Company's
personnel and financial resources. The Company's proposed expansion will depend
on, among other things, market acceptance for the Company's Galveston's
steakhouse concept, the availability at a reasonable cost of suitable
restaurant sites, timely development and construction of restaurants, the
hiring of skilled management and other personnel, the general ability to
successfully manage growth (including monitoring restaurants, controlling costs
and maintaining effective quality controls) and the availability of adequate
financing. There can be no assurance that the Company will be successful in its
proposed expansion. In view of the currently small restaurant base, the closing
of any single Company restaurant could have an adverse effect upon the Company.
The Company does not currently intend to expand its operations through the
sale of franchises. See "Business -- Expansion."
The Company's ability to achieve its expansion plans will depend on a
variety of factors, many of which may be beyond the Company's control,
including but not limited to the Company's ability to identify suitable
restaurant sites, negotiate acceptable lease or purchase terms, obtain required
governmental approvals, construct new restaurants in a timely manner, attract,
train and retain qualified and experienced personnel and management, operate
its restaurants profitably and obtain additional capital, as well as the
general economic conditions and degree of competition in the particular region
of expansion. The Company may experience delays in restaurant openings,
including delays caused by the remodeling of acquired restaurants, which may
result in lost revenues during periods of restaurant closures. The
Company will incur substantial costs in opening each new Company-owned
restaurant, and new restaurants experience fluctuating operational levels for
some time after opening. Should the Company's results of operations or its rate
of growth fail to be adequate to finance expansion or should costs of capital
expenditures rise, the Company may not have the ability to open new restaurants
at its desired pace or at all, and could be required to seek additional
financing in the future. There can be no assurance that the Company will be
able to raise such capital when needed on satisfactory terms or at all. In
addition, there can be no assurance that the Company will successfully expand
or that the Company's existing or new restaurants will be profitable. The
Company expects to encounter intense competition for restaurant sites, and may
have difficulty buying or leasing desirable sites on terms that are acceptable
to the Company. In many cases, the Company's competitors may be willing and
able to pay more than the Company for sites. The Company expects these
difficulties with regard to obtaining desirable sites to continue for the
foreseeable future. See "-- Restaurant Industry and Competition," "Use of
Proceeds," "Business -- Expansion Strategy," and "-- Competition."
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RESTAURANT INDUSTRY AND COMPETITION
The restaurant industry is highly competitive. Key competitive factors in the
industry include the quality and value of the food products offered, quality of
service, price, dining experience, restaurant locations and the ambiance of
facilities. The Company's competitors include various mid-price, full-service
casual dining restaurants. The Company will compete with national and regional
chains, as well as individually owned restaurants. The number of steakhouse
restaurants with operations generally similar to the concept planned by
the Company has grown substantially in the last several years, and the Company
believes competition among such restaurants is increasing. As the Company's
competitors expand operations in various geographic areas, competition,
including competition among steakhouse restaurants with concepts similar to the
Company's, can be expected to intensify. Such increased competition could
increase the Company's operating costs or adversely affect its revenues. Many of
the Company's competitors have been in existence longer than the Company, have a
more established market presence and have substantially greater financial,
marketing and other resources than the Company, which may give them certain
competitive advantages. The restaurant industry is affected by changes in
consumer tastes, national, regional and local economic conditions and
demographic trends. The Company's success will be dependent on acceptance of the
"Galveston's" concept. Consumer trends can shift rapidly. There can be no
assurance that the Company's restaurants will match trends in consumer tastes.
The performance of individual restaurants may be affected by factors such as
traffic patterns, demographic considerations and the type, number and location
of competing restaurants. Changes in economic conditions affecting the Company's
future customers could reduce traffic in some or all of the Company's
restaurants or impose practical limits on pricing, either of which could have a
material adverse effect on the profitability of the Company. In addition, the
restaurant industry has few non-economic barriers to entry. There can be no
assurance that third parties will not be able to successfully imitate and
implement the Company's concept. See "Business."
COST SENSITIVITY
The Company's profitability is highly sensitive to increases in food, labor
and other operating costs. The Company's restaurants' dependence on frequent
deliveries of fresh food supplies subject them to the risk that shortages or
interruptions in supply caused by adverse weather or other conditions could
materially and adversely affect the availability, quality and cost of
ingredients. In addition, unfavorable trends or developments concerning factors
such as inflation, food, labor and employee benefit costs (including increases
in hourly wage and minimum unemployment tax rates), rent increases resulting
from the rent escalation provisions in the various restaurants' leases, and the
availability of experienced management and hourly employees may also adversely
affect the Company. The Company believes recent favorable inflation rates and
part-time labor supplies in its principal market area have contributed to
relatively stable food and labor costs in recent years. However, there can be no
assurance that these conditions will continue or that the Company will have the
ability to control costs in the future. See "Business."
CONTROL BY PRINCIPAL STOCKHOLDERS
Prior to the Offering, the management of the Company beneficially owned
50.0% of the outstanding shares of Common Stock of the Company and 67.7% of the
combined stockholder voting power of the Company, including all 1,000,000
outstanding shares of the Company's Series B Convertible Preferred Stock, which
carries rights to vote with the Common Stock as one class on a one
vote-per-share basis. After the Offering, such management will beneficially own
27.4% of the outstanding shares of Common Stock of the Company and 44.2% of the
combined stockholder voting power of the Company. Accordingly, after the
Offering, management will continue to have control over the outcome of all
matters submitted to the stockholders for approval, including the election of
the Company's board of directors. As a result, the stockholders of the Company
possess little practical ability to remove management or effect the operations
or business of the Company. See "Principal Stockholders" and "Description
of Securities."
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NO DIVIDENDS ON COMMON STOCK
The Company has never paid any dividends on its Common Stock and does not
expect to declare or pay any cash dividends for the foreseeable future. It is
anticipated that earnings, if any, will be used in the Company's operations and
to finance the expansion of its business. See "Dividend Policy" and
"Management's Discussion, Analysis or Plan of Operation -- Liquidity and Capital
Resources" and "Business -- Plan of Operations."
DEPENDENCE UPON KEY AND OTHER PERSONNEL
The success of the Company will be largely dependent on the efforts of certain
key personnel of the Company, including Richard M. Lee, its Chairman and Chief
Executive Officer and Hiram J. Woo, its President, Secretary and Chief
Financial Officer. On June 3, 1996, the Company entered into a three-year
employment contract with each of Messrs. Lee and Woo. See "Certain Transactions
- -- Employment Agreements." The loss of the services of either of Mr. Lee or Mr.
Woo would have a material adverse effect on the Company, and the Company does
not maintain any key-man life insurance. Additionally, in order to implement
its business plan, the Company will be dependent upon its ability to hire
experienced financial, marketing, and restaurant management personnel. There
can be no assurance that the Company will be able to hire additional
experienced personnel. The inability to hire and retain additional experienced
personnel could have a material adverse effect on the Company. The Company will
also be dependent on its ability to hire and train restaurant managers and
hourly employees from the local labor pool who are able to operate the
Company's restaurants in conformity with the required standards of service and
efficiency. The unavailability of an adequate number of qualified local
managers and hourly employees could have an adverse effect on the Company. See
"Business -- Restaurant Operations and Management" and "Management --
Employment Agreements."
BENEFITS TO RELATED PARTIES
A portion of the proceeds of this Offering may be used to pay the salaries of
the Company's executive officers and directors' fees, to the extent that cash
flow, if any, is not sufficient to fund these expenses. See "Management --
Employment Agreements" and "Principal Stockholders." In addition, 150,000 shares
of Common Stock held by two (2) existing stockholders who are members of
management of the Company, together with 75,000 shares of Common Stock to be
issued by the Company, will be sold as part of the Underwriters' over-allotment
option, if the option is exercised. See "Underwriting."
AUTHORIZATION OF PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of
5,000,000 shares of "blank check" preferred stock with such designation, rights
and preferences as may be determined from time to time by the Board of
Directors. Accordingly, the Board of Directors is empowered, without
stockholder approval, to issue preferred stock with dividend, liquidation,
conversion, voting or other rights that could adversely affect the voting power
or other rights of the holders of the Common Stock. As of the date of this
Prospectus, 1,000,000 shares of Series B Convertible Preferred Stock of the
Company (the "Series B Preferred") are outstanding, all of which are owned by
Richard M. Lee, the Company's Chairman and Chief Executive Officer. The Series
B Preferred carries voting rights along with the Common Stock on a
one-vote-per-share basis. The preferred stock can be utilized, under certain
circumstances, as a method of discouraging, delaying, or preventing a change in
control of the Company. See "Description of Securities -- Preferred Stock."
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding an
aggregate of 3,318,685 shares of Common Stock, which includes the 1,500,000
shares offered hereby. See "Underwriting." Upon completion of the Offering, the
1,500,000 shares issued in the Offering will be freely transferable without
restriction under the Securities Act (excluding any Shares purchased in the
Offering by any person who is or thereby becomes an "affiliate" of the
Company). All of the 1,818,685 shares of Common Stock outstanding immediately
prior to the Offering were issued without registration under the Securities
Act and are "restricted securities" as that term is defined in Rule 144
under the Securities Act.
Of the 1,818,685 shares of Common Stock outstanding immediately prior to the
Offering, 245,000 shares (the "Selling Securityholders Securities") are being
registered for resale pursuant to the Registration Statement of which this
Prospectus forms a part. So long as such shares remain subject to an effective
registration statement, and following any sale pursuant thereto, such shares
will be freely transferable without restriction under the Securities Act
(subject to the contractual restrictions that the holders thereof may not sell,
transfer, assign, pledge or hypothecate their shares until one (1) year after
the effective date of the Registration Statement of which this Prospectus forms
a part) without the prior written consent of the Underwriters. See
"Underwriting" and "Concurrent Offering." The remaining 1,573,685 shares of
Common Stock outstanding prior to this Offering are "restricted securities."
Messrs. Lee and Woo have agreed not to sell, transfer, assign, pledge or
hypothecate any securities of the Company owned by them until two (2) years
after the effective date of the Registration Statement of which this Prospectus
forms a part, without the prior written consent of the Underwriters.
The Company is unable to predict the effect that sales of the Selling
Securityholders Securities, the Underwriter's Warrants or the shares underlying
such Underwriters' Warrants or sales under Rule 144 may have on the then
prevailing market price of the Common Stock, but such sales may have a
substantial depressing effect on such market price. The 1,573,685 shares of
Common Stock that will be "restricted securities" immediately subsequent to the
Offering will become eligible for sale at various times beginning 90 days after
the date of this Prospectus. See "Shares Eligible for Future Sale."
NO PRIOR PUBLIC MARKET FOR THE COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this Offering there has been no public market for the Company's
Common Stock and there can be no assurance that an active public trading market
for the Company's Common Stock will develop or be sustained. The absence of an
active trading market would adversely affect the liquidity of the Common Stock
and, consequently purchasers of Shares in the Offering could experience
substantial difficulty in selling these securities. The initial public offering
price has been determined by negotiation between the Company and the
Underwriters and may not bear any relationship to the market price for the
Common Stock subsequent to the Offering. See "-- Arbitrary Offering Price" and
"Underwriting." In addition, the trading price for the Common Stock may be
highly volatile and could be subject to significant fluctuations in response to
variations in the Company's quarterly operating results, general conditions in
the food service industry or the general economy, and other factors. In
addition, the stock market is subject to price and volume fluctuations
affecting the market price for public companies generally, or within broad
industry groups, which fluctuations may be unrelated to the operating results
or other circumstances of a particular company. Such fluctuations may adversely
affect the liquidity of the Common Stock, as well as the price that holders may
achieve for their shares upon any future sale.
UNDERWRITERS' INFLUENCE ON THE MARKET
A significant number of shares of Common Stock offered hereby may be sold to
customers of the Underwriters. Such customers subsequently may engage in
transactions for the sale or purchase of such securities through or with the
Underwriters. Although they have no obligation to do so, the Underwriters
intend to make a market in the Common Stock and may otherwise effect
transactions in such securities. If they participate in such market, the
Underwriters may exert a dominating influence on the market, if one develops,
for the Common Stock. Such market-making activity may be discontinued at any
time. Moreover, if the Underwriters exercise the Underwriters' Warrants, they
may be required under the Exchange Act to temporarily suspend market-making
activities. The price and liquidity of the Common Stock may be significantly
affected by the degree, if any, of the Underwriters' participation in such
market. See "UNDERWRITING."
CONTINUED NASDAQ LISTING; POTENTIAL ADVERSE EFFECTS OF DELISTING
While the Company's Common Stock meets the current Nasdaq listing requirements
and expected to be initially included on Nasdaq, there can be no assurance that
the Company will meet the criteria for continued listing. Continued inclusion on
Nasdaq generally requires that (i) the Company maintain at least $2,000,000 in
total assets and $1,000,000 in capital and surplus, (ii) the minimum bid price
of the Common Stock be $1.00 per share, (iii) there be at least 200,000 shares
in the public float valued at $1,000,000 or more, (iv) the Common Stock have at
least two active market makers and (v) the Common Stock be held by at least 400
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holders. If the Company is unable to satisfy Nasdaq's maintenance requirements,
its Common Stock may be delisted from Nasdaq. In addition, Nasdaq has the right
to review and reverse a decision to list a security on the Nasdaq SmallCap
Market before or after the completion of an offering. In the event of any such
delisting, trading, if any, in the Common Stock would thereafter be conducted
in the over-the-counter market in the so-called "pink sheets" or the
"Electronic Bulletin Board" of the National Association of Securities Dealers,
Inc. ("NASD") and it could be more difficult to obtain quotations of the market
price of the Company's Common Stock. Consequently, the liquidity of the
Company's Common Stock could be impaired, not only in the number of securities
which could be bought and sold, but also through delays in the timing of
transactions, reduction in security analysts' and the news media's coverage of
the Company.
The Nasdaq Stock Market, Inc. has proposed a rule change which, if adopted,
would impose substantially more stringent criteria for the initial and
continued listing of securities on The Nasdaq SmallCap Market. The proposed new
rules provide that, for initial listing on The Nasdaq SmallCap Market, a
company would need to have, among other things, (i) either net tangible assets
(i.e., net of goodwill) of $4,000,000, a market capitalization of $50,000,000
or net income for two of the last three fiscal years of $750,000, (ii) a
minimum market value of public float of $5,000,000, (iii) a minimum bid price
of $4 per share, and (iv) either one year of operating history or a market
capitalization of $50,000,000. The Company believes that it meets the
requirements for initial listing under this proposal. For continued listing on
The Nasdaq SmallCap Market, a company would need to have, among other things,
(i) either net tangible assets of $2,000,000, a market capitalization of
$35,000,000, or net income for two of the last three fiscal years of $500,000
and (ii) a minimum market value of public float of $1,000,000. Additionally,
for both initial listing and continued listing on The Nasdaq SmallCap market,
companies would be required to have at least two independent directors, and an
Audit Committee, a majority of the members of which would need to be
independent directors.
If the Company's Common Stock were delisted from Nasdaq, it could become
subject to Rule 15g-9 under the Exchange Act, which imposes additional sales
practice requirements on broker-dealers that sell such Common Stock to persons
other than established customers and "accredited investors" (generally,
individuals with a net worth in excess of $1,000,000 or annual incomes exceeding
$200,000 or $300,000 together with their spouses). For transactions covered by
such a rule, a broker-dealer must make a special suitability determination for
the purchaser and have received the purchaser's written consent to the
transaction prior to sale. Consequently, such rule may adversely affect the
ability of broker-dealers to sell the Company's Common Stock and may adversely
affect the ability of purchasers in the Offering to sell in the secondary market
any of the Common Stock acquired.
Commission regulations define a "penny stock" to be any non-Nasdaq equity
security that has a market price (as therein defined) of less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, the
rules require delivery, prior to any transaction in a penny stock, of a
disclosure schedule prepared by the Commission relating to the penny stock
market. Disclosure is also required to be made about commissions payable to both
the broker-dealer and the registered representative and current quotations for
the securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stocks.
The foregoing required penny stock restrictions will not apply to the
Company's Common Stock if the Common Stock is listed on Nasdaq and has certain
price and volume information provided on a current and continuing basis or
meets certain minimum net tangible assets or average revenue criteria. There
can be no assurance that the Company's Common Stock will qualify for exemption
from these restrictions. In any event, even if the Company's Common Stock was
exempt from such restrictions, it would remain subject to Section 15(b)(6) of
the Exchange Act, which gives the Commission the authority to prohibit any
person that is engaged in unlawful conduct while participating in a
distribution of a penny stock from associating with a broker-dealer or
participating in a distribution of a penny stock, if the Commission finds that
such a restriction would be in the public interest. If the Company's Common
Stock were subject to the rules on penny stocks, the market liquidity for the
Company's Common Stock could be severely adversely affected.
SUBSTANTIAL DILUTION; DISPROPORTIONATE RISK OF LOSS
Based on the anticipated initial public offering price of $5.50 per share,
purchasers of the Shares offered hereby will incur immediate dilution in the net
tangible book value from the Offering price of $3.93 per share. The Company's
current stockholders acquired their equity investments at an average per share
cost substantially less than the initial public offering price. Accordingly,
purchasers in the Offering will bear a disproportionate portion of losses
incurred by the Company in the future. See "Dilution."
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ARBITRARY OFFERING PRICE
The initial public offering price of the Common Stock has been determined by
negotiation between the Company and the Underwriters. See "Underwriting." Such
price will not necessarily relate to the Company's asset value, earnings, net
worth, financial condition or any other established criteria of value and should
not be regarded as an indication of the actual value or future market price of
the Common Stock.
DISCRETION IN USE OF PROCEEDS DESIGNATED FOR WORKING CAPITAL
The Company will have broad discretion with respect to the application of
approximately $850,000 or 12.3%, of the net proceeds of this Offering. While
such funds are to be applied for working capital and general corporate purposes
in furtherance of the Company's business, investors will be reliant on
management as to the specific application of these amounts. See "Use of
Proceeds."
DILUTION
At March 31, 1997 the Company had a negative net tangible book value of
$1,894,132 or approximately ($1.12) per share. The pro forma negative net
tangible book value of the Company as of March 31, 1997 was $1,826,394 or
approximately ($1.00) per share, assuming (i) that the conversion of $92,000 of
convertible notes payable (and issuance of 50,185 shares of the Company's
Common Stock), which will occur on the effective date of this Offering and (ii)
the issuance of additional debt in the amount of $225,000 in connection with a
private placement (and related issuance of 54,000 shares of the Company's
Common Stock), which occurred subsequent to March 31, 1997, and (iii)
the issuance of 22,500 shares of the Company's Common Stock awarded by grant
to certain individuals, which occurred subsequent to March 31, 1997, had
occurred as of that date. "Net tangible book value" per share is equal to
the tangible assets of the Company, reduced by total liabilities, divided
by the number of shares of Common Stock outstanding. Assuming the sale
by the Company of the 1,500,000 shares of Common Stock offered hereby
(less underwriting discounts and offering expenses, but before application
of the net proceeds therefrom), the pro forma net tangible book value of
the Company at such date would have been approximately $5,076,106 or
$1.53 per share. This represents an immediate increase in net tangible
book value per share of $2.53 to existing owners of the Common Stock
and an immediate dilution in net tangible book value per share
of $3.97 to purchasers of Common Stock in this Offering.
<TABLE>
<CAPTION>
The following table illustrates this per share dilution:
<S> <C> <C>
Initial public offering price........................................... $ 5.50
Pro forma net tangible book value per share before offering............. $(1.00)
Increase in net tangible book value per share attributable
to new investors...................................................... $ 2.53
------
Pro forma net tangible book value per share after offering.............. $ 1.53
------
Dilution to new investors............................................... $ 3.97
------
------
</TABLE>
The following table summarizes, as of March 31, 1997, the difference between
the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per common share paid by the existing
stockholders and the price per common share paid by the new investors (before
deducting the underwriting discounts and estimated offering expenses):
<TABLE>
<CAPTION>
Average
Shares Purchased Total Consideration Price Per
-------------------- -------------------- ---------
Number Percent Amount Percent Share
------- ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Present stockholders (1)................ 1,768,500 53.3% $ 222,943 2.6% .13
Exercise of convertible debt............ 50,185 1.5% 92,000 1.1% $1.83
Purchasers of shares in this Offering... 1,500,000 45.2% $8,250,000 96.3% $5.50
Total........................ 3,318,685 100.0% $8,564,943 100%
<FN>
(1) Includes (i) 54,000 shares of common stock issued during the second quarter 1997, related to receipt
of $225,000 in private placement proceeds and (ii) 22,500 shares of common stock awarded via grant
to certain individuals.
</TABLE>
13
<PAGE>
USE OF PROCEEDS
The Company intends to apply the net proceeds from this Offering, estimated
to be $6,902,500 ($7,261,375 if the Underwriters' over-allotment option is
exercised in full), to open six (6) to eight (8) additional Company-owned
restaurants ($3,652,500), remodel three (3) of the Company's four (4) existing
restaurants ($300,000), repay the notes payable to the Company's private
placement bridge financing investors due upon consummation of this Offering
bearing interest at eight percent (8%) per annum ($1,500,000), repay certain
notes payable to the sellers of the Texas Loosey's restaurants due upon
consummation of this Offering bearing interest at eleven percent (11%) per
annum ($375,000), repay other notes payable ($122,000) due upon consummation
of this Offering, of which $25,000 bears interest at eight percent (8%) per
annum, $37,000 bears interest at ten percent (10% per annum, and $60,000 bears
interest at fourteen percent (14%) per annum, reduce accrued interest expense
($103,000), and for working capital and general corporate purposes ($850,000).
The proceeds from the Company's various notes payable were used by the Company
to acquire, enhance and operate its restaurants. See "Description of
Securities."
The Company anticipates, based on current plans and assumptions relating to
its operations, that the proceeds of this Offering, together with existing
resources and cash generated from operations will be sufficient to satisfy the
Company's contemplated cash requirements for at least the 12-month period
subsequent to completion of the Offering. There can be no assurance, however,
that the Company's cash requirements during this period will not exceed its
available resources. See "Risk Factors -- Need for Additional Working Capital."
The allocation of the net proceeds of this Offering set forth above
represents the Company's best estimates based upon its current plans and certain
assumptions regarding industry and general economic conditions and the Company's
future revenues and expenditures. If any of these factors changes, the Company
may find it necessary or advisable to reallocate some of the proceeds within the
above-described categories or to use a portion thereof for other purposes. See
"Risk Factors -- Discretion in Use of Proceeds Designated for Working Capital."
Proceeds not immediately required for the purposes described above will be
invested in short-term United States government securities, short-term bank
certificates of deposit, money market funds or other investment grade
short-term, interest bearing instruments.
Any additional proceeds received upon exercise of the Underwriters'
over-allotment option will be added to working capital. There can be no
assurance that the Underwriters' over-allotment option will be exercised. The
Company will not derive any proceeds from sales of the Selling Securityholders
Securities or the sale of 150,000 shares of Common Stock in the over-allotment
option by two stockholders who are members of management. See "Concurrent
Offering."
14
<PAGE>
CAPITALIZATION
The following table sets forth the actual capitalization of the Company at
March 31, 1997, as adjusted to give effect to the sale of the Common Stock
offered hereby, and application of the net proceeds of the Offering as set
forth at "Use of Proceeds", exercise of $92,000 of convertible notes payable,
receipt of $225,000 in private placement proceeds and issuance of common stock
therefrom, and shares of common stock awarded via grant to certain individuals.
This table should be read in conjunction with the Financial Statements and the
Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
March 31, 1997
----------------------------
Actual As Adjusted(1)
(unaudited)
<S> <C> <C>
Long-term debt . .................................... $ 870,000 $ 870,000
Preferred Stock, $.001 par value, 5,000,000 shares
authorized; Series B Convertible Preferred Stock,
1,000,000 shares issued and outstanding (actual
and as adjusted) .................................... $ 1,000 $ 1,000
Common Stock, $.01 par value, 10,000,000 shares
authorized, 1,692,000 shares issued and outstanding,
actual: 3,318,685 shares outstanding, as
adjusted (1)(2)...................................... $ 16,920 $ 33,187
Paid-in capital ..................................... $ 201,035 $ 7,383,556
Retained earnings (deficit) (3)...................... $(1,152,053) $(1,380,603)
Total common stock, non-redeemable preferred
stock and other stockholders' equity (deficit)....... $ (933,098) $ 6,037,140
Total capitalization............................ $ (63,098) $ 6,907,140
----------- -----------
----------- -----------
<FN>
- -------------------
(1) Gives effect to the sale of 1,500,000 shares of Common Stock in this
Offering, net of expenses, and the application of the estimated net proceeds
therefrom.
(2) Includes (i) 54,000 shares of common stock issued during the second quarter
1997, related to receipt of $225,000 in private placement proceeds
(ii) 50,185 shares of common stock to be issued upon the effective date of this
Offering related to the conversion of $92,000 of convertible notes payable and
(iii) 22,500 shares of common stock awarded via grant to certain individuals.
(3) Includes expense charges of (i) $184,000 of interest related to
conversion of $92,000 of convertible notes payable (ii) $29,250 in financing
commissions related to receipt of $225,000 in private placement proceeds and
(iii) $15,300 of compensation expense for Common Stock awarded via grant to
certain individuals.
</TABLE>
DIVIDEND POLICY
The Company has not paid any cash or other dividends on its Common Stock
since its inception and does not anticipate paying any such dividends in the
foreseeable future. The Company intends to retain any earnings for use in the
Company's operations and to finance the expansion of its business. See "Risk
Factors - No Dividends."
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED
ELSEWHERE IN THIS PROSPECTUS. THE DISCUSSION OF RESULTS, CAUSES AND TRENDS
SHOULD NOT BE CONSTRUED TO IMPLY ANY CONCLUSION THAT SUCH RESULTS OR TRENDS WILL
NECESSARILY CONTINUE IN THE FUTURE.
OVERVIEW
The Company currently owns and operates two (2) steakhouse restaurants in
Southern California and manages two others that are in escrow to be purchased,
which together formerly comprised all of the restaurants known as
"Texas Loosey's Chili Parlor & Saloon." The Company first acquired two (2)
Texas Loosey's restaurants on August 19, 1996, and has entered escrow on
December 30, 1996 to purchase the remaining two (2) Texas Loosey's
restaurants. The Company anticipates that escrow will close on these two
restaurants in September 1997. The closing of escrow is contingent upon the
approval by the ABC for the assumption of liquor licenses and approval from the
SBA for the Company to assume the outstanding notes guaranteed by the SBA and
currently in the name of the sellers.
The Company has converted one of the owned Texas Loosey's restaurants into a
Galveston's steakhouse restaurant reminiscent of the late 1950's and early
1960's, with popular rock 'n roll music from that period. The Company's
Galveston's restaurant offers high quality, reasonably priced, mesquite-grilled
steak, fresh fish, hamburgers, chicken and other specialty items to a diverse
clientele. The Company intends to convert its other restaurants into
Galveston's steakhouses in this same manner. After the other three (3)
existing restaurants are remodeled, the Company intends to develop additional
Galveston's steakhouses and to identify and develop new markets.
The Company believes that the high quality, moderately priced segment of
the restaurant industry presents an opportunity for significant growth. There
can be no assurance given, however, that such growth will, in fact, be
achieved.
Set forth below is certain selected historical operating results
for the fiscal year ended December 30, 1995 and for the period from
December 31, 1995 through August 18, 1996 for TLC Restaurant Management Corp.
(the prior owner of the first two (2) Texas Loosey's restaurants acquired by the
Company) ("TLC") and operating results for the Company from inception (June 3,
1996) through December 31, 1996 and for the quarter ended March 31, 1997. Prior
to the Company's August 19, 1996 acquisition of these two (2) restaurants, the
restaurants experienced a substantial decline in revenues. The Company believes
that this decline in revenues was largely attributable to the absentee
management of the restaurants during the months preceding their acquisition.
The prior owner ceased, among other things, all advertising for the
restaurants and generally allowed the restaurants to operate with limited
supervision, funds or direction. As a result, patronage at the restaurants
naturally declined. It should be noted, however, that the Company's business
concept is not to replicate or resuscitate the Texas Loosey's theme but rather
to convert these acquired restaurants into Galveston's steakhouse restaurants.
A second contributing factor to the decline in revenues for this period was a
fire which occurred at one of the restaurant units shortly after the August 19,
1996 acquisition date, closing the restaurant for a period of three (3) months,
and resulting in a loss of revenues for that period.
RESULTS OF OPERATIONS
The following table sets forth certain selected historical operating
results for the fiscal year ended December 30, 1995, and for the period
from December 31, 1995 through August 18, 1996 for TLC operating results
for the Company from inception (June 3, 1996) through December 31, 1996
and for the quarter ended March 31, 1997 as a percentage of revenues.
<TABLE>
<CAPTION>
STATEMENTS OF EARNINGS DATA (on a % basis):
Unaudited
1995 1996 1997
---------------------- ---------------------------------------------------- -------------------------
TLC TLC TLC TLC Galveston's Galveston's Galveston's Galveston's
Income Year Year 12/31/95 12/31/95 6/3/96 6/3/96 1/1/97 1/1/97
Statement Ended Ended to to to to to to
Caption 12/30/95 12/30/95 8/18/96 8/18/96 12/31/96 12/31/96 3/31/97 3/31/97
- ------------ ---------- -------- ---------- -------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $2,063,364 100.0% $1,096,262 100.0% $ 416,544 100.0% $ 403,942 100.0%
Restaurant Costs 2,166,209 105.0% 1,144,538 104.4% 542,963 130.3% 389,843 96.5%
---------- ------ ---------- ------ --------- ------ --------- ------
Operating Profit
(Loss) (102,845) (5.0%) (48,276) (4.4%) (126,419) (30.3%) 14,099 3.5%
---------- ------ ---------- ------ --------- ------ --------- ------
Other Income/
(Expenses):
Interest and
Financing Costs (11,605) (0.6%) (10,459) (1.0%) (271,373) (65.1%) (134,810) (33.4%)
General &
Administrative (408,179) (19.8%) (103,271) (9.4%) (136,467) (32.8%) (80,342) (19.9%)
Pre-Opening &
Start -Up
Costs -- -- -- -- (433,694) (104.1%) -- --
Other 2,110 0.1% 1,312 0.1% 25,401 6.1% (8,448) (2.1%)
---------- ------ ---------- ------ --------- ------ --------- ------
(417,674) (20.3%) (112,418) (10.3%) (816,133) (195.9%) (223,600) (55.4%)
Net Loss (520,519) (25.3%) (160,694) (14.7%) (942,552) (226.2%) (209,501) (51.9%)
========== ====== ========== ====== ========= ====== ========= ======
</TABLE>
16
<PAGE>
YEAR ENDED DECEMBER 30, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1996
REVENUES
The Company acquired its first two (2) Texas Loosey's restaurants on August
19, 1996. Gross revenues for these restaurants for the fiscal period beginning
on January 1, 1996 (i.e, pre-dating the Company's acquisition) and ending on
December 31, 1996, were $1,512,806 (which represents gross revenues of
$1,096,262 prior to the acquisition and gross revenues of $416,544 subsequent
to the acquisition). Gross revenues declined by $550,550 or 26.7% from 1995
during which gross revenues were $2,063,364. As noted above, the Company
believes that this decline in revenues was largely attributable to the absentee
management of the Texas Loosey's restaurants during the months preceding their
acquisition. A second contributing factor to the decline in revenues for this
period was a fire which occurred at one of the restaurant units shortly after
the August 19, 1996 acquisition date, closing the restaurant for a period of
three (3) months, and resulting in a loss of revenues for that period.
RESTAURANT COSTS
The percentage of operating expenses to revenue in 1996 increased over 1995
by 6.6%, or $99,240. The Company believes that the operating expenses increased
as a percentage of revenue due to an inefficient use of basic labor during the
period of revenue decline under prior management, coupled with the loss of
revenue (without an offsetting deduction in operating expenses) during the
rebuilding of the restaurant unit after the fire described above.
OTHER INCOME/(EXPENSES)
The Company incurred non-recurring pre-operating and start-up costs in
connection with its acquisition of the first two (2) Texas Loosey's
restaurants. These costs amounted to $433,694 and represent 104.1% of
gross revenues for the period from inception (June 3, 1996) through
December 31, 1996. This amount included significant costs such as
pre-opening, training and organizational staffing; consulting, legal,
and other professional fees, incorporation and escrow fees; and travel
and relocation expenses for management personnel.
The Company believes that the general and administrative expenses for the
period preceding this acquisition are unique to the previous owner of the
restaurants. Specifically, the general and administrative expenses for the
year ended December 30, 1995 ($408,179) and the period ended August 18, 1996
($103,271) for TLC include corporate salaries and other corporate expenses
that, in current management's opinion, are not reflective of the necessary
costs to operate and manage the restaurants and is in excess of what the
Company has and expects to incur for general and administrative expenses. The
Company's general and administrative expenses for the period from inception
(June 3, 1996) through December 31, 1996 were $136,467 and include $70,000 of
auditing fees for the Company and the predecessor business acquired from TLC
Restaurant Management Corp. The Company's general and administrative expenses
for the period from inception (June 3, 1996) through December 31, 1996, do not
include any salary compensation for the Company's Chief Executive Officer or
its President. Both of these individuals have agreed to waive their salary
compensation that would be earned up to the successful completion of this
Offering. Had these individuals taken a salary for the period from inception
(June 3, 1996) through December 31, 1996, the Company's general and
administrative expenses would have increased by approximately $55,000 to
approximately $191,000.
Interest and financing costs for the period from inception (June 3, 1996)
through December 31, 1996 for the Company increased significantly over prior
periods due to the debt incurred to transact the acquisition of the first two
(2) restaurants and to fund operations.
17
<PAGE>
QUARTER ENDED MARCH 31, 1997
Interim financial information for TLC, the predecessor business, as of
and for the quarter ended March 31, 1996 has not been presented herein because
of the prohibitive costs and difficulties to obtain such information and
because the March 31, 1996 interim financial statement information would not
be comparable to the March 31, 1997 information due to the significant amount
of debt incurred by the Company to consummate the acquisition and due to the
significant purchase accounting adjustments that resulted therefrom.
EARNINGS FROM OPERATIONS. The data for the first quarter of 1997 showed
an operating profit of $14,099 for the period, which represented 3.5% of
the period's gross revenues of $403,942. The Company's general and
administrative expenses for the quarter were $80,342 which included salaries
for senior management personnel, which personnel have been employed in
anticipation of the Company's future growth, rather than as personnel
necessary to oversee the Company's current operations. However, the Company's
general and administrative expenses for the quarter ended March 31, 1997, do
not include any salary compensation for the Company's Chief Executive Officer
or its President. Both of these individuals have agreed to waive their salary
compensation that would be earned up to the successful completion of this
Offering. Had these individuals taken a salary for the quarter ended March 31,
1997, the Company's general and administrative expenses would have increased
by approximately $24,000 to approximately $104,000.
18
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company requires significant capital to fund its working capital needs
and its planned expansion. Revenues are not yet sufficient to support the
Company's operating expenses and are not expected to reach such levels during
the next twelve (12) months. Cash used by operating activities for the period
following the Company's acquisition of the first two (2) Texas Loosey's
restaurants was $791,314 for the period ended December 31, 1996 and $269,587 in
the first quarter of 1997. Cash and cash equivalents at March 31, 1997
aggregated $79,338 and the Company had a working capital deficit of
$1,697,554.
The aggregate amount of accounts payable and accrued expenses was $191,535 at
March 31, 1997. It is the Company's policy to pay its vendors within 30 days
(unless alternative payment terms are available on advantageous terms).
Since its formation on June 3, 1996, the Company has funded its operations
and capital expenditures primarily through capital contributions from private
placements of its equity securities and by utilizing vendor credit.
The Company's independent certified public accountants issued a going
concern opinion with regard to the most recent audited financial statements
based in part upon an operating loss of $942,552 for the period from inception
(June 3, 1996) through December 31, 1996, an accumulated deficit of $942,552
and a working capital deficit of $1,533,104 at December 31, 1996. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. The continuation of the Company as a going concern is dependent
upon its ability to generate sufficient cash flows from operations and
financing activities and achieving successful operations. Management's
plans to address the foregoing included and include the following:
1. The closing of this Offering with anticipated net proceeds of
approximately $6,902,500, a portion of which will be used to satisfy
certain outstanding obligations of the Company. See "Use of Proceeds".
2. An increase in revenues by substantially increasing the number of
Company-owned restaurants.
The Company believes that the increase in capital obtained in this Offering
will enhance the Company's potential for a transition to profitable operations
in the future.
The Company believes that these plans can be effectively implemented in the
next twelve months. There can be no assurance, however, that the Company will
be successful in these endeavors. The Company's ability to continue as a going
concern is dependent on the implementation and success of these plans. The
financial statements do not include any adjustments in the event the Company is
unable to continue as a going concern.
NEW ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS No. 123). This standard, if fully adopted,
changes the methods of accounting for employee stock-based compensation
plans to the fair value based method. For stock options, fair value is
determined using an option pricing model that takes into account the stock
price at the grant date, the exercise price, the expected life of the
option, the volatility of the underlying stock (not applicable for private
entities), expected dividends and the risk-free interest rate over the
expected life of the option. Compensation expense, if any, is recognized over
the applicable service period, which is usually the vesting period. The
adopotion of the accounting methodology of SFAS No. 123 is optional and the
Company has elected to continue accounting for stock-based compensation issued
to employees using APB No. 25; however, pro forma disclosures as if the
Company adopted the cost recognition requirements under SFAS No. 123 are
required to be presented if the effect is material to the financial statements.
The effects of applying SFAS No. 123 to the Company's option grants in 1996 is
immaterial to the Company's net loss and net loss per share.
The FASB has issued SFAS No. 128, "Earnings per Share". This statement is
effective for both interim and annual reporting periods ending after December
15, 1997. SFAS No. 128 replaces primary earnings per share (EPS) with basic EPS
and fully diluted EPS with diluted EPS. Basic EPS is computed by dividing
reported earnings by the weighted average number of shares outstanding. Diluted
EPS is computed in the same way as fully diluted EPS, except that the
calculation now uses the average share price for the reporting period to
compute dilution from options under the treasury stock method. The Company will
adopt the new standard in its reporting for the year ended December 31, 1997.
Management does not believe that the adoption of this standard will have a
significant impact on EPS.
The FASB has also issued SFAS No. 129, "Disclosure of Information about
Capital Structure". This statement is effective for annual reporting periods
ending after December 15, 1997. SFAS No. 129 continues the existing
requirements to disclose the pertinent rights and privileges of all securities
other than ordinary common stock but expands the number of companies subject to
portions of its requirements. The Company will adopt the new standard in its
reporting for the year ended December 31, 1997. The adoption of this statement
will have no effect on the financial statements.
BUSINESS
BACKGROUND
The Company currently owns and operates two (2) steakhouse restaurants and
manages two (2) others that it is in escrow to purchase in Southern
California, which together formerly comprised all of the restaurants
known as "Texas Loosey's Chili Parlor & Saloon." The Company first acquired two
(2) Texas Loosey's restaurants on August 19, 1996, and has entered escrow on
December 30, 1996 to purchase the remaining two (2) Texas Loosey's
restaurants. The Company anticipates that escrow will close on these two
restaurants in September 1997. The closing of escrow is contingent upon the
approval by the ABC for the assumption of liquor licenses and approval from the
SBA for the Company to assume the outstanding notes guaranteed by the SBA and
currently in the name of the sellers.
The Company has converted one of the Texas Loosey's restaurants into a
Galveston's steakhouse restaurant reminiscent of the late 1950's and early
1960's, with popular rock 'n roll music from that period. Maps of Galveston
Island, Route 66 road signs, pictures of James Dean, wild beach saw grass and
other Galveston Island and Texas-style motifs decorate the restaurant's casual
setting. The Company's Galveston's restaurant offers high quality, reasonably
priced, mesquite- grilled steak, fresh fish, hamburgers, chicken and other
specialty items to a diverse clientele. The Company intends to convert its
other restaurants into Galveston's steakhouses in this same manner. After the
other three (3) existing restaurants are remodeled, the Company intends to
develop additional Galveston's steakhouses and to identify and develop new
markets. The Company believes that the high quality, moderately priced segment
of the restaurant industry presents an opportunity for significant growth.
There can be no assurance given, however, that such growth will, in fact, be
achieved.
19
<PAGE>
RESTAURANT CONCEPT
The Company will seek to position its restaurants as "destination restaurants"
that attract loyal clientele. By its use of the term "destination restaurants,"
the Company means that it will seek to establish its restaurants as the primary
destination of its clientele, rather than a destination or activity ancillary
to another activity, such as shopping or site-seeing. The Company also intends
to emphasize the steakhouse aspect of its restaurants, including changing the
name of the restaurants from "Texas Loosey's Chili Parlor & Saloon" to
"Galveston's Steakhouse." The Company intends to focus on a Galveston's Island
steakhouse concept that features Texas artifacts with late 1950's and early
1960's music intended to capitalize on popular themes. The restaurants' decor
will include weathered wood panels, wall murals depicting Galveston Island
themes and other Texas memorabilia, all of which is intended to help establish
a distinct identity for the restaurants. Galveston's will serve USDA
choice-graded steaks, hand-cut fresh daily at each restaurant and
mesquite-grilled to order. Portions will be deliberately generous and full
liquor and bar service will be available.
CORPORATE STRATEGY
The Company believes that excellence in operations, quality of food and
service, ambiance, location and price-value relationship are keys to success in
the restaurant industry. The Company intends to differentiate its restaurants by
emphasizing the following strategic elements:
* Positioning in the moderately-priced, high-quality, full
service, steakhouse segment of the restaurant industry.
* The association with nostalgia, early rock 'n roll and
Texas themes.
* Generous portions offered at moderate prices.
* High-quality and attentive service.
* Consistent high-quality products through careful ingredient
selection, food preparation and aging of steaks.
EXPANSION
Following the closing of this Offering, the Company plans to remodel the three
(3) Texas Loosey's restaurants that have not yet been remodeled to reflect the
Company's Galveston's steakhouse concept. The Company expects that future
acquired restaurants will also reflect the new Galveston's steakhouse identity.
The Company intends to direct its initial expansion efforts primarily on the
West Coast of the United States to areas away from tourist or major metropolitan
centers. The Company plans to target smaller cities in lower density areas where
a new theme restaurant is a major attraction. The Company believes that,
demographically, the target market for this initial expansion strategy has a
minimum population of 25,000 people within a 4.5 mile radius and an average
annual household income between $14,000 and $57,000. The Company currently
intends to expand solely through the acquisition and development of additional
Company-owned restaurants.
MENU
The Galveston's menu features a selection of high-quality, specially
seasoned char-grilled steaks, fresh fish, hamburgers, and mesquite chicken.
A complete meal would include a choice of side dishes, including baked potato,
baked sweet potato, french fries and steamed vegetables. The menu will also
include appetizers and desserts, together with a full bar service. Alcoholic
beverage service accounted for approximately thirty six and one-half percent
(36 1/2%) of the first two (2) acquired Texas Loosey's restaurants' net sales
during 1996.
20
<PAGE>
SITE SELECTION AND CONSTRUCTION
The Company considers the location of each restaurant to be critical to its
long-term success and management intends to devote significant effort to the
investigation and evaluation of potential sites. The site selection process will
focus on regional and trade area demographics, target population density,
household income and educational levels and traffic patterns, as well as
specific site characteristics such as visibility, accessibility, traffic volume
and the availability of adequate parking. The Company also intends to review
potential competition and customer activity at other restaurants operating in
the area.
The Company anticipates that the cost of opening each new Galveston's
steakhouse will range from $600,000 to $800,000 for the build-out of a
brand-new facility and from $350,000 to $530,000 for the conversion of an
existing restaurant, which includes leasehold improvements, furniture, fixture,
equipment, food and beverage inventory and other pre-opening expenses. There
can be no assurance given, however, that the Company's costs of opening
additional Galveston's steakhouses will not exceed the foregoing estimates.
RESTAURANT SIZE
The Company's restaurants currently average approximately 4,500 to 5,800
square feet and include a dining area with seating for approximately 210
customers at between 35 and 55 tables. The bar is located adjacent to the
dining room primarily to accommodate customers waiting for dining tables and up
to approximately 30 additional diners at between six and nine tables. The
Company anticipates that future Galveston's steakhouses will, on average, be of
similar size.
MARKETING
The Company believes that Galveston's steakhouses will be well positioned as
"destination steakhouse restaurants" that focus on the moderately-priced,
high-quality, full service, casual dining market segments. The Company intends
to rely principally on its commitment to customer service, excellent price-value
relationship and the "Galveston Island" ambiance of its restaurants to attract
and retain customers. Accordingly, the Company intends to focus its resources on
seeking to provide customers with superior service, value and an exciting and
vibrant atmosphere.
The Company's restaurants currently rely on positive word-of-mouth and
in-store promotions to generate consumer interest. However, as the number of
restaurants expand, the Company intends to utilize advertising to promote its
restaurants and build customer awareness, including but not limited to print,
direct-mail and radio advertising, and to conduct some local restaurant
promotions. To create additional Galveston's name recognition and customer
identification, the Company may sell Galveston's T-shirts, hats, steak sauces
and other items bearing the Galveston's name and logo.
A portion of the Company's external marketing effort is expected to consist of
attracting customers through the use of free-standing inserts ("FSIs"). FSIs
contain descriptive information regarding the restaurants and would be
distributed by direct mail and through newspapers. In addition, the Company may
initiate a "business-to-business" program under which it would mail promotions
to local businesses for distribution to their employees. In addition, each
restaurant would periodically co-sponsor fund-raising events for local
charitable and other community organizations.
For each new restaurant, the Company intends to conduct a pre-opening
awareness program beginning approximately two to three weeks prior to, and
ending four to six weeks after, the opening of a restaurant. The Company
anticipates that a given program typically would include special promotions,
site signs, sponsorship of a fund-raising event for a local charity to
establish ties to local community leaders and increase awareness of the new
restaurant, and pre-opening trial operations, to which the family and friends
of new employees would be invited.
21
<PAGE>
RESTAURANT OPERATIONS AND MANAGEMENT
The Company plans to maintain quality and consistency in its restaurants
through the careful hiring, training and supervision of personnel and the
establishment of standards relating to food and beverage preparation,
maintenance of facilities and conduct of personnel. See "Risk Factors --
Dependence on Key and Other Personnel."
The Company plans to maintain financial and accounting controls for each of
its restaurants through the use of centralized accounting and management
information systems. Sales information would be collected semi-weekly from each
restaurant, and restaurant managers would be provided with weekly and monthly
operating statements for their locations. In addition, the Company intends that
all of the sales information would be available via network or other "on-line"
service, and the Company would be able to inspect each restaurant's sales data
at any time, unannounced. Most of the Company's restaurants are expected to be
open daily from 11:00 a.m. to 11:00 p.m. weekdays and until 12:00 p.m. on
weekends. The bar would customarily remain open for an additional hour.
The management team for a typical Galveston's restaurant is expected to
consist of one general manager, two assistant managers and a kitchen manager.
Each restaurant also would be expected to employ a staff consisting of
approximately 50 to 70 hourly employees, many of whom work part-time.
Typically, each general manager would report directly to a district manager
who, in turn, would report to the Company's vice president of regional
operations. As the number of Galveston's steakhouses expands, the Company
anticipates having one district manager for every five restaurants. Restaurant
managers (and, if a franchise program is instituted, franchisees) would
complete an extensive training program during which they would be instructed in
areas including food quality and preparation, customer satisfaction, alcoholic
beverage service, governmental regulations compliance, liquor liability
management and employee relations. Restaurant managers would also be provided
with an operations manual relating to food and beverage preparation, all areas
of restaurant management and compliance with governmental regulations. Working
in concert with the individual restaurant managers, the Company's senior
management would define operations and performance objectives for each
restaurant and monitor implementation. Senior management would regularly visit
various Galveston's restaurants and meet with the respective management teams
to ensure compliance with the Company's strategies and standards of quality in
all respects of restaurant operations and personnel development.
Each new restaurant employee of the Company would participate in a training
program during which the employee works under the close supervision of a
restaurant manager, or an experienced key employee. Management would
continuously solicit employee feedback concerning restaurant operations and
strive to be responsive to the employees' concerns.
PURCHASING
The Company intends to negotiate directly with suppliers for food and beverage
products to ensure consistent quality and freshness of products and to obtain
competitive prices. Food and supplies would be shipped directly to the
restaurants, although invoices for purchases would be sent to the Company for
payment. The Company's emphasis on first-quality food will require frequent
deliveries of fresh food supplies. Because of the need for freshness of
products, the Company does not intend to maintain a central product warehouse or
commissary. See "Risk Factors -- Cost Sensitivity."
COMPETITION
Competition in the restaurant industry is increasingly intense. The Company
will compete with other moderate to mid-priced, full service restaurants
primarily on the basis of quality of food and service, ambiance, location and
price-value relationship. The Company will also compete with a number of other
restaurants within its markets, including both locally-owned restaurants and
regional or national chains. The Company believes that its "Galveston's Island"
concept, attractive price-value relationship and quality of food and service
will enable it to differentiate itself from its competitors. While the Company
believes that its restaurants are distinctive in design
22
<PAGE>
and operating concept, it is aware of restaurants that operate with similar
concepts, such as the Lonestar and Outback steakhouses. The Company will also
compete with other restaurants and retail establishments for sites. Many of the
Company's competitors are well-established in the mid-priced dining segment and
certain competitors have substantially greater financial, marketing and other
resources than the Company. The Company believes that its ability to compete
effectively will continue to depend upon its ability to offer high-quality,
moderately priced food in a full service, distinctive dining environment. See
"Risk Factors -- Restaurant Industry and Competition."
GOVERNMENT REGULATION
The Company's restaurants are subject to numerous federal, state and local
laws affecting health, sanitation and safety standards, as well as to state and
local licensing regulation of the sale of alcoholic beverages. Each restaurant
currently has appropriate licenses from regulatory authorities allowing it to
sell liquor, beer and wine, and each restaurant has food service licenses from
local health authorities. The Company is required to renew these licenses
annually. In addition, those licenses may be suspended or revoked at any time
for cause, including violation by the Company or its employees of any law or
regulation pertaining to alcoholic beverage control, such as those regulating
the minimum age of patrons or employees, advertising, wholesale purchasing and
inventory control. The failure of the Company to obtain or retain liquor or
food service licenses would likely have a material adverse effect on its
operations. See "Risk Factors -- Government Regulation." In order to reduce
this risk, each of the Company's restaurants is expected to be operated in
accordance with standardized procedures designed to assure compliance with all
applicable codes and regulations. Difficulties in obtaining or failures to
obtain the required licenses or approvals could delay or prevent the
development of a new restaurant in a particular area. In California, there is a
set number of alcoholic beverage licenses available, but there is an active
market through which new licenses can be obtained at the then-applicable market
price. The failure to receive or retain, or a delay in obtaining, a liquor
license in a particular location could adversely affect the Company's ability
to obtain such a license elsewhere.
The Company will be subject, as the Company expands, in certain states to
"dram-shop" statutes, which generally provide a person injured by an intoxicated
person the right to recover damages from an establishment that wrongfully served
alcoholic beverages to the intoxicated person. The Company expects to carry
liquor liability coverage as part of its comprehensive general liability
insurance.
The Company's future restaurant operations will also be subject to federal and
state minimum wage laws governing such matters as working conditions, overtime
and tip credits and other employee matters. Significant numbers of the Company's
food service and preparation personnel will be paid at rates related to the
federal minimum wage. Government-imposed increases in minimum wages, paid leaves
of absence and mandated health benefits, or increased tax reporting and tax
payment requirements for employees who receive gratuities, could be detrimental
to the economic viability of the Galveston's restaurants.
The development and construction of additional restaurants will be subject to
compliance with applicable zoning, land use and environmental regulations.
Management is not aware of any environmental regulations that have had a
material effect on the Company or the Texas Loosey's restaurants to date.
The Federal Americans With Disabilities Act (the "Disabilities Act") prohibits
discrimination on the basis of disability in public accommodations and
employment. The Company intends to ensure that its restaurants will be in full
compliance with the Disabilities Act, and the Company intends to review plans
and specifications and make periodic inspections to ensure continued compliance.
The Company's current restaurants are designed to be accessible to the disabled.
The Company believes that it is in substantial compliance with all current
applicable regulations relating to restaurant accommodations for the disabled.
The Company does not anticipate that such compliance will require the Company to
expend substantial funds.
23
<PAGE>
EMPLOYEES
At March 31, 1997, the Company employed approximately 135 individuals, of
which 14 occupy executive or managerial positions, approximately 119 hold
non-managerial restaurant-related positions and the balance occupy clerical and
office positions. None of the Company's employees is covered by a collective
bargaining agreement. The Company considers its relations with its employees to
be good and has not experienced any interruption of operations due to labor
disputes.
PROPERTIES AND LEASES
All of the existing restaurants are situated on leased property.
These leases mature at various dates through 2004. The owned restaurants
are as follows: The Fullerton facility consists of 8,285 square feet at a
rent of $8,300 per month and the Torrance facility consists of 6,000 square
feet at a rent of $7,093 per month. The restaurants to be purchased are as
follows: The Riverside facility consists of 5,500 square feet at a rent of
$7,069 per month; the Norco facility consists of 4,260 square feet at a rent
of $6,177 per month. The Company expects that future restaurants will be
developed on leased property, but it may also develop future restaurants on
property owned by the Company or any to-be-formed subsidiaries.
The Company's executive offices are located at its Riverside facility at 151
E. Alessandro Boulevard, Riverside, California. The Company believes that there
is sufficient office space available at favorable leasing terms in the Orange
County, California area to satisfy the additional needs of the Company that may
result from future expansion.
LEGAL PROCEEDINGS
The Company is not involved in any legal proceedings.
PURCHASE OF TEXAS LOOSEY'S RESTAURANTS
On August 19, 1996, the Company acquired two (2) restaurants known as "Texas
Loosey's Chili Parlor & Saloon" for a purchase price of $1.52 million, pursuant
to the Asset Purchase Agreement. The cash portion of such purchase price was
$275,000 and the remainder of the purchase price was paid in the form of the
First TL Note and the Second TL Note, secured by the assets acquired by the
Company. The First TL Note was originally due on the earlier of: February 19,
1997, being the date which was six months following the closing date of the
acquisition of the Texas Loosey's restaurants (the "Six Month Date") or the
date that the Company filed a registration statement with the Commission for an
initial public offering of its securities. Pursuant to an Extension Agreement,
dated March 24, 1997, the due date for the First TL Note has since been
extended to August 19, 1997. The First TL Note bears interest at the rate of
ten percent (10%) per annum from August 19, 1996 through February 19, 1997 and
at the rate of fifteen percent (15%) per annum from February 19, 1997 through
August 19, 1997. The Second TL Note bears interest at the rate of eight
percent (8%) per annum from August 19, 1996. Commencing February 19, 1997,
interest only payments of $6,032 are due monthly for one year. Commencing
February 19, 1998 through July 19, 2001, monthly principal and interest
payments of $10,978 are due. The remaining principal balance is due via
a balloon payment on August 19, 2001.
As secured creditors, the TL Sellers would have the right to foreclose on
such assets if the Company defaulted on the payment of either promissory note.
See "Risk Factors - Effect of Possible Default Under the Asset Purchase
Agreement." In addition, pending the Company's payment of the First TL Note
from the proceeds of this Offering, the liquor licenses for the restaurants are
being held in escrow.
Under the Asset Purchase Agreement, the Company entered into a consulting
agreement with Walton (the "Consulting Agreement"). The Consulting Agreement
provides that Walton will render consulting services for a period of
approximately two (2) years in connection with the management, marketing,
development and expansion of the business and operations of the restaurants
24
<PAGE>
through consultation with the officers and employees of the Company as the
Company's Chief Executive Officer or President may reasonably request.
In consideration for such consulting services, the Company will pay
Walton $95,000 each year.
On December 30, 1996, the Company agreed to enter into escrow an agreement to
acquire substantially all of the assets of two Texas Loosey's restaurants in
Norco, California and Riverside, California, respectively, from the franchisee
of the restaurants for a purchase price of $563,177, excluding inventory and
escrow costs. A cash payment of $77,835 was paid into escrow and the balance
paid by various notes and credits. The Company anticipated that escrow will
close on these two restaurants in September, 1997. The closing of escrow is
contingent upon the approval by the ABC for the assumption of liquor licenses
and approval from the SBA for the Company to assume the outstanding notes
guaranteed by the SBA and currently in the name of the Sellers.
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY PERSONNEL
The current directors, executive officers and key personnel of the Company are
as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
MR. RICHARD M. LEE 31 CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
MR. HIRAM J. WOO 62 PRESIDENT, SECRETARY, CHIEF FINANCIAL OFFICER, DIRECTOR
MR. MICHAEL R. DUNMIRE 31 SENIOR OPERATIONS OFFICER
MS. REBECCA L. ROTMAN 26 SENIOR TRAINING OFFICER
</TABLE>
MR. RICHARD M. LEE has been the Chairman of the Board and Chief Executive
Officer of the Company since its inception. Mr. Lee began his business career
upon graduating high school at the age of 16, founding his first company with a
total of $3,500 of seed capital. By the age of 22, Mr. Lee was recognized as a
"young-millionaire" entrepreneur by the University of Southern California. In
addition, Mr. Lee was one of the youngest inductees into the Young Presidents
Organization of America. Mr. Lee has been featured in numerous industry, local
and national media publications. He was featured as a model entrepreneur in the
university textbook, Contemporary Business (Dryden Press: 1990). From 1982 to
1990, Mr. Lee was the founder and President of Audio-Chamber International,
Inc. based in Orange County, California, a manufacturer of high-fidelity mobile
sound systems. In 1990, Mr. Lee sold Audio-Chamber International, Inc. to
actively invest in real estate and securities. From 1991 to 1992, Mr. Lee
co-founded and co-managed Aristotle Investments Ltd. as its chief strategist
for investments in franchise restaurant acquisitions. From 1992 to 1995, Mr.
Lee was the co-founder and Chairman/CEO of China Coast Foods, Inc., a company
formed to explore opportunities in the food industry in the Peoples Republic of
China. Mr. Lee has also been involved with and invested in franchised
restaurants, including, for example, Domino's Pizza Restaurants and Popeyes
Fried Chicken.
MR. HIRAM J. WOO has been the President, Secretary and a director of the
Company since its inception. Since 1976, he has owned and operated Hiram J. Woo
Accountancy Corporation, a San Francisco-based accounting firm with numerous
restaurateurs among his clients. Over the past 14 years, Mr. Woo has actively
invested in, owned or reorganized and restructured various restaurants, ranging
from large-scale casual dining establishments to night clubs to bar and grill
operations. In 1980, Mr. Woo founded and has since managed Regal Financial
Development Corporation ("RFDC"), a real estate development and planning firm
based in San Francisco. In the past 14 years, RFDC has managed over $300
million of real estate development projects in the Western United States. Mr.
Woo has owned and operated several large-scale restaurants in the San Francisco
area. Mr. Woo is active among the local Chinese community and has served as a
director of two Chinese-American financial institutions and several
25
<PAGE>
business organizations. Mr. Woo is a Certified Public Accountant. Mr. Woo
is a past director of the Chinese Resources Development Center of San Francisco,
a past president of Park Presidio Optimist Club, and a member of the San
Francisco, Fairfield and Vacaville Chambers of Commerce.
MR. MICHAEL R. DUNMIRE has been the Company's Senior Operations Officer since
October 15, 1996. He has substantial experience during the past five years in
training and developing kitchen and other restaurant staff, and is responsible
for overseeing all operations at the Company's restaurants. Mr. Dunmire began
his career in the restaurant business in 1982 as a busboy, and worked his way up
through the ranks as a dishwasher, server, head cook, kitchen manager and
general manager. From December 1992 to December 1993, he was a Kitchen
Manager/General Manager at Garfield's Restaurant & Pub, in Nashville, Tennessee.
From December 1993 to April 1994, Mr. Dunmire was the General Manager of
Garfield's Restaurant & Pub in Laredo, Texas. In April 1994, Mr. Dunmire
co-founded Out Yonder Catfish House in Yeoman, Indiana, and as General Manager
created the theme and identity for the restaurant and was responsible for
overseeing all restaurant operations. In July 1995, Mr. Dunmire sold his
interest in Out Yonder and joined the Lonestar Steakhouse & Saloon restaurant
chain as a Service Manager at its Lafeyette, Indiana location where he was
responsible for training and supervising all service staff. In December 1995, he
took over as Kitchen Manager of Lonestar's New Orleans, Louisiana location where
he was responsible for training the kitchen personnel and controlling all costs,
budgets and profit and loss projections at the restaurant.
MS. REBECCA L. ROTMAN has been the Company's Senior Training Officer since
October 15 , 1996. She has had substantial experience during the past five years
in the training of restaurant service staff. Ms. Rotman began her career in the
restaurant business in February 1991 as a member of the service staff for the
Lonestar Steakhouse & Saloon restaurant chain in Asheville, North Carolina. Ms.
Rotman eventually became a Corporate Trainer, at which time she assisted in
opening some of the first twenty (20) Lonestar restaurants. In February 1992,
she took over as the Service Manager of Lonestar's Ft. Myers, Florida location.
From August 1993 through December 1995, Ms. Rotman was a Training Manager for
Lonestar's new store openings, in which capacity she trained the service staff
of over twenty (20) Lonestar steakhouses. In that capacity, she was responsible
for creating and implementing training manuals, policies and procedures for the
opened locations. From January 1996 to September 1996, Ms. Rotman was the Senior
Manager of Lonestar's New Orleans, Louisiana location.
BOARD OF DIRECTORS
Directors are elected at the annual meeting of the Company's stockholders
to hold office until the next annual meeting and until their successors are
elected and qualified. Officers serve at the discretion of the Board. Directors
may receive such compensation for their services as is fixed from time to time
by resolution of the Board.
DIRECTORS' COMPENSATION
Directors of the Company currently receive no compensation for their service
as such.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted pursuant to the corporate law of the State of Delaware, the
Company's state of incorporation, the Certificate of Incorporation and By-Laws
require that the Company indemnify its directors and officers against certain
liabilities and expenses incurred in their service in such capacities to the
fullest extent permitted by applicable law. These provisions would provide
indemnification for liabilities arising under the federal securities laws to the
extent that such indemnification is found to be enforceable under, and to be in
accordance with applicable law. Additionally, the Company intends to enter into
an indemnity agreement with each director which generally provides that
directors are indemnified with respect to actions taken in good faith.
Furthermore, the personal liability of the directors is limited as provided in
the Company's Certificate of Incorporation.
26
<PAGE>
OMNIBUS STOCK PLAN
In January 1997, the Company adopted the Galveston's Steakhouse Omnibus
Stock Plan (the "Plan") to promote the long-term growth and profitability of the
Company by (i) providing key directors, officers and employees of the Company
and its subsidiaries with incentives to improve stockholder value and contribute
to the growth and financial success of the Company and (ii) enabling the Company
to attract, retain and reward the best available persons for positions of
substantial responsibility. As described more fully below, the Plan provides for
grants of options to purchase specified numbers of shares of Common Stock at
predetermined prices.
THE FOLLOWING DISCUSSION REPRESENTS ONLY A SUMMARY OF CERTAIN OF THE PLAN
TERMS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE COMPLETE PLAN, A
COPY OF WHICH HAS BEEN FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF
WHICH THIS PROSPECTUS FORMS A PART.
Shares Available; Maximum Awards; Participants. A total of 400,000 shares of
the Company's Common Stock has been reserved for issuance upon exercise of
options granted pursuant to the Plan. The Plan allows the Company to grant
options to employees, officers and directors of the Company and its
subsidiaries; provided that only employees of the Company and its subsidiaries
may receive incentive stock options under the Plan. The Company has not
granted, and prior to completion of the Offering does not expect to grant, any
options under the Plan.
Stock Option Features. Under the Plan, options to purchase the Company's
Common Stock may take the form of incentive stock options ("ISOs") under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") or
nonqualified stock options ("NQSOs"). As required by Section 422 of the Code,
the aggregate fair market value (as defined in the Plan) of shares of Common
Stock (determined as of the date of grant of the ISO) with respect to which
ISOs granted to an employee are exercisable for the first time in any calendar
year may not exceed $100,000. The foregoing limitation does not apply to NQSOs.
Initially, each option will be exercisable over a period, determined by the
Board of Directors or the Compensation Committee of the Board of Directors of
the Company, in its discretion, of up to ten years from the date of grant.
Options may be exercisable during the option period at such time, in such
amounts, and in accordance with such terms and conditions and subject to such
restrictions as are determined by the Board or the Compensation Committee and
set forth in option agreements evidencing the grant of such options; provided
that no option may be exercisable less than six months from its date of grant.
The exercise price of options granted pursuant to the Plan is determined by
the Board or the Compensation Committee, in its discretion; provided that the
exercise price of an ISO may not be less than 100% of the fair market value (as
defined in the Plan) of the shares of the Company Common Stock on the date of
grant. The exercise price of options granted pursuant to the Plan is subject to
adjustment as provided in the Plan to reflect stock dividends, splits, other
recapitalizations or reclassifications or changes in the market value of the
Company Common Stock. In addition, the Plan provides that, in the event of a
proposed change in control of the Company (as defined in the Plan), the Board
or the Compensation Committee is to take such actions as it deems appropriate
to effectuate the purposes of the Plan and to protect the grantees of options,
which action may include (i) acceleration or change of the exercise dates of
any option; (ii) arrangements with grantees for the payment of appropriate
consideration to them for the cancellation and surrender of any option; and
(iii) in any case where equity securities other than Common Stock are proposed
to be delivered in exchange for or with respect to Common Stock, arrangements
providing that any option shall become one or more options with respect to such
other equity securities. Further, in the event the Company dissolves and
liquidates (other than pursuant to a plan of merger or reorganization), then
notwithstanding any restrictions on exercise set forth in the Plan or any grant
agreement pursuant thereto (i) each grantee shall have the right to exercise
his option at any time up to ten days prior to the effective date of such
liquidation and dissolution; and (ii) the Board or the Compensation Committee
may make arrangements with the grantees for the payment of appropriate
consideration to them for the cancellation and surrender of any option that is
so canceled or surrendered at any time up to ten days prior to the effective
date of such liquidation and dissolution. The Board or the Compensation
Committee also may establish a different period (and different conditions) for
such exercise, cancellation, or surrender to avoid subjecting the grantee to
liability under Section 16(b) of the Exchange Act.
27
<PAGE>
The shares purchased upon the exercise of an option are to be paid for by
the optionee in cash or cash equivalents acceptable to the Compensation
Committee. In addition, the Plan provides for broker-assisted cashless exercises
in the discretion of the Compensation Committee.
Except as permitted pursuant to Rule 16b-3 under the Exchange Act, and in
any event in the case of an ISO, an option is not transferable except by will or
the laws of descent and distribution. In no case may the options be exercised
later than the expiration date specified in the option agreement.
Plan Administration. The Plan will be administered by the Board of
Directors or a Compensation Committee of the Board of Directors in accordance
with the provisions of Rule 16b-3.
The Compensation Committee will decide when and to whom to make grants, the
number of shares to be covered by the grants, the vesting schedule, the type of
awards and the terms and provisions relating to the exercise of the awards. The
Compensation Committee may interpret the Plan and may at any time adopt such
rules and regulations for the Plan as it deems advisable. The Board of Directors
may at any time amend or terminate the Plan and change its terms and conditions,
except that, without stockholder approval, no such amendment may (i) materially
increase the maximum number of shares as to which awards may be granted under
the Plan; (ii) materially increase the benefits accruing to Plan participants;
or (iii) materially change the requirements as to eligibility for participation
in the Plan.
Accounting Effects. Under current accounting rules, neither the grant of
options at an exercise price not less than the current fair market value of the
underlying Common Stock, nor the exercise of options under the Plan, is
expected to result in any charge to the earnings of the Company.
Certain Federal Income Tax Consequences. The following is a brief summary of
certain Federal income tax aspects of awards under the Plan based upon the
Federal income tax laws in effect on the date hereof. This summary is not
intended to be exhaustive and does not describe state or local tax consequences.
Incentive Stock Options. An optionee will not realize taxable
income upon the grant of an ISO. In addition, an optionee will
not realize taxable income upon the exercise of an ISO, provided
that such exercise occurs no later than three months after the
optionee's termination of employment with the Company (one year
in the event of a termination on account of disability). However,
an optionee's alternative minimum taxable income will be increased
by the amount that the fair market value of the shares acquired
upon exercise of an ISO, generally determined as of the date of
exercise, exceeds the exercise price of the option. If an
optionee sells the shares of Common Stock acquired upon exercise
of an ISO, the tax consequences of the disposition depend upon
whether the disposition is qualifying or disqualifying. The
disposition of the shares is qualifying if made more than two
years after the date the ISO was granted and more than one
year after the date the ISO was exercised. If the disposition of
the shares is qualifying, any excess of the sale price of the
shares over the exercise price of the ISO would be treated as
long-term capital gain taxable to the option holder at the time
of the sale. If the disposition is not qualifying, i.e., a
disqualifying disposition, the excess of the fair market value of
the shares on the date the ISO was exercised over the exercise
price would be compensation income taxable to the optionee at the
time of the disposition, and any excess of the sale price of the
shares over the fair market value of the shares on the date the
ISO was exercised would be capital gain.
Unless an optionee engages in a disqualifying disposition, the
Company will not be entitled to a deduction with respect to an
ISO. However, if an optionee engages in a disqualifying
disposition, the Company generally will be entitled to a
deduction equal to the amount of compensation income taxable to the
optionee.
Nonqualified Stock Options. An optionee will not realize
taxable income upon the grant of an NQSO. However, when the
optionee exercises the NQSO, the difference between the exercise
price of the NQSO and the fair market value of the shares
acquired upon exercise of the NQSO on the date of exercise is
compensation income taxable to the optionee. The Company
generally will be entitled to a deduction equal to the amount of
compensation income taxable to the optionee.
28
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the cash and other compensation paid from the
Company's inception in June 1996 through December 31, 1996.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary($) Bonus ($) Compensation Options (#) Compensation
- --------------------------- ----- --------- --------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Richard M. Lee, Chairman 1996 - 0 - - 0 - - 0 - 82,500(1) - 0 -
and Chief Executive Officer
<FN>
- -------------------------------------
(1) Represents non-plan options granted to Mr. Lee in connection with his Employment Agreement. See "MANAGEMENT - Employment
Agreements."
</TABLE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR (INDIVIDUAL GRANTS)
Percent of Total
Options Granted Exercise
Number Securities to Employees in or Base Expiration
Name Underlying Option(#) Fiscal Year Price ($/Sh) Date
- ---- -------------------- ----------------- ------------ -----------
<S> <C> <C> <C> <C>
Richard M. Lee 82,500(1) 36.7% $1.00 N/A
Hiram J. Woo 82,500(1) 36.7% $1.00 N/A
Michael Dunmire 35,000(1) 15.5% $5.50 N/A
Rebecca L. Rotman 25,000(1) 11.1% $5.50 N/A
<FN>
- ------------------------------------
(1) Represents non-plan options granted to the employees in connection with their respective Employment Agreements.
See "MANAGEMENT - Employment Agreements".
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL-YEAR AND FISCAL-YEAR END OPTION VALUES
Number of Securities Underlying Value of Unexercised in-the-
Shares Acquired Value Unexercised Options at Fiscal Year Money Options at Fiscal Year
Name On Exercise (#) Realized ($) End (#) Exercisable/Unexercisable End($)Exercisable/Unexercisable(1)
- ---- --------------- ------------ ---------------------------------- ----------------------------------
<S> <C> <C> <C>
Richard M. Lee - 0 - ..... 0 exercisable/82,500 unexercisable $0 exercisable/$144,375 unexercisable
Hiram J. Woo - 0 - ..... 0 exercisable/82,500 unexercisalbe $0 exercisable/$144,375 unexercisable
Michael Dunmire - 0 - ..... 0 exercisable/35,000 unexercisable $0 exercisable/$0 unexercisable
Rebecca L. Rotman - 0 - ..... 0 exercisable/25,000 unexercisable $0 exercisable/$0 unexercisable
<FN>
- ------------------------------------
(1) There was no public trading market for the Common Stock on December 31,
1996. Accordingly, solely for purposes of this table, the values in this
column have been calculated on the basis of fifty percent (50%) of the
proposed initial public offering price, less the aggregate exercise price
of the options.
</TABLE>
29
<PAGE>
EMPLOYMENT AGREEMENTS
On June 3, 1996, the Company entered into a four-year employment agreement
with Richard M. Lee at an annual base salary of $50,000, to be increased to
$100,000 upon the closing of this Offering. Under the employment agreement,
Mr. Lee's employment may not be terminated by the Company without cause. In
addition, Mr. Lee has agreed in his employment agreement not to compete with
the Company for a period of one (1) year following his termination of
employment for any reason. On June 3, 1996, the Company also issued to Mr. Lee
options to purchase up to 82,500 shares of Common Stock at $1.00 per share,
exercisable at the earlier of one year after the closing of this Offering or
June 3, 1998. These options expire three (3) months following any termination
of employment with the Company. Mr. Lee has waived his salary compensation
until the closing date of this Offering. In April 1997, the Company issued
6,250 shares of Common Stock to Mr. Lee in consideration for services rendered
by him to the Company.
On June 3, 1996, the Company entered into a four-year employment agreement
with Hiram Woo at an annual base salary of $45,000, to be increased to $80,000
upon the closing of this Offering. Under the employment agreement, Mr. Woo's
employment may not be terminated by the Company without cause. In addition,
Mr. Woo has agreed in his employment agreement not to compete with the Company
for a period of one (1) year following his termination of employment for any
reason. On June 3, 1996, the Company also issued to Mr. Woo options to purchase
up to 82,500 shares of Common Stock at $1.00 per share, exercisable at the
earlier of one year after the closing of this Offering or June 3, 1998. These
options expire three (3) months following any termination of employment with
the Company. Mr. Woo has waived his salary compensation until the closing date
of this Offering. In April 1997, the Company issued 6,250 shares of Common
Stock to Mr. Woo in consideration for services rendered by him to the Company.
On October 15, 1996, the Company entered into a four-year employment
agreement with Michael Dunmire at an annual base salary of $40,000, to be
increased to $60,000 upon the closing of this Offering. Under the employment
agreement, Mr. Dunmire's employment may not be terminated by the Company without
cause. In addition, Mr. Dunmire has agreed in his employment agreement not to
compete with the Company for a period of three (3) years following his
termination of employment for any reason. The employment agreement provides Mr.
Dunmire with an option, vesting over a period of four years, to purchase up to
35,000 shares of Common Stock at the initial public offering price per share.
These options expire three (3) months following any termination of employment
with the Company.
On October 3, 1996, the Company entered into a four-year employment agr
ement with Rebecca L. Rotman at an annual base salary of $32,000, to be
increased to $50,000 upon the closing of this Offering. Under the employment
agreement, Ms. Rotman's employment may not be terminated by the Company without
cause. In addition, Ms. Rotman has agreed in her employment agreement not to
compete with the Company for a period of three (3) years following her
termination of employment for any reason. The employment agreement provides Ms.
Rotman with an option, vesting over a period of four years, to purchase up to
25,000 shares of Common Stock at the initial public offering price per share.
These options expire three (3) months following any termination of employment
with the Company.
CERTAIN TRANSACTIONS
EMPLOYMENT AGREEMENTS
The Company has entered into separate Employment Agreements with Richard M.
Lee, Hiram J. Woo, Michael Dunmire and Rebecca L. Rotman. See "Management --
Employment Agreements."
CONVERTIBLE NOTES
In June 1996, the Company assumed $92,000 in principal amount of
convertible promissory notes from Texas Loosey's Steakhouse Holdings, Inc.
("Holdings"), an affiliate of Messrs. Lee and Woo, to acquire from Holdings
its right to purchase two (2) Texas Loosey's restaurants from the TL Sellers.
The holders of such notes have agreed to convert the notes held by them into
50,182 shares of Common Stock of the Company at the consummation of this
Offering.
PERSONAL GUARANTEES
Mr. Woo has personally guaranteed the Company's lease agreements for its
Fullerton and Norco locations, as well the Company's vendor debt with Sysco
Food Services and various other vendors.
COMPANY POLICY
The Company believes that each of the foregoing transactions has been on
terms no less favorable to the Company than those that could have been obtained
from unaffiliated parties. It is the Company's intent that, in the future,
transactions with affiliated parties will be approved by a majority of the
Company's disinterested directors or otherwise as permitted by applicable law.
Any such future transactions are expected to be on terms no less favorable to
the Company than could be obtained from unaffiliated parties.
30
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock, as of the date of this Prospectus, by
(i) each person known to the Company to beneficially own more than 5% of the
outstanding shares of Common Stock of the Company, (ii) each director of the
Company and (iii) all directors and officers as a group.
<TABLE>
<CAPTION>
NUMBER PERCENTAGE PERCENTAGE
NAME OF BENEFICIALLY BENEFICIALLY
---- SHARES(1) OWNED PRIOR OWNED AFTER
-------- TO OFFERING OFFERING(5)
------------- ------------
<S> <C> <C> <C>
Richard M. Lee (2)............................................ 565,350 31.1% 17.0%
Hiram J. Woo (3).............................................. 344,250 18.9% 10.4%
JWJ International (4)......................................... 125,000 6.9% 3.8%
All officers and directors as a group (2 persons)............. 909,600 50.0% 27.4%
<FN>
- --------------------
1. Except as otherwise indicated, the Company believes that the beneficial owners
of Common Stock listed above, based on information furnished by such owners,
have sole investment and voting power with respect to such shares, subject to
community property laws where applicable.
2. Does not include an aggregate of 1,000,000 shares of Series B Convertible
Preferred Stock issued to Richard M. Lee, which shares have rights to vote with
the Common Stock as one class on a one-vote-per-share basis. See "Description of
Securities -- Preferred Stock". Mr. Lee's business address is at 151 E.
Alessandro Boulevard, Riverside, California 92508. Does not include options held
by Mr. Lee to acquire up to 82,500 shares of Common Stock. Assumes that the
Underwriters' over-allotment option is not exercised. If the over-allotment
option is exercised, Mr. Lee will own 14.4% of the Common Stock after the
Offering.
3. Mr. Woo's business address is at 151 E. Alessandro Boulevard,
Riverside, California 92508. Does not include options held by Mr. Woo to
acquire up to 82,500 shares of Common Stock. Assumes that the Underwriters'
over-allotment option is not exercised. If the over-allotment option is
exercised Mr. Woo will own 7.9% of the Common Stock after the Offering.
4. JWJ International's business address is at 2242 Mesa Drive, Newport Beach,
California 92660.
5. Assumes that the Underwriters' over-allotment option will not be exercised.
</TABLE>
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 10,000,000 shares of
common stock, $.01 par value (the "Common Stock"), and 5,000,000 shares of
preferred stock, $.001 par value (the "Preferred Stock").
THE FOLLOWING SUMMARIES OF CERTAIN TERMS OF THE COMPANY'S COMMON STOCK AND
PREFERRED STOCK DO NOT PURPORT TO BE COMPLETE AND ARE SUBJECT TO, AND QUALIFIED
IN THEIR ENTIRETY BY, THE PROVISIONS OF THE COMPANY'S CERTIFICATE OF
INCORPORATION AND THE PROVISIONS OF APPLICABLE LAW.
COMMON STOCK
As of the date of this Prospectus, there are 1,818,682 shares of Common
Stock issued and outstanding. Holders of Common Stock are entitled to one vote
for each share held of record on all mat ers submitted to a vote of the
stockholders. Subject to preferences that may be applicable to any then
outstanding Preferred Stock, holders of Common Stock are entitled to receive
ratably such dividends as may be declared by the Board of Directors out of funds
legally available therefor. See "Dividend Policy." In the event of a
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference of any then outstanding Preferred
Stock. Holders of Common Stock have no right to convert their Common Stock into
any other securities. The Common Stock has no preemptive or other subscription
rights. There are no redemption or sinking fund provisions applicable to the
Common Stock. All outstanding shares of Common Stock are duly authorized,
validly issued, fully paid and nonassessable.
31
<PAGE>
PREFERRED STOCK
The Company has issued 1,000,000 shares of Series B Preferred Stock ("Series
B Preferred") to Richard M. Lee. The Series B Preferred is not redeemable and
carries rights to vote with the Common Stock as one class on a
one-vote-per-share basis. The Series B Preferred is convertible into Common
Stock, at the option of the holder, upon the earlier of: (i) eight (8) years
after the closing date of this Offering; or (ii) the first fiscal year of the
Company in which the Company's annual net profits equal or exceed $3.5
million. Upon conversion of the Series B Preferred, the holder will be required
to pay to the Company, in cash, a conversion price (the "Conversion Price") per
share equal to 150% of the initial public offering price of the Company's
Common Stock.
The Series B Preferred carries no dividends prior to the second anniversary
of the closing of this Offering, but thereafter, if the above conversion test is
satisfied, the Series B Preferred will participate in any dividends declared on
the Common Stock, on an "as-converted" basis. The Series B Preferred carries a
liquidation value of $0.001 per share prior to the second anniversary of the
closing of this Offering. Thereafter, if the above conversion test is satisfied,
the Series B Preferred will upon liquidation participate pari passu with the
Common Stock, on an "as-converted" basis.
If and to the extent that the shares of Common Stock issuable upon
conversion of the Series B Preferred are not includable in a registration
statement on Form S-8, at the request of the holders thereof, delivered to the
Company within three years of any such conversion of the Series B Preferred
shares, the Company will prepare and file, at its own expense, one (1)
registration statement on Form S-3 (to the extent available) to enable such
holders to resell shares of Common Stock acquired upon conversion of the Series
B Preferred. The Board of Directors may change or otherwise adjust the terms of
the above-described Series B Preferred Stock in its sole discretion.
The Board of Directors of the Company, without further action by the
stockholders, has authority to issue all or any portion of the additional
4,000,000 shares of authorized but unissued Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences and the number of shares constituting any
series or the designation of such series. The issuance of Preferred Stock could
adversely affect the voting power of holders of the Common Stock and could have
the effect of delaying, deferring or preventing a change in control of the
Company.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. That section provides, with certain exception , that a
Delaware corporation may not engage in any of a broad range of business
combinations with a person or affiliate or associate of such person who is an
"interested stockholder" for a period of three years from the date that such
person became an interested stockholder unless: (i) the transaction resulting in
a person's becoming an interested stockholder, or the business combination, is
approved by the board of directors of the corporation before the person becomes
an interested stockholder, (ii) the interested stockholder acquires 85% or more
of the outstanding voting stock of the corporation in the same transaction that
makes it an interested stockholder (excluding shares held by directors, officers
and certain employee stock ownership plans); or (iii) on or after the date the
person becomes an interested stockholder, the business combination is approved
by the corporation's board of directors and by the holders of at least
66 2/3% of the corporation's outstanding voting stock at an annual or special
meeting, excluding shares owned by the interested stockholder. An "interested
stockholder" is defined to include any person, and the affiliates and
associates of such person that (i) is the owner of 15% or more of the
outstanding voting stock of the corporation or (ii) is an affiliate or
associate of the corporation and was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the three-year
period immediately prior to the date on which it is sought to be determined
whether such person is an interested stockholder.
32
<PAGE>
WARRANTS
In connection with the completion of this Offering, for nominal
consideration the Company will grant to the Underwriters, Underwriters' Warrants
to purchase 150,000 shares of Common Stock at an initial exercise price of 120%
of the initial public offering price of the Shares sold in this Offering. The
Underwriters' Warrants are exercisable for a period of four years commencing one
year from the date of this Prospectus. The shares of Common Stock issuable upon
exercise of the Underwriters' Warrants are identical to the Shares being sold in
this Offering. The Underwriters' Warrants contain anti-dilution provisions
providing for adjustment in the number of Warrants and the exercise price
thereof under certain circumstances. The Underwriters' Warrants also grant the
holders thereof certain rights of registration of the shares of Common Stock
issuable upon exercise of such Warrants. The Company is registering the
Underwriters' Warrants, as well as the underlying Common Stock, pursuant to the
Registration Statement of which this Prospectus forms a part. See
"Underwriting."
TRANSFER AGENT
The transfer agent for the Company's Common Stock is ____________.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding an
aggregate of 3,318,685 shares of Common Stock which includes the 1,500,000
shares offered hereby. See "Underwriting." Upon completion of the Offering, the
1,500,000 Shares issued in the Offering will be freely transferable without
restriction under the Securities Act (excluding any shares purchased in the
Offering by any person who is or thereby becomes an "affiliate" of the
Company). All of the 1,818,685 shares outstanding immediately prior to the
Offering were issued in private placements without registration under the
Securities Act and, therefore, are "restricted securities" as that term is
defined in Rule 144 under the Securities Act.
Of the 1,818,685 shares outstanding immediately prior to the Offering,
245,000 shares (the "Selling Securityholders Securities") are being registered
for resale pursuant to the Registration Statement of which this Prospectus
forms a part. So long as such shares remain subject to an effective
registration statement, and following any sale pursuant thereto, such shares
will be freely transferable without restriction under the Securities Act
(subject to the contractual restrictions that the holders thereof may not sell,
transfer, assign, pledge or hypothecate their shares without the prior written
consent of the Underwriters until one (1) year after the effective date of
the Registration Statement of which this Prospectus forms a part). See
"Underwriting" and "Concurrent Offering." The remaining 1,573,685 shares of
Common Stock outstanding prior to this Offering are "restricted securities" as
that term is defined under Rule 144. In addition, Messrs. Lee and Woo have
agreed not to sell, transfer, assign, pledge or hypothecate any securities of
the Company owned by them until two (2) years after the effective
date of the Registration Statement of which this Prospectus forms a part,
without the prior written consent of the Underwriters.
In general, under Rule 144, as currently in effect, a person (or persons whose
shares are aggregated) who has satisfied a one-year holding period may sell
within any three-month period a number of restricted shares which does not
exceed the greater of 1% of the then outstanding shares of such class of
securities or the average weekly trading volume during the four calendar weeks
prior to such sale. Sales under Rule 144 are also subject to certain
requirements as to the manner of sale, notice and the availability of current
public information about the Company. Rule 144 also permits, under certain
circumstances, the sale of shares by a person who is not an affiliate of the
Company with respect to restricted securities that satisfy a two-year holding
period, without regard to the volume or other resale limitations.
The Company is unable to predict the effect that sales of the Selling
Securityholders Securities, the Underwriter's Warrants or the shares underlying
such Underwriters' Warrants or sales under Rule 144 may have on the then
prevailing market price of the Common Stock, but such sales may have a
substantial depressing effect on such market price. The 1,573,685 shares of
Common Stock that will be "restricted securities" immediately subsequent to the
Offering will become eligible for sale at various times beginning 90 days after
the date of this Prospectus. See "Risk Factors."
33
<PAGE>
UNDERWRITING
The underwriters named below (the "Underwriters") have agreed, subject to the
terms and conditions of the Underwriting Agreement among the Company and
Nichols, Safina, Lerner & Co., Inc. and William Scott & Co., L.L.C., as
Representatives of the several Underwriters, to purchase from the Company the
number of Shares set forth below opposite their names:
Number
of
Name of Underwriter Shares
------------------ -------
Nichols, Safina, Lerner & Co., Inc.
William Scott & Co. L.L.C. . . . . .
--------
Total
The Underwriters are committed to purchase and pay for all of the Shares
offered hereby if any are purchased. The Common Stock is being offered by the
Underwriters subject to prior sale, when, as and if delivered to and accepted by
the Underwriters and subject to approval of certain legal matters by counsel and
to certain other conditions, such as no adverse changes in the Company and
market conditions.
The Underwriters have advised the Company that they propose to offer the
Common Stock to the public at the initial public offering price set forth on
the cover page of this Prospectus. The Underwriters may allow to certain
dealers who are members of the NASD concessions, not in excess of $0. per
share, of which not in excess of $0. per share may be reallowed to other
dealers who are members of the NASD. After the commencement of the Offering,
the public offering price, concession and reallowance may be changed by the
Underwriters.
The Company and two (2) management stockholders have granted the
Underwriters an over-allotment option, exercisable during the 30-day period
commencing with the date of the Underwriting Agreement, to purchase from the
Company and such stockholders at the initial offering price less underwriting
discounts, up to an aggregate of 75,000 additional shares of Common Stock from
the Company and 150,000 additional shares from such stockholders, for the sole
purpose of covering over-allotments, if any. The Company and such stockholders
will be obligated, pursuant to this over-allotment option, to sell such
additional shares to the Underwriters.
The Company has agreed to pay to the Underwriters a non-accountable expense
allowance of 3% of the gross proceeds of the Offering, of which $20,000 has been
paid as of the date of this Prospectus. The Company has also agreed to pay all
expenses in connection with qualifying the Common Stock offered hereby for sale
under the laws of such states as the Underwriters may designate, including
expenses of counsel retained for such purpose by the Underwriters.
In connection with the Offering, the Company has agreed to sell to the
Underwriters, for $0.001 per Warrant, the Underwriter's Warrants. The
Underwriter's Warrants initially are exercisable at a price of 120% of the per
share initial public offering price of the Shares offered hereby, for a period
of four years commencing one year from the date of this Prospectus. The shares
of Common Stock issuable upon exercise of the Underwriter's Warrants are
identical to the Shares being sold in this Offering. The Underwriter's Warrants
contain anti-dilution provisions providing for adjustment in the number of
Warrants and the exercise price thereof under certain circumstances. The
Underwriter's Warrants also grant the holders thereof certain rights of
registration of the shares of Common Stock issuable upon exercise of such
Warrants. The Company is registering the Underwriter's Warrants, as well as the
underlying Common Stock, pursuant to the Registration Statement of which this
Prospectus forms a part.
34
<PAGE>
The Underwriters have the right to designate one member of the Board of
Directors for a period of three (3) years commencing with the closing of the
Offering or, at their option, to designate a non-director observer to the Board
of Directors.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
The Underwriters have informed the Company that they do not expect sales to
any accounts over which they exercise discretionary authority to exceed 5% of
the shares of Common Stock offered by the Company.
In addition, the Selling Securityholders have agreed not to transfer, assign
or sell, any of their shares of Common Stock (representing a total of 245,000
shares, or approximately 7.5% of the shares of Common Stock to be outstanding
immediately after the Offering) for a period of one (1) year following the
closing of the Offering without the Underwriters' consent. In addition, Messrs.
Lee and Woo have agreed not to transfer, assign or sell any securities of
the Company to be owned by them after the Offering for a period of two (2)
years, without the Underwriters' prior written consent.
The Company has agreed with the Underwriters that, except as described in this
Prospectus, for a period of 90 days from the date of this Prospectus, it will
not issue any securities or grant options or warrants to purchase any securities
of the Company without the consent of the Underwriters.
The foregoing does not purport to be a complete statement of the terms and
conditions of the Underwriting Agreement and related documents, copies of which
are on file at the offices of the Company and the Commission. See "Additional
Information."
PRICING THE OFFERING
Prior to this Offering, there has been no public market for any of the
Company's securities. Consequently, the initial public offering price of the
Common Stock has been determined by negotiation between the Company and the
Underwriters. Factors to be considered in determining such price, in addition
to prevailing market conditions, include an assessment of the Company's
prospects. The public offering price of the Shares does not necessarily bear
any relationship to the Company's asset value, earnings, net financial
condition, or other established criteria of value applicable to the Company and
should not be regarded as an indication of the actual value or future market
price of the Shares. Such prices are subject to change as a result of market
conditions and other factors, and no assurance can be given that the Shares can
be resold at its public offering price.
CONCURRENT OFFERING
Concurrently with the offering, the Company is also registering for resale,
from time to time, on behalf of the owners thereof, the Selling Securityholder
Securities consisting of 245,000 shares of Common Stock acquired by the holders
thereof in the Company's prior private placements, subject to the contractual
restrictions that the Selling Securityholders may not sell, transfer, assign,
pledge or hypothecate their shares until the later of one (1) year after the
effective date of the Registration Statement of which this Prospectus forms a
part. The Company will not receive any proceeds from the sale of securities
by the Selling Securityholders.
In addition, 150,000 shares of Common Stock to be sold by two (2) management
stockholders (namely, Messrs. Lee and Woo) as part of the Underwriters'
over-allotment option, if the option is exercised, will be registered.
In the event the Underwriters elect to exercise the over-allotment option,
the Underwriters will purchase the first 150,000 shares of Common Stock under
such option from the two (2) management stockholders at the initial offering
price. If the Underwriters exercise the over-allotment option for less than
150,000 shares of Common Stock, the Underwriters will purchase shares from such
stockholders on a pro rata basis. If all 150,000 shares are purchased by the
Underwriters, Messrs. Lee and Woo will own 14.4% and 7.9%, respectively, of
the outstanding shares of Common Stock upon completion of the Offering. The
Company will not receive any proceeds from the sale of securities by Messrs.
Lee and Woo.
LEGAL MATTERS
The validity of the securities offered hereby has been passed upon for the
Company by Lehman & Eilen, Uniondale, New York. The Law Offices of David N.
Feldman, Esq., New York, New York, will pass upon certain legal matters for the
Underwriters. Hank Gracin, Esq., counsel to Lehman & Eilen, owns 10,000 shares
of common stock of the Company.
35
<PAGE>
EXPERTS
The audited financial statements of TLC Restaurant Management Corp. for the
period from December 31, 1995 through August 18, 1996 and the year ended
December 30, 1995 and Galveston's Steakhouse Corp. for the period from
inception (June 3, 1996) through December 31, 1996 included in this Prospectus
and elsewhere in the registration statement have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports
with respect thereto, and are included herein in reliance upon the authority
of said firm as experts in giving said reports. Reference is made to said
reports which include explanatory paragraphs that state substantial doubt
about the Companys' ability to continue as a going concern, as described in
Notes 1 and 2 to the audited financial statements of TLC Restaurant Management
Corp. and Galveston's Steakhouse Corp.
ADDITIONAL INFORMATION
The Company has filed with the Commission a registration statement under the
Securities Act with respect to the securities offered by this Prospectus. As
permitted by the rules and regulations of the Commission, this Prospectus does
not contain all the information set forth in the Registration Statement and the
exhibits thereto. For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statement and
the exhibits thereto, which may be examined without charge at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or at the Regional Offices of the Commission at 7 World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such materials may be obtained from the Public Reference Section of the
Commission in Washington, D.C. upon payment of the prescribed fees. In addition,
such materials may be accessed electronically at the Commission's site on the
World Wide Web, located at http://www.sec.gov. Statements contained in this
Prospectus as to the contents of any contract or other documents referred to
herein are not necessarily complete, and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
The Company will, upon completion of the Offering, be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
and, in accordance therewith, will file reports and other information with the
Commission. Such reports and other information may be inspected and copied at
the public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such materials can be obtained at prescribed
rates from the Commission at such address.
================================================================================
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, BY ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER,
SOLICITATION OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE OF THE PROSPECTUS.
---------------
TABLE OF CONTENTS
Page
----
Prospectus Summary................
Risk Factors......................
Dilution..........................
Use of Proceeds...................
Capitalization....................
Dividend Policy...................
36
<PAGE>
Management's Discussion and Analysis
or Plan of Operation............
Business..........................
Management........................
Certain Transactions..............
Principal Stockholders............
Description of Securities.........
Shares Eligible for Future Sale...
Underwriting......................
Concurrent Offering...............
Legal Matters.....................
Experts...........................
Additional Information............
Index to Financial Statements..... F-1
---------------
UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
================================================================================
================================================================================
1,500,000 SHARES
GALVESTON'S STEAKHOUSE CORP.
COMMON STOCK
---------------
PROSPECTUS
---------------
NICHOLS, SAFINA, LERNER & CO., INC.
WILLIAM SCOTT & CO., L.L.C.
, 1997
================================================================================
37
<PAGE>
ALTERNATIVE PROSPECTUS
245,000 SHARES
GALVESTON'S STEAKHOUSE CORP.
COMMON STOCK
---------------
This Prospectus relates to 245,000 shares of the Common Stock, $.01 par value,
of Galveston's Steakhouse Corp., a Delaware corporation (the "Company"), issued
to the holders thereof in private placements by the Company. The shares of
Common Stock referred to above are sometimes referred to herein as the "Selling
Securityholders Securities" and the holders thereof as the "Selling
Securityholders."
The securities offered by the Selling Securityholders pursuant to this
Prospectus may be sold from time to time by the Selling Securityholders or by
their transferees. The distribution of the securities offered hereby by the
Selling Securityholders may be effected in one or more transactions that may
take place on the over-the-counter market, including ordinary brokers'
transactions, privately negotiated transactions or through sales to one or more
dealers for resale of such securities as principals, at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. Usual and customary or specifically negotiated brokerage fees
or commissions may be paid by the Selling Securityholders.
The Selling Securityholders, and intermediaries through whom such securities
are sold, may be deemed underwriters within the meaning of the Securities Act
of 1933, as amended (the "Securities Act"), with respect to the securities
offered, and any profits realized or commissions received may be deemed
underwriting compensation. The Company has agreed to indemnify the Selling
Securityholders against certain liabilities, including liabilities under the
Securities Act.
On the date of this Prospectus, a registration statement under the Securities
Act with respect to an underwritten public offering by the Company (the
"Offering") of 1,500,000 shares of Common Stock, (including 225,000 such shares
to cover over-allotments, if any) was declared effective by the Securities and
Exchange Commission (the "Commission"). The Company expects to receive
approximately $6,902,500 in net proceeds from the Offering (assuming no exercise
of the Underwriters' over-allotment option) after payment of underwriting
discounts and commissions and estimated expenses of the Offering. The Company
will not receive any proceeds from the sale of the Selling Securityholders
Securities by the Selling Securityholders.
---------------
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH DEGREE
OF RISK AND SUBSTANTIAL DILUTION. INVESTMENT IN THESE SECURITIES SHOULD BE MADE
ONLY BY INVESTORS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. POTENTIAL
PURCHASERS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER "RISK FACTORS"
BEGINNING ON PAGE 6.
---------------
38
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1997
39
<PAGE>
SELLING SECURITYHOLDERS
An aggregate of up to 245,000 shares of Common Stock may be offered for resale
by the Selling Securityholders.
The following table sets forth certain information with respect to each
Selling Securityholder for whom the Company is registering Common Stock for
resale to the public. Each of the Selling Securityholders is offering for sale
all of the Common Stock beneficially owned thereby. The Company will not
receive any of the proceeds from the sale of Common Stock by the Selling
Securityholders.
There are no material relationships between any of the Selling Securityholders
and the Company or any of its predecessors or affiliates, nor have any such
material relationships existed within the past three years.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
OF TO BE OWNED
COMMON STOCK OWNED AFTER COMPLETION
AND MAXIMUM NUMBER OF OFFERING(1)
SELLING SECURITYHOLDERS TO BE SOLD
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
JWJ Int'l.................................................. 125,000 3.8%
Brian N. Sly Separate Property Trust
Sly Family Trust........................................... 24,000 .72%
M. Jenkins Cromwell........................................ 6,000 .18%
Tony Varvara............................................... 6,000 .18%
Alan Rosenbaum............................................. 6,000 .18%
Allan Carter............................................... 6,000 .18%
Charles P. McWade.......................................... 6,000 .18%
Phil Dean, Jr.............................................. 6,000 .18%
Elizabeth Henderson........................................ 6,000 .18%
Jerome E. Collins.......................................... 6,000 .18%
Trager, Kevy & Trager Self Employment Plan................. 6,000 .18%
Ezio and Jeanne Rossi...................................... 6,000 .18%
Robert L. Newton........................................... 6,000 .18%
Scott Page................................................. 6,000 .18%
David Lee.................................................. 6,000 .18%
NST Partnership............................................ 6,000 .18%
Steven Gershkoff........................................... 6,000 .18%
Ned Pascucci............................................... 6,000 .18%
<FN>
(1) Assumes no sale of Selling Securityholders Securities after completion of the Offering. The Selling
Securityholders have agreed not to sell, transfer, assign, pledge or hypothecate their shares in any manner
without the prior written consent of the Underwriters until one (1) year from the effective date of the
Registration Statement of which this Prospectus forms a part. Also assumes the Underwriters' over-allotment
option is not exercised.
</TABLE>
PLAN OF DISTRIBUTION
The sale of the Selling Securityholder Securities by the Selling
Securityholders may be effected from time to time in transactions (which may
include block transactions by or for the account of the Selling
Securityholders) in the over-the-counter market or in negotiated transactions,
through the writing of options on the securities, a combination of such methods
of sale or otherwise. Sales may be made at fixed prices which may be changed,
at market prices prevailing at the time of sale or at negotiated prices.
The Selling Securityholders may effect such transactions by selling their
securities directly to purchasers, through broker-dealers acting as agents for
the Selling Securityholders or to broker-dealers who may purchase shares as
principals and thereafter sell the securities from time to time in the
over-the-counter market in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Securityholders or the purchasers
for whom such broker-dealers may act as agents or to whom they may sell as
principals or otherwise (which compensation as to a particular broker-dealer may
exceed customary commissions).
The Selling Securityholders have agreed not to sell, transfer, assign, pledge
or hypothecate their shares in any manner without the prior written consent of
the Underwriters until one (1) year from the effective date of
40
<PAGE>
the Registration Statement of which this Prospectus forms a part.
The Selling Securityholders and broker-dealers, if any, acting in connection
with such sale might be deemed to be underwriters within the meaning of Section
2(11) of the Securities Act and any commission received by them and any profit
on the resale of the securities might be deemed to be underwriting discounts and
commissions under the Securities Act.
CONCURRENT PUBLIC OFFERING
On the date of this Prospectus, a Registration Statement was declared
effective under the Securities Act with respect to an underwritten offering by
the Company of 1,500,000 shares of Common Stock and up to 225,000 additional
shares of Common Stock to cover over-allotments, if any.
The sale of the Selling Securityholder Securities by the Selling
Securityholders may be effected from time to time in transactions (which may
include block transactions by or for the account of the Selling
Securityholders) in the over-the-counter market or in negotiated transactions,
through the writing of options on the securities, a combination of such methods
of sale or otherwise. Sales may be made at fixed prices which may be changed,
at market prices prevailing at the time of sale or at negotiated prices.
The Selling Securityholders may effect such transactions by selling their
securities directly to purchasers, through broker-dealers acting as agents for
the Selling Securityholders or to broker-dealers who may purchase shares as
principals and thereafter sell the securities from time to time in the
over-the-counter market in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Securityholders or the purchasers
for whom such broker-dealers may act as agents or to whom they may sell as
principals or otherwise (which compensation as to a particular broker-dealer may
exceed customary commissions).
The Selling Securityholders have agreed not to sell, transfer, assign, pledge
or hypothecate their shares in any manner without the prior written consent of
the Underwriters until one (1) year from the effective date of the Registration
Statement of which this Prospectus forms a part.
The Selling Securityholders and broker-dealers, if any, acting in connection
with such sale might be deemed to be underwriters within the meaning of Section
2(11) of the Securities Act and any commission received by them and any profit
on the resale of the securities might be deemed to be underwriting discounts and
commissions under the Securities Act.
41
<PAGE>
[ALTERNATE PAGE]
================================================================================
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF ANY
OFFER TO BUY, ANY SECURITIES OFFERED HEREBY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER, OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN CONTAINED IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
---------------
TABLE OF CONTENTS
Page
-----
Prospectus Summary................
Risk Factors......................
Dividend Policy...................
Management's Discussion and Analysis
or Plan of Operation............
Business..........................
Management........................
Certain Transactions..............
Description of Securities.........
Principal Stockholders............
Shares Eligible for Future Sale...
Selling Securityholders...........
Plan of Distribution..............
Concurrent Public Offering........
Legal Matters.....................
Experts...........................
Additional Information............
Index to Financial Statements..... F-1
================================================================================
================================================================================
42
<PAGE>
245,000 SHARES
GALVESTON'S STEAKHOUSE CORP.
COMMON STOCK
---------------
PROSPECTUS
---------------
, 1997
================================================================================
43
<PAGE>
INDEX TO FINANCIAL STATEMENTS
TLC Restaurant Management Corp. for the period from
December 31, 1995 through August 18, 1996, and the year
ended December 30, 1995.......................................... F-2
Report of Independent Public Accountants....................... F-3
Balance Sheet.................................................. F-4
Statement of Operations........................................ F-6
Statement of Stockholders' Deficit............................. F-7
Statements of Cash Flow........................................ F-8
Supplemental Disclosure of Cash Flow........................... F-9
Notes to Financial Statements.................................. F-10
Galveston's Steakhouse Corp. for the period from inception
(June 3, 1996) through December 31, 1996......................... F-12
Report of Independent Public Accountants....................... F-13
Balance Sheet.................................................. F-14
Statement of Operations........................................ F-16
Statement of Stockholders' Deficit............................. F-17
Statement of Cash Flows........................................ F-18
Supplemental Disclosure of Cash Flow........................... F-19
Notes to Financial Statements.................................. F-20
Galveston's Steakhouse Corp. for the quarter ended
March 31, 1997 (unaudited)....................................... F-29
Balance Sheet.................................................. F-30
Statement of Operations........................................ F-32
Statement of Stockholders' Deficit............................. F-33
Statement of Cash Flows........................................ F-34
Supplemental Disclosure of Cash Flow........................... F-35
Notes to Financial Statements.................................. F-36
F-1
<PAGE>
TLC RESTAURANT MANAGEMENT CORP.
FINANCIAL STATEMENTS
FOR THE PERIOD FROM DECEMBER 31, 1995
THROUGH AUGUST 18, 1996 AND
THE YEAR ENDED DECEMBER 30, 1995
TOGETHER WITH AUDITORS' REPORT
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Management of the
TLC Restaurant Management Corp.:
We have audited the accompanying balance sheet of TLC RESTAURANT MANAGEMENT
CORP. (a California corporation) as of December 30, 1995, and the related
statements of operations, stockholder's deficit and cash flows for the period
from December 31, 1995 through August 18, 1996 and the year ended December 30,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of TLC Restaurant Management
Corp. as of December 30, 1995, and the results of its operations and its cash
flows for the period from December 31, 1995 through August 18, 1996 and the
year ended December 30, 1995, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. Since commencing operations, the
Company has incurred substantial operating losses, resulting in a deficiency in
stockholder's equity. As further discussed in Note 1, on August 19, 1996,
Galveston's Steakhouse Corp. ("Galveston's") purchased all the assets of the
Company. Under the new ownership of Galveston's, the Company continued to incur
operating losses during the period from August 19, 1996 through December 31,
1996. Galveston's has plans to raise approximately $7 million to $8 million of
additional capital through a public offering of its common stock. There can be
no assurance that Galveston's will be successful in raising sufficient capital
to meet its needs and even if it does raise additional capital, there can be no
assurance that it will achieve successful operations. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
The accompanying financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
ARTHUR ANDERSEN LLP
Orange County, California
February 14, 1997
F-3
<PAGE>
TLC RESTAURANT MANAGEMENT CORP.
BALANCE SHEET - DECEMBER 30, 1995
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash $ 6,367
Inventories 30,511
Prepaid expenses 2,757
Other current assets 3,975
----------
Total current assets 43,610
----------
PROPERTY AND EQUIPMENT:
Furniture, fixtures and equipment 561,232
Leasehold improvements 471,892
----------
1,033,124
Less--Accumulated depreciation and amortization (1,012,827)
----------
20,297
----------
OTHER ASSETS:
Liquor licenses and other 38,546
----------
Total assets $ 102,453
==========
</TABLE>
The accompanying notes are an integral part of
this balance sheet.
F-4
<PAGE>
TLC RESTAURANT MANAGEMENT CORP.
BALANCE SHEET - DECEMBER 30, 1995
LIABILITIES AND STOCKHOLDER'S DEFICIT
<TABLE>
<S> <C>
CURRENT LIABILITIES:
Note payable $ 5,619
Accounts payable 49,995
Accrued liabilities 30,642
Accrued payroll and sales tax 202,543
---------
Total current liabilities 288,799
---------
LONG-TERM LIABILITIES:
Pre-petition liabilities 283,657
Note payable-officer 161,749
---------
Total long-term liabilities 445,406
---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S DEFICIT:
Common stock, $.05 par value, 1,000,000 shares
authorized, 10,000 shares issued and
outstanding at December 30, 1995 500
Paid-in capital 152,660
Accumulated deficit (784,912)
---------
Total stockholder's deficit (631,752)
---------
Total liabilities and stockholder's deficit $ 102,453
=========
</TABLE>
The accompanying notes are an integral part of
this balance sheet.
F-5
<PAGE>
TLC RESTAURANT MANAGEMENT CORP.
STATEMENTS OF OPERATIONS FOR THE PERIOD FROM
DECEMBER 31, 1995 THROUGH AUGUST 18, 1996
AND THE YEAR ENDED DECEMBER 30, 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
REVENUES $1,096,262 $2,063,364
---------- ----------
RESTAURANT COSTS:
Food and beverage 340,556 600,244
Payroll 457,182 780,365
Direct operating 324,910 698,569
Depreciation and amortization 21,890 87,031
---------- ----------
1,144,538 2,166,209
---------- ----------
OPERATING LOSS (48,276) (102,845)
---------- ----------
OTHER (INCOME) EXPENSES:
General and administrative expenses 103,271 408,179
Interest expense 10,459 11,605
Other (1,312) (2,110)
---------- ----------
112,418 417,674
---------- ----------
NET LOSS $ (160,694) $ (520,519)
========== ==========
NET LOSS PER SHARE $ (16.07) $ (52.05)
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 10,000 10,000
========== ==========
</TABLE>
The accompanying notes are an integral part of
these statements.
F-6
<PAGE>
TLC RESTAURANT MANAGEMENT CORP.
STATEMENT OF STOCKHOLDER'S DEFICIT
FOR THE PERIOD FROM DECEMBER 31, 1995
THROUGH AUGUST 18, 1996
AND THE YEAR ENDED DECEMBER 30, 1995
<TABLE>
<CAPTION>
Common Stock
----------------------- Additional
Number of Paid-in Accumulated
Shares Amount Capital Deficit Total
--------- ------ -------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994 10,000 $500 $152,660 $(264,393) $(111,233)
Net loss - - - (520,519) (520,519)
------ ---- -------- --------- ---------
BALANCE, December 30, 1995 10,000 500 152,660 (784,912) (631,752)
Net loss - - - (160,694) (160,694)
------ ---- -------- --------- ---------
BALANCE, August 18, 1996 10,000 $500 $152,660 $(945,606) $(792,446)
====== ==== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
TLC RESTAURANT MANAGEMENT CORP.
STATEMENTS OF CASH FLOWS FOR THE PERIOD FROM
DECEMBER 31, 1995 THROUGH AUGUST 18, 1996
AND THE YEAR ENDED DECEMBER 30, 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(160,694) $(520,519)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 21,890 87,031
(Increase) decrease in:
Accounts receivable - 77,251
Inventories 987 30,811
Supplies and prepaid expenses (6,670) 6,598
Other current assets 2,143 (3,975)
Liquor licenses and other - 65,449
Increase (decrease) in:
Accounts payable 18,421 12,596
Accrued liabilities 15,446 (3,277)
Accrued payroll costs 131,765 185,256
Pre-petition liabilities - (4,739)
--------- ---------
Net cash provided by (used in)
operating activities 23,288 (67,518)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment - (5,404)
Purchase of leasehold improvements - (2,371)
--------- ---------
Net cash used in investing
activities - (7,775)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in note payable (3,567) (5,363)
(Decrease) increase in note payable-officer (13,933) 73,634
--------- ---------
Net cash provided by (used in)
financing activities (17,500) 68,271
--------- ---------
NET INCREASE (DECREASE) IN CASH 5,788 (7,022)
CASH, beginning of year 6,367 13,389
--------- ---------
CASH, end of year $ 12,155 $ 6,367
========= =========
</TABLE>
The accompanying notes are an integral part of
these statements.
F-8
<PAGE>
<TABLE>
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for-
Interest $10,459 $11,605
Income taxes $ - $ -
</TABLE>
The accompanying notes are an integral part of
these statements.
F-9
<PAGE>
TLC RESTAURANT MANAGEMENT CORP.
NOTES TO FINANCIAL STATEMENTS
AUGUST 18, 1996 AND DECEMBER 30, 1995
1. Company Background and Risk Factors
TLC Restaurant Management Corp. (the "Company"), a California
corporation, was organized on March 25, 1987. The Company owns and
operates two Texas Loosey's restaurants located in Fullerton and
Torrance, California. Texas Loosey's is a casual dining restaurant
with a wide variety of menu choices, ranging from mexican dishes to
steak dinners.
On August 19, 1996, Galveston's Steakhouse Corp., purchased
substantially all of the assets of the Company and certain intangible
assets for a purchase price of $1,520,000. The operating results of
the restaurants through August 18, 1996, are included in the
accompanying financial statements. The operating results of the two
restaurants from August 19, 1996 through December 31, 1996, are
included in the Galveston's Steakhouse Corp. financial statements,
included elsewhere in this prospectus.
The Company has incurred operating losses of $160,694 and $520,519
for the period from December 31, 1995 through August 18, 1996 and
the year ended December 30, 1995, respectively, and has an accumulated
deficit of $784,912 at December 30, 1995. Additionally, the Company
has negative working capital of $245,189 at December 30, 1995. Under
the new ownership of Galveston's, the Company continued to incur
operating losses during the period from August 19, 1996 through
December 31, 1996. Galveston's has plans to raise approximately $7
million to $8 million of additional capital through a public offering
of its common stock. There can be no assurance that Galveston's will
be successful in raising sufficient capital to meet its needs and even
if it does raise additional capital, there can be no assurance that it
will achieve successful operations.
Both of the Company's restaurants are located in Southern California
and are therefore susceptible to fluctuations in their business caused
by adverse economic conditions or other conditions in that region.
The Company operates in a highly competitive industry. Many of the
Company's competitors have been in existence longer than the Company,
have a more established market presence and have substantially
greater financial, marketing, and other resources than the Company,
which may give them certain competitive advantages.
These factors raise substantial doubt about the Company's ability
to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of
these uncertainties.
2. Summary of Significant Accounting Policies
a. Fiscal Year-End
The Company reports its operations on a 52-53 week fiscal year ending
on the Sunday closest to December 31.
b. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities at the date of the financial statements, and the reported
amounts of revenue and expenses during the reported period. Actual
results could differ from those estimates.
c. Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and in banks and
credit card receivables. Credit card receivables are considered cash
equivalents because of their short collection period. The carrying
amount of credit card receivables approximates their fair value.
d. Inventories
Inventories, consisting principally of food, beverages and restaurant
supplies, are valued at the lower of cost (first-in, first-out) or
market.
F-10
<PAGE>
e. Property and Equipment
Property and equipment, including leasehold improvements, are recorded
at cost. Depreciation is computed by the straight-line method over the
estimated useful lives of the assets. Leasehold improvements are
amortized using the straight-line method over the shorter of the
useful life of the improvements or the remaining lease term.
f. Liquor License and Other Assets
Liquor licenses and other assets consist of the Company's liquor
licenses for the Fullerton and Torrance restaurants and miscellaneous
rent deposits.
g. Pre-petition Liabilities
Pre-petition liabilities represent the remaining liabilities of the
Company after its 1993 bankruptcy filing.
h. New Accounting Pronouncements
The Company adopted SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" on
December 31, 1995. This standard requires that long-lived assets and
certain identifiable intangibles held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The
adoption of this standard did not have a material effect on the
financial statements.
3. Commitments
Texas Loosey's leases its Torrance and Fullerton facilities under operating
leases. These leases mature at various dates through 2004. Both the Torrance
and Fullerton leases have two five year options to renew. For the year ended
December 30, 1995, total rental expense, including associated common area
maintenance charges, was $182,188.
Future minimum lease payments for facilities under noncancellable operating
leases are as follows:
Year ending:
December 29, 1996 $ 185,000
December 28, 1997 174,000
December 27, 1998 164,000
December 26, 1999 166,000
December 31, 2000 100,000
Thereafter 293,000
----------
$1,082,000
==========
In addition, the Company leases certain minor equipment under operating leases.
F-11
<PAGE>
GALVESTON'S STEAKHOUSE CORP.
(FORMERLY TEXAS LOOSEY'S STEAKHOUSE
AND SALOON, INC.)
FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION (JUNE 3, 1996)
THROUGH DECEMBER 31, 1996
TOGETHER WITH AUDITORS' REPORT
F-12
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Management of
Galveston's Steakhouse Corp.:
We have audited the accompanying balance sheet of GALVESTON'S STEAKHOUSE CORP.
(a California corporation) as of December 31, 1996, and the related statements
of operations, stockholders' deficit and cash flows for the period from
inception (June 3, 1996) through December 31, 1996. These statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Galveston's Steakhouse Corp. as
of December 31, 1996 and the results of its operations and its cash flows for
the period from inception (June 3, 1996) through December 31, 1996, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. Since commencing operations, the
Company has incurred substantial losses, resulting in a deficiency in
stockholders' equity. As further discussed in Note 2, the Company has plans to
raise approximately $7 million to $8 million in additional capital through a
public offering of its common stock. There can be no assurance that the Company
will be successful in raising sufficient capital to meet its needs and even if
the Company does raise additional capital, there can be no assurance that it
will achieve successful operations. These factors raise substantial doubt about
the Company's ability to continue as a going concern. The accompanying
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
ARTHUR ANDERSEN LLP
Orange County, California
February 14, 1997
F-13
<PAGE>
GALVESTON'S STEAKHOUSE CORP.
BALANCE SHEET - DECEMBER 31, 1996
ASSETS
<TABLE>
<CAPTION>
<S> <C>
CURRENT ASSETS:
Cash $ 46,439
Receivables 79,235
Inventories 30,291
Prepaid expenses 6,425
----------
Total current assets 162,390
----------
PROPERTY AND EQUIPMENT:
Furniture, fixtures and equipment 117,753
Leasehold improvements 511,857
----------
629,610
Less--Accumulated depreciation and amortization (17,089)
----------
612,521
----------
OTHER ASSETS:
Intangible assets, net of accumulated
amortization of $24,578 969,094
Liquor licenses and other 56,300
----------
Total assets $1,800,305
==========
</TABLE>
The accompanying notes are an integral part of
this balance sheet.
F-14
<PAGE>
GALVESTON'S STEAKHOUSE CORP.
BALANCE SHEET - DECEMBER 31, 1996
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
<S> <C>
CURRENT LIABILITIES:
Notes payable $1,469,972
Accounts payable 37,018
Accrued liabilities 78,162
Accrued interest 69,488
Accrued payroll costs 40,854
----------
Total current liabilities 1,695,494
----------
LONG-TERM DEBT 870,000
----------
Total long-term liabilities 870,000
----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value, 5,000,000 shares
authorized, 1,000,000 shares issued
and outstanding at December 31, 1996 1,000
Common stock, $.01 par value, 10,000,000 shares
authorized, 1,588,000 shares issued
and outstanding at December 31, 1996 15,880
Paid-in capital 160,483
Accumulated deficit (942,552)
----------
Total stockholders' deficit (765,189)
----------
Total liabilities and stockholders' deficit $1,800,305
==========
</TABLE>
The accompanying notes are an integral part of
this balance sheet.
F-15
<PAGE>
GALVESTON'S STEAKHOUSE CORP.
STATEMENT OF OPERATIONS FOR THE PERIOD
FROM INCEPTION (JUNE 3, 1996) THROUGH DECEMBER 31, 1996
<TABLE>
<S> <C>
REVENUES $ 416,544
---------
RESTAURANT COSTS:
Food and beverage 153,592
Payroll 255,463
Direct operating 116,819
Depreciation and amortization 17,089
---------
542,963
---------
OPERATING LOSS (126,419)
---------
OTHER (INCOME) EXPENSES:
General and administrative expenses 136,467
Pre-opening and start-up costs 433,694
Interest and financing costs 271,373
Amortization expense 24,578
Other (49,979)
---------
816,133
---------
NET LOSS $(942,552)
=========
NET LOSS PER SHARE $ (0.64)
=========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,480,330
=========
</TABLE>
The accompanying notes are an integral part of
these statements.
F-16
<PAGE>
GALVESTON'S STEAKHOUSE CORP.
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM INCEPTION (JUNE 3, 1996) THROUGH DECEMBER 31, 1996
<TABLE>
<CAPTION>
Common Stock Preferred Stock
--------------------- ---------------------- Additional
Number of Number of Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit Total
---------- -------- ---------- -------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, June 3, 1996 - $ - - $ - $ - $ - $ -
Issuance of common stock 1,588,000 15,880 - - 160,483 - 176,363
Issuance of preferred stock - - 1,000,000 1,000 - - 1,000
Net loss - - - - - (942,552) (942,552)
--------- ------- --------- ------ -------- --------- ---------
BALANCE, December 31, 1996 1,588,000 $15,880 1,000,000 $1,000 $160,483 $(942,552) $(765,189)
========= ======= ========= ====== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-17
<PAGE>
GALVESTON'S STEAKHOUSE CORP.
STATEMENT OF CASH FLOWS FOR THE PERIOD
FROM INCEPTION (JUNE 3, 1996) THROUGH DECEMBER 31, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(942,552)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 41,667
Increase in:
Receivables (79,235)
Inventories (30,291)
Supplies and prepaid expenses (6,425)
Increase in:
Accounts payable 37,018
Accrued liabilities 78,162
Accrued interest 69,488
Accrued payroll costs 40,854
----------
Net cash used in operating activities (791,314)
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (164,105)
Insurance proceeds for loss of property and equipment 19,003
Purchase of Texas Loosey's restaurants (275,000)
----------
Net cash used in investing activities (420,102)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable 1,094,972
Proceeds from issuance of common stock 162,883
----------
Net cash provided by financing activities 1,257,855
----------
NET INCREASE IN CASH 46,439
CASH, beginning of year -
----------
CASH, end of year $ 46,439
==========
</TABLE>
The accompanying notes are an integral part of
these statements.
F-18
<PAGE>
- 2 -
<TABLE>
<S> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for-
Interest $3,030
Income taxes $ -
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
On August 19, 1996, the Company acquired two restaurants together with certain
franchise contracts and certain other intangible assets. In conjunction with the
acquisition, liabilities were assumed as follows:
Fair value of assets acquired $1,520,000
Cash paid for assets (275,000)
----------
Liabilities assumed $1,245,000
==========
</TABLE>
The accompanying notes are an integral part of
these statements.
F-19
<PAGE>
GALVESTON'S STEAKHOUSE CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. Company Background and Operations
Galveston's Steakhouse Corp., a Delaware corporation (the "Company") was
incorporated on June 3, 1996. On December 19, 1996, the Board of Directors
adopted a resolution to change the Company's name from Texas Loosey's Steakhouse
& Saloon, Inc. to Galveston's Steakhouse Corp. The Company owns and operates a
Texas Loosey's Steakhouse and Saloon in Torrance, California, and a Galveston's
Steakhouse located in Fullerton, California. Texas Loosey's is a casual dining
restaurant with a wide variety of menu choices, ranging from mexican dishes to
steak dinners. Galveston's Steakhouse is a moderately priced steak and seafood
restaurant. Both of these restaurants were acquired from TLC Restaurant
Management Corp. on August 19, 1996, together with certain intangible assets for
a purchase price of $1,520,000, consisting of notes payable of $1,245,000 (see
Notes 6 and 11), and cash of $275,000.
2. Risk Factors
Since commencing operations, the Company has incurred substantial operating
losses, resulting in a deficiency in stockholders' equity. Additionally, the
predecessor company from whom the Company purchased the Torrance and Fullerton
restaurants, has a history of operating losses, resulting in an accumulated
stockholder's deficit. The Company was organized on June 3, 1996. As such, it
has a limited operating history and experience; therefore, it is vulnerable to a
variety of business risks generally associated with start up companies.
Additionally, both of the Company's restaurants are located in Southern
California and are therefore susceptible to fluctuations in their business
caused by adverse economic conditions or other conditions in that region. The
Company operates in a highly competitive industry. Many of the Company's
competitors have been in existence longer than the Company, have a more
established market presence and have substantially greater financial, marketing,
and other resources than the Company, which may give them certain competitive
advantages. To fund the acquisition and operations of the restaurants, the
Company has incurred a substantial amount of debt (see Note 6). Due to the
limited operating history and risk associated with the Company, the debt was
structured such that the Company has incurred significant interest charges.
These interest charges have significantly impacted the operating results of the
Company.
F-20
<PAGE>
The Company has plans to raise approximately $7 million to $8 million in
additional capital through a public offering of its common stock. There can be
no assurance that the Company will be successful in raising sufficient capital
to meet its needs and even if the Company does raise additional capital, there
can be no assurance that it will achieve successful operations. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
3. Pending Acquisition
On December 30, 1996, the Company entered into an agreement with two
individuals for the purchase of the assets of two franchised Texas Loosey's
Chili Parlor and Saloon restaurants located in Riverside and Norco, California.
This transaction is expected to close in September 1997. In accordance with SEC
Rules and Regulations, the financial statements of these restaurants to be
acquired have been excluded from the Company's prospectus as the restaurants
are (i) below the 50% significance level (i.e. the proposed purchase price of
the restaurants is less than 50% of the assets of the Company at December 31,
1996) and (ii) have not yet been acquired. Accordingly, pro forma financial
information related to the effects of this pending acquisition have also been
omitted. The net book value of the assets to be acquired are approximately
$600,000 at December 31, 1996.
4. Summary of Significant Accounting Policies
a. Fiscal Year-End
The Company reports its operations on a 52-53 week fiscal year ending
on the Sunday closest to December 31. The current fiscal year ended on
December 29, 1996; however, for financial statement presentation, the
fiscal year end has been designated as December 31, 1996.
b. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities at the date of the financial statements, and the reported
amounts of revenue and expenses during the reported period. Actual
results could differ from those estimates.
c. Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and in banks and
credit card receivables. Credit card receivables are considered cash
equivalents because of their short collection period. The carrying
amount of credit card receivables approximates their fair value.
d. Inventories
Inventories, consisting principally of food, beverages and restaurant
supplies, are valued at the lower of cost (first-in, first-out) or
market.
F-21
<PAGE>
e. Property and Equipment
Property and equipment, including leasehold improvements, are recorded
at cost. Depreciation is provided using the straight-line method over
the estimated useful lives of the respective assets, generally five
years. Leasehold improvements are amortized using the straight-line
method over the shorter of the useful life of the improvements or the
remaining lease term.
f. Intangibles
Intangibles consist of a covenant not to compete made with the
former owner of the Fullerton and Torrance restaurants and goodwill.
The covenant not to compete is being amortized over 5 years (the
length of the contract) and goodwill is being amortized over a
15 year period. The Company continually evaluates whether events
or circumstances have occurred that indicate the remaining estimated
useful life of goodwill may warrant revision or that the remaining
balance of goodwill may not be recoverable. When factors indicate
that goodwill should be evaluated for possible impairment, the
Company uses an estimate of the related restaurants undiscounted
cash flows over the remaining life of the goodwill in
measuring whether the goodwill is recoverable.
g. Liquor License and Other Assets
Liquor licenses and other assets consist of the Company's liquor
licenses for the Fullerton and Torrance restaurants and miscellaneous
rent deposits.
h. Stock-Based Compensation
The Company accounts for stock-based compensation issued to employees
using the intrinsic value based method as prescibed by APB Opinion No.
25 "According for Stock Issued to Emploees" (APB No. 25). Under the
intrinsic value based method, compensation is the excess, if any, of
the fair value of the stock at grant date or other measurement date
over the amount an employee must pay to acquire the stock.
Compensation, if any, is recognized over the applicable service
period, which is usually the vesting period.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS No. 123). This standard, if fully
adopted, changes the methods of accounting for employee stock-based
compensation plans to the fair value based method. For stock options
and warrants, fair value is determined using an option pricing model
that takes into account the stock price at the grant date, the
exercise price, the expected life of the option or warrant, the
volatility of the underlying stock (not applicable for private
entities), expected dividends and the risk-free interest rate over the
expected life of the option or warrant. Compensation expense, if any,
is recognized over the applicable service period, which is usually
the vesting period.
The adoption of the accounting methodology of SFAS No. 123 is optional
and the Company has elected to continue accounting for stock-based
compensation issued to employees using APB. No. 25; however, pro forma
disclosures as if the Company adopted the cost recognition
requirements under SFAS 123 are required to be presented if the effect
is material to the financial statements (see Note 10).
F-22
<PAGE>
i. New Accounting Pronouncements
The Company adopted SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" on June
3, 1996. This standard requires that long-lived assets and certain
identifiable intangibles held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. The adoption of
this standard did not have a material impact on the financial
statements.
The Financial Accounting Standards Board (FASB) has issued SFAS No.
128, "Earnings per Share". This statement is effective for both interim
and annual reporting periods ending after December 15, 1997. SFAS No.
128 replaces primary earnings per share (EPS) with basic EPS and fully
diluted EPS with diluted EPS. Basic EPS is computed by dividing
reported earnings by the weighted average number of shares outstanding.
Diluted EPS is computed in the same way as fully diluted EPS, except
that the calculation now uses the average share price for the reporting
period to compute dilution from options under the treasury stock
method. The Company will adopt the new standard in its reporting for
the year ended December 31, 1997. Management does not believe that the
adoption of this standard will have a significant impact on EPS.
The FASB has also issued SFAS No. 129, "Disclosure of Information about
Capital Structure". This statement is effective for annual reporting
periods ending after December 15, 1997. SFAS No. 129 continues the
existing requirements to disclose the pertinent rights and privileges
of all securities other than ordinary common stock but expands the
number of companies subject to portions of its requirements. The
Company will adopt the new standard in its reporting for the year ended
December 31, 1997. The adoption of this statement will have no effect
on the financial statements.
j. Income Taxes
The Company accounts for income taxes using the asset and liability
method as prescribed by Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes." Under the asset and
liability method, deferred income tax assets and liabilities are
determined based on the differences between the financial reporting and
tax basis of assets and liabilities and are measured using the
currently enacted tax rates and laws.
k. Net Loss Per Share
Net loss per share is computed based on the weighted average number
of shares of common stock outstanding during the period from inception
(June 3, 1996) through December 31, 1996. Stock options have been
excluded from the computation of the Company's loss per share as
their inclusion would have the effect of decreasing the loss per
share amount otherwise computed.
5. Receivables
Receivables include the following items: employee advances of approximately
$35,000, an insurance receivable of approximately $30,000 for business
interruption due to a fire in the Fullerton restaurant, and a $12,000 receivable
arising from the sale of a liquor license during 1996.
F-23
<PAGE>
6. Notes Payable
At December 31, 1996 the Company's notes payable consisted of the following:
<TABLE>
<S> <C>
Notes payable to private placement investors: principal and
accrued interest at 8% is payable at the successful
completion of the IPO (see Note 2). Additionally, for each
$25,000 note, these investors received 6,000 shares of the
Company's common stock (see Note 8). $ 905,972
Note payable to the former owner in the amount of $375,000, bearing
interest at 10% per annum accrued from the original note date (August
19, 1996) until either February 19, 1997 or the successful completion
of the Company's IPO (see Note 2), upon which principal and accrued
interest is payable in full. Pursuant to an extension agreement (the
"Agreement"), the due date of this note has been extended to August 19,
1997. The Agreement also modified the interest rate to 15% per annum
from February 19, 1997 through August
19, 1997. 375,000
Note payable to the former owner in the amount of $870,000, bearing
interest at 8% per annum from the original note date (August 19, 1996).
No payments are due on this note until February 19, 1997, at which time
interest only payments of $6,032 are due monthly for one year.
Principal and interest payments of $10,978 are due from February 19,
1998 through July 19, 2001, with the remaining principal
balance due via a balloon payment on August 19, 2001. 870,000
Notes payable to various individuals with interest rates ranging from
10 to 14 percent, maturing in June 1997 or upon the successful
completion of the Company's IPO (see
Note 2). 97,000
Convertible notes payable (see Note 7) to various individuals which
will convert to the Company's common stock by dividing the original
note amount by the IPO price per share multiplied by a factor of three.
This conversion will only take place upon the successful completion of
the Company's IPO (see Note 2). 92,000
----------
Total notes payable 2,339,972
Less: short-term notes payable 1,469,972
----------
Long-term debt $ 870,000
==========
</TABLE>
F-24
<PAGE>
Future principal payments due on long-term debt are as follows:
<TABLE>
<S> <C>
Year ending:
December 28, 1997 $ -
December 27, 1998 51,001
December 26, 1999 65,847
December 31, 2000 71,312
December 30, 2001 681,840
--------
$870,000
========
</TABLE>
7. Convertible Debt
The Company has convertible debt in the amount of $92,000, payable to various
individuals which will convert to the Company's common stock upon the successful
completion of the Company's IPO (see Note 2). All note-holders have elected to
convert their debt to equity. The note-holders will receive shares of the
Company's common stock equal to the principal amount of their note multiplied by
a factor of three, divided by the IPO price per share. Consequently, the
noteholders will receive common stock worth $276,000, in the aggregate. Although
the noteholders have elected to convert their debt to the Company's common
stock, these amounts are carried in debt at December 31, 1996, due to the
uncertainty of the pricing of the IPO. The Company will record the difference
between the note amount of $92,000 and the conversion amount of $276,000 as
interest expense upon the closing date of the IPO at which time the noteholders
will convert their debt to equity, as noted above.
8. Private Placement
The Company raised $1,000,000 through a private placement during 1996. Each
private placement unit was a combination of debt and equity. For each $25,000
unit, an individual received a $25,000 note from the Company and 6,000 shares of
the Company's common stock. The notes bear interest at 8 percent per annum from
the original note date until the successful completion of the Company's IPO (see
Note 2). Upon the successful completion of the Company's IPO, accrued interest
and principal are due in full.
As each private placement participant received both debt (in the form of the
note payable from the Company) and equity (in the form of the Company's common
stock), a portion of the $1,000,000 face value of the debt was allocated to
equity based on an estimate of the relative fair value of the debt and equity.
As such, the Company has allocated $2,400 and $160,483 to common stock and
additional paid-in-capital, respectively. This allocation was determined using
an effective interest rate of 30 percent, as this is management's estimate of a
reasonable risk adjusted rate. The remainder was allocated to short-term debt.
The difference between the face value of $1,000,000 and the amount recorded in
short-term debt will be accreted to interest expense over the expected life of
the debt.
F-25
<PAGE>
9. Preferred Stock
On June 3, 1996, the Company issued 1,000,000 shares of preferred stock to the
Chairman of the Board and Chief Executive Officer of the Company, for services
rendered. The preferred stock has a par value of $.001 per share and carries
rights to vote with the common stock as one class on a one-vote-per-share basis.
The preferred stock is convertible into the Company's common stock on a one for
one basis at the option of the holder at the earlier of eight years following
the closing date of the Company's IPO (see Note 2) or when the Company's annual
net income equals or exceeds $3.5 million. Upon conversion, the holder of the
preferred stock will be required to pay to the Company, in cash, a conversion
price (the "Conversion Price") per share equal to 150% of the IPO price of the
Company's common stock.
The preferred stock carries no dividends prior to the second anniversary of the
closing date of the proposed IPO, but thereafter, if the above conversion test
is satisfied, the preferred stock will participate in any dividends declared on
the Company's common stock, on an "as converted" basis. In the event of a
voluntary or involuntary liquidation or dissolution of the Company prior to the
second anniversary of the closing date of the proposed IPO, or subsequent to the
IPO if annual net profits of $3.5 million have not been achieved, the holder of
the preferred stock would be entitled to the par value of $.001 per share, or
$1,000 in the aggregate. In the event of a voluntary or involuntary liquidation
or dissolution of the Company subsequent to the Company's achieving $3.5 million
in annual net profits, the holder of the preferred stock would be entitled to
share with the holders of the Company's common stock, the assets of the Company,
on an as converted basis.
10. Stock-Based Compensation
During 1996, the Company granted certain options to employees and directors.
These grants were made outside the Omnibus Stock Plan (see Note 14). On
inception (June 3, 1996) of the Company, the Company's Chief Executive Officer
and President, who are both directors, were granted 82,500 options each. These
options vest at the earlier of one year following the successful completion of
the Company's IPO or June 3, 1998 (see Note 2), and are exercisable at $1.00
per share. These options expire three months following any termination of
employment with the Company.
In October 1996, two employees of the Company were granted an aggregate of
60,000 options. The options vest over a period of four years, and are
exercisable at the initial public offering price per share of the Company's
common stock. These options expire three months following any termination of
employment with the Company.
For purposes of computing the pro forma disclosures required by SFAS No. 123,
the fair value of each option granted during 1996 to employees and directors is
estimated using the Black-Scholes option-pricing model. The fair value is
computed as of the date of grant using the following assumptions: (i) no
dividend yield, (ii) volatility of effectively zero (required for public
companies only), (iii) weighed-average risk-free interest rate of approximately
6.24% and 6.21%, and (iv) expected lives of two and four years.
The effects of applying SFAS No. 123 to the Company's option grants in 1996 is
immaterial to the Company's net loss and net loss per share; therefore, pro
forma disclosures for 1996 have been omitted as allowed by SFAS No. 123.
11. Commitments
Lease Commitments
Texas Loosey's leases its Torrance and Fullerton facilities under operating
leases. These leases mature at various dates through 2004. Both the Torrance and
Fullerton leases have two five year options to renew. For the period from
inception (June 3, 1996) through December 31, 1996, total rental expense,
including associated common area maintenance charges, was $51,860.
Future minimum lease payments for facilities under noncancellable operating
leases are as follows:
<TABLE>
<S> <C>
Year ending:
December 28, 1997 $173,784
December 27, 1998 163,804
December 26, 1999 165,900
December 31, 2000 99,600
December 30, 2001 99,600
Thereafter 192,900
--------
$895,588
========
</TABLE>
In addition, the Company leases certain minor equipment under operating leases.
Executive Compensation
Upon inception of the Company (June 3, 1996), the Company entered into one year
employment agreements with both the Company's Chief Executive Officer and
President. These agreements are for annual base salaries of $50,000 and
$45,000, respectively. However, due to the limited cash flows from operations
for the period from inception (June 3, 1996) through December 31, 1996, these
individuals have agreed to waive their salary compensation that would be earned
up to the successful completion of the Company's IPO (see Note 2). Had these
individuals taken salaries for the period from inception (June 3, 1996) through
December 31, 1996, the Company would have recognized additional aggregate salary
expense of approximately $55,000, which would increase the Company's net loss
from $942,552 to $997,552 for 1996.
Consulting Agreement
In connection with the acquisition of the Torrance and Fullerton restaurants
(more fully discussed in Note 12 below), the Company entered into a Consulting
Agreement (the "Agreement") with the seller. The Agreement provides that the
seller will render consulting services for a period of two years in connection
with the management, marketing, development and expansion of the Company's
business. In consideration for such consulting services, the Company will pay
the seller $95,000 per year.
F-26
<PAGE>
12. Acquisition of Restaurants
On August 19, 1996, the Company acquired substantially all the assets of TLC
Restaurant Management Corp. ("TLC") including two restaurants located in
Torrance and Fullerton, California, and certain intangible assets.
The acquisition was accounted for by the purchase method of accounting, and
accordingly the purchase price has been allocated to the assets acquired based
on the estimated fair values at the date of the acquisition. The excess of the
purchase price over the estimated fair values of the assets acquired has been
recorded as goodwill, which is being amortized over 15 years.
The estimated fair values of assets as of the date of the acquisition is
summarized as follows:
<TABLE>
<S> <C>
Liquor licenses $ 36,000
Furniture, fixtures and equipment 20,000
Leasehold improvements 470,328
Covenant not to compete 45,000
Goodwill 948,672
----------
$1,520,000
==========
</TABLE>
The following table presents the unaudited pro forma condensed income statement
for the period ended December 31, 1996, and reflects the results of operating
the Company as if the acquisition had been effective January 1, 1996. The pro
forma amounts are not necessarily indicative of the combined results of
operations had the acquisition been effective as of that date, or of the
anticipated results of operations, due to cost reductions and operating
efficiencies that are expected as a result of the acquisition.
<TABLE>
<CAPTION>
Unaudited
Pro Forma
<S> <C>
REVENUES $1,512,806
-----------
RESTAURANT COSTS 1,706,196
-----------
OPERATING LOSS (193,390)
-----------
OTHER EXPENSES 1,133,186
-----------
NET LOSS $(1,326,576)
===========
NET LOSS PER SHARE $ (0.84)
===========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,588,000
===========
</TABLE>
F-27
<PAGE>
13. Income Taxes
No provision for federal and state income taxes has been recorded as the Company
incurred net operating losses through December 31, 1996. At December 31, 1996,
the Company has approximately $940,000 and $470,000 of federal and state net
operating loss carryforwards, respectively, for tax reporting purposes available
to offset future taxable income; such carryforwards expire in 2011.
Deferred tax assets, consisting primarily of the tax effect of net operating
loss carryforwards are offset with a valuation allowance because of the
uncertainty regarding realizability.
As discussed in Note 2, the Company has plans to raise approximately $7 million
to $8 million in additional capital through a public offering. As a result of
bringing in additional shareholders there may be a substantial annual limitation
on the use of these net operating loss carryforwards for both federal and state
purposes.
In general, an ownership change occurs when the major shareholders, which
includes groups of shareholders of the Company, have increased their ownership
by more than 50 percentage points. If there has been an ownership change,
section 382 of the Internal Revenue Code places a limitation on the amount of
income that can be offset by net operating loss carryforwards. The section 382
limitation is the product of multiplying the Company's value (at the time of the
ownership change) by the highest federal long-term tax-exempt rate for the month
of the change or the two preceding months. The amount of the potential
limitation if any, is yet to be determined.
14. Subsequent Events
Private Placement
The Company anticipates raising $400,000 through a private placement
subsequent to year end. Each private placement unit will be a
combination of debt and equity. For each $25,000 unit, an individual
will receive a $25,000 note from the Company and 6,000 shares of the
Company's common stock. The notes will bear interest at 8 percent per
annum from the original note date until the successful completion of
the Company's IPO (see Note 2). Upon the successful completion of the
Company's IPO, accrued interest and principal are due in full.
Each private placement participant will receive both debt (in the form
of a note payable from the Company) and equity (in the form of the
Company's common stock), a portion of the $400,000 face value of the
debt will be allocated to equity based on an estimate of the relative
fair value of the debt and equity. As such, the Company will allocate
$960 and $20,181 to common stock and additional paid-in-capital,
respectively. This allocation will be determined using an effective
interest rate of 30 percent, as this is management's estimate of a
reasonable risk adjusted rate. The remainder will be allocated to
short-term debt. The difference between the face value of $400,000 and
the amount recorded in short-term debt will be accreted to interest
expense over the expected life of the debt.
As of February 14, 1997, the Company has raised $175,000 of private
placement proceeds.
Omnibus Stock Option Plan
In January 1997, the Board of Directors approved the adoption of an
Omnibus Stock Plan (the "Plan"). The Plan is intended to provide
incentive to key employees, officers and directors of the Company
who provide significant services to the Company. There are 400,000
options available for grant under the Plan. The Company has not
granted, and prior to the successful completion of the Company's
IPO (see Note 2) does not expect to grant, any options under the Plan.
Options will vest over a period of time as determined by the Board of
Directors, for up to ten years from the date of grant. However, no
options may be exercisable less than six months from the date of
grant. The exercise price of options granted under the Plan will be
determined by the Board of Directors, provided that, the exercise
price is not less than the fair market value of the Company's
common stock on the date of grant.
F-28
<PAGE>
GALVESTON'S STEAKHOUSE CORP.
(FORMERLY TEXAS LOOSEY'S STEAKHOUSE
AND SALOON, INC.)
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1997
(UNAUDITED)
F-29
<PAGE>
GALVESTON'S STEAKHOUSE CORP.
BALANCE SHEET - MARCH 31, 1997
UNAUDITED
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash $ 79,338
Receivables 99,022
Inventories 32,332
Prepaid expenses 18,123
Other 79,018
----------
Total current assets 307,833
----------
PROPERTY AND EQUIPMENT:
Furniture, fixtures and equipment 137,707
Leasehold improvements 511,857
----------
649,564
Less--Accumulated depreciation and amortization (31,508)
----------
618,056
----------
OTHER ASSETS:
Intangible assets, net of accumulated
amortization of $42,639 961,034
Liquor licenses and other 55,366
----------
Total assets $1,942,289
==========
</TABLE>
The accompanying notes are an integral part of
this balance sheet.
F-30
<PAGE>
GALVESTON'S STEAKHOUSE CORP.
BALANCE SHEET - MARCH 31, 1997
UNAUDITED
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIT
<S> <C>
CURRENT LIABILITIES:
Notes payable $ 1,813,852
Accounts payable 47,905
Accrued liabilities 16,738
Accrued interest 92,408
Accrued payroll costs 34,484
-----------
Total current liabilities 2,005,387
-----------
LONG-TERM DEBT 870,000
-----------
Total long-term liabilities 870,000
-----------
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value, 5,000,000 shares
authorized, 1,000,000 shares issued
and outstanding at March 31, 1997 1,000
Common stock, $.01 par value, 10,000,000 shares
authorized, 1,692,000 shares issued
and outstanding at March 31, 1997 16,920
Paid-in capital 201,035
Accumulated deficit (1,152,053)
-----------
Total stockholders' deficit (933,098)
-----------
Total liabilities and stockholders' deficit $ 1,942,289
===========
</TABLE>
The accompanying notes are an integral part of
this balance sheet.
F-31
<PAGE>
GALVESTON'S STEAKHOUSE CORP.
STATEMENT OF OPERATIONS FOR THE QUARTER
ENDED MARCH 31, 1997
UNAUDITED
<TABLE>
<S> <C>
REVENUES $ 403,942
---------
RESTAURANT COSTS:
Food and beverage 126,381
Payroll 151,320
Direct operating 97,723
Depreciation and amortization 14,419
---------
389,843
---------
OPERATING PROFIT 14,099
---------
OTHER (INCOME) EXPENSES:
General and administrative expenses 80,342
Interest and financing costs 134,810
Amortization expense 18,061
Other (9,613)
---------
223,600
---------
NET LOSS $(209,501)
=========
NET LOSS PER SHARE $ (0.43)
=========
WEIGHTED AVERAGE SHARES OUTSTANDING 483,167
=========
</TABLE>
The accompanying notes are an integral part of
these statements.
F-32
<PAGE>
GALVESTON'S STEAKHOUSE CORP.
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE QUARTER ENDED MARCH 31, 1997
UNAUDITED
<TABLE>
<CAPTION>
Common Stock Preferred Stock
--------------------- ---------------------- Additional
Number of Number of Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit Total
---------- -------- ---------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996 1,588,000 $15,880 1,000,000 $1,000 $160,483 $ (942,552) $(765,189)
Issuance of common stock 104,000 1,040 - - 40,552 - 41,592
Net loss - - - - - (209,501) (209,501)
--------- ------- --------- ------ -------- ----------- ---------
BALANCE, March 31, 1997 1,692,000 $16,920 1,000,000 $1,000 $201,035 $(1,152,053) $(933,098)
========= ======= ========= ====== ======== =========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE>
GALVESTON'S STEAKHOUSE CORP.
STATEMENT OF CASH FLOWS FOR THE QUARTER
ENDED MARCH 31, 1997
UNAUDITED
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(209,501)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 32,480
Amortization of discount on private
placement proceeds 63,033
(Increase) decrease in:
Receivables (19,787)
Inventories (2,041)
Supplies and prepaid expenses (11,699)
Other current assets (79,018)
Intangibles (10,001)
Liquor licenses and other 934
Increase (decrease) in:
Accounts payable 10,887
Accrued liabilities (61,424)
Accrued interest 22,920
Accrued payroll costs (6,370)
---------
Net cash used in operating activities (269,587)
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (19,954)
---------
Net cash used in investing activities (19,954)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable 280,848
Issuance of common stock 41,592
---------
Net cash provided by financing activities 322,440
---------
NET INCREASE IN CASH 32,899
CASH, December 31, 1996 46,439
---------
CASH, March 31, 1997 $ 79,338
=========
</TABLE>
The accompanying notes are an integral part of
these statements.
F-34
<PAGE>
<TABLE>
<S> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the quarter for-
Interest $13,109
Income taxes $ -
</TABLE>
The accompanying notes are an integral part of
these statements.
F-35
<PAGE>
GALVESTON'S STEAKHOUSE CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
UNAUDITED
1. Financial Statement Presentation
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the quarter ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1997. For further information refer to the financial statements and footnotes
thereto included elsewhere in this prospectus, for the period from inception
(June 3, 1996) through December 31, 1996.
Galveston's Steakhouse Corp. (the "Company") was incorporated on June 3, 1996.
The Company acquired certain assets of TLC Restaurant Management Corp. on August
19, 1996, including two restaurants located in Fullerton and Torrance,
California, and certain intangible assets. Interim financial information for TLC
Restaurant Management Corp., the predecessor business, as of and for the quarter
ended March 31, 1996 has not been presented herein because of the prohibitive
costs and difficulties to obtain such information and because the March 31, 1996
interim financial statement information would not be comparable to the March 31,
1997 information due to the significant amount of debt incurred by the Company
to transact the acquisition and due to the significant purchase accounting
adjustments that resulted therefrom. Audited financial statements of TLC
Restaurant Management Corp. for the year ended December 30, 1995 and the period
from December 31, 1995 through August 18, 1996, and footnotes thereto are
included elsewhere in this prospectus and should be referred to for further
information.
2. Inventories
Inventories, consisting principally of food, beverages and restaurant supplies,
are valued at the lower of cost (first-in, first-out) or market.
3. Escrow Deposit
The Company is currently in escrow for the purchase of the assets of two
franchised Texas Loosey's Chili Parlor and Saloon restaurants located in
Riverside and Norco, California. In connection with this acquisition the Company
has deposited approximately $78,000 into an escrow account. This deposit is
being carried in other current assets on the accompanying balance sheet at March
31, 1997.
F-36
<PAGE>
4. Management Fee
As discussed more fully in Note 3, the Company is in escrow for the purchase of
two restaurants in Riverside and Norco, California. This transaction is expected
to close in June 1997. However, the Company took over the day to day operations
of these restaurants on March 1, 1997. In return for managing these restaurants
until the purchase is consummated, the Company is receiving a management fee
equal to the net income generated by the restaurants. As of March 31, 1997, the
Company has earned a management fee approximating $9,300. This management fee is
reflected in other income on the accompanying statement of operations for the
quarter ended March 31, 1997.
5. Private Placement
The Company raised $275,000 through a private placement during the quarter ended
March 31, 1997. Each private placement unit was a combination of debt and
equity. For each $25,000 unit, an individual received a $25,000 note from the
Company and 6,000 shares of the Company's common stock. The notes bear interest
at 8 percent per annum from the original note date until the successful
completion of the Company's IPO. Upon the successful completion of the Company's
IPO, accrued interest and principal are due in full.
As each private placement participant received both debt (in the form of a note
payable from the Company) and equity (in the form of the Company's common
stock), a portion of the $275,000 face value of the debt was allocated to equity
based on an estimate of the relative fair value of the debt and equity. As such,
the Company has allocated $660 and $16,639 to common stock and additional
paid-in-capital, respectively. This allocation was determined using an effective
interest rate of 30 percent, as this is management's estimate of a reasonable
risk adjusted rate. The remainder was allocated to short-term debt. The
difference between the face value of $275,000 and the amount recorded in
short-term debt will be accreted to interest expense over the expected life of
the debt.
6. Note Payable
On January 30, 1997, the Company issued a $25,000 note payable. The note
payable was comprised of a $25,000 note from the Company and 5,000 shares of
the Company's common stock. The note bears interest at 8 percent per annum
from the original note date until the successful completion of the Company's
IPO. Upon the successful completion of the Company's IPO, accrued interest and
principal are due in full.
As this individual received both debt (in the form of the note payable from the
Company) and equity (in the form of the Company's common stock), a portion of
the $25,000 face value of the note was allocated to equity based on an
estimate of the relative fair value of the debt and equity. As such, the
Company has allocated $50 and $1,803 to common stock and additional
paid-in-capital, respectively. This allocation was determiend using an
effective interest rate of 30 percent, as this is management's estimate of a
reasonable risk adjusted rate. The remainder was allocated to short-term debt.
The difference between the face value of the $25,000 and the amount recorded
in short-term debt will be accreted to interest expense over the expected life
of the debt.
F-37
<PAGE>
GALVESTON'S STEAKHOUSE CORP.
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware sets
forth the conditions and limitations governing the indemnification of officers,
directors and other persons. References are made to Article VI of the
Registrant's Bylaws, a copy of which is incorporated herein by reference as
Exhibit 3.4, which provides for indemnification of officers and directors of the
Registrant to the full extent authorized by the aforesaid section of the General
Corporation Law of the State of Delaware.
Section 102(b) of the General Corporation Law of the State of Delaware
permits corporations to eliminate or limit the personal liability of a director
to the corporation or its stockholders for monetary damages for breach of the
fiduciary duty of care as a director. Reference is made to Article Tenth of the
Registrant's Restated Certificate of Incorporation, as amended, a copy of which
is incorporated herein by reference as Exhibit 3.1, which limits a director's
liability in accordance with the aforesaid section of the General Corporation
Law of the State of Delaware.
The Registrant intends to enter into Indemnification Agreements with its
executive officers and directors. These Indemnification Agreements will provide
that the executive officers and directors will be indemnified to the fullest
extent permitted by law against all expenses (including attorneys' fees),
judgments, fines and amounts paid or incurred by them for settlement in any
action or proceeding, including any derivative action, on account of their
service as a director or officer of the Company or of any subsidiary of the
Company or of any other company or enterprise in which they are serving at the
request of the Company. No indemnity will be provided to any director or officer
under these agreements on account of conduct which is finally adjudged to be
knowingly fraudulent or deliberately dishonest or willful misconduct. In
addition, no indemnification will be provided if there is a final adjudication
that such indemnification is not lawful, or in respect of any suit in which
judgment is rendered against a director or officer for an accounting of profits
made from a purchase or sale of securities of the Company in violation of
Section 16(b) of the Securities Exchange Act of 1934, or of any similar
statutory law, or on account of any compensation paid to a director or officer
which is adjudicated to have been in violation of law, and in certain other
circumstances.
The Registrant intends to acquire directors and officers liability
insurance prior to the completion of the Offering. The amount and scope of
coverage will depend upon the Company's analysis of the cost and appropriateness
thereof.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following expenses will be incurred in connection with the proposed
offering hereunder. All of such expenses will be borne by the Company. With the
exception of the registration and listing fees, all amounts shown are estimates:
<TABLE>
<CAPTION>
<S> <C>
SEC registration fees........................ $ 3,583.33
Nasdaq listing fee...........................
NASD registration fee........................
Legal fees and expenses......................
Underwriters' nonaccountable expense
allowance..................................
Accounting fees and expenses.................
Blue sky fees and expenses (including
counsel fees)..............................
Printing and engraving expenses..............
Transfer agent fees and expenses.............
Miscellaneous................................
-----------
Total........................................ $
-----------
-----------
</TABLE>
II-1
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The following sets forth certain information regarding sales of, and other
transactions with respect to, securities of the Company issued within the past
three years, which sales and other transactions were not registered pursuant to
the Securities Act of 1933, as amended (the "Securities Act"). All of such sales
and transactions were exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or as otherwise indicated
herein.
In June 1996, the Company issued for nominal consideration 1,330,000
shares of Common Stock to its founding shareholders, namely, Richard M. Lee,
Hiram J. Woo, James Maguire, James Djen, Paul Cassidy, Khalil Mayeri , JWJ
International, Shelly Singhal and Marcus Goudge, and 1,000,000 shares of
Series B convertible preferred stock to Mr. Lee.
In June 1996, the Company assumed $92,000 in principal amount of convertible
promissory notes in connection with its acquisition from Texas Loosey's
Steakhouse Holdings, Inc. of its right to purchase the Texas Loosey's business.
The notes are convertible into 50,185 shares of the Company's common stock.
In June 1996, the Company commenced a private placement bridge financing
through William Scott & Co., L.L.C. pursuant to which it raised $1,000,000 by
issuing to thirty four (34) accredited investors forty (40) $25,000 units,
consisting of a $25,000 promissory note bearing interest at eight percent (8%)
per annum and 6,000 shares of its common stock. The Company paid a ten percent
(10%) sales commission and a three percent non-accountable expense allowance
(3%) in connection with such financing.
In January 1997, the Company commenced a second private placement bridge
financing through William Scott & Co., L.L.C. pursuant to which it raised
$500,000 by issuing to eighteen (18) accredited investors twenty (20) $25,000
units, consisting of a $25,000 promissory note bearing interest at eight percent
(8%) per annum and 6,000 shares of its common stock. The Company paid a ten
percent (10%) sales commission and a three percent (3%) non-accountable expense
allowance in connection with such financing.
In January 1997, the Company borrowed $25,000 from Kenneth W. Larson, Esq.
and issued to him a $25,000 promissory note bearing interest at eight percent
(8%) per annum and 5,000 shares of its common stock.
In February 1997, the Company issued 33,000 shares of common stock to three
(3) persons associated with Winchester Investment Securities, Inc., a NASD
member, for services rendered to the Company.
In April 1997, the Company issued 10,000 shares to its counsel, Hank Gracin,
Esq. of Lehman & Eilen, in payment for legal services rendered.
In April 1997, the Company issued 6,250 shares of common stock to Mr. Lee and
6,250 shares of common stock to Mr. Woo in consideration for services rendered
by them to the Company.
ITEM 27. EXHIBITS.
The following exhibits are filed as part of this Registration Statement:
1.1* Form of Underwriting Agreement.
3.1* Restated Certificate of Incorporation of the Company.
II-2
<PAGE>
3.2* Certificate of Correction to Restated Certificate of
Incorporation of the Company.
3.3* Certificate of Amendment to Restated Certificate of
Incorporation of the Company.
3.4* By-Laws of the Company.
4.1* Form of Specimen of Common Stock Certificate.
4.2* Form of Underwriter's Warrant Agreement.
5.1** Opinion of Counsel re: legality of securities being
registered.
10.1* Lease between Walter Bollenbacher Family
Trust and TLC Corp. (Seller) dated November
1, 1994 and assigned to the Company June 25, 1996.
(re: Torrance)
10.2* Lease between University Plaza, Ltd. and
the Company dated September 4, 1996.
(re: Fullerton)
10.3* Lease between Mission Grove Plaza, LP and
Kent Andersen (Seller) dated March 8, 1993
and assigned to the Company March 1, 1997.
(re: Riverside)
10.4* Lease between E & R Co-ownership (The Family
Corner) and the Company dated February 1,
1997. (re: Norco)
10.5* Employment Contract between the Company and Michael
R. Dunmire dated October 15, 1996.
10.6* Employment Contract between the Company and Rebecca
L. Rotman dated October 15, 1996.
10.7* Employment Contract between the Company and Hiram J.
Woo dated June 3, 1996.
10.8* Employment Contract between the Company and Richard
M. Lee dated June 3, 1996.
10.9* Asset Purchase Agreement between the Company as
buyer and TLC Restaurant Management Corp., Better
Business Security, Inc., River Diego Investment
Corp. and Ron Walton, collectively as seller dated
April 10, 1996.
10.10* Escrow Instruction with Jean Allen Escrow Co., Inc.
dated February 20, 1996 reference to Asset Purchase
Agreement cited in 10.9 above.
10.11* Note Payable in the amount of $375,000 to Ron
Walton, et. al. with extension of Due Date to August
29, 1997.
10.12* Note Payable in the amount of $870,000 to Ron
Walton, et. al.
10.13* Asset Purchase Agreement between the Company as
buyer and Kent & Jenny Andersen as sellers dated
September 23, 1996.
10.14* Escrow Instruction with Jean Allen Escrow Co., Inc.
dated December 3, 1996 with Estimated Closing
Statement dated March 3, 1997 reference to Asset
Purchase Agreement cited in 10.13 above.
10.15* Galveston Steakhouse Corp. Omnibus Stock Plan.
10.16* Richard M. Lee Stock Option Agreement.
10.17* Hiram J. Woo Stock Option Agreement.
23.1* Consent of Arthur Andersen LLP
23.2** Consent of Counsel (including in their opinion filed
as Exhibit 5.1).
27.1* Financial Data Schedule.
- ----------
* Filed herewith.
** To be filed by amendment
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sales securities, a
post-effective amendment to this Registration Statement to;
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Act");
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
Registration Statement;
(iii) Include any additional or changed material information
on the plan of distribution.
(2) For determining liability under the Act, to treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide offering.
(3) To file a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
II-3
<PAGE>
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission (the
"Commission") such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable.
The undersigned registrant hereby undertakes:
(1) For determining any liability under the Act, to treat the information
omitted from the form of prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in the form of prospectus filed by the
registrant under Rule 424(b)(1), or (4), or 497(h) under the Act as part of this
Registration Statement as of the time the Commission declared it effective.
(2) For determining any liability under the Act, to treat each post-effective
amendment that contains a form of prospectus as a new registration statement for
the securities offered in the registration statement, and the offering of the
securities at that time as the initial bona fide offering of those securities.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE
REQUIREMENTS FOR FILING ON FORM SB-2 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED IN RIVERSIDE, CALIFORNIA, ON THIS 11TH DAY OF JUNE, 1997.
GALVESTON'S STEAKHOUSE CORP.
By: /s/ Richard M. Lee
----------------------------------
RICHARD M. LEE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE Title Date
/s/ RICHARD M. LEE Chairman of the Board of June 11, 1997
- -------------------------------- Directors and Chief
Richard M. Lee Executive Officer
/s/ HIRAM J. WOO Director, President, June 11, 1997
- -------------------------------- Secretary and Chief
Hiram J. Woo* Financial Officer
(Principal Financial and
Accounting Officer)
II-4
EXHIBIT 1.1
<PAGE>
UNDERWRITING AGREEMENT
June , 1997
Nichols, Safina, Lerner & Co., Inc.
800 Third Avenue
New York, New York 10022
William Scott & Co., L.L.C.
1030 Salem Road
Union, NJ 07083
Dear Sirs:
Galveston's Steakhouse Corp., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to you, 1,500,000 shares of the common stock, $.01 par value (the "Common
Stock") of the Company (the "Firm Shares"). In addition, solely for the purpose
of covering over-allotments, (i) the Company proposes to issue and sell to you
125,000 shares of Common Stock (the "Additional Company Shares") and (ii) Mr.
Richard M. Lee ("Lee") and Mr. Hiram J. Woo ("Woo") propose to grant to you the
option to purchase up to 100,000 additional shares of Common Stock (the
"Additional Selling Stockholder Shares") (the Additional Company Shares and the
Additional Selling Stockholder Shares, collectively, the "Additional Shares").
The Firm Shares and the Additional Shares are hereinafter collectively referred
to as the "Shares". The Shares are more fully described in the Registration
Statement and Prospectus referred to below.
The Company and Lee and Woo confirm as follows their agreement with you:
1. REGISTRATION STATEMENT AND PROSPECTUS: The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission"), in
accordance with the Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder (the "Rules and
Regulations", and together with said Act, the "Act"), a registration statement
on Form SB-2 (File No. ) and may have filed one or more amendments thereto,
including in such registration statement and in certain amendments thereto a
related preliminary prospectus for the registration under the Act of the Shares.
In addition, subject to the provisions of Section 4(e) hereof, the Company has
filed or will promptly file a further amendment to such registration statement
prior to the effectiveness of such registration statement, unless an amendment
is not required pursuant to Rule 430A of the Rules and Regulations. As used in
this Agreement, the term "Registration Statement" means such registration
statement, including the prospectus, financial statements and schedules thereto,
exhibits and other documents filed as part thereof, as amended when, and in the
form in which, it is declared effective by the Commission, and, in the event any
post-effective amendment thereto is filed thereafter and on or before the
Closing Date (as hereinafter defined), shall also mean (from and after the date
such post-effective amendment is effective under the Act) such registration
statement as so amended, provided that such Registration Statement, at the time
it becomes effective, may omit such information as is permitted to be omitted
from the Registration Statement when it becomes effective pursuant to Rule 430A
of the Rules and Regulations, which
1
<PAGE>
information ("Rule 430 Information") shall be deemed to be included in such
Registration Statement when a final prospectus is filed with the Commission in
accordance with Rules 430A and 424(b)(1) or (4) of the Rules and Regulations;
the term "Preliminary Prospectus" means each prospectus included in the
Registration Statement, or any amendments thereto, before it becomes effective
under the Act, the form of prospectus omitting Rule 430A Information included in
the Registration Statement when it becomes effective, if applicable (the "Rule
430A Prospectus"), and any prospectus filed by the Company with your consent
pursuant to Rule 424(a) of the Regulations; the term "Prospectus" means the
final prospectus included as part of the Registration Statement, except that (i)
if any prospectus (including any preliminary prospectus) which differs from such
prospectus included in the Registration Statement is provided to you for use in
connection with the offering of the Shares (whether or not such differing
prospectus is required to be filed by the Company pursuant to Rule 424(b) under
the Act), the term "Prospectus" as used herein shall mean such differing
prospectus from and after the date on which it shall have been first used, and
(ii) in the event any supplement to or amendment of such prospectus is made
after the date on which the Registration Statement is declared effective and on
or prior to the Closing Date, the term "Prospectus" shall also mean (with
respect to any supplement, from and after the date such supplement is first used
or, with respect to any amendment, the date such amendment is effective under
the Act) such prospectus as so supplemented or amended; and the term "Effective
Date" means (i) if the Company and you have determined not to proceed pursuant
to Rule 430A under the Act, the date on which the Registration Statement becomes
effective, or (ii) if the Company and you have determined to proceed pursuant to
Rule 430A under the Act, the date of this Agreement.
2. AGREEMENTS TO SELL AND PURCHASE: Subject to the terms and conditions
herein set forth, the Company agrees to sell to you and each of you agree,
severally and not jointly, to purchase from the Company, at a purchase price of
$4.95 per Firm Share (net of underwriting discounts and commissions) or, as
applicable, solely for the purpose of covering over-allotments made in
connection with the offering of the Firm Shares, Additional Company Share, the
number of Shares (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying the aggregate number of Firm Shares or Additional
Company Shares to be sold by a fraction, the numerator of which is the aggregate
number of Firm Shares or Additional Company Shares to be purchased by each of
you as set forth opposite your respective names in Schedule I hereto and the
denominator of which is the aggregate number of Firm Shares or Additional
Company Shares to be purchased hereunder.
Subject to the terms and conditions herein set forth, Lee and Woo each
agrees to sell to you, and you shall have the right to purchase from Lee and
Woo, up to an aggregate of 100,000 Additional Selling Stockholder Shares at a
purchase price of $5.00 per Additional Selling Stockholder Share. Additional
Selling Stockholder Shares may be purchased solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. If any
Additional Selling Stockholder Shares are to be purchased, each of you,
severally, agrees to purchase from each of Messrs. Lee and Woo that proportion
(subject to such adjustments as you may both determine to avoid fractional
Additional Selling Stockholder Shares) of the number of Additional Selling
Stockholder Shares to be purchased which the number of Firm Shares set forth
opposite your name in Schedule I bears to the aggregate number of Firm Shares to
be purchased from the Company
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hereunder. Additional Shares may be purchased at any time and from time to time
on or before the thirtieth business day following the date of this Agreement
upon written notice from you to the Company specifying the number of Additional
Shares to be purchased. You agree that, if any Additional Shares are to be
purchased, they will be purchased first from Messrs. Lee and Woo as Additional
Selling Stockholder Shares prior to the purchase from the Company of any
Additional Company Shares.
You will offer the Shares for sale at the initial public offering price
set forth on the cover of the Prospectus. After the initial public offering, you
may from time to time increase or decrease the public offering price, in your
sole discretion, by reason of changes in general market conditions or otherwise.
3. DELIVERY AND PAYMENT: Delivery of and payment for the Firm Shares
shall be made at the offices of Nichols, Safina, Lerner & Co., Inc. ("NSL") at
800 Third Avenue, New York, New York 10022 (or such other place as shall be
mutually agreed upon) at such time and date, not later than the third full
business day following the Effective Date (unless the time of effectiveness is
after 4:00 P.M. New York time, in which case the date of closing shall be no
later than four business days following the Effective Date), as you shall
designate by at least forty-eight hours prior notice to the Company (the
"Closing Date").
Delivery of and payment for Additional Shares shall be made at said
offices of NSL, or at such other place, and at such time(s) and date(s) (each an
"Optional Closing Date") as may be agreed upon in writing by you and the
Company; provided, however, that in no event may an Optional Closing Date be (i)
earlier than the Closing Date or (ii) later than three business days after the
date on which the related notice to purchase Additional Shares is given.
The Closing Date and the time and place of delivery of and payment for
the Shares may be varied by agreement between you and the Company. The Optional
Closing Date and the time and place of delivery of and payment for the
Additional Shares may be varied by agreement between you, the Company, Lee and
Woo. Delivery of certificates for the Shares (in definitive form, registered in
such names and in such denominations as you shall request at least two business
days prior to the Closing Date by written notice to the Company) shall be made
to you against payment of the purchase price therefor by certified or official
bank check or checks payable in New York Clearing House funds to the order of
the Company, Lee and Woo, as their interests may appear. For the purpose of
expediting the checking and packaging of certificates for the Shares, the
Company agrees to make such certificates available for inspection at the offices
of NSL at least 24 hours prior to the Closing Date and each Optional Closing
Date, as the case may be.
On the Closing Date, at the time of the delivery and payment for the
Firm Shares, (i) the Company shall pay to you as a non-accountable expense
allowance a sum equal to three percent (3%) of the gross proceeds of the sale of
the Firm Shares purchased by you hereunder less the $20,000 heretofore paid to
you in respect thereof, by certified or official bank check or checks payable
in New York Clearing House funds payable to
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the order of, and in accordance with instructions from, you and (ii) the Company
shall issue, sell and deliver to you, for an aggregate purchase price of $10, a
warrant to purchase up to an aggregate of 150,000 Shares (the "Underwriters'
Warrant") in substantially in the form filed as an exhibit to the Registration
Statement. The shares of Common Stock issuable upon exercise of the
Underwriters' Warrant are hereinafter referred to collectively as the
"Underwriters' Warrant Shares". The Underwriters' Warrant will be exercisable at
an initial exercise price equal to 120% of the initial public offering sale
price Share at any time and from time to time, in whole or in part, during a
four-year period commencing one year following the Effective Date. The Company
has granted you certain registration rights with respect to the Underwriters'
Warrant and the securities issuable upon exercise thereof, as set forth in said
Underwriters' Warrant.
On each Additional Closing Date, at the time of the delivery and
payment for the Additional Shares, the Company, Lee and Woo shall pay to you as
a non-accountable expense allowance, a sum equal to three percent (3%) of the
gross proceeds of the sale of the Additional Shares purchased by you hereunder
(or an aggregate of $33,750 in the event that all Additional Shares are
purchased by you) on such date by certified or official bank check or checks
payable in New York Clearing House funds payable to the order of, and in
accordance with instructions from, you.
4. COVENANTS AND AGREEMENTS OF THE COMPANY: (A) The Company covenants
and agrees with you as follows:
(a) The Company will notify you promptly by telephone and (if requested by you)
will confirm such advice in writing, (1) when the Registration Statement
has become effective and when any post-effective amendment thereto becomes
effective, (2) if Rule 430A under the Act is used, or the Prospectus is
otherwise required to be filed with the Commission pursuant to Rule 424(b)
under the Act, when the Prospectus is filed with the Commission pursuant to
Rule 424(b) under the Act, (3) of any request by the Commission for
amendments or supplements to the Registration Statement or the Prospectus
or for additional information, (4) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement,
preventing or suspending the use of the Preliminary Prospectus, the
Prospectus, the Registration Statement or any amendment or supplement
thereto, or refusing to permit the effectiveness of the Registration
Statement ("Stop Order"), or the initiation of any proceedings for any of
those purposes, (5) of the happening of any event during the period
mentioned in paragraph (f) below which in the reasonable judgment of the
Company makes any statement made in the Registration Statement or the
Prospectus untrue or which requires the making of any changes in the
Registration Statement or the Prospectus in order to make the statements
therein not misleading, and (6) of the receipt of any comments from the
Commission or the Blue Sky or securities authorities of any jurisdiction
regarding the Registration Statement, any post-effective amendment thereto,
the Preliminary Prospectus, the Prospectus, or any amendment or supplement
thereto. The Company will use its best efforts to prevent the issuance of
any Stop Order by the Commission or any notification from the Blue Sky or
securities authorities of any jurisdiction suspending the qualification or
registration of the Shares for sale in such jurisdictions, and if at any
time the Commission shall
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issue any Stop Order, or if the Blue Sky or securities authorities of any
jurisdiction shall issue notification suspending the qualification or
registration of the Shares, the Company will make every reasonable effort
to obtain the withdrawal of such Stop Order or notification at the earliest
possible moment. The Company will promptly advise you of its receipt of any
notification with respect to the suspension of the qualification or
registration of the Shares for offer or sale in any jurisdiction or the
initiation or threatening of any action or proceeding for such purpose.
(b) Prior to any public offering of the Shares by you, the Company will
cooperate with you and your counsel (or, at your discretion, our counsel)
in registering or qualifying the Shares for offer or sale under the Blue
Sky or securities laws, rules or regulations of such jurisdictions as you
may reasonably request; provided that in no event shall the Company be
obligated to register or qualify to do business as a foreign corporation in
any jurisdiction where it is not now so registered or qualified or to take
any action which would subject it to general service of process, or to
taxation as a foreign corporation doing business, in any jurisdiction where
it is not now so subject. The Company will pay all fees and expenses
relating to the registration or qualification of the Shares under such Blue
Sky or securities laws of such jurisdictions as you may designate
(including the legal fees, expenses and disbursements of counsel to you,
or, in your discretion, counsel to the Company, for the registration or
qualifi cation of the Shares in such jurisdictions as you shall determine).
After registration, qualification or exemption of the Shares for offer and
sale in such jurisdictions, and for as long as any offering pursuant to
this Agreement continues, the Company, at your reasonable request, will
file and make such statements or reports, and pay the fees applicable
thereto, at such times as are or may be required by the laws, rules or
regulations of such jurisdictions in order to maintain and continue in full
force and effect the registration, qualification or exemption for offer or
sale of the Shares in such jurisdictions. After the termination of the
offering contemplated hereby, and as long as any of the Shares are
outstanding, the Company will file and make, and pay all fees applicable
thereto, such statements and reports and renewals of registration as are or
may be required by the laws, rules or regulations of such jurisdictions to
maintain and continue in full force and effect the registration,
qualification or exemption for secondary market transactions in the Shares,
in the various jurisdictions in which the Shares were originally
registered, qualified or exempted for offer or sale.
(c) The Company will furnish to you, without charge, four manually-signed
copies, and such reasonable number of conformed copies, of the Registration
Statement as originally filed on Form SB-2 and of any amendments (including
post-effective amendments thereto), including financial statements and
schedules, if any, and all consents, certificates and exhibits (including
those incorporated therein by reference to the extent not previously
furnished to you), heretofore or hereafter made, signed by or on behalf of
its officers whose signatures are required thereon and a majority of its
board of directors.
(d) The Company will use its best efforts to cause the Registration Statement
to become effective under the Act. Upon such effectiveness, if the Company
and you have determined not to proceed pursuant to Rule 430A under the Act,
the Company will timely file a Prospectus
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pursuant to, and in conformity with, Rule 424(b), if required, and if the
Company and you have determined to proceed pursuant to Rule 430A under the
Act, the Company will timely file a Prospectus pursuant to, and in
conformity with, Rules 424(b) and 430A under the Act.
(e) The Company will give you and your counsel advance notice of its intention
to file any amendment to the Registration Statement or any amendment or
supplement to the Prospectus, whether before or after the effective date of
the Registration Statement, and will not file any such amendment or
supplement unless the Company shall have first delivered copies of such
amendment or supplement to you and your counsel and you and your counsel
shall have given your consent to the filing of such amendment or
supplement. Any such amendment or supple ment shall comply with the Act.
(f) From and after the Effective Date, the Company will deliver to you, without
charge, as many copies of the Prospectus or any amendment or supplement
thereto as you may reasonably request. The Company consents to the use of
the Prospectus or any amendment or supplement thereto by you and by all
dealers to whom the Shares may be sold, both in connection with the
offering or sale of the Shares and for such period of time thereafter as
the Prospectus is required by law to be delivered in connection therewith.
If during such period of time any event shall occur which in the judgment
of you or your counsel should be set forth in the Prospectus in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading, or if it is necessary to supplement or amend the
Pro spectus to comply with law, the Company will forthwith prepare and duly
file with the Commission an appropriate supplement or amendment thereto,
and will deliver to each of you, without charge, such number of copies
thereof as you may reasonably request.
(g) The Company will promptly pay all expenses in connection with (1) the
preparation, printing, filing, distribution and mailing (including, without
limitation, express delivery service) of the Registration Statement, each
preliminary prospectus, the Prospectus, and the preliminary and final forms
of Blue Sky memoranda (if any); (2) the issuance and delivery of the
Shares; (3) the fees and expenses of legal counsel and independent
accountants for the Company relating to, among other things, opinions of
counsel, audits, review of unaudited financial statements and cold comfort
review; (4) the fees and expenses of a registrar or transfer agent for the
Common Stock; (5) the printing, filing, distribution and mailing
(including, without limitation, express delivery service) of this
Agreement, the Agreement Among Underwriters, if any, and the Selected
Dealers Agreement; (6) furnishing such copies of the Registration
Statement, the Prospectus and any preliminary prospectus, and all
amendments and supplements thereto, as may be requested for use in
connection with the offering and sale of the Shares by you or by dealers to
whom Shares may be sold; (7) any fees and communication expenses with
respect to filings required to be made by you with the National Association
of Securities Dealers Regulatory, Inc. (the "NASDR"); and (8) the quotation
of the Shares on NASDR's Automated Quotation System ("NASDAQ").
(h) On the Closing Date, the Company shall sell to you the Underwriters'
Warrant to purchase 150,000 Shares for an aggregate purchase price of $10.
The Underwriters' Warrant shall be
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divided between you and your designees in such manner as you shall jointly
direct by written instruction to the Company at least two business days
prior to the Closing Date.
(i) If this Agreement shall be terminated pursuant to any of the provisions
hereof (otherwise than by notice given by you pursuant to Section 8 hereof)
or if for any reason the Company shall be unable to perform its obligations
hereunder, the Company will reimburse you for all of your out-of-pocket
expenses (including the fees and expenses of your counsel) reasonably
incurred by you in connection herewith; provided, however, the Company
shall not be so obligated to reimburse you if this Agreement is terminated
by reason of a failure to satisfy the condition set forth in Section 7(k)
hereinbelow by reason of your unwillingness to modify the underwriting
arrangements pertaining to sale of the Shares and/or the participation by
you in the sale of the Shares, as may be requested by the NASDR.
(j) For a period of ninety (90) days after the commencement of the public
offering of the Shares by you, without your prior written consent, the
Company will not offer, issue, sell, contract to sell, grant any option for
the sale of, or otherwise dispose of, directly or indirectly, any
securities of the Company, except as provided for and as contemplated by
this Agreement, as specifically disclosed in the Registration Statement
respecting certain post-offering issuances to Company employees, or for
stock options granted to employees pursuant to the Company's Omnibus Stock
Plan attached as an exhibit to the Registration Statement.
(k) On or prior to the Closing Date, the Company shall obtain from each of its
officers and directors, his or her enforceable written agreement, in form
and substance satisfactory to your counsel, that for a period of
twenty-four (24) months after the Effective Date (or any longer period
required by NASDAQ or any jurisdiction in which the offer and sale of the
Shares is to be registered or qualified), he or she will not offer for
sale, sell, contract to sell, assign, pledge, transfer, grant any option
for the sale of, or otherwise dispose of, directly or indirect ly, any
securities of the Company (including without limitation any shares of
Common Stock), owned by him or her as of the Closing Date, whether upon
exercise of warrants, stock options or otherwise, without Nichols, Safina,
Lerner & Co., Inc.'s prior written consent (the "Lock- up Letter").
(l) The Company has reserved and shall continue to reserve and keep available
the maximum number of shares of its authorized but unissued Common Stock
and other securities for issuance upon exercise of the Underwriters'
Warrant.
(m) For a period of five years after the date of this Agreement, the Company
shall:
(1) retain Arthur Andersen LLP or another nationally recognized
firm of independent public accountants, as its auditors, and
at its own expense, shall cause such indepen dent certified
public accountants to review the Company's financial
statements for each of the first three fiscal quarters of each
fiscal year prior to the announcement of quarterly financial
information, the filing of the Company's Form 10-QSB quarterly
reports and the mailing of quarterly financial information to
its stockholders;
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(2) cause the Company's Board of Directors to meet not less
frequently than quarterly, upon proper notice, and cause an
agenda and minutes of the preceding meeting to be distributed
to directors prior to each such meeting;
(3) distribute to its security holders, within 120 days after the
end of each fiscal year, an annual report (containing
certified financial statements of the Company) prepared in
accordance with those required under Rule 14a-3(b) of
Regulation 14A promulgated by the Commission under the
Securities Exchange Act of 1934, as amended; and
(4) appoint a transfer agent for the Common Stock, in each case
acceptable to you.
(n) For a period of five years after the date of this Agreement, the
Company shall furnish you, free of charge, with the following:
(1) within 90 days after the end of each fiscal year, financial
statements for the Company certified by the independent
certified public accountants referred to in Section 4(m)(1)
above, including a balance sheet, statement of operations,
statement of stockholders' equity and statement of cash flows,
for the Company, with supporting schedules, prepared in
accordance with generally accepted accounting principles, as
at the end of such fiscal year and for the twelve months then
ended, accompanied by a copy of the certificate or report
thereon of such independent certified public accountants;
(2) (x) for so long as the Company is a reporting company under
any of Sections 12(b), 12(g) or 15(d) of the Securities
Exchange Act, as amended, and the rules and regulations of the
Commission promulgated thereunder (collectively, the "Exchange
Act"), promptly after filing with the Commission, copies of
all reports and proxy soliciting material which the Company is
required to file under the Exchange Act, or (y) at such times
as the Company is not a reporting company under the aforesaid
provisions of the Exchange Act, as soon as practicable after
the end of each of the first three fiscal quarters of each
fiscal year, financial statements of the Company, including a
balance sheet, statement of operations, statement of
stockholders' equity and statement of cash flows as at the end
of, or for each such fiscal quarter and the comparable period
of the preceding year, which statements need not be audited;
(3) as soon as practicable after they have first been distributed
to stockholders of the Company, copies of each annual and
interim financial or other report or communica tion sent by
the Company to its stockholders (except to the extent
duplicative of information furnished pursuant to any other
clause of this Section 4(n));
(4) as soon as practicable following release or other
dissemination, copies of every press release and every
material news item and article in respect of the Company or
its affairs released or otherwise disseminated by the Company;
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(5) promptly following receipt thereof, copies of the Company's
daily transfer sheets prepared by the Company's transfer agent
and a list of stockholders; and
(6) such additional documents and information with respect to the
Company and its affairs, if any, as you may from time to time
reasonably request.
(o) [Intentionally deleted].
(p) On or prior to the Effective Date, the Company will have accomplished the
quotation of the Shares on the NASDAQ SmallCap Market, subject only to
notice of issuance and the registra tion of such securities under the
Exchange Act. For a period of five years from the date of this Agreement,
the Company agrees, at its sole cost and expense, to take all necessary and
appropriate action such that its securities continue to be quoted on
NASDAQ, provided that the Company otherwise complies with the prevailing
requirements of NASDAQ.
(q) For a period of two years after the date of this Agreement, the Company
will not seek to amend its certificate of incorporation or file a
certificate of designation to authorize the issuance of any other class or
series of its capital stock, including, without limitation, any preferred
stock, without your prior written consent.
(r) The Company agrees, at its own cost and expense, to deliver to you and your
counsel, within a reasonable period after the Optional Closing Date, or the
expiration of the period in which you may exercise the over-allotment
option, five bound volumes containing copies of all documents and
correspondence filed with, or received from, the Commission, NASDAQ and the
NASDR relating to the offering of the Shares and the closing thereof,
including related matters.
(s) The Company will make generally available to its security holders and
deliver to you as soon as it is practicable to do so (but in no event later
than the 45th day after the end of the twelve- month period beginning at
end of the fiscal quarter of the Company during which the Registration
Statement becomes effective, or, if the Registration Statement becomes
effective during the Company's last fiscal quarter, the 90th day after the
end of such twelve-month period), an earnings statement of the Company
(which need not be audited) covering a period of at least twelve
consecutive months commencing after the effective date of the Registration
Statement, which shall satisfy the requirements of Section 11(a) of the
Act.
(t) The Company will, promptly upon your request, prepare and file with the
Commission any amendments or supplements to the Registration Statement, any
Preliminary Prospectus or the Prospectus and take any other action, which
in the reasonable opinion of Law Offices of David N. Feldman, counsel to
you, may be reasonably necessary or advisable in connection with the
distribution of the Shares, and will cause the same to become effective as
promptly as possible.
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(u) The Company will furnish to you as early as practicable prior to the
Closing Date and any Optional Closing Date, as the case may be, but no less
than two full business days prior thereto, a copy of the latest available
unaudited interim financial statements of the Company which have been
reviewed by the Company's independent certified public accountants, as
stated in their letters to be furnished pursuant to Section 7(e) hereof.
(v) The Company will apply the net proceeds from the issuance and sale of the
Shares for the purposes and in the manner set forth under the caption "Use
of Proceeds" in the Prospectus, and will file on a timely basis such
reports with the Commission with respect to the sale of the Shares and the
application of the proceeds therefrom as may be required pursuant to Rule
463 under the Act. The Company will operate its business in such a manner
and, pending application of the net proceeds of the offering for the
purposes and in the manner set forth under the caption "Use of Proceeds" in
the Prospectus, will invest such net proceeds in certain types of
securities so as not to become an "investment company" as such term is
defined under the Investment Company Act of 1940, as amended (the
"Investment Company Act").
(w) The Company has filed a registration statement on Form 8-A covering the
Shares pursuant to Section 12(b) of the Exchange Act and will use its best
efforts to cause said registration statement to become effective on the
Effective Date. The Company will comply with all reg istration, filing and
reporting requirements of the Exchange Act, which may from time to time be
applicable to the Company. The Company shall comply with the provisions of
all under takings contained in the Registration Statement.
(x) Prior to the Closing Date or any Optional Closing Date, as the case may be,
the Company shall neither issue any press release or other communication,
directly or indirectly, nor hold any press conference with respect to the
offering of the Shares, the Company or its business, results of operations,
condition (financial or otherwise), property, assets, liabilities or
prospects of the Company, without your prior written consent.
(y) For a period of ninety (90) days after the date hereof, the Company will
not, directly or indirectly, take any action designed, or which will
constitute or which might reasonably be expected to cause or result in,
stabilization or manipulation of the market price of the Shares, or the
facilitation of the sale or resale of the Shares.
(aa) The Company maintains a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to maintain asset accountability; (iii) access to cash and cash equivalents
is per mitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for cash and cash
equivalents is compared with the existing cash and cash equivalents at
reasonable intervals and appropriate action is taken with respect to any
differences.
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(bb) There are no business relationships or related party transactions of the
nature described in Item 404 of Regulation S-B of the Rules and Regulations
involving the Company and any person referred to in Items 401 or 404,
except as required to be described in the Prospectus and as so described.
(cc) The Company will not grant any person or entity registration rights with
respect to any of its securities, except such rights as are subordinate to
the registration rights contained in the Underwriters' Warrant and are
exercisable no earlier than six months after the securities to be
registered upon exercise of such registration rights have been offered for
sale pursuant to an effective registration statement under the Act and
registered or qualified for sale under the Blue Sky or state securities
law, rules or regulations of the jurisdictions in which such securities are
to be offered for sale.
(B) Lee and Woo each covenants and agrees with the Company and you that
he will pay or cause to be paid all costs and expenses incident to the
performance of his obligations hereunder which are not otherwise specifically
provided for in this Agreement, including, without limitation, any fees and
expenses of his counsel and all expenses and taxes incident to the sale and
delivery of the Shares to be sold by him to you hereunder. It is understood,
however, that the Company shall bear, and Lee and Woo shall not be required to
pay or reimburse the Company for, the cost of any other matters not directly
relating to the sale and purchase of the Additional Selling Stockholder Shares
to be sold by them pursuant to this Agreement and that except as provided in
this Section and Section 6 hereof, you will pay all of your own costs and
expenses, including the fees of your counsel, stock transfer taxes on resale of
any of the Shares by you, and any advertising expenses connected with any offers
you may make.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY: (A) The Company
represents and warrants to you that:
(a) When the Registration Statement becomes effective, and at all times
subsequent thereto to and including the Closing Date and each Optional
Closing Date, and during such longer period as the Prospectus may be
required to be delivered in connection with sales by you or any dealer, and
during such longer period until any post-effective amendment thereto shall
become effective, the Registration Statement (and any post-effective
amendment thereto) and the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment or supplement to
the Registration Statement or the Prospectus) will contain all statements
which are required to be stated therein in accordance with the Act, will
comply with the Act, and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and no
event will have occurred which should have been set forth in an amendment
or supplement to the Registration Statement or the Prospectus which has not
then been set forth in such an amendment or supplement; if a Rule 430A
Prospectus is included in the Registration Statement at the time it becomes
effective, the Prospectus filed pursuant to Rules 430A and 424(b) (1) or
(4) will contain all Rule 430A Information and all
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statements which are required to be stated therein in accordance with the
Act, will comply with the Act, and will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; and
each Preliminary Prospectus, as of the date filed with the Commission, did
not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading; except that no representation or warranty is made in
this Section 5(A)(a) with respect to statements or omissions made in
reliance upon and in conformity with written information furnished to the
Company as stated in Section 6(b) with respect to you expressly for
inclusion in any Preliminary Prospectus, the Registration Statement, or the
Prospectus, or any amendment or supplement thereto.
(b) Neither the Commission nor the Blue Sky or securities authorities of any
jurisdiction has issued an order suspending the effectiveness of the
Registration Statement, preventing or suspending the use of any Preliminary
Prospectus, the Prospectus, the Registration Statement, or any amendment or
supplement thereto, refusing to permit the effectiveness of the
Registration Statement, or suspending the registration or qualification of
the Shares, nor has the Commission or any of such authorities instituted or
threatened to institute any proceedings with respect to such an order.
(c) The Company is a corporation duly incorporated and validly existing in good
standing under the laws of Delaware, its jurisdiction of incorporation. The
Company has full corporate power and authority and has obtained all
necessary consents, authorizations, approvals, orders, licenses,
certificates, declarations and permits of and from, and have made all
required filings with, all federal, state, local and other governmental
authorities and all courts and other tribunals, to own, lease, license and
use its properties and assets and to carry on its business in the manner
described in the Prospectus. All such consents, authorizations, approvals,
orders, licenses, certificates, declarations, permits and filings are in
full force and effect and the Company is in all material respects complying
therewith. The Company is duly registered or qualified to do business as a
foreign corporation and is in good standing in each other jurisdiction in
which their ownership, leasing, licensing, or use of property and assets or
the conduct of its business requires such registration or qualification.
(d) The authorized capital stock of the Company consists of 10,000,000 shares
of Common Stock, $.01 par value, of which 1,778,200 shares are outstanding,
and 5,000,000 shares of Preferred Stock, $.001 par value, of which
1,000,000 shares of Series B Convertible Preferred Stock are outstanding.
The Company does not have any subsidiaries or own any capital stock or
equity interest in any other corporation, partnership, limited liability
company or other entity. Each outstanding share of Common Stock, including
the Additional Selling Stockholder Shares to be sold by Lee and Woo to you
hereunder, are validly authorized, validly issued, fully paid, and
nonassessable, without any personal liability attaching to the ownership
thereof, and has not been issued and is not owned or held in violation of
any preemptive rights of stockholders. There is no commitment, plan or
arrangement to issue, and no outstanding option, warrant or other right
calling for the issuance of, any share of
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capital stock of the Company or any security or other instrument which by
its terms is convertible into, exercisable for, or exchangeable for capital
stock of the Company, except as disclosed in the Prospectus. There is
outstanding no security or other instrument which by its terms is
convertible into or exchangeable for capital stock of the Company.
(e) The financial statements of the Company included in the Registration
Statement and the Prospectus fairly present the financial position, the
results of operations and the other information purported to be shown
therein at the respective dates and for the respective periods to which
they apply. Such financial statements have been prepared in accordance with
generally accepted accounting principles and are prepared in accordance
with the books and records of the Company. The accountants whose reports on
the audited financial statements are filed with the Commission as a part of
the Registration Statement are, and during the periods covered by their
report(s) included in the Registration Statement and the Prospectus were,
independent certified public accountants with respect to the Company within
the meaning of the Act. No other financial statements are required by Form
SB-2 or otherwise to be included in the Registration Statement or the
Prospectus. Except as disclosed in the Prospectus, there has at no time
been a material adverse change in the condition (financial or otherwise),
results of operations, business, property, assets, liabilities or prospects
of the Company from the latest information set forth in the Registration
Statement or the Prospectus.
(f) There is no litigation, arbitration, claim, governmental or other
proceeding (formal or informal), or investigation pending, threatened, or
in prospect (or any basis therefor known to the Company) with respect to or
affecting the Company, its operation, business, property or assets, except
as disclosed in the Prospectus or such as individually or in the aggregate
do not now have and are not expected to have a material adverse effect upon
the operations, businesses, property, assets, condition (financial or
otherwise) or prospects of the Company. The Company is not in violation of,
or in default with respect to, any law, rule, regulation, order, judgment,
or decree, except as disclosed in the Prospectus or such as individually or
in the aggregate do not now have and are not expected to have a material
adverse effect upon the operations, businesses, property, assets, condition
(financial or otherwise) or prospects of the Company; nor is the Company
required to take any action in order to avoid any such violation or
default.
(g) The Company has good and marketable title in fee simple absolute to all
real properties and good title to all other properties and assets which the
Prospectus indicates are owned by it, free and clear of all liens, security
interests, pledges, charges, mortgages and other encumbrances (except as
may be required to be and are disclosed in the Prospectus). The properties
held under lease by the Company are held by it under valid and enforceable
leases and the interests of the Company in such leases are free and clear
of all liens, encumbrances and defects, except as disclosed in the
Prospectus, and the Company is in full compliance with all material terms
and conditions thereunder and such leases are in full force and effect. No
real property owned, leased, licensed or used by the Company is situated in
an area which is, or to the knowledge of the Company, will be, subject to
zoning, use or building code
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restrictions which would prohibit (and no state of facts relating to the
actions or inaction of another person or entity or his or its ownership,
leasing, licensing, or use of any real or personal property exists or will
exist which would prevent) the continued effective ownership, leasing,
licensing, or use of such real property in the business of the Company as
presently conducted or as the Prospectus indicates any of them contemplate
conducting, except as disclosed in the Prospectus).
(h) Neither the Company nor any other party is now or is expected by the
Company to be in violation or breach of, or in default with respect to
complying with, any material provision of any indenture, mortgage, deed of
trust, debenture, note or other evidence of indebtedness, contract,
agreement, instrument, lease or license, or arrangement or understanding
which is material to the Company, and each such indenture, mortgage, deed
of trust, debenture, note or other evidence of indebtedness, contract,
agreement, instrument, lease or license is in full force and is the legal,
valid and binding obligation of the Company, and to the knowledge of the
Company, of the other contracting party and is enforceable as to them in
accordance with its terms. The Company enjoys peaceful and undisturbed
possession under all leases and licenses under which they are operating.
The Company is not a party to or bound by any contract, agreement,
instrument, lease, license, arrangement or understanding, or subject to any
charter or other restriction, which has had or is expected in the future to
have a material adverse effect on the condition (financial or otherwise),
results of operations, businesses, property, assets or liabilities of the
Company. The Company is not in violation or breach of, or in default with
respect to, any term of its Certificate of Incorporation or By-laws, in
each case as amended to date.
(i) The Company does not own or have any licensed rights to, in or under any
patents, patent applications, trademarks, service marks, trademark or
service mark applications, trade names, service marks, copyrights,
technology, know-how or other intangible properties or assets (all of the
foregoing being herein called "Intangibles") that are material to the
business of the Company, except to the extent disclosed in the Prospectus.
There is no right under any Intan gibles of the Company necessary to the
business of the Company as presently conducted or as proposed to be
conducted as indicated in the Prospectus, except as may be disclosed in the
Prospectus. The Company has not received notice of infringement with
respect to asserted Intangibles of others, except as disclosed in the
Prospectus. To the knowledge of the Company, there is no infringement by
others of Intangibles of the Company. To the knowledge of the Company,
there is no Intangible of others which has had or may in the future have a
materially adverse effect on the condition (financial or otherwise),
results of operations, businesses, property, assets, liabilities or
prospects of the Company.
(j) Neither the Company, any director or officer of the Company, or to the best
knowledge of the Company, any agent, employee, or other person authorized
to act on behalf of the Company have, directly or indirectly: used any
corporate funds of the Company for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity;
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns from
corporate funds of the Company;
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violated any provision of the Foreign Corrupt Practices Act of 1977, as
amended, as relates to the business of the Company or its predecessor in
interest; or made any bribe, rebate, payoff, influence payment, kickback,
or other unlawful payment in connection with the business of the Company or
its predecessor in interest.
(k) Any contract, agreement, instrument, lease or license required to be
described in the Registration Statement or the Prospectus has been properly
described therein. Any contract, agreement, instrument, lease or license
required to be filed as an exhibit to the Registration Statement has been
filed with the Commission as an exhibit to or has been incorporated as an
exhibit by reference into the Registration Statement.
(l) The Company has all requisite corporate power and authority to execute,
deliver and perform under the terms and conditions of this Agreement and
the Underwriters' Warrant. All necessary corporate proceedings of the
Company have been duly taken to authorize the execution, delivery and
performance by the Company of this Agreement and the Underwriters' Warrant.
This Agreement has been duly authorized, executed and delivered by the
Company, is a legal, valid, and binding agreement of the Company, and is
enforceable as to the Company in accordance with its terms. The
Underwriters' Warrant has been duly authorized by the Company and, when
executed and delivered by the Company, assuming the due execution and
delivery thereof by the other parties thereto, will be a legal, valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms. No consent, authorization, approval, order,
license, certificate, declaration or permit of or from, or filing with, any
governmental or regulatory authority, agent, board or other body is
required for the issue and sale of the Shares by the Company and the
execution, delivery or performance by the Company of this Agreement or the
Underwriters' Warrant (except filings with and orders of the Commission
pursuant to the Act which have been or will be made or obtained prior to
the Closing Date, and such filings, consents or permits as are required
under Blue Sky or securities laws in connection with the transactions
contemplated by this Agreement). No consent of any party to any contract,
agreement, instrument, lease, license, arrangement or understanding to
which the Company is a party, or to which any of their properties or assets
are subject, is required for the execution, delivery or performance of this
Agreement or the Underwriters' Warrant; and the execution, delivery and
performance of this Agreement and the Underwriters' Warrant will not
violate, result in a breach of, conflict with, or (with or without the
giving of notice or the passage of time or both) entitle any party to
terminate or call a default under any such contract, agreement, instrument,
lease, license, arrangement or understanding, result in the creation or
imposition of, any lien, security interest, pledge, charge, or other
encumbrance upon any of the property or assets of the Company pursuant to
the terms of any indenture, mortgage, deed of trust, loan or credit
agreement, lease or other agreement or instrument to which the Company is a
party or by which the Company is bound or to which any of the property or
assets of the Company is subject or violate or result in a breach of any
term of the Certificate of Incorporation or By-laws of the Company, or
violate, result in a breach of, or conflict with any law, rule, regulation,
order, judgment or decree binding on the Company or to which its
operations, business, properties or assets are subject.
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(m) The Shares are validly authorized, and when issued, paid for and delivered
in accordance with this Agreement, will be validly issued, fully paid, and
nonassessable, without any personal liability attaching to the ownership
thereof, and will not be issued in violation of any preemptive rights of
stockholders. You will receive good title to the Shares and the
Underwriters' Warrant purchased by it, upon payment of the purchase price
therefor in accordance with the provisions of this Agreement, free and
clear of all liens, security interests, pledges, charges, encumbrances,
stockholders' agreements and voting trusts (collectively, "Encumbrances").
(n) The Underwriters' Warrant Shares are validly authorized and reserved for
issuance and, when issued, paid for and delivered upon exercise of the
Underwriters' Warrant, in accordance with the provisions of the
Underwriters' Warrant will be validly issued, fully paid and non-assessable
and will not be issued in violation of any preemptive rights of
stockholders; and the holders of the Underwriters' Warrant Shares will
receive good title to them, free and clear of all Encumbrances.
(o) The Shares and the Underwriters' Warrant conform to all statements relating
thereto contained in the Registration Statement and the Prospectus.
(p) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, and except as otherwise may be
stated therein, (i) the Company has not entered into any transaction or
incurred any liability or obligation, contingent or otherwise, which is
material to the Company, except in the ordinary course of business, (ii)
there has not been any change in the outstanding capital stock of the
Company, or any issuance of options, warrants or rights to purchase the
capital stock of the Company, or any material increase in the long-term
debt of the Company, or any material adverse change in the business,
condition (financial or otherwise) or results of operations of the Company,
(iii) no loss or damage (whether or not insured) to the properties of the
Company has been sustained which is material to the Company, (iv) the
Company has not paid or declared any dividend or other distribution with
respect to its capital stock, and (v) there has not been any change,
contingent or otherwise, in the direct or indirect control of the Company
nor, to the best knowledge of the Company, do there exist any circumstances
which would likely result in such a change.
(q) Neither the Company nor any officers or directors of the Company or
Affiliates (as defined in Rule 405 of the Rules and Regulations), have
taken or will take, directly or indirectly, prior to the termination of the
offering contemplated by this Agreement, any action designed to stabilize
or manipulate the price of any security of the Company, or which has caused
or resulted in, or which might in the future reasonably be expected to
cause or result in, stabi lization or manipulation of the price of any
security of the Company, to facilitate the sale or resale of any of the
Shares.
(r) The Company has not incurred, directly or indirectly, any liability for a
fee, commission or other compensation on account of the employment of a
broker or finder in connection with
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the offering of the Shares contemplated by this Agreement, except as
contemplated by this Agreement or as disclosed in the Registration
Statement.
(s) The Company is not, and does not intend to conduct its business in a manner
in which it would become, an "investment company" as defined in Section
3(a) of the Investment Company Act.
(t) The Company has obtained, or prior to the Closing Date will obtain a
Lock-up Letter, from each of its officers and directors who owns shares of
Common Stock.
(u) No person or entity has the right to require registration of shares of
Common Stock or other securities of the Company because of the filing or
effectiveness of the Registration Statement.
(v) The Company has and will continue to (i) adequately insure its properties
against loss or damage by fire, (ii) maintain adequate insurance against
liability for negligence and (iii) maintain such other insurance as is
usually maintained by companies engaged in the same or similar businesses,
including without limitation, product liability insurance.
(w) The Company has filed all federal, state and local tax returns required to
be filed (or have obtained extensions therefor) and have paid all taxes
shown on such returns and all assessments received by it to the extent that
payment has become due. The Company has made adequate accruals for all
taxes which may be owed by it but has not been paid.
(y) Arthur Andersen LLP, who have certified certain financial statements of the
Company, are independent public accountants as required by the Act and the
rules and regulations of the Commission thereunder.
(B) Subject to your exercise of your option to purchase the Additional
Selling Stockholder Shares, each of Lee and Woo represents and warrants to the
Company and you that:
(a) All consents, approvals, authorizations and orders necessary for the
execution and delivery by such stockholder of this Agreement, and for the
sale and delivery of the Additional Shares to be sold by such stockholder
hereunder, have been obtained; and such stockholder has full right, power
and authority to enter into this Agreement and to sell, assign, transfer
and deliver the Additional Shares to be sold by such stockholder hereunder;
(b) The sale of the Additional Shares to be sold by such stockholder hereunder
and the performance of this Agreement and the consummation of the
transactions herein and therein contemplated will not result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any statute, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which such stockholder is a party or by
which such stockholder is bound, or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over such
stockholder or the property of such stockholder;
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(c) Such stockholder has, and immediately prior to the Closing Date such
stockholder will have, good and valid title to the Shares to be sold by
such stockholder hereunder, free and clear of all Encumbrances: and, upon
delivery of such Additional Shares and payment therefor pursuant hereto,
good and valid title to such Additional Shares, free and clear of all
Encumbrances;
(d) No offering, sale or other disposition of any shares of Common Stock will
be made within 90 days after the date of the Prospectus, directly or
indirectly, by such stockholder, otherwise than hereunder or with your
written consent or pursuant to bona fide gifts to persons who agree in
writing with you to be bound by the provisions of this clause, provided,
that the foregoing is not intended to apply to stockholders who are
executing Lock-Up Letters, whose terms and conditions shall supersede the
foregoing provisions;
(e) Such stockholder has not taken and will not take, directly or indirectly,
any action which is designed to or which has constituted or which might
reasonably be expected to cause or result in stabilization or manipulation
of the price of any security of the Company to facilitate the sale or
resale of the Additional Shares; and
(f) To the extent that any statements or omissions made in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto are made in reliance upon and in conformity with written
information furnished to the Company by such stockholder expressly for use
therein, such Preliminary Prospectus did, and the Registration Statement
and the Prospectus and any amendments or supplements thereto will, when
they become effective or are filed with the Commission, as the case may be,
conform in all material respects to the requirements of the Act and the
rules and regulations of the Commission thereunder and not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading.
Each of Lee and Woo specifically agrees that his obligations hereunder
shall not be terminated by operation of law, whether by his death or incapacity
or the occurrence of any other event.
6. INDEMNIFICATION AND CONTRIBUTION:
(a) The Company agrees to indemnify and hold harmless you, your
officers, directors, partners, employees, agents and counsel, and each person,
if any, who controls you within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against any and all loss, liability, claim, damage
and expense whatsoever (which shall include, for all purposes of this Section 6,
but not be limited to, attorneys' fees and any and all expense whatsoever
incurred in investigating, preparing, or defending against any litigation,
commenced or threatened, or any claim whatsoever and any and all amounts paid in
settlement of any claim or litigation) as and when incurred arising out of,
based upon, or in connection with (i) any untrue statement or alleged untrue
statement of a material fact contained in (1) any Preliminary Prospectus, the
Rule 430A Prospectus, the Registration
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Statement, or the Prospectus (as from time to time amended and supplemented), or
any amendment or supplement thereto, or (2) any application or other document or
communication (in this Section 6 collectively called an "application") executed
by or on behalf of the Company or based upon written information furnished by or
on behalf of the Company filed in any jurisdiction in order to qualify the
Shares under the Blue Sky or securities laws thereof (or the rules and
regulations promulgated thereunder) or filed with the Commission or any
securities exchange or automated quotation system; or any omission or alleged
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, unless such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company as stated in Section 6(b) by you for inclusion in any Preliminary
Prospectus, the Rule 430A Prospectus, the Registration Statement, of the
Prospectus, or any amendment or supplement thereto, or in any application, as
the case may be, or (ii) any breach of any representation, warranty, covenant or
agreement of the Company contained in this Agreement. The foregoing agreement to
indemnify shall be in addition to any liability the Company may otherwise have,
including liabilities arising under this Agreement.
If any action is brought against you or any of your officers,
directors, partners, employees, agents or counsel, or any of your controlling
persons (each, an "indemnified party") in respect of which indemnity may be
sought against the Company pursuant to the foregoing paragraph, such indemnified
party or parties shall promptly notify the Company in writing of the institution
of such action (but the failure so to notify shall not relieve the Company from
any liability it may have pursuant to this Section 6(a)) and the Company shall
promptly assume the defense of such action, including the employment of counsel
(satisfactory to such indemnified party or parties) and payment of expenses.
Such indemnified party or parties shall have the right to employ its or their
own counsel in any such case, but the fees and expenses of such counsel shall be
at the expense of such indemnified party or parties, unless the employment of
such counsel shall have been authorized in writing by the Company in connection
with the defense of such action or the Company shall not have promptly employed
counsel satisfactory to such indemnified party or parties to have charge of the
defense of such action or such indemnified party or parties shall have
reasonably concluded that there may be one or more legal defenses available to
it or them or to other indemnified parties which are different from or
additional to those available to the Company, in any of which events such fees
and expenses shall be borne by the Company and the Company shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties. Anything in this paragraph to the contrary notwithstanding, the Company
shall not be liable for any settlement of any such claim or action effected
without its written consent. The Company agrees promptly to notify you of the
commencement of any litigation or proceedings against the Company or any of its
officers or directors in connection with the sale of the Shares, any Preliminary
Prospectus, the Rule 430A Prospectus, the Registration Statement, or the
Prospectus, or any amendment or supplement thereto, or any application.
(b) Subject to your exercise of your option to purchase the Additional
Selling Stockholder Shares, each of Lee and Woo, severally and not jointly,
agrees to indemnify and hold harmless you, your officers, directors, partners,
employees, agents and counsel, and each person, if any, who controls you within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, the
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Company, each director of the Company, each officer of the Company who shall
have signed the Registration Statement, and each other person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, to the same extent as the foregoing indemnity from
the Company to you in Section 6(a), but only with respect to statements or
omissions, if any, made in any Preliminary Prospectus, the Rule 430A Prospectus,
the Registration Statement, or the Prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, or in any application, in
reliance upon and in conformity with written information furnished to the
Company by such stockholder expressly for inclusion in any Preliminary
Prospectus, the Rule 430A Prospectus, the Registration Statement, or the
Prospectus, or any amendment or supplement thereto, or in any application, as
the case may be. If any action shall be brought against you, the Company or any
other person so indemnified based upon any Preliminary Prospectus, the Rule 430A
Prospectus, the Registration Statement, or the Prospectus, or any amendment or
supplement thereto, or any application, and in respect of which indemnity may be
sought against Lee or Woo pursuant to this Section 6(b), Lee and Woo each shall
have the rights and duties given to the Company, and you, the Company and each
other person so indemnified shall have the rights and duties given to the
indemnified parties, by the provisions of Section 6(a).
(c) You agree to indemnify and hold harmless the Company, each director
of the Company, each officer of the Company who shall have signed the
Registration Statement, and each other person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, and Lee and Woo, to the same extent as the foregoing indemnity from the
Company to you in Section 6(a), but only with respect to statements or
omissions, if any, made in any Preliminary Prospectus, the Rule 430A Prospectus,
the Registration Statement, or the Prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, or in any application, in
reliance upon and in conformity with written information furnished to the
Company by you expressly for inclusion in any Preliminary Prospectus, the Rule
430A Prospectus, the Registration Statement, or the Prospectus, or any amendment
or supplement thereto, or in any application, as the case may be. For all
purposes of this Agreement, the public offering price, the amounts of the
selling concession and reallowance set forth in the Prospectus and the
information in the third paragraph under "Underwriting" constitute the only
information furnished in writing by or on your behalf expressly for inclusion in
any Preliminary Prospectus, the Rule 430A Prospectus, the Registration Statement
or the Prospectus (as from time to time amended or supplemented), or any
amendment or supplement thereto, or in any application, as the case may be. If
any action shall be brought against the Company or any other person so
indemnified based upon any Preliminary Prospectus, the Rule 430A Prospectus, the
Registration Statement, or the Prospectus, or any amendment or supplement
thereto, or any application, and in respect of which indemnity may be sought
against you pursuant to this Section 6(c), you shall have the rights and duties
given to the Company, and the Company and each other person so indemnified shall
have the rights and duties given to the indemnified parties, by the provisions
of Section 6(a).
(d) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 6(a),
6(b) or 6(c) (subject to the limitations thereof) but it is found in a final
judicial determination, not subject to further appeal, that such indemnification
may not be enforced in such case, even though this Agreement expressly provides
for indemnification in
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such case, or (ii) any indemnified or indemnifying party seeks contribution
under the Act, the Exchange Act, or otherwise, then the Company (including for
this purpose any contribution made by or on behalf of any director of the
Company, any officer of the Company who signed the Registration Statement, and
any controlling person of the Company), as one entity, and you, as a second
entity, and Lee and Woo, as a third entity, shall contribute to the losses,
liabilities, claims, damages and expenses whatsoever to which any of them may be
subject, so that you are responsible for the propor tion thereof equal to the
percentage which the aggregate underwriting discount set forth on the cover page
of the Prospectus represents of the initial public offering price of the Shares
set forth on the cover page of the Prospectus and the Company and Lee and Woo
are responsible for the remaining portion, in proportion to the net proceeds
from the offering received by them; provided, however, that if applicable law
does not permit such allocation, then other relevant equitable considerations
such as the relative fault of the Company, Lee and Woo and you in the aggregate
in connection with the facts which resulted in such losses, liabilities, claims,
damages and expenses shall also be considered. The relative fault, in the case
of an untrue statement, alleged untrue statement, omission, or alleged omission,
shall be determined by, among other things, whether such statement, alleged
statement, omission, or alleged omission relates to information supplied by the
Company, by Lee, Woo or you, and the parties' relative intent, knowledge, access
to information, and opportunity to correct or prevent such statement, alleged
statement, omission or alleged omission. The Company and you agree that it would
be unjust and inequitable if the respective obligations of the Company and you
for contribution were determined by pro rata or per capita allocation of the
aggregate losses, liabilities, claims, damages and expenses or by any other
method of allocation that does not reflect the equitable considerations referred
to in this Section 6(d). No person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 6(d), each person, if any, who
controls you within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, each officer of the Company who shall have signed the Registration
Statement and each director of the Company, shall have the same rights to
contribution as the Company, subject in each case to the provisions of this
Section 6(d). Anything in this Section 6(d) to the contrary notwithstanding, no
party shall be liable for contribution with respect to the settlement of any
claim or action effected without its written consent. This Section 6(d) is
intended to supersede any right to contribution under the Act, the Exchange Act,
or otherwise.
7. CONDITIONS OF YOUR OBLIGATIONS: Your obligations hereunder are
subject to the continuing accuracy of the representations and warranties of the
Company, Lee and Woo contained herein and in each certificate and document
contemplated under this Agreement to be delivered to you, as of the date hereof,
as of the Closing Date, and each Optional Closing Date, as the case may be, to
the performance by the Company, Lee and Woo of their respective obligations
hereunder, and to the following additional conditions:
(a) Notification that the Registration Statement has become effective shall be
received by you not later than 6:30 p.m., New York City time, on the date
of this Agreement or at such later date and time as shall be consented to
in writing by you. If the Company has elected to rely upon Rule 430A of the
Rules and Regulations, the price of the Shares and any price-related infor
mation previously omitted from the effective Registration Statement
pursuant to such Rule 430A shall have been transmitted to the Commission
for filing pursuant to Rule 424(b) of the Rules and Regulations within the
prescribed time period, and prior to the Closing Date the Company shall
have provided evidence satisfactory to you of such timely filing, or a
post-ef fective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements
of Rule 430A of the Rules and Regulations.
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(b) The Commission shall not have issued a Stop Order and no Blue Sky or
securities authority of any jurisdiction shall have issued an order
suspending the registration or qualification of the Shares, and no
proceedings for such purpose shall have been instituted or shall be
pending, or to the knowledge of the Company, be threatened or contemplated
by the Commission or the Blue Sky or securities authorities of any such
jurisdiction.
(c) You shall have received an opinion, dated the Closing Date and satisfactory
in form and substance to your counsel from Lehman & Eilen, counsel to the
Company, to the effect that:
(1) The Company is a corporation duly incorporated and validly
existing in good standing under the laws of Delaware, its
jurisdiction of incorporation, with full corporate power and
authority to own its property and conduct its business in the
manner described in the Prospectus. To the knowledge of such
counsel, the Company has obtained all necessary consents,
authorizations, approvals, orders, licenses, certificates,
declarations and permits of and from, and has made all
required filings with, all federal, state, local and other
governmental authorities and all courts and other tribunals,
to own, lease, license and use its properties and assets and
to carry on its business in the manner described in the
Prospectus. The Company is duly registered or qualified to do
business as a foreign corporation and is in good standing in
each other jurisdiction in which the ownership, leasing,
licensing, or use of its property and assets or the conduct of
its business require such registration or qualification.
(2) The authorized capital stock of the Company consists of
10,000,000 shares of Common Stock, $.01 par value, of which
1,778,200 shares are outstanding, and 5,000,000 shares of
Preferred Stock, $.001 par value ("Preferred Stock"), of which
1,000,000 shares of Series B Convertible Preferred Stock are
outstanding. Each outstanding share of Common Stock and
Preferred Stock is validly authorized, validly issued, fully
paid, and nonassessable, with no personal liability attaching
to the ownership thereof, has not been issued and is not owned
or held in violation of any preemptive right of stockholders.
There is no commitment, plan or arrangement to issue, and no
outstanding option, warrant or other right calling for the
issuance of, any share of capital stock of the Company or any
security or other instrument which by its terms is convertible
into, exercisable for, or exchangeable for capital stock of
the Company, except as disclosed in the Prospectus. There is
outstanding no security or other instrument which by its terms
is convertible into or exchangeable for capital stock of the
Company except for the outstanding shares of Preferred Stock.
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(3) To the knowledge of such counsel, there is no litigation,
arbitration, claim, governmental or other proceeding (formal
or informal), or investigation pending or threatened, with
respect to the Company or any of its operations, business,
property or assets, except as disclosed in the Prospectus or
such as individually or in the aggregate do not now have and
are not expected to have a material adverse effect on the
operations, business, property, assets or condition (financial
or otherwise) of the Company. The Company is not in violation
of, or in default with respect to, any law, rule or
regulation, or to the knowledge of such counsel, after
reasonable investigation, any order, judgment or decree,
except as disclosed in the Prospectus or such as individually
or in the aggregate do not now have and are not expected to
have a material adverse effect on the operations, businesses,
property, assets or condition (financial or otherwise) of the
Company; nor is the Company required to take any action in
order to avoid any such violation or default.
(4) Except as disclosed in the Prospectus, the Company is not
now in violation or breach of, or in default with respect to
complying with, any material provision of any indenture,
mortgage, deed of trust, debenture, note or other evidence
of indebtedness, contract, agreement, instrument, lease or
license, or arrangement or understanding which is material
to the Company, and each such indenture, mortgage, deed of
trust, debenture, note or other evidence of indebtedness,
contract, agreement, instrument, lease or license is in full
and force and is the legal, valid and binding obligation of
the Company.
(5) The Company is not in violation or breach of, or in default
with respect to, any term of its Certificate of Incorporation
or By-laws, in each case as amended to date.
(6) The Company has all requisite corporate power and authority to
execute, deliver and perform this Agreement and the
Underwriters' Warrant. All necessary corporate proceedings of
the Company have been taken to authorize the execution,
delivery, and performance by the Company of this Agreement and
the Underwriters' Warrant. This Agreement and the
Underwriters' Warrant have been duly authorized, executed and
delivered by the Company, constitute legal, valid, and binding
agreements of the Company, and (subject to applicable
bankruptcy, insolvency, reorganization and other laws
affecting the enforceability of creditors' rights generally,
and the application of equitable principles affecting the
enforceability of remedies in the nature of specific
enforcement, and except as the enforceability of the
indemnification and contribution provisions of this Agreement
and the Underwriters' Warrant may be limited under applicable
securities laws) is enforceable as to the Company in
accordance with its terms. The Underwriters' Warrant has been
duly authorized by the Company and, when executed, issued and
delivered by the Company and paid for by you in accor dance
with the provisions of this Agreement, will be a legal, valid
and binding obligation of the Company, enforceable against the
Company in accordance with their respective terms, except as
may be limited by applicable bankruptcy, insolvency,
registration and other laws affecting the enforceability of
creditors' rights generally
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and the application of equitable principles affecting the
availability of remedies in the nature of specific
enforcement.
(7) All legally required proceedings in connection with the
authorization, issue and sale of the Shares by the Company in
accordance with the provisions of this Agreement have been
taken, and no consent, authorization, approval, order,
license, certificate, declaration or permit of or from, or
filing with, any governmental or regulatory authority, agency,
board, bureau or other body or is required for the execution,
deliv ery or performance by the Company of this Agreement and
the Underwriters' Warrant (except filings with and orders of
the Commission pursuant to the Act which have been made or
received and matters under Blue Sky or state securities laws,
rules or regulations, as to which such counsel need not
express an opinion).
(8) No consent of any party to any material contract, agreement,
instrument, lease or license, or arrangement or understanding
known to such counsel, after due inquiry, to which the Company
is a party, or to which any of the property or assets of the
Company is subject, is required for the execution, delivery or
performance of this Agreement or the Underwriters' Warrant;
and the execution, delivery and performance of this Agreement
and the Underwriters' Warrant will not violate, result in a
breach of, conflict with, or (with or without the giving of
notice or the passage of time or both) entitle any party to
terminate or call a default under any such contract,
agreement, instrument, lease, license, arrangement or
understanding, result in the creation or imposition of any
lien, security interest, pledge, charge or other encumbrance
upon any of the property or assets of the Company pursuant to
the terms of any indenture, mortgage, deed of trust, loan or
credit agreement, lease or other agreement or instrument to
which the Company is a party or by which the Company is bound
or to which any of the property or assets of the Company is
subject, known to such counsel, or violate or result in a
breach of any term of the Certificate of Incorporation or
By-laws of the Company, or violate, result in a breach of, or
conflict with any law, rule, regulation, order, judgment or
decree binding on the Company or to which the operations,
business, property or assets of the Company are subject to.
(9) The Shares are validly authorized. Upon payment of the
purchase price thereunder in accordance with the provisions of
this Agreement, the Underwriters' Warrant will be duly
delivered. The Shares, when issued, paid for and delivered in
accordance with the provisions of this Agreement, will be
validly issued, fully paid and nonassessable, without any
personal liability attaching to the ownership thereof, and
will not be issued in violation of any preemptive rights of
stockholders. Upon payment of the purchase price therefor in
accordance with the provisions of this Agreement, you will
receive good title to the Shares and the Underwriters' Warrant
purchased by it from the Company, free and clear of all
Encumbrances.
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(10) The Underwriters' Warrant Shares are validly authorized and
have been duly and validly reserved for issuance, and when
issued, paid for and delivered upon exercise of the
Underwriters' Warrant in accordance with the provisions of the
Underwriters' Warrant will be validly authorized, validly
issued, fully paid, and nonassessable, with no personal
liability attaching to the ownership thereof, and will not
have been issued in violation of any preemptive rights of
stockholders, and the holders of the Underwriters' Warrant
Shares will receive good title to them, free and clear of all
Encumbrances.
(11) The Shares and the Underwriters' Warrant Shares conform to all
statements relating thereto contained in the Registration
Statement and the Prospectus.
(12) To the knowledge of such counsel, any contract, agreement,
instrument, lease or license required to be described in the
Registration Statement or the Prospectus has been properly
described therein. To the knowledge of such counsel, any
contract, agreement, instrument, lease, or license required to
be filed as an exhibit to the Registration Statement has been
filed with the Commission as an exhibit to or has been
incorporated as an exhibit by reference into the Registration
Statement.
(13) The Shares are duly authorized for quotation on the NASDAQ
SmallCap Market, subject to notice of issuance.
(14) To the knowledge of such counsel, no person or entity has the
right to require registration of shares of Common Stock or
other securities of the Company because of the filing or
effectiveness of the Registration Statement who has not waived
such right.
(15) The Company is not an "investment company" by reason of its
assets and operations as defined in Section 3(a) of the
Investment Company Act.
(16) None of the shares of Common Stock issued by the Company prior
to the date hereof have been offered and sold by the Company
in violation of the Act or applicable Blue Sky or state
securities laws or rules or regulations. All shares of Common
Stock outstanding as of the date hereof have been duly
authorized and validly issued, and are fully paid and
non-assessable, with no personal liability attaching to the
ownership thereof, and have not been issued in violation of
any preemptive rights of stockhold ers.
(17) The statements in the Prospectus under captions "Business",
"Risk Factors", "Use of Proceeds", "Management" and
"Description of Securities" have been reviewed by such counsel
and insofar as such statements refer to descriptions of
agreements, instruments or leases, summarize the status of
litigation or other proceedings, or the provisions of orders,
judgments or decrees, or constitute statements of law,
descriptions of statutes, rules or regulations, or conclusions
of law, such statements
25
<PAGE>
fairly present the information called for and are accurate and
complete in all material respects.
(18) Except for liabilities and obligations incurred in the
ordinary course of business, to the knowledge of such counsel,
after due inquiry, there are no claims (absolute, accrued,
contingent or otherwise), except as disclosed in the
Prospectus or such as individually or in the aggregate do not
have and are not expected to have a material adverse effect
upon the operations, businesses, property, assets or condition
(financial or otherwise) of the Company.
(19) The Registration Statement has become effective under the Act,
and to the knowledge of such counsel, no Stop Order has been
issued and no proceedings for that purpose have been
instituted or threatened.
(20) The Registration Statement, any Rule 430A Prospectus, and the
Prospectus, and any amendment or supplement thereto (except
for the financial statements and the notes and schedules
related thereto, and other financial information and
statistical data contained therein or omitted therefrom, as to
which such counsel need express no opinion), comply as to form
in all material respects with the applicable requirements of
the Act.
(21) Such counsel has participated in the preparation of the
Registration Statement and the Prospectus and any amendments
or supplements thereto, and in the course thereof participated
in conferences with officers and other representatives of the
Company, representatives of the independent certified public
accountants for the Company and your representatives at which
the contents of the Registration Statement and Prospec tus and
related matters were discussed and, although such counsel is
not passing upon and does not assume any responsibility for
the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus, or any
amendment or supplement thereto, on the basis of the
foregoing, no facts have come to the attention of such counsel
which lead them to believe that either the Registration
Statement or any amendment thereto at the time such
Registration Statement or such amendment became effective or
the Prospectus as of its date or any amendment or supplement
thereto as of its date contained an untrue statement of a
material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein
not misleading (it being understood that such counsel need
express no comment with respect to the financial statements,
and the notes and schedules related thereto, and other
financial information and statistical data included in the
Registration Statement or Prospectus).
(22) To the knowledge of such counsel, since the effective date of
the Registration Statement, no event has occurred which should
have been set forth in an amendment or supplement to the
Registration Statement or the Prospectus which has not been
set forth in such an amendment or supplement.
26
<PAGE>
In rendering such opinion, counsel for the Company may rely (i) as to
matters involving the application of laws other than the laws of the United
States, to the extent counsel for the Company deems proper and to the extent
specified in such opinion, upon an opinion or opinions of local counsel (in form
and substance satisfactory to your counsel) acceptable to your counsel, familiar
with the applicable laws, in which case the opinion of counsel for the Company
shall state that the opinion or opinions of such other counsel are satisfactory
in scope, form and substance to counsel for the Company and that reliance
thereon by counsel for the Company is reasonable; (ii) as to matters of fact, to
the extent they deem proper, on certificates of responsible officers of the
Company; and (iii) to the extent they deem proper, upon written statements or
certificates of officers of departments of various jurisdictions having custody
of documents respecting the corporate existence or good standing of the Company,
provided that copies of any such statements or certificates shall be delivered
to your counsel.
(d) Counsel for Lee and Woo shall have furnished to you its written opinion
with respect to Lee and Woo, dated the Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(1) This Agreement has been duly executed and delivered by or on
behalf of such stockholder and constitutes a valid and binding
agreement of such stockholder in accordance with its terms;
and the sale of the Shares to be sold by such stockholder
hereunder and the performance of this Agreement and the
consummation of the transactions herein and therein
contemplated will not result in a breach or violation of any
terms or provisions of, or constitute a default under, any
statute, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument known to such
counsel to which such stockholder is a party or by which such
stockholder is bound, or any order, rule or regulation known
to such counsel of any court or governmental agency or body
having jurisdiction over such stockholder or the property of
such stockholder;
(3) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation
of the transactions contemplated by this Agreement in
connection with the Additional Shares to be sold by such
stockholder hereunder, except such as have been obtained under
the Act and such as may be required under state securities or
Blue Sky laws in connection with the purchase and distribution
of such Shares by you;
(4) Immediately prior to the Closing Date such stockholder had
good and valid title to the Additional Shares to be sold by
such stockholder under this Agreement, free and clear of all
liens, encumbrances, equities or claims, and full right, power
and authority to sell, assign, transfer and deliver the
Additional Shares to be sold by such stockholder hereunder;
and
27
<PAGE>
(5) Good and valid title to such Additional Shares, free and clear
of all liens, encum brances, equities or claims, has been
transferred to you who has purchased such Additional Shares in
good faith and without notice of any such lien, encumbrance,
equity or claim or any other adverse claim within the meaning
of the Uniform Commercial Code.
In rendering the opinion in subparagraph (4) such counsel may rely upon
a certificate of such stockholder in respect of matters of fact as to
ownership of and liens, encumbrances, equities or claims on the
Additional Shares sold by such stockholder, provided that such counsel
shall state that they believe that both you and they are justified in
relying upon such certificate;
(e) You shall have received letters addressed to you and dated the date
hereof and the Closing Date from Arthur Andersen LLP, independent
certified public accountants for the Company, addressed to you, and in
form and substance satisfactory to you, to the effect that:
(1) Such accountants are independent public accountants as
required by the Act and the rules and regulations of the
Commission thereunder and no information need be supplied with
respect to them in answer to Item 13 of Form SB-2.
(2) In their opinion, the financial statements and related notes
of the Company examined by them, at all dates and for all
periods referred to in their report therein, and included in
the Registration Statement and the Prospectus on their
authority as experts comply as to form in all material
respects with the applicable accounting requirements of the
Act and the Rules and Regulations of the Commission
promulgated thereunder.
(3) On the basis of limited procedures not constituting an
audit, including a reading of the latest available unaudited
interim financial statements of the Company and the finan-
cial data and accounting records of the Company, inquiries
of officials of the Com pany and others responsible for
financial and accounting matters, a reading of the minute
books of the Company, including without limitation the
minutes (if any) of meetings or consents in lieu of meetings
of the stockholders and of the Board of Di rectors (and any
committees thereof) of the Company, and other specified
procedures and inquiries requested by you, if any, nothing
has come to their attention which causes them to believe
that:
(i) except as disclosed in or contemplated by the
Registration Statement and the Prospectus, during the
period from the date of the last audited balance sheet
of the Company included in the Registration Statement
and Prospectus to a specified date not more than five
(5) days prior to the date of such letter, there were
any decreases, as compared with the corresponding
period of the preceding year, in net sales, cost of
goods sold, operating, selling, general and
administrative expenses, earnings from operations, the
total or per share amounts of net earnings, or the
weighted average number of shares outstand ing;
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<PAGE>
(ii) except as disclosed in or contemplated by the
Registration Statement and the Prospectus, during the
period from the date of the last audited balance sheet
of the Company included in the Registration Statement
and Prospectus to a specified date not more than five
(5) days prior to the date of such letter, there has
been any change in the capital stock or other
securities of the Company or any payment or declaration
of any dividend or other distribution in respect
thereof or in exchange therefor, or any increase in the
long-term debt of the Company or any decrease in the
net current assets or net assets of the Company as
compared with the amounts shown on the last audited
balance sheet of the Company, included in the
Registration Statement and the Prospectus (other than
in the ordinary course of business); and
(iii)On the basis of their examinations referred to in
their report and consent in cluded in the Registration
Statement and Prospectus and the indicated procedures
and inquiries referred to above, nothing has come to
their attention which, in their judgment, would cause
them to believe or indicate that the financial
statements and related notes and schedules of the
Company included in the Registration Statement and
Prospectus do not present fairly the financial position
and results of operations of the Company, as at the
dates and for the periods indicated, in conformity with
generally accepted account ing principles applied on a
consistent basis, and are not in all material respects
a fair presentation of the information purported to be
shown.
(4) In addition to their examination referred to in their report
included in the Registration Statement and the Prospectus and
the inquiries and limited procedures referred to in clause
(ii) of this Section 7(e), they have performed other
procedures, not constituting an audit, with respect to certain
numerical data, percentages, dollar amounts and other
financial information appearing in the Registration Statement
and the Prospectus, which are derived from the general
accounting records of the Company, and have compared certain
of such data and information with the accounting records of
the Company and found them to be in agreement.
(5) Such other matters as you may have reasonably requested.
(f) The representations and warranties of the Company, Lee and Woo in this
Agreement shall be true and correct with the same effect as if made on
and as of the Closing Date and the Company, Lee and Woo shall have
complied with all agreements and satisfied all conditions on its part
to be performed or satisfied at or prior to the Closing Date.
(g) The Registration Statement and the Prospectus and any amendments or
supplements thereto shall contain all statements which are required to be
stated therein in accordance with the Act and the Rules and Regulations,
and shall in all material respects conform to the requirements thereof, and
neither the Registration Statement nor the Prospectus nor any amendment or
supplement thereto shall contain any untrue statement of a material fact or
omit to state any
29
<PAGE>
material fact required to be stated therein or necessary to make the
statements therein not misleading.
(h) There shall have been, since the respective dates as of which information
is given in the Registration Statement and the Prospectus, no material
adverse change in the business, property, condition (financial or
otherwise), results of operations, capital stock, long-term or short-term
debt or general affairs of the Company, except changes which the
Registration Statement and the Prospectus indicate might occur after the
effective date of the Registration Statement, and the Company shall not
have incurred any material liabilities or entered into any agreements not
in the ordinary course of business, except as disclosed in the Registration
Statement and the Prospectus.
(i) No action, suit or proceeding, at law or in equity, shall be pending or
threatened against the Company which would be required to be set forth in
the Registration Statement, and no proceedings shall be pending or
threatened against the Company before or by any commission, board or
administrative agency in the United States or elsewhere, wherein an
unfavorable decision, ruling or finding would have a materially adverse
affect on the business, property, condition (financial or otherwise),
results of operations or general affairs of the Company.
(j) The Company, Lee and Woo shall have furnished to you or caused to be
furnished to you at the Closing Date, certificates of the President and
chief financial officer of the Company and of Lee and Woo, respectively, in
form and substance satisfactory to you, as to the accuracy of the
representations and warranties of the Company and Lee and Woo,
respectively, herein at and as of the Closing Date and as to the
performance by the Company and Lee and Woo of all their respective
obligations hereunder to be performed at or prior to the Closing Date and
the Company shall have furnished to you a certificate of the President and
chief financial officer of the Company satisfactory to you as to the
matters set forth in Sections 7(a) and (b) above.
(k) The NASDR, upon review of the terms of the public offering of the Shares,
shall have indicated that it has no objections to the underwriting
arrangements pertaining to the sale of the Shares and the participation by
you in the sale of the Shares.
(l) Prior to or on the Closing Date, the Company shall have executed and
delivered the Underwriters' Warrant to you.
(m) Prior to or on the Closing Date, the Company shall have delivered to you
executed copies of the Lock-up Letters.
(n) Subsequent to the date hereof, there shall not have occurred any change, or
any development involving a prospective change, in or affecting
particularly the business or financial affairs of the Company which would
materially and adversely affect the market for the Shares.
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<PAGE>
(o) Subsequent to the date hereof, no executive officer of the Company listed
as such in the Prospectus shall have died, become physically or mentally
disabled, resigned or have been removed or discharged.
(p) The Company shall furnish you with such further certificates and documents
as you or your counsel shall have reasonably requested.
All opinions, certificates, letters and other documents required by
this Section 7 to be delivered to you by the Company, Lee and Woo will be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to you and your counsel. The Company will furnish you with such
conformed copies of such opinions, certificates, letters and other documents as
you shall reasonably request.
(q) Upon the exercise, in whole or in part, by you of the option to purchase
the Additional Shares, referred to in Section 2 hereof, your obligations to
purchase and pay for the Addi tional Shares will be subject to the
continuing accuracy of the representations and warranties of the Company,
Lee and Woo contained herein and in each certificate and document contem
plated under this Agreement to be delivered to you, as of the date hereof
and as of each Optional Closing Date, to the performance by the Company of
its obligations hereunder, and the following additional conditions:
(1) The Registration Statement shall remain effective at the
Optional Closing Date, and no Stop Order shall have been
issued by the Commission and no proceedings for that purpose
shall have been instituted or shall be pending, or to your
knowledge or the knowledge of the Company, shall be
contemplated by the Commission, and any rea sonable request on
the part of the Commission for additional information shall
have been complied with to the satisfaction of Law Offices of
David N. Feldman, your counsel.
(2) You shall have received an opinion, dated the Optional Closing
Date and satisfactory in form and substance to counsel to you,
from Lehman & Eilen, counsel to the Company, which opinion
shall be substantially the same in scope and substance as the
opinion furnished to you on the Closing Date pursuant to
Section 7(c) hereof, except that such opinion, where
appropriate, shall cover the Additional Shares.
(3) Counsel for Lee and Woo shall have furnished to you its
written opinion with respect to the Additional Shares, dated
the Optional Closing Date, in form and substance satisfactory
to you, to the effect that:
(1) This Agreement has been duly executed and delivered
by or on behalf of Lee and Woo and constitutes a
valid and binding agreement of Lee and Woo in
accordance with its terms; and the sale of the
Additional Shares hereunder and the performance of
this Agreement, and the consummation of the
transactions herein and therein contemplated will not
result in a breach or violation of any
31
<PAGE>
terms or provisions of, or constitute a default
under, any statute, any indenture, mortgage, deed of
trust, loan agreement or other agreement or
instrument known to such counsel to which Lee or Woo
is a party or of which Lee or Woo is bound, or any
order, rule or regulation known to such counsel of
any court or governmental agency or body having
jurisdiction over Lee or Woo or the property of Lee
or Woo;
(2) No consent, approval, authorization or order of any
court or governmental agency or body is required for
the consummation of the transactions contem plated by
this Agreement in connection with the Additional
Shares hereunder, except such as have been obtained
under the Act and such as may be required under state
securities or Blue Sky laws in connection with the
purchase and distribution of such Shares by you;
(3) Immediately prior to the Optional Closing Date, Lee
and Woo had good and valid title to the Additional
Shares, free and clear of all liens, encumbrances,
equities or claims, and full right, power and
authority to sell, assign, transfer and deliver the
Additional Shares hereunder; and
(4) Good and valid title to such Additional Shares, free
and clear of all liens, encumbrances, equities or
claims, has been transferred to you who has pur
chased such Shares in good faith and without notice
of any such lien, encum brance, equity or claim or
any other adverse claim within the meaning of the
Uniform Commercial Code.
In rendering the opinion in subparagraph (4) such counsel may rely upon
a certificate of Lee and Woo in respect of matters of fact as to
ownership of and liens, encumbrances, equities or claims on the Shares
sold by Lee and Woo, provided that such counsel shall state that they
believe that both you and they are justified in relying upon such
certificate;
(4) You shall have received a letter in form and substance
satisfactory to you from Arthur Andersen LLP, independent
certified public accountants for the Company, dated the
Optional Closing Date and addressed to you confirming the
information in their letter referred to in Section 7(e) hereof
and stating that nothing has come to their attention during
the period from the ending date of their review referred to in
said letter to a date not more than five (5) days prior to the
Optional Closing Date, which would re quire any change in said
letter if it were required to be dated the Optional Closing
Date.
(6) You shall have received a certificate of the President and
chief financial officer of the Company, dated the Optional
Closing Date, in form and substance satisfactory to you,
substantially the same in scope and substance as the
certificate furnished to you on the Closing Date pursuant to
Section 7(j) hereof. Lee and Woo shall have furnished to you
or caused to be furnished to you at the Closing Date, a
certificate in form and
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<PAGE>
substance satisfactory to you, as to the accuracy of his
representations and warranties herein at and as of the
Optional Closing Date and as to the performance by Lee and Woo
of all obligations hereunder to be performed by Lee and Woo at
or prior to the Optional Closing Date.
8. EFFECTIVE DATE OF AGREEMENT; TERMINATION.
(a) This Agreement shall become effective at 9:30 A.M., New York City
time, on the first full business day following the day on which the Registration
Statement becomes effective or at the time of the initial public offering by you
of the Shares, whichever is earlier. The time of the initial public offering
shall mean the time, after the Registration Statement becomes effective, of the
release by you for publication of the first newspaper advertisement which is
subsequently published relating to the Shares or the time, after the
Registration Statement becomes effective, when the Shares are first released by
you for offering by you or dealers by letter or telegram, whichever shall first
occur. You, the Company, Lee or Woo may prevent this Agreement from becoming
effective without liability of any party to any other party, except as noted
below in this Section 8, by giving the notice indicated in Section 8(c) before
the time this Agreement becomes effective.
(b) In addition to the right to terminate this Agreement pursuant to
Section 7 hereof by reason of the Company's or Lee's or Woo's failure, refusal
or inability to perform all obligations and satisfy all conditions on their part
to be performed or satisfied hereunder prior to the Closing Date or Optional
Closing Date, as the case may be, you shall have the right to terminate this
Agreement at any time prior to the Closing Date or any Optional Closing Date, as
the case may be, by giving notice to the Company, Lee and Woo, if the Company
shall have sustained a material loss or material adverse interference with its
business or properties from fire, flood, accident, hurricane, earthquake, theft,
sabotage, or other calamity or malicious act, including the death or disability
of Lee or Woo, whether or not covered by insurance, or from any labor dispute or
any court or governmental action, order or decree, of such a character as to
have a material adverse effect with the conduct of the business and operations
of the Company; or if there shall have been a general suspension of, or a
general limitation on prices for, trading in securities on the New York Stock
Exchange, the American Stock Exchange or in the over-the-counter market; or if a
banking moratorium has been declared by a state or federal authority; or if
there shall have been an outbreak of major hostilities between the United States
and any foreign power, or any other insurrection, armed conflict or national
calamity, which in your judgment makes it impracticable or inadvisable to
proceed with the offering, sale or delivery of the Firm Shares or the Additional
Shares, as the case may be.
(c) If you elect to prevent this Agreement from becoming effective as
provided in this Section 8, or to terminate this Agreement pursuant to Section 7
or this Section 8, you shall notify the Company, Lee and Woo promptly by
telephone, telecopier, telex, or telegram, confirmed by letter. If, as so
provided in this Section 8, the Company elects to prevent this Agreement from
becoming effective, the Company shall notify you promptly by telephone,
telecopier, telex, or telegram, confirmed by letter. If, as so provided in this
Section 8, Lee or Woo elects to prevent this Agreement
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<PAGE>
from becoming effective, such stockholder shall notify you promptly by
telephone, telecopier, telex, or telegram, confirmed by letter.
(d) Anything in this Agreement to the contrary notwithstanding other
than Section 8(e), if this Agreement shall not become effective by reason of an
election pursuant to this Section 8 or if this Agreement shall terminate or
shall otherwise not be carried out within the time specified herein by reason of
any failure on the part of the Company to perform any covenant or agreement or
satisfy any condition of this Agreement by it to be performed or satisfied, the
sole liability of the Company to you, in addition to the obligations the Company
assumed pursuant to Section 4(g), will be to reimburse you for such
out-of-pocket expenses (including the fees and disbursements of their counsel)
as shall have been incurred by them in connection with this Agreement or the
proposed offer, sale, and delivery of the Shares, and upon demand the Company
agrees to pay promptly the full amount thereof to you. Anything in this
Agreement to the contrary notwithstanding other than Section 8(e), if this
Agreement shall not become effective by reason of any failure on the part of Lee
and Woo to perform any covenant or agreement or satisfy any condition of this
Agreement by such stockholder to be performed or satisfied, the sole liability
of such stockholder to you will be to reimburse you for such out-of-pocket
expenses (including the fees and disbursements of their counsel) as shall have
been incurred by them in connection with this Agreement or the proposed offer,
sale, and delivery of the Shares, and upon demand such stockholder agrees to pay
promptly the full amount thereof to you.
(e) Notwithstanding any election hereunder or any termination of this
Agreement, and whether or not this Agreement is otherwise carried out, the
provisions of Sections 4(b), 4(g), 6, 10(b) and 10(c) shall not be in any way
affected by such election or termination or failure to carry out the terms of
this Agreement or any part hereof.
9. SUBSTITUTION OF UNDERWRITERS.
If any one or more of the Underwriters shall fail or refuse to purchase
any of the Shares which it or they have agreed to purchase hereunder, and the
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of Shares, the other Underwriters shall be obligated, severally, to purchase the
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase, in the proportions which the number of Shares which they
have respectively agreed to purchase pursuant to Section 2 hereof bears to the
aggregate number of Shares which all such non-defaulting Underwriters have so
agreed to purchase or in such other proportions as you may specify, provided
that in no event shall the maximum number of Shares which any Underwriter has
become obligated to purchase pursuant to Section 2 hereof be increased pursuant
to this Section 9 by more than one-ninth of such number of Shares, without the
written consent of such Underwriter. If any Underwriter or Underwriters shall
fail or refuse to purchase any Shares and the aggregate number of Shares which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase exceeds one-tenth of the aggregate number of Shares and arrangements
satisfactory to you and the Company for the purchase of such Shares are not made
within 48 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Company for the
34
<PAGE>
purchase or sale of any Shares under this Agreement. In any such case either you
or the Company shall have the right to postpone the Closing Date, but in no
event for longer than five business days, in order that the required changes, if
any, in the Registration Statement and in the Prospectus or in any other
documents or arrangements may be effected. Any action taken under this paragraph
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
10. MISCELLANEOUS: (a) Notices required to be in writing shall be
mailed or delivered (i) to the Company or Lee and Woo at the Company's office at
1752 Clement Street, San Francisco, CA 94121, Attention: Hiram Lee, with copies
to Hank Gracin, Esq., Lehman & Eilen, Suite 505, 50 Charles Lindbergh Blvd.,
Uniondale, NY 11553 or (ii) to you, at the office of Nichols, Safina, Lerner &
Co., Inc., 800 Third Avenue, New York, New York 10022, Attention: Jon Lerner,
CEO, with copies to: William Scott & Co., L.L.C., 1030 Salem Road, Union, NJ
07083 and David N. Feldman, Esq., Law Offices of David N. Feldman, 36 West 44th
Street, Suite 1201, New York, NY 10036, and shall be deemed given when received.
Any notice not required to be in writing, including but not limited to notices
under Section 7(a) or 8 hereof, may be made by telex, telecopier or telephone
and shall be deemed given at the time the telex, or telecopied communication is
received or the telephone call is made, but if so made shall be subsequently
confirmed in writing.
(b) The representations, warranties, covenants and agreements of the
Company, Lee and Woo, and the indemnity and contribution agreements, contained
in Sections 4, 5 and 6 of this Agree ment will remain in full force and effect,
regardless of any investigation made by or on behalf of you, Lee, Woo, the
Company or any of its officers or directors or any controlling persons of you,
Lee, Woo or the Company and will survive acceptance of and payment for any of
the Shares and the termination of this Agreement.
(c) This Agreement has been and is made solely for the benefit of you,
Lee, Woo and the Company and the controlling persons, directors and officers
referred to in Section 6 hereof and their respective successors and assigns, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" as used in this Agreement shall not
include a purchaser, as such purchaser, of Shares from you.
(d) This Agreement shall be governed by and construed in accordance
with the laws of the
35
<PAGE>
State of New York, applicable to contracts made and to be performed entirely
with such State, without regard to conflict of laws provisions thereof.
Please confirm that the foregoing correctly sets forth the agreement
among the Company and you.
Very truly yours,
GALVESTON'S STEAKHOUSE CORP.
By:________________________________
Hiram J. Woo, President
-----------------------------------
RICHARD M. LEE
-----------------------------------
HIRAM J. WOO
Confirmed, as of the date first above mentioned.
NICHOLS, SAFINA & LERNER, INC.
WILLIAM SCOTT & CO., L.L.C.
BY: NICHOLS, SAFINA & LERNER, INC.
By:___________________________
Jon Lerner, CEO
36
<PAGE>
SCHEDULE I
Underwriting Agreement, dated
<TABLE>
<CAPTION>
Underwriter No. of Firm Shares No. of Addtl. Company Shares
- ----------------------------------- -------------------- ----------------------------
<S> <C> <C>
Nichols, Safina, Lerner & Co., Inc
William Scott & Co., L.L.C.
Total 1,500,000 shares 125,000 shares
</TABLE>
37
EXHIBIT 3.1
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
GALVESTON'S STEAKHOUSE CORP.
Galveston's Steakhouse Corp., a corporation organized and existing
under the laws of the State of Delaware hereby certifies as follows:
1. The name of the corporation is Galveston's Steakhouse Corp. The date
of filing of its original Certificate of Incorporation with the Secretary of
State was June 3, 1996, under the name of Texas Loosey's Steakhouse & Saloon,
Inc.
2. This Restated Certificate of Incorporation only restates and
integrates and does not further amend the provisions of the Certificate of
Incorporation of this corporation as heretofore amended or supplemented and
there is no discrepancy between those provisions and the provisions of this
Restated Certificate of Incorporation.
3. The text of the Certificate of Incorporation as amended or
supplemented heretofore is hereby restated without further amendments or changes
to read as herein set forth in full:
FIRST: The name of the corporation is: GALVESTON'S STEAKHOUSE CORP.
SECOND: The address of its registered office in the State of Delaware
is to be located at The Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle. The name of its registered agent at
such address is The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The total number of shares of stock which the corporation
shall have authority to issue is TEN MILLION (10,000,000) shares of Common
Stock, par value $.01 per share (the "Common Stock"), and FIVE MILLION
(5,000,000) shares of Preferred Stock, par value $.001 per share (the "Preferred
Stock").
The Preferred Stock of the corporation shall be issued by the Board of
Directors of the corporation in one or more classes or one or more series within
any class and such classes or series shall have such voting powers, full or
limited, or no voting powers, and such designations, preferences, limitations or
restrictions as the Board of Directors of the corporation may determine, from
time to time.
The holders of the Common Stock are entitled to one vote for each
share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting.
1
<PAGE>
Shares of Common Stock and Preferred Stock may be issued from time to
time as the Board of Directors shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
FIFTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter or repeal
the By-laws of the corporation.
SIXTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-laws may provide. The books of the corporation may
be kept (subject to any provisions contained in the statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the Board of Directors or in the By-laws of the corporation. Elections of
directors need not be by written ballot unless the By-laws of the corporation
shall so provide.
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware General Corporation Law
or on the application of trustees in dissolution or of any receiver or receivers
appointed for this corporation under the provisions of Section 279 of Title 8 of
the Delaware General Corporation Law order a meeting of the creditors or class
of creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this corporation, as the case
may be, and also on this corporation.
EIGHTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate of incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
NINTH: The corporation shall to the fullest extent permitted by
Section 145 of the Delaware General Corporation Law, as the same may be amended
or supplemented, or by any successor thereto, indemnify and reimburse any and
all persons whom it shall have the power to indemnify under said Section from
and against any and all of the expenses, liabilities or other matters referred
to in, or covered by said Section. Notwithstanding the foregoing, the
indemnification provided for in this Article TENTH shall not be deemed exclusive
of any other rights to which those entitled to receive indemnification or
reimbursement hereunder may be
2
<PAGE>
entitled under any By-law of the corporation, agreement, vote of stockholders or
disinterested directors or otherwise.
TENTH: No director of this corporation shall be personally liable to
the corporation or any of its stockholders for monetary damages for breach of a
fiduciary duty as a director, except for liability (i) for any breach of a
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law as the same exists or hereafter may be amended or (iv) for any
transaction from which the director derived an improper benefit. If the Delaware
General Corporation Law hereafter is amended to authorize the further
elimination or limitation of the liability of directors, then liability of a
director of the corporation, in addition to limitation on personal liability
provided herein, shall be limited to the fullest extent permitted by the amended
Delaware General Corporation Law. Any repeal or modification of this paragraph
by the stockholders of the corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of directors of the
corporation existing at the time of such repeal or modification.
4. This Restated Certificate of Incorporation was duly adopted by Board
Of Directors in accordance with Section 245 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, said GALVESTON'S STEAKHOUSE CORP. has caused this
Certificate to be signed by Richard M. Lee, its Chief Executive Officer, this
31st day of January, 1997.
GALVESTON'S STEAKHOUSE CORP.
By: /s/ Richard M. Lee
Richard M. Lee,
President and Secretary
CORPORATE SEAL
3
<PAGE>
Exhibit 3.2
CERTIFICATE OF CORRECTION FILED TO CORRECT
A CERTAIN ERROR IN THE RESTATED CERTIFICATE
OF INCORPORATION OF GALVESTON'S STEAKHOUSE
CORP. FILED IN THE OFFICE OF THE SECRETARY OF
STATE OF DELAWARE ON FEBRUARY 27, 1997
Galveston's Steakhouse Corp., a corporation organized and existing
under and by virtue of General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
1. The name of corporation is Galveston's Steakhouse Corp.
2. That a Restated Certificate of Incorporation was filed by the
Secretary of State of Delaware on February 27, 1997 and that said Restated
Certificate of Incorporation requires correction as permitted by Section 103 of
the General Corporation Law of the State of the Delaware.
3. The inaccuracy or defect of said Restated Certificate of
Incorporated to be corrected as follows:
The Restated Certificate of Incorporation did not include the
designations of the Company's Series B Convertible Preferred Stock in Article
Fourth thereof.
4. Article Fourth of the Restated Certificate of Incorporation
is corrected to read as follows:
FOURTH: The total number of shares of stock which the corporation
shall have authority to issue is TEN MILLION (10,000,000) shares of Common
Stock, par value $.01 per share (the "Common Stock"), and FIVE MILLION
(5,000,000) shares of Preferred Stock, par value $.001 per share (the "Preferred
Stock").
The Preferred Stock of the corporation shall be issued by the Board of
Directors of the corporation in one or more classes or one or more series within
any class and such classes or series shall have such voting powers, full or
limited, or no voting powers, and such designations, preferences, limitations or
restrictions as the Board of Directors of the corporation may determine, from
time to time.
The holders of the Common Stock are entitled to one vote for each
share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting.
Shares of Common Stock and Preferred Stock may be issued from time to
time as the Board of Directors shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
1. Designation. The Board of Directors does hereby provide for
the issue of a new class
<PAGE>
of Preferred Stock of the Corporation, to be designated and known as the Series
B Convertible Preferred Stock. As used herein, the term "Series B Convertible
Preferred Stock" shall refer to the shares of this Corporation's Series B
Convertible Preferred Stock, and the term "Preferred Share" shall refer to one
share of Series B Convertible Preferred Stock, and the term "Preferred Shares"
shall refer to more than one such Share.
2. Number of Shares. The number of shares constituting the Series B
Convertible Preferred Stock shall be and the same is hereby fixed as 1,000,000.
3. Stated Capital. The amount to be represented in stated capital at all
times for each share of the Series B Convertible Preferred Stock shall be its
par value of $.001 per share.
4. Rank. Subject to Section 6, the Series B Convertible Preferred Stock
shall, with respect to rights on liquidation, rank equivalent to all classes of
the common stock, $.01 par value per share (collectively, the "Common Stock" or
"Common Shares"), of the Corporation.
5. Dividends. The holders of outstanding Preferred Shares shall not be
entitled to receive dividends prior to the second anniversary of the Closing
Date (as defined in Subsection 8(a) below). Thereafter, in the event the
Conversion Test (as defined in Section 8(a) below) is satisfied, the Series B
Convertible Preferred Stock will participate in any dividends declared on the
Common Stock, on an as-converted basis under Conversion Option B (as defined in
Section 8(b) below).
6. Liquidation Rights. In the event of a voluntary or involuntary
liquidation, dissolution or winding up of the Corporation prior to the second
anniversary of the Closing Date, or subsequent to the Closing Date if the
Conversion Test is not satisfied, the holders of Series B Convertible Preferred
Stock shall be entitled to $0.001 per share. In the event of a voluntary or
involuntary liquidation, dissolution or winding up of the Corporation after the
satisfaction of the Conversion Test, the holders of Series B Convertible
Preferred Stock shall be entitled to share with the holders of Common Shares
pari passu in the assets of the Corporation, on an as converted basis under
Conversion Option B, whether such assets are capital or surplus of any nature. A
Reorganization (as defined in Subsection 9(f) below) shall not be deemed to be a
liquidation, dissolution or winding up within the meaning of this Section 6.
7. Redemption. Shares of Series B Convertible Preferred Stock may not be
redeemed by the Corporation absent the unanimous consent of the holders thereof.
8. Conversion Rights.
(a) The Preferred Shares shall be convertible at any time from
and after the date the Company's net profits for any fiscal year equal or exceed
$3.5 million. If the Corporation is sold (whether by sale of all or
substantially all of its stock or assets, or by a merger in which the
Corporation is not the surviving corporation) at a per share price which exceeds
150% of the initial public offering price of the Common Stock, the Conversion
Test will be deemed satisfied, the Preferred Shares will be convertible
immediately prior to the closing of such sale, and the holders of the Preferred
Shares will be entitled to the rights set forth in Section 6 above.
<PAGE>
(b) The date on which a conversion of Preferred Shares takes
place shall be termed the "Conversion Date" for such shares. The conversion of
Preferred Shares shall be on the basis of one share of Common Stock for
Preferred Share; provided, however, that such one for one conversion rate shall
be subject to adjustment from time to time in certain instances as provided in
Section 9 below (the conversion rate in effect at any given time shall be termed
the "Conversion Rate"). Upon conversion, the holder of the Preferred Shares will
be required to pay to the Corporation a conversion price for each share equal to
150% of the per share initial public offering price of the Common Stock (the
"Conversion Price"). The holder of the Preferred Shares may pay the Conversion
Price in cash ("Conversion Option A") or by surrendering additional Preferred
Shares, valued at the difference between (i) the average market value of the
Common Stock over the five (5) business day period immediately preceding the
Conversion Date and (ii) the Conversion Price ("Conversion Option B").
(c) As promptly as practicable after the Conversion Date, the
Corporation shall issue and deliver to the holders at the office of the then
transfer agent for the Series B Convertible Preferred Stock, a certificate or
certificates for the number of full shares of Common Stock to which such holders
are entitled and a check or cash with respect to any fractional interest in a
share of Common Stock as provided in Subsection 8(d) below. Each holder shall be
deemed to have become a shareholder of record of the Common Stock on the
Conversion Date.
(d) No fractional shares of Common Stock or scrip shall be
issued upon conversion of Series B Convertible Preferred Stock. The number of
full shares of Common Stock issuable upon conversion of such Preferred Shares
shall be computed on the basis of the aggregate number of Preferred Shares so
surrendered. Instead of any fractional shares of Common Stock which otherwise
would be issuable upon conversion of any shares of Series B Convertible
Preferred Stock, the Corporation shall pay a cash adjustment in respect to such
fractional interest based upon the Market Price (as defined in Subsection 13(a))
of the Common Stock at the close of business on the last business day prior to
the Conversion Date.
(e) If any shares of Common Stock to be reserved for the
purpose of conversion of Series B Convertible Preferred Stock require
registration or listing with or approval of any governmental authority, stock
exchange or other regulatory body under any federal or state law or regulation
or otherwise before such shares may be validly issued or delivered upon
conversion, the Corporation shall at its sole cost and expense in good faith and
as expeditiously as possible endeavor to secure such registration, listing or
approval, as the case may be.
(f) All shares of Common Stock which may be issued upon
conversion of Series B Convertible Preferred Stock upon issuance will be validly
issued, fully paid and nonassessable. The Corporation will pay any and all
documentary taxes that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of Preferred Shares pursuant hereto. The
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of shares of Common Stock in
a name other than that in which the Preferred Shares so converted were
registered, and no such issue or delivery shall be made unless and until the
person requesting such transfer has paid to the Corporation the amount of any
such tax or has established to the satisfaction of the Corporation that such tax
has been paid. If and to the
<PAGE>
extent the Corporation is required to withhold taxes in connection with the
conversion of the Preferred Shares, the holders thereof may, at their option
(and subject to compliance with federal securities laws), effect such
withholding by (i) causing the Corporation to retain a portion of the Common
Stock issuable upon such conversion (valued at Market Price), or (ii) delivering
additional shares of Series B Convertible Preferred Stock (valued at Market
Price less Conversion Price).
(g) All certificates representing Preferred Shares surrendered
for conversion shall be appropriately cancelled on the books of the Corporation
and the shares so converted represented by such certificates shall be restored
to the status of authorized but unissued shares of Preferred Stock of the
Corporation.
9. Adjustment of Conversion Rights.
(a) In case the Corporation shall, with respect to its Common
Stock, (i) pay a dividend or make a distribution on its shares of Common Stock
which is paid or made in shares of Common Stock or in securities convertible
into or exchangeable for its Common Stock (in which latter event the number of
shares of Common Stock initially issuable upon the conversion or exchange of
such securities shall be deemed to have been distributed), (ii) subdivide its
outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares, or (iv) issue by reclassification
of its Common Stock any shares of capital stock of the Corporation, the
Conversion Rate in effect immediately prior thereto shall be adjusted so that
each holder of a Preferred Share thereafter converted shall be entitled to
receive the number and kind of shares of Common Stock or other capital stock of
the Corporation which it would have owned or been entitled to receive in respect
of such Preferred Share immediately after the happening of any of the events
described above had such Preferred Share been converted immediately prior to the
happening of such event. An adjustment made pursuant to this Section shall
become effective immediately after the record date, in the case of a dividend,
and shall become effective immediately after the effective date, in the case of
a subdivision, combination or reclassification. If, as a result of an adjustment
made pursuant to this Subsection 9(a), the holder of any Preferred Share
thereafter surrendered for conversion shall become entitled to receive shares of
two or more classes of capital stock or shares of Common Stock and other capital
stock of the Corporation, the Board of Directors (whose determination shall be
conclusive), shall determine the allocation of the adjusted Conversion Rate
between or among shares of such classes of capital stock or shares of Common
Stock and other capital stock.
In the event that at any time as a result of an adjustment
made pursuant to this Subsection 9(a), the holder of any Preferred Share
thereafter surrendered for conversion shall become entitled to receive any
shares of the Corporation other than shares of Common Stock, thereafter the
Conversion Rate with respect to other shares so receivable upon conversion of
any Preferred Share shall be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions with respect
to Common Stock contained in this Section 9.
(b) In case the Corporation shall issue rights or warrants to
all holders of its Common Stock entitling them to subscribe for or purchase
shares of Common Stock (or securities convertible
<PAGE>
into or exchangeable for its Common Stock) at a price per share less than the
Market Price per share of Common Stock on the record date mentioned below (other
than pursuant to an automatic dividend reinvestment plan of the Corporation or
any substantially similar plan) the Conversion Rate shall be adjusted so that
the same shall equal the rate determined by multiplying the Conversion Rate in
effect immediately prior to the issuance of such rights or warrants by a
fraction, of which the numerator shall be the number of shares of Common Stock
outstanding (excluding treasury shares) on the date of issuance of such rights
or warrants plus the number of additional shares of Common Stock offered for
subscription or purchase, and of which the denominator shall be the number of
shares of Common Stock outstanding (excluding treasury shares) on the date of
issuance of such rights or warrants, plus the number of shares of Common Stock
which the aggregate subscription or purchase price of the total number of shares
offered for subscription or purchase would purchase at such Market Price. Such
adjustment shall become effective immediately after the opening of business on
the day following the record date for such rights or warrants.
In case the Corporation shall distribute to all holders of its
Common Stock evidences of its indebtedness or assets (excluding cash dividends
out of legally available funds and dividends or distributions payable in capital
stock or other securities for which adjustment is made pursuant to Subsection
9(a) and excluding for purposes of this section rights or warrants to subscribe
to securities of the Company), then in each such case the Conversion Rate shall
be adjusted so that the same shall equal the rate determined by multiplying the
Conversion Rate in effect immediately prior to such distribution by a fraction,
of which the numerator shall be the Market Price per share of Common Stock on
the record date mentioned below, and of which the denominator shall be such
Market Price per share of Common Stock less the then fair market value (as
determined by the Board of Directors of the Corporation, whose determination
shall be conclusive) of the portion of the assets or evidences of indebtedness
so distributed applicable to one share of Common Stock. Such adjustment shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such distribution. Anything in this Section 9
to the contrary notwithstanding, the Corporation shall be entitled to make such
increase in the number of shares of Common Stock to be acquired upon conversion
of a Preferred Share, in addition to those required by this Section 9, as it in
its discretion shall determine to be advisable in order that any stock dividend,
subdivision of shares, distribution of rights to purchase stock or securities,
or distribution of securities convertible into or exchangeable for stock
hereafter made by the Corporation to its stockholders shall not be taxable to
the recipients.
(c) On the expiration of any rights or warrants referred to in
Subsection 9(b), or the termination of any rights of conversion or exchange
referred to in Subsection 9(a)(i), the Conversion Rate then in effect shall
forthwith be readjusted to such Conversion Rate as would have obtained had the
adjustment made upon the issuance of such rights or warrants or convertible or
exchangeable securities been made upon the basis of the delivery of only the
number of shares of Common Stock actually delivered upon the exercise of such
rights or warrants or upon the conversion or exchange of such securities.
(d) Except as provided in Subsections 9(a), 9(b) and 9(c)
above, no other event shall effect a change in the Conversion Rate. Whenever the
Conversion Rate is adjusted as herein provided, the Chief Financial Officer of
the Corporation shall compute the adjusted Conversion Rate
<PAGE>
in accordance with the provisions of this Section 9 and shall prepare a
certificate setting forth such Conversion Rate showing in detail the facts upon
which such adjustment is made (the "Adjustment Certificate"). Such Adjustment
Certificate shall forthwith be filed with) the transfer agent for the Series B
Convertible Preferred Stock, if any, and a notice thereof mailed to the holders
of record of the outstanding shares of such series.
(e) It the event of any consolidation or merger to which the
Corporation is a party other than a consolidation or merger in which the
Corporation is the continuing corporation, or the sale or conveyance to another
corporation of the property of the Corporation as an entirety or substantially
as an entirety or any statutory exchange of securities with another corporation
(includ ing any exchange effected in connection with a merger of a third
corporation into the Corporation) (each such transaction referred to herein as
"Reorganization"), no adjustment of conversion rights or the Conversion Rate
shall be made; provided, however, each holder of a Preferred Share shall
thereupon be entitled to receive upon conversion of the Preferred Share, and
provision shall be made therefor in any agreement relating to a Reorganization,
the kind and number of securities or property (including cash) of the
corporation ("Successor Corporation") resulting from such consolidation or
surviving such merger or to which such properties and assets shall have been
sold or otherwise transferred or with whom securities have been exchanged, which
such holder would have owned or been entitled to receive as a result of such
Reorganization had such Preferred Share been converted immediately prior to such
Reorganization (and assuming such holder failed to make an election, if any was
available, as to the kind or amount of securities, property or cash receivable
by reason of such Reorganization; provided that if the kind or amount of
securities, property or cash receivable upon such Reorganization is not the same
for each share of Common Stock in respect of which such rights of election shall
not have been exercised ("non-electing share") then for the purpose of this
Subsection 9(e) the kind and amount of securities, property or cash receivable
upon such Reorganization for each non-electing share shall be deemed to be the
kind and amount so receivable per share by a plurality of the non-electing
shares). In any case, appropriate adjustment shall be made in the application of
the provisions herein set forth with respect to the rights and interests
thereafter of the holders of Preferred Shares, to the end that the provisions
set forth herein (including the specified changes and other adjustments to the
Conversion Rate) shall thereafter be applicable, as nearly as reasonably may be,
in relation to any shares, other securities or property thereafter receivable
upon conversion of the Preferred Shares. The provisions of this Subsection 9(e)
shall similarly apply to successive Reorganizations.
(f) The Corporation 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 Series B Convertible Preferred Stock,
such number of shares of Common Stock as shall from time to time be sufficient
to effect a conversion of all outstanding Series B Convertible Preferred Stock,
and 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 the Series B Convertible Preferred Stock, the Corporation shall promptly take
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose. In the event of a Reorganization
to which Subsection 9(e) above applies, effective provision shall be made in the
certificate or articles of incorporation, merger or consolidation or otherwise
of the Successor Corporation so that such Successor Corporation will
<PAGE>
at all times reserve and keep available a sufficient number of shares of common
stock or other securities or property to provide for the conversion of the
Series B Convertible Preferred Stock in accordance with the provisions of this
Section 9.
(g) The Corporation shall not amend its Certificate of
Incorporation, or participate in any reorganization, sale or transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action for the purpose of avoiding or seeking to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but shall at all times in good faith use its best efforts, and
assist in carrying out all such action as may be reasonably necessary or
appropriate in order to protect the conversion rights of the holders of the
Series B Convertible Preferred Stock set forth herein.
10. Voting Rights.
(a) The holders of the Series B Convertible Preferred Stock
shall vote on all matters with the holders of the Common Stock (and not as a
separate class) on a one vote per share basis. The holders of the Series B
Convertible Preferred Stock shall be entitled to receive all notices relating to
voting as are required to be given to the holders of the Common Stock.
(b) In addition to any other rights provided by Subsection
10(a) or by applicable law, so long as any Series B Convertible Preferred Stock
shall be outstanding, the Corporation shall not without first obtaining the
affirmative vote or written consent of all of the holders of the Preferred
Shares outstanding;
(i) increase the authorized number of shares of Series B Convertible
Preferred Stock;
(ii) create any class or series of shares ranking prior or pari passu to
the Series B Convertible Preferred Stock either as to dividends or upon
liquidation;
(iii) amend, alter or repeal any of the preferences or rights of the Series
B Convertible Preferred Stock; or
(iv) authorize any reclassification of the Series B Convertible Preferred
Stock.
(c) The voting rights set forth in this Section 10 shall in no
way be affected by a failure in the satisfaction of the Conversion Test.
11. Transferability. Subject to restrictions imposed under federal and
state securities laws, the Preferred Shares shall be freely transferable by the
holders thereof.
12. Registration Rights. If and to the extent that the shares of Common
Stock issuable upon conversion of the Preferred Shares are not includable in a
registration statement on Form S-8, the Corporation will prepare and file, at
its own expense, a shelf registration statement on Form
<PAGE>
S-3 (or such other available Form if Form S-3 shall not be available to the
Corporation) to enable them to resell shares of Common Stock acquired upon
conversion of the Preferred Shares.
13. Definitions.
(a) The "Market Price" per share of Common Stock at the time
as of which such "Market Price" is determined shall be deemed to be the average
of the Closing Prices for twenty (20) business days selected by the Corporation
out of the thirty (30) consecutive days immediately preceding the date as of
which such "Market Price" is determined, except that for purposes of Section
8(d) above, the "Market Price" shall be the Closing Price on the last business
day preceding the event requiring such determination. For the purpose of the
foregoing sentence, a "business day" means a day on which the exchange or
over-the-counter market on which the Common Shares are traded was open for at
least one-half (1/2) of its normal business day.
(b) The "Closing Price" on any day shall be the last sale
price, regular way, as reported in a composite published report of transactions
which includes transactions on the exchange or other principal markets in which
the Common Shares are traded or, if there is no such composite report as to any
day, the last reported sale price, regular way (or if there is no such reported
sale on such day, the average of the closing reported bid and asked prices) on
the principal United States securities trading market (whether a stock exchange,
NASDAQ, or otherwise) in which the Common Shares are traded; provided, however,
that if the Common Shares are not publicly traded or listed during the time of
any computation pursuant to this section, their "Market Price" for the purposes
hereof shall be the fair value as determined in good faith and certified to the
Corporation by any person agreed upon by, and mutually satisfactory to, the
President of the Corporation and the holders of the Series B Convertible
Preferred Stock; provided, however, that if such persons are unable to agree
upon a mutually satisfactory person, then the "Market Price" shall be the fair
value as determined in good faith by the Board of Directors of the Corporation.
IN WITNESS WHEREOF, said Galveston's Steakhouse Corp. has caused this
certficate to be signed by Hiram Woo, its President and Secretary, this day of
May, 1997.
Hiram Woo,
President and Secretary
EXHIBIT 3.2
<PAGE>
EXHIBIT 3.3
<PAGE>
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
GALVESTON'S STEAKHOUSE CORP.
GALVESTON'S STEAKHOUSE CORP., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of Galveston's Steakhouse Corp., by
unanimous written consent, adopted a resolution setting forth a proposed
amendment to the Restated Certificate of Incorporation of said corporation,
declaring said amendment advisable and submitting said amendment to the
stockholders of said corporation for consideration thereof. The resolution
setting forth the proposed amendment is as follows:
"RESOLVED, that in the judgment of the Board of Directors of the
Corporation, it is declared advisable and it is hereby proposed that the
designations, powers, preferences and relative, participating, optional or other
rights, and the qualifications, limitations or restrictions thereof, with
respect to the Series B Convertible Preferred Stock of the Corporation, as set
forth in Article FOURTH of the Restated Certificate of Incorporation of the
Corporation, be, and the same hereby are, amended to read in their entirety as
follows:
1. Designation. The Board of Directors does hereby provide for the
issue of a new class of Preferred Stock of the Corporation, to be designated and
known as the Series B Convertible Preferred Stock. As used herein, the term
"Series B Convertible Preferred Stock" shall refer to the shares of this
Corporation's Series B Convertible Preferred Stock, and the term "Preferred
Share" shall refer to one share of Series B Convertible Preferred Stock, and the
term "Preferred Shares" shall refer to more than one such Share.
2. Number of Shares. The number of shares constituting the
Series B Convertible Preferred Stock shall be and the same is hereby fixed as
1,000,000.
<PAGE>
3. Stated Capital. The amount to be represented in stated
capital at all times for each share of the Series B Convertible Preferred Stock
shall be its par value of $.001 per share.
4. Rank. Subject to Section 6, the Series B Convertible
Preferred Stock shall, with respect to rights on liquidation, rank equivalent
to all classes of the common stock, $.01 par value per share (collectively, the
"Common Stock" or "Common Shares"), of the Corporation.
5. Dividends. The holders of outstanding Series B Convertible Preferred
Stock shall not be entitled to receive dividends prior to the second anniversary
of the closing date ("Closing Date") of any initial public offering effected by
the Corporation. Thereafter, in the event the Conversion Test (as defined in
Section 8(a) below) is satisfied, the Series B Convertible Preferred Stock will
participate in any dividends declared on the Common Stock, on an as converted
basis.
6. Liquidation Rights. In the event of a voluntary or involuntary
liquidation, dissolution or winding up of the Corporation prior to the second
anniversary of the Closing Date, or subsequent to the Closing Date if the
Conversion Test is not satisfied, the holders of Series B Convertible Preferred
Stock shall be entitled to $0.001 per share. In the event of a voluntary or
involuntary liquidation, dissolution or winding up of the Corporation after the
satisfaction of the Conversion Test, the holders of Series B Convertible
Preferred Stock shall be entitled to share with the holders of Common Shares
pari passu in the assets of the Corporation, on an as converted basis, whether
such assets are capital or surplus of any nature. A Reorganization (as defined
in Subsection 9(f) below) shall not be deemed to be a liquidation, dissolution
or winding up within the meaning of this Section 6.
7. Redemption. Shares of Series B Convertible Preferred Stock
may not be redeemed by the Corporation absent the unanimous consent of the
holders thereof.
8. Conversion Rights.
(a) The Preferred Shares shall be convertible after the
Closing Date upon the earlier of: (i) eight (8) years after the Closing Date; or
(ii) the first fiscal year of the Corporation in which the Corporation's annual
net profits equal or exceed $3.5 million (the "Conversion Test"). If the
Corporation is sold (whether by sale of all or substantially all of its stock or
assets, or by a merger in which the Corporation is not the surviving
corporation) at a per share price which exceeds 150% of the initial public
offering price of the Common Stock, the Conversion Test will be deemed satis
fied, the Preferred Shares will be convertible immediately prior to the closing
of such sale, and the holders of the Preferred Shares will be entitled to the
rights set forth in Section 6 above.
(b) The date on which a conversion of Preferred Shares takes
place shall be termed the "Conversion Date" for such shares. The conversion of
Preferred Shares shall be on the basis of one share of Common Stock for one
Preferred Share; provided, however, that such one for one conversion rate shall
be subject to adjustment from time to time in certain instances as provided in
Section 9 below (the conversion rate in effect at any given time shall be termed
the "Conversion
<PAGE>
Rate"). Upon conversion, the holder of the Preferred Shares will be
required to pay to the Corporation a conversion price for each share equal to
150% of the per share initial public offering price of the Common Stock (the
"Conversion Price"). The holder of the Preferred Shares shall pay the Conversion
Price in cash.
(c) As promptly as practicable after the Conversion Date, the
Corporation shall issue and deliver to the holders at the office of the then
transfer agent for the Series B Convertible Preferred Stock, a certificate or
certificates for the number of full shares of Common Stock to which such holders
are entitled and a check or cash with respect to any fractional interest in a
share of Common Stock as provided in Subsection 8(d) below. Each holder shall be
deemed to have become a shareholder of record of the Common Stock on the
Conversion Date.
(d) No fractional shares of Common Stock or scrip shall be
issued upon conversion of Series B Convertible Preferred Stock. The number of
full shares of Common Stock issuable upon conversion of such Preferred Shares
shall be computed on the basis of the aggregate number of Preferred Shares so
surrendered. Instead of any fractional shares of Common Stock which otherwise
would be issuable upon conversion of any shares of Series B Convertible
Preferred Stock, the Corporation shall pay a cash adjustment in respect to such
fractional interest based upon the Market Price (as defined in Subsection 13(a))
of the Common Stock at the close of business on the last business day prior to
the Conversion Date.
(e) If any shares of Common Stock to be reserved for the
purpose of conversion of Series B Convertible Preferred Stock require
registration or listing with or approval of any governmental authority, stock
exchange or other regulatory body under any federal or state law or regulation
or otherwise before such shares may be validly issued or delivered upon
conversion, the Corporation shall at its sole cost and expense in good faith and
as expeditiously as possible endeavor to secure such registration, listing or
approval, as the case may be.
(f) All shares of Common Stock which may be issued upon
conversion of Series B Convertible Preferred Stock upon issuance will be validly
issued, fully paid and nonassessable. The Corporation will pay any and all
documentary taxes that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of Preferred Shares pursuant hereto. The
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of shares of Common Stock in
a name other than that in which the Preferred Shares so converted were
registered, and no such issue or delivery shall be made unless and until the
person requesting such transfer has paid to the Corporation the amount of any
such tax or has established to the satisfaction of the Corporation that such tax
has been paid. If and to the extent the Corporation is required to withhold
taxes in connection with the conversion of the Preferred Shares, the holders
thereof may, at their option (and subject to compliance with federal securities
laws), effect such withholding by (i) causing the Corporation to retain a
portion of the Common Stock issuable upon such conversion (valued at Market
Price), or (ii) delivering additional shares of Series B Convertible Preferred
Stock (valued at Market Price less Conversion Price).
(g) All certificates representing Preferred Shares surrendered
for conversion shall be
<PAGE>
appropriately canceled on the books of the Corporation and the shares so
converted represented by such certificates shall be restored to the status of
authorized but unissued shares of Preferred Stock of the Corporation.
9. Adjustment of Conversion Rights.
(a) In case the Corporation shall, with respect to its Common
Stock, (i) pay a dividend or make a distribution on its shares of Common Stock
which is paid or made in shares of Common Stock or in securities convertible
into or exchangeable for its Common Stock (in which latter event the number of
shares of Common Stock initially issuable upon the conversion or exchange of
such securities shall be deemed to have been distributed), (ii) subdivide its
outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares, or (iv) issue by reclassification
of its Common Stock any shares of capital stock of the Corporation, the
Conversion Rate in effect immediately prior thereto shall be adjusted so that
each holder of a Preferred Share thereafter converted shall be entitled to
receive the number and kind of shares of Common Stock or other capital stock of
the Corporation which it would have owned or been entitled to receive in respect
of such Preferred Share immediately after the happening of any of the events
described above had such Preferred Share been converted immediately prior to the
happening of such event. An adjustment made pursuant to this Section shall
become effective immediately after the record date, in the case of a dividend,
and shall become effective immediately after the effective date, in the case of
a subdivision, combination or reclassification. If, as a result of an adjustment
made pursuant to this Subsection 9(a), the holder of any Preferred Share
thereafter surrendered for conversion shall become entitled to receive shares of
two or more classes of capital stock or shares of Common Stock and other capital
stock of the Corporation, the Board of Directors (whose determination shall be
conclusive), shall determine the allocation of the adjusted Conversion Rate
between or among shares of such classes of capital stock or shares of Common
Stock and other capital stock.
In the event that at any time as a result of an adjustment
made pursuant to this Subsection 9(a), the holder of any Preferred Share
thereafter surrendered for conversion shall become entitled to receive any
shares of the Corporation other than shares of Common Stock, thereafter the
Conversion Rate with respect to other shares so receivable upon conversion of
any Preferred Share shall be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions with respect
to Common Stock contained in this Section 9.
(b) In case the Corporation shall issue rights or warrants to
all holders of its Common Stock entitling them to subscribe for or purchase
shares of Common Stock (or securities convertible into or exchangeable for its
Common Stock) at a price per share less than the Market Price per share of
Common Stock on the record date mentioned below (other than pursuant to an
automatic dividend reinvestment plan of the Corporation or any substantially
similar plan) the Conversion Rate shall be adjusted so that the same shall equal
the rate determined by multiplying the Conversion Rate in effect immediately
prior to the issuance of such rights or warrants by a fraction, of which the
numerator shall be the number of shares of Common Stock outstanding (excluding
treasury shares) on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase, and of which the denominator shall be the number of shares of Common
<PAGE>
Stock outstanding (excluding treasury shares) on the date of issuance of
such rights or warrants, plus the number of shares of Common Stock which the
aggregate subscription or purchase price of the total number of shares offered
for subscription or purchase would purchase at such Market Price. Such
adjustment shall become effective immediately after the opening of business on
the day following the record date for such rights or warrants.
In case the Corporation shall distribute to all holders of its
Common Stock evidences of its indebtedness or assets (excluding cash dividends
out of legally available funds and dividends or distributions payable in capital
stock or other securities for which adjustment is made pursuant to Subsection
9(a) and excluding for purposes of this section rights or warrants to subscribe
to securities of the Corporation), then in each such case the Conversion Rate
shall be adjusted so that the same shall equal the rate determined by
multiplying the Conversion Rate in effect immediately prior to such distribution
by a fraction, of which the numerator shall be the Market Price per share of
Common Stock on the record date mentioned below, and of which the denominator
shall be such Market Price per share of Common Stock less the then fair market
value (as determined by the Board of Directors of the Corporation, whose
determination shall be conclusive) of the portion of the assets or evidences of
indebtedness so distributed applicable to one share of Common Stock. Such
adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such distribution. Anything in
this Section 9 to the contrary notwithstanding, the Corporation shall be
entitled to make such increase in the number of shares of Common Stock to be
acquired upon conversion of a Preferred Share, in addition to those required by
this Section 9, as it in its discretion shall determine to be advisable in order
that any stock dividend, subdivision of shares, distribution of rights to
purchase stock or securities, or distribution of securities convertible into or
exchangeable for stock hereafter made by the Corporation to its stockholders
shall not be taxable to the recipients.
(c) On the expiration of any rights or warrants referred to in
Subsection 9(b), or the termination of any rights of conversion or exchange
referred to in Subsection 9(a)(i), the Conversion Rate then in effect shall
forthwith be readjusted to such Conversion Rate as would have obtained had the
adjustment made upon the issuance of such rights or warrants or convertible or
exchangeable securities been made upon the basis of the delivery of only the
number of shares of Common Stock actually delivered upon the exercise of such
rights or warrants or upon the conversion or exchange of such securities.
(d) Except as provided in Subsections 9(a), 9(b) and 9(c)
above, no other event shall effect a change in the Conversion Rate. Whenever the
Conversion Rate is adjusted as herein provided, the Chief Financial Officer of
the Corporation shall compute the adjusted Conversion Rate in accordance with
the provisions of this Section 9 and shall prepare a certificate setting forth
such Conversion Rate showing in detail the facts upon which such adjustment is
made (the "Adjustment Certificate"). Such Adjustment Certificate shall forthwith
be filed with) the transfer agent for the Series B Convertible Preferred Stock,
if any, and a notice thereof mailed to the holders of record of the outstanding
shares of such series.
(e) It the event of any consolidation or merger to which the
Corporation is a party other than a consolidation or merger in which the
Corporation is the continuing corporation, or the sale
<PAGE>
or conveyance to another corporation of the property of the Corporation as
an entirety or substantially as an entirety or any statutory exchange of
securities with another corporation (includ ing any exchange effected in
connection with a merger of a third corporation into the Corporation)
(each such transaction referred to herein as "Reorganization"), no adjustment of
conversion rights or the Conversion Rate shall be made; provided, however, each
holder of a Preferred Share shall thereupon be entitled to receive upon
conversion of the Preferred Share, and provision shall be made therefor in any
agreement relating to a Reorganization, the kind and number of securities or
property (including cash) of the corporation ("Successor Corporation") resulting
from such consolidation or surviving such merger or to which such properties and
assets shall have been sold or otherwise transferred or with whom securities
have been exchanged, which such holder would have owned or been entitled to
receive as a result of such Reorganization had such Preferred Share been
converted immediately prior to such Reorganization (and assuming such holder
failed to make an election, if any was available, as to the kind or amount of
securities, property or cash receivable by reason of such Reorganization;
provided that if the kind or amount of securities, property or cash receivable
upon such Reorganization is not the same for each share of Common Stock in
respect of which such rights of election shall not have been exercised
("non-electing share") then for the purpose of this Subsection 9(e) the kind and
amount of securities, property or cash receivable upon such Reorganization for
each non-electing share shall be deemed to be the kind and amount so receivable
per share by a plurality of the non-electing shares). In any case, appropriate
adjustment shall be made in the application of the provisions herein set forth
with respect to the rights and interests thereafter of the holders of Preferred
Shares, to the end that the provisions set forth herein (including the specified
changes and other adjustments to the Conversion Rate) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares, other
securities or property thereafter receivable upon conversion of the Preferred
Shares. The provisions of this Subsection 9(e) shall similarly apply to
successive Reorganizations.
(f) The Corporation 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 Series B Convertible Preferred Stock,
such number of shares of Common Stock as shall from time to time be sufficient
to effect a conversion of all outstanding Series B Convertible Preferred Stock,
and 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 the Series B Convertible Preferred Stock, the Corporation shall promptly take
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose. In the event of a Reorganization
to which Subsection 9(e) above applies, effective provision shall be made in the
certificate or articles of incorporation, merger or consolidation or otherwise
of the Successor Corporation so that such Successor Corporation will at all
times reserve and keep available a sufficient number of shares of common stock
or other securities or property to provide for the conversion of the Series B
Convertible Preferred Stock in accordance with the provisions of this Section 9.
(g) The Corporation shall not amend its Certificate of
Incorporation, or participate in any reorganization, sale or transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action for the purpose of avoiding or seeking to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but
<PAGE>
shall at all times in good faith use its best efforts, and assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of the holders of the Series B
Convertible Preferred Stock set forth herein.
10. Voting Rights.
(a) The holders of the Series B Convertible Preferred Stock
shall vote on all matters with the holders of the Common Stock (and not as a
separate class) on a one vote per share basis. The holders of the Series B
Convertible Preferred Stock shall be entitled to receive all notices relating to
voting as are required to be given to the holders of the Common Stock.
(b) In addition to any other rights provided by Subsection
10(a) or by applicable law, so long as any Series B Convertible Preferred Stock
shall be outstanding, the Corporation shall not without first obtaining the
affirmative vote or written consent of all of the holders of the Preferred
Shares outstanding;
(i) increase the authorized number of shares of
Series B Convertible Preferred Stock;
(ii) create any class or series of shares ranking
prior or pari passu to the Series B Convertible Preferred Stock either as to
dividends or upon liquidation;
(iii) amend, alter or repeal any of the
preferences or rights of the Series B Convertible Preferred Stock; or
(iv) authorize any reclassification of the Series
B Convertible Preferred Stock.
(c) The voting rights set forth in this Section 10 shall in no
way be affected by a failure in the satisfaction of the Conversion Test.
11. Transferability. Subject to restrictions imposed under
federal and state securities laws, the Preferred Shares shall be freely
transferable by the holders thereof.
12. Registration Rights. If and to the extent that the shares of Common
Stock issuable upon conversion of the Preferred Shares are not includable in a
registration statement on Form S-8, the Corporation will prepare and file, at
its own expense, a shelf registration statement on Form S-3 (or such other
available Form if Form S-3 shall not be available to the Corporation) to enable
them to resell shares of Common Stock acquired upon conversion of the Preferred
Shares.
13. Definitions.
(a) The "Market Price" per share of Common Stock at the time
as of which such "Market Price" is determined shall be deemed to be the average
of the Closing Prices for twenty (20)
<PAGE>
business days selected by the Corporation out of the thirty (30)
consecutive days immediately preceding the date as of which such "Market Price"
is determined, except that for purposes of Section 8(d) above, the "Market
Price" shall be the Closing Price on the last business day preceding the event
requiring such determination. For the purpose of the foregoing sentence, a
"business day" means a day on which the exchange or over-the-counter market on
which the Common Shares are traded was open for at least one-half (1/2) of its
normal business day.
(b) The "Closing Price" on any day shall be the last sale
price, regular way, as reported in a composite published report of transactions
which includes transactions on the exchange or other principal markets in which
the Common Shares are traded or, if there is no such composite report as to any
day, the last reported sale price, regular way (or if there is no such reported
sale on such day, the average of the closing reported bid and asked prices) on
the principal United States securities trading market (whether a stock exchange,
NASDAQ, or otherwise) in which the Common Shares are traded; provided, however,
that if the Common Shares are not publicly traded or listed during the time of
any computation pursuant to this section, their "Market Price" for the purposes
hereof shall be the fair value as determined in good faith and certified to the
Corporation by any person agreed upon by, and mutually satisfactory to, the
President of the Corporation and the holders of the Series B Convertible
Preferred Stock; provided, however, that if such persons are unable to agree
upon a mutually satisfactory person, then the "Market Price" shall be the fair
value as determined in good faith by the Board of Directors of the Corporation.
SECOND: In lieu of a meeting and vote of stockholders, a majority of
stockholders of the corporation entitled to vote thereon have given their
written consent to said amendment in accordance with Section 228 of the General
Corporation Law of the State of Delaware.
THIRD: That the foregoing amendment was duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the State
of Delaware.
<PAGE>
IN WITNESS WHEREOF, said GALVESTON'S STEAKHOUSE CORP. has caused
this Certificate to be signed by Richard M. Lee, its Chief Executive Officer,
and attested to by Hiram J. Woo, its Secretary this __th day of May, 1997.
GALVESTON'S STEAKHOUSE CORP.
By: ________________________________
Richard M. Lee
Chief Executive Officer
CORPORATE SEAL
ATTEST:
By: _________________________
Hiram J. Woo
Secretary
<PAGE>
EXHIBIT 3.4
<PAGE>
BY-LAWS
OF
GALVESTON'S STEAKHOUSE CORP.
ARTICLE I
Stockholders
Section 1.1. Annual Meetings. An annual meeting of
stockholders shall be held for the election of Directors at such date, time and
place either within or without the State of Delaware as may be designated by the
Board of Directors from time to time. Any other proper business may be
transacted at the annual meeting.
Section 1.2. Special Meetings. Special meetings of
stockholders may be called at any time by the Chairman of the Board, if any, the
Vice Chairman of the Board, if any, or the President to be held at such date,
time and place either within or without the State of Delaware as may be stated
in the notice of the meeting. A special meeting of stockholders shall be called
by the Sec retary upon the written request, stating the purpose of the meeting,
of stockholders who together own of record a majority of the outstanding shares
of each class of stock entitled to vote at such meeting.
Section 1.3. Notice of Meetings. Whenever stockholders are
required or permitted to take any action at a meeting, a written notice of the
meeting shall be given which shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Unless otherwise provided by law, the written
notice of any meeting shall be given not less than ten nor more than sixty days
before the date of the meeting to each stockholder entitled to vote at such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the United States mail, postage prepaid, directed to the stockholder at such
stockholder's address as it appears on the records of the Corporation.
Section 1.4. Adjournments. Any meeting of stockholders, annual
or special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 1.5. Quorum. At each meeting of stockholders, except
where otherwise provided by law or the certificate of incorporation or these
by-laws, the holders of a majority of the outstanding shares of each class of
stock entitled to vote at the meeting, present in person or repre sented by
proxy, shall constitute a quorum. For purposes of the foregoing, two or more
classes or
- 1 -
<PAGE>
series of stock shall be considered a single class if the holders thereof are
entitled to vote together as a single class at the meeting. In the absence of a
quorum the stockholders so present may, by majority vote, adjourn the meeting
from time to time in the manner provided by Section 1.4 of these by-laws until a
quorum shall attend. Shares of its own capital stock belonging on the record
date for the meeting to the Corporation or to another corporation, if a majority
of the shares entitled to vote in the election of directors of such other
corporation is held, directly or indirectly, by the Corporation, shall neither
be entitled to vote nor be counted for quorum purposes; provided, however, that
the foregoing shall not limit the right of the Corporation to vote stock,
including but not limited to its own stock, held by it in a fiduciary capacity.
Section 1.6. Organization. Meetings of stockholders shall be
presided over by the Chairman of the Board, if any, or in the absence of the
Chairman of the Board by the Vice Chairman of the Board, if any, or in the
absence of the Vice Chairman of the Board by the President, or in the absence of
the President by a Vice President, or in the absence of the foregoing persons by
a chairman designated by the Board of Directors, or in the absence of such
designation by a chairman chosen at the meeting. The Secretary, or in the
absence of the Secretary an Assistant Secretary, shall act as secretary of the
meeting, but in the absence of the Secretary and any Assistant Secretary the
chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 1.7. Voting; Proxies. Unless otherwise provided in the
certificate of incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of stock held by
such stockholder which has voting power upon the matter in question. If the
certificate of incorporation provides for more or less than one vote for any
share on any matter, every reference in these by-laws to a majority or other
proportion of stock shall refer to such majority or other proportion of the
votes of such stock. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for such
stockholder by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is irrevocable and if,
and only as long as, it is coupled with an interest sufficient in law to support
an irrevocable power. A stockholder may revoke any proxy which is not
irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy bearing
a later date with the Secretary of the Corporation. Voting at meetings of
stockholders need not be by written ballot and need not be conducted by
inspectors unless the holders of a majority of the outstanding shares of all
classes of stock entitled to vote thereon present in person or by proxy at such
meeting shall so determine. At all meetings of stockholders for the election of
directors a plurality of the votes cast shall be sufficient to elect. With
respect to other matters, unless otherwise provided by law or by the certificate
of incorporation or these by-laws, the affirmative vote of the holders of a
majority of the shares of all classes of stock present in person or represented
by proxy at the meeting and entitled to vote on the subject matter shall be the
act of the stockholders, provided that (except as otherwise required by law or
by the certificate of incorporation) the Board of Directors may require a larger
vote upon any such matter. Where a separate vote by class is required, the
affirmative vote of the holders of a majority of the shares of each class
present in
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<PAGE>
person or represented by proxy at the meeting shall be the act of such class,
except as otherwise provided by law or by the certificate of incorporation or
these by-laws.
Section 1.8. Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix, in advance, a record date, which shall not be
more than sixty nor less than ten days before the date of such meeting, nor more
than sixty days prior to any other action. If no record date is fixed: (1) the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held; (2) the record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the Board is necessary, shall be the day on which the first written consent
is expressed; and (3) the record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board adopts
the resolution relating thereto. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board may fix a new
record date for the adjourned meeting.
Section 1.9. List of Stockholders Entitled to Vote. The
Secretary shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof and may be inspected by any stockholder who is
present.
Section 1.10. Consent of Stockholders in Lieu of Meeting. Any
action required by law to be taken at any annual or special meeting of
stockholders of the Corporation, or any action which may be taken at any annual
or special meeting of such stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
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<PAGE>
ARTICLE II
Board of Directors
Section 2.1. Powers; Number; Qualifications. The business and
affairs of the Corporation shall be managed by or under the direction of the
Board of Directors, except as may be otherwise provided by law or in the
certificate of incorporation. The Board shall consist of one or more members,
the number thereof to be determined from time to time by the Board. Directors
need not be stockholders.
Section 2.2. Election; Term of Office; Resignation; Removal;
Vacancies. Each director shall hold office until the annual meeting of
stockholders next succeeding his or her election and until his or her successor
is elected and qualified or until his or her earlier resignation or removal. Any
director may resign at any time upon written notice to the Board of Directors or
to the President or the Secretary of the Corporation. Such resignation shall
take effect at the time specified therein, and unless otherwise specified
therein no acceptance of such resignation shall be necessary to make it
effective. Any director or the entire Board of Directors may be removed, with or
without cause, by the holders of a majority of the shares then entitled to vote
at an election of directors; except that, if the certificate of incorporation
provides for cumulative voting and less than the entire Board is to be removed,
no director may be removed without cause if the votes cast against his or her
removal would be sufficient to elect him or her if then cumulatively voted at an
election of the entire Board, or, if there be classes of directors, at an
election of the class of directors of which he or she is a part. Whenever the
holders of any class or series of stock are entitled to elect one or more
directors by the provisions of the certificate of incorporation, the provisions
of the preceding sentence shall apply, in respect to the removal without cause
of a director or directors so elected, to the vote of the holders of the
outstanding shares of that class or series and not to the vote of the
outstanding shares as a whole. Unless otherwise provided in the certificate of
incorporation or these by-laws, vacancies and newly created directorships
resulting from any increase in the authorized number of directors elected by all
of the stockholders having the right to vote as a single class or from any other
cause may be filled by a majority of the directors then in office, although less
than a quorum, or by the sole remaining director. Whenever the holders of any
class or classes of stock or series thereof are entitled to elect one or more
directors by the provisions of the certificate of incorporation, vacancies and
newly created directorships of such class or classes or series may be filled by
a majority of the directors elected by such class or classes or series thereof
then in office, or by the sole remaining director so elected.
Section 2.3. Regular Meetings. Regular meetings of the Board
of Directors may be held at such places within or without the State of Delaware
and at such times as the Board may from time to time determine, and if so
determined notice thereof need not be given.
Section 2.4. Special Meetings. Special meetings of the Board of Directors
may be held at any time or place within or without the State of Delaware
whenever called by the Chairman cf the Board, if any, by the Vice Chairman of
the Board, if any, by the President or by any two
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<PAGE>
directors. Reasonable notice thereof shall be given by the person or
persons calling the meeting.
Section 2.5. Participation in Meetings by Conference Telephone
Permitted. Unless otherwise restricted by the certificate of incorporation or
these by-laws, members of the Board of Directors, or any committee designated by
the Board, may participate in a meeting of the Board or of such committee, as
the case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this by-law shall
constitute presence in person at such meeting.
Section 2.6. Quorum; Vote Required for Action. At all meetings
of the Board of Directors one-third of the entire Board shall constitute a
quorum for the transaction of business. The vote of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
unless the certificate of incorporation or these by-laws shall require a vote of
a greater number. In case at any meeting of the Board a quorum shall not be
present, the members of the Board present may adjourn the meeting from time to
time until a quorum shall attend.
Section 2.7. Organization. Meetings of the Board of Directors
shall be presided over by the Chairman of the Board, if any, or in the absence
of the Chairman of the Board by the Vice Chairman of the Board, if any, or in
the absence of the Vice Chairman of the Board by the President, or in their
absence by a chairman chosen at the meeting. The Secretary, or in the absence of
the Secretary an Assistant Secretary, shall act as secretary of the meeting, but
in the absence of the Secretary and any Assistant Secretary the chairman of the
meeting may appoint any person to act as secretary of the meeting.
Section 2.8. Action by Directors Without a Meeting. Any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board or of such committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
or conunittee.
Section 2.9. Compensation of Directors. The Board of Directors shall have
the authority to fix the compensation of directors.
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<PAGE>
ARTICLE III
Committees
Section 3.1. Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board to act at the
meeting in place of any such absent or disqualified member. Any such committee,
to the extent provided in the resolution of the Board, shall have and may
exercise all the powers and authority of the Board in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have power or authority in reference to amending the certificate
of incorporation, adopting an agreement of merger or consolidation, recommending
to the stockholders the sale, lease or exchange of all or substantially all of
the Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of dissolution, removing or
indemnifying directors or amending these by-laws; and, unless the resolution
expressly so provides, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock.
Section 3.2. Committee Rules. Unless the Board of Directors
otherwise provides, each committee designated by the Board may adopt, amend and
repeal rules for the conduct of its business. In the absence of a provision by
the Board or a provision in the rules of such committee to the contrary, a
majority of the entire authorized number of members of such committee shall
constitute a quorum for the transaction of business, the vote of a majority of
the members present at a meeting at the time of such vote if a quorum is then
present shall be the act of such committee, and in other respects each committee
shall conduct its business in the same manner as the Board conducts its business
pursuant to Article II of these by-laws.
ARTICLE IV
Officers
Section 4.1. Officers; Election. As soon as practicable after
the annual meeting of stockholders in each year, the Board of Directors shall
elect a President and a Secretary, and it may, if it so determines, elect from
among its members a Chairman of the Board and a Vice Chairman of the Board. The
Board may also elect one or more Vice Presidents, one or more Assistant Vice
Presidents, one or more Assistant Secretaries, a Treasurer and one or more
Assistant Treasurers and such other officers as the Board may deem desirable or
appropriate and may give any of them such
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<PAGE>
further designations or alternate titles as it considers desirable. Any
number of offices may be held by the same person.
Section 4.2. Term of office; Resignation; Removal; Vacancies.
Except as otherwise provided in the resolution of the Board of Directors
electing any officer, each officer shall hold office until the first meeting of
the Board after the annual meeting of stockholders next succeeding his or her
election, and until his or her successor is elected and qualified or until his
or her earlier resignation or removal. Any officer may resign at any time upon
written notice to the Board or to the President or the Secretary of the
Corporation. Such resignation shall take effect at the time specified therein,
and unless otherwise specified therein no acceptance of such resignation shall
be necessary to make it effective. The Board may remove any officer with or
without cause at any time. Any such removal shall be without prejudice to the
contractual rights of such officer, if any, with the Corporation, but the
election of an officer shall not of itself create contractual rights. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise may be filled for the unexpired portion of the term by the
Board at any regular or special meeting.
Section 4.3. Chairman of the Board. The Chairman of the Board,
if any, shall preside at all meetings of the Board of Directors and of the
stockholders at which he or she shall be present and shall have and may exercise
such powers as may, from time to time, be assigned to him or her by the Board
and as may be provided by law.
Section 4.4. Vice Chairman of the Board. In the absence of the
Chairman of the Board, the Vice Chairman of the Board, if any, shall preside at
all meetings of the Board of Directors and of the stockholders at which he or
she shall be present and shall have and may exercise such powers as may, from
time to time, be assigned to him or her by the Board and as may be provided by
law.
Section 4.5. President. In the absence of the Chairman of the
Board and Vice Chairman of the Board, the President shall preside at all
meetings of the Board of Directors and of the stockholders at which he or she
shall be present. The President shall be the chief executive officer and shall
have general charge and supervision of the business of the Corporation and, in
general, shall perform all duties incident to the office of president of a
corporation and such other duties as may, from time to time, be assigned to him
or her by the Board or as may be provided by law.
Section 4.6. Vice Presidents. The Vice President or Vice
Presidents, at the request or in the absence of the President or during the
President's inability to act, shall perform the duties of the President, and
when so acting shall have the powers of the President. If there be more than one
Vice President, the Board of Directors may determine which one or more of the
Vice Presidents shall perform any of such duties; or if such determination is
not made by the Board, the President may make such determination; otherwise any
of the Vice Presidents may perform any of such duties. The Vice President or
Vice Presidents shall have such other powers and shall perform such other duties
as may, from time to time, be assigned to him or her or them by the Board or the
President
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<PAGE>
or as may be provided by law.
Section 4.7. Secretary. The Secretary shall have the duty to
record the proceedings of the meetings of the stockholders, the Board of
Directors and any committees in a book to be kept for that purpose, shall see
that all notices are duly given in accordance with the provisions of these
by-laws or as required by law, shall be custodian of the records of the
Corporation, may affix the corporate seal to any document the execution of
which, on behalf of the Corporation, is duly authorized, and when so affixed may
attest the same, and, in general, shall perform all duties incident to the
office of secretary of a corporation and such other duties as may, from time to
time, be assigned to him or her by the Board or the President or as may be
provided by law.
Section 4.8. Treasurer. The Treasurer shall have charge of and
be responsible for all funds, securities, receipts and disbursements of the
Corporation and shall deposit or cause to be deposited, in the name of the
Corporation, all moneys or other valuable effects in such banks, trust companies
or other depositories as shall, from time to time, be selected by or under
authority of the Board of Directors. If required by the Board, the Treasurer
shall give a bond for the faithful discharge of his or her duties, with such
surety or sureties as the Board may determine. The Treasurer shall keep or cause
to be kept full and accurate records of all receipts and disbursements in books
of the Corporation, shall render to the President and to the Board, whenever
requested, an account of the financial condition of the Corporation, and, in
general, shall perform all the duties incident to the office of treasurer of a
corporation and such other duties as may, from time to time, be assigned to him
or her by the Board or the President or as may be provided by law.
Section 4.9. Other Officers. The other officers, if any, of
the Corporation shall have such powers and duties in the management of the
Corporation as shall be stated in a resolution of the Board of Directors which
is not inconsistent with these by-laws and, to the extent not so stated, as
generally pertain to their respective offices, subject to the control of the
Board. The Board may require any officer, agent or employee to give security for
the faithful performance of his or her duties.
ARTICLE V
Stock
Section 5.1. Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by or in the name of
the Corporation by the Chairman or Vice Chairman of the Board of Directors, if
any, or the President or a Vice President, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary, of the Corporation,
certifying the number of shares owned by such holder in the Corporation. If such
certificate is manually signed by one officer or manually countersigned by a
transfer agent or by a registrar, any other signature on the certificate may be
a facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer,
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<PAGE>
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if such person were such officer,
transfer agent or registrar at the date of issue.
Section 5.2. Lost, Stolen or Destroyed Stock Certificates;
Issuance of New Certificates. The Corporation may issue a new certificate of
stock in the place of any certificate theretofore issued by it, alleged to have
been lost, stolen or destroyed, and the Corporation may require the owner of the
lost, stolen or destroyed certificate, or such owner's legal representative, to
give the Corporation a bond sufficient to indemnify it against any claim that
may be made against it on account of the alleged loss, theft or destruction of
any such certificate or the issuance of such new certificate.
ARTICLE VI
Miscellaneous
Section 6.1. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 6.2. Seal. The Corporation may have a corporate seal
which shall have the name of the Corporation inscribed thereon and shall be in
such form as may be approved from time to time by the Board of Directors. The
corporate seal may be used by causing it or a facsimile thereof to be impressed
or affixed or in any other manner reproduced.
Section 6.3. Waiver of Notice of Meetings of Stockholders,
Directors and Committees. Whenever notice is required to be given by law or
under any provision of the cer tificate of incorporation or these by-laws, a
written waiver thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless so required by the certificate
of incorporation or these by-laws.
Section 6.4. Indemnification of Directors, Officers and
Employees. The Corporation shall indemnify to the full extent authorized by law
any person made or threatened to be made a party to any action, suit or
proceeding, whether criminal, civil, administrative or investigative, by reason
of the fact that such person or such person's testator or intestate is or was a
director, officer or employee of the Corporation or serves or served at the
request of the Corporation any other enterprise as a director, officer or
employee. For purposes of this by-law, the term "Corporation" shall include any
predecessor of the Corporation and any constituent corporation (including any
constituent of a constituent) absorbed by the Corporation in a consolidation or
merger; the term
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<PAGE>
"other enterprise" shall include any corporation, partnership, joint venture,
trust or employee benefit plan; service "at the request of the Corporation"
shall include service as a director, officer or employee of the Corporation
which imposes duties on, or involves services by, such director, officer or
employee with respect to an employee benefit plan, its participants or
beneficiaries; any excise taxes assessed on a person with respect to an employee
benefit plan shall be deemed to be indemnifiable expenses; and action by a
person with respect to an employee benefit plan which such person reasonably
believes to be in the interest of the participants and beneficiaries of such
plan shall be deemed to be action not opposed to the best interests of the
Corporation.
Section 6.5. Interested Directors; Quorum. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because his or
her or their votes are counted for such purpose, if: (1) the material facts as
to his or her relationship or interest and as to the contract or transaction are
disclosed or are known to the Board or the committee, and the Board or committee
in good faith authorizes the contract or transaction by the affirmative votes of
a majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or (2) the material facts as to his or her
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders entitied to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or (3) the contract or transaction is fair as to the Corporation as of the time
it is authorized, approved or ratified, by the Board, a committee thereof or the
stockholders. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board or of a committee which
authorizes the contract or transaction.
Section 6.6. Form of Records. Any records maintained by the
Corporation in the regular course of its business, including its stock ledger,
books of account and minute books, may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, microphotographs or any other information
storage device, provided that the records so kept can be converted into clearly
legible form within a reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to inspect the same.
Section 6.7. Amendment of By-Laws. These by-laws may be
amended or repealed, and new by-laws adopted, by the Board of Directors, but the
stockholders entitled to vote may adopt additional by-laws and may amend or
repeal any by-law whether or not adopted by them.
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EXHIBIT 4.1
GALVESTON'S STEAKHOUSE CORP.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $.01 EACH OF THE
COMMON STOCK OF
GALVESTON'S STEAKHOUSE CORP.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed.
This certificate is not valid unless countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
SECRETARY
[CORPORATE SEAL]
PRESIDENT
COUNTERSIGNED:
BY
TRANSFER AGENT
AUTHORIZED OFFICER
The Corporation will furnish without charge to each stockholder who so requests
a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM--as tenants in common
TEN ENT--as tenants by the entireties
JT TEN--as joint tenants with right of survivorship and not as tenants in common
UNIF GIFT MIN ACT--Custodian
(Cust) (Minor)
under Uniform Gifts to Minors
Act
(State)
Additional abbreviations may also be used though not in the above list.
For value received, ______ hereby sell, assign, and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- -----------------------------------------------------------------------
shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises
Dated
-----------------------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
- ---------------------------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE>
EXHIBIT 4.2
<PAGE>
GALVESTON'S STEAKHOUSE CORP.
UNDERWRITERS' WARRANT AGREEMENT
UNDERWRITERS' WARRANT AGREEMENT dated as of ___________, 1997 by and
among Galveston's Steakhouse Corp., a Delaware corporation (the "Company"),
NICHOLS, SAFINA, LERNER & CO., INC. ("NSL") and _________________________
("___"; NSL and ____ are hereinafter collectively referred to herein as the
"Underwriters").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue warrants to the Underwriters
("Warrants") to purchase up to 150,000 shares of common stock, $.01 par value,
of the Company (the "Common Stock"); and
WHEREAS, the Underwriters have agreed, pursuant to the underwriting
agreement (the "Underwriting Agreement") dated _________, 1997 by and among the
Underwriters and the Company, to act as the underwriters in connection with the
Company's public offering of up to 1,500,000 shares of its Common Stock at a
public offering price of $_____ per share (the "Public Offering"); and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be
issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the Underwriters in consider ation for, and as part
of their compensation in connection with acting as underwriters pursuant to the
Underwriting Agreement;
NOW, THEREFORE, in consideration of the foregoing premises which are
incorporated into the terms hereof, of the payment by the Underwriters to the
Company of $10.00 for the Warrants purchased hereunder, the agreements herein
set forth and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. GRANT. The holders of the Warrants issued hereunder are hereby granted the
right to purchase, at any time from ________, 1998 until 5:00 p.m., New York
time, on ________, 2002, up to 150,000 shares of the Common Stock of the
Company, at an initial exercise price (subject to adjustment as provided in
Article 8 hereof) of $____ per Share (120% of the public offering price per
share), subject to the terms and conditions of this Agreement. The shares
issuable upon exercise of the Warrants are referred to as the "Warrant Shares".
2. WARRANT CERTIFICATES. The warrant certificates (the "Warrant Certificates")
delivered and to be delivered pursuant to this Agreement shall be in the form
set forth in Exhibit A, attached hereto and made a part hereof, with such
appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. EXERCISE OF WARRANTS. The Warrants are exercisable during the term set forth
in Section 1 hereof at the Exercise Price (defined below) per Share set forth in
Section 6 hereof payable by certified or cashier's check or money order payable
in lawful money of the United States, subject to adjustment as provided in
Article 8 hereof. Upon surrender of a Warrant Certificate with the annexed Form
of Election to Purchase duly executed, together with payment of the Exercise
Price (as hereinafter defined) for the Warrant Shares (and such other amounts,
if any, arising pursuant to Section 4 hereof) at the Company's principal office
in Alexandria, Louisiana, the registered holder of a Warrant Certificate
("Holder" or "Holders") shall be entitled to receive a certificate or
certificates for the Warrant Shares so purchased. The purchase rights
represented by each Warrant Certificate are exercisable at the option of the
Holder thereof, in whole or in part,
<PAGE>
(but not as to fractional Shares). The Warrants may be exercised to
purchase all or part of the Warrant Shares represented thereby. In the case of
the purchase of less than all the Warrant Shares purchasable on the exercise of
the Warrants represented by a Warrant Certificate, the Company shall cancel the
Warrant Certificate represented thereby upon the surrender thereof and shall
execute and deliver a new Warrant Certificate of like tenor for the balance of
the Warrant Shares purchasable thereunder.
4. ISSUANCE OF CERTIFICATES. Upon the exercise of the Warrants and payment of
the Exercise Price therefor, the issuance of certificates for the Warrant Shares
underlying such Warrants shall be made forthwith (and in any event within three
(3) business days thereafter) without further charge to the Holder thereof, and
such certificates shall (subject to the provisions of Sections 5 and 7 hereof)
be issued in the name of, or in such names as may be directed by, the Holders
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificates in a name other than that of the Holders, and
the Company shall not be required to issue or deliver such certificates unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid. The Warrant
Certificates and the certificates representing the Warrant Shares shall be
executed on behalf of the Company by the manual or facsimile signature of the
then present Chairman or Vice Chairman of the Board of Directors or President or
Vice President of the Company under its corporate seal reproduced thereon,
attested to by the manual or facsimile signature of the then present Secretary
or Assistant Secretary or Treasurer or Assistant Treasurer of the Company.
Warrant Certificates shall be dated the date of execution by the Company upon
initial issuance, division, exchange, substitution or transfer.
5. RESTRICTION ON TRANSFER OF WARRANTS. The Holder of a Warrant Certificate (and
its Permitted Transferee, as defined below), by its acceptance thereof,
covenants and agrees that the Warrants are being acquired as an investment and
not with a view to the distribution thereof; that the Warrants may be sold,
transferred, assigned, hypothecated or otherwise disposed of, in whole or in
part, to any person (a "Permitted Transferee"), provided such transfer,
assignment, hypothecation or other deposition is made in accordance with the
provisions of the Securities Act of 1933 (the "1933 Act"); and provided,
further, that until ________, 1998 (one year after the Effective Date, defined
below) only officers of the Underwriters, or any selling group member or their
respective officers or partners, shall be Permitted Transferees.
6. EXERCISE PRICE.
a. INITIAL AND ADJUSTED EXERCISE PRICE. Except as otherwise provided in
Section 8 hereof, the initial exercise price of each Warrant to purchase Warrant
Shares shall be $____ per Share. The adjusted exercise price shall be the price
which shall result from time to time from any and all adjustments of the initial
exercise price in accordance with the provisions of Section 8 hereof.
b. EXERCISE PRICE. The term "Exercise Price" herein shall mean the
initial exercise price or the adjusted exercise price, depending upon the
context.
7. REGISTRATION RIGHTS.
a. REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Warrant
certificates shall bear the following legend:
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR
SALE OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 (THE "1933 ACT"), OR (II) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH 1933 ACT IS AVAILABLE.
b. DEMAND REGISTRATION. At any time commencing one (1) year and
expiring five (5) years after the effective date of the Company's Registration
Statement relating to the Public Offering (the "Effective Date"), the Holders of
the Warrants and the Warrant Shares representing at least a Majority (as
hereinafter defined) of such securities shall have the right, exercisable by
written notice to the Company, to have the Company prepare and file with the
Securities and Exchange Commission (the "Commission"), on one (1) occasion, a
registration statement on Form S-1, SB-2 (or other appropriate form, including,
without limitation, a post-effective amendment to the Company's Registration
Statement) and such other documents, including a prospectus, as may be necessary
in the opinion of both counsel for the Company and counsel for the Holders, in
order to comply with the provisions of the 1933 Act, so as to permit a public
offering and sale, for a period of nine (9) months, of the Warrant Shares by
such Holders and any other Holders of the Warrants and/or Warrant Shares who
notify the Company within fifteen (15) business days after receipt of the notice
described in the succeeding sentence. The Company covenants and agrees to give
written notice of any registration request under this Section 7(b) by any
Holder(s) to all other registered Holders of the Warrants and the Warrant Shares
within ten (10) days from the date of the receipt of any such registration
request. For purposes of this Agreement, the term "Majority" in reference to the
Holders of the Warrants or Warrant Shares, shall mean in excess of fifty percent
(50%) of the then outstanding Warrants or Warrant Shares that (i) are not held
by the Company, an affiliate, officer, director, employee or agent thereof or
any of their respective affiliates, members of their family, persons acting as
nominees or in conjunction therewith, or (ii) have not been resold to the public
pursuant to a registration statement filed with the Commission under the 1933
Act. The Holders of the Warrants may demand registration without exercising the
Warrants, and shall never be required to exercise same. For the purposes of
subsection (i) above, the Underwriters and their officers, directors, employees
and agents shall not be deemed an affiliate, officer, director, employee or
agent of the Company.
c. PIGGYBACK REGISTRATION. If, at any time within the period commencing
one (1) year and expiring six (6) years after the Effective Date, the Company
should file a registration statement with the Commission under the 1933 Act
(other than in connection with a merger or pursuant to Form S-8) it will give
written notice by registered mail, at least thirty (30) days prior to the filing
of each such registration statement, to the Underwriters and to all other
Holders of the Warrants and/or the Warrant Shares of its intention to do so. If
the Underwriters or other Holders of the Warrants and/or the Warrant Shares
notify the Company within twenty (20) days after receipt of any such notice of
its or their desire to include any Warrant Shares in such proposed registration
statement, the Company shall afford the Underwriters and such Holders of the
Warrants and/or Warrant Shares the opportunity to have any such Warrant Shares
registered under such registration statement. Notwithstanding the provisions of
this Section 7(c), the Company shall have the right at any time after it shall
have given written notice pursuant to this Section 7(c) (irrespective of whether
a written request for inclusion of any such securities shall have been made) to
elect not to file any such proposed registration statement, or to withdraw the
same after the filing but prior to the effective date thereof.
If the underwriter of an offering to which the above piggyback rights
apply objects to such rights, such objection shall preclude such inclusion.
However, in such event, the Company will, within six (6) months
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<PAGE>
of completion of such subsequent underwriting, file at its sole expense, a
registration statement relating to such excluded Warrant Shares, which shall be
in addition to any registration statement required to be filed pursuant to
Section 7(b), unless such Holders had refused an opportunity provided with the
consent of the underwriter, to be included in the registration statement on the
condition that they agree not to offer the securities for sale without the prior
written consent of the underwriter for a period not exceeding 60 days from the
effective date of such registration statement.
If the underwriter in such underwritten offering shall advise the
Company that it declines to include a portion or all of the Warrant Shares
requested by the Underwriters and the Holders to be included in the registration
statement, then (A) registration of all of the Warrant Shares shall be excluded
from such registration statement on the condition that all securities to be
registered by other selling security holders, if any, are also excluded and (B)
registration of a portion of such Warrant Shares allocated among the
Underwriters and the Holders and any other selling securityholders in proportion
to the respective numbers of securities to be registered by the Underwriters and
each such Holder and other selling securityholder. In such event the Company
shall give the Underwriters and the Holders prompt notice of the number of
Warrant Shares excluded.
d. COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. In
connection with any registrations under Sections 7(b) and 7(c) hereof, the
Company covenants and agrees as follows:
(1) The Company shall use its best efforts to file a registration
statement within forty-five (45) days of receipt of any demand
therefor; provided, however, that the Company shall not be
required to produce audited or unaudited financial statements
for any period prior to the date such financial statements are
required to be filed in a report on Form 10-K or Form 10-Q (or
Form 10-KSB or Form 10-QSB), as the case may be. The Company
shall use its best efforts to have any registration statements
declared effective at the earliest possible time, and shall
furnish each Holder desiring to sell Shares such number of
prospectuses as shall reasonably be requested.
(2) The Company shall pay all costs (excluding fees and expenses
of Holder(s)' counsel and any underwriting discounts or
selling fees, expenses or commissions), fees and expenses in
connection with any registration statement filed pursuant to
Sections 7(b) and 7(c) hereof including, without limitation,
the Company's legal and accounting fees, printing expenses,
blue sky fees and expenses. If the Company shall fail to
comply with the provisions of Section 7(d) (1), the Company
shall, in addition to any other equitable or other relief
available to the Holder(s), be liable for any or all
incidental, special and consequential damages and damages due
to loss of profit sustained by the Holder(s) requesting
registration of their Warrant Shares.
(3) The Company will take all necessary action which may be
required to qualify or register the Warrant Shares included in
a registration statement for offering and sale under the
securities or blue sky laws of such states as reasonably are
requested by the Holder(s), provided that the Company shall
not be obligated to execute or file any general consent to
service of process or to qualify as a foreign corporation to
do business under the laws of any such jurisdiction.
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(4) The Company shall indemnify the Holder(s) of the Warrant
Shares to be sold pursuant to
any registration statement and each person, if any, who
controls such Holders within the meaning of Section 15 of the
1933 Act or Section 20(a) of the Securities Exchange Act of
1934 (the "Exchange Act"), against all losses, claims,
damages, expenses or liability (including all expenses
reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which any of them may become
subject under the 1933 Act, the Exchange Act or otherwise,
arising from such registration statement, but only to the same
extent and with the same effect as the provisions pursuant to
which the Company has agreed to indemnify the Underwriters
contained in Section 8 of the Underwriting Agreement, and the
Holder(s) shall indemnify the Company to the same extent and
with the same effect as the provisions pursuant to which the
Underwriters have agreed to indemnify the Company contained in
Section 6 of the Underwriting Agreement.
(5) The Holder(s) of the Warrant Shares to be sold pursuant to a
registration statement, and their successors and assigns,
shall severally, and not jointly, indemnify the Company, its
officers and directors and each persons, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act
or Section 20(a) of the Exchange Act, against all losses,
claims, damages, expenses or liability (including all expenses
reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which they may become subject
under the 1933 Act, the Exchange Act or otherwise, arising
from information furnished by or on behalf of such Holders, or
their successors or assigns, for specific inclusion in such
registration statement to the same extent and with the same
effect as the provisions contained in Section 6 of the
Underwriting Agreement pursuant to which the Underwriters have
agreed to indemnify the Company.
(6) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Warrants prior to
the initial filing of any registration statement or the
effectiveness thereof.
(7) If the manner of distribution proposed by the holders of the
Warrants and the Warrant Shares is an underwriting, the
Company shall furnish to each Holder participating in the
offering and to each underwriter, a signed counterpart,
addressed to such Holder or underwriter of (i) an opinion of
counsel to the Company, dated the effective date of such
registration statement (and if such registration includes an
underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) a "cold
comfort" letter dated the effective date of such registration
statement (and, if such registration includes an underwritten
public offering, a letter dated the date of the closing under
the underwriting agreement) signed by the independent public
accountants who have issued a report on the Company's
financial statements included in such registration statement,
in each case covering substantially the same matters with
respect to such registration statement (and the prospectus
included therein) and, in the case of such accountants'
letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letter, with respect
to events subsequent to the date of such financial statements,
as are customarily covered in opinions of issuer's counsel and
in accountants' letters delivered to underwriters in
underwritten public offerings of securities.
5
<PAGE>
(8) The Company shall as soon as practicable after the
effective date of the registration
statement, and in any event within the first full four fiscal
quarters following the effective date, make "generally
available to its security holders" (within the meaning of Rule
158 under the 1933 Act) an earnings statement (which need not
be audited) complying with Section 11(a) of the 1933 Act.
(9) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence
described below and any managing underwriter, copies of all
correspondence between the Commission and the Company, its
counsel or auditors with respect to the registration statement
and permit each Holder and underwriter to do such
investigation, upon reasonable advance notice, with respect to
information contained in or omitted from the registration
statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National
Association of Securities Dealers Regulation, Inc. Such
investigation shall include access to books, records and
properties and opportunities to discuss the business of the
Company with its officers and independent auditors, all to
such reasonable extent and at such reasonable times and as
often as any such Holder shall reasonably request.
(10) In connection with an offering for which the Holders have
demand rights, the Company shall enter into an underwriting
agreement with the managing underwriter selected for such
underwriting by Holders holding a Majority of the Shares
requested to be included in such underwriting. In connection
with an offering for which the Holders have piggyback rights,
the Company shall have the sole right to select the managing
underwriter. Such underwriting agreement shall be satisfactory
in form and substance to the Company, a Majority of such
Holders and such managing underwriters, and shall contain such
representations, warranties and covenants by the Company and
such other terms as are customarily contained in agreements of
that type used by the managing underwriter. The Holders shall
be parties to any underwriting agreement relating to an
underwritten sale of their Warrant Shares and may, at their
option, require that any or all the representations,
warranties and covenants of the Company to or for the benefit
of such underwriters shall also be made to and for the benefit
of such Holders. Such Holders shall not be required to make
any representations or warranties to or agreements with the
Company or the underwriters except as they may relate to such
Holders their ownership and their intended methods of
distribution.
8. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SECURITIES; REDEMPTION.
a. (i) Except as hereinafter provided, in the event the Company shall,
at any time or from time to time after the date hereof, issue any shares of
Common Stock as a stock dividend to the holders of Common Stock, or subdivide or
combine the outstanding shares of Common Stock into a greater or lesser number
of shares (any such issuance, subdivision or combination being herein called a
"Change of Shares"), then, and thereafter upon each further Change of Shares,
the Exercise Price for the Warrants (whether or not the same shall be issued and
outstanding) in effect immediately prior to such Change of Shares shall be
changed to a price (including any applicable fraction of a cent to the nearest
cent) determined by dividing (i) the sum of (a) the total number of shares of
Common Stock outstanding immediately prior to such Change of Shares, multiplied
by the Exercise Price in effect immediately prior to such Change of Shares, and
(b) the consideration, if any,
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<PAGE>
received by the Company upon such issuance, subdivision or combination by
(ii) the total number of shares of Common Stock outstanding immediately after
such Change of Shares; provided, however, that in no event shall the Exercise
Price be adjusted pursuant to this computation to an amount in excess of the
Exercise Price in effect immediately prior to such computation, except in the
case of a combination of outstanding shares of Common Stock.
For the purposes of any adjustment to be made in accordance with this
Section 8(a) the following provisions shall be applicable:
(1) Shares or equivalents of Common Stock issuable by way of
dividend or other distribution on any stock of the Company
shall be deemed to have been issued immediately after the
opening of business on the day following the record date for
the determination of shareholders entitled to receive such
dividend or other distribution and shall be deemed to have
been issued without consideration.
(2) The reclassification of securities of the Company other than
shares of Common Stock into securities including shares of
Common Stock shall be deemed to involve the issuance of such
shares of Common Stock for a consideration other than cash
immediately prior to the close of business on the date fixed
for the determination of security holders entitled to receive
such shares, and the value of the consideration allocable to
such shares of Common Stock shall be determined in good faith
by the Board of Directors of the Company on the basis of a
record of values of similar property or services.
(3) The number of shares of Common Stock at any one time
outstanding shall be deemed to include the aggregate maximum
number of shares issuable (subject to readjustment upon the
actual issuance thereof) upon the exercise of options, rights
or warrants and upon the conversion or exchange of convertible
or exchangeable securities.
b. Upon each adjustment of the Exercise Price pursuant to this Section
8, the number of shares of Common Stock purchasable upon the exercise of each
Warrant shall be the number derived by multiplying the number of shares of
Common Stock purchasable immediately prior to such adjustment by the Exercise
Price in effect prior to such adjustment and dividing the product so obtained by
the applicable adjusted Exercise Price.
c. In case of any reclassification or change of outstanding shares of
Common Stock issuable upon exercise of the Warrants (other than a change in par
value, or from par value to no par value, or from no par value to par value or
as a result of a subdivision or combination), or in case of any consolidation or
merger of the Company with or into another corporation (other than a merger with
a subsidiary in which merger the Company is the continuing corporation and which
does not result in any reclassification or change of the then outstanding shares
of Common Stock or other capital stock issuable upon exercise of the Warrants
(other than a change in par value, or from par value to no par value, or from no
par value to par value or as a result of subdivision or combination) or in case
of any sale or conveyance to another corporation of the property of the Company
as an entirety or substantially as an entirety, then, as a condition of such
reclassification, change, consolidation, merger, sale or conveyance, the
Company, or such successor or purchasing corporation, as the case may be, shall
make lawful and adequate provision whereby the registered Holder of each Warrant
then
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<PAGE>
outstanding shall have the right thereafter to receive on exercise of such
Warrant the kind and amount of securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of securities issuable upon exercise of such Warrant immediately
prior to such reclassification, change, consolidation,
merger, sale or conveyance. Such provisions shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in Section 8a. The above provisions of this Section 8b.
shall similarly apply to successive reclassifications and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances.
d. Irrespective of any adjustments or changes in the Exercise Price or
the number of shares of Common Stock purchasable upon exercise of the Warrants,
the Warrant Certificates theretofore and thereafter issued shall, unless the
Company shall exercise its option to issue new Warrant Certificates, continue to
express the Exercise Price per share and the number of shares purchasable
thereunder as the Exercise Price per share and the number of shares purchasable
thereunder were expressed in the Warrant Certificates when the same were
originally issued.
e. After each adjustment of the Exercise Price pursuant to this Section
8, the Company will promptly prepare a certificate signed by the Chairman or
President, and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary, of the Company setting forth: (i) the Exercise Price as so
adjusted, (ii) the number of shares of Common Stock purchasable upon exercise of
each Warrant, after such adjustment, and (iii) a brief statement of the facts
accounting for such adjustment. The Company will promptly cause a brief summary
thereof to be sent by first class mail to each registered Holder at his last
address as it shall appear on the registry books of the Company. No failure to
mail such notice nor any defect therein or in the mailing thereof shall affect
the validity thereof except as to the holder to whom the Company failed to mail
such notice, or except as to the holder whose notice was defective. The
affidavit of the Secretary or an Assistant Secretary of the Company that such
notice has been mailed shall, in the absence of fraud, be prima facie evidence
of the facts stated therein.
f. No adjustment of the Exercise Price shall be made as a result of or
in connection with the issuance or sale of shares of Common Stock pursuant to
options, warrants, stock purchase agreements and convertible or exchangeable
securities outstanding or in effect on the date hereof or granted upon the
consummation of and in connection with the first Business Combination (as
defined in the Registration Statement). In addition, registered Holders shall
not be entitled to cash dividends paid by the Company prior to the exercise of
any Warrant or Warrants held by them.
g. DEFINITION OF COMMON STOCK. For the purpose of this Agreement, the
term "Common Stock" shall mean (i) the class of stock designated as Common Stock
in the Certificate of Incorporation of the Company as it may be amended as of
the date hereof, or (ii) any other class of stock resulting from successive
changes or reclassification of such Common Stock consisting solely of changes in
par value, or from par value to no par value, or from no par value to par value.
In the event that the Company shall after the date hereof issue securities with
greater or superior voting rights than those of the shares of Common Stock
outstanding as of the date hereof, the Holder, at its option, may receive upon
exercise of any Warrant either shares of Common Stock or a like number of such
securities with greater or superior voting rights.
h. RECLASSIFICATION, MERGER OR CONSOLIDATION. The Company will not
merge, reorganize or take any
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other action which would terminate the Warrants without first making
adequate provision for the Warrants. In case of any reclassification or change
of the outstanding shares of Common Stock (other than a change in par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination), or in case of any consolidation of the Company with, or merger
of the Company with, or merger of the Company into, another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification or change of the
outstanding Common Stock except a change as a result of a subdivision or
combination of such shares or a change in par value, as aforesaid), or in the
case of a sale or conveyance to another corporation or other entity of the
property of the Company as an entirety, the Holder of each Warrant then
outstanding or to be outstanding shall have the right thereafter (until the
expiration of such Warrant) to purchase, upon exercise of such Warrant, the kind
and number of shares of stock and other securities and property receivable upon
such reclassification, change, consolidation, merger, sale or conveyance as if
the Holder were the owner of the shares of Common Stock underlying such Warrants
immediately prior to any such events at a price equal to the product of (x) the
number of shares issuable upon exercise of the Warrants and (y) the Exercise
Prices in effect immediately prior to the record date for such reclassification,
change, consolidation, merger, sale or conveyance, as if such Holder has
exercised the Warrants. In the event of a consolidation, merger, sale or
conveyance of property, the corporation formed by such consolidation or merger,
or acquiring such property, shall execute and deliver to the Holders a
supplemental warrant agreement to such effect. Such supplemental warrant
agreement shall provide for adjustments which shall be identical to the
adjustment to those provided in Section 8. The provisions of this Section 8(h)
shall similarly apply to successive consolidations or mergers.
i. NO ADJUSTMENT OF EXERCISE PRICES IN CERTAIN CASES. No adjustment
of the Exercise Prices shall be made:
(1) Upon the issuance or sale of (i) the Warrants or the Warrant
Shares; (ii) the shares of Common Stock pursuant to the Public
Offering; or (iii) the shares of Common Stock issuable upon
the exercise of the options or warrants outstanding or in
effect on the date hereof as described in the prospectus
relating to the Public Offering.
(2) If the amount of said adjustments shall be less than five
($.05) cents per Share, provided, however, that in such case
any adjustment that would otherwise be required then to be
made shall be carried forward and shall be made at the time of
and together with the next subsequent adjustment which,
together with any adjustment so carried forward, shall amount
to at least five ($.05) cents per Share.
j. DIVIDENDS AND OTHER DISTRIBUTIONS. In the event that the Company
shall at any time prior to the exercise of all the Warrants declare a dividend
(other than a dividend consisting solely of shares of Common Stock) or otherwise
distribute to its stockholders any assets, property, rights, evidences of
indebtedness, securities (other than shares of Common Stock), whether issued by
the Company or by another, or any other thing of value, the Holders of the
unexercised Warrants shall thereafter be entitled, in addition to the shares of
Common Stock or other securities and property receivable upon the exercise
thereof, to receive, upon the exercise of such Warrants, the same property,
assets, rights, evidences of indebtedness, securities or any other thing of
value that they would have been entitled to receive at the time of such dividend
or distribution as if the Warrants had been exercised immediately prior to such
dividend or distribution. At the time of any such dividend or distribution, the
Company shall make appropriate reserves to ensure the timely performance of
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the provisions of this Section 8 (j).
k. SUBSCRIPTION RIGHTS FOR SHARES OF COMMON STOCK OF OTHER SECURITIES.
In the event that the Company or an affiliate of the Company shall at any time
after the date hereof and prior to the exercise of all the Warrants issue any
rights to subscribe for shares of Common Stock or any other securities of the
Company or of such affiliate to all the stockholders of the Company, the Holders
of the unexercised Warrants shall be entitled to receive, in addition to
the Warrant Shares receivable upon the exercise of the Warrants, such rights at
the time such rights are distributed to the other stockholders of the Company.
9. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. Each Warrant Certificate is
exchangeable without expense, upon the surrender thereof by the registered
Holder at the principal executive office of the Company, for a new Warrant
Certificate of like tenor and date representing in the aggregate the right to
purchase the same number of Shares in such denominations as shall be designated
by the Holder thereof at the time of such surrender. Upon receipt by the Company
of evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of any Warrant Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of the Warrants, if mutilated, the Company will
make and deliver a new Warrant Certificate of like tenor, in lieu thereof.
10. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be required to
issue certificates representing fractions of Shares upon the exercise of the
Warrants, nor shall it be required to issue scrip or pay cash in lieu of
fractional interests; provided, however, that if a Holder exercises all Warrants
held of record by such Holder the fractional interests shall be eliminated by
rounding any fraction up to the nearest whole number of Shares.
11. RESERVATION AND LISTING OF SECURITIES. The Company shall at all times
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issuance upon the exercise of the Warrants, such number of
shares of Common Stock as shall be issuable upon the exercise on conversion
thereof. The Company covenants and agrees that, upon exercise of the Warrants
and payment of the Exercise Price therefor, all the Warrant Shares issuable upon
such exercise shall be duly and validly issued, fully paid, nonassessable and
not subject to the preemptive rights of any stockholder. As long as the Warrants
shall be outstanding, the Company shall use its best efforts to cause the Common
Stock to be listed and quoted (subject to official notice of issuance) on all
securities exchanges on which the Common Stock issued to the public in
connection herewith may then be listed or quoted.
12. NOTICES TO WARRANT HOLDERS. Nothing contained in this Agreement shall be
construed as conferring upon the Holders the right to vote or to consent or to
receive notice as a stockholder in respect of any meetings of stockholders for
the election of directors or any other matter, or as having any rights
whatsoever as a stockholder of the Company. If, however, at any time prior to
the expiration of the Warrants and their exercise, any of the following events
shall occur:
a. the Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
10
<PAGE>
b. the Company shall offer to all the holders of its Common Stock any
additional shares of capital stock of the Company or securities convertible into
or exchangeable for shares of capital stock of the Company, or any option, right
or warrant to subscribe therefor; or
c. a dissolution, liquidation or winding up of the Company (other than
in connection with a consolidation or merger) or a sale of all or substantially
all of its property, assets and business as an entirety shall be proposed; then,
in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment of any such
dividend, or the issuance of any convertible or exchangeable securities, or
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
13. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
a. If to the registered Holder of the Warrants, to the address of such
Holder as shown on the books of the Company; or
b. If to the Company to the address set forth in Section 3 hereof or to
such other address as the Company may designate by notice to the Holders.
14. SUPPLEMENTS AND AMENDMENTS. The Company and the Underwriters may from time
to time supplement or amend this Agreement without the approval of any Holders
of Warrant Certificates (other than the Underwriters) in order to cure any
ambiguity, to correct or supplement any provision contained herein which may be
defective or inconsistent with any provisions herein, or to make any other
provisions in regard to matters or questions arising hereunder which the Company
and NSL may deem necessary or desirable and which the Company and the
Underwriters deem shall not adversely affect the interests of the Holders of
Warrant Certificates.
15. SUCCESSORS. All the covenants and provisions of this Agreement shall be
binding upon and inure to the benefit of the Company, the Underwriters, the
Holders and their respective successors and assigns hereunder.
16. TERMINATION. This Agreement shall terminate at the close of business
on __________, 2007. Notwithstanding the foregoing, the indemnification
provisions of Section 7 shall survive such termination until the close of
business on the later of the expiration of any applicable statue of limitations
or ________, 2008.
17. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement and each Warrant
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of New York and for all purposes shall be construed in
accordance with the laws of said State without giving effect to the rules of
said State
11
<PAGE>
governing the conflicts of laws, except that matters concerning the
validity of the issuance of securities shall be determined and construed in
accordance with the laws of the State of Louisiana. The Company, the
Underwriters and the Holders hereby agree that any action, proceeding or claim
against it arising out of, or relating in any way to, this Agreement shall be
brought and enforced in the courts of the State of New York or of the United
States of America for the Southern District of New York, and irrevocably submits
to such jurisdiction, which jurisdiction shall be exclusive. The Company, the
Underwriters and the Holders hereby irrevocably waive any objection to such
exclusive jurisdiction or inconvenient forum. Any such process or summons
to be served upon any of the Company, the Underwriters and the Holders (at the
option of the party bringing such action, proceeding or claim) may be served by
transmitting a copy thereof, by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in Section
13 hereof. Such mailing shall be deemed personal service and shall be legal and
binding upon the party so served in any action, proceeding or claim.
18. ENTIRE AGREEMENT; MODIFICATION. This Agreement (including the Underwriting
Agreement to the extent portions thereof are referred to herein) contains the
entire understanding between the parties hereto with respect to the subject
matter hereof. Subject to Section 14, this Agreement may not be modified or
amended except by a writing duly signed by the party against whom enforcement of
the modification or amendment is sought.
19. SEVERABILITY. If any provision of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision of this Agreement.
21. CAPTIONS. The caption headings of the Sections of this Agreement are
for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
22. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to
give to any person or corporation, other than the Company and the Underwriters
and any other registered Holder(s) of the Warrant Certificates or Warrant
Shares, any legal or equitable right, remedy or claim under this Agreement; and
this Agreement shall be for the sole and exclusive benefit of the Company and
the Underwriters and any other Holder(s) of the Warrant Certificates or Warrant
Shares.
23. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
24. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the Company,
12
<PAGE>
the Underwriters and their successors and assigns and the Holders from time to
time of the Warrant Certificate(s) or any of them.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
GALVESTON'S STEAKHOUSE CORP.
By:___________________________________
NICHOLS, SAFINA, LERNER & CO., INC.
By:___________________________________
By:___________________________________
13
<PAGE>
EXHIBIT A
GALVESTON'S STEAKHOUSE CORP.
WARRANT CERTIFICATE
THE SECURITIES ISSUABLE UPON EXERCISE OF THE WARRANT REPRESENTED BY THIS
CERTIFICATE MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933
ACT"), (II) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR
RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURI TIES), OR (III) AN
OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL
FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR SALE OR
SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933
ACT, OR (II) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY
SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER
SUCH 1933 ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANT REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE COMMENCING ________, 1998 THROUGH 5:00 P.M., NEW YORK TIME ________,
2002
NO. WC-1 _________ WARRANTS
This Warrant Certificate certifies that ______________ _______________
or registered assigns, is the registered holder of _________ warrants (the
"Warrants") to purchase initially, at any time from _______, 1998, until 5:00
p.m., New York time on _______, 2002 (the "Expiration Date"), up to ________
fully paid and non-assessable shares (the "Shares"), of Common Stock, $.01 par
value (the "Common Stock"), of Galveston's Steakhouse Corp., a Delaware
corporation (the "Company") at the exercise price of $____ per Share (the
"Exercise Price"), upon the surrender of this Warrant Certificate and payment of
the Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the warrant agreement dated as of _______,
1997 (the "Warrant Agreement") by and among the Company, Nichols, Safina, Lerner
& Co., Inc. and . Payment of the Exercise Price shall be made by certified or
cashier's check or money order payable to the order of the Company.
No Warrant may be exercised after 5:00 P.M, New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and
<PAGE>
the type and/or number of the Company's securities issuable thereupon may,
subject to certain conditions, be adjusted. In such event, the Company will, at
the request of the holder, issue a new Warrant Certificate evidencing the
adjustment in the Exercise Price and the number and/or type of securities
issuable upon the exercise of the Warrants; provided, however, that the failure
of the Company to issue such new Warrant Certificates shall not in any way
change, alter, or otherwise impair, the rights of the holder as set forth in the
Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange as provided herein,
without any charge except for any tax or other governmental charge imposed in
connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the undersigned has executed this certificate this
__th day of _______, 1996.
[SEAL]
GALVESTON'S STEAKHOUSE CORP.
By:____________________________________
ATTEST:
By:_____________________________
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Warrant Certificate.)
FOR VALUE RECEIVED ____________________________________________
hereby sells, assigns and transfers unto _____________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ____________________
Attorney, to transfer the within Warrant Certificate on the books of Galveston's
Steakhouse Corp., with full power of substitution.
Dated:____________________
Signature_____________________
(Signature must conform
in all respects to the
name of holder as specified
on the face of the Warrant
Certificate.)
- ------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE>
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right, represented by
this Warrant Certificate, to purchase:
_______ Shares
and herewith tenders in payment for such securities a certified or cashier's
check or money order payable to the order of Galveston's Steakhouse Corp. in the
amount of $_______________, all in accordance with the terms hereof. The
undersigned requests that a certificate for such securities be registered in the
name of _____________________ whose address is ______________________________
and that such Certificate be delivered to _____________________________ whose
address is
.
Dated:____________________
Signature_____________________
(Signature must conform
in all respects to the
name of holder as specified
on the face of the Warrant
Certificate.)
- ------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
EXHIBIT 10.1
<PAGE>
ASSIGNMENT AND ASSUMPTION OF LEASE
1. Identification and Parties.
This Agreement and Assumption of Lease ("Assignment") is made and entered into
the day of June 25, 1996 by and between TLC RESTAURANT MANAGEMENT CORPORATION
("Assignor") and TEXAS LOOSEY'S STEAKHOUSE & SALOON, INC. ("Assignee").
2. Recitals
2.1 Assignor is the lessee under that certain lease (the Lease) dated
November 1, 1994 between, WALTER BOLLENBACHER FAMILY TRUST as lessor and
Assignor, as Lessee as amended, covering certain real property more particularly
described in Exhibit "A" attached hereto.
2.2 Assignor and Assignee desire to enter into this Assignment to
consummate the assignment of the Lease from Assignor to Assignee.
3. Assignment and Assumption.
3.1 Assignor hereby transfers, grants, conveys and assigns to Assignee
all of Assignors rights, title and interest in, to and under the Lease.
Concurrently with the execution of this Assignment, Assignor shall deliver to
Assignee a true, correct and complete copy of the Master Lease and all
amendments thereto.
3.2 Assignee hereby accepts the assignment of the Lease are shall be
entitled to all of the rights and benefits accruing to the lessee thereunder,
and hereto assumes and agrees to perform any and all obligations, duties,
undertakings and liabilities of Assignor under the Lease first arising from and
after the date of the Assignment.
3.3 This Assignment shall inure to the benefit of and be binding upon
the respective legal representatives, successor, and assigns for the parties
hereto.
IN WITNESS WHEREOF, the parties have executed this Assignment as of the
date first set forth above.
"ASSIGNOR" "ASSIGNEE"
TLC RESTAURANT MANAGEMENT CORP TEXAS LOOSEY'S STEAKHOUSE & SALOON INC
- ----------------------------------- ----------------------------------------
Ronald K. Walton, President Hiram J. Woo, President
<PAGE>
SOUTHWOOD CENTER
STORE LEASE
This Agreement is dated as of November 1, 1994 by and between the
WALTER BOLLENBACHER FAMILY TRUST, owner of the below described premises,
hereinafter referred to for convenience as "LESSOR", who by this Agreement
leases said premises, and TLC RESTAURANT MGMT. CORP., a California Corporation
hereinafter referred to for convenience as "LESSEE" who be this Agreement leases
said premises from said LESSOR.
WITNESSETH:
For and in consideration of the convenience and agreements herein set
forth to be kept and performed by the LESSEE, LESSOR hereby leases to LESSEE and
LESSEE hereby takes, accepts and hires from LESSOR the premises hereinafter
described for the period, at the rental and subject to and upon the terms and
conditions herein set forth as follows:
1. LEASED PREMISES
The premises leased hereunder are located in the City of
Torrance, County of Los Angeles, and consists of certain store premises located
in buildings owned at 22246 and 22250-52 Palos Verdes Boulevard, Torrance, CA
90505. The leased premises together with other property which the LESSOR owns
comprise a shopping center development referred to herein and throughout this
Lease as the "Center." Said Center is described on the attached Exhibit "A"
incorporated herein by reference. The location and specific description of the
premises which are the subject of this Lease (the "Leased Premises") is attached
hereto as Exhibit "B" and incorporated herein by reference.
2. TERM
(A) The Term of this Lease shall be for a period of SIXTY TWO
(62) full and consecutive calendar months, plus the partial month, if any,
commencing on the "Commencement Date," as hereinafter defined, of this Lease and
expiring at midnight on the last day of December, 1999, unless sooner terminated
or extended as hereinafter provided (the "Term").
(B) The "Commencement Date" as used in this Lease, shall be
construed to mean November 1, 1994.
3. LEASE YEAR
The first partial lease year of the Term of this Lease shall
commence on the Commencement Date hereof and shall continue until the following
December 31. Subsequent lease years of the Term hereof shall be on a calendar
year basis with the exception of the last lease year which shall be from January
1 to the expiration date of this Lease.
4. USE OF THE LEASED PREMISES
The Leased Premises shall be used and occupied by LESSEE for
the purpose of operating the following described retail store operation and for
no other purpose without the prior written consent of the LESSOR:
A FULL SERVICE RESTAURANT AND COCKTAIL LOUNGE WITH ENTERTAINMENT AND DANCING.
At all times in the operation of such business and use of the
Leased Premises, LESSEE shall:
(A) Carry a full and complete stock of seasonable merchandise
offered for sale at competitive prices; maintain adequate facilities and
personnel for the efficient service of its customers; and employ LESSEE'S best
judgment, efforts and abilities to operate the business conducted on the Leased
Premises in a manner calculated to produce the maximum profitable and practical
volume of sales and transactions obtainable and is in keeping with the quality
of the Center; provided, however, that without LESSOR'S prior written consent,
LESSEE shall not conduct any auction, fire, bankruptcy or other distress-type
sale;
(B) Promptly comply with all laws, ordinances, orders and
regulations affecting the Leased Premises and the cleanliness, safety,
occupation and use thereof, and obtain all necessary governmental permits for
activities conducted at or from the Leased Premises;
(C) Not use or permit the use of any portion of the Leased
Premises as sleeping apartments, lodging rooms or, for any unlawful purpose or
purposes.
(D) Not to solicit business nor distribute adverting matter
in any common area;
(E) Warehouse, store and stock in the Leased Premises only
such goods, wares and merchandise as LESSEE intends to offer for sale at retail
in, at, upon or from the Leased Premises within a reasonable time after receipt,
and use only such space in the Leased Premises for office, clerical or
non-selling purposes as is from time to time reasonably required to LESSEE'S
business conducted at or from the Leased Premises;
(F) Not interfere with or permit the interference with the use
by other tenants or third parties of common areas or obstruct or permit the
obstruction by LESSEE'S patrons or customers of any portion thereof;
(G) Not use or permit the use of the Leased Premises by
LESSEE'S patrons or customers in any manner which will constitute a nuisance,
disturbance or unreasonable annoyance to other tenants or third parties
including, without limitation damages to the Leased Premises or common areas, or
excessive noise or congestion caused by LESSEE'S patrons or customers;
(H) Not cause, suffer or permit any waste of, or injury to,
the Leased Premises.
The restrictions set forth herein shall extend to all
officers, agents, employees, licensees, sublessees, and concessionaires of
LESSEE.
5. RENT
(A) The minimum rent during the Term of this Lease shall be as
set forth in Paragraph 53 of Addendum One attached hereto. LESSEE agrees to pay
the LESSOR upon the execution of the Lease the sum of SIX THOUSAND FIVE HUNDRED
and 00/100 Dollars ($6,500.00), which shall be applied towards LESSEE'S first
month's minimum rent. The minimum rent shall be payable, in advance on the first
day of each and every month. Should the Commencement Date or the expiration of
the Lease occur on a day other than the first day of a calendar month, then the
rental for such partial month shall be prorated on a daily basis, based upon a
thirty (30) day calendar month.
(B) LESSEE hereby acknowledges that late payment by LESSEE to
LESSOR of Rent or other sums due hereunder will cause LESSOR to incur costs not
contemplated by this Lease, the exact amount of which is extremely difficult to
ascertain. Such costs include, but are not limited to, processing and accounting
charges, and late charges which may be imposed upon LESSOR by the terms of any
mortgage or deed of trust covering the Leased Premises. Therefore, if any
payment of rent or other sum due hereunder is not paid within ten (10) days
after due, LESSEE shall pay to LESSOR, as additional rent, an amount equal to
Four Hundred Fifty Dollars ($450.00). The parties hereby agree that such late
charge represents a fair and reasonable estimate of the cost that LESSOR will
incur by reason of the late payment by LESSEE. Acceptance of a late charge
hereunder shall not constitute a waiver of LESSEE's default with respect to such
overdue amount and shall not prevent LESSOR from exercising any of the other
rights and remedies available to it.
(C) Lawful Money. All rental s to be paid by LESSEE to LESSOR
shall be payable in lawful money of the United State of America.
(D) Construction of Agreement. The aforesaid payment of
amounts due under the terms of this Lease shall be paid to the LESSOR at 15315
Magnolia Blvd., Suite 410, Sherman Oaks, CA 91403, or at such other place as may
be designated by the LESSOR in writing at lease ten (10) days prior to the next
ensuing minimum rent payment date.
6. SECURITY DEPOSIT
(A) The Security Deposit shall be equal to FIVE THOUSAND SIX
HUNDRED EIGHTY-SIX and 50/100 Dollars ($5,686.50) (the "Security Deposit").
LESSOR hereby acknowledges that it is in possession of said Security Deposit.
Said Security Deposit shall be held by LESSOR, without interest, as security for
the faithful performance by LESSEE of all the terms, covenants, and conditions
of this Lease by LESSEE to be kept and performed during the Term hereof. If at
any time during the Term of this Lease any of the rent herein reserved shall be
overdue and unpaid, or any other sum payable by LESSEE to LESSOR hereunder shall
be overdue and unpaid then LESSOR may, at the option of LESSOR (but LESSOR shall
not be required to), appropriate and apply any portion of said deposit to the
payment of any such overdue rent or other sum.
7. USE AND RETURN OF SECURITY DEPOSIT
In the event of the failure of LESSEE to keep and perform any
of the terms, covenants and conditions of this Lease to be kept and performed by
LESSEE then LESSOR, at its option may, with or without terminating this Lease,
appropriate and apply said entire deposit, or so much thereof as may be
necessary, to compensate LESSOR for all loss or damage sustained or suffered by
LESSOR due to such breach on the part of the LESSEE. Should the entire deposit,
or any portion thereof be appropriated and applied by LESSOR for the payment of
overdue rent or other sums due and payable to LESSOR by LESSEE hereunder, then
LESSEE shall, upon the written demand of LESSOR, forthwith remit to LESSOR, a
sufficient amount in cash to restore said security to the original sum
deposited, and LESSEE'S failure to do so within ten (10) days after receipt of
such demand shall constitute a breach of this Lease. Should LESSEE comply with
all of said terms, covenants and conditions and promptly pay all the rental
herein provided for as it falls due, and all other sums payable by LESSEE to
LESSOR hereunder, the said deposit shall be returned in full to LESSEE within
fifteen (15) days after the end of the Term of this Lease, or earlier
termination of this Lease.
8. TAXES
(A) Commencing on the Commencement Date and for the balance of
the Term of this Lease, LESSEE shall pay to LESSOR, without deduction or offset
of any kind, "LESSEE's pro rata share" of all "Real Property Taxes," as
hereinafter defined, in accordance with paragraph 9 below. As used in this
Lease, the term "Real Property Taxes" shall include all taxes and assessments or
reassessments, general, supplemental, or special, ordinary or extraordinary,
betterment or otherwise, whether ad valorem or otherwise, levied or assessed
against the Leased Premises or the Center, or any portion thereof, including any
tax and/or assessment of any kind or nature against, upon, or with respect to
Rent payable by LESSEE to LESSOR or on any service provided by LESSOR under this
LEASE (except net income or estate taxes) assessed or imposed by any
governmental authority upon LESSOR or upon LESSEE, which is so assessed,
imposed, or paid as a result of LESSOR's ownership of the Leased Premises or of
this Lease or the Rent accruing under this Lease or as a result of LESSOR's
business of leasing the Leased Premises; any so called "value added" tax; any
tax which may be in lieu of, as a substitute for, or in addition to such taxes;
and any tax, assessment or surcharge of any kind or nature, or any increase
therein, imposed upon LESSOR which is otherwise measured by or based in whole or
in part upon the Leased Premises or the Center, or any portion thereof,
including without limitation, a tax, assessment or surcharge of any kind or
nature, or an increase thereon, upon, against or with respect to any of the
following: (i) the parking areas or the number of parking spaces In the Center,
(ii) a service or right not charged prior to June 1, 1978, or if previously
charged, has been increased since June 1, 1978, (iii) except as hereinafter
provided, a transfer, either partial or total, of LESSOR's interest in the
Leased Premises or the Center, or (iv) this transaction, any modifications or
changes hereto or any transfers hereof. Said Real Property Taxes levied or
assessed for the fiscal tax year in which the Term commences and for the fiscal
tax year in which the Term ends shall be prorated. With respect to any
assessment that may be levied against or upon the Leased Premises or the Center
and that under the laws then in force may be evidenced by improvement or other
bonds, or may be paid in annual installments, there shall be included within the
definition of Real Property Taxes with respect to any tax fiscal year only the
amount currently payable on such bonds, including interest, for such tax fiscal
year, or the current annual installment for such tax fiscal year.
Notwithstanding anything to the contrary contained herein, during the initial
Term, LESSEE shall not be required to pay its pro rata share of any increase in
Real Property Taxes resulting from the transfer by LESSOR of any or all of its
interest in the Leased Premises or the Center.
(B) LESSEE shall pay before delinquency and all taxes,
assessments, licenses fees, and public charges levied, assessed or imposed and
which become payable during the Term upon LESSEE'S fixtures, furniture,
appliances and personal property installed, and in addition, on improvements in
the Leased Premises, made or installed by LESSEE subsequent to the Commencement
Date. If any time during the Term of this Lease any of the foregoing are
assessed as a part of the real property of which the Leased Premises are a part,
LESSEE shall pay to LESSOR upon demand the amount of such additional taxes as
may be levied against said real property by reason thereof. For the purpose of
determining said amount , figures supplied by the County Assessor as to the
amount so assessed shall be conclusive.
(C) LESSEE shall indemnify and hold LESSOR and the property of
LESSOR, including the Premises and any improvements now or hereafter on the
Premises, free and harmless from any liability, loss, or damage resulting from
LESSEE's failure to pay any taxes, assessments, or other charges required by
this paragraph 8 to be paid by LESSEE and from all interest, penalties, and
other sums imposed thereon, and from any sales or other proceedings to enforce
collection of any such taxes, assessments, or other charges.
9. MAINTENANCE CHARGES
(A) In addition to other amounts set forth in this Lease,
LESSEE shall pay to LESSOR, one twelfth (1/12) OF "LESSEE's pro rata share," as
hereinafter defined, of the aggregate of "maintenance charges," as hereinafter
defined, incurred by LESSOR during each calendar year of the Term hereof, in
accordance with paragraph 9(B) below. If the expiration of the Term of this
Lease shall not occur simultaneously with the end of the calendar year, LESSEE'S
liability for additional sums set forth in this paragraph 9 for the last partial
lease year shall be prorated on an annual basis. The common facilities and
parking areas of the Center, together with all areas, facilities and buildings
used in the maintenance and operation of the Center are referred to herein as
"Common Areas." "LESSEE'S pro rata share," as used in this Lease, shall be equal
to a fraction, the numerator of which shall be the total number of leasable
square feet in the Leased Premises and the denominator of which shall be the
total number of leasable square feet in the buildings located within the
boundaries of the Center.
(B) For purposes hereof, "maintenance charges" shall include,
without limitation, all sums expended in connection with the Common Areas for
all general maintenance, repairs and restoration, resurfacing, painting,
re-stripping, cleaning, sweeping and janitorial services; maintenance and repair
of floors, sidewalks, curbs and Center signs, sprinkler systems, planting and
landscaping, lighting and other utilities, directional signs and other markers
and bumpers; maintenance and repair of any fire protection systems, lighting
systems, storm drainage systems and any other utility systems within the Center;
the costs incurred by LESSOR for personnel to implement such services including,
if LESSOR deems necessary, the cost of security guards or devices; LESSOR's
share of real and personal property taxes and governmental charges, fees or
assessments of any kind or nature on the facilities, improvements and land
comprising said common areas; Real Property Taxes generally assessed to the
Center; transportation fees or similar charges payable to governmental bodies
with respect to the development or operation of the Center; utilities not
individually metered to tenants; the cost of any capital improvements made to
the Premises or the Center by LESSOR that reduce common area expenses, benefit
the health and safety of LESSEES and their employees or are required under any
governmental law or regulation not applicable to the Center at the time it was
constructed, such cost to be amortized over such reasonable period as LESSOR
shall determine with a return on capital at the rate of ten percent (10%) per
annum on the unamortized balance or at such higher rate as may have been paid by
LESSOR on funds borrowed for the purpose of constructing such capital
improvements; all costs and expenses pertaining to a security alarm system, if
any is provided in LESSOR's sole discretion, for the tenants in the Center;
depreciation on maintenance and operating machinery and equipment, if owned, and
rental paid for such machinery and equipment if rented; premiums for public
liability, property damage, fire and extended coverage insurance (including
"Earthquake Insurance" and "Flood Insurance" if LESSOR deems desirable),
together with insurance against sprinkler damage, vandalism and malicious
mischief, and any other insurance carried by LESSOR on the Center, and any
deductible portion of an insured loss concerning the buildings in the Center or
the Common Area; all costs and expenses necessary to maintain, repair or replace
the roofs of the buildings located within the Center; the expenses involved in
contesting any tax or assessment affecting the Center; such other expenditures
which, in LESSOR's sole discretion, LESSOR deems appropriate for the operation
and maintenance of a first-class shopping center; and a management fee equal to
the fee that LESSOR pays to the management company (including any affiliate of
LESSOR) which manages the Center, provided that, for purposes of calculating
LESSEE'S pro rata share of maintenance charges, such management fee shall not
exceed three and one-half percent (3.5%) of $4,500.00 for months 1 - 32, three
and one-half percent (3.5%) of $4,680.00 for months 33-45, three and one-half
percent (3.5%) of $4,868.00 for months 46-58, three and one-half percent (3.5%)
of $5,063.00 for months 59 - 62. Thereafter the management fee will be 3.5% of
the base rent payable to Lessor by the Lessee.
Commencing on the commencement date, and thereafter on the first day of
each calendar month of the Term, LESSEE shall pay to LESSOR, as additional rent,
it's pro rata share of one-twelfth (1/12) of an amount estimated by LESSOR to be
the amount of the total maintenance charges for the ensuing calendar year or
balance thereof. LESSOR may, from time to time, adjust the estimate of
maintenance charges to LESSEE on the basis of LESSOR's experience and reasonably
anticipated costs. Within ninety (90) days following the end of each calendar
year, LESSOR shall furnish LESSEE with a statement covering the calendar year
just expired, showing the actual maintenance charges for said calendar year, the
amount of LESSEE's pro rata share thereof and the payments made by LESSEE with
respect to such calendar year. If LESSEE's pro rata share of such maintenance
charges exceeds LESSEE's payments so made, LESSEE shall pay LESSOR the
deficiency with ten (10) days after receipt of said statement. If said payments
exceed LESSEE's pro rata share of such maintenance charges, LESSEE shall be
entitled to a credit the excess against payments of maintenance charges next
thereafter to become due as set forth above. Failure of LESSEE to pay when due
any of the charges required to be paid pursuant to this paragraph 9(B) shall
constitute a default under the terms of this Lease. Failure or delay by LESSOR
to prepare or submit such annual statement shall not be deemed a default by
LESSOR or a waiver of any right thereafter to collect any amounts owed and
payable by LESSEE under this paragraph 9(B).
10. REPAIRS BY LESSEE
LESSEE covenants and agrees at LESSEE'S own cost and expense
to keep the Leased Premises, and each and every part thereof including the
plumbing and electrical installations and the air conditioning and heating
system within the Leased Premises, in good condition and repair at all times
during the Term hereof and to make promptly any and all repairs, renewals and
replacements which may at any time be necessary or proper to put and keep the
premises in good condition (except any repairs or renewals or replacement
resulting from), damage by fire, (except fire caused by elements or other
casualty and normal wear and tear excepted; and to keep the Leased Premises and
all appurtenances thereto in a good, clean, safe and wholesome condition at all
times during said term. LESSEE's obligation to maintain the Leased Premises
shall include compliance with all applicable laws, rules, ordinances,
regulations and requirements of federal, state, county and municipal authorities
now in force or which may hereafter be in force which shall impose any duty upon
LESSOR or LESSEE with respect to the use, occupation or alteration of the
premises. In the event that the Leased Premises an elevator or elevators,
LESSEE'S said obligation shall also include the retaining by LESSEE of an
elevator service company approved by LESSOR, which approval LESSOR will not
unreasonably or arbitrarily withhold, to service and maintain the elevator
equipment on a regular periodic inspection and service basis calling for
inspection and servicing not less frequently than once each month. LESSEE agrees
not to make any additions to or changes or improvements in the Leased Premises,
or any part thereof, without the written consent of LESSOR first obtained,
except those changes, additions and improvements, if any, which LESSEE is
required to make by the provisions of this Lease. If during the Term hereof any
additions, alterations and improvements to or of the Leased Premises (as
distinguished from ordinary repairs and maintenance) are required by any legal
or governmental authority or by the laws, ordinances or regulations of any
governmental authority, whether adopted heretofore or hereafter, the same shall
be made and paid for by LESSEE. LESSEE expressly agrees to pay promptly for any
and all labor done or material furnished for any work or repair, maintenance,
improvement, alteration or addition done by the LESSEE in connection with the
Leased Premises and agrees to keep and hold the premises and LESSOR free, clear
and harmless of and from any mechanic's liens or liens of a similar nature that
might or could arise by reason of any such work.
Notwithstanding any of the above provisions it is agreed that
LESSOR is authorized to have the outside walls and trim of the Leased Premises
painted, once every five years of the Term of this Lease and such expense shall
be considered an expense of maintenance of the common areas as hereinafter
defined and LESSEE agrees to pay its pro rata share of such expenses as provided
below in relation to common areas. LESSOR shall keep the structural exterior
walls and the roof in good repair, except for damage by LESSEE, directly or
indirectly.
11. LESSOR'S RIGHT TO INSPECT
LESSOR and its agents shall have free access to the Leased
Premises during all reasonable hours (or at any time in the case of an
emergency) for the purpose of examining the same and to ascertain if they are in
good repair, to make reasonable repairs which LESSOR may be required to desire
to make hereunder and to exhibit the same to prospective purchasers or tenants.
LESSEE hereby grants to LESSOR such licenses or easements in,
under or over the Leased Premises or any portion or portions thereof as shall be
reasonably required for the installation or maintenance of mains, conduits,
pipes or other facilities to serve the Center or any part thereof, including but
not by way of limitation the premises of any occupant.
12. CLEANLINESS AND WASTE
LESSEE shall keep the Leased Premises and the walls adjacent
thereto at all times in a neat, clean and sanitary condition, free from refuse
or debris and shall neither commit nor permit any waste or nuisance thereon.
13. INDEMNITY BY LESSEE
LESSEE hereby indemnifies, protects, defends, and holds LESSOR
harmless from and against any and all claims, actions, demands, proceedings,
losses, damages, costs of any kind or character (including attorney's fees and
court costs), expenses, liabilities, judgements, fines, penalties, or interest,
arising from or out of any occurrence in, at, or about the Premises or the
Center in connection with or arising out of (i) the use or occupancy of the
Premises, or any part thereof, or (ii) the failure by LESSEE, any person
claiming under LESSEE, or LESSEE's employees, agents, contractors, servants,
customers, licensees or invitees, to perform and comply with any provision of
this Lease or any law, ordinance or governmental requirement, or (iii) the
construction, repair, alteration or improvement of the Premises, or (iv) any act
or omission or negligence of LESSEE, its agents, contractors, employees,
servants, customers, invitees or licensees, or (v) the negligence, whether
active or passive, of LESSOR or its agents, except that LESSEE shall not be
liable for the gross negligence or willful misconduct of LESSOR, unless same is
covered by insurance LESSEE is required to provide hereunder. This obligation to
indemnify shall include the reasonable costs of legal counsel and investigation
costs and all other reasonable costs, expenses, and liabilities incurred in
connection with any and all claims of damage. For the purpose hereof, the
Premises shall include the service areas adjoining the same, the loading
platform area allocated to the use by LESSEE, and the sidewalks abutting the
Premises.
In the event LESSOR shall be made a party to any litigation commenced
by or against LESSEE, then LESSEE shall protect, defend and hold LESSOR harmless
and shall pay all costs, expenses, and attorneys' fees incurred or paid by
LESSOR in connection with such litigation. Notwithstanding the foregoing, LESSEE
shall have no obligation to defend or indemnify LESSOR from successful claims
made by LESSEE against LESSOR for breaches of the Lease or claims for damage or
injury caused by the willful or criminal act of LESSOR or its agents. LESSOR
shall have the right to supervise any such litigation and LESSEE shall cooperate
with any attorneys selected by LESSOR.
LESSEE hereby agrees that LESSOR shall not be liable for injury to
LESSEE's business or any loss of income therefrom or for damage to the goods,
wares, merchandise or other property of LESSEE, LESSEE's employees, invitees,
customers, or any other person in or about the Premises or the Center, nor shall
LESSOR be liable for injury to the person of LESSEE, LESSEE's employees, agents
or contractors, whether such damage or injury is caused by or results from fire,
steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures, or from any other cause, whether said
damage or injury results from conditions arising upon the Premises or upon other
portions of the Center, or from other sources or places and regardless of
whether the cause of such damage or injury or the means of repairing the same is
inaccessible to LESSEE. LESSOR shall not be liable to LESSEE for any damage by
or from any act or negligence of any other tenant or occupant of the Center or
by any owner or occupant of any property adjoining or contiguous to the Center.
LESSEE agrees to pay for all damage to the Center as well as to other tenants or
occupants of the Center, caused by the acts or omissions of LESSEE, its agents,
servants, employees or invitees.
14. INSURANCE
(A) LESSEE shall, at its own cost and expense, maintain full
force and effect a policy of general liability insurance against claims for
personal injury, bodily injury, death and property damage covering the Leased
Premises and appurtenances thereto, or arising out of the maintenance, use or
occupancy of the Leased Premises and all areas appurtenant thereto or the
business operated by LESSEE and any other occupants of the Leased Premises in
amounts of not less than One Million Dollars ($1,000,000.00) per occurrence,
with an aggregate limit of not less than One Million Dollars ($1,000,000.00).
Said liability policy shall specifically insure the performance by LESSEE of the
indemnity agreement set forth in Paragraph 13 above. In addition, said liability
policy shall include (i) products and completed operations coverage and (ii)
contractual liability; and (iii) to the extent commonly carried for businesses
of the type operated by LESSEE in the Premises, liquor liability coverage in an
amount equal to not less than One Million Dollars ($1,000,000.00) per
occurrence.
(B) LESSEE shall carry, at its sole cost and expense, (i)
insurance against fire, vandalism, malicious mischief, and extended coverage,
and such other perils as are from time to time included in a standard "All Risk"
insurance policy insuring the leasehold improvements within the Leased Premises,
LESSEE's merchandise, trade fixtures, furnishings, equipment, and all other
items of personal property of LESSEE located on or within the Leased Premises in
an amount equal to not less than one hundred percent (100%) of the actual
replacement cost thereof, without depreciation, from time to time during the
Term; and (ii) insurance for the plate glass on the Leased Premises. That
portion of all such proceeds of such insurance issued for the damage or
destruction of the leasehold improvements within the Leased Premises, LESSEE's
merchandise, trade fixtures, furnishings, equipment, and all other items of
personal property of LESSEE located on or within the Leased Premises shall be
held in trust to be used for the repair or replacement of the fixtures and
equipment so insured.
(C) LESSOR, its successors or assigns, and the holder of any
fee or leasehold mortgage shall be named as additional insureds (or loss payees,
as the case may be) under each such policy of general liability insurance
maintained by LESSEE. LESSEE shall furnish LESSOR with a certificate of such
insurance with shall provide for notification in writing by the insurer at least
thirty (30) days prior to the cancellation or modification of such insurance by
LESSEE or the insurer. A duplicate original of all policies procured by LESSEE
in compliance with its obligations shall be delivered to LESSOR at least fifteen
(15) days prior to the time such insurance is first required to be carried by
LESSEE, and thereafter at least fifteen (15) days prior to the expiration of any
such policy. In the event LESSEE fails at any time during the Term of this Lease
to obtain insurance as required hereby, LESSOR may do so and LESSEE shall pay to
LESSOR the costs and expenses thereof as additional rent when the next payment
of minimum rent is required to be made.
(D) LESSEE agrees to waive any right of subrogation against
the LESSOR with respect to any policy of insurance maintained in connection with
the occupancy of the Leased Premises by the LESSEE. LESSEE shall have no
interest in or claim any portion of the proceeds of any insurance maintained by
the LESSOR under the terms of this Lease.
(E) LESSEE agrees that it will not at any time during the Term
of this Lease, carry and stock goods or do anything in or about the Leased
Premises which will in any way tend to increase the insurance rates upon the
building of which the Leased Premises are a part (the "Building"). LESSEE agrees
to pay to LESSOR forthwith upon demand the amount of any increase in premiums
for insurance against loss by fire that may be charged during the Term of this
Lease on the amount of insurance to be carried by LESSOR on the building of
which the Leased Premises are a part resulting from the foregoing or from LESSEE
doing any act in or about said Leased Premises which does so increase the
insurance rates, whether or not LESSOR shall have consented to such act on the
part of LESSEE. If LESSEE installs upon the Leased Premises any electrical
equipment which constitutes an overload on the electrical lines of the Leased
Premises, LESSEE shall at its own expense make whatever changes are necessary to
comply with the requirements of the insurance underwriters and any governmental
authority having jurisdiction thereover, but nothing herein contained shall be
deemed to constitute LESSOR'S consent to such overloading.
LESSEE shall maintain Workmen's Compensation Insurance to
comply with California law.
(F) LESSEE hereby agrees that LESSOR shall not be liable for
injury to LESSEE'S business or any loss of income therefrom or for damage to the
goods, wares, merchandise, or other property of LESSEE, LESSEE'S employees,
invitees, customers, or any other person in or about the Leased Premises, nor
shall LESSOR be liable for injury to the person of LESSEE, LESSEE'S employees,
agents, or contractors, whether such damage or injury is caused by or results
from fire, steam, electricity, gas, water or rain or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures, or from any other cause, whether the said
damage or injury results from conditions arising upon the Leased Premises or
upon other portions of the building of which the Leased Premises are part, or
from other sources or places and regardless of whether the cause of such damage
or injury or the means of repairing the same is inaccessible to LESSEE. LESSOR
shall not be liable for any damages arising from any act or neglect of any other
tenant, if any, of the building in which the Leased Premises are located.
15. SURRENDER OF THE LEASED PREMISES
At the expiration of the tenancy hereby created, LESSEE shall
surrender the Leased Premises in the same condition as the Leased Premises were
in upon delivery of possession thereto under this Lease, in addition to any
alterations or additions as set forth in Paragraph 38, reasonable wear and tear
excepted, and shall surrender all keys for the Leased Premises to LESSOR at the
place then fixed for the payment of rent and shall inform LESSOR of all
combinations on locks, safes and vaults, if any, in the Leased Premises. No act
or conduct of LESSOR, except a written acknowledgment of acceptance of surrender
sign by LESSOR, shall be deemed to be or constitute an acceptance of the
surrender of the Leased Premises by LESSEE prior to the expiration of the Term
of this Lease.
16. EMINENT DOMAIN
In the event the Leased Premises, or any part thereof, or if
any part of the Center described in Exhibit "B", shall be taken or sold to such
entity under threat of such taking or condemned for public purposes by any
competent authority, the entire compensation award therefore shall belong to the
LESSOR without any deduction therefrom for any present or future estate of
LESSEE. The provisions of this paragraph, however, shall no preclude LESSEE from
pursuing a separate compensation award from said competent authority for
LESSEE'S fixtures and good will and the remaining portion of the lease.
In the event that more than 20% of the floor areas of the
Leased Premises shall be so taken or condemned, then either LESSOR or LESSEE
shall have the option of terminating this Lease upon giving written notice of
such election within thirty (30) days after possession of the part condemned has
been taken, whereupon the Term of the Lease shall be terminated as of the date
on which possession is so taken. If neither LESSOR or LESSEE elects to so
terminate this Lease, or if less than 20% of the Leased Premises shall be so
taken or condemned, LESSOR at its own expense shall repair and restore the
premises not affected by the taking and the minimum rent to be paid by LESSEE
shall be equitably and proportionately reduced in the same proportion that the
floor area of the Leased Premises so taken bears to the floor area leased to
LESSEE immediately prior to the time of such taking.
17. ASSIGNMENT AND SUBLETTING
(A) Lessee shall not sublet the leased premises or any part
thereof or assign this Lease or any interest herein, or suffer any other person
to occupy or use the leased premises or any portion thereof (any of the
foregoing herein defined as a "Transfer") without first having obtained LESSOR'S
written consent, which consent shall not be unreasonably withheld. LESSEE hereby
agrees that it shall not be unreasonable for LESSOR to withhold its consent to
such Transfer for any of the reasons set forth in Paragraph 17 below.
Any and all Transfers made by LESSEE shall be made expressly
subject to this Lease and all of the terms and provisions hereof.
(B) Lessee shall not suffer a Transfer of the Premises or any
interest therein, or any part thereof, or any right or privilege appurtenant
thereto without the prior written consent of Lessor, and a consent to one
Transfer shall not be deemed to be a consent to any subsequent Transfer of the
Premises. Any Transfer without such consent shall be void, and shall, at the
option of LESSOR, terminate this Lease.
(C) LESSEE and LESSOR hereby agree that it shall not be
unreasonable for LESSOR to withhold its consent to a Transfer hereunder for any
of the following reasons:
(1) The "financial net worth" of the proposed transferee
is not reasonably acceptable to LESSOR;
(2) The occupation of the leased premises by the
proposed transferee would, in the reasonable business judgement of LESSOR,
cause diminution in the reputation of the Center or the other businesses located
therein;
(3) The proposed Transfer would, in the reasonable
business judgement of LESSOR, have a detrimental impact on the common areas of
the Center or on the use and occupancy of the Center by the other occupants of
the Center;
(4) The use and occupancy of the leased premises by the
proposed transferee would violate any of the terms of the Lease, including,
without limitation, Paragraph 4 of the Lease.
(5) The proposed assignee or sublessee does not HAVE
REASONABLE OPERATING EXPERIENCE;
(6) The proposed Transfer would result in a breach of
any lease for space in the Center then in effect or of any other agreement
relating to the Center which is then in effect;
For purposes of this paragraph 17, "financial net worth" shall
not include goodwill, intangible assets or the value of any privately held
corporations or partnership interests.
(D) Any transfer, hypothecation, or assignment of more than
forty-nine percent (49%) of the interest of LESSEE or LESSEE'S Guarantor, if
any, whether a partnership, unincorporated association, or corporation, or the
election of new officers of LESSEE if a corporation, shall constitute a Transfer
within the meaning of this paragraph 17. Notwithstanding the foregoing, any
offer or sale of the stock of LESSEE in a registered offering pursuant to the
Securities Act of 1933, as amended shall not be deemed to be a Transfer under
the terms of this paragraph 17.
(2) Notwithstanding anything to the contrary contained
herein, provided that LESSEE is not in monetary default, LESSEE shall have the
right to make the following Transfers without LESSOR'S consent:
(i) The assignment of this Lease as part of the
sale by LESSEE of its entire business to such proposed assignee as an ongoing
concern, provided that (i) such transferee shall continue to operate the
business being operated in the Premises at the time of such proposed Transfer,
and (ii) the transferee's "financial net worth" is equal to at least FIVE
HUNDRED THOUSAND DOLLARS ($500.00) at the time of the proposed Transfer.
(ii) The assignment of the Lease to a "Texas
Loosey's" franchisee, provided that the "financial net worth" of the proposed
transferee is sufficient, in the reasonable business judgement of LESSOR, to
operate the business to be operated in the leased premises pursuant to
paragraph 4 of this Lease.
(E) If LESSOR consents to a Transfer pursuant to this
paragraph 17 of if LESSEE Transfers the Lease pursuant to paragraph 17(D)(2)
above, the following conditions shall apply:
(1) Each and every covenant, condition and obligation
imposed upon LESSEE by this Lease and each and every right, remedy or benefit
afforded LESSOR by this Lease shall not be impaired or diminished as a result
of such Transfer.
(2) Except as otherwise provided herein, if LESSOR
consents to a Transfer, such Transfer shall not extend beyond the expiration of
the original term AND OPTIONS of this Lease. This paragraph 17(E)(3) shall not
apply to a Transfer under paragraph 17(D)(2) above.
(3) No Transfer shall be valid and no transferee shall
take possession of the leased premises or any part thereof unless, within ten
(10) days after the execution of the assignment or sublease agreement, LESSEE
shall deliver to LESSOR a duly executed duplicate original of such agreement in
a form satisfactory to LESSOR which provides that (i) the transferee assumes
Lessee's obligations for the payment of rent and for the full performance of the
covenants, terms and conditions of the Lease, and (ii) that the transferee
agrees to attorn, at LESSOR'S election, directly to LESSOR in the event the
Lease is terminated for any reason.
18. DEFAULTS AND REMEDIES
(A) Defaults. The occurrence of any one or more of the
following events shall constitute a material default and breach of this Lease by
LESSEE:
(i) The vacating or abandonment of the Lease Premises by
LESSEE.
(ii) The failure by LESSEE to make any payment of rent
or any other payment required to be made by LESSEE hereunder, as and when due,
where such failure shall continue for a period of three days after written
notice thereof from LESSOR to LESSEE. In the event that LESSOR serves LESSEE
with a Notice to Pay Rent of Quit pursuant to applicable unlawful Detainer
statutes such Notice to Pay Rent or Quit shall also constitute the notice
required by this subparagraph.
(iii) The failure by LESSEE to observe or perform
any of the covenants, conditions or provisions of this Lease to be observed or
performed by LESSEE, other than described in paragraph 18(A)(ii) above, where
such failure shall continue for a period of 30 days after written notice thereof
from LESSOR to LESSEE; provided however, that if the nature of LESSEE'S default
is such that more than 30 days are reasonably required for its cure, then LESSEE
shall not be deemed to be in default if LESSEE commenced such cure within said
30-day period and thereafter diligently prosecutes such cure to completion.
(iv) The making by LESSEE of any general arrangement or
assignment for the benefit of creditors; (b) LESSEE becomes a "debtor" as
defined in 11 U.S.C. 101 or any successor statute thereto (unless, in the case
of a petition filed against LESSEE, the same is dismissed with 60 days); (c) the
appointment of a trustee or receiver to take possession of substantially all of
LESSEE'S assets located at the Leased Premises or of LESSEE'S interest in this
Lease, where possession is not restored to LESSEE within 30 days; or (d) the
attachment, execution or other judicial seizure is not discharged within 30
days. Provided, however, in the event that any provision of this paragraph
18(A)(iv) is contrary to any applicable law, such provision shall be of no force
or effect.
(v) The discovery by LESSOR that any financial statement
given to LESSOR by LESSEE, any assignee of LESSEE, any subtenant of LESSEE, any
successor in interest of LESSEE or any guarantor of LESSEE'S obligation
hereunder, and any of them, was materially false.
(B) Remedies. In the event of any such material default or
breach by LESSEE, LESSOR may at any time thereafter, with or without notice of
demand and without limiting LESSOR in the exercise of any right or remedy which
LESSOR may have by reason of such default or breach:
(i) Terminate this Lease and LESSEE's rights to
possession of the Leased Premises, in which event, upon such
termination, LESSOR shall have the right to recover from LESSEE:
(1) the worth at the time of award of the unpaid rent which had been
earned at the time of termination; (2) the worth at the time of award
of the amount by which the unpaid rent which would have been earned after
termination until the time of award exceeds the amount of such rental loss that
the LESSEE proves could have been reasonably avoided; (3) the worth at the time
of award of the amount by which the unpaid rent for the balance of the Term
after the time of award exceeds the amount of such rental loss that the LESSEE
proves could have been reasonably avoided; (4) any other amount necessary to
compensate LESSOR for all the detriment proximately caused by LESSEE's failure
to perform LESSEE'S obligations under this LEASE or which, in the ordinary
course of things, would be likely to result therefrom; and (5) any other rights
and remedies available to LESSOR under California law.
The "worth at the time of award" of the amounts referred to in
subsections (1) and (2) of this paragraph 18(B)(i) is computed by allowing
interest at the interest rate set forth in paragraph 49 below. The "worth at the
time of award" of amount referred to in subsection (3) of this paragraph
18(B)(i) is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of award plus one percent
(1%). For the purpose of this paragraph, the term "rent" shall be deemed to be
and to mean all sums of every nature required to be paid by LESSEE pursuant to
the terms of this Lease, whether to LESSOR or to others.
(ii) Maintain LESSEE'S right to possession in which
case this Lease shall continue in effect whether or not LESSEE shall have
abandoned the Leased Premises, in which event LESSOR shall be entitled to
enforce all of LESSOR'S rights and remedies under this Lease,
including the right to recover the rent as it becomes due hereunder.
After LESSEE'S default and for as long as LESSOR does not terminate
LESSEE'S right to possession of the Leased Premises, LESSEE shall
have the right to assign its interest in the Lease upon the reasonable consent
of LESSOR in accordance with the criteria set forth in paragraph 17(A) of the
Lease (to the extent that such criteria are reasonable at the time of any such
proposed assignment); provided, however, that LESSEE shall not be released from
any liability under this Lease as a result of such assignment.
(C) Whether or not LESSOR elects to terminate this Lease on
account of any default by LESSEE, LESSOR shall have the right to terminate any
and all subleases, licenses, concessions or other consensual arrangements for
possession entered into by LESSEE and affecting the Leased Premises or may, in
LESSOR'S sole discretion, succeed to LESSEE's interest in such subleases,
licenses, concessions or arrangements. In the event of LESSOR's election to
succeed to LESSEE's interest in any such subleases, licenses, concessions or
arrangements, LESSEE shall, as of the date of notice by LESSOR of such election,
have no further right to or interest in the rent or other consideration
receivable thereunder.
(D) For the purposes of this paragraph 18, LESSEE's right to
possession shall not be deemed to have been terminated by efforts of LESSOR to
relet the Leased Premises, by its acts of maintenance or preservation with
respect to the Leased Premises, or by appointment of a receiver to protect
LESSOR's interests hereunder. The foregoing enumeration is not exhaustive, but
merely illustrative of acts which may be performed by LESSOR without terminating
LESSEE's right to possession.
(E) Notwithstanding anything to the contrary contained in this
Lease, LESSEE hereby agrees to either assume or reject the Lease concurrently
with the filing by or against LESSEE of a petition for relief under the
Bankruptcy Code. In the event that LESSEE shall assume the Lease, LESSEE, and
LESSEE's Trustee as the case may be, shall, at the time of such assumption, (1)
cure any default by LESSEE under the Lease, or provide adequate assurance that
such Default shall be cured promptly; (2) compensate or provide adequate
assurance of prompt compensation to a party to the Lease (other than LESSEE) for
any actual pecuniary loss resulting from such default; and (3) provide adequate
assurance of future performance under the Lease, as provided in Section
365(b)(3) of the Bankruptcy Code. LESSEE hereby agrees that (i) if LESSEE shall
fail to assume the Lease upon such filing of a petition for relief under the
Bankruptcy Code, or (ii) if LESSEE, and LESSEE's Trustee as the case may be,
assumes the Lease but fails to comply with subsections (1) through (3) of this
paragraph 18(E), then LESSOR may, promptly thereafter, take whatever action it
deems necessary and appropriate to protect its interests, including, but not
limited to, filing an ex parte motion with the bankruptcy Court for relief from
the automatic stay and for repossession of the Leased Premises and termination
of the Lease and for any other relief available to it under the Bankruptcy Code
or applicable law.
19. DESTRUCTION BY FIRE OR CASUALTY
In the event the Lease Premises, or any part thereof, shall be
damaged by fire, explosion, windstorm or any other casualty, then LESSOR shall
repair such damage and put the Leased Premises in good condition as rapidly as
reasonably possible and LESSEE shall be entitled to an equitable abatement of
the minimum rent, unless LESSOR shall establish that such damage was occasioned
by the negligence of LESSEE, its agents or employees. Notwithstanding any other
provisions of this paragraph to the contrary, if the Leased Premises shall be
damaged, and such damage shall be to the extent of more than forty percent (40%)
of the value of the Leased Premises at the time of such damage, then LESSOR may
at its election upon notice to LESSEE, within ninety (90) days after such
damage, terminate this Lease as of the date of such damage. In the event LESSOR
notifies LESSEE of its intention to terminate this Lease pursuant to this
paragraph, LESSEE may, at its sole cost and expense, repair such damage and put
the Leased Premises back into good condition and this lease shall remain in full
force and effect. Notwithstanding anything to the contrary contained herein,
LESSOR shall not be required to repair the Premises or the Center if any holder
of a mortgage or deed of trust on the Center should require that the insurance
proceeds payable upon damage or destruction to the Center by fire or other
casualty be used to retire the debt secured by such mortgage or deed of trust.
20. PARTIAL DESTRUCTION OF CENTER
In the event that one-third (1/3) or more of the rental area
of the Building shall be damaged or destroyed fire, explosion, windstorm or any
other casualty, notwithstanding that the Leased Premises may be unaffected by
such fire or other cause set forth above, LESSOR may terminate this Lease and
the tenancy hereby created by giving to LESSEE five (5) days written notice of
LESSOR'S election so to do, which notice shall be given, if at all, within the
ninety (90) days following the date of said occurrence. LESSOR CAN ONLY
TERMINATE SAID LEASE AS DESCRIBED IN THIS PARAGRAPH ONLY IF LESSOR IS PROHIBITED
TO REPLACE THE DESTRUCTED AREA. RENT SHALL BE ADJUSTED AS OF THE DATE OF SUCH
TERMINATION.
21. REMEDIES SHALL BE CUMULATIVE
All rights and remedies of LESSOR herein enumerated shall be
cumulative and none shall exclude any other right or remedy allowed by law.
Likewise, the exercise by LESSOR of any remedy provided for herein or allowed by
law shall not be to the exclusion of any other remedy.
22. ATTORNEY'S FEES
Should any litigation be commences between the parties hereto
concerning said Leased Premises, this Lease, or the rights and duties of either
in relation thereto, the party prevailing in such litigation shall be entitled,
in addition to such other relief as may be granted, to recover his actual
attorney's fees, reasonably incurred. To the extent Section 1717(b)(2) of the
California Civil Code is contrary to this provision, said statute is waived; and
if one party files an action and voluntarily dismisses it, the other party shall
be the "prevailing party," and entitled to recover their attorney's fees
pursuant to this provision.
23. UTILITIES
LESSEE shall pay all water, gas, heat, light, power, telephone
and other utilities and services supplied to the Leased Premises, together with
any taxes thereon. If any such services are not separately metered to LESSEE,
LESSEE shall pay a reasonable proportion to be determined by LESSOR of all
charges jointly metered with other premises.
24. DEFAULT BY LESSOR
LESSOR shall in no event be charged with default in the
performance of any of its obligations hereunder unless and until LESSOR shall
have failed to perform such obligations within thirty (30) days (or such
additional time as is reasonably required to correct any such defaults) after
written notice by LESSEE to LESSOR properly specifying wherein LESSOR has failed
to perform any such obligation.
25. OFFSET STATEMENT; ATTORNMENT AND SUBORDINATION
(A) Within seven (7) days after request therefor by LESSOR,
LESSEE agrees to deliver, in recordable form, a certificate or offset statement
to LESSOR, certifying (if such be the case) that this Lease is in full force and
effect. LESSEE'S failure to deliver such certificate within such time shall be
conclusive upon LESSEE (i) that this Lease is in full force and effect; (ii)
that LESSEE has no right of Offset, counterclaim or deduction against rent
hereunder; and (iii) that no more than one (1) month's rent has been paid in
advance.
(B) Subordination - (i) This Lease, at LESSOR'S option, shall
be subordinate to any ground lease, mortgage, deed of trust, or any other
hypothecation for security now hereafter placed upon the real property of which
the premises are a part, and to any and all advance made on the security
thereof, and to all renewals, modifications, consolidations, replacements and
extensions thereof. Notwithstanding such subordination, LESSEE'S right to quiet
possession of the premises shall not be disturbed if LESSEE is not in default
and so long as LESSEE shall pay the rent and observe and perform all of the
provisions of this Lease, unless this Lease is otherwise terminated pursuant to
its terms. If any mortgagee, trustee or ground lessor shall elect to have this
Lease prior to the lien of its mortgage, deed of trust or ground lease, and
shall have written notice thereof to LESSEE, this Lease shall be deemed prior to
such mortgage, deed of trust, or ground lease whether this Lease is dated prior
to subsequent to the date of said mortgage, deed of trust or ground lease, or
the date of recording thereof. (ii) LESSEE agrees to execute any document
required to effectuate such subordination or to make this Lease prior to the
lien of any ground lease, mortgage, or deed of trust, as the case may be, and
failing to do so within ten (10) days after written demand, does hereby
irrevocably appoint LESSOR as LESSEE'S attorney-in-fact and in LESSEE'S name to
do so.
26. BROKERAGE
LESSEE warrants that it has no dealing with any broker or
agent in connection with this Lease, who will be compensated by LESSOR, and
LESSEE covenants to pay, hold harmless, and indemnify LESSOR from any cost,
expense or liability in connection with any claim, demand, cause of action or
suit for any compensation, commission or charges claimed by any other broker or
agent with respect to this Lease or the negotiation thereof.
27. RECORDATION
Neither LESSOR nor LESSEE shall record this Lease or a short
form memoranda hereof without the prior written consent of the other party.
28. TIME ESSENTIAL
Time is of the essence in this Lease and with respect to the
performance of the LESSEE hereunder.
29. NO OPTION
The submission of this Lease for examination does not
constitute a reservation of or option for the Leased Premises and this Lease
becomes effective as a Lease only upon execution and delivery thereof by LESSOR
and LESSEE.
30. AGREEMENTS IN WRITING
It is understood that there are no oral agreements between the
parties hereto affecting this Lease supersedes and cancels any and all previous
negotiations, arrangements, brochures, agreements, representations, and
understandings, if any, between the parties hereto and none thereof shall be
used to interpret or construe this Lease.
31. CONSTRUCTION NOTICES
At least fifteen (15) days prior to commencing any work or
construction of any alterations, additions, replacements, or substantial repairs
in or about the Leased Premises, LESSEE shall notify LESSOR in writing of the
intended work and expected date of commencement thereof. Nothing in this
paragraph shall be construed to permit LESSEE to make any alterations,
additions, replacements, or substantial repairs in or about the Leased Premises.
LESSOR shall have the right at any time and from time to time to post and
maintain on the Leased Premise such notices as LESSOR deems necessary to protect
the Leased Premises and LESSOR from mechanics' liens, materialmen's liens, or
any other liens.
32. AUTHORITY
If LESSEE is a corporation, trust, or general or limited
partnership, each individual executing this Lease on behalf of such entity
represents and warrants that he or she is duly authorized to execute and deliver
this Lease on behalf of said entity. If LESSEE is a corporation, trust or
partnership, LESSEE shall, within thirty (30) days after execution of this
Lease, deliver to LESSOR evidence of such authority satisfactory to LESSOR.
33. PARAGRAPH HEADINGS
The paragraph titles herein are for convenience only and do
not define, limit or construe the contents of such paragraphs.
34. NOTICES
All notices to be given to the parties hereunder may and shall
be given by certified mail, return receipt requested, at the addresses indicated
as follows:
A. Lessor: W.B.F.T.
15315 Magnolia Boulevard, Suite 410
Sherman Oaks, CA 91403
B. Lessee: TLC RESTAURANT MGMT. CORP.
P.O. Box 1697
Temecula, CA 92593
All notices given pursuant to this Lease shall be given to the addresses
specified above or to such other address designated by written notice by either
party. Notices shall be deemed delivered when either personally delivered or, if
mailed, upon actual delivery as shown by the addressee's certification receipt
or three (3) days after deposit in an official United States Postal Service
office branch or official depository maintained by the United States Postal
Service, whichever is earlier.
35. COMMON AREAS
LESSOR shall make available at all times during the Term of
this Lease on such portion of the premises described in Exhibit "A" as LESSOR
shall from time to time designate or relocate as appurtenant to or constituting
a part of the Center, such common areas (as the term "common areas" is hereafter
defined) as LESSOR shall from time to time deem appropriate, LESSEE shall have
the nonexclusive right during the Term of this Lease to us the common areas for
itself, its employees, agents, customers, invitees and licensees.
All common areas shall be subject to the exclusive control and
management of LESSOR or such other persons or nominees as LESSOR may have
delegated or assigned to exercise such management or control, in whole or in
part, in LESSOR'S place and stead, and LESSOR and LESSOR'S nominees and
assignees shall have the right to establish, modify, amend and enforce
reasonable rules and regulations with respect to the common areas. LESSEE agrees
to abide by and conform with such rules and regulations; to cause its
concessionaires, and its and their employees and agents, so to abide and
conform; and to use its best efforts to cause its customers, invitees and
licensees so to abide and conform.
LESSOR shall have the right to close, if necessary, all or any
portion of the common areas to such extent as may in the opinion of LESSOR'S
counsel be legally necessary to prevent a dedication thereof or the accrual of
any rights of any person or of the public therein; to close temporarily all or
any portion of the common areas while engaged in making additional improvements
or repairs or alterations to the Center; and to do and perform such other acts
in, to, and with respect to the common areas as in the use of good business
judgment LESSOR shall determine to be appropriate for the Center.
LESSOR shall have the unqualified right to increase or reduce
the common areas, and to rearrange the parking spaces and improvements on the
common areas.
LESSOR agrees that its officers, agents, employees, vendors,
suppliers and other independent contractors will use such access roads and will
operate trucks and trailer in delivery of merchandise to and from the Leased
Premises upon and over such access roads as are designated therefor by LESSOR as
a means of ingress to and egress from the Leased Premises. The use of such
access roads, as above provided, or as LESSOR may from time to time designate,
by LESSEE and their respective officers, agents, employees, vendors, suppliers
and other independent contractor shall be subject to the rules and regulations
established by LESSOR with respect to the use thereof and the operation of
trucks, trailers and other vehicles traveling over and upon the same.
All delivery trucks and other delivery vehicles of LESSEE or
its suppliers shall be parked only where and as permitted by LESSOR from time to
time. LESSEE agrees that when and if requested by LESSOR so to do, LESSEE will
furnish LESSOR with the license numbers of the vehicles of LESSEE and other
respective officers, agents and employees. Until such time as LESSOR may give
its written consent to the contrary, LESSEE'S officers, agents or employees
shall not park their automobiles, trucks, bicycles or other vehicles in any part
of the Center set aside for customer parking.
36. CHANGES AND ADDITIONS
LESSOR hereby reserves the right at any time to make
alterations or additions to and to build additional stores on the site in which
the Leased Premises are contained and to build adjoining the same. LESSOR also
reserves the right to construct other buildings or improvements in the Center
from time to time and to make alterations thereof or additions thereto and to
build additional stories on any such building or buildings and to build
adjoining same and to construct double deck or elevated parking facilities. All
such alterations or additions shall be at LESSOR'S sole cost and expense.
37. SIGNS
LESSEE shall not erect or install any exterior signs or window
or door signs, advertising media or window or door lettering or placards without
LESSOR'S prior written consent. LESSEE shall not install any exterior lighting;
shades or awnings; or make any exterior decoration; or build any fences; or
install any radio or television antennae, loud speakers or sound amplifiers; or
similar devices; on the roof or exterior walls of the Leased Premises, or make
any changes to the store front without LESSOR'S prior written consent. Use of
roof is reserved to LESSOR. Any electrical signs visible from the exterior must
be designed or approved by the LESSOR'S architect or agent for color, size,
shape and lettering in every detail for installation by the LESSEE at LESSEE'S
cost.
38. ALTERATIONS
(A) LESSEE shall not make any alterations or additions to the
Leased Premises nor make any contract therefor without first procuring LESSOR'S
written consent. All alterations, additions, and improvements including utility
installations as defined in paragraph 38(B) below, made by LESSEE to or upon the
Leased Premises, shall at once when made of installed be deemed to have attached
to the freehold and to have become the property of LESSOR; provided, however, if
prior to termination of this Lease, or within fifteen (15) days thereafter,
LESSOR so directs by written notice to LESSEE, LESSEE shall promptly remove the
additions, improvements, and utility installations which were placed on the
Leased Premises by LESSEE and which are designated in said notice, and shall
repair any damage occasioned by such removal; and in default thereof LESSOR may
effect said removals and repairs at LESSEE'S expense.
(B) "Utility Installation" shall mean air lines, power panels,
electrical distribution systems, lighting fixtures, space heaters, air
conditioning, plumbing, and fencing (whether or not such utility installations
constitute trade fixtures of LESSEE).
(C) LESSEE shall remove or suffer to be removed or demolished
all or any portion of any of the improvements on the Leased Premises without the
prior written consent of LESSOR. LESSOR agrees not to unreasonably withhold its
consent from LESSEE with respect to LESSEE's installation of any necessary trade
fixtures, equipment and furniture in the Leased Premises, provided that such
improvements shall be removable without damage to the Leased Premises or the
Building. LESSOR shall have the right to refuse consent if, among other reasons,
LESSEE fails to deliver LESSOR plans and specifications satisfactory to LESSOR
showing in detail the proposed removal, demolition and/or improvements or LESSEE
fails to use contractors or subcontractors reasonably satisfactory to LESSOR.
LESSOR's approval of the plans, specifications and working drawings for LESSEE's
alterations shall create no responsibility or liability on the part of LESSOR
for their completeness, design sufficiency or compliance with all laws, rules
and regulations of governmental agencies or authorities. LESSOR will have 15
days from submission to LESSOR to approve or disapprove the plans and
specifications and the contractors and subcontractors.
(D) All alterations, additions or installations made by LESSEE
to or upon the Leased Premises, except for trade fixtures, shall be deemed to
have been attached to the real property constituting the Leased Premises upon
installation and shall not be removed by LESSEE except as provided herein. Such
improvements shall remain the property of LESSOR and shall be, at LESSOR's
option, removed upon the expiration or termination of the terms of the Lease.
LESSEE shall repair, at its sole expense, all damage caused by the installation
or removal of such property and shall leave the Leased Premises in their
original condition, reasonable wear and tear excepted. Whether or not any
alterations, additions or installations are to be removed by LESSEE, LESSEE
shall leave the Leased Premises at the expiration or termination of the Term
free of debris, broom clean and in good condition, reasonable wear and tear
excepted. LESSOR shall be entitled to exercise the rights with respect to any
personal property of LESSEE which shall remain on the Leased Premises within
five (5) days after the expiration or termination of this Lease as afforded by
Section 1980 et seq of the California Civil Code, as from time to time amended,
or other applicable law with respect thereto.
39. WAIVER
One or more waivers of any covenant, term or condition of this
Lease by either party shall not be construed by the other party as a waiver of a
subsequent breach of the same or any other covenant, term or condition. The
consent or approval of either party to or of any act by the other party of a
nature requiring consent or approval shall not be deemed to waive or render
unnecessary consent to or approval of any subsequent act.
40. RELATIONSHIP OF PARTIES
Nothing contained in this Lease shall be deemed or construed
by the parties hereto or by any third party to create the relationship of
principal and agent or of partnership or of joint venture or of any association
whatsoever between LESSOR and LESSEE, it being expressly understood and agreed
that neither the method of computation of rent nor any other provisions
contained in this Lease nor any act or acts of the parties hereto shall be
deemed to create any relationship between LESSOR and LESSEE other than the
relationship of LESSOR and LESSEE.
41. LAW GOVERNING
The laws of the State of California shall govern the validity,
construction, performance and enforcement of this Lease.
42. HOURS OF BUSINESS
LESSEE shall continuously during the entire Term hereof
conduct and carry on LESSEE'S business in the Leased Premises and shall keep the
Leased Premises open for business and cause LESSEE'S business to be conducted
therein during the usual business hours of each and every business day as is
customary for businesses of like character to be open for business; provided,
however, that this provision shall not apply if the Leased Premises should be
closed and the business of LESSEE temporarily discontinued therein on account of
strikes, lockouts or similar causes beyond the reasonable control of LESSEE or
closed for not more than three days out of respect to the memory of any deceased
officer or employee of LESSEE, or the relative of any such officer or employee.
LESSEE shall keep the Lease Premises adequately stocked with merchandise, and
with sufficient sales personnel to care for the patronage and to conduct said
business in accordance with sound business practices.
43. GENDER AND INTERPRETATION OF TERMS AND PROVISIONS
As used in this Lease and wherever required by the context
thereof, each number both singular or plural, shall include all numbers, and
each gender shall include all genders. LESSOR and LESSEE as used in this Lease
or in any other instrument referred to in or made a part of this Lease shall
likewise include both the singular and the plural, a corporation,
co-partnership, individual or person acting in any fiduciary capacity as
executor, administrator trustee, or in any other representative capacity. All
covenants herein contained on the part of LESSEE shall be joint and several.
44. COVENANTS TO BIND SUCCESSORS
All and singular the terms hereof shall apply to, run in favor
of and shall be binding upon and inure to the benefit of, as the case may
require, the parties hereto, and also their respective heirs, executors,
administrators, personal representatives, and assigns and successors in
interest, subject at all times nevertheless to the provisions of paragraph 17 of
this Lease relating to restrictions upon assignment or subletting this Lease or
the Leased Premises.
45. LESSEE'S ACKNOWLEDGMENT OF CONDITION OF THE LEASED PREMISES
LESSEE agrees that its acceptance of the Leased Premises
evidence LESSEE'S entry into possession thereof shall constitute unqualified
proof that the Leased Premises are, as of the date of the commencement of
LESSEE'S occupancy thereof, in a tenantable and good condition; that LESSEE will
take good care thereof; and LESSEE hereby waives the right to make repairs at
LESSOR'S expense under the provisions of Sections 1941 and 1942 of the Civil
Code of California. In respect to any partial destruction which LESSOR is
obligated to repair or may repair under any of the provisions of this Lease, the
provisions of Section 1932, Sub-division 2, the Section 1933, Subdivision 4, of
the Civil Code of California are waived by LESSEE.
46. SALE AND LEASING
LESSOR, and its authorized agents, and representative, shall
be entitled to enter the premises at all reasonable times for the purpose of
exhibiting the same to prospective purchasers and, during the final six (6)
months of the Term of this Lease, LESSOR shall be entitled to exhibit the
premises for hire or for rent and to display thereon in such manner as will not
unreasonably interfere with LESSEE'S business the usual "For Rent" or "For
Lease" signs, and such signs shall remain unmolested on the premises.
47. INTEREST ON PAST DUE OBLIGATIONS
Any sum accruing to LESSOR under the terms and conditions of
this Lease which shall not be paid when due shall bear interest at the rate of
seven percent (7%) per annum from the date when the same becomes due and
payable.
48. HOLDING OVER
If LESSEE holds over after the Term hereof, with or without
the express or implied consent of LESSOR, such tenancy shall be from
month-to-month only, and not a renewal hereof or an extension for any further
Term and, in such case, minimum rent shall be payable at one hundred fifty
percent (150%) of the monthly amount applicable during the last complete month
of the Term hereof and such month-to-month tenancy shall be subject to every
other term, covenant, and agreement contained herein. All other rentals provided
for herein shall continue during this month-to-month tenancy in accordance with
the terms thereof.
49. HAZARDOUS MATERIALS
(A) Except as provided in Exhibit "D" attached hereto, LESSEE
shall not cause, permit or suffer any "Hazardous Material" to be brought upon,
treated, kept, stored, disposed of, discharged, released, produced,
manufactured, generated, refined or used upon, about or beneath the Leased
Premises or the real property upon which they are located by LESSEE, its agents,
employees, contractors, subtenants, invitees, licensees, or any other person
without the prior written consent of LESSOR. Any request by LESSEE for such
consent by LESSOR shall be in writing and shall demonstrate to the reasonable
satisfaction of LESSOR that such Hazardous Material is necessary to the business
of LESSEE and will be store, used and disposed of in a manner that complies with
all "Environmental Requirements" applicable to such Hazardous Material. Such
consent shall not be unreasonably withheld, but LESSOR shall in no case be
obligated to consent to the presence of any Hazardous Material which will
increase the likelihood or magnitude of liability for Environmental Damages or
to any treatment, storage or disposal upon the Leased Premises or the real
property of which they are a part of any Hazardous Material the treatment,
storage or disposal of which requires a permit or variance under the Federal
Resource Conservation and Recovery Act (42 U.S.C. Section 6901, et seq.) or any
similar state statute and LESSOR shall in no case be obligated to execute any
application for such a permit or variance.
(B) LESSEE shall not cause, permit or suffer the existence or
the commission by LESSEE, its agents, employees, contractors, invitees,
licensees or subtenants or by any other person of a violation of any
Environmental Requirements upon, about or beneath the Leased Premises or the
real property upon which they are located.
(C) LESSEE shall not cause, permit or suffer to exist with
respect to the Leased Premises or the real property of which they are a part or
permit any of its agents, employees, contractors, invitees, licenses, subtenants
or any other person to create or suffer to exist any lie, security interest or
other charge or encumbrance of any kind relating to Hazardous Materials or
Environmental Requirements, including without limitation any liens imposed
pursuant to Section 107(f) of the Superfund Amendments and Reauthorization Act
of 1986 (42 U.S.C. Section 9607(1)) or any similar state statute.
(D) If LESSEE does, or intends to, bring upon, treat, store,
dispose of, discharge, release, produce, manufacture, generate, refine or use
upon, about or beneath the Leased Premises or the real property of which they
are a part, either directly or through agents, employees, contractors, invitees,
licensees, subtenants or any other person, any Hazardous Material, whether or
not such actions are sanctioned by this Lease and consents given pursuant
hereto, LESSEE shall purchase insurance with coverage no less than $300,000 to
insure against Environmental Damages which may result from such activities. Such
policy of insurance shall name LESSOR as an additional insured. LESSEE shall pay
for all such insurance immediately upon receipt of an invoice therefor, and
shall at each anniversary date of this Lease or at such other additional times
as may be requested by LESSOR provide evidence of such coverage and of such
payment to LESSOR. Such insurance shall contain a waiver of subrogation clause
and shall not be cancelable without 30 days prior written notice from the
insurer to LESSOR.
(E) LESSEE, its successors, assigns and guarantors, agree to
indemnify, defend, reimburse and hold harmless:
(i) LESSOR; and
(ii) Any other person who acquires a portion of the
Leased Premises or the real property of which they are a part or any portion
of either thereof in any manner, including but not limited to purchase or
foreclosure sale; and
(iii) Trustees, beneficiaries, directors,
officers, shareholders, employees, partners, agents, contractors,
subcontractors, experts, licensees, invitees, lessees and mortgagees of
such persons from and against any and all Environmental Damages
arising from the presence of Hazardous Materials upon, about or beneath the
Leased Premises or migrating to or from the Leased Premises or the real
property of which they are a part as a result of any act or omission
of LESSEE or its agents, employees, contractors, subtenants, invitees, licensees
or any other person on or near the Leased Premises or the real property of which
they are a part through LESSEE or arising in any manner whatsoever out of the
violation of any Environmental Requirements pertaining to the Leased Premises by
LESSEE or any such other person.
The foregoing obligations shall include, but not be limited
to, the burden and expense of defending all claims, suits and administrative
proceedings (with counsel approved by LESSOR) even if such claims, suits or
proceedings are groundless, false or fraudulent and paying and discharged, as
the same come due, any and all judgments, penalties or other sums due against
such indemnified parties. LESSOR, at its sole expense, may employ additional
counsel of its choice to associate with counsel representing LESSEE.
The obligations of LESSEE under this paragraph 51 shall
survive the termination or expiration of the Term of this Lease and any transfer
of title to the Leased Premises (whether by sale, foreclosure, deed in lieu of
foreclosure or otherwise).
(F) Hazardous Material means any substance:
(i) the presence of which requires investigation or
remediation under any federal, state or local statute, regulation, ordinance,
order, action, policy or common law; or
(ii) which is or becomes defined as "Hazardous waste",
"hazardous substance", "pollutant" or "contaminant" under any feral, state or
local statute, regulation, rule or ordinance or amendments thereto including,
without limitation, the Comprehensive Environmental Response, Compensation in
Liability Act (42 U.S.C. Section 9601, et seq.) and/or the Resource Conservation
and Recovery Act (42 U.S.C. Section 6901, et seq.); or
(iii) which is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise
hazardous or is or becomes regulated by any governmental authority, agency,
department, commission, board, agency or instrumentality of the United States,
the State of California or any political subdivision thereof; or
(iv) the presence of which on the Leased Premises causes
or threatens to cause a nuisance upon the real property upon which the Leased
Premises are a part or to adjacent properties or poses or threatens to pose a
hazard to the health or safety or persons on or about the property; or
(v) without limiting the generality of the
foregoing, which contains gasoline, diesel fuel or other petroleum
hydrocarbons (excluding gasoline and other hydrocarbons in gas tanks and
comparable portions of cars which come upon the real property of which the
Leased Premises are a part); or
(vi) without limiting the generality of the
foregoing, which contains polychlorinated bipheynols (PCBs), asbestos or
urea formaldehyde foam insulation; or
(vi) without limiting the generality of the foregoing,
radon gas.
(G) Environmental Requirements means all applicable present
and future statutes, regulations, rules, ordinances, codes, licenses, permits,
orders, approvals, plans, authorizations, concessions, franchises and similar
items of all governmental authorities of the United States, California and
political subdivisions thereof and all applicable judicial, administrative and
regulatory decrees, judgments and orders relating to the protection of human
health or the environment, including those relating to Hazardous Materials or
the protection of the health and safety of employees of the public.
(H) Environmental Damages means all claims, judgments,
damages, losses, penalties, fines, liabilities (including strict liability),
encumbrances, liens, cost and expenses of investigation in defense of any claim,
whether or not such claim is ultimately defeated, and of any good faith
settlement or judgement, or whatever kind or nature, contingent or otherwise,
mature or unmatured, foreseeable or unforeseeable, including without limitation
reasonable attorney's fees and disbursements and consultant's fees, any of which
are incurred at any time after the date of this Lease as a result of any default
by LESSEE in any provision of this Lease relating to Hazardous Materials or
Environmental Requirements.
50. ADDENDUM
In addition to the written provisions 1 through 50 and
Exhibits "A", "B", "C" and "D" this Lease includes on addendum setting forth
numbered Paragraphs 53 through 55 which are incorporated herein by reference.
IN WITNESS WHEREOF, the parties have set their hand the date first above
written.
LESSOR: LESSEE:
WALTER BOLLENBACHER FAMILY TRUST TLC RESTAURANT MGMT. CORP.
By: ________________________________ By: ______________________________
Ronald K. Walton
Its: Trustee Its: President
By: ________________________________
Its: Trustee
Address: Address:
15315 Magnolia Blvd., Ste 410 P.O. Box 1697
Sherman Oaks, CA 91403 Temecula, CA 92593
(818) 386-0080 (909) 677-3345
ADDENDUM ONE
SOUTHWOOD SHOPPING CENTER
53. ADJUSTMENT OF MINIMUM RENT
MONTHS DIFFERENCE RENT
1-32 $6,500.00
33-45 (1,820.00) $4,680.00
46-58 188.00 $4,868.00
59-62 195.00 $5,063.00
54. OPTION TO RENEW LEASE
Provided that LESSEE has not been in monetary default or other
material default under the terms of the Lease during the twelve (12) month
period immediately preceding the expiration of the term, or the first option
period as the case may be, LESSEE shall have the right to extend the Term of the
Lease for TWO (2) additional FIVE (5) year periods; however, that LESSEE
notifies LESSOR his intention to exercise said option one not more than two
hundred ten (210) days and not less than one hundred eighty (180) days prior to
the expiration of the lease term; If LESSEE defaults under any of the terms of
the Lease at any time after its notified LESSOR of its desire to exercise its
option hereunder, LESSEE is Default of any of the terms of the Lease, option
period shall not commence and the Lease shall expire at the end of the Term.
Each such option shall be on the terms and conditions set
forth in the Lease, with the exception of Paragraph 5 (Rent). The minimum rent
for the first year of each option period shall be equal to (i) the fair market
rental value of the Leased Premises as of the date 6 months prior to the first
day of the option period in question. For 20 days after LESSEE's timely exercise
of its option, LESSOR and LESSEE shall attempt to mutually agree upon the fair
rental value for the Leased Premises for the Option Period. At any time
thereafter, either LESSOR or LESSEE may request that the fair market rental
value be determined by appraisal; and within 15 days after notice, LESSOR shall
appoint its appraiser and LESSEE shall appoint its appraiser. If the two
appraiser do not agree, a third appraiser will be retained as selected by the
two appraisers. The fair market rental value shall be the average of the two
closest appraisals of the three appraisers. Any such appraisal of the fair
market rental value of the Leased Premises shall take into account the leasehold
improvements in the Leased Premises at the time of such appraisal. The cost of
the third appraiser will be shared by LESSOR and LESSEE.
The minimum rent after the first year of each option period
shall increase FOUR PERCENT (4%) annually for the Term of such option period.
55. ADDITIONAL SECURITY
LESSEE agrees to provide a FORM UCC-1 Financing Statement to
be executed by LESSOR on all of LESSEE's trade fixtures, furniture and equipment
installed on the Leased Premises. The UCC-1 filing will terminate upon the
expiration of the first 32 months of the Term provided all MONETARY TERMS OF THE
LEASE HAVE BEEN MET, and LESSOR shall take whatever steps are necessary to
terminate such filing.
LESSOR and LESSEE have executed this Addendum One on Nov. 1, 1994.
LESSOR: LESSEE:
WALTER BOLLENBACHER FAMILY TRUST TLC RESTAURANT MGMT. CORP.
By: ________________________________ By: ______________________________
Ronald K. Walton
Its: Trustee Its: President
By: ________________________________
Its: Trustee
Address: Address:
15315 Magnolia Blvd., Ste 410 P.O. Box 1697
Sherman Oaks, CA 91403 Temecula, CA 92593
(818) 386-0080 (909) 677-3345
<PAGE>
EXHIBIT 10.2
<PAGE>
SHOPPING CENTER LEASE
THIS LEASE, made and entered into this 4th day of September, 1996 by
and between University Plaza, Ltd. - JJ, a Ca. Limited Partnership
("Landlord") and Texas Loosey's Steakhouse & Saloon, Inc. a Delaware
Corporation ("Tenant", without regard to gender or number), and simultaneously
hereto a Guarantee to Lease, signed by "Guarantor": Mr. Hiram J. Woo, on
behalf of Tenant in his Lease transaction.
WITNESSETH:
1. USE: The Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord, those certain premises hereinafter described, to be used and
occupied by Tenant for the limited purpose of the operations of a first class
"family-style" restaurant and cocktail lounge, with the main theme of the
business being that of a "country/western" atmosphere, food and entertainment,
and for no other use or purpose.
2. PREMISES: The premises leased to Tenant, together with
appurtenances, are hereinafter referred to as the "demised premises" and are
situated and commonly known as 2720 Nutwood Ave., located in the City of
Fullerton, County of Orange, State of California, and are the premises outlined
in read on the plat of the shopping center commonly known and designated as
"University Plaza" (hereinafter referred to as the "shopping center"); said plat
being marked Exhibit "A" and attached hereto and made a part hereof. The demised
premises have a frontage of approximately irreg feet and a depth of
approximately irreg feet for a total of approximately 8,285 square feet.
3. TERM: *Note: The commencement of this lease agreement is
contingent upon Landlord receiving the monies currently
owed and delinquent on the existing lease between "Landlord"
and Texas Loosey's Chili Parlor of Fullerton, Inc.
(hereinafter referred to as "Existing Tenant") and Ron Walton,
"Guarantor" to said lease, which monies must be received by
Landlord prior to the commencement date as noted in Article A, below.
A. Term. The term of this Lease shall be for a period of
eight (8) years, commencing on *October 1, 1996, and ending at midnight on
September 30, 2004 unless sooner terminated pursuant to any provision hereof.
B. Delay In Commencement. Notwithstanding said commencement
date, if for any reason Landlord cannot deliver possession of the demised
premises to Tenant on said date, Landlord shall not be subject to any liability
thereof, nor shall such failure affect the validity of this Lease or the
obligations of Tenant hereunder or extend the term hereof, but in such case
Tenant shall not be obligated to pay rent until possession of the demised
premises is tendered to Tenant; provided however, that if Landlord shall not
have delivered possession of the demised premises within ninety (90) days from
said commencement date, Tenant may, at Tenant's option, by notice in writing to
Landlord within ten (10) days thereafter, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder; provided further,
however, that it such written notice of Tenant is not received by Landlord
within said ten (10) day period, Tenant's right to cancel this Lease hereunder
shall terminate and be of no further force or effect. If Tenant occupies the
demised premises prior to said commencement date, such occupancy shall be
subject to all provisions hereof, and Tenant shall pay rent for such period at
the monthly rental provided in Paragraphs 4 and 5 below, however, such occupancy
shall not advance the termination date hereinabove set forth.
4. BASIC RENTAL.
A. Minimum Monthly Rental.
(i) Tenant shall pay to Landlord as minimum monthly
rental for the demised premises the sum of Six Thousand Five Hundred and
no/100 Dollars ($ 6,500.00) per month, which sum shall be subject to possible
upward adjustment as provided in Paragraph 4A (ii) below. Said minimum monthly
rental shall be paid in advance on the first day of each month of the term,
with proration to occur for any partial month, if the commencement of the term
hereof ward adjustment as provided in Paragraph 4A (ii) below. Said minimum
monthly rental shall be paid in advance on the fir is other than on the first
day of a calendar month. All rentals to be paid by Tenant to Landlord shall be
in lawful money of the United States and shall be paid without deduction or
offset, prior notice or demand, and at such places as may be designated from
time to time by Landlord.
(ii) At the end of each and every lease year hereof,
the minimum monthly rental as provided in Paragraph 4A(i) above, shall be
adjusted as hereinafter set forth to reflect any increase in the cost of living
based on the "Consumer Price Index for All Urban Consumers - Los Angeles - Long
Beach - Anaheim Area (1967 - 100) All items" (hereinafter referred to as
"Index"), published by the Bureau of Labor Statistics of the United States
Department of Labor.
The Index Number for the calendar month immediately preceding the month
in which the Lease is made and entered into (according to the Introductory
Paragraph hereof shall be the "Base Index Number" and the corresponding Index
Number for the last full calendar month of the lease year just ended shall be
the "Current Index Number". The Base Index Number shall be subtracted from the
current Index Number, and the result obtained shall be converted to a percentage
of the Base Index Number. The minimum monthly rental as provided in Paragraph
4A(i) above shall then be increased by such percentage and the result so
obtained shall be the new minimum monthly rental of the premises effective as of
the first day of the new lease year, Tenant shall continue payment of minimum
monthly rental in effect for the expiring lease year until notified by Landlord
of any increase in such minimum monthly rental. Such notification shall include
a memorandum showing the calculations used by Landlord in determining the new
minimum monthly rental. On the first day of the calendar month immediately
succeeding receipt of such notice, Tenant shall commence payment of the new
minimum monthly rental specified in the notice and shall also pay to the
Landlord with respect to the month(s) already expired, the excess of the
required monthly rentals specified in the notice over the monthly amounts
actually paid by Tenant.
If publication of the Index shall -be discontinued,
the most comparable index published by any branch or department of the United
States Government shall be substituted by Landlord, and Landlord shall make
such adjustments in the method of computation as may be reasonably required to
carry out the intent of this cost-of-living provision.
The term "lease year" as used in the Lease shall mean
the successive one (1) year periods during the lease term commencing on the
first day of the term and on each anniversary of such commencement date.
B. Percentage Rental.
(i) In addition to the minimum guaranteed monthly
rental hereinabove agreed to be paid by Tenant, Tenant shall pay to Landlord,
at the time and in the manner herein specified, the amount, if any, by which
five percent (5%) of Tenant's gross sales made in, upon or from the demised
premises during each month of the term hereof, exceeds the amount of minimum
monthly rental payable by Tenant for said month pursuant to Paragraph 4A
hereof. The 5% would apply only if the monthly gross sales is at least $142,000
or more.
(ii) Within ten (10) days after the end of each
calendar month of the term hereof, commencing with the 10th day of the
month following commencement of this Lease. And ending with the 10th day of the
month next succeeding the last month of the lease term, Tenant shall furnish to
Landlord a statement in writing certified by Tenant to be true and correct,
showing the total gross sales made in, upon or from the demised premises during
the preceding calendar month and shall accompany each such statement with a
payment to Landlord of a sum equal to five percent (5%) of such total monthly
gross sales, less the minimum monthly rental previously paid by Tenant for said
month pursuant to Paragraph 4A hereof.
(iii) The term "gross sales" as used in the Lease shall
include the entire gross receipts of every kind and nature from sales and
services made in, upon or from the demised premises, whether upon credit or for
cash, in every department operating in the demised premises, whether operated
by the Tenant or by a subtenant or subtenants, excepting therefrom any rebates
or refunds to customers and the amount of all sales tax receipts which has to
be accounted for by Tenant to any government or governmental agency. Sales upon
credit shall be deemed cash sales and shall be included in the gross sales for
the period which the merchandise is delivered to the customer, whether or not
title to the merchandise passes with delivery.
(iv) The Tenant shall keep fully, complete and
proper books, records, and accounts of its daily gross sales, both for cash
and on credit, of all business conducted upon or from the demised premises. The
Landlord and its agents and employees shall have the right at any and all
times, during regular business hours, to examine and inspect all of the books
and records of the Tenant. Tenant shall also deliver to Landlord copies of all
Sales Tax Reports relating to Tenant's gross sales which Tenant files with the
Board of Equalization or other regulatory agency, concurrently with such
filing; and shall deliver to Landlord copies of any documents relating to
Tenant's gross sales which Tenant receives from the Board of Equalization,
immediately following Tenant's receipt thereof.
Landlord may at any time and from time to time cause an
audit of the business of Tenant to be made by a certified public accountant of
Landlord's selection and it any statement of gross sales previously made to
Landlord shall be found to be inaccurate, then and in that event, there shall
be an adjustment and one party shall pay to the other on demand such sums as
may be necessary to settle in full the accurate amount of said percentage rent
that should have been paid to Landlord for the period or periods covered by
such inaccurate statement or statements. If such audit shall disclose an
inaccuracy of greater than 2% error with respect to the amount of gross sales
reported by Tenant for the period of said report, then Tenant shall immediately
pay to Landlord the cost of such audit; otherwise the cost of such an audit
shall be paid by Landlord. If such audit shall disclose any willful or
substantial inaccuracies, this Lease may thereupon be cancelled and terminated,
at the option of the Landlord.
(v) Any information obtained by Landlord pursuant
to the provisions of this paragraph shall be treated as confidential,
except in any litigation or arbitration proceedings between the parties, and
except further that Landlord may divulge such information to a prospective
buyer or encumbrancer of the premises.
5. ADDITIONAL RENTAL: Note: All operating expenses shall be paid by
Tenant on the basis of his pro-rata share using the square footage of the
premises, which shall be deemed to include not only the "building" proper,
but also the service area(s), fenced patio area(s) and entry which service
or are particular only to the Tenant's use. This total square footage is
herein agreed to be approximately 8,285 square feet.
A. Shopping Center Operating Costs. In addition to all
other amounts specified in this Lease and as additional rent, Tenant shall
pay, upon demand, tenant's pro rata share (as defined in Paragraph 5C hereof of
all direct costs and expenses ("Operating Costs") of every kind and nature paid
or incurred by Landlord in operating, managing, insuring, repairing, and
maintaining the Shopping Center, including all parking and common areas thereof
in a manner deemed reasonable and appropriate by Landlord and in the best
interest of the shopping center. Operating costs shall be determined by
standard accounting practices and shall include, but not be limited to: all
real property taxes and assessments levied on the shopping center and all
improvements thereon, rent or gross receipts, taxes, costs and expenses of
cleaning, painting, striping, policing (including costs of uniforms, equipment
and all employment taxes, regulating traffic, furnishing water, lights, music,
heat, ventilation an air-conditioning to the common areas, depreciation for
machinery and equipment used in maintaining common facilities, including the
common area heating, air-conditioning and ventilating equipment and personal
property taxes and other charges incurred in connection with such equipment;
Costs and expenses exterior wall, foundations and structural portions of
buildings, maintaining underground and overhead utility and service lines,
repairing, resurfacing or replacing parking areas, driveways, curbs, walkways,
sprinklers, drainage facilities and light standards; costs and expenses of
gardening, relandscaping and replacing flowers, shrubbery and planters; legal
and accounting fees; premiums for liability, business interruption, property
damage, tire, extended coverage, malicious mischief, vandalism, workers'
compensation, employees' liability, earthquake, sprinkler leakage and other
casualty and/or risk insurance procured by Landlord in connection with the
shopping center; together with an administrative charge by Landlord equal to
15% of the total (exclusive of depreciation of equipment) of said costs and
expenses. Notwithstanding hereinabove to the contrary, Operating Costs shall
not include promotional expenses included in Paragraph 5B, depreciation of
improvements, loan payments, executive salaries or real estate broker's
commissions.
Tenant's pro rata share of Operating Costs may be
estimated by Landlord and shall be paid by Tenant monthly in advance, subject
to adjustment in future billing to Tenant. Operating Costs shall be computed on
a cash basis according to standard accounting practices. On or before March 1st
of each year, Landlord shall determine (and furnish to Tenant a statement
showing in reasonable detail) the Operating Costs for the preceding lease year.
To the extent that Tenant's pro rata share of such Operating Costs is greater
or less than the sum actually billed to and paid by Tenant for such year, the
difference shall be billed to and paid by Tenant or credited to Tenant against
its next successive Operating Cost payment(s), as the case may be. Any such
annual statement from Landlord which is not objected to by Tenant (stating the
reason for objection and the specific items being questioned) within 60 days
after Tenant's receipt thereof from Landlord, shall be deemed binding and
conclusive.
(1) Tenant further acknowledges that the premises are a part
of a larger complex, commonly referred to as "University Plaza", which consists
of a total of one office building called "University Plaza" and two restaurants,
one of which is the "premises" referred to herein.
Therefore, Tenant agrees to the following:
(a) Tenant herein acknowledges that these three entities use
in common with one another a certain number of utilities, services, and/or
commonly shared facilities;
(b) That in some cases, certain of these utilities/services
are connected to and have been the sole responsibility of each of the individual
entities, i.e. water, lighting for the parking lot, etc.
(c) That these utilities, as they are presently connected to
and paid for by each individual entity, and as they presently exist, shall
remain unchanged and uncontested, and that Tenant shall continue, at Tenant's
sole cost and expense, to be responsible at all times for (i) supplying
electricity to and keeping turned on from "dusk to dawn" those parking lot
lights which are connected to Tenant's electrical service at Tenant's cost, and
shall keep in continuous service the water and/or electricity as necessary which
controls any portion of the irrigation services that are presently connected to
Tenant's utilities.
(2) Tenant is aware that in addition to those utilities
indicated above for which the Tenant already agrees to pay, that Tenant is also
responsible for paying his full pro-rata share of all other shared utilities,
services and/or facilities, referenced hereinabove as "operating costs".
As such:
(a) The Landlord, at his sole discretion, may dictate the
proportion for which the office building shares in the "shopping center
operating costs' with the two restaurants. However, under no circumstances shall
the two restaurants, as they presently exist, be designated to pay more than 50%
of the total of all "operating costs" of the complex as a whole.
(b) Of that portion of all "operating costs" designated to be
the responsibility of the two restaurants, the two restaurants shall then pay
their respective proportionate share based upon their percentage of the total as
determined by dividing their respective total square footage of their building
and appurtenant surroundings as compared to the combined total of the two.
Currently, the total square footage of the premises (including the building
proper and the surrounding appurtenant area(s) shall be deemed to be a total
square footage of 8,285 square feet.
C. Definition of "Tenant's Pro Rate Share". "Tenant's pro rate
share" as said phrase is used in this Lease shall be a fraction, the numerator
of which shall be the `floor area' of the premises, which in the case of this
lease shall be the total of the square footage of the building proper plus the
surrounding appurtenant areas as noted above in 5-A-(2)-(b) and the denominator
of which shall be the total square footage area (total `floor areas') of the two
restaurants in the shopping center so noted above, which are completed and
operating, including the demised premises. The term "floor area" as used herein
shall be computed by taking the aggregate number of square feet of floor space
within the exterior faces of the exterior walls (except party and interior walls
as to which the center thereof, instead of the exterior faces thereof, shall be
used and except that the exterior building line shall be used as to all exterior
entrances), plus the square footage of the surrounding appurtenant areas. No
deduction or exclusion shall be make from floor area otherwise computed by
reason of columns or other interior construction within the demised premises or
buildings) of the shopping center. The "floor area" within the shopping center
shall be increased or decreased (at Landlord's option) for additional buildings
or demolition of buildings (if appropriated at Landlord's discretion and without
Tenant's approval, with a corresponding increase or decrease in the denominator
used in computing "Tenant's pro rata share" of costs.
6. CONDITION OF PREMISES AND SHOPPING CENTER: Except as otherwise
specifically provided in this Lease or any exhibit hereto, Tenant hereby agrees
to accept the demised premises in their condition existing as of the date of
execution hereof, reasonable wear and tear excepted, and acknowledges that
Landlord shall not be required to make any improvements or alterations in
connection with the demised premises or the shopping center. Tenant further
agrees to accept the demised premises subject to all applicable zoning,
ordinances and regulations governing and regulating the use of the demised
premises, and any covenants of restrictions of record, and accepts this Lease
subject thereto and to all matters disclosed thereby and by any exhibits
attached hereto. Tenant acknowledges that neither Landlord nor Landlord's agent
has made any representation or warranty as to the present or future suitability
of the demised premises for the conduct of Tenant's business, as to occupancy of
the shopping center by other tenants or that Tenant shall have any exclusivity
with respect to the type of business described in Paragraph 1 above.
7. PARKING AND COMMON AREAS:
A. Parking. With respect to the parking areas provided by
Landlord as part of the shopping center, it is agreed as follows:
(i) Such parking areas shall be available to
Tenant's customers and business invitees on a non-exclusive first-come,
first-served basis.
(ii) Landlord Shall have the right to adopt rules and
regulations for parking which, among other things, preclude or restrict the
use of parking areas by employees of tenants in the shopping center and/or to
designate a certain portion of the parking areas for use by such employees.
(iii) Landlord reserves the right to change the
entrances, exits, traffic lanes, dimensions, boundaries and locations of
such parking areas, provided that the total parking area available to the
shopping center shall not be less than (and shall otherwise comply with) the
requirements of law.
(iv) Nothing in this Lease shall be deemed to prohibit
the establishment and enforcement by Landlord of a system of charging for
the use of parking spaces in the Center; provided that the revenues derived by
Landlord from such parking charges shall be applied to reduce the cost incurred
for the operation of such parking area, including real estate taxes properly
allocated thereto.
B. Common Areas. The term "common areas" refers to that part
of the shopping center which is designated by Landlord from time to time for the
common use of all tenants, including among other facilities, parking areas,
sidewalks, landscaping, curbs, truckways, delivery passages, enclosed and open
malls, loading areas, private streets and alleys, lighting facilities, drinking
fountains, public toilets and the like. Landlord reserves the right to change
from time to time the dimensions and location of the common areas as shown on
Exhibit "A", as well as the dimensions, identity and type of any buildings
(except the demised premises) shown on Exhibit "A" and to construct additional
buildings or additional stories on existing buildings or make other alterations
to the shopping center. Landlord also reserves the right to dedicate portions of
the common area and other portions of the shopping center (except the demised
premises) for street, park, utility and other public purposes. The use of common
areas as constituted from time to time shall be subject to such reasonable rules
and regulations governing use as Landlord may from time to time prescribe.
8. RULES AND REGULATIONS: Tenant shall faithfully observe and comply
with the Rules and Regulations attached hereto as Exhibit "C" and all reasonable
modifications of and additions thereto from time to time put into effect by
Landlord. Landlord shall not be responsible to Tenant for the nonperformance by
any other tenant or occupant of the shopping center of any of said Rules and
Regulations.
9. USE PROHIBITED: Tenant shall not use or permit the demised premises,
or any part thereof, to be used for any purpose or purposes other than the
purpose and purposes for which said premises are hereby leased; and no use shall
be made or permitted to be made of said premises, nor acts done, which will
increase the existing rate of insurance upon the building in which said premises
may be located (once said rate is established), or cause a cancellation of any
insurance policy covering said building or any part thereof, nor shall Tenant
sell or permit to kept, used or sold in or about said premises any article which
may be prohibited by standard form or fire insurance policies. Tenant shall, at
his sole cost, comply with any and all requirements pertaining to the use of
said premises, of any insurance organization or company covering said building
and appurtenances.
10. COMPLIANCE WITH LAWS: Tenant shall, at his sole cost and expense,
comply with all of the requirements of all Municipal, State and Federal
authorities, now in force or which may hereafter be in force pertaining to the
use of the demised premises, and shall faithfully observe in said use all
Municipal ordinances and State and Federal statutes now in force or which shall
hereinafter be in force.
11. AUCTIONS: Tenant shall not conduct or permit to be
conducted any sale by auction in, upon or from the demised premises,
whether said auction be voluntary, involuntary, pursuant to any assignment
for the payment of creditors or pursuant to any bankruptcy or other insolvency
proceeding.
12. CONTINUOUS USE; ABANDONMENT: Tenant shall continuously use the
demised premises for uses specified in this Lease and shall continuously
merchandise the demised premises during all usual business hours and on all such
days as comparable business in the shopping center or businesses of like nature
in the area are open for business but, in any event, not less than 54 hours per
week.
Tenant shall not vacate or abandon the demised premises at any
time during the term of this Lease; and if Tenant shall abandon, vacate or
surrender the demised premises or be dispossessed by process of law, or
otherwise, any of Tenant's personal property left on the demised premises shall
be deemed to be abandoned, at the option of Landlord.
13. ALTERATIONS: Except as may be otherwise provided herein, Tenant
shall not make any alterations to the demised premises without Landlord's
consent. Any alterations made shall remain on and be surrendered with the
demised premises on expiration or termination of the term, except that Landlord
can elect within 5 days after termination of the term, to require Tenant to
remove any alteration that Tenant has made to the demised premises. If Landlord
so elects. Tenant at its cost shall restore the demised premises to the
condition designated by Landlord in its election, before the last day of the
term, or within 10 days after notice of election is given, whichever is later.
If Tenant makes any alterations to the demised premises as
provided in this Paragraph, the alterations shall not be commenced until 5 days
after Landlord has received notice from Tenant stating the date the installation
of the alterations is to commence so that Landlord can post and record an
appropriate notice of nonresponsibility. Landlord's consent to said alterations
shall not be unreasonably withheld.
14. MAINTENANCE AND REPAIRS: Tenant agrees that its acceptance of the
demised premises evidenced by Tenant's entry into possession thereof shall
constitute conclusive proof that the demised premises are, as of that date of
such acceptance, in a tenantable and good condition; that Tenant will take good
care thereof; and Tenant hereby waives the right to make repairs at Landlord's
expense under the provisions of Section 1941 and 1942 of the Civil Code of
California. Any partial destruction which Landlord is obligated to repair or may
repair under any of the provisions of Section 1932, Subdivision 2 and Section
1933, Subdivision 4 of the Civil Code of California are hereby waived by Tenant.
Tenant covenants and agrees to at Tenant's own cost and
expense, keep the demised premises, and each and every part (including the
building proper, as well as service areas, patio areas, entrances and any other
parts or areas that are pertinent to the Tenant's business and premises),
including without limitation, all plumbing and electrical conduits, wiring,
fixtures and pipes and all sewers, floors, flooring, walls, lighting, light
bulbs, light ballasts, identification signs, doors, door closures, store fronts,
plate glass and glazing, air conditioning and heating systems, ceilings and all
other parts thereof, in good condition and repair at all times during the term
hereof and to promptly make any and all repairs, renewals and replacements which
may at any time be necessary or proper to put and keep the demised premises in
good condition and repair, and to keep the demised premises and all
appurtenances thereto in a good, clean, safe and wholesome condition at all
times during said term. In the event that the demised premises contain air
conditioning and/or elevators, Tenant's said obligation shall also include the
retaining by Tenant of an air conditioning service company and/or an elevator
service company approved by Landlord, which approval Landlord will not
unreasonably or arbitrarily withhold, to servicer and to maintain the air
conditioning equipment and/or the elevator equipment on a regular periodic
inspection and service basis, calling for inspection and servicing not less
frequently than once each month. Tenant expressly agrees to pay promptly for any
and all labor done or material furnished for any work or repair, maintenance,
improvements, alteration or addition done by Tenant in connection with these
items.
Landlord shall (subject to reimbursement under Paragraph 5A)
repair and maintain the following items unless such maintenance and repairs are
caused in part or in whole by the act, neglect, fault or omission of any duty by
Tenant, its agents, servants, employees, or invitees, in which case Tenant shall
pay to Landlord the cost thereof: roofs (including gutters and downspouts),
exterior walls, foundations and structural portions of the building, exterior
trim, all underground and overhead utilities and service lines and drops located
outside the perimeter of the demised premises, and painting or staining of
exterior walls, trim or accessories at such intervals as Landlord shall
determine and which work shall be performed by Landlord.
Tenant shall promptly notify Landlord in writing of the need
for any of the foregoing repairs to be performed by Landlord and Landlord shall
have the right to enter the demised premises at any time with men and equipment
as may be deemed necessary by Landlord to make such repairs. In no event shall
Landlord be liable to any person, including Tenant, its agents or employees, for
any loss, damage (including water damage), theft, or destruction of or to any
merchandise, fixtures, money or other property belonging to any person as a
result of Landlord's failure promptly or correctly to perform any of the
foregoing repairs or occasioned by acts of Landlord or its agents or employees
while making such repairs. In no event shall Tenant be entitled to any offset,
abatement or reduction in rent during periods of such repair.
In the event Tenant fails or refuses to perform any repairs
required of it hereunder, in addition to all other remedies available hereunder
or at law for Tenant's default, the Landlord may, but shall not be obligated to,
enter the demised premises, with men and equipment and perform such repairs on
behalf of and at expense of Tenant.
15. INSURANCE BY TENANT: At all times during the term of this Lease,
Tenant shall maintain in full force and effect with insurance companies licensed
to do business in the state of California and otherwise satisfactory to Landlord
in its sole discretion, one or more policies evidencing the following coverage
and naming the Landlord and/or his designees as co-insured:
A. Combined Single Limit Bodily Injury and Property Damage
Insurance, with dram shop coverage if deemed applicable by Landlord, against any
liability arising out of the ownership, use, occupancy or maintenance of the
demised premises and all areas appurtenant thereto. Such insurance shall be a
combined single limit policy in an amount of not less than $1,000,000 per
occurrence. The policy shall insure performance by Tenant of the indemnity
provisions of Paragraph 16 hereof, however, the limits of said insurance shall
not limit the liability of Tenant hereunder, Landlord may increase the foregoing
limits if Landlord deems such increase desirable to protect Landlord and Tenant.
B. Plate glass insurance on the demised premises, and policies
of fire insurance, including extended coverage and such other insurance as
Landlord may require, on all of Tenant's improvements, alterations and personal
property, such insurance to be in an amount equal to 100% of the insurable value
thereof.
All proceeds of such property insurance shall be
paid to Landlord and held in trust to be used for the repair or replacement of
the plate glass, fixtures, improvements or personal property so insured. A
duplicate original of all such policies shall be delivered to Landlord at least
15 days prior to the time such insurance is first required to be carried by
Tenant, and thereafter at least 15 days prior to the expiration or cancellation
of any such policy. In the event Tenant fails at any time during the term of
this Lease to obtain such insurance or to provide such evidence thereof,
Landlord shall have the right but not the duty to procure such insurance and
Tenant shall pay to Landlord the costs and expenses thereof as additional rent
when the next payment of fixed minimum rent is required to be made.
Landlord and Tenant agree that all insurance policies
shall contain a clause permitting the insured to waive the insurance
carrier's right of subrogation against the other arising out of the occurrence
of any casualty. Tenant and Landlord hereby waive any such right of subrogation
against the other party hereto.
16. HOLD HARMLESS AND INDEMNITY: Tenant shall hold Landlord harmless
and indemnified at all times against any claims, loss, damage, cost or expense,
including reasonable attorneys' fees, by reason of Tenant's failure to perform
any obligation to be performed by Tenant under the terms of this Lease or from
Tenant's use of the demised premises or from any activity, work or things done
or permitted by Tenant, its contractors, agents, employees, licensees or
invitees in or about the demised premises or elsewhere. Tenant covenants and
agrees that in case Landlord shall without fault on its part be made a party to
any litigation commenced by or against Tenant, then Tenant shall and will pay
all costs and expenses, including attorneys' fees, incurred by or imposed on
Landlord by or in connection with such litigation, and also shall pay all costs
and expenses, including attorneys' fees, which may be incurred by Landlord in
enforcing any of the convenants and agreements of this Lease, and all such cost,
expenses and attorneys' fees shall, if paid by Landlord herein, be so much
additional rent due on the next rent date after such payment or payments.
17. FREE FROM LIENS: Tenant shall keep the demised premises and
the property on which the demised premises are situated free from any liens
arising out of any work performed, material furnished, or obligation incurred
by Tenant.
18. PERSONAL PROPERTY TAXES: During the term hereof Tenant shall
pay prior to delinquency all taxes assessed against and levied upon
fixtures, furnishings, equipment and all other personal property of Tenant
contained in the demised premises.
19. UTITILIES: Tenant agrees to pay before delinquency all charges for
gas, heat, sewer, power, electricity, telephone, storm drain, water service and
water meter charges and all other utility charges including any hook up or
connection fees or charges which may accrue with respect to the demised premises
during the term of this Lease whether the same be charged or assessed at flat
rates, measured by separate meters or prorated by the utility company or
Landlord. Landlord shall in no event be liable to Tenant for any interruption in
service, of any such utilities to the demised premised, however such
interruption may be caused; and this Lease shall continue in full force and
effect despite any such interruptions.
20. ENTRY AND INSPECTION: Tenant shall permit Landlord and his agents
to enter into and upon the demised premises at all reasonable times for the
purpose of inspecting the same or for the purpose of maintaining the building in
which said premises are situated, or for the purpose of making repairs,
alterations or additions to any other portion of said building, including the
erection and maintenance of such scaffolding, canopy, fences and props as may be
required, or for the purpose of posting notices of non-liability for
alterations, additions or repairs, or for the purpose of placing upon the
property in which the premises are located any usual or ordinary For Sale"
signs. Landlord shall be permitted to do any of the above without any rebate of
rent and without any liability to Tenant for any loss of occupation or quiet
enjoyment of the demised premises thereby occasioned. Tenant shall permit the
Landlord, at any time within one hundred twenty (120) days prior to the
expiration of this Lease, to place upon said premises any usual or ordinary "For
Lease" signs and during such one hundred twenty (120) day period Landlord or his
agents may, during normal business hours, enter upon said premises and exhibit
same to prospective tenants.
21. DAMAGE OR DESTRUCTION: In the event of a partial or total damage or
destruction of the demised premises during the term hereof from any cause or
casualty covered by fire and standard extended coverage insurance, Landlord
shall forthwith repair or reconstruct the same unless Landlord shall elect to
terminate this Lease as hereinafter set forth, provided such repairs or
reconstruction can be made under the then existing laws and regulations of the
relevant governmental authorities. If such repairs cannot be made under such
laws and regulations, this Lease may be terminated at the option of either
party. With respect to any damage or destruction which Landlord is obligated to
repair or may elect to repair under the terms of this Paragraph 21, Tenant
hereby waives the provisions of Section 1932 and Section 1033, Subdivision 4 of
the Civil Code of the State of California and any amendments thereto or law
which may hereafter be passed by the State of California during the term of this
Lease authorizing the termination of a lease upon the complete or partial
destruction of the leased premises. In the event the demised premises are
partially or totally damaged or destroyed by a cause or casualty not covered by
fire and standard extended coverage insurance, or by any cause at any time
during the last two (2) years of the term hereof, or in the event the demised
premises or the building in which the demised premises are situated are/is
damaged or destroyed by any cause or casualty to the extent of more than
thirty-three and one-third percent (33-1/3%) of the replacement cost thereof at
the time of such damage or destruction, then Landlord shall have the right to
terminate this Lease by giving notice to Tenant of such termination within sixty
(60) days after the occurrence of such damage or destruction.
The minimum guaranteed rental payable hereunder shall be
abated proportionately to the extent that Tenant's use of the demised premises
is impaired, commencing on the date of such damage or destruction and continuing
during such period of repair or reconstruction: provided, that Tenant shall
continue the operation of its business during any such period to the extent
reasonably practicable from the standpoint of prudent business management, and
the obligation to pay percentage rent shall during any such period remain in
full force and effect.
Any such repair or reconstruction by Landlord shall be only to
the extent of the Landlord's obligation with respect to the condition of the
demised premises at the time they were delivered to Tenant at the commencement
of the term, but exclusive of any work which was performed Landlord at Tenant's
expense. Upon the completion of such work of repair or restoration by Landlord,
Tenant shall forthwith repair and restore all other parts of the demised
premises, including all of Tenant's improvements, alterations and trade
fixtures.
22. CONDEMNATION: If all or any part of the demised premises shall be
taken or appropriated by any public or quasi-public authority under the power of
eminent domain, either party hereto shall have the right at its option to
terminate this Lease, and Landlord shall be entitled to any and all income,
rent, award, or any interest therein whatsoever which may be paid or made in
connection with such public or quasi-public use or purpose, and Tenant shall
have no claim against Landlord for the value of any unexpired term of this
Lease. If a part of the demised premises shall be so taken or appropriated and
neither party hereto shall elect to terminate this Lease, the rental thereafter
to be paid shall be equitably reduced. Before Tenant may terminate this Lease by
reason of taking or appropriation as above provided, such taking or
appropriation shall be of such an extent and nature as to substantially
handicap, impede, or impair Tenant's use of the demised premises. If any part of
the building other than the demised premises shall be so taken or appropriated,
Landlord shall have the right, at is option, to terminate this Lease and shall
be entitled to the entire award, as above provided; and in such case, Tenant
shall not have any claim against Landlord for the value of any unexpired term of
this Lease. For purposes hereof, a voluntary sale or conveyance to an entity
having the power of eminent domain, either under threat of condemnation or while
condemnation proceedings are pending, shall be deemed an appropriation or taking
under the power of eminent domain.
23. ASSIGNMENT AND SUBLETTING: Tenant shall not assign, transfer or
hypothecate this Lease or any interest therein whether voluntarily, by operation
of law, or otherwise, and shall not sublet the demised premises or any part
thereof, except by written permission and consent of Landlord being first had
and obtained. Consent of Landlord shall not be unreasonably withheld, provided,
however that in all instances, any assignment or subletting (and Landlord's
consent to the same) shall be subject to and conditioned upon the followings (i)
That at the time of the assignment or subletting, Tenant shall not be in default
under any terms, provisions or conditions of this Lease: (ii) That the demised
premises shall continue to be used solely for the purposed set forth in
Paragraph 1; (iii) That if the fixed minimum monthly rent, or any additional
rent or charges required to be paid by any such subtenant or assignee exceeds
the rentals and/or charges reserved hereunder, then Tenant shall pay to Landlord
monthly, the entire amount of such excess, which shall be deemed additional rent
hereunder, (iv) That the assignee or subtenant of Tenant shall expressly assume
in writing all of Tenant's obligations hereunder, (v) That both Tenant and its
Guarantor, if any, shall acknowledge in writing that notwithstanding such
assignment or sublease, both Tenant and its Guarantor, if any, shall not be
released or discharged from any liability whatsoever under this Lease and shall
continue to be liable hereunder (vi) That at the time of its request for
Landlord's consent, Tenant shall furnish to Landlord all relevant documents
pertaining to the proposed transaction, including a current certified financial
statement of the proposed transferee and shall, concurrently therewith, pay to
Landlord a non-refundable administrative (review) fee of $250; and (vii) and
assignee/subtenant must be capable, in Landlord's opinion, of operating said
business.
Any attempted assignment, transfer, hypothecation, encumbrance
or subletting without Landlord's consent shall be void and constitute a breach
of this Lease. The acceptance of rent from any person shall not be deemed to be
a waiver of any of the provisions of this Lease or a consent to the assignment
or subletting of the demised premises. Consent to any assignment or subletting
shall not be deemed a consent to any future assignment or subletting.
If Tenant is a corporation or a partnership, and if at any
time during the term of this Lease, the person or persons who, at the date
hereof, own(s) a majority of such corporation's voting shares or a general
partners interest in such partnership, as the case may be, cease(s) to own a
majority of such shares (whether such sale occurs at one time or at intervals or
by merger or consolidation) or general partner's interest, as the case may be,
(except as a result of transfer by gift or inheritance) Tenant shall promptly
give Landlord notice of such occurrence and Landlord shall have the right, at
its option, to terminate this Lease by notice to Tenant within 30 days after
Landlord receives notice of such occurrence.
24. INTEREST ON PAST-DUE OBLIGATIONS: Except as otherwise expressly
provided, any amount due to Landlord not paid when due shall bear interest at
the maximum legal rate then allowable by law from the date due. Payment of such
interest shall not excuse or cure any default by Tenant, provided however, that
interest shall not be payable on late charges incurred by Tenant nor upon any
amounts upon which late charges are paid by Tenant.
25. DEFAULTS; REMEDIES:
A. Defaults. The occurrence of any one or more of the
following events shall constitute a material default and breach of this
Lease by Tenant:
(i) The vacating or abandonment of the demised premises
by Tenant.
(ii) The failure by Tenant to make any payment of rent
or any other payment required to be made by Tenant hereunder, as and when
due, where no such failure shall continue for a period of three days after
written notice thereof from Landlord to Tenant. In the event that Landlord
serves Tenant with a Notice to Pay Rent or Quit pursuant to applicable Unlawful
Detainer statutes such Notice to Pay Rent or Quit shall also constitute the
notice required by this subparagraph.
(iii) The failure by Tenant to observe or perform any of
the covenants, or provisions of this Lease to be observed or performed by
Tenant, other than described in paragraph (ii) above, where such failure shall
continue for a period of 30 days after written notice hereof from Landlord to
Tenant; provided, however, that if the nature of Tenant's default is such that
more than 30 days are reasonably required for its cure, then Tenant shall not
be deemed to be in default if Tenant commenced such cure within said 30-day
period and thereafter diligently prosecutes such cure to completion.
(iv) (a) The making by Tenant of any general arrangement
or assignment for the benefit of creditors; (b) Tenant becomes a "debtor" as
defined in 11 U.S.C. 101 or any successor statute thereto (unless, in the case
of a petition filed against Tenant, the same is dismissed within 60 days); (c)
the appointment of a trustee or receiver to take possession of substantially
all of Tenant's assets located at the demised premises or of Tenant's interest
in this Lease, where possession is not restored to Tenant within 30 days; or
(d) the attachment, executioner other judicial seizure of substantially all of
Tenant's assets located at the demised premises or of Tenant's interest in this
Lease, where such seizure is not discharged within 30 days. Provided, however,
in the event that any provision of this subparagraph (iv) is contrary to any
applicable law, such provision shall be of no force or effect.
(v) The discovery by Landlord that any financial
statement given to Landlord by Tenant, any assignee of Tenant, any subtenant
of Tenant, any successor in interest of Tenant or any guarantor of Tenant's
obligation hereunder, and any of them, was materially false.
B. Remedies. In the event of any such material default
of breach by Tenant, Landlord may at any time thereafter with or without
notice or demand and without limiting Landlord in the exercise of any right
or remedy which Landlord may have by reason of such default or breach:
(i) Terminate Tenant's right to possession of the
demised premises by any lawful means, in which case this Lease shall
terminate and Tenant shall immediately surrender possession of the demised
premises to Landlord. In such event Landlord shall be entitled to recover from
Tenant all damages incurred by Landlord by reason of Tenant's default
including, but not limited to, the cost of recovering possession of the demised
premises, expenses of reletting, including necessary renovation and alteration
of the demised premises, reasonable attorneys' fees, and any real estate
commission actually paid; the worth at the time of award by the court having
jurisdiction thereof of the amount by which the unpaid rent for the balance of
the term after the time of such award exceeds the amount of such rental loss of
the same period that Tenant proves could be reasonably avoided; that portion of
any leasing commission paid by Landlord applicable to the unexpired term of
this Lease.
(ii) Maintain Tenant's right to possession in which
case this Lease shall continue in effect whether or not Tenant shall have
abandoned the demised premises. In such event Landlord shall be entitled to
enforce all of Tenant's rights and remedies under this Lease, including the
right to recover the rent as it becomes due hereunder.
(iii) Pursue any other remedy now or hereafter
available to Landlord under the laws or judicial decisions of the state
wherein the demised premises are located. Unpaid installments of rent and other
unpaid monetary obligations of Tenant under the terms of this Lease shall bear
interest from the date due at the maximum rate then allowable by law.
C. Late Charges. Tenant hereby acknowledges that late payment
by Tenant to Landlord of rent and other sums due hereunder will cause Landlord
to incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed on
Landlord by the terms of any mortgage or trust deed covering the demised
premises. Accordingly, if any installment of rent or any other sum due from
Tenant shall not be received by Lessor or Lessor's designee within five (5) days
after such amount shall be due, then without any requirement for notice to
Tenant, Tenant shall pay to Landlord a late charge equal to 10% of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Landlord will incur by reason of late payment
by Tenant. Acceptance of such late charge by Lessor shall in event constitute a
waiver of Tenant's default with respect to such overdue amount, nor prevent
Landlord from exercising any of the other rights and remedies granted hereunder.
In the event that a late charge is payable hereunder, whether or not collected,
for three (3) consecutive installments of rent then rent shall automatically
become due and payable quarterly in advance, rather than monthly,
notwithstanding paragraph 4 or any other provision of this Lease to the
contrary. Any late charges incurred by Tenant shall be deemed to be "additional
rental", and shall be immediately due and payable in full, without notice being
required, with the next scheduled monthly base rental amount.
Late charges shall be deemed as "additional rental"
effective on the 6th day of the calendar month, and shall be immediately due
and payable as a part of the base minimum monthly rent for the calendar month
in which the late charge is incurred, with no formal or written notice of same
being required.
D. Payment in Cash. In addition to all other rights and
remedies provided hereunder, in the event Tenant shall at any time tender to
Landlord in payment of rent or any other sum due from Tenant hereunder, a check
or draft which the bank or financial institution upon which it is drawn fails or
refuses to promptly pay, whether by reason of insufficient funds, stop payment
order or otherwise, or in the event there has been a material default by Tenant
under Paragraph 25 A hereof, then Landlord may, at its option, require that all
rent and other sums payable under this Leased, including sums required to cure
any outstanding default hereunder, be paid by cash, cashier's check, certified
check or money order only; in the event payments tendered in any other form
(e.g., personal check) may be rejected by Landlord and shall not serve to
extinguish any obligation of Tenant under this Lease.
E. Default By Landlord. Landlord shall not be in default
unless Landlord fails to perform obligations required of Landlord within a
reasonable time, but in no event later than thirty (30) days after written
notice by Tenant to Landlord and to the holder of any first mortgage or deed of
trust covering the demised premises whose name and address shall have
theretofore been furnished by Tenant in writing, specifying wherein Landlord has
failed to perform such obligation; provided, however, that if the nature of
Landlord's obligation is such that more than thirty (30) days are required for
performance then Landlord shall not be in default if Landlord commences
performance within such 30-day period and thereafter diligently prosecutes the
same to completion.
26. SUBORDINATION: Landlord shall, at any time during the term of this
Lease, have the right to subject and subordinate this Lease to any and all
mortgages and deeds of trust which may affect, or which may hereafter be created
by Landlord and affect the demised premises, and to all advances made or
hereafter to be made upon the security thereof, to the interest on all
obligations secured by them, and to all renewals, modifications, consolidations,
replacements and extensions thereof. Notwithstanding any other provision of this
paragraph, however, should the demised premises be purchased or otherwise
acquired by any person in connection with any foreclosure or power of sale
proceeding under any such mortgage or deed of trust, and should not disturb
Tenant in the quiet enjoyment of the demised premises and in such event, this
Lease shall continue in full force and effect and Tenant hereby attorns and
agrees to attorn to such person.
In confirmation of any such subordination, Tenant shall
promptly execute any certificate or other instrument which Landlord may deem
proper to evidence such subordination, without expense to Landlord. Tenant
hereby irrevocably constitutes and appoints Landlord as Tenant's attorney in
fact to execute (and to deliver to any third party) any such certificate or
instrument for and on behalf of Tenant, it Tenant shall have failed to do so
within ten (10) days after written request therefore by Landlord, which request
shall in addition confirm that Landlord has exercised his right to subordinate
as set forth herein.
27. ESTOPPEL CERTIFICATES: Tenant agrees at any time and from time to
time, upon not less than ten (10) business days' prior written request from
Landlord, to execute, acknowledge and deliver to Landlord a statement in writing
certifying that this Lease is unmodified and in full force and effect (or if
there have been modifications, that the same is in full force and effect, as
modified, and stating the modifications) and that there are no uncured defaults
hereunder if such state of facts shall be true, or if there be uncured defects,
stating the same, and the dates to which the rental and other charges have been
paid in advance, if any, it being intended that any such statement delivered
pursuant to this paragraph may be relied upon by any prospective purchaser of
the fee or mortgage upon the fee of the demised premises or any assignee of the
Landlord's interest hereunder. Failure of Tenant to give any certificate within
said ten (10) business day period shall be deemed equivalent to a statement by
Tenant that this Lease is in full force and effect, unmodified and that there
are no uncured defaults hereunder and that all rent has been paid to date.
28. SALE OF PREMISES BY LANDLORD: In the event of any sale of the
demised premises by Landlord, Landlord shall be and is hereby entirely freed and
relieved of all liability under any and all of its covenants and obligations
contained in or derived from this Lease arising out of any act, occurrence or
omission occurring after the consummation of such sale; and the Purchaser, at
such sale or any subsequent sale of the demised premises shall be deemed,
without any further agreement between the parties or their successors in
interest or between the parties and any such purchaser, to have assumed and
agreed to carry out any and all of the covenants and obligations of the Landlord
under this Lease.
29. EXEMPTION OF LANDLORD FROM LIABILITY: Tenant hereby agrees that
Landlord shall not be liable for injury to Tenant's business or any loss of
income therefrom or for damage to the goods, wares, merchandise or other
property of Tenant, Tenant's employees, invitees, customers, or any other person
in or about the demised premises, nor shall Landlord be liable for injury to the
person of Tenant. Tenant's employees, agents or contractors, whether such damage
or injury is caused by or results from fire, steam, gas, electricity, water or
rain, or from the breakage, leakage, obstruction or other defects of pipes,
sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures,
or from any other cause, whether the said damage or injury from conditions
arising upon the demised premises or upon other portions of the shopping center
of which the demised premises are a part, or from other sources or places and
regardless of whether the cause of such damage or injury or the means of
repairing the same is inaccessible to Tenant, Landlord shall not be liable for
any damages arising from any act or neglect of any other Tenant, if any, of the
shopping center in which the demised premises are located.
30. ATTORNEYS' FEES: In the event the Landlord finds it necessary
to retain an attorney in connection with the default by the Tenant in any of
the agreements or covenants contained in this Lease, Tenant shall pay
reasonable attorneys' fees to said attorney.
In the event of any litigation regarding this Lease, the
losing party shall pay to the prevailing party reasonable attorneys fees.
32. WAIVER: No delay or omission in the exercise of any right or
remedy of Landlord on any default by Tenant shall impair such a right or
remedy or be construed as a waiver.
The receipt and acceptance by Landlord of delinquent rent
shall not constitute a waiver of any default by Tenant shall constitute only a
waiver of timely payment for the particular rent payment involved.
No act or conduct of Landlord, including, without limitation,
the acceptance of the keys to the demised premises, shall constitute an
acceptance of the surrender of the demised premises by Tenant before the
expiration of the term. Only a notice from Landlord to Tenant shall constitute
acceptance of the surrender of the demised premises and accomplish a termination
of the Lease.
Landlord's consent to or approval of any act by Tenant
requiring Landlord's consent or approval shall not be deemed to waive or render
unnecessary to Landlord's consent to or approval of any subsequent act by
Tenant.
Any waiver by Landlord of any default must be in writing and
shall not be a waiver of any other default concerning the same or any other
provision of the Lease.
No payment by Tenant, or acceptance by Landlord of a lesser
amount than shall be due from Tenant to Landlord, shall be treated otherwise
than as a payment on account. The acceptance by Landlord of a check for a lesser
amount with an endorsement or statement thereon, or upon any letter accompanying
such check, that such lesser amount shall be deemed payment in full, shall be
given no effect, and Landlord may accept such check without prejudice to any
other right or remedies which Landlord may have against Tenant.
33. SURRENDER OF DEMISED PREMISES: On expiration of the term, Tenant
shall surrender to Landlord the demised premises and all Tenant's improvements
and alterations in good condition (except for ordinary wear and tear occurring
after the last necessary maintenance made by Tenant and destruction to the
demised premised covered by Paragraph 21), except for alterations that Tenant
has the right to remove or is obligated to remove under the provisions of
Paragraph 13, Tenant shall remove all of Tenant's personal property and shall
perform all restoration made necessary by the removal of any alterations or
Tenant's personal property within the time period stated in this paragraph.
Landlord can elect to retain or dispose of in any manner any
alterations or Tenant's personal property that Tenant does not remove from the
demised premises on expiration or termination of the term as allowed or required
by this Lease after giving at least 3 days notice to Tenant. Title to any such
alterations or Tenant's personal property that Landlord elects to retain or
dispose of on expiration of the 3-day period shall vest in Landlord. Tenant
waives all claims against Landlord for any damage to Tenant resulting from
Landlord's retention or disposition of any such alterations or Tenant's personal
property. Tenant shall be liable to Landlord for Landlord's costs of storing,
removing and disposing of any alterations or Tenant's personal property.
If Tenant fails to surrender the demised premises to Landlord
on expiration of the term as required by this paragraph. Tenant shall hold
Landlord harmless from all damages resulting from Tenant's failure to surrender
the demised premises, including, without limitation, claims made by a succeeding
tenant resulting from Tenant's failure to surrender the demised premises.
34. HOLDING OVER: Any holding over after the expiration of the term of
this Lease, with the consent of Landlord, shall be construed to be a tenancy
from month to month, cancellable by either party upon thirty (30) days written
notice, and upon terms and conditions as existed at the expiration of the term,
except that the minimum monthly rental under Paragraph 4A shall be 150% of the
minimum monthly rental in effect at the expiration of the term.
35. SECURITY:
A. Security Deposit. On execution of this Lease, Tenant shall
deposit with Landlord $ 8,000.00 as a security deposit for the performance by
Tenant of the provisions of this Lease. If Tenant is in default, Landlord can
use the security deposit, or any Portion of it, to cure the default or to
compensate Landlord for all damage sustained by Landlord re-suiting from
Tenant's default. Tenant shall immediately on demand pay to Landlord a sum equal
to the portion of the security deposit expended or applied by Landlord as
provided in this paragraph so as to maintain the security deposit in the sum
initially deposited with Landlord. If Tenant is not in default at the expiration
of termination of this Lease, Landlord shall return the security deposit to
Tenant. Landlord's obligaion with respect to the security deposit are those of a
debtor and not a trustee. Landlord can maintain the security deposit separate
and apart from Landlord's general funds or can co-mingle the security deposit
with Landlord's general and other funds. Landlord shall not be required to pay
Tenant interest on the security deposit.
B. Security Interest. In consideration of the mutual benefits
arising under this Lease, Tenant hereby grants to Landlord a lien and security
interest on all property of Tenant now or hereafter placed in or upon the
demised premises, and such property shall be and remain subject to such lien and
security interest of Landlord for payment of all rent and other sums agreed to
be paid by Tenant herein. The provisions of this paragraph relating to said lien
and security interest shall constitute a security agreement under the Uniform
Commercial Code ("The Code") so that Landlord shall have and may enforce a
security interest on all property of Tenant now or hereafter placed in or on the
demised premises, including but not limited to all fixtures, machinery,
equipment, furnishings, inventory and other articles of personal property now or
hereafter place in or upon the demised premises by Tenant. Tenant agrees to
execute as debtor such financial statement or statements as Landlord may now or
hereafter reasonably request in order that such security interest or interests
be protected pursuant to the Code.
Landlord may, at its election, at any time file a copy of this
Lease (or a copy of this Lease with the rental and other major business terms of
this Lease deleted therefrom) as a financing statement. Landlord, as a secured
party, shall be entitled to all of the rights and remedies afforded a secured
party under the Code in addition to and cumulative with Landlord's liens and
right provided by law or by other terms and provisions of this Lease.
Concurrently with the execution of this Lease or at any time thereafter upon
request of Landlord, Tenant shall execute the UCC-1 Financing Statement covering
all Tenant's property herein referred to.
36. NOTICES: Any notice, demand, request, consent, approval, or
communication that either party desires or is required to give to the other
party or any other person shall be in writing and either served personally or
sent prepaid, first class main. Any notice, demand, request, consent, approval,
or communication that either party desires or is required to give to the other
party shall be addressed to the other party at the address set forth opposite
its signature at the end of this Lease. Either party may change its address by
notifying the other party of the change of address Notices shall be deemed
communicated within 48 hours from the time of mailing if mailed as provided in
this paragraph.
37. BROKERS OR FINDERS: Each party represents and warrants to the other
that, except for Investment Concepts, Inc. who shall be compensated by Landlord
subject to the terms and conditions of a separate written Commission Agreement
executed by Landlord, it has engaged no Broker or Finder and that no claims for
brokerage commissions or finders' fees will arise in connection with the
execution of this Lease and each Party agrees to indemnify the other against,
and hold it harmless from any liability or expense (including attorneys' fees)
arising from any such claim.
38. DEFINITIONS: As used in this Lease, the following words and
phrases have the following meanings:
"Alteration" - any addition or change to, or modification of,
the demised premises made by Tenant after the fixturizing period, including,
without limitation, fixtures, but excluding trade fixtures as defined here, and
Tenant's improvements as defined here.
"Damage" - injury, deterioration, or loss to a person or
property caused by another person's acts or omissions. Damage includes death.
"Destruction" - any damage, as defined here, to or
disfigurement of the subject premises.
"Good Condition" - the good physical condition of the demised
premises and each portion of the demised premises, including, without
limitation, signs, windows, show windows, walls, appurtenances, and Tenant's
personal property as defined here. "In good condition" means first-class, neat,
clean, and broom clean, and is equivalent to similar phrases referring to
physical adequacy in appearance and for use.
"Substantial completion" - completion of Landlord's
construction obligation as evidence by Landlord's architect or by the general
contractor performing Landlord's construction obligation.
"Tenant's improvement" - any addition to or modification of
the demised premises made by or at the expense of Tenant before, at or near the
commencement of the term, including without limitation, fixtures (not including
Tenant's trade fixtures, as defined here),
"Tenant's personal property" - Tenant's equipment, furniture,
merchandise, and movable property placed in the demised premises by Tenant,
including Tenant's trade fixtures as defined here.
"Tenant's trade fixtures" - any property installed in or on
the demised premises by Tenant for purposes of trade, manufacture, ornament, or
related use.
39. MISCELLANEOUS:
A. Successors. The covenants herein contained shall,
subject to the provisions as to assignment, apply to and bind the heirs,
successors, executors, administrators and assigns of all the parties
hereto; and all of the parties hereto shall be jointly and severally liable
hereunder.
B. Partial Invalidity. If any term, covenant, condition
or provision of this Lease is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the provisions hereof
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated thereby.
C. Captions. The various headings and numbers herein and
the grouping of the provisions of this Lease into paragraphs are for the
purpose of convenience only and shall not be considered to part hereof.
D. Gender; Number. As used in this Lease whenever
required by the context hereof, each number, both singular or plural, shall
include all numbers, and each gender shall include all genders.
E. Applicable Law. This Lease shall be governed by the laws
of the State of California.
F. Corporation As Tenant. If a corporation executes
this Lease as Tenant, it shall promptly furnish Landlord with certified
corporate resolutions attesting to the authority of the officers executing
this Lease on behalf of such corporation.
G. Time. Time is of the essence of this Lease.
40. INTERGRATION: Tenant acknowledges that this Lease, including the
Exhibits and Addenda, if any, attached hereto, set forth the entire agreement
between the parties and that all prior negotiations, understandings,
conversations, or writings between the parties are superseded, merged herein and
extinguished. Tenant acknowledges that it has not relied upon any estimates,
representations or statements of opinion or fact by Landlord or its agents or
employees in entering into this Lease Agreement, other than expressly provided
herein. This Lease may not be modified except by a writing subscribed to by all
parties, nor may this Lease be cancelled by Tenant or the demised premises
surrendered except with the written consent of the Landlord.
41. EFFECTIVENESS OF LEASE: The submission by Landlord to Tenant of
this Lease in draft form shall be deemed solely for Tenant's consideration and
not acceptance or execution. Such submission shall have no binding force or
effect, shall not constitute an option for leasing the premises herein
described, nor confer any rights or impose any obligations upon either party.
The submission by Landlord of this Lease for execution by tenant and the actual
execution and delivery thereof by Tenant shall similarly have no binding effect
unless and until it is executed on behalf of Landlord by the President or a Vice
President thereof and a duplicate original of such executed Lease shall have
been delivered to Tenant.
Tenant further acknowledges that this Lease may be subject to
approval of Landlord's lender; and agrees that Landlord shall have the right to
cancel this Lease within 15 business days after execution hereof by both parties
(provided that possession of the premises has not been delivered to Tenant), if
such lender's approval is not obtained.
IN WITNESS WHEREOF, the parties hereto have executed this
Lease as of the day and year first above written.
LANDLORD:
University Plaza, Ltd. -JJ University Plaza, Ltd. - JJ
a Ca. Limited Partnership c/o Investment Concepts, Inc.
Investment Concepts, Inc., General Partner 1667 E. Lincoln Ave.
Orange, Ca. 92665
_____________________________________
BY: Collen M. Khouri, Vice President
- -------------------------------------
Date:
TENANT:
Texas Loosey's Steakhouse and Saloon, Inc. Texas Loosey's Steakhouse
a Delaware Corporation and Saloon
2720 Nutwood
____________________________________ Fullerton, Ca 92831
BY: Hiram J. Woo, President
- ------------------------------------
Date:
<PAGE>
EXHIBIT "B"
DESCRIPTION OF LANDLORD'S WORK AND TENANT'S WORK
A. Landlord's Work: NONE: Tenant herein acknowledges that he is taking
possession of the premises directly from the existing and currently occupying
tenant of the premises, and as such agrees to take the premises on a completely
AS IS basis. Tenant has had ample time to inspect and evaluate the premises, and
Tenant warrants to Landlord that Landlord shall not be liable for any repairs,
improvements, cost or damages as a result of the condition of the premises which
is now known or unknown or which may be discovered at any time in the future.
Whatever the condition, the Tenant shall adhere to all conditions of the
Tenant's responsibility to maintain the premises in good condition as prescribed
within the Lease Agreement.
1. Standard Work: None required. Tenant accepts premises
in an "as is" condition.
2. Non-Standard Work to be performed by Landlord: Landlord
may, but shall not be required to enter into a written construction agreement
with Tenant to provide, at Tenant's sole cost and expense, improvements other
than those specifically set forth in Paragraph 1 above. In the event Landlord
shall enter into a written construction agreement with Tenant to provide any
such Non-Standard Work and upon condition that Tenant performs all of its
obligations under said construction contract, including but not limited to the
obligation for payments as called for in said contract, Landlord shall be
required to substantially complete such Non-Standard Work in accordance with
such contract, together with all Standard Work required under Paragraph A.1
above, before giving Tenant notice of completion under Paragraph 6 of this
Lease.
B. Tenant's Work:
Tenant shall be required to provide by his own means and at
his own cost and expense, any Non-Standard Work which Landlord has not agreed in
writing to provide, it being understood and agreed that:
(a) All plans shall be subject to Landlord's prior
approval which shall not be unreasonably withheld.
(b) All work shall be performed in a good workmanlike
and substantial manner.
(c) Fixturization and decor of the demised premises
shall be consistent with a first-class shopping center and conform to general
architectural theme of the shopping center.
(d) Lessee shall contract with Lessor and pay for
construction and installation of signs in accordance with Sign Criteria to
be supplied by Landlord.
(e) Tenant shall comply with all other terms and
conditions of this lease relating to alterations.
C. Conditions upon which Landlord will ordinarily Contract to Provide
Selected Non-Standard Work:
In the event Tenant should desire to have Landlord perform
Non-Standard Work at Tenant's sole cost and expense, Landlord will ordinarily
contract to perform selected portions thereof, on the following conditions:
(a) That Tenant deliver to Landlord within twenty
(20) days from the date of the Lease, a set of drawings which adequately
describe those improvements which Tenant desires to have furnished by Landlord.
(b) That Tenant and/or its architects be available to
confer with Landlord as requested, to clarity Tenant's plans.
(c) That Tenant promptly obtain all permits required by
any public authority.
(d) That Tenant approve of the plans and specifications
and tentative cost breakdown prepared by Landlord or indicate what specific
changes are desired, within ten (10) days after submission by Landlord; and
(e) That Tenant execute the written construction
agreement submitted by Landlord for such Non-Standard Work within ten (10)
days following its submission by Landlord; it being understood that such
construction contract will provide that: (i) Tenant is require to pay at least
50% of the contract price immediately upon execution thereof and the balance
upon completion of such improvements; (ii) Tenant is solely responsible for the
design, function and maintenance of such Non-Standard Work, provided that it is
constructed in a good and workmanlike manner in accordance with plans and
specifications, and (iii) any disputes arising out of such contract shall be
submitted to Arbitration by the Building Industry Association of California,
Incorporated (BIA) in accordance with its rules.
D. Integration:
This Exhibit "B" represents the entire understanding and
agreement between the parties related to the construction of improvements by
Landlord upon the demised premises and there have been no oral representations
made by Landlord which are not included in this Exhibit "B".
<PAGE>
EXHIBIT "C"
RULES AND REGULATIONS
THESE RULES AND REGULATIONS ARE ESTABLISHED FOR THE COMMON BENEFIT OF ALL OF THE
TENANTS OF THE SHOPPING CENTER GENERALLY, AND LANDLORD RESERVES THE RIGHT TO
MAKE SUCH OTHER AND FURTHER RULES AND REGULATIONS AS IN ITS JUDGMENT MAY BE
REQUIRED FOR THE SAFETY, CARE AND CLEANLINESS OF THE PREMISES AND FOR THE
PRESERVATION OF GOOD ORDER THEREIN. TENANT AGREES TO ABIDE BY ALL OF THE RULES
AND REGULATIONS HEREINAFTER STATED AND ANY ADDITIONAL RULES AND REGULATIONS
WHICH ARE HEREAFTER ADOPTED.
1. No sign, advertising placard, insignia trademark, descriptive
material, name or notice shall be inscribed, displayed, printed or affixed on or
to any part of the demised premises, building, common area or upon any public
street adjacent to the shopping center without firs obtaining the written
consent of Landlord, and Landlord shall have the right to remove any such sign,
placard, insignia, material, name or notice without notice to Tenant and at the
expense of Tenant. All approved signs or lettering on windows, doors, or store
fronts shall be printed, painted, affixed or inscribed at the expense of Tenant
by a person approved by Landlord.
2. If Landlord, by a notice in writing to Tenant, shall object to any
curtains, blinds, shades or screens attached to or hung in or used in connection
with any window or door of the demised premises, (other than as may currently
exist and which may have previously been approved by Landlord in writing) such
use shall-be forthwith discontinued by Tenant.
3. Tenant shall not place, or allow anything to be place, near the
glass of any window, door, partition or wall (other than as may currently exist
and which may have previously been approved by Landlord in writing) which, in
Landlord's judgement, appears unsightly from outside the demised premises.
4. No exterior lighting, amplifiers or other advertising devices or
medium which can be heard or seen outside the demised premises, such as flashing
lights, searchlights, loud speakers, phonographs or radio broadcasts shall be
used in or about the demised premises or shopping center, (other than as may
currently exist and have previously been approved by Landlord in writing).
5. No awning or other structure extending outside the demised premises
shall be permitted, (other than as may currently exist and have previously been
approved by Landlord in writing).
6. Sidewalks, passages, exits, entrances, driveways and stairways shall
not be obstructed by Tenant, its employees or invitees, or used for any purpose
other than for ingress to and egress from the demised premises or shopping
center.
7. Tenants are not permitted to park any trucks, trailers, or service
vehicles of any kind in the parking areas or on any surface street that would
block the visibility of any shops in the shopping center.
8. Tenant shall cooperate with Landlord in excluding or expelling any
person whose presence, in the judgement of Landlord, shall be injurious to the
safety, character, reputation and interests of the shopping center and its
tenants, including but without limitation, persons who are under the influence
of alcohol or drugs or engaging in any activity which is illegal or constitutes
a public or private nuisance.
11. The toilets, wash bowls and other apparatus shall not be used for
any purposes other than that for which they were constructed and no foreign
substance of any kind whatsoever shall be thrown therein and the expense of any
breakage, stoppage or damage resulting from the violation of this rule shall be
borne by Tenant who, or whose employees or invitees, shall have caused it.
12. Tenant shall not overload the floor of the demised premises or
mark, drive nails, screw or drill holes into the partitions, woodwork or plaster
or in any way deface the demised premises or any part thereof.
13. Landlord will not be responsible for loss of or damage to any
such safe or property and all damage done to the building by moving or
maintaining any such safe or other property shall be repaired at the expense
of Tenant.
14. Tenant shall not use, keep or permit to be used or keep any foul or
noxious gas or substances in the demised premises, or permit or suffer the
demised premises to be occupied or used in a manner offensive or objectionable
to Landlord or other occupants of the shopping center by reason of noise, odors
and/or vibrations, or interfere in any way with other tenants or their invitees,
nor shall any animals or birds be brought in or kept in or about the demised
premises or the building.
15. Tenant shall not use or keep in the demised premises or the
building any kerosene, gasoline or inflammable or combustible fluid or material,
or use any method of heating or air conditioning other than that supplied by
Landlord.
16. Tenant shall not lay linoleum, tile, carpet or other similar floor
covering so that the same shall be affixed to the floor of the demised premises
in any manner except as approved by Landlord. The expense of repairing any
damage resulting from a violation of this rule or removal of any floor covering
shall be borne by Tenant by whom, or by whose contractors, employees or
invitees, the damages shall have been caused.
17. Tenant shall see that the doors of the demised premises are closed
and securely locked before leaving the building and shall observe strict care
and caution that all water faucets or water apparatus are entirely shut off
before Tenant or Tenant's employees leave the building, and that air
conditioning and heating systems shall likewise be carefully shut off, so as to
prevent waste or damage, and for any default or carelessness Tenant shall make
good all injuries sustained by other tenants or occupants of the building or by
Landlord.
18. Without special instructions from Landlord, Tenant is not to
request or permit employees of Landlord to perform any work or do anything
outside of their regular duties and are not to seek entry into any office or
premises other than the demised premises.
19. Tenant shall not disturb, solicit or canvass other tenants of
shopping center or their invitees and shall cooperate to prevent such activity.
20. Tenant shall direct and require its employees not to park in the
shopping center parking lot. If and when requested to do so, Tenant will furnish
Landlord with the license numbers of the vehicles of Tenants and of its
officers, agents and employees.
21. In addition to any or all other remedies available to Landlord by
law against Tenant for the non-compliance of any of the above, Landlord may, at
Landlord's option, give Tenant a fine of exceed $100.00 per month, which fine
may be incurred for each and every month that passes, for any item referenced
hereinabove that is not brought into compliance by Tenant within thirty (30)
days of notification to Tenant to do so.
<PAGE>
EXHIBIT "D"
I. NOTIFICATION OF ASBESTOS
A. Prior to the 1980's, asbestos was a common component of
construction materials used in the construction of hospitals, schools, offices,
commercial buildings, and some residential buildings.
Under certain circumstances, the presence of asbestos in
buildings may pose a health risk to the occupants or workers in the building. In
order to ensure that the public is informed of these risks, the California
legislature adopted Assembly Bill 3713, which requires, among other things, that
a building owner inform employees, contractors, and tenants if the building
owner has knowledge of the presence of asbestos-containing building materials
(ACBM) in the building.
A survey conducted in 1990 for the building(s) identified as
2720 Nutwood Ave., Fullerton, Ca. was conducted in order to determine whether
there is ACBM present in the building. The conclusions, and a list of the
contents are summarized in this notification. However, the survey report did not
include information regarding potential health risks, (if any) that may result
from exposure to ACBM in the building. The results (as well as the survey
itself) are available for review in the main management office of Investment
Concepts, Inc.
Therefore, let this exhibit serve as notification that a
survey has been conducted and that it has revealed that there is the presence of
ACBM's in the premises in the approximate following locations:
(i) Some existing linolium sheet flooring and some acoustic
ceiling tiles were found or assumed to have evidence of
ACBMs.
II. MANAGEMENT PLAN:
A. The survey recommends the following operation and maintenance
procedures which the Landlord has adopted and for which the tenant in occupancy
shall be responsible for, to minimize disturbance, release, and exposure to the
ACBM.
(1) The results of the survey show that the ACBM is bonded
asbestos, and is presently in a non-friable condition, (not crushable by hand).
(2) In its non-friable state, there is low probability for
damage due to its location and present condition, and should be managed in
place, with periodic surveillance by Tenant.
(3) No work or action should be taken without approval of
Landlord, and any change in the present condition should be reported to
Landlord.
(4) A.B. requires that notice of this condition be given to
employees/contractors working in or performing repair or maintenance work in the
building. Accordingly, you the "Tenant" must comply by giving copies of this
notice and the start of work or occupancy of the building.
(5) If any work is to be performed and/or involves the area
where ACBMs have been identified, you must notify Landlord prior to commencing
such work, of your plan for dealing with the area containing ACBMs. Such plan
must be in compliance with current required standards.
(6) Tenant shall be bound by these provisions and agrees to
comply with all notification requirements as may be established by any local or
state agencies.
(7) Any breach of the obligations set forth herein shall be a
breach of this Lease.
III. ACKNOWLEDGEMENT
A. Tenant acknowledges that he has been informed of the survey of the
building which has determined that there may/does exist ACBMs (i.e.asbestos) in
some locations within the premises, known to the state of California to cause
cancer. Disturbance of/or damage to certain surfaces may increase the potential
for exposure to this asbestos.
B. Tenant acknowledges that certain rules and regulations concerning
ACBMs have been established and Landlord and Tenant are obliged to comply
therewith. Such compliance shall be fully binding on Tenant as part of the Lease
provisions, and Tenant acknowledges that he will fully comply as may be
required.
C. Tenant agrees that he has received all those materials, (or that
said materials in Landlord's possession have been made available to Tenant)
related to an asbestos survey of the building, and the asbestos operations and
maintenance program as are set forth in the management plan described in this
Exhibit "D".
LANDLORD TENANT
University Plaza, Ltd. - JJ Texas Loosey's Steakhouse
a Ca. Limited Partnership and Saloon
Investment Concepts, Inc., General Partner a Delaware Corporation
- ----------------------------------- ------------------------------
BY: Colleen M. Khouri, Vice President BY: Hiram J. Woo, President
- ----------------------------------- ------------------------------
Date: Date:
<PAGE>
SIGN ADDENDUM
TO SHOPPING CENTER LEASE DATED September 4, 1996 BETWEEN
University Plaza, Ltd., LANDLORD, AND
Texas Loosey's Steakhouse and Saloon, Inc., TENANT
*SEE NOTE BELOW:
1. Landlord shall, on behalf of and for the account of Tenant, subject
to reimbursement by Tenant as hereinafter set forth, purchase and install
any/all identification sign(s) in accordance with the sign criteria (covering
dimensions, material, color, design, content and location) established by
Landlord for the Shopping Center. In order to secure Tenant's obligation
hereunder and any initial commitment which Landlord may be required to make to
a sign company. Tenant shall deposit with Landlord upon the execution of this
Lease, the sum of $ to be determined, representing approximately 100% of the
estimated cost of such sign(s) and shall pay to Landlord the balance of the
estimated cost (as such estimate may be revised upward or downward based on
changes or other factors) within 5 days after notice from Landlord that work on
the sign(s) is ready to begin. In the event that the actual cost incurred by
Landlord for the purchase and installation of such sign(s) shall be more or less
than the amount paid by Tenant pursuant to this paragraph, the difference shall
be immediately paid by Tenant upon notice from Landlord as to amount due, or
refunded by Landlord, as the case may be.
2. Within two weeks of Tenant's possession date, tenant will provide
Landlord with sign drawings, prepared by a licensed sign company, indicating
sign design, dimensions, colors and other specifications of all of Tenant's
proposed sign(s). These plans must be first approved in writing by Landlord
prior to sign installation.
Within two weeks of Tenant's receipt of Landlord's written
approval, Tenant must provide satisfactory evidence to Landlord that a contract
has been entered into for fabrication and installation thereof, and within 30
days after Tenant's possession of the premises, all signage must have been
installed.
Should Tenant fail to comply with the requirements herein, the
Landlord reserves the right to proceed with the sign purchase and installation
at Tenant's sole cost as noted in Paragraph #1 above.
Should Tenant fail to reimburse Landlord in full any/all payment
for signage upon demand, such failure shall be considered a material default of
the Lease terms and conditions.
All signage, in addition to having, first received Landlord's
written approval, must at all times be in compliance with city or other
governmental code requirements, and all permits must be obtained as may be
required.
*NOTE: As of the date of this Lease, the Tenant is simply taking over the
existing signage presently installed on the building. Should Tenant, at some
time in the future, desire to change the signage, then Tenant shall adhere to
and comply with the requirements of Articles 1 & 2 hereinabove.
<PAGE>
ADDENDUM NO. 1
Date: September 4, 1996
This Agreement made and entered into this 4th day of September, 1996,
by University Plaza, Ltd., a Ca. Limited Partnership ("Landlord"), and Texas
Loosey's Steakhouse and Saloon, Inc., a Delaware Corporation, "Tenant"), to
amend their Lease dated on or about September 4, 1996 pertaining to the
premises located at 2720 Nutwood Ave., Fullerton, Ca. 92831 is as follows:
1. OPTION TO RENEW:
A. Provided Tenant is not in default of any of the terms, conditions,
restrictions, convenants or agreements of the Lease Agreement at either the time
of exercise or at the then pending lease termination date, the Tenant shall have
the option to renew the lease term for two (2) additional tiem periods of five
(5) years each under the same terms and conditions as in the original Lease
agreement.
B. Tenant must give notice to Landlord of his intention to renew the
term in writing at Landlord's office no later than sixty (60) and no more than
one hundred and twenty (120) days prior to the then pending lease termination
date.
C. Failure by Tenant to give proper notification as specified above
within the time perimeters above shall render Tenant's then current option and
any future option(s) to renew null and void and of no further force and/or
effect.
Except as specifically altered by this Addendum, all of the terms, provisions,
conditions, covenants and agreements of said Lease shall be and remain in full
force and effect.
LANDLORD TENANT
University Plaza, Ltd. - JJ Texas Loosey's Steakhouse
a Ca. Limited Partnership and Saloon
Investment Concepts, Inc., General Partner a Delaware Corporation
- ----------------------------------- -----------------------------
BY: Colleen M. Khouri, Vice President BY: Hiram J. Woo, President
- ----------------------------------- -----------------------------
Date: Date:
<PAGE>
GUARANTY TO LEASE
This Guaranty to Lease dated September 4, 1996 is between University Plaza, Ltd.
- - JJ, a California Limited Partnership as "Landlord" Texas Loosey's Steakhouse
and Saloon, Inc., a Delaware Corporation as "Tenant", and Hiram J. Woo, the
individual as "Guarantor" on behalf of Tenant.
Guarantor, as a material inducement to and in consideration of
"Landlord" entering into a written lease ("the Lease") with "Tenant", dated the
same date as this Guaranty, unconditionally guarantees and promises to and for
the benefit of Landlord that Tenant shall perform the provisions of the Lease
that Tenant is to perform.
If Guarantor is more than one person, Guarantor's obligations are joint
and several and are independent of Tenant's obligation. A separate action may be
brought or prosecuted against any Guarantor whether the action is brought or
prosecuted against any other Guarantor or Tenant, or all, or whether any other
Guarantor or Tenant, or all, are joined in the action.
Guarantor waives the benefit of any statute of limitations affecting
Guarantor's liability under this Guaranty.
The provisions of the Lease may be changed by agreement between
Landlord and Tenant at any time, or by course of conduct, without the consent of
or without notice to Guarantor. This Guaranty shall guarantee the performance of
the Lease as changed. Assignment of the Lease (as permitted by the Lease) shall
not affect this Guaranty.
This Guaranty shall not be affected by Landlord's failure or delay to
enforce any of its rights.
If Tenant defaults under the Lease, Landlord can proceed immediately
against Guarantor or Tenant, or both, or Landlord can enforce against Guarantor
or Tenant, or all, any rights that it has under the Lease, or pursuant to
applicable laws. If the Lease terminates and Landlord has any rights it can
enforce against Tenant after termination, Landlord can enforce those rights
against Guarantor without giving previous notice to Tenant or Guarantor, or
without making any demand on either of them.
<PAGE>
Guaranty to Lease
Page 2
Guarantor waives the right to require Landlord to (1) proceed against
Tenant; (2) proceed against or exhaust any security that Landlord holds from
Tenant; or (3) pursue any other remedy in Landlord's power. Guarantor waives any
defense by reason of any disability of Tenant, and waives any other defense
based on the termination of Tenant's liability from any cause. Until all
Tenant's obligation to Landlord have been discharged in full, Guarantor has no
right of subrogation against Tenant. Guarantor waives theri right to enforce any
remedies that Landlord now has, or later may have, against Tenant. Guarantor
waives any right to participate in any security now or later held by Landlord.
Guarantor waives all presentments, demands for performance, notices of
non-performance, protests, notices of protest, notices of dishonor, and notice
of acceptance of this Guaranty, and waives all notices of the existence,
creation, or incurring of new or additional obligations.
If Landlord disposes of its interest in the Lease, "Landlord", as used
in this Guaranty, shall mean Landlord's successors.
If Landlord is required to enforce Guarantor's obligations by legal
proceedings, Guarantor shall pay to Landlord all costs incurred, including,
without limitation, reasonable attorneys' fees.
Guarantor's obligations under this Guaranty shall be binding on
Guarantor's successors.
Dated: __________________
Guarantor:
- ------------------------
Hiram J. Woo
<PAGE>
EXHIBIT 10.3
<PAGE>
ASSIGNMENT OF LEASE
The parties to this Agreement are MISSION GROVE PLAZA, L.P.,
a California limited partnership (the "Landlord"), KENT ANDERSON and JENNY
ANDERSON, husband and wife (the "Assignor") and GALVESTON'S STEAKHOUSE, INC.,
a Delaware corporation (the "Assignee").
R E C I T A L S :
Landlord and Assignor entered into a written Lease Agreement
dated March 9, 1993 (the "Lease") for the lease of certain premises located in
Mission Grove Plaza (hereinafter the "Shopping Center").
Assignor desires by this Agreement to assign all of
Assignor's right, title and interest in and to the Lease to the Assignee subject
to the terms of the Lease and this Agreement.
T E R M S :
In consideration of the mutual agreements herein contained,
the parties hereby agree as follows:
Assignor assigns to Assignee all of Assignor's right, title
and interest in the Lease as of March 1, 1997 (the "Effective Date").
Assignee assumes and agrees to be bound; by and perform all
covenants, conditions, obligations and duties of Assignor; under the Lease as of
the Effective Date.
(a) Assignor acknowledges and consents that the Lease may be
reassigned by Assignee and/or its successor (s) in the future. Assignor further
acknowledges and consents that the Assignee, as well as any future assignee,
shall have the right to all benefits of all provisions existing in the original
Lease, and all modifications and amendments existing, as of the Effective Date
of this Agreement; provided, however, specifically excluded therefrom is the
right to exercise all existing options to extend the Lease Term as set forth in
Article 2.B. of the Lease. At the expiration of the Basic Term of the Lease,
Landlord agrees to negotiate in good faith with Assignee for a new lease for the
Leased Premises.
Assignor agrees that it shall remain primarily obligated
to Landlord for the full performance of all covenants, conditions, obligations
and duties required of Tenant under the Lease during the Lease Term, and during
any such option periods and shall not be relieved of any such performance
thereunder, for any reason whatsoever, including, without limitation, (i) this
or any future assignment, (ii) any exercise by Assignee, or any successor, of
any option to extend, and/or (iii) any amendment or modification to the Lease.
(b)In furtherance of Assignor's express agreement to
remain primarily liable under the Lease, as set forth in Section 3 (a) above,
Assignor, furthermore, waives notice of any demand by Landlord as well as any
notice of default in the payment of rent or any other amounts contained or
reserved in the Lease and further waives the provisions of Sections 2809, 2810,
2819, 2845, 2849, 2850 and 3433 of the California Civil Code.
4. Assignor agrees that the Security Deposit
currently being held by Landlord shall be retained by Landlord to satisfy
Assignee's Security Deposit requirements under the Lease. Any Security Deposit
remaining at the end of the term of the Lease shall be paid to Assignee after
full satisfaction of any amount owed to Landlord.
5. Assignee acknowledges that the sums due as
Common Area Expenses, Property Taxes and Insurance (collectively "Expenses")
through the Effective Date do not include and adjustment for Expenses, which
will be made on or about March 15, 1997 based on actual Expenses from January
1, 1996 through December 31, 1996 and an adjustment for Expenses which will be
made on or about March 15, 1998 based on actual Expenses from January 1, 1997
through the Effective Date. Assignee agrees that upon receipt of bills therefor,
Assignee shall pay any additional amounts for Expenses which may be due as a
result of such adjustments.
6. Landlord consents to the assignment of the lease
to Assignee.
7. Assignor represents and covenants that the Lease
is in full force and effect, that Assignor's interest therein is free and clear
of all encumbrances, and that Assignor has fully performed all covenants and
obligations under the Lease and has not done or permitted any acts in violation
of the covenants contained in the Lease.
8. Assignor represents and covenants that Landlord
has fully performed all the covenants and obligations on its part to be
performed and observed under the Lease, that Landlord has not done or permitted
any act or acts in violation of any of the covenants, provisions or terms
thereof, and that there is not now in existence any reason of claim to offset,
deduct or decrease any payments due under the lease.
9. Assignee agrees that it has inspected the
Premises and hereby agrees to take the Premises in the condition existing upon
the Effective Date.
10. Landlord and Assignee agree that Paragraph
4.B (ii) of the Lease shall be amended as of the Effective Date as Follows:
(i) From the Effective Date through the
end of the fifth year following the Commencement Date, the Annual Breakpoint
shall be One Million Eight Hundred Fifty Thousand and No/100 Dollars
($1,850,000.00).
(ii) During the sixth (6th) year following the
Commencement Date, the Annual Breakpoint shall be Two Million One Hundred
Thousand and No/100 Dollars ($2,100,000.00).
(iii) Effective at the commencement of the
seventh (7th);year following the Commencement Date and annually thereafter, the
Annual Breakpoint shall be adjusted in the manner prescribed for adjustment of
Fixed Minimum Rent in Paragraph 4. B (i) (b).
11. Nothing in this Agreement shall be deemed to
waive or modify any of the provisions of the Lease.
12. The provisions of this Agreement shall
bind and inure to the benefits of the heirs, representative, successors and
assigns of the parties hereto. Assignor warrants to Landlord that they have not
heretofore assigned, mortgaged or otherwise transferred, amended or encumbered,
voluntarily or involuntarily, the Lease or their interest herein.
13. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
14. Assignee's address for notices shall be
P.O. Box 9490, Moreno Valley, California 92552, unless changed in accordance
with the Lease.
This Agreement has been executed by the parties as of March 1,
1997.
"ASSIGNOR" __________________________________________
KENT ANDERSON
------------------------------------------
JENNY ANDERSON
"ASSIGNEE" GALVESTON'S STEAKHOUSE, INC.,
a Delaware corporation
By: ______________________________________
Hiram J. Woo, President
"LANDLORD" MISSION GROVE PLAZA, L.P.,
a California limited partnership
By: Regional Properties, Inc.,
a California corporation
Its: General Partner
By: __________________________________
L E A S E
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
<S> <C>
LEASED PREMISES.................................................................... 1
TERN AND RENEWAL OPTION............................................................ 1
CONDITIONS PRECEDENT............................................................... 2
RENT............................................................................... 3
GROSS SALES AND RECORDS............................................................ 5
USE; TRADE NAME; LIMITED EXCLUSIVE; CESSATION OF
BUSINESS; RESTRICTIONS...................................................... 6
UTILITIES.......................................................................... 8
REPAIRS............................................................................ 8
ALTERATIONS........................................................................ 9
TAXES AND ASSESSMENTS.............................................................. 9
COMMON AREA........................................................................ 10
INSURANCE.......................................................................... 12
DAMAGE AND DESTRUCTION............................................................. 13
EMINENT DOMAIN..................................................................... 14
ASSIGNMENT AND SUBLETTING.......................................................... 15
DEFAULT BY TENANT.................................................................. 16
DEFAULT BY LANDLORD................................................................ 18
SURRENDER OF PREMISES.............................................................. 19
INDEMNIFICATION, RELEASE AND LIENS................................................. 19
SUBORDINATION AND FINANCING........................................................ 20
ATTORNEYS' FEES.................................................................... 21
NOTICES............................................................................ 21
CONSTRUCTION OF LEASED PREMISES.................................................... 21
SIGNS.............................................................................. 21
HAZARDOUS MATERIALS................................................................ 21
FRANCHISOR RIGHTS.................................................................. 24
MISCELLANEOUS...................................................................... 25
</TABLE>
EXHIBITS: "A" Plot Plan of Shopping Center
"B" Legal Description of Shopping Center
"C" Construction of Tenant's Building
"D" Estoppel Certificate
"E" Sign Criteria
LEASE
THIS LEASE, executed this 9th day of March, 1993, by and between MISSION
GROVE PLAZA, L.P., a California limited partnership, hereinafter called
"Landlord", and KENT ANDERSEN and JENNY ANDERSEN, husband and wife, hereinafter
called "Tenant".
W I T N E S S E T H :
That for and in consideration of the covenants and agreements hereinafter set
forth to be kept and performed by Tenant, Landlord hereby leases to Tenant and
Tenant does hereby take, accept and hire from Landlord the leased premises
hereinafter described for; the period, and at the rental, subject to, and upon
the terms and conditions herein set forth as follows:
LEASED PREMISES.
Landlord leases to Tenant, and Tenant leases
from Landlord a certain parcel of land located in the City of Riverside,
ounty of Riverside, State of California, which is designated as "Pad G" on the
plan attached hereto as Exhibit "A", together with a building containing not
more than 5,000 square feet of Building Area to be constructed thereon in
accordance with the terms hereof and a patio area consisting of a minimum of
500 square feet of Exclusive Use Area. The land and the building and other
improvements to be erected thereon, are hereinafter collectively called the
"Premises", or "Demised Premises", or "Leased Premises".
The Leased Premises, together with and including
other property owned by Landlord, or in which Landlord has a valid leasehold or
easement, is referred to hereinafter and throughout this Lease as the "Shopping
Center". The Shopping Center is depicted on Exhibit "A" and legally described
in Exhibit "B", both attached hereto and made a part hereof.
In addition to the demising of the Leased
Premises, Landlord hereby grants to Tenant a non-exclusive right, in common
(as with others, during the Term of this Lease to use the Common Areas
(hereinafter defined) located in the Shopping Center for the purposes
hereinafter described.
The term "Floor Area" as used throughout the
Lease shall be deemed to mean and include all areas for the exclusive use and
occupancy by a tenant of Landlord, or by any other occupant of any portion of
the Shopping Center measured (i) with respect to interior areas, from the
exterior surface of exterior walls (and from the extensions thereof, in the
case of openings) and from the center of interior demising partitions,
including, without limitation, restrooms, mezzanines, warehousing or storage
areas, clerical or office areas and employee areas ("Building Area") and (ii)
with respect to exterior areas, the areas shown on Exhibit "A", which are
reserved for the exclusive use of Tenant, Tenant's licensees and invitees,
including, without limitation, perimeter sidewalks and patio area and accesses
leading thereto ("Exclusive Use Area").
TERM AND RENEWAL OPTION.
The initial term of this Lease ("Initial Term")
shall be as follows: An interim term (Interim
Term") commencing on the date of this
Lease and expiring on the earliest to occur of (a) the date Tenant opens for
business in the Premises, or (b) one hundred eighty (180) days from delivery of
possession of the Premises to Tenant from Landlord.
A basic term (the "Basic Term") commencing
on the date of the expiration of the Interim Term (the "Commencement Date")
and expiring on the date which is ten (10) years following the Commencement
Date. When the Commencement Date and expiration date have been established,
Tenant and Landlord shall execute a memorandum of lease, in recordable form,
confirming same. The recording party shall pay all costs, direct and indirect,
in connection with recordation of the memorandum of lease.
Tenant is given the right and option to extend the
Initial Term for four (4) successive five (5)-year periods ("First Option
Term", "Second Option Term", "Third Option Term" and "Fourth Option Term"
respectively) following the expiration of the Initial Term, upon all the
provisions contained in this lease, including an adjustment of Fixed Minimum
Rent at the commencement of each Option Term and annually thereafter in
accordance with Paragraph 4B (i) (b), by giving notice of exercise
of the applicable option ("Option Notice") to Landlord at least six (6) months
but not more than one (1) year before the expiration of the Initial
Term, First Option Term, Second Option Term, or Third Option Term, as
the case may be; provided, however that it is an express condition of the
foregoing options to extend, that if Tenant shall be in default in the
performance of its obligations hereunder at the time the Option Notice is given
or when the applicable Option Term is to commence, the applicable Option Notice
shall be null, void and totally ineffective, and in such case the Option Term
shall not commence and this Lease shall expire at the end of the Initial Term,
First Option Term, Second Option Term, or Third Option Term, as the case may be,
(or on such earlier date, if this Lease is terminated earlier pursuant to the
provisions hereof). Tenant shall have no other right to extend the term except
as herein expressly provided.
As used in this Lease the phrase "Term of this
Lease", "the Term Hereof", or words of like import shall refer to the Initial
Term as the same may be extended.
In the event the Interim Term of this Lease shall
not commence within thirty-six (36) months from the date of execution hereof,
this Lease shall be null, void and of no force and effect.
3. CONDITION PRECEDENT.
All obligations of Tenant and Landlord under this Lease are
conditioned upon the occurrence of, or Tenant's written waiver of, each of the
following conditions precedent within the shorter of (i) one hundred twenty
(120) days after execution of the Lease; or (ii) the time periods hereinafter
specifically provided. In the event Tenant fails to approve or waive said items
within the time period provided, the items shall be deemed approved.
In the event an application is pending before any governmental
or municipal agency at the end of the above one hundred twenty (120) day period,
either party's right to terminate shall be exercisable only at the end of an
additional sixty (60) day period.
`Both parties agree to reasonably cooperate with each other in
the pursuit of the satisfaction of their respective conditions precedent and
both parties will exercise due diligence in attempting to satisfy their
respective conditions precedent.
In the event, however, each of the conditions precedent are
not either satisfied or waived, Tenant may terminate the Lease within ten (10)
days following the applicable approval period upon (10) days written notice to
Landlord.
Conditional Use Permit. The premises are
zoned for the use by Tenant as set forth in Paragraph 6.A. Premises, immediately
upon execution of this Lease by both parties.
Permits. Immediately upon execution of
this Lease by both parties, Tenant shall apply for and Tenant will attempt
to obtain all necessary licenses, permits and other authorizations to utilize
the Premises for its use as stated herein. Such approvals shall include,
without limiting same, right to erect the signs approved by Landlord, alcoholic
beverage licenses and permits issued directly by appropriate government
authority at the fees set by statute, ordinance or regulation. Landlord
agrees to cooperate with Tenant and the state, or county municipal authorities
to obtain such permits and will execute any documents necessary for Tenant's
use at no cost to Landlord.
Financing. Notwithstanding anything contained in
this Lease to the contrary, Landlord and Tenant agree that Tenant shall have
the right, for a period of ninety (90) days from the date of this Lease to
attempt to obtain a commitment for and/or consummation of financing, reasonably
acceptable to Tenant, for the purpose of fixturizing the Premises. The terms of
such financing shall be subject to Tenant's reasonable discretion.
RENT.
Tenant hereby covenants and agrees to pay rent to
Landlord in the form of "Fixed Minimum Rent", "Percentage Rent" and
"Additional Rent", all as hereinafter defined. Except as otherwise herein
expressly provided, the payment of all rents hereinafter set forth shall begin
on the Commencement Date. All rents shall be paid without set-off or demand, and
without abatement, set-off or deduction (unless otherwise expressly provided to
the contrary herein) to Landlord at the address specified in this lease, unless
and until Tenant is otherwise notified. Time is of the essence in the payment of
all forms of rent payable hereunder. No rental, or other charges, shall accrue
or be payable by Tenant during the Interim term.
Tenant shall pay to Landlord, commencing on the Commencement Date, and
continuing thereafter during the Term of this Lease, as rental hereunder, the
aggregate of the following:
(a) An annual fixed minimum rent (Fixed
Minimum Rent") payable during the first (1st) sixty (60) months following
the Commencement Date, in the amount of Seventy-six Thousand Eight Hundred and
No/100 Dollars ($76,800.00) per annum, payable in monthly installments of Six
Thousand Four Hundred and No/100 Dollars ($6,400.00) per month.
The foregoing Fixed Minimum Rent is calculated
at the rate of One and 28/100 Dollars ($1.28) per square foot of Building
Area per month, based on an estimated finished Building Area of 5,000 square
feet. Within thirty (30) days following delivery of possession of the Premises
to Tenant, Tenant shall have the right, at its expense, to cause an architect or
licensed engineer to measure the square footage of Floor Area in the Premises in
order to determined the Building Area for calculation of Fixed Minimum Rent and
the Floor Area for determination of Tenant's Pro Rata Share in accordance with
Paragraph 4 (B) (iii) hereof. If there is a deviation in the number of square
feet of Building Area and/or Floor Area from that proposed in Paragraph 1A, upon
verification of same by Landlord, such Fixed Minimum Rent shall be adjusted to
reflect the actual square footage of Building Area and Additional Rent or other
charges based on Floor Area shall be based on the actual Floor Area of the
Premises.
Each such monthly installment shall be
payable in advance on the first (1st) day of each month throughout the Term
of this Lease, without notice or demand, and without any off-set or deduction.
Should the Term of this Lease commence on a day other than the first (1st) day
of a month, the first monthly installment of Fixed Minimum Rent shall be
prorated on the basis of a thirty (30) day month and shall be paid on the
Commencement Date.
At the end of the sixtieth (60th) month
after the Commencement Date, and at the end of each twelve (12) months
thereafter ("Adjustment Date"), This fraction shall have as its numerator the
Consumer Price Index for Urban Wage Earners and Clerical Workers (Revised) (all
items) (Based Period 1982-84 = 100), as published by the U.S. Department of
Labor, Bureau of Labor Statistics for the Los Angeles-Anaheim-Riverside area,
as published for the third (3rd) calendar month prior to which the Adjustment
Date occurs. For the first Adjustment Date, the fraction shall have as its
denominator said Consumer Price Index as published for the third (3rd) calendar
month prior to the Commencement Date. For subsequent Adjustment Dates, the
denominator of said fraction will be the Consumer Price Index for the calendar
month fifteen (15) months prior to the particular Adjustment Date. In no event
shall the Fixed Minimum Rent as adjusted be less than the Fixed Minimum Rent in
effect immediately prior to the Adjustment Date. In the event the numerator of
said fraction is not available, Tenant shall continue to pay the then current
Fixed Minimum Rent; provided, however, Tenant shall promptly pay to Landlord
the additional amounts due, if any, at such time as the Fixed Minimum Rent
adjustment can be calculated. Notwithstanding the actual increase or decrease
in Fixed Consumer Price Index, in no event shall the increase in Fixed Minimum
Rent on the first Adjustment Date be more than twenty percent (20%) of the
Fixed Minimum Rent payable immediately prior to such first Adjustment Date and
in no event shall the increase in Fixed Minimum Rent on any subsequent
Adjustment Date be more than four percent (4%) of the Fixed Minimum Rent
payable immediately prior to such Adjustment Date.
Percentage rent ("Percentage Rent") equal to
six percent (6%) of Gross Sales (as defined in Paragraph 5) made during
each calendar year in the Premises in excess of the Annual Breakpoint. During
the first (1st) five (5) years following the Commencement Date, the Annual
Breakpoint shall be One Million Seven Hundred Fifty Thousand Dollars
($1,750,000.00). During the sixth (6th) year following the Commencement Date,
the Annual Breakpoint shall be Two Million Dollars ($2,000,000.00). Effective at
the commencement of the seventh (7th) year following the Commencement Date and
annually thereafter, the Annual Breakpoint shall be adjusted in the manner
prescribed for adjustment of Fixed Minimum Rent in Paragraph 4B (i) (b).
Additional rent ("Additional Rent"),
(monthly or quarterly as Landlord shall designate) being Tenant's Pro Rata
Share (defined below) of the aggregate of the following: (a) estimated annual
taxes and assessments as defined in Paragraph 10 hereof; and (b) estimated
common area charges as defined in Paragraph 11 hereof incurred or to be incurred
in connection with the operation of the Common Areas in the Shopping Center.
Tenant's Pro Rata Share of such Additional Rent shall be calculated as a
fraction, the numerator of which shall be the Floor Area of the Premises and the
denominator of which shall be the Floor Area of the Shopping Center, as
calculated from time to time by Landlord. It is understood that the foregoing
charges shall be paid in estimated amounts determined periodically by Landlord.
Within sixty (60) days following the end of each calendar year, the actual
amounts of such charges shall be determined, and if Tenant shall have paid an
amount less than it is required to pay, Tenant shall pay the balance due within
ten (10) days after receipt of said statement, and if Tenant shall have paid and
amount greater than it is required to pay, the additional amount shall be
credited to Tenant's next such payments.
Tenant hereby acknowledges that late payment
by Tenant of the Fixed Minimum Rent, additional rent, or any other sums due
under this Lease will cause Landlord to incur costs not contemplated by this
Lease. Such costs include, but are not limited to, processing and accounting
charges, and late charges which may be imposed upon Landlord by the terms of any
mortgage or trust deed covering the premises. Accordingly, if any installment of
Fixed Minimum Rent, additional rent, or any other sums due from Tenant under
this Lease, shall not be paid within ten (10) days after the time set forth in
this Lease for payment thereof, Tenant shall thereupon pay to Landlord a late
charge equal to five percent (5%) of the overdue amount. Landlord and Tenant
agree that this late charge represents a reasonable sum considering all of the
circumstances existing on the date of this Lease, including the relationship of
the sum to the loss to Landlord that could be reasonably anticipated by such
nonpayment by Tenant and the anticipation that proof of actual damages sustained
by Landlord would be costly or inconvenient to determine. Landlord and Tenant
agree that such late charge shall in no event constitute a waiver of Tenant's
default with respect to such overdue amount, nor prevent Landlord from
exercising any of the other rights and remedies available to Landlord at law, in
equity, or under this Lease. Landlord, at its option, may deem any such overdue
amounts and/or late charges so; unpaid to be additional rent, nonpayment of
which shall, in addition to any other rights and remedies available to Landlord,
give rise to those rights and remedies of Landlord set forth in Section 16 of
this Lease.
GROSS SALES AND RECORDS.
The Term "Gross Sales" as used in this Lease, shall mean the
total of the gross selling price of all merchandise and/or services sold and/or
provided by tenant, its subtenants, concessionaires and any other person, in or
from the Premises including, without limitation: (i) All sales made in, or upon
orders placed at, or completed by delivery in, through, or from the Premises;
(ii) All charges made for services rendered in or from or upon orders placed at
the Premises; and (iii) All sales and charges made in connection with business
transacted in whole or in part in, upon, or from the Premises. Gross Sales shall
include sales and charges made for cash, credit card or upon credit, or partly
for cash and partly for credit, without regard to whether or not collection is
made of the amounts for which is given, and shall also include (iv) Sales and
charges, whether made by Tenant or any other occupant or occupants of the
Premises or any part or parts thereof; and (v) Sales made by means of mechanical
or other vending machines in the Premises. Each sale, charge or business
transaction upon installment or contract therefor shall be included in Gross
Sales for the full price or charge thereof, in the month during which such
charge or contract is made.
B. Gross Sales shall exclude (i) refunds for merchandise
returned which were previously included in Gross Sales; (ii) allowances or
adjustments granted to customers, to the extent that these were previously
included in Gross Sales; (iii) transfers of merchandise from the Premises to any
other store or stores, warehouse or warehouses of Tenant provided any such
transfer is not for the purpose of delivery of merchandise sold from the
Premises; (iv) merchandise returned to vendors; (v) sales, excise and like taxes
which are added to the selling price of merchandise at the point of sale and
paid for by the customer; (vi) bulk sales and bulk transfers of business
merchandise made at other than retail; (vii) revenue from the sales of trade
fixtures which are not stock; (viii) revenue from cigarette machines, pay
telephones and lotto machines installed for the convenience of customers; (ix)
insurance proceeds recovered for damage to merchandise or trade fixtures; (x)
sales to employees at a discount (not to exceed two percent (2%) of Gross
Sales); (xi) complimentary meals for the manager, employees, and/or customers of
Tenant; and (xii) monies stolen through theft, burglary or robbery which are not
reimbursed by the insurance company.
C. Tenant shall keep full and complete records and books of
account reflecting all sales or business transactions in or from the Premises in
order to enable Landlord to ascertain the Percentage Rent due hereunder . Tenant
shall install one or more recording cash registers on which all sales including
credit card sales in, on, or from the Premises shall be recorded, and such cash
register tapes shall be retained as part of the records. Landlord, or its duly
authorized representatives, shall have access thereto at all reasonable times
for the purpose of examining the same and, if Landlord elects, of auditing the
same, in the manner hereinafter provided. Tenant shall keep all records
pertaining to Gross Sales within the State of California for a period of not
less than three(3) years following the date on which Tenant submits its report
of Gross Sales based on such records.
D. Tenant represents that its records of Gross Sales are
computed on the basis of 4-week periods rather than monthly and thus, there are
thirteen (13) 4-week periods in each year. Within twenty (20) days following the
expiration of each three (3) 4-week periods, Tenant shall prepare and deliver to
Landlord at the place where Fixed Minimum Rent is then required to be paid
hereunder, a true written statement signed by Tenant or Tenant's duly authorized
officer or agent showing in such form and detail as Landlord shall reasonably
specify the elements and amounts of Gross Sales made by Tenant during such three
(3) 4-week periods or fraction thereof. In addition, Tenant shall further
prepare and deliver to Landlord on or before the sixtieth (60th) day following
the end of each thirteen (13) 4-week periods during the Term of this Lease, and
on or before the sixtieth (60th) day after the end of the Term of this Lease, a
complete annual statement, prepared and signed by Tenant's duly authorized
officer or representative, showing in such detail as Landlord shall specify the
elements and amounts of Gross Sales made during the preceding thirteen (13)
4-week periods or fraction thereof. With said statement for each thirteen (13)
4-week periods, Tenant shall pay to Landlord the amount of Percentage Rent due
for such year.
E. If Tenant shall fail to prepare and deliver, within the
time hereinabove specified, any statement of Gross Sales or other related
information required hereunder, Landlord may elect to treat Tenant's failure as
a breach of this Lease, entitling Landlord to terminate this Lease or to
exercise any other remedy provided for in Paragraph 16 hereof; provided,
however, that Tenant shall have the right to cure such default prior to
Landlord's instituting any of the remedies available to Landlord for Tenant's
failure to provide Landlord with such Gross Sales statements and/or information.
In the alternative, or in any case in which Landlord questions the accuracy of
any statement submitted by Tenant, at any time within three (3) years following
the date on which Tenant was required to submit its statement of Gross Sales,
Landlord may elect to conduct an audit of all books and records of Tenant which
in any way pertain to or show Gross Sales. Such audit may be conducted by
Landlord or by its authorized representative. If the statement prepare as a
result of such audit indicates that any additional Percentage Rent is due,
Tenant shall pay such Percentage Rent, plus interest thereon at the maximum
lawful rate from the date such payment was due until the date of payment, and in
addition, in any case where the amount of Gross Sales shown by such audit is
equal to or in excess of one hundred four percent (104%) of the amount disclosed
by Tenant's statement for the same period, Tenant shall pay for the cost of the
audit.
6. USE; TRADE NAME; LIMITED EXCLUSIVE; CESSATION OF BUSINESS; RESTRICTIONS.
A. Tenant shall occupy and use the Premises during the entire Term
of this Lease only for a sit-down restaurant with its primary business featuring
a menu-mix of southwestern-style entrees, ribs and hamburgers, with on-premises
beer, wine and liquor under the trade name "Texas Loosey's Chili Parlor"
including incidental dancing and entertainment incidental to the restaurant
operation, and for no other use or purpose. Tenant shall have the right to
change the use of the Premises provided Landlord's consent is first obtained.
Landlord shall not unreasonably withhold its consent to a change in use provided
such change in use (i) does not violate any exclusive or restrictive use granted
by Landlord to another Tenant or occupant in the Shopping Center, and (ii) is
not in competition with the primary business of another tenant or occupant in
the Shopping Center, and (iii) is in keeping with the character of a first-class
retail shopping center. "Primary business" shall be defined as deriving more
than fifteen percent (15%) of sales from the sale of a particular product. In no
event shall Tenant feature, offer or serve Mexican food as it primary business.
B. In the event Tenant shall cease operating in the Premises for
any reason other than temporary closures for casualty repairs, or remodeling,
for a period exceeding sixty (60) days, then Landlord shall have the right to
terminate the Lease upon thirty (30) days' written notice to Tenant.
C. So long as Tenant is operating a Texas Loosey's restaurant and
has not ceased operating in the Premises, Landlord will not hereafter lease
space in the Shopping Center to another major whose primary business is a
menu-mix of southwestern style entrees, ribs and hamburgers. The foregoing
restriction shall not apply to the occupants of Major A, Major B, Major C and
Pad C, as shown on Exhibit "A" hereto. Notwithstanding anything herein to the
contrary, nothing herein shall prevent the sale of southwestern-style entrees,
ribs and/or hamburgers as an incidental menu item in connection with the
operation of the business of any other tenant or occupant of the Shopping
Center.
D. Tenant shall not:
(i) Use or permit the Premises to be used for any
purpose other than that set forth in this Paragraph 6, and Tenant further
covenants and agrees to comply promptly with all statutes, ordinances, rules,
orders or regulations of any governmental authority regulating the use or
occupation or physical condition of the Premises.
(ii) Use or permit the use of the Premises in any
manner that will tend to create a nuisance or disturb other tenants or
occupants of the Shopping Center or tend to adversely affect or injure the
reputation of the Shopping Center.
(iii) Conduct or permit to be conducted in the
Premises any fire sale, auction, bankruptcy sale, second-hand sale,
going-out-of-business sale or other promotions or sales without Landlord's prior
written consent.
(iv) Allow any activity to be conducted on the
Premises or store any material on the Premises which will increase premiums
for or violate the terms of any insurance policy maintained by or for the
benefit of Landlord or the Shopping Center or any other occupant thereof. In no
event shall any explosive, radioactive or dangerous materials be stored in or
about the Premises.
(v) Use or allow the Premises to be used for sleeping
quarters, dwelling rooms or for any unlawful purpose.
(vi) Solicit business, distribute advertising,
obstruct, or place or permit to be placed any merchandise, vending or
amusement machines on, or otherwise use in the conduct of its business, any part
of the common Areas of the Shopping Center.
(vii) Erect or install any exterior signs or
window or door signs, advertising media or window or door lettering or
placards; install any exterior lighting, plumbing fixtures, shades or awnings;
make any exterior decoration or painting; build any fences, walls, barricades or
other obstructions; or, install any radio, television, phonograph, antennae,
loud speakers, sound amplifiers, flashing or revolving lights, or similar
devices on the roof, exterior walls or in the windows of the Premises or make
any changes to the exterior of the Premises, including the storefront, without
Landlord's prior written consent. Any signs, lights, advertising material, loud
speakers or anything installed by Tenant on the Premises which may be seen,
heard or experienced outside the Premises must be designed or approved by
Landlord in writing. Notwithstanding the foregoing, Tenant shall have the right,
at its sole cost and expense and subject to governmental approval, to install a
satellite dish on the roof of the Premises. The manner of installation of such
satellite dish shall be subject to Landlord's prior written approval. If
required by Landlord or governmental authority, an enclosure shall be erected
for such satellite dish and a higher parapet for the purpose of concealing the
satellite dish shall be constructed, at the sole expense of Tenant. If Tenant
shall install such satellite dish, Tenant shall submit to Landlord
specifications (including elevations) for such satellite dish. In the event such
installation requires any roof-cut whatsoever, Tenant shall use Tenant's roof
contractor so that such roof bond shall not be invalidated. If no such roof bond
exists and Landlord consents to a roof cut, Tenant shall indemnify Landlord
against all costs and expenses which may be incurred in connection with any roof
leaks caused, in the opinion of a qualified roofing expert, by such roof cut.
Tenant shall furthermore be responsible for, and indemnify and hold Landlord
harmless from, any damage or interference caused by the installation or
operation of said satellite dish. Upon expiration of the term of the Lease, or
earlier termination, Tenant shall remove the satellite dish and repair any
damage caused by such removal. Tenant shall not display, paint or place, or
cause to be displayed, painted or placed any handbills, or other advertising
devices on any vehicles parked in the Common Area of the Shopping Center nor
shall Tenant distribute or cause to be distributed in the Shopping Center any
handbills or other advertising devices.
(viii) Interfere with any other Tenant's use of the
Common Area or cause or permit any waste in the Premises or in the Shopping
Center.
E. Tenant shall:
(i) Warehouse, store and/or stock in the Premises only such goods,
wares and merchandise as Tenant intends to offer for sale at retail at, in, from
or upon the Premises. Tenant shall use for office, clerical or other non-selling
purposes only such space in the Premises as is from time to time reasonably
required for Tenant's business in the Premises.
(ii) Operate all of the Premises during the entire Term of this
Lease with due diligence and efficiency. Tenant shall provide sufficient
personnel and carry at all times in said Premises, a stock of merchandise of
sizes, character, and quality as shall be reasonably designed to produce the
maximum Gross Sales. Tenant shall keep the Premises open for business during all
days and hours as is reasonable and customary for a typical "Texas Loosey's
Chili Parlor".
(iii) Keep the Premises, entrances thereto, walkways adjacent
thereto, loading platforms, service areas and the garbage and refuse storage
areas free from obstruction and clean and neat, and arrange for the prompt and
frequent pick-up of rubbish at such intervals as Landlord may reasonably direct.
7. UTILITIES.
A. Tenant covenants and agrees to pay before delinquency all charges
for gas, heat, sewer, power, electricity, telephone, storm drain, water service
and water meter charges and all other utility charges including any hook-up or
connection or tap-in fees or charges which may accrue with respect to the
Premises during construction, or thereafter during the term of this Lease
(except sewer hook-up which shall be Landlord's responsibility) whether the same
be charged or assessed at flat rates, measured by separate meters or prorated by
the utility company or Landlord. All such utility lines shall be brought to the
Premises by Landlord.
B. Unless caused by the willful act of Landlord or Landlord's agent,
Landlord shall in no event be liable to Tenant for any interruption in the
service of any such utilities to the Premises, howsoever such interruption may
be caused; and the Lease shall, in any event, continue in full force and effect,
with no abatement of rent whatsoever despite any such interruptions.
C. In the event a utility easement is necessary to provide utility
service necessary to the Tenant's use, the Landlord agrees to execute any
reasonable non-exclusive utility easement grant.
8. REPAIRS.
A. Except as specifically set forth in Paragraph 8.C hereof, Tenant
covenants and agrees that it shall at Tenant's sole cost and expense, at all
times during the Term of this Lease, keep the Premises, and each and every part
thereof including, without limitation, all plumbing and electrical conduits,
utility meters, wiring, fixtures and pipes and all sewers, floors, flooring,
interior and exterior walls, exterior building maintenance, lighting, store
fronts, plate glass and glazing, air conditioning, foundations, interior and
exterior heating and utility systems, ceilings and all other parts thereof, as
well as all improvements within the "Improvement Area" shown on Exhibit "A",
including, without limitation, all sidewalks, walk-ways, patios and landscaped
areas within such Improvement Area, in good condition and repair at all times
during the term hereof and that it shall make promptly any and all repairs and
replacements which may at any time be necessary or proper to put and keep the
Premises in good condition and repair, and to keep the Premises and all
appurtenances thereto in a good, clean, safe and wholesome condition al all
times during the Term of this Lease. Tenant expressly agrees to pay promptly for
any and all labor done or material furnished for any work or repair,
maintenance, improvements, alteration or addition done by the Tenant in
connection with these items.
B. Tenant hereby waives the right to make repairs at Landlord's expense
under the provisions of Sections 1941 and 1942 of the Civil Code of California.
Any partial destruction which Landlord is obligated to repair or may repair
under any of the provisions of Section 1932, Subdivision 2 and Section 1933,
Subdivision 4 of the Civil Code of California are hereby waived by Tenant.
C. Landlord covenants and agrees that it shall at Landlord's sole cost
and expense maintain the roof and structural portions of the Premises. Except as
specifically set forth in this Paragraph 8.C, Landlord shall have no obligation
to repair or maintain any portion of the Premises, unless the need therefor is
due to Landlord's negligence.
D. In the event either party fails or refuses to perform any repairs to
the Premises required of it hereunder after notice to the other party (except in
an emergency, in which event no notice shall be required), then, in addition to
all other remedies available hereunder or at law or in equity, such party may,
but shall not be obligated to, perform or cause to be performed such repairs on
behalf of, and at the expense of the other party. Landlord may undertake on
behalf of and at the expense of Tenant such emergency repairs as Landlord deems
necessary. All expenses so incurred by Landlord shall be repaid in the form of
Additional Rent to be remitted with the next subsequent rent payment.
9. ALTERATIONS.
A. Tenant shall not make any exterior or structural alterations,
additions or modifications to the Premises without first obtaining Landlord's
prior written consent, in each instance. Prior to making any alterations,
additions or modifications to the Premises costing in excess in Twenty Thousand
Dollars ($20,000.00),whether or not Landlords consent is required, Tenant shall
provide Landlord with at least ten (10) days' prior written notice before
commencing any such work.
B. Any alterations to the Premises which are required by reason of any
present or future law, ordinance, rule, regulation or order of any governmental
authority having jurisdiction over the Premises or the Shopping Center or of any
insurance company insuring the Premises, and regardless of whether or not such
alteration pertains to the nature, construction or structure of the building or
to the use made thereof by Tenant, shall be performed by Tenant. Any such
alterations necessitated by reason of Tenant's particular use of the Premises
shall be at the sole cost of Tenant. Any such alterations which are general in
nature and are not necessitated by reason of Tenant's particular use of the
Premises shall be performed by Tenant unless Landlord elects to perform same and
in either such case Tenant shall be responsible for a maximum of Twenty
Thousand-Five Thousand Dollars ($20,000.00) of such alterations and any costs in
excess thereof shall be the responsibility of Landlord. All alterations, to or
upon the Premises, except removable trade fixtures, shall at once when made or
installed be deemed to have attached to the real property and to have become the
property of Landlord.
10. TAXES AND ASSESSMENTS.
A. Tenant shall be responsible for and shall pay all real property
taxes, assessments (whether special or general), fees, city business license,
rental tax, (the term "rental tax" as used herein, shall include any tax imposed
upon Landlord by the State of California, or any political subdivision thereof,
or any country, municipality or agency thereof, which is based upon or measured
in whole or in part by amounts charged or received by Landlord under this Lease,
provided that Tenant shall only pay the amount of such rental tax that would be
payable by Landlord if the Premises were the only property of Landlord) or
surcharges including, without limitation, any tax, excise on rent, or levy for
parking privileges or in any way relating to environmental protection, or any
other tax, levy, assessment or other charge of any nature whatsoever imposed by
any governmental authority having jurisdiction over the Shopping Center and
levied upon or payable in connection with the Shopping Center, the Premises, the
operation thereof, or business conducted therein including any such tax, fee or
assessment levied or assessed in lieu of such real property taxes (all of which
are herein referred to as "taxes and assessments"). For purposes of this Lease,
taxes and assessments shall exclude all general income taxes, gift taxes,
inheritance taxes and estate taxes. Notwithstanding any of the foregoing to the
contrary, Tenant shall be responsible for the increase in taxes and assessments
resulting from the first (1st) change of ownership, however, Tenant shall not be
responsible for subsequent increases resulting from a change of ownership.
Landlord will use its best efforts to obtain a separate assessment for the
building in which the Premises are located in which event Tenant shall be
responsible for all taxes and assessments on the improvements and land included
within such tax bill. If the Premises are not separately assessed, Tenant shall
be responsible for Tenant's Pro Rata Share as defined in Paragraph 4B (iii) of
all taxes and assessments except that for purposes of this paragraph, the
denominator for computing Pro Rata Share shall be the ground floor area of such
buildings as are included in such tax bill. In the event Tenant does not pay
such taxes and assessments in accordance with Paragraph 4B (iii) of this Lease,
Landlord may, in addition to all other remedies permitted in this Lease, add
interest at the maximum lawful rate to the penalty and interest that would have
been due if Tenant had failed to make timely payments directly to the tax
collector in order to reimburse Landlord for its administrative costs incurred
as a result of Tenant's failure to pay.
B. Tenant shall pay or cause to be paid, before delinquency, all
property taxes and assessments on the furniture, fixtures, equipment,
merchandise and other property at any time situated or installed in the
Premises, and, in addition, on improvements in the Premises made or installed
subsequent to the Commencement Date. If at any time during the Term of this
Lease any of the foregoing are assessed as a part of the real property of which
the Premises are a part, Tenant shall pay to Landlord upon demand the amount of
such additional taxes as may be levied against said real property by reason
thereof. For the purpose of determining said amount, figures supplied by the
taxing authority as the amount so assessed shall be conclusive.
C. The Tenant shall have the right at its own cost and expense to
initiate and prosecute any proceedings permitted by law for the purpose of
obtaining an abatement or otherwise contesting the validity or amount of taxes
assessed to or levied upon the Premises and, if required by law, Tenant may take
such action in the name of the Landlord who shall at no cost or expense to
Landlord cooperate with the Tenant to such extent as the Tenant may reasonably
require to the end that such proceedings may be brought to a successful
conclusion provided, however, that the Tenant shall fully indemnify, defend and
hold Landlord harmless from all loss, cost, damage and expense incurred.
11. COMMON AREA.
A. Landlord hereby grants to Tenant the non-exclusive right in common
with others during the term of this Lease to use the Common Area (as hereinafter
defined) of the Shopping Center for itself, its employees, agents, customer,
invitees and licensees.
B. The Common Area shall be subject to the exclusive control and
management of Landlord or such other persons or nominees as Landlord may
designate to exercise such management or control in whole or in part over the
Common Area, in Landlord's place and stead, and Landlord, and Landlord's
nominees and assignees, shall have the right to establish, modify, amend and
enforce reasonable rules and regulations with respect to the Common Area. Tenant
agrees to abide by and conform with such rules and regulations, provided the
same are reasonable, to cause its concessionaires, and its and their employees
and agents, to so abide and conform, and to use its best efforts to cause its
customers, invitees and licensees so to abide and conform.
C. Landlord shall have the right to close, if necessary, all or any
portion of the Common Area to such extent as may in the reasonable opinion of
Landlord be necessary or desirable in order to prevent a dedication thereof or
the accrual of any rights of any person or of the public therein; to close
temporarily all or any portion of the Common Area to discourage non-customer
use; to use portions of the Common Area while engaged in making additional
improvements or repairs or alterations to the Shopping Center; and to do and
perform such other acts, to, and with respect to the Common Area as Landlord, in
its reasonable judgment, shall determine to be appropriate for the Shopping
Center.
D. Landlord shall have the right to increase or reduce the Common
Area and to rearrange the parking spaces, driveways and improvements on the
Common Area.
E. As used herein, "Common Area" means all areas of the Shopping
Center except those areas which from time to time are designated by Landlord as
being outside the Common Area or which are leased to a tenant and/or owned by an
occupant of the Shopping Center. The Common Area includes, without limitation,
the land and facilities utilized for as parking areas, access and perimeter
roads, truck passageways (which may be elevated or subsurface in whole or in
part), and platforms therein (including, notwithstanding anything herein
contained, any such platform as is for the use of Tenant or its concessionaire);
service corridors and stairways providing access from premises to such platforms
and truck passageways; loading docks, special easement areas, easement areas,
seasonal decorations, exterior walks, arcades and/or balconies; directory
equipment; wash room, comfort rooms, drinking fountains, toilets and other pubic
facilities, bus stations, taxi stands and the like; areas devoted to or for
maintenance purposes or equipment including management offices; and any areas
dedicated or belonging to the public or any governmental authority which are
contiguous or near to the Shopping Center and which are required to be
maintained by or the cost of maintenance required to be borne by Landlord.
F. Landlord and Tenant agree that the common Area shall be
unobstructed and open. Neither Landlord nor Tenant shall take or permit any
action inconsistent therewith.
G. Tenant shall pay to Landlord in the manner set forth in Paragraph
4B(iii) Tenant's Pro Rate Share as defined in Paragraph 4B (iii) of the charges
incurred or paid by Landlord in connection with the maintenance, repair,
operation or ownership of the Common Area, which charges shall include but not
necessarily be limited to the expense of the following:
Repair, replacement, maintenance, surfacing, resurfacing,
painting, restriping, cleaning, sweeping, janitorial services, planting and
landscaping, signs and markers, lighting and other utilities, fire protection
service, security service, all real property and personal property taxes and
assessments (as defined in Paragraph 10) levied or assessed against the Common
Area, premiums for all forms of insurance described in Paragraph 12 covering the
Common Area as well as Worker's Compensation Insurance and any other insurance
carried by and deemed advisable by Landlord wages and salaries for personnel
employed to operate the Common Area, cost (if purchased) of machinery and
equipment used for Common Area maintenance or rental thereof (if rented or
leased), plus fifteen percent (15%) of the foregoing charges (excluding taxes
and insurance) to cover Landlord's overhead.
H. Tenant shall have the right at any time within three (3) years
following the date Tenant receives a statement for Common Area charges, but no
more frequently than once per calendar year to audit Landlord's books and
records pertaining to Common Area charges. If the results of such audit show
that Landlord overstated Common Area charges by more than one hundred four
percent (104%), then Landlord shall refund any overpayment to Tenant and shall
reimburse Tenant for the reasonable cost of such audit.
I. It is understood that the employees of Tenant and the other tenants
of Landlord within the shopping Center and the employees of other owners of the
shopping center shall not be permitted to park their automobiles in those
portions of the automobile parking areas in the common Area, which may from time
to time be designated for patrons of the Shopping Center. Landlord agrees to use
its best efforts to designate and/or cause to be designated either within the
automobile parking area in the Shopping Center or reasonably close thereto,
space for employee parking. During the hours from dusk until one (1) hour after
Tenant closes for business for business each day, employee parking shall be in
reasonable proximity to the Premises.
J. During the hours from dusk to one (1) hour after Tenant closes for
business each day, the lighting in the parking area immediately adjacent to the
Premises shall remain illuminated. The cost of providing such lighting beyond
the hours of operation of Tenant shell be allocated by Landlord between Tenant
and other tenants in the Shopping Center requiring such late lighting.
12. Insurance.
A. Landlord's Insurance.
At all times during the Term of this Lease, Landlord shall
maintain or cause to be maintained in full force and effect with insurance
companies licensed to do business in the State of California one or more
policies including the following coverages:
(i) General public liability insurance against claims for bodily
injury, death or property damage occurring in or upon the Common Area with
limits of coverage of not less than $500,000 for death or injury to one person,
$3,000,000 for death or injury to more than one person in a common accident or
occurrence, and $50,000 for damage or injury to property. Landlord may increase
the foregoing limits if it deems such increase desirable to protect Landlord and
Tenant.
(ii) Tenant shall pay its Pro Rata Share of such premiums as
defined in Paragraph 4B (iii) as part of the Common Area expense. Landlord shall
have the right to maintain blanket policies with the foregoing limits provided
that the amount of insurance premium payable by Tenant hereunder shall be
determined as premium Tenant would have been required to reimburse Landlord if
Landlord had caused to be issued a separate policy of insurance for the Common
Area in accordance with applicable tariff rules and rates duly promulgated for
same by the Insurance Service Bureau or any successor insurance industry rating
authority.
B. Tenant's Insurance
At all times during the Term of this Lease, Tenant shall maintain
in full force and effect with insurance companies licensed to do business in the
State of California one or more policies evidencing the following coverage a
certificate of which shall be submitted to Landlord prior to Tenant's
undertaking any of the work required of Tenant pursuant to this Lease:
(i) Fire, extended coverage, vandalism, malicious mischief,
earthquake, loss of rental income, and sprinkler damage (if the building
contains sprinklers) insurance in an amount equal to one hundred percent (100%)
of the replacement value of the buildings and other improvements on the
Premises, excluding Tenant's furniture, fixtures and equipment which shall be
insured pursuant to Paragraph 12.B (v). All proceeds of insurance carried
pursuant to this Paragraph 12.B(i) shall belong to and be the sole property of
Landlord and Tenant hereby assigns to Landlord or its nominee all of Tenant's
right, title and interest thereto.
(ii) Comprehensive General Liability insurance insuring all
Premises-Operations, Independent Contractors, Products and Completed Operations
and Contractual Liability arising from the operation, possession, maintenance or
use of the Premises or areas immediately adjacent thereto with Limits of
Liability of not less than $500,000 Each person and $2,000,000 Each Occurrence
for Bodily Injury and Personal Injury and $50,000 Each Occurrence for Property
Damage. At any time commencing five (5) years following the date hereof, Tenant
shall increase the foregoing limits of $2,000,00.00 to $3,000,000.00 if such
increase is reasonably justified in Landlord's reasonable discretion. Provided,
however, Tenant shall not be required to carry limits of liability in excess of
that customarily carried by similar businesses in Riverside County operating in
a prudent manner.
(iii) Comprehensive Automobile Liability insurance insuring all
owned, non-owned and hired vehicles used in the conduct of the Tenant's business
and operated upon or parked upon the Common Area with Limits of Liability of not
less then $500,00 Each Person and $2,00,00 Each Occurrence for Bodily Injury and
$50,000 Each Occurrence for Property Damage. At any time commencing five (5)
years following the date hereof, Tenant shall increase the foregoing limits of
$2,000,000.00 to $3,000,000.00 if such increase is reasonably justified in
Landlord's reasonable discretion. Provided, however, Tenant shall not be
required to carry limits of liability in excess of that customarily carried by
similar businesses in Riverside County operating in a prudent manner.
(iv) Standard form Worker's Compensation and Employer's Liability
insurance covering all Tenant's employees for injury or illness suffered in the
course of or arising out of their employment, providing Statutory Worker's
Compensation benefits and Employer's Liability Limits of not less than $100,000.
(v) Fire, Extended Coverage, Vandalism and Malicious Mischief and
other insurance, in Landlord's reasonable discretion, in an amount equal to the
full Actual Cash Value of all furniture, fixtures, stock and equipment,
including fixtures and improvements and betterments installed by Tenant in the
Premises. Tenants shall have the right to self-insure for the coverage under
this Paragraph 12.B(v).
C. All proceeds of insurance carried under Paragraph 12.B(v) shall be
payable to Tenant. All proceeds insurance carried under Paragraph 12. B(I) shall
be paid to Landlord and held in trust to be used for the repair or replacement
of the premises. In event this the Lease shall terminate for any cause
whatsoever, such proceeds shall belong to Landlord, to be retained by Landlord,
and, at Landlord's sole discretion, Landlord shall have the right to apply such
funds for the redevelopment of the Premises. A duplicate original of all such
policies, or a certificate evidencing same shall be delivered to Landlord at
least thirty (30) days prior to the time such insurance is first required to be
carried by Tenant, and thereafter at least thirty (30) days prior to the
expiration or cancellation of any such policy of any such policy. In the event
Tenant fails at any time during the term of this Lease to obtain such insurance
or to provide such evidence thereof, Landlord shall have the right, but not the
obligation, to procure such insurance and Tenant shall pay to Landlord the costs
and expenses thereof as Additional Rent when next payment of Fixed Minimum Rent
is required to be made.
D. Tenant agrees that all insurance policies (except Worker's
Compensation insurance), shall contain an endorsement stipulating that Landlord,
its officers, employees and agents and such other parties as Landlord, in its
sole discretion, shall name, are included as Additional In thereon, and that
such insurance shall not be cancelled without thirty (30) days' written notice
to be sent by certified nail to Landlord.
E. Tenant agrees that all insurance policies shall contain a clause
waiving the insurance carrier's right of subrogation against Landlord arising
out of the occurrence of any casualty insured against. Tenant and Landlord each
hereby waives any such right of subrogation against the other party.
13. DAMAGE AND DESTRUCTION.
A. In the event the Premises, or any part thereof, shall be damaged or
destroyed by any casualty whatsoever, this Lease shall remain in full force and
effect, with no abatement of rental, or other charges, and Tenant shall repair
such damage or destruction and put the Premises in good condition as rapidly as
reasonably possible, and Landlord shall make the insurance proceeds applicable
to the Premises available to Tenant for such purpose; provided, however, that
Landlord shall in no event be required to expend any funds in excess of the
insurance proceeds available for such restoration.
B. Notwithstanding any other provision of this Paragraph 13 to the
contrary, if the Premises shall be damaged or destroyed and such damage or
destruction shall be to the extent of more than twenty-five percent (25%) of the
replacement value of the Premises at the time of such damage, and if at the time
of such damage or destruction there shall remain less than two (2) years of the
Term of this Lease, then either Landlord or Tenant may at its election, upon
notice to the other party, within ninety (90) days after such damage, terminate
this Lease as of the date of such damage or destruction.
C. In the event that twenty-five percent (25%) or more of the building
area or Common Area of the Shopping Center shall be damaged or destroyed by
casualty, then, notwithstanding that the Premises may be unaffected by such
casualty, Landlord may terminate this Lease and the tenancy hereby created by
giving to Tenant written notice of such election, within the ninety (90) days
following the date of said occurrence.
D. Rent shall be adjusted as of the date of such termination.
14. EMINENT DOMAIN.
A. If there is any taking of or damage to all or any part of the
Premises or any interest therein because of the exercise of the power of eminent
domain, whether by condemnation proceedings or otherwise, or any transfer of any
part of the Premises or any interest therein made in avoidance of the exercise
of the power of eminent domain (all of the foregoing being hereinafter referred
to as "taking") prior to or during the term hereof, the rights and obligations
of the Landlord and Tenant with respect to such taking shall be as follows:
(i) If there is a taking of all of the Premises, this Lease shall
terminate as of the date of such taking.
(ii) If twenty-five percent (25%) or more of the floor area the
Premises shall be taken, or if twenty-five percent (25%) of the land area of the
Shopping Center, as described in Exhibit "B" (as the same may be amended) shall
be taken (regardless of whether or not any part of the Premises is taken), then,
in that event, Landlord shall be entitled to elect to terminate this Lease. If
Landlord does not terminate this Lease, Tenant shall rebuild the remainder of
the Premises, and Landlord will rebuild the remainder of the Shopping Center, as
the case may be. Landlord shall give written notice to Tenant of its election no
later than ninety (90) days after the date Landlord receives notice that
possession or title to the portion of the Premises or Shopping Center, whichever
is taken, has vested in the condemnor.
B. If this Lease is terminated in accordance with the provisions of
this Paragraph 14, such termination shall become effective as of the date
physical possession of the particular portion is taken or immediate possession
is ordered. The parties shall be released from all further liability hereunder
accruing thereafter. If this Lease is not terminated as provided in this
Paragraph 14, the party so restoring shall perform such restoration so far as
practicable to a complete unit of like quality, character, and condition as that
which existed immediately prior to the taking.
C. If this Lease is not terminated as provided in this Paragraph 14,
the Fixed Minimum Rent set forth in Paragraph 4B(i) square feet of Floor Area of
the Premises taken bears to the total Floor Area of the Premises immediately
before the taking.
D. The entire award or compensation in such proceedings, whether for a
total or partial taking or for diminution in the value of the leasehold or for
the fee shall belong to and be the property of Landlord, and Tenant hereby
assigns to Landlord all of Tenant's interest in any award.
E. In any event the date of such taking shall be deemed to have
occurred on the date that possession of the Premises is taken by the
condemning authority.
15. ASSIGNMENT AND SUBLETTING.
A. Tenant shall not, and shall not have the power to, assign this
Lease or any interest therein whether voluntarily, by operation of law, or
otherwise, and shall not sublet the Premises or any part thereof, except with
the written permission and consent of Landlord being first had and obtained, and
any such attempted assignment or subletting without Landlord's prior consent
shall be null and void and shall confer no interest in this Lease, or in the
Premises, to anyone. Landlord's consent to a proposed assignment or sublease
shall not be unreasonably withheld if the criteria set forth in Paragraph 15.C
is met. Landlord's consent shall not be required for a transfer of Tenant's
interest in this Lease to "Texas Loosey's Corporation".
B. Should Tenant desire to assign this Lease or sublet the Premises or
any part thereof, Tenant shall in each instance, give written notice of its
intention to do so to Landlord at least sixty (60) days or more before the
effective date of any such proposed subletting or assignment, specifying in such
notice whether Tenant proposes to assign, or sublet, and the proposed date
thereof, and specifically identifying the proposed assignee or sublessee. Such
notice must be accompanied by a recent financial statement of the proposed
assignee or sublessee, together with all pertinent data necessary for Landlord
to determine the credit, character, quality of business operation, merchandising
reputation and experience and business standing of the proposed assignee or
sublessee. In the case of a proposed subletting, such notice shall also be
accompanied by a copy of the proposed sublease, or it same is not available, a
letter of commitment, or letter of intent. Within sixty (60) days after
Landlord's receipt of such notice and the accompanying documentation required
hereunder, Landlord shall approve or disapprove the proposed assignment in
writing. Landlord's approval of any assignment shall only be deemed an approval
of the assignment specified in such notice from Tenant to Landlord, and shall in
no event be deemed an approval of any other assignment, or an assignment to a
different assignee, or to any subsequent or prior assignment.
C. Consent of Landlord to any such assignment or subletting shall not
be unreasonably withheld if: (I) At the time of such proposed assignment or
subletting Tenant is not in default in the performance and observance of any of
the covenants and conditions of this Lease: (ii) The assignee or subtenant of
Tenant shall expressly assume in writing all of tenant's obligations hereunder:
(iii) Tenant shall provide proof to Landlord that the assignee or subtenant has
a financial condition which is satisfactory to Landlord in Landlord's sole
discretion; and (iv) The Premises continue to be used solely for the purposes
set forth in Paragraph 6 and the assignee or subtenant is, in Landlord's
reasonable opinion, capable of operating such business.
D. Any such subletting or assignment, even with the consent of
Landlord shall not relieve Tenant from liability for payment of all forms of
rental and other charges herein provided or from the obligations of Tenant to
keep and be bound by the terms, conditions and covenants of this Lease. The
acceptance of rent from any other person shall not be deemed to be a waiver of
any of the provisions of this Lease, or a consent to the assignment or
subletting of the Premises. Consent to any assignment or subletting shall not be
deemed a consent to any future assignment or subletting.
E. If Tenant is a corporation which, under the then cuurent laws of
the State of California, is not deemed a public corporation or a publicly traded
corporation, or is an unincorpo rated association or partnership, the transfer,
assignment or hypothecation of any stock or interest in such corporation,
association or partnership in the aggregate of ll transactions in excess of
forty-nine percent (49%) (or the transfer of less than forty-nine percent (49%)
of any stock or interest which transfers voting control, including the transfer
of voting control to a party previously holding a minority interest in such
corporation, association or partnership) or the legal or beneficial transfer of
voting control shall be deemed an assignment requiring Landlord's approval. In
the event of a transfer not requiring the approval of Landlord, Tenant shall
notify Landlord of the specifics of such transfer within thirty (30) days
following the effective date thereof.
F. Notwithstanding anything to the contrary contained herein, tenant
shall have the right to assign this Lease or sublet the Premises to a
corporation in which Tenant owns fifty-one percent (51%) or more of the issued
and outstanding stock. No such assignment or sublease shall release the original
Tenant hereunder from any liability under this Lease and upon any assignment or
sublease pursuant to this Paragraph 15.F, the original Tenant shall execute and
deliver to Landlord a document evidencing such liability in form acceptable to
Landlord. Following any assignment pursuant to this Paragraph 15.F, any
transfer, assignment or hypothecation of any stock or interest in the
corporation shall be subject to the terms of Paragraph 15. E.
16. DEFAULT BY TENANT.
The following shall be deemed to be acts of default under this Lease.
A. Tenant shall fail, neglect or refuse to pay any installment of
Fixed Minimum Rent, Additional Rent, Percentage Rent or any other charge
including, without limitation, penalty charges required to be paid by Tenant
hereunder at the time and in the amount as herein provided, or pay any moneys
agreed by it to be paid, promptly when and as the same shall become due and
payable under the terms hereof and such default shall continue for a period of
more than five (5) days after notice thereof in writing given to Tenant by
Landlord.
B. Tenant shall fail, neglect or refuse to keep and perform any of the
other covenants, conditions, stipulations or agreements herein contained and
agreed to be kept and performed by Tenant and such default shall continue for a
period of more than thirty (30) days after notice thereof in writing has been
given to Tenant by Landlord; provided, however, that if the cause for giving
such notice involves the making of repairs or other matters reasonably requiring
a longer period of time, Tenant shall be deemed to comply with such notice if
Tenant has commenced such performance within fifteen (15) days of such notice
and is diligently prosecuting compliance therewith.
C. Any attachment or levy of execution or similar seizure of the
Premises or Tenant's merchandise, fixtures or other property at the Premises or
any foreclosure, repossession, or sale under any chattel mortgage, security
agreement or conditional sales contract covering Tenant's merchandise, fixtures
or other property at the Premises; or the filing of any petition by or against
Tenant under any chapter of the Bankruptcy Act, or the adjudication of Tenant as
a bankrupt or insolvent; or the appointment of a receiver or trustee to take
possession of all or substantially all of the assets of Tenant, or a general
assignment by Tenant for the benefit of creditors; or any other action taken or
suffered by Tenant under any State or Federal insolvency or bankruptcy act and
the continuation thereof for more than ninety (90) days.
D. In the event of an act of default by Tenant, Landlord my, at its
option:
(i) Declare the term hereof ended and re-enter the Premises and
take possession thereof and remove all persons therefrom, and Tenant shall have
no further claim thereon or hereunder; or
(ii) Without declaring this Lease ended, re-enter the Premises
and occupy the whole or any part thereof for and on account of Tenant and
collect said rent and any other rent that may thereafter become payable; or
(iii) Even though Landlord may have re-entered the Premises,
Landlord may thereafter elect to terminate this Lease and all of the rights of
Tenant in or to the Premises.
E. Should Landlord have re-entered the Premises under the provisions
of subparagraph D (ii) above, Landlord shall not be deemed to have terminated
this Lease, or the liability of Tenant to pay rent thereafter to accrue, or its
liability for damages under any of the provisions hereof, by any such re-entry
or by any action in unlawful detainer, or otherwise, to obtain possession of the
Premises, unless Landlord shall have notified Tenant in writing that it has so
elected to terminate this Lease, and Tenant further covenants that the service
by Landlord of any notice pursuant to the unlawful detainer statutes of the
State where the Shopping Center is situated and the surrender of possession
pursuant to such notice shall not (unless Landlord elects to the contrary at the
time or at any time subsequent to the serving of such notices and such election
be evidenced by a written notice to Tenant) be deemed to be a termination of
this Lease. In the event of any entry or taking possession of the Premises as
aforesaid, Landlord shall have the right, but not the obligation, to remove
therefrom all or any part of the personal property located therein and may place
the same in storage at a public warehouse at the expense and risk of the Tenant.
F. Should Landlord elect to terminate this Lease under the Provisions
of subparagraphs D (i) or (iii) above, Landlord may recover from Tenant as
damages:
(i) the worth at the time of award of any unpaid rent which
had been earned at the time of such termination; plus
(ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss Tenant proves could have been
reasonably avoided; plus
(iii) the worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided; plus
(iv) any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom, including, but not limited to any costs or expenses incurred
by Landlord in maintaining or preserving the Premises after such default,
preparing the premises for such reletting, leasing commissions, or any other
costs necessary or appropriate to relet the Premises; plus
(v) at Landlord's election, such other amounts in addition to or
in lieu of the foregoing as may be permitted from time to time by the laws of
the State where the Shopping Center is situated.
G. As used in subparagraphs F(i) and (ii) above, the "worth at the time
of award" is computed by allowing interest at the maximum lawful rate. As used
in subparagraph F(iii) above, the "worth at time of award" is computed by
discounting such amount at the discount rate of the Federal Reserve Bank
situated nearest to the location of the Shopping Center at the time of award
plus one percent(1%).
H. For all purposes of the Paragraph 16, the term "rent" shall be
deemed to be the Fixed Minimum Rent and all other sums required to be paid by
Tenant pursuant to the terms of this Lease. Ass such sums, other than the Fixed
Minimum Rent, shall be computed on the basis of the average monthly amount
thereof accruing during the immediately preceding sixty (60) month period,
except that if it becomes necessary to compute such rental before such a sixty
(60) month period has occurred then on the basis of the average monthly amount
thereof accruing during such shorter period.
I. Notwithstanding any other provisions of this Paragraph 16, Landlord
agrees that is the default complained of, other than for the payment of monies,
is of such a nature that the same cannot be rectified or cured within the period
requiring such rectification or curing as specified in the written notice
relating thereto, then such default shall be deemed to be rectified and cured if
the Tenant within such period shall have commenced the rectification and curing
thereof and shall continue thereafter with all due diligence to cause such
rectification and curing and does so complete the same with the use of such
diligence as aforesaid.
J. The remedies given to Landlord in this Paragraph 16 shall be in
addition to and supplemental to all other rights or remedies which the Landlord
may have under the laws then in force.
K. The waiver by Landlord of any breach of any term, covenant or
condition herein contained shall not be deemed to be a waiver of such term,
covenant or condition or any subsequent breach of the same or any other term,
covenant or condition herein contained. The subsequent acceptance of rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant or condition of this Lease, other than the
failure of Tenant to pay the particular rental so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent. No covenant, term, or condition of this Lease shall be deemed to have been
waived by Landlord unless such waiver be in writing signed by Landlord.
17. DEFAULT BY LANDLORD.
A. Landlord shall in no event be charged with default in the
performance of any of its obligations hereunder unless and until Landlord shall
have failed to perform such obligations within thirty (30) days (or such
additional time as is reasonable required to correct any such defaults) after
written notice by Tenant to Landlord properly specifying wherein Landlord has
failed to perform any such obligation.
B. In the event that Landlord shall be liable to Tenant for damage
sustained by Tenant as a result of Landlord's breach, it is expressly understood
and agreed that any money judgment resulting from any default or other claim
arising under this Lease shall be satisfied only out of the rents, issues,
profits and other income ("income") actually received from the operation of the
Shopping Center, and no other real, personal or mixed property of Landlord (the
term "Landlord" for purposes of this Paragraph 17 only shall mean any and all
partner, both general and/or limited, if any, which comprise Landlord), wherever
situated, shall be subject to levy on any such judgment obtained against
Landlord and if such income is insufficient for the payment of such judgment,
Tenant will not institute any further action, suit, claim or demand, in law or
in equity, against Landlord for or on the account of such deficiency. Tenant
hereby waives, to the extent waivable under law, any right to satisfy said money
judgment against Landlord except income received by Landlord from the operation
of the Shopping Center.
C. If the Premises or any part thereof are at any time subject to a
mortgage or deed of trust and this Lease or the rentals due from Tenant
hereunder are assigned to such mortgagee, trustee or beneficiary (referred to as
"Mortgagee" for purposes of this Paragraph 17) and Tenant is given written
notice thereof, including the address of such Mortgagee, then Tenant shall not
terminate this Lease for any default on the part of Landlord without first
giving written notice to such Mortgagee, specifying in detail the default
complained of, and affording such Mortgagee a reasonable opportunity to make
performance for and on behalf of Landlord. If and when the Mortgagee has make
performance on behalf of Landlord, such default shall be deemed cured.
18. SURRENDER OF PREMISES.
A. At the expiration or earlier termination of the Term of this Lease,
in accordance with the terms hereof, Tenant shall surrender the Premises in the
same condition as the Premises were in upon delivery of possession thereof under
this Lease, in addition to any alterations or additions thereto, reasonable wear
and tear excepted, and shall surrender all keys for the Premises to Landlord at
the place then fixed for the payment of rent and shall inform Landlord of all
combinations on locks, safes and vaults, if any, in the Premises.
19. INDEMNIFICATION, RELEASE AND LIENS.
A. Tenant expressly agrees, and this Lease is made upon the express
condition, that Landlord shall not be liable, responsible, or in any way
accountable to Tenant, Tenant's agents, employees, servants, customers or
invitees, or to any person whomever, for any loss, theft or destruction of or
damage (including but not limited to any damage caused by rainstorm or other
water damage) to the Premises, or to any goods, wares, merchandise, fixtures or
other property stored, kept, maintained, or displayed in, on or about the
Premises, or in, on or about the facilities, the use of which Tenant may have in
conjunction with its use and occupancy of the Premises, nor for injury to or
death of any person or persons who may at any time be using, occupying or
visiting the Premises or the Shopping Center, regardless of the nature or cause
of such injury, damage or destruction excluding however, the gross negligence of
Landlord.
B. Except for the willful acts, omissions or negligence of Landlord,
Tenant agrees to indemnify, defend and hold harmless Landlord, its agents and
employees from and against any and all expense, liability and claims for damage
to or loss of property (including Tenant's property) or injury to or death of
persons (including Tenant, its agents, employees, visitors, licensees, or
invitees) directly or indirectly resulting from any cause on or about the
Premises, in connection with the maintenance or operation of Tenant's business,
or Tenant's occupation or use of the Premises. Tenant shall discharge any
judgment or compromise rendered against or suffered by Landlord as a result of
anything indemnified against hereunder and shall reimburse Landlord for any and
all costs, fees, or expenses incurred or paid by Landlord (including, without
limitation, reasonable attorneys' fees), in connection with the defense of any
action or claim resulting therefrom.
C. Landlord expressly agrees and this Lease is made upon the express
condition, that Tenant shall not be liable, responsible, or in any way
accountable to Landlord, Landlord's agents, employees, servants, customers or
invitees, or to any person whomever, for any loss, theft or destruction of or
damage (including but not limited to any damage caused by rainstorm or other
water damage) to the Common Area, or to any goods, wares, merchandise, fixtures
or other property stored, kept, maintained, or displayed in, on or about the
Common Area, or in, on or about the facilities, the use of which Landlord may
have in conjunction with its use and operation of the Common Area, nor for
injury to or death of any person or persons who may at any time be using,
occupying or visiting the Common Area or the Shopping Center, regardless of the
nature or cause of such injury, damage or destruction except however, the
negligence of Tenant.
D. Except for the willful acts, omissions or negligence of Tenant,
Landlord agrees to indemnify, defend and hold harmless Tenant, its agents and
employees from and against any and all expense, liability and claims for damage
to or loss of property (including Landlord's property) or injury to or death of
persons (including Landlord, its agents, employees, visitors, licensees, or
invitees) directly or indirectly resulting from any cause on or about the Common
Area, in connection with the maintenance or operation of the Common Area.
Landlord shall discharge any judgment or compromise rendered against or suffered
by Tenant as a result of anything indemnified against hereunder and shall
reimburse Tenant for any and all cost, fees, or expenses incurred or paid by
Tenant (Including, without limitation, reasonable attorneys' fees), in
connection with the defense of any action or claim resulting therefrom.
E. Tenant shall keep the Premises and any improvements located thereon,
and all the right, title and interest of Tenant and Landlord therein free and
clear of all liens or claims which may ripen into such a lien or encumbrance.
Tenant shall have thirty (30) days in which to discharge any lien or claim. In
the event Tenant fails to do so, Landlord may pay such lien or encumbrance or
claim and on or before the tenth (10th) day of the month following the month
during which such payment is made, Tenant shall pay to Landlord such sums so
paid, plus such reasonable costs and attorneys' fees as may have been incurred
by Landlord; provided, however, that in the event Tenant in good faith disputes
such lien or encumbrance and with reasonable promptness furnishes an indemnity
bond or other undertaking in an amount sufficient either to procure the release
of such lien or encumbrance or to indemnify against the principal amounts
thereof, together with such costs or attorneys' fees as may be covered by said
lien or encumbrance, then the furnishing of such bond or undertaking shall be
deemed due compliance with the foregoing provision.
20. SUBORDINATION AND FINANCING.
A. This Lease shall in all respects be junior and subordinate to
matters of record affection the Premises and/or the Shopping Center and all of
the provisions contained therein. In the event of any conflict between the terms
hereof and any of the foregoing, the provisions of the forgoing shall prevail.
Subject to the foregoing, and upon payment by Tenant of all of the rents herein
provided, and upon the observation and performance of all of the covenants,
terms and conditions on Tenant's part to be observed and performed, Tenant shall
quietly hold and enjoy the Premises for the Term hereof without hindrance or
interruption by Landlord or any other person or persons lawfully or equitably
claiming by, through or under Landlord, subject nevertheless to the terms and
conditions of this Lease.
B. Tenant covenants and agrees that upon written request of Landlord,
Tenant will make, execute, acknowledge and deliver any and all instruments
requested by Landlord which are necessary or proper to effect the subordination
of this Lease to any mortgage, deed of trust or indenture affection the Premises
or the Shopping Center, provided that, if Tenant is not in default hereunder,
the party to whose interest this lease is subordinated shall agree in the event
it acquires Landlord's interest hereunder, to continue this Lease in full force
and effect in the same manner and with like effect as if such person had been
named as Landlord herein, and Tenant hereby attorns and agrees to attorn to such
party. Tenant agrees to attorn directly to any such party.
C. At any time and from time to time, upon request in writing from
Landlord, Tenant agrees to execute, acknowledge and deliver to Landlord a
statement in writing in the form attached hereto as Exhibit "D" certifying that
this Lease is unmodified and in full force and effect (or, if there have been
modifications, stating the modifications) the commencement and termination
dates, the Fixed Minimum Rent, Percentage Rent and other charges payable
hereunder and the dates to which the same have been paid. It is understood and
agreed that any such statement may be relied upon by any prospective purchaser
of the Premises or the Shopping Center or any mortgagee, beneficiary or grantee
of any security or interest, or any assignee of any thereof, under any mortgage
or deed of trust now or hereafter made covering any leasehold interest in the
Premises or the Shopping Center.
D. If during the Term of this Lease, Landlord sells its interest in the
Premises, or this Lease, or all or any portion of the Shopping Center, then all
rights and obligations of Tenant hereunder shall remain in full force and effect
as though there had been no such sale or transfer. Upon such transfer and
conveyance, Landlord shall be released of all obligations of Landlord accruing
hereunder from and after the date of such sale or transfer.
21. ATTORNEYS' FEES.
In case suit shall be brought for any breach for any breach of this
lease, including, without limitation, unlawful detainer of the Premises, or for
the recovery of any rent due under the provisions of this Lease, or because of
any covenant herein contained on the part of either party to be kept or
performed, the prevailing party shall be entitled to a reasonable attorney's fee
which shall be fixed by the Court.
22. NOTICES.
A. Whenever under this Lease a provision is made for any demand,
notice or declaration of any kind or where it is deemed desirable or necessary
by either party to give or serve any such notice, demand or declaration to the
other, the same shall not be effective unless it shall be in writing delivered
personally or by Certified of Registered Mail with postage prepaid addressed to
Tenant or to Landlord at the address appearing below:
Landlord: MISSION GROVE PLAZA, L.P.
c/o Regional Properties, Inc.
1801 Century Park East, Suite 820
Los Angeles, Ca. 90067
Tenant: KENT ANDERSEN and JENNY ANDERSEN
205 Bathhurst Road
Riverside, California 92506
B. Either party may, by like notice, at any time and from time to time
designate a different address to which or a different person to whom or in care
of whom notices shall be sent. Notices delivered by mail shall be deemed
delivered forty-eight (48) hours after deposit thereof in a U.S. Mail Post Box,
postage prepaid Certified or Register Mail and addresses as required herein.
23. CONSTRUCTION OF LEASED PREMISES.
Landlord shall complete, at its own expense, the work so designated on
Exhibit "C" as "Landlord's Work". All other work of any character, shall be
performed by Tenant as provided in Exhibit "C", and whether performed by
Landlord or Tenant, shall except as expressly provided in Exhibit "C" be at
Tenant's sole expense. All work to be performed by either party shall be done in
accordance with the plans and specifications referred to in Exhibit "C" and all
such improvements shall at once become property of Landlord.
24. SIGNS.
Tenant shall only erect signs on the exterior of the Premises which
shall strictly conform to the provisions of the Sign Criteria attached hereto as
Exhibit "E".
In the event Landlord erects pylon sign on which another tenant in the
Shopping Center occupying the same square footage of Building Area as Tenant, or
less, places its identification sigh thereon, Tenant at Tenant's sole cost shall
have the right to place its identification sign on said pylon sign of Landlord's
designation.
25. HAZARDOUS MATERIALS.
A. Tenant shall at all times and in all respects comply with all Laws
(as defined below) relating to industrial hygiene, environmental protection and
the use, analysis, generation, emission, manufacture, storage, disposal or
transportation of any Hazardous Material (as defined below).
B. Tenant shall indemnity, defend (by counsel reasonably acceptable to
Landlord), protect, and hold Landlord and each of Landlord's partners,
employees, agents, lenders, attorneys, successors and assigns, free and harmless
from and against any and all claims, liabilities, penalties, forfeitures, losses
or expenses (including attorneys' fees) or death of or injury to any person or
damage to any property whatsoever, arising from or caused in whole or in part,
directly or indirectly, by (i) the presence in, on, under or about the Premises
or discharge in or from the Premises of any Hazardous Materials and/or Tenant's
use, analysis, storage, transportation, disposal, release, threatened release,
discharge or generation of Hazardous Materials to, in, on, under, about or from
the Premises, or (ii) Tenant's failure to comply with any Laws. Tenant's
obligations hereunder shall include, without limitation, and whether foreseeable
or unforeseeable, all costs of any investigation (including consultant's and
attorneys' fees and testing) required or necessary repair, remediation,
restoration, cleanup or detoxification or decontamination of the Premises and/or
the Shopping Center and the preparation and implementation of any closure,
remedial action or other required plans in connection therewith, and shall
survive the expiration or earlier termination of the term of the Lease. For
purposes of the release and indemnity provisions hereof, any acts or omissions
of tenant, or by employees, agents, assignees, contractors or subcontractors of
Tenant or others acting for or on behalf of Tenant (whether or not they are
negligent, intentional, willful or unlawful) shall be strictly attributable to
Tenant.
C. Without limiting the foregoing, if the presence of any Hazardous
Material on the Premises is caused or permitted by Tenant and results in any
contamination of the Premises, Tenant shall promptly take all actions at its
sole expense as are necessary to return the Premises to the condition existing
prior to the introduction of any such Hazardous Material.
D. Provided, however, Tenant shall not take any remedial action in
response to the presence of any Hazardous Materials in or about the Premises nor
enter into any settlement agreement, consent decree or other compromise in
respect to any claims relating to any Hazardous Materials in any way connected
with the Premises, without first notifying Landlord of Tenant's intention to do
so and affording Landlord ample opportunity to appear, intervene or otherwise
appropriately assert and protect Landlord's interest respect thereto.
E. Tenant shall immediately notify Landlord in writing of: (i) any
enforcement, cleanup, removal or other governmental or regulatory action
instituted, completed or threatened pursuant to any Laws; (ii) any claim made or
threatened by any person against Tenant, and/or the Premises, relating to
damage, contribution, cost recovery compensation, loss or injury resulting from
or claimed to result from any Hazardous Materials; and (iii) any reports made to
any environmental agency arising out of or in connection with any Hazardous
Materials in, emanating from, or removed from the Premises, including any
complaints notices, warnings or asserted violations in connection therewith.
Tenant shall also provide to Landlord as promptly as possible, and in any event
within five (5) business days after Tenant first receives or sends the same,
with copies of all claims, reports, complaints, notices, citations, report
warnings or asserted violations relating in any way to the Premises, or Tenant's
use thereof, or involving failure by Tenant or the Premises to comply with any
Law. Tenant shall promptly deliver to Landlord copies of hazardous waste
manifests reflecting the legal and proper disposal of all Hazardous Materials
removed from the Premises.
F. Tenant shall, within five (5) days after receipt of Landlord's
written request, provide Landlord with copies of all documents and information,
including, but not limited to permits, registrations, manifests, applications,
reports and certificates, evidencing Tenant's compliance with any Law specified
by Landlord.
G. Tenant shall at its own expense procure, maintain in effect
and comply with all conditions of any and all permits licenses, and other
governmental and regulatory approvals required for Tenant's use of the Premises,
and any construction in the Premises for the Permitted Use, including without
limitation, the disposal of vapors from the Premises and discharge of
(appropriately treated materials or wastes into or through any
sanitary sewer serving the Premises. Except as discharged into the sanitary
sewer in strict accordance and conformity with all applicable Laws, Tenant shall
cause any and all Hazardous Materials removed from the Premises to be removed
and transported solely by duly licensed haulers to duly licensed facilities for
final disposal of such materials and wastes. Tenant shall in all respects
handle, treat, deal with and manage any and all Hazardous Materials in, on under
about the Premises in total conformity with all applicable Laws and prudent
industry practices regarding management of such Hazardous Materials.
H. Notwithstanding any of the foregoing, Landlord's prior written
approval of all such actions and the contractors to be used by Tenant in
complying with the provisions of the Lease shall first be obtained, which
approval shall not be unreasonably withheld so long as such actions would not
potentially have any material adverse long-term or short-term effect on the
Premises or the Shopping Center.
I. Upon expiration or earlier termination of the term of the Lease,
Tenant shall cause all Hazardous Materials to be removed from the Premises and
transported for use, storage or disposal in accordance and compliance with all
applicable Laws and in accordance with the requirements of this Lease.
J. Landlord and Landlord's lender(s) shall have the right to enter the
Premises at any time, in the case of an emergency, and otherwise at reasonable
times, for the purpose of inspecting the condition of the Premises and for
verifying compliance by Tenant with this Lease and all Laws, and th employ
experts and/or consultants in connection therewith and/or to advise Landlord
with respect to Tenant's activities, including but not limited to the
installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Material or storage tank on or from the Premises. The costs and
expenses of any such inspections shall be paid by the party requesting same,
unless a default or breach of this Lease, violation of Law, or a contamination,
caused or materially contributed to by Tenant is found to exist or be imminent
or unless the inspection is requested of ordered by a governmental authority as
the result of any such existing or imminent violation or contamination. In any
such case, Tenant shall upon request reimburse Landlord or Landlord's lender, as
the case may be, for the costs and expenses of such inspections.
K. It shall not be unreasonable for Landlord to withhold its consent to
any proposed transfer of the Lease if (i) the proposed transferee's anticipated
use of the Premises involves the generation, storage, use, treatment, or
disposal of Hazardous Material: (ii) the proposed transferee has been required
by any prior landlord, lender, or governmental authority to take remedial action
in connection with Hazardous Material contaminating a property if the
contamination resulted from such transferee's actions or use of the property in
question; or (iii) the proposed transferee is subject to an enforcement order
issued by any governmental authority in connection with the use, disposal, or
storage of a Hazardous Material.
L. As used herein, the term "Hazardous Material" means any oil,
flammable explosive, asbestos, ureaformaldehyde, radioactive material, vapor,
solvent, or waste, contaminated or polluting materials, hazardous or toxic
substance, material, or waste which is or becomes regulated by any local
governmental authority, the State of California or the United States Government.
The term "Hazardous Material" includes, without limitation, any material or
substance which is (i) defined as "hazardous waste", "extremely hazardous
waste", or "restricted hazardous waste", under Sections 25115, 25117, or
15122.7, or listed pursuant to Section 25140, of the California Health and
Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii)
defined as a "Hazardous substance" under Section 25316 of the California Health
and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous
Substance Account Act), (iii) defined as a "Hazardous material", "Hazardous
substance", or "Hazardous waste" under Section 25501 of the California Health
and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response
Plans and Inventory), (iv) defined as a "Hazardous substance" under Section
25281 of the California Health and Safety Code, Division 20, Chapter 6.7
(Underground Storage of Hazardous Substances), (v) petroleum (vi) asbestos,
(vii) listed under Article 9 or defined as hazardous or extremely hazardous
pursuant to Article 11 of Title 22 of the California Administrative Code,
Division 4, Chapter 20, (viii) designated as a "hazardous substance" pursuant to
Section 311 of the Federal Water Pollution Control Act (33 U.S.C. Section 1317),
(ix) defined as a "hazardous waste" pursuant to Section 1004 of the Federal
Resource Conservation and Recovery Act.42 U.S.C. Section 6901 et seq. (42 U.S.C.
Section 6903), or (x) defined as a "hazardous substance" pursuant to Section 101
of the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, 42 U.S.C. Section 6901 et seq. (42 U.S.C. Section 9601).
M. As used herein, the term "Laws" means any applicable federal, state
or local laws, ordinances, or regulations relating to any Hazardous Material
affecting the Premises, whether in effect as of the date hereof or hereinafter
enacted including, without limitation, Proposition 65 of the State of
California, California Assembly Bill 3713 and the laws, ordinances, and
regulations referred to above.
N. In no event shall Landlord's compliance with or performance of
voluntary measures of any Law governing Hazardous Materials with respect to any
portion of the Shopping Center entitle Tenant to any damages from Landlord,
relieve Tenant of the obligations to pay any sum due under the Lease or perform
any other of Tenant's obligations hereunder, or give Tenant the right to
terminate or cancel the Lease, or constitute or be construed as constructive or
other eviction of Tenant or interference with Tenant's right of quiet enjoyment
of the Premises.
26. FRANCHISOR RIGHTS.
Notwithstanding anything to the contrary contained in this Lease,
Tenant, as franchisee, has entered into a franchise agreement (dated
_____________, 19____) with Texas Loosey's _________________________________,
a_________________, as franchisor. (Herein "Franchisor") and if such franchise
agreement is terminated for any reason, Tenant's rights under this Lease shall,
at the option of Franchisor, be transferred and assigned to Franchisor. Said
option may be exercised by Franchisor giving Landlord written notice within
fifteen (15) days following such termination. Such notice shall, without further
act, operate as an effective assignment of Tenant's rights hereunder to
Franchisor and the assumption by Franchisor of the covenants herein required to
be performed by Tenant. Franchisor shall thereafter have the right to assign or
sublease the Premises to its bona fide franchisee provided such assignment or
sublease shall not release Franchisor from its obligation to perform, or cause
to be performed, all of the obligations of Tenant arising under this Lease from
and after the time of the exercise of such option.
Landlord agrees that in the event of a default under the Lease by
Tenant, Landlord shall provide to Franchisor a copy of any such default notice
and afford Franchisor a simultaneous cure period to cure such default on behalf
of Tenant. In the event of any such default by Tenant, if Franchisor shall cure
such default on behalf of tenant, Franchisor shall have the right, but not the
obligation, and provided Franchisor cures or causes to be cured all of Tenant's
defaults under the Lease, to assume the Lease and take possession of the
Premises and operate the business conducted therein until such time as
Franchisor procures a franchisee to commence operations in the Premises.
In the event that Franchisor shall terminate the franchise agreement
and/or assume the Lease pursuant to any of the foregoing, Franchisor shall
exercise such right pursuant to its contractual agreements with Tenant and/or
applicable law, and shall indemnify, defend and hold Landlord harmless from and
against any claim, loss, damage or liability which may be incurred by Landlord
as a result of such default by Tenant, and/or resulting from Franchisor's
takeover of the Premises, including, without limitation any claim against
Landlord, which may be made by Tenant.
Franchisor's address for notices, until changed by written
notice to Landlord and shall be:
--------------------------
--------------------------
--------------------------
In the event Franchisor shall become the Tenant under the Lease as
provided above, it shall have the right to assign this Lease or sublease the
entire Premises to a franchisee on the following conditions:
(i) The franchisee shall be contractually obligated to operate
the Premises under the trade name and for the use specified in
the Paragraph 6.A.; ;
(ii) The franchisee shall have a net worth equal to or greater than
Tenant as of the date hereof;
(iii) Franchisor shall not be released from its obligations and
liabilities under this Lease by virtue of such assignment or
subletting;
(iv) Franchisor shall submit to Landlord a notice and a true and
correct copy of any such assignment or sublease and all
amendments thereto, and franchise agreements;
(v) In no event shall such franchisee be permitted to transfer,
sublease or assign this Lease of any interest therein;
(vi) The franchisee shall assume all of the obligations and
liabilities of Tenant under this Lease; and
(vii) In the event such franchisee shall default under the provisions
of this Lease or the franchise agreement, as provided above,
Franchisor shall take possession of the Premises pursuant to
said agreement and this Lease and shall operate such business
until such time as another franchisee commences operations in
the Premises, and all of the terms and provisions set forth
herein shall be applicable to the replacement franchisee.
27. MISCELLANEOUS.
A. Landlord and its agents shall have free access to the Premises
during all reasonable hours and after reasonable notice (except that no such
notice shall be required in an emergency) for the purposes of examining the same
and to ascertain if Tenant is in compliance with the terms of this Lease, to
perform any repairs or maintenance deemed necessary or desirable by Landlord
(although no obligation to make such repairs or maintenance shall be construed
thereby), to exhibit the same to prospective purchasers or tenants and to post
such notices as may be desirable or necessary in Landlord's reasonable judgment.
B. The unenforceability or invalidity of any one or more
provisions hereof shall not render any other provisions herein contained
unenforceable or invalid.
C. As used in this Lease and whenever required by the context thereof,
each number, both singular or plural, shall include all numbers, and each gender
shall include all genders. "Landlord" and "Tenant" as used in this Lease or in
any other instrument referred to in or made a part of this Lease shall likewise
include both the singular and the plural, a corporation, co-partnership,
individual or person acting in any fiduciary capacity as executor,
administrator, trustee, or in any other representative capacity. All covenants
herein contained on the part of Tenant shall be joint and several.
D. All of the terms hereof shall apply to, run in favor of and shall be
binding upon and inure to the benefit of, as the case may require, the parties
hereto, and also their respective heirs, executors, administrators, personal
representatives and assigns and successors in interest, subject at all times
nevertheless to the provisions of Paragraph 15 of this Lease or subletting the
restrictions upon assignment of this Lease or subletting the Premises.
E. One or more waivers of any covenant, term or condition of this Lease
by either party shall not be construed by the other party as a waiver of a
subsequent breach of the same or any other covenant, term or condition. The
consent or approval of either party to or of any act by the other party of a
nature requiring consent or approval shall not be deemed to waive or render
unnecessary consent to or approval of any subsequent act.
F. Nothing contained in this Lease shall be deemed or construed by the
parties hereto or by any third party to create the relationship of principal and
agent, or of partnership, or of joint venture, or of any association whatsoever
between Landlord and Tenant, it being expressly understood and agreed that
neither the method of computation of rent nor any other provisions contained in
this Lease nor any act or acts of the parties hereto shall be deemed to create
any relationship between Landlord and Tenant other than the relationship of
landlord and tenant.
G. The laws of the State of California shall govern the
validity, construction, performance and enforcement of this Lease.
H. Landlord and Tenant acknowledge and agree that except for DAUM
Commercial Real Estate Services, neither party has dealt with any real estate
brokers in connection with this Lease. Each of the parties agrees to indemnify
the other against claims for brokerage commissions or finders fees in connection
with this Lease transaction, and to hold such other party harmless from all
liabilities arising from any such claim (including, without limitation, the cost
of attorneys' fees in connection therewith).
I. The submission of this Lease for examination does not constitute a
reservation of, or option for the Premises and this Lease shall become effective
as a Lease only upon complete execution thereof by both Landlord and Tenant.
J. It is understood that there are no oral agreements between the
parties affecting this Lease and this Lease supersedes and cancels any and all
previous negotiations, arrangements, brochures, agreements, representations and
understandings, if any, between the parties hereto or displayed by Landlord to
Tenant with respect to the subject matter thereof and none thereof shall be used
to interpret or construe this Lease.
K. If a corporation executes this Lease as Tenant, Tenant shall
promptly furnish Landlord with a Secretary's Certificate attesting to the
authority of the officers to execute the Lease on behalf of such corporation.
L. The Paragraph titles herein are for convenience only and do
not define, limit or construe the contents of such Paragraphs.
M. Tenant hereby grants to Landlord such licenses or easements in,
under or over the Premises or any portion or portions thereof as shall be
reasonably required for the installation or maintenance of mains, conduits,
pipes or other facilities to serve the Shopping Center or an part thereof,
including but not by way of limitation the premises of any other occupant of the
Shopping Center. The installation of pipes and other conduits shall be done in
such a manner as to cause the least possible interference with Tenant's business
activity.
N. In the event the Tenant shall hold over in the Premises after the
expiration of the Term hereof with the consent of the Landlord either express or
implied, such holding over shall be construed to be only a tenancy from month to
month, subject to all the covenants, conditions and obligations hereof and the
Tenant hereby agrees to pay the Landlord the same rentals provided for by this
Lease for such additional time as Tenant shall hold such property.
O. Tenant hereby covenants by and for itself, its successors and
assigns, and all persons claiming under or through them, that this Lease is made
and accepted upon and subject to the following conditions:
That there shall be no discrimination against or segregation of
any person or group of persons on account of sex, marital status, race, color,
creed, religion, national origin or ancestry in the leasing, subleasing,
renting, transferring, use, occupancy, tenure or enjoyment of the Premises
herein leased, nor shall Tenant itself, or any person claiming under or through
it, establish or permit such practice or practices of discrimination or
segregation with reference to the selection, location, number, use, or occupancy
of tenants, lessees, sublessees, subtenants, or vendees in the Premises herein
leased.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day and year first above written.
MISSION GROVE PLAZA, L.P., _____________________________
a California Limited Partnership KENT ANDERSEN
By: Regional Properties, Inc., _____________________________
a California corporation JENNY ANDERSEN
Its: General Partner
By:______________________
"LANDLORD' "TENANT"
<PAGE>
Legal Description of Shopping Area
That portion of Parcels 14, 15 and 16 of Parcel Map 4806 as shown by Map on file
in Book 7 of Parcel Maps, at Pages 8 through 12 thereof, Records of Riverside
County, California, described as follows:
Commencing at the centerline intersection of Alessandro Boulevard and Mission
Grove Parkway South as shown on Record of Survey on file in Book 83, at pages 59
and 60 thereof, Records of Riverside County, California; Thence S. 00(Degree)
09' 43" E. along the centerline of said Mission Grove Parkway South, a distance
of 136.00 feet;
Thence S. 89(Degree) 50' 17" W., a distance of 50.00 feet to a point on the
Westerly line of Parcel 4 (Mission Grove Parkway South) of said Record of
Survey, said point being the most Southerly corner of parcel "A" of that certain
parcel of land as conveyed to the City of Riverside by Deed recorded October 20,
1989 as Instrument No. 365394 of Official Records of Riverside County,
California; also being the point of beginning of the parcel of land to be
described; Thence S. 00(Degree) 09' 43" E., a distance of 435.18 feet; Thence
Southerly on a curve concave Easterly having a radius of 1050.00 feet, through
an angle of 19(Degree) 10' 00", an arc length of 351.25; Thence S. 19(Degree)
19' 43" E., a distance of 351.16 feet.
The preceding three (3) courses being along the Westerly line of said Parcel 4
(Mission Grove Parkway South); Thence S. 70(Degree) 40' 17" W., a distance of
42.05 feet; Thence Westerly on a curve concave Northerly having a radius of
1000.00 feet, through an angle 40(Degree) 24' 07", an arc length of 705.15 feet;
Thence N. 68(Degree)55' 36" W., a distance of 438.29 feet; Thence Westerly on a
curve concave Southerly having a radius of 1000.00 feet, through an angle of
37(Degree) 24' 07", an arc length of 652.79 feet; Thence S. 73(Degree) 40' 17"
W., a distance of 40.04 feet to the Easterly line of Parcel "B" of said parcel
as conveyed to the City of Riverside; Thence N. 22(Degree) 02' 52" W. along said
Easterly line, a distance of 72.57 feet to the Easterly line of Parcel 1
(Trautwein Road) of said Record of Survey; Thence N. 16(Degree) 19' 43" W., a
distance of 6.44 feet; Thence N. 11(Degree) 56' 58" W., a distance of 584.85
feet; Thence Northerly and Easterly on a non-tangent curve, concave
Southeasterly having a radius of 323.00 feet, through an angle of 99(Degree) 23'
37", an arc length of 560.32 feet (the initial radial line bears S. 78(Degree)
32' 25" W.) to the most Westerly corner of said Parcel "A".
The preceding three (3) courses being along the Easterly line of said Parcel 1
(Trautwein Road); Thence S. 81(Degree) 58' 18" E.., a distance of 395.91 feet;
Thence Easterly on a curve concave Northerly having a radius of 1543.92 feet,
through an angle of 08(Degree) 11' 26", an arc length of 220.70 feet; Thence N.
89(Degree) 50' 17" E., a distance of 849.85 feet; Thence S. 47(Degree) 32' 52"
E., a distance of 33.97 feet to the point of beginning.
The preceding four (4) courses being along the southerly line of said Parcel
"A".
Per Certificate of Compliance as recorded July 20, 1990 as Instrument
No. 269242 of Official Records.
Said land is located in the City of Riverside.
<PAGE>
Exhibit "C"
CONSTRUCTION OF THE PREMISES
1. Landlord shall, at Landlord's expense, and in accordance with plans and
specifications prepared by Landlord, perform the following work on the Premises
and deliver to Tenant a finished building consisting of approximately 5,000
square feet of Building Area, together with an outside seating area (patio)
consisting of a minimum of 500 square feet of Exclusive Use Area:
(i) Concrete foundation, perimeter walls and roof.
(ii) Drywall on perimeter walls (excluding masonry
walls), taped, sanded and painted.
(iii) All underground plumbing (water and waste) including
stubbing of plumbing lines, floor sinks, drains, and
beer line chases per space plans provided and
supplied by tenant.
(iv) Concrete flooring including curbs and raised
elevation in bathrooms.
(v) 1,500 gallon grease trap with inspection box per
Health Department Codes.
(vi) Electrical panels sized for restaurant use-minimum
of 600 amps.
(vii) Rear exterior door (3'6" x 7'0").
(viii) Trash and receiving enclosures will be constructed as
close to rear exterior door per city ordinances.
(ix) Roofing to be installed after all penetrations are
in.
(x) Requirements of Building and Health Departments
such as sewer hook up charge and back flow preventor.
(xi) French style (aluminum, turquoise-green) multi-pane
windows and double door entry to be added to conform
to Texas Loosey's style. The building exterior must
conform to the Mission Grove design guidelines, and
subject to the city of Riverside.
(xii) Minimum size requirements on gas and water.
(xiii) All A/C units for public areas, restrooms, dressing
rooms, and offices (3 units, minimum 15 tons with
heat pumps).
(xiv) Sprinklers set and finished at final ceiling height.
(xv) Patio area including concrete stub wall with glass,
or plexi-glass and/or wrought iron wind shields,
which patio area shall be subject to approval by
Landlord and shall blend with the architectural
design of the Shopping Center, including stucco.
Landlord shall submit preliminary plans to Tenant for Tenant's
approval and Tenant shall have ten (10) business days within which to approve
same, or to indicate those matters which are not approved. The parties shall
work together in good faith to resolve any objections of Tenant and to arrive at
a mutually satisfactory set of plans and specifications. If the parties are
unable to agree on a mutually satisfactory set of plans and specifications
within sixty (60) days after Landlord first submits same to Tenant. Landlord
may, at its option, terminate the Lease.
2. Within thirty (30) days after the later to occur of (i) approval of the
plans by Landlord and Tenant, or (ii) the issuance by the city of Riverside of
the Conditional Use Permit and all other required approvals, Landlord shall
enter into a contract for the construction of the improvements described in the
plans.
3. As soon as possible after the contract for construction of the premises
has been entered into but in no event before the obtaining of the building
permit and other required governmental approvals for the Premises, Landlord
shall cause construction to commence on the Premises. Landlord agrees that such
construction will be diligently and continuously pursued to completion.
4. Tenant shall pay the cost of any change order for the Premises after the
building permit is in a position to be issued and the contract has been entered
into, if (i) Tenant or the Tenant's architect initiated the change order, or
(ii) such change order is the resulted from an order, rule or regulation of a
governmental entity having jurisdiction or a utility company, or (iii) the
change order is the result of the design of the Premises as set forth in the
approved plans being incorrect, insufficient or inaccurate. Landlord shall be
responsible for the cost of any change order initiated by Landlord after
Landlord has approved the plans.
5. All work to the Premises not specifically set forth in Section 1 above
shall be Tenant's responsibility, including without limitation, construction
and/or installation of any interior walls, floor coverings, and all of Tenant's
furniture, fixtures and equipment necessary for operation of a restaurant
facility.
6. Notwithstanding anything to the contrary contained herein, Landlord
agrees to contribute a sum not to exceed One Hundred Thousand Dollars
($100,000.00) to apply toward installation of tenant improvement work. Said sum
is hereinafter referred to as "Construction Allowance". The Construction
Allowance shall in no event be applied toward Tenant's trade fixtures, signs or
architect fees of Tenant to Tenant's architect.
The Construction Allowance shall be paid in the form of progress
payments based on the portion of Tenant's Work performed, and in accordance with
Tenant's "Draw Request" as follows: Tenant shall submit to Landlord, every two
(2) weeks, beginning two weeks after Tenant's Work is commenced, Tenant's Draw
Request consisting of invoices for completed work or progress of work, certified
by Tenant and Tenant's contractor, which shall show thereon the percentage of
Tenant's Work completed and the amount of the payment requested by Tenant's
contractor, and which shall in addition, show in sufficient detail the work
performed for which payment is sought. All such Draw Requests shall be
accompanied by receipted bills for work already paid for, and in the case of
work not yet paid for, such evidence of payment shall be submitted within five
(5) business days thereafter. Provided Landlord shall approve such Draw Request
by Tenant, Landlord shall within ten (10) days thereafter, pay to Tenant the
amount of such Draw Request. With regard to the final Draw Request, Landlord
shall pay to Tenant the amount of such final Draw Request within ten (10) days
after Tenant has opened for business and executed and delivered to Landlord the
Estoppel Certificate which is labeled Exhibit "D", attached to the Lease and
made a part hereof, provided the Premises are free and clear of all mechanics'
liens and other liens on account of such construction work, evidenced by
mechanics' lien releases or other lien releases.
7. The following conditions shall apply to Tenant's Work:
(a) All work, once commenced, shall be diligently Prosecuted to
completion (subject to force majeure); shall comply in all respects with the
Uniform Building Code and/or State, County or City or other laws, codes,
ordinances and regulations, as each may apply according to the rulings of the
controlling public official, inspector or agent. Applicable standards of the
National Board of Fire Underwriters, the National Electrical code, the American
Gas Association, and the American Society of Heating, Refrigeration and
Air-Conditioning Engineers shall be observed.
(b) Each contractor or subcontractor shall guarantee that portion of
the work for which he is responsible to be free from defects in workmanship or
materials for a period of not less than one (1) year from the date of completion
thereof, and such guarantees shall be in writing. Every such contractor and
subcontractor shall be responsible for the replacement or repair without
additional charge, if any, for all work done or furnished in accordance with its
contract, if such shall become defective within one (1) year after completion
and acceptance thereof by Tenant, The correction of such work shall include,
without additional charge, all expenses and repair of damages in connection with
removal or replacement of all or any part of such work. All such guarantees and
warranties as to materials or workmanship shall be continued in the written
contract of the contractor or subcontractor, which shall be written so that such
guarantees and warranties shall inure to the benefit of both Landlord and Tenant
as their respective interests may appear, and cab be directly enforced by
either. Tenant shall, upon request, give to the Landlord any assignment or other
assurances necessary to effect such right of direct enforcement.
(c ) Where required by law, all design and engineering shall be done by
architects or engineers licensed to practice in the state in which the Project
is located. Tests and inspections shall be performed by firms whose work is
approved and accepted by the governmental agency having jurisdiction.
(d) Tenant shall act as its own contractor with respect to the interior
work performed in the Premises, building as an owner/occupant. Tenant is a
licensed B-1 general contractor, contractor's license no. B381636. All other
contractors and subcontractors shall be licenses by the state and city in which
the work is to be performed. Contracts and subcontracts shall require that all
work be performed in a thoroughly first-class and workmanlike manner in
conformance with plans. The cost of permits and fees shall be included in the
contractor's price in all instances.
(e) All contractors and subcontractors shall carry workman's
compensation insurance covering all their respective employees shall also carry
public liability insurance including property damage insurance, with limits and
in form and in companies approved in advance by Landlord, and the policies
therefor shall insure Landlord and Tenant as well as contractor. Builder's risk
insurance shall be carried by the Tenant or Tenant's contractors on all Tenant's
Work. Certificates or endorsements of such insurance coverage shall be delivered
to each party on request.
<PAGE>
EXHIBIT "D"
ESTOPPEL CERTIFICATE
Date: ______________________, 19____
Re: address: _______________________
------------------------------------
For Premises in:____________________
------------------------------------
Gentleman:
It is our understanding that you have committed to place a
mortgage upon the subject premises and, as a condition precedent thereof, have
required this certification by the undersigned.
The undersigned, as Tenant under that certain Lease dated
______________________, 19______, made and entered into between
_____________________________________, as Landlord and the undersigned, as
Tenant, hereby ratifies said Lease and certifies that the undersigned has
entered into occupancy of the premises described in said Lease on
_________________, 19____, and the fixed minimum rent in the monthly amount of
$_______________________ was payable from that date; that said Lease is in full
force and effects and has not been assigned, modified, supplemented or amended
in any way (except by agreement(s) dated _____________, 19 ____); that the same
represents the entire agreement between the parties as to this leasing; that the
term of said Lease expires on ___________________, 19____; that all conditions
under said Lease to be performed by the Landlord have been satisfied, but
without limitation, all cotenancy requirements thereunder, all required
contributions by Landlord to Tenant on account of Tenant's improvements have
been received, and on this date there are no existing defenses or offsets which
the undersigned has against the enforcement of said Lease by the Landlord; that
no rental has been paid in advance and no security (or the sum of
$_____________) has been deposited with Landlord; and that the fixed minimum
rent for the period to and including _____________________, 19____, has been
paid.
Very truly yours,
---------------------------------------------
---------------------------------------------
Tenant
<PAGE>
SIGN CRITERIA
Mission Grove Plaza
100-300 Blvd. Alessandro Blvd.
General Specifications
1. Purpose: The purpose of the following criteria is to establish a
coordinated sign program that gives each Tenant adequate
Identification, while achieving a unified, attractive appearance among
all lease spaces. In order to maintain the integrity of the criteria
and equity among all tenants, deviations from the criteria will not
generally be approved.
2. Exceptions: All exceptions to these criteria must be approved by the
landlord and City of Riverside Design Review Board.
3. Landlord Approval: Prior to sign fabrication, the tenant shall
submit three (3) copies of drawings of the proposed signs to the
landlord for approval. Such drawings must include all of the items
listed below under "City Approval and Permits". One (1) copy of
the drawings shall be colored.
4. City Approval and Permits: Upon approval by the landlord, the
tenant shall secure a sign permit from the City of Riverside Planning
Department by submitting three (3) copies fully dimensioned scaled
drawings as follows:
a. A site plan showing the location of the lease space on the
site.
b. An elevation of the lease space drawn to scale and showing
sign placement and lease space width.
c. A detailed elevation of the sign drawn to scale and
showing all colors, materials, dimensions and copy.
d. Fabrication and installation details, Including structural
and engineering data, U.L. electrical specifications, and
type and intensity of illumination (for electrical signs).
5. Cost of permits: All permits for signs and the installation thereof
shall be obtained and paid for by the tenant.
6. Compliance with Code: All signs and the installation thereof shall
comply with all local zoning, building and electrical codes.
B.1. Location of Signs (ANCHOR TENANTS)
1. Approval Required: All signs shall be attached to the building
only at a location specified by these criteria and approved by
the landlord and the City of Riverside Planning Department.
2. Main Business ID Sign: The main business identification sigh
shall be centered on the building fascia, both vertically and
horizontally, above the lease space.
3. Delivery Entrance Sign: If applicable, the tenant may attach a sign
consisting of 2" high helvetica medium letters, identifying the
business name and address on a non-customer delivery entrance. The
location of this sign will be subject to landlord approval.
4. Under Canopy Business ID Sign: If provided for in the criteria the
under canopy business ID sign shall be centered on the lease space
and oriented perpendicular to the adjacent building wall.
5. Window Sign: The business identification window sign shall be
centered on the storefront glass nearest the main pedestrian
entrance. The sign shall not exceed 180 square inches and shall be
composed of white vinyl lettering (Helvetica Medium letter style).
B.2. Location of Signs (Shop Building Tenants).
1. Approval Required: All signs shall be attached to the building
only at a location specified by these criteria and approved
by the landlord and the City of Riverside Planning Department.
2. Main Business ID Sign: The main business identification sign
shall be centered on the building fascia, both vertically and
horizontally, above the lease space.
3. Delivery Entrance Sign: If applicable, the tenant may attach a sign
consisting of 2" high helvetica medium letters, identifying the
business name and address on a non-customer delivery entrance. The
location of this sign will be subject to landlord approval.
4. Under Canopy Business ID Sign: If provided for in the criteria, the
under canopy business ID sign shall be centered on the lease space
and oriented perpendicular to the adjacent building wall.
5. Window Sign: If provided for in the criteria, the business
identification window sign shall be centered on the storefront glass
nearest the main pedestrian entrance.
C.1. Design of Sign (Anchor Tenants).
1. Sign Type: All tenant signs shall be composed of single face cabinet
or channel letters, with one (1) square foot of sign area per foot
of building frontage, not to exceed 150 square feet in area.
Sandblasted or painted signs are not permitted.
2. Sign Size: Tenant signs shall be dimensioned as follows:
a. Sign height: Maximum 10'
b. Sign Width: Not to exceed 70% of the tenant's lease space.
3. Sign Copy: Wording of signs shall not include the product sold or
services offered, except as part of Tenant's trade name or insignia.
4. Sign Colors: All signs shall consist of the following colors:
a. Sign Copy Color(s): Subject to Planning Department and
landlord approval.
b. Sign Background Color: Subject to Planning Department and
landlord approval.
c. Cabinet/Letter Return Color: To match main building color.
d. Trim Cap Color: To match main building color.
5. Logos: LOGOS ARE NOT TO EXCEED 10% OF THE OVERALL SIGN AREA. Logos
will be considered on a case by case basis, at the discretion of the
landlord subject to approval of the City of Riverside Design Review
staff as follows:
a. Logo Height: Maximum 10'
b. Logo Copy Color(s): Maximum three (3) colors, at least on
(1) to match the sign color, and subject to Planning and
landlord approval.
c. Logo Background Color: Subject to Planning and landlord
approval.
d. Logo Return Color: To match main building color.
e. Logo Trim Cap Color: To match main building color.
6. Materials:
Sign Face Material: Plastic
Cabinet/Letter Return Material: Sheet metal or aluminum.
Cabinet/Letter Return Depth: Subject to Planning and landlord approval.
Trim Cap Size: 3/4'
7. Lighting:
Type of Lamps: Fluorescent or neon
Milliamps: 430 MA (florescent) and 30MA (neon)
C.2. Design of Sign (Shop Building Tenants)
1. Sign Type: All tenant signs shall be composed of internally illuminated
channel letters, with one (1) square foot of sign area per foot of
tenant lease space frontage. A maximum of four (4) letter styles will
be allowed, subject to landlord and planning approval.
2. Sign Size: Tenant signs shall be dimensioned as follows:
a. Sign Height: Maximum 24"
b. Sign Width: Not to exceed 70% of the Tenant's lease space.
3. Sign Copy: Wording of signs shall not include the product sold or
services offered, except as a part of Tenant's trade name or insignia.
4. Sign Colors: All signs shall consist of the following colors:
a. Sign Copy Color(s): Maximum four (4) colors, including red
(2,157 or 2793) and white (W-7328), to Planning and landlord
approval.
b. Sign background Color: same as fascia color.
c. Cabinet/Letter Return Color: To match storefront color.
d. Trim Cap Color: To match storefront color.
5. Logos: LOGOS ARE NOT TO EXCEED 10% OF THE OVERALL SIGN AREA.
Logos will be considered on a case by case basis, at the
discretion of the landlord subject to the approval of the City of
Riverside Design Review staff as follows:
a. Logo Height: Maximum 24'
b. Logo Copy Color(s): Maximum four (4) colors, at least one (1) to
match copy color
c. Logo Background Color: Same as fascia color.
d. Logo Return Color: To match storefront color.
e. Logo Trim Cap Color: To match storefront color.
6. Materials:
Sign Face Material: Plastic
Cabinet/Letter Return Material: Sheet metal
Cabinet/Letter Return Depth: 5"
Trim Cap Size: 3/4"
7. Lighting:
Type of Lamps: Neon
Milliamps: 30 MA
D. Construction Requirements
1. Fastners: All exterior signs, bolts, fastenings and clips shall
be enameling iron with porcelain enamel finch, stainless steel,
aluminum, brass or bronze. No black iron or other rust prone
materials of any type will be permitted.
2. Conduit Openings: Location of all openings for conduits in the walls
of the building shall be indicated by sign drawings submitted to and
approved in writing by the landlord.
3. Sealing of Openings: All penetrations of the building structure
required for sign installation and which shall have been
approved in writing by the landlord, shall be neatly sealed in a
water tight condition.
4. Labels: A "U.L." label must be placed on every separate electrical
sign element (eg: every sign cabinet or channel letter). A city
permit label must be placed on at least one (1) sign element of each
sign. All required labels must be placed in a conspicuous location.
No other labels are allowed.
5. Exposed lamps or lubing will not be permitted.
6. Concealment of Mechanical Equipment: Raceways, crossovers,
conductors, transformers and other equipment shall be concealed.
7. Repair of Damage: The tenant is responsible for assuring that the sign
contractor repairs (in a good and workman like manner) any damage
caused by the contractor's work within two (2) days after such
damage is caused.
8. Responsibility for Work: The tenant shall be fully responsible
for the work of its sign contractors.
9. Cost of Electricity: Electrical service to all signs shall be on the
tenant's meters and shall be part of the tenant's operational costs.
E. Miscellaneous Restrictions
1. Hours of Business and Telephone Numbers: Limited to no more than
four (4) square feet for each business frontage with a customer
entrance.
2. Flashing Signs: Animated, flashing or audible signs will not be
permitted.
3. Lettering painted directly on a building surface will not be permitted.
4. Projections above or below the designated sign area will not be
permitted.
5. Temporary Signs: All paper signs, banners, balloons, streamers,
placards, pennants, or portable signs which direct, promote, attract,
service, or which are otherwise designed to attract attention are
prohibited, except that the following temporary signs shall be
permitted:
1. One banner not exceeding 60 square feet shall be permitted for a period
not exceeding thirty consecutive days when announcing a grand opening
of a new business at the site where the banner is to be displayed. The
banner shall be stretched and secured flat against the building surface
and shall not exceed higher than the building eave or the building
parapet wall.
2. Merchandise sale and special event signs not exceeding 30% of a window
area may be displayed for a period of time not to exceed thirty
consecutive days in and not to exceed a total of thirty days in any
ninety day period. Such signs may be painted in water soluble paints or
constructed of paper, wood, fabric, plastic or similar materials and
shall be restricted to a window area on the premises where the sale is
conducted. No more than two (2) colors shall be used for such signs
including black and white. Fluorescent colors are prohibited.
E. All Companies Bidding To Manufacture
1. Substitutions: All companies bidding to manufacture a tenant's signs
are advised that no substitutes will be accepted by the landlord
whatsoever, unless so indicated in the specifications which are
approved in writing by the landlord, the tenant and City of Riverside
Planning Department. Signs that deviate from these criteria without
such approval must be removed at the tenant's expense.
2. Inspection: Prior to acceptance and final payment, each sign
will be inspected for conformance to these criteria by the City
of Riverside Planning Department and by an authorized
representative of the landlord. Any signs found not in
conformance will be rejected and removed at the tenant's expense.
3. Guarantee: The entire sign display shall be guaranteed for one (1)
year against defects in material and workmanship. Defective parts
shall be replaced without charge.
4. Insurance: The tenant's sign fabrication and installation company shall
carry Workmen's Compensation and Public Liability Insurance against all
damage suffered or done to any and all persons and/or property while
engaged in the construction or erection of signs in the amount of Five
Hundred Thousand Dollars ($500,00.00), or as provided by current
ordinance, combined single limit.
5. Erection: The tenant's sign company shall completely erect and
connect (including all wiring) the subject sign in accordance with
these criteria.
G. No Assurances
1. The tenant acknowledges that the landlord gives no assurances that a
sign approved by the landlord, which is in accordance with the
provision of these criteria, will be acceptable to the City of
Riverside.
2. The tenant shall be solely responsible for bringing its sign into
compliance with all local rules and ordinances.
LANDLORD APPROVAL OF CRITERIA
Signature:______________________________ Date:_____________________
Printed:___________________________ Title:__________________________
*TENANT ACKNOWLEDGEMENT:
I have read, understand, and agree to abide by the above Sign Criteria.
Signature:______________________________ Date:_____________________
Printed:___________________________ Title:__________________________
*Each tenant must be supplied with a copy of these criteria and sign the above
acknowledgement.
CITY OF RIVERSIDE
Sign permits will not be issued
DESIGN REVIEW STAFF unless the criteria have been
APPROVED stamped approved to
the left.
BY_____________ DATE_____________
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EXHIBIT E
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EXHIBIT 10.4
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LEASE AGREEMENT
1. PARTIES. THIS LEASE AGREEMENT, made and entered into by and between
E & R Co-Ownership The Family Corner, hereinafter referred to as LESSOR, and
TEXAS LOOSEY'S STEAKHOUSE & SALOON, hereinafter referred to as LESSEE.
LESSOR hereby leases to LESSEE, and LESSEE hereby takes from LESSOR
that certain space ( herein called the " premises " ) delineated on Exhibit A
( Plot Plan ), which premises are located on that real property described in
Exhibit B ( Legal Description ) and situated within the City of Norco, County of
Riverside, State of California, commonly known as 1825 Hamner Ave., Suites A-E
TO HAVE AND TO HOLD the same for the term of Six (6) years and five (5) months
beginning on Commencement Date as defined in Paragraph 2 hereof, upon the
following terms, conditions and covenants. SEE ADDENDUM I.
2. TERM. The term of this Lease shall commence February 1, 1997 ( the
"Commencement Date" ) No rent shall be payable by LESSEE until the term hereof
shall have commenced.
3. RENT. LESSEE agrees to pay at such place as may be designated by LESSOR, rent
for said premises at a rental of $ 5,112.00 per month in advance on the first
day of each calendar month during the Lease term, as adjusted in accordance with
the Consumer Price Index described below. If the Lease commences on any day
other than the first day of a calendar month, that prorata fraction of the first
month's minimum rental based on a (30) day month shall be paid at the end of
that portion of the month. SEE ADDENDUM I.
If LESSEE shall fail to pay, when the same is due and payable, any rent
or additional rent or any amount or other charges required to be paid under this
Lease, LESSEE promises to pay to LESSOR, in addition to such unpaid amounts, a
late payment charge equal to Ten Percent (10%) of such unpaid amounts. Other
than the Minimum Rent, All monetary obligations of LESSEE under this Lease,
including the obligation to pay insurance premiums, taxes, utilities,
maintenance expenses and all " Common Area " ( as hereinafter defined )
expenses, shall be deemed to be additional rent. LESSEE acknowledges that in the
event that he does not pay rent in a timely manner,
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LESSOR will incur administrative and other costs and that the late charge is a
fair compensation to LESSOR for the late payment, and in not a penalty.
4. SECURITY DEPOSIT. As further consideration for the execution of this Lease by
LESSOR, LESSEE agrees to pay LESSOR, upon LESSEE'S execution of this lease, the
first month's rent plus the sum of Six thousand one hundred & seventy seven
dollars ($6,177.00) which shall constitute a Security Deposit. LESSEE, upon
vacating the premises, hereby warrants that all damage, if any, will have been
repaired, that the premises will be clean, swept and free of rubbish to LESSOR'S
specification and that LESSEE will have fully complied with all rental
obligations by LESSEE shall result in a full refund of the Security Deposit. In
lieu of the above, costs including, but not limited to, repair, cleaning or
fulfillment of LESSEE'S rental obligation may be deducted, by and at LESSOR'S
sole discretion, from the Security deposit and upon LESSOR'S satisfaction that
the terms, covenants and conditions of this Lease have been fully met, the
balance, if any, of the Security Deposit shall be returned to LESSEE.
Notwithstanding the above, LESSOR'S right under this Lease prevail
beyond this clause and use of the Security Deposit does not affect or abrogate
LESSOR'S claims that have not been fully remedied by use of said Security
Deposit.
5. USE OF PREMISES.
The premises shall be used as a restaurant and cocktail lounge to be
operated under the trade name of " Texas Loosey's Steakhouse & Saloon. " The
operation shall be consistent with other Texas Loosey's restaurant operations.
The premises may be used for any other lawful purpose not in conflict with other
tenants in the shopping center.
Lessee shall not sell any product which directly competes with the
principle product of any other tenant in the shopping center.
6. COMPLIANCE WITH LAW. LESSEE shall comply with all governmental laws,
ordinances and regulations applicable to the use of the premises, and shall
promptly comply
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with all governmental orders and directives for the correction,
prevention and abatement of nuisance in or upon or connected with the premises,
at the LESSEE'S sole expense.
7. TAXES AND ASSESSMENTS. LESSEE shall pay before delinquency all taxes,
assessments, license fees and other charges that are levied and assessed against
LESSEE'S personal property installed or located in or on the premises, and have
become payable during the term. On demand by LESSOR, LESSEE shall furnish LESSOR
with satisfactory evidence of these payments.
LESSEE shall pay to LESSOR ( or, at LESSOR'S option, to the applicable
taxing authority ) its share of the " Real Estate Taxes " ( as hereinafter
defined ) applicable to the shopping center. LESSOR and LESSEE acknowledge and
agree that the percentage rate of Sixteen (16%) ( the "Contribution Rate " ) is
an equitable percentage negotiated and agreed upon by LESSOR and LESSEE and is
not intended to be a pro-rata formula for LESSEE'S share of costs. It is
expressly agreed by LESSOR and LESSEE that the Contribution Rate shall remain
constant and shall not be subject to adjustment of LESSEE'S share during the
term of the Lease. There shall be an appropriate adjustment of LESSEE'S share
during the term of the Lease. There shall be an appropriate adjustment of
LESSEE'S share of the common area expenses as of the commencement and expiration
of the term of this Lease.
The term " Real Estate Taxes " shall include all taxes, excises and
assessments, both general and special levied on or assessed against LESSOR or
the shopping center and all taxes, excises or assessments measured by or based
in whole or in part upon the business or leasing the shopping center, including
those taxes, excises and assessments imposed in addition to or as a substitution
in whole or in part for any taxes prevailing at the Commencement Date; provided,
however Real Estate Taxes shall not include any municipal, county, state or
federal income, estate, succession, inheritance or transfer tax imposed upon
LESSOR. LESSEE agrees to and shall pay all such Real Estate Taxes not more that
ten (10) days after receipt of a statement from LESSOR setting forth the amount
then to be paid.
LESSEE acknowledges and understands that in the even LESSOR should at
any time in the future sell the Premises, then pursuant to California Article
XIIIA ( Proposition 13, Jarvis-Gann Initiative ) there would probable be a
substantial increase in the real property taxes. LESSOR makes no
representations, statements or warranties to LESSEE, expressly or implied, that
it will not see the Premises at any time in the future during the term or
extended term of this Lease.
8. MAINTENANCE. LESSEE shall at its expense and risk maintain all of the
interior and other and other improvements of the premises in good repair and
condition including, but not limited to, all necessary repairs and replacements
to the plumbing, electrical wiring, window glass, plate glass, doors, painting,
heating system, and the air conditioning equipment. LESSOR shall provide, as
necessary maintenance, repair, replacement, repainting and cleaning of all
exterior areas of the building, including the roof and Common Areas. LESSEE
shall bear a part of the cost of such maintenance, repair, replacement,
repainting, cleaning and utilities at the same Contribution Rate as set forth in
Paragraph 7. LESSEE shall throughout the Lease term take good care of the
building and other improvements and keep them free from waste or nuisance, shall
deliver up the premises
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broom clean at the termination of this Lease in good
repair and condition (reasonable wear and damage by fire, tornado, or other
casualty excepted ). In the event LESSEE should neglect reasonably to maintain
the premises, LESSOR shall have the right ( but not the obligation ) to cause
repairs or corrections to be made and any reasonable costs therefore shall be
payable by LESSEE to LESSOR as additional rental on the next rental installment
date. LESSOR shall have first given 10 days prior written notice to LESSEE
before the repairs are made by LESSOR.
LESSOR may provided as LESSOR deems necessary, servicing for the air
conditioning unit(s) located on the premises. LESSEE shall bear the cost of such
servicing as a part of the common area maintenance charges. LESSEE shall remain
responsible for all necessary air conditioning repairs.
LESSEE'S obligations set forth in this paragraph form a material part
of the consideration for this Lease, and LESSEE hereby waives all rights to make
repairs at the expense of LESSOR as provided by any law, statute or ordinance
now or hereafter in effect.
9. ALTERATION, ADDITIONS, AND IMPROVEMENTS. LESSEE shall not create any openings
in the roof or exterior walls, nor make any structural alterations, additions or
improvements to the premised without prior written consent of LESSOR, which
consent shall not be unreasonable withheld. LESSEE shall have the right at all
times to erect or install shelves, bins, machinery and trade fixtures, provided
that LESSEE complies with all applicable governmental law, ordinances, and
regulations. LESSEE shall have the right to remove at the termination of the
Lease such items so installed, however, LESSEE shall, prior to the termination
of this Lease, repair any damage caused by such removal.
All alterations, additions, or improvements made by LESSEE that are
permanently attached to the real estate shall become the property of the LESSOR
at the termination of this Lease; however, LESSEE shall promptly remove, if
LESSOR so elects, all alterations, additions and improvements and any other
property placed in the premised by LESSEE and LESSEE shall repair any damage
caused by such removal.
LESSEE has the right to make minor interior alterations of a
nonstructural nature, without LESSOR'S consent.
If LESSEE makes any alterations to the premises after obtaining
LESSOR'S consent, such alterations shall not be commenced until ten (10) days
after LESSOR has received notice from LESSEE stating the date installation is to
commence so that LESSOR can record and post an appropriate Notice of Non
responsibility.
10. SIGNS. LESSEE shall not have the right to place, construct, or maintain on
the exterior wall or roof of the building in which the premises are located, any
signs, advertisements, names, insignia, trademarks, descriptive material or any
other items without first procuring LESSOR'S express written consent. LESSEE
will provide a facia sigh for LESSEE'S use at LESSEE'S expense. LESSOR shall
designate the size, shape, color, design, and location of all exterior signs to
be installed by LESSEE. LESSEE agrees to submit to LESSOR, copies of LESSEE'S
sign plans for LESSOR'S written approval within (30) days after LESSOR'S request
for such plans. LESSEE shall not open for business prior to the installation of
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the facia sign without the express written consent of LESSOR. LESSOR at LESSEE'S
cost can remove any item placed, constructed, or maintained that does not comply
with the provisions of this section. LESSEE shall not place, construct, or
maintain on the premises any advertisement media, including without limitations,
search lights, flashing light, loudspeakers, phonographs, or other visual or
audio media. LESSEE shall remove all signs at the termination of this Lease and
shall repair any damage and close any holes caused by such removal.
LESSOR, at LESSOR'S option, may install a pole and pole sign, if said
pole and pole sign are installed by LESSOR, and if LESSEE is granted space on
said sign, LESSEE shall pay its proportionate cost in purchasing and maintaining
said sign.
11. UTILITY SERVICES. LESSEE shall be solely responsible for and promptly pay
when due all charges for water, gas, telephone, heat, electricity or any other
utility used or consumed on the premises during the term of the Lease. If LESSEE
refuses or neglects to pay any utility charges, as provided in the Lease, LESSOR
may, at LESSOR'S option, pay for such charges, and LESSEE shall pay such amount
and all costs incurred in connection therewith to LESSOR, as additional rent,
upon demand. In no event shall LESSOR be liable for an interruption or failure
in the supply of any utilities to the premises, unless caused by the gross
negligence or intentional act of LESSOR. LESSEE shall, at its own expense, be
solely responsible for prompt removal and disposal of refuse and rubbish from
the premises.
In the event that the utility usage by LESSEE is not separately
metered, LESSEE agrees to pay to LESSOR, as additional rent, its equitable share
of the charges for each utility on such common meter; provided, however, that
LESSOR shall have the option to be exercised within its sole discretion, of
allocating utility charges with reference to criteria other than comparative net
leasable floor area ( including, without limitation, the particular uses and
hours of usage by lessees ) and LESSEE agrees to pay within ten (10) days after
receipt of a statement from LESSOR, the amount of such allocation to LESSOR as
additional rent. If LESSEE disputed, the reasonableness of such allocation,
LESSEE shall have, as its sole and bargained-for-remedy, the option to cause, at
its sole cost and expense, the installation of separate meters or sub meters and
incidental auxiliary lines, for the premises.
Tenant responsible for any special water meter devices, installed on
his meter, including any annual maintenance and/or devices. This is not a CAM
item.
12. INSURANCE. LESSOR shall obtain and maintain a fire insurance and lessor's
risk liability insurance policy covering the building and/or buildings and
common areas on the described premises. LESSEE shall reimburse LESSOR for the
cost of said insurance policy at the same Contribution Rate as set forth in
Paragraph 7. The policy of insurance will include the Special Extended Coverage
Endorsement or its equivalent, and shall include but not be limited to the
perils of fire and lightning, extended coverage, and vandalism and malicious
mischief. Said policy shall also include Rental Value insurance coverage for any
period of at least six (6) months during which the premises are partially or
totally untenantable.
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LESSEE shall, at LESSEES sole cost and expense, at all times during the term of
this Lease procure and maintain in full force and effect, fire legal liability
insurance with limits of not less than $100,000.00 and Broad Form general
liability insurance with limits of not less than $1,000,000.00 for death or
injury to any one person, and not less than $250,000.00 for damage to property
of others. Such insurance policy shall name LESSOR as an additional insured and
a certificate by the insurer that such insurance is in force shall be furnished
the LESSOR. The Certificate of Insurance shall provide (30) days notice in the
event the policy is terminated for any reason.
Indemnity - Insurance Waiver of Subrogation. The LESSEE covenants with
the LESSOR that LESSOR shall not be liable for any damage or liability of any
kind or for any injury to or death of any persons during the term of this lease,
from any cause whatsoever, which arises out of, is connected with, or is holding
under said LESSEE, and that LESSEE will indemnify and hold harmless the LESSOR
from all liability whatsoever, on account of any such real or claimed damage or
injury as above described and from all liens, claims and demands arising out of
the use of the premises and its facilities, or any repairs or alterations which
the LESSEE may make upon said premises, but the LESSEE shall not be liable for
damage or injury arising out of the negligence of the LESSOR and its designated
agents, servants or employees.
This obligation to indemnify shall include the retention of legal
counsel and investigation costs and all other reasonable costs, expenses and
liabilities from the first notice that any claim or demand is to be made or may
be made.
The LESSOR and LESSEE hereby waive an rights each may have against the
other on account of any loss or damage occasioned to the LESSOR or the LESSEE,
as the case may be, their respective property, the premises, or its contents on
to other portions of the shopping center, arising from any risk generally
covered by fire and extended coverage insurance, vandalism, malicious mischief
and sprinkler leakage; and the parties each, on behalf of their respective
insurance companies insuring the LESSOR or the LESSEE, as the case may be.
13. MONTHLY CHARGES. LESSEE shall pay to LESSOR as additional monthly rent on
the first of the month, the total sum of One Thousand & Sixty Five Dollars
($1065.00) ( the "Estimated Monthly Charges " ). This sum is LESSEE'S estimated
Contribution of: (1) the estimated monthly cost of real property taxes (
exclusive of special assessments ): (2) the estimated monthly cost of Common
Area Maintenance charges; and (3) the actual monthly cost of the fire insurance
required to be purchased by LESSOR. LESSOR may increase the Estimated Monthly
Charges due each month at the time any semiannual or annual adjustment is made.
LESSOR shall furnish at least annually, in December, of every calendar
year, or at LESSOR'S sole option semiannually, in June and December, for each
calendar year or portion thereof, an expense statement to LESSEE setting forth
the actual taxes, common area maintenance charges and insurance incurred for the
annual or semi-annual period covered by the expense statement together with the
actual amount of Estimated Monthly Charges collected for the period covered.
LESSEE agrees to pay any deficiency within (10) days after receipt of a
statement from LESSOR setting forth the amount to be paid. In the
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event of any overpayment, such overpayment will be credited to future estimated
monthly charges.
14. LESSOR'S RIGHT OF ENTRY. LESSOR or its authorized agents shall have the
right to enter premises during normal working hours for the following purposes:
(a) inspecting the general conditions and the state of repair of the premises:
(b) the making of repairs required of LESSOR; and (c) the showing of the
premises to any prospective purchaser.
If LESSEE shall not have renewed or extended this Lease prior to the
final ninety (90) day period of the Lease term, LESSOR or its authorized agents
shall have the right to erect on or about the premises a customary sign
advertising the property for lease or for sale. During said ninety (90) day
period LESSOR or its authorized agents shall have the right to enter the
premises during normal working hours for the showing of the premises to
prospective tenants.
15. HOLDING OVER Should LESSEE, or any of its successors in interest, hold over
the premises, or any part thereof, after expiration of the term of this Lease,
unless otherwise agreed to in writing, such holding over shall constitute and be
construed as tenancy from month to month only, at a monthly rental equal to the
rent paid for the last month of the term of this Lease, and subject to all the
terms and conditions, provisions and obligations of this Lease insofar as the
same are applicable to a month-to-month tenancy.
16. ASSIGNMENT AND SUBLETTING. LESSEE shall not assign this Lease, nor any
interest therein and shall not sublet the premises or any part thereof, or any
right or privilege appurtenant thereto, or permit any other person ( the agents
and servants of LESSEE excepted ) to occupy or use the premises, or any portion
thereof, without first obtaining the written consent of LESSOR, which consent
shall not be unreasonable withheld. LESSOR reserves the right, at its option, to
terminate this Lease rather than consent to such assignment, subletting,
occupation or use by another person whose use of the premises is not in
compliance with the use set forth in Paragraph 5. Consent to an assignment,
subletting or occupation shall not release the original LESSEE from liability
for the continued performance of the terms and provisions on the part of LESSEE
to be kept and performed.
17. REPAIR OF DAMAGE. If the building or other improvements on the premises
should be damaged or destroyed by fire, tornado or other casualty, LESSEE shall
give immediate written notice thereof to LESSOR. In the event the improvements
on the premises are damaged or destroyed, then LESSOR shall repair and restore
the improvements then owned by LESSOR, only to the extent of insurance proceeds
actually received by LESSOR from insurance policies maintained pursuant to
Paragraph 12 and this Lease shall continue in full force and effect; provided,
however, LESSOR shall not be obligated to repair or restore damage or
destruction arising from uninsured events. For purposes of this paragraph,
improvements owned by LESSOR shall include the building and common areas and
those tenant improvements provided by LESSOR, and shall not include fixtures and
equipment, interior decorating or other improvements installed by LESSEE. LESSOR
shall commence such repair or rebuilding with reasonable diligence and shall
complete the same within five (5) months after the same is commenced, or such
longer period as may be reasonably required; provided, however, that any delay
in the completion of said repairs resulting from fire or other casualty,
strikes, shortages of material or labor, governmental laws, rules and
regulations, the elements or matters beyond the reasonable control of LESSOR
shall extend
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the time within which LESSOR may complete said repairs or rebuilding by the
period of such delay. There shall be an abatement of rental by reason of such
damage or destruction for the time required to repair or rebuild. In the event
of an uninsured casualty wherein at least twenty percent (20%) of the square
footage of the premises is damaged or destroyed so as to be unusable, the Lease
may terminate at LESSOR'S option. The net proceeds of any and all insurance on
the premises shall be paid to LESSOR to be applied to the costs and expense of
repair or rebuilding of the premises. Notwithstanding anything contained herein
to the contrary, if the premises are damaged or destroyed during the final
twenty-four (24) months of the Lease terms, LESSOR shall not be required to
rebuild or repair such damage and this Lease may terminate at LESSOR'S option.
18. HOLD HARMLESS. LESSOR shall not be liable to LESSEE or LESSEE'S employees,
agents or invitees or to any other persons whomsoever, for any injury to person
or damage to property on or about the premises resulting from any cause
whatsoever, unless causes by or due to the negligence of LESSOR, its agents,
servants or employees, LESSEE agrees to indemnify LESSOR and hold it harmless
from any liability, loss, expense or claims arising out of any damage or injury,
unless such damage or injury result from LESSOR'S act or neglect.
19. ATTORNEY'S FEES. should any party hereto institute any action or proceeding
at low or in equity, or in connection with an arbitration, to enforce any
provision of this Agreement, including an action for relief, or for damages by
reason of an alleged breach of any provision of this Agreement or otherwise in
connection with this Agreement, or any provision thereof, the prevailing party
shall be entitled to recover from the losing party or parties reasonable
attorney's fees and costs for services rendered to the prevailing party in such
action or proceeding.
20. QUIET ENJOYMENT. LESSOR warrant that it has full right and power to execute
and perform this Lease and to grant the estate demised herein that LESSEE, on
payment of the rent and performing the covenants herein contained, shall
peaceable and quietly have, hold and enjoy the premises during the full term of
this Lease and any extension or renewal thereof.
21. CONDEMNATION. If, during the term of this lease or any extension or renewal
thereof, a portion of the premises or common area should be taken for any public
or quasi-public use under any governmental law, ordinance or regulation of by
right of eminent domain, or should be sold to the condemning authority under
threat of condemnation, ( a "taking" ) so as to render the premises unsuitable
for LESSEE'S continued use ( a "substantial taking" ), this Lease shall
terminate and the rent shall be abated during the unexpired portion of this
Lease, effective as of the date of taking of said premises by the condemning
authority.
If the taking is less than a substantial taking, the Lease shall not
terminate but LESSOR shall forthwith at its sole expense restore and reconstruct
the buildings and other improvements situated on the premises, to the extent of
the amount of condemnation proceeds actually received by LESSOR, provided such
restoration and reconstruction shall make the same reasonable tenantable and
suitable for the uses for which the premises are
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leased as defined in Paragraph 5 above. The rent payable hereunder during the
unexpired portion of this Lease shall be adjusted equitably.
In all cases the entire condemnation award shall belong to and be paid
to the order of LESSOR, except that to the extent it is expressly awarded
separately, LESSEE shall receive the amount awarded for the LESSEE'S trade
fixtures and relocation expenses. LESSEE shall have no claim against LESSOR for
the value of any unexpired term of this lease.
22. DEFAULT.
1. The following events shall be deemed to be events of default by LESSEE under
this Lease:
a) Lessee shall fail to pay any installment of the rent, or additional
rent, or other charges payable by LESSEE, on the date that same is due and such
failure shall continue for a period of three (3) days after written notice from
LESSOR.
b) LESSEE shall fail to comply with any term, condition, or covenant of
this Lease other that the payment and shall not cure such failure within ten
(10) days after written notice thereof to LESSEE or if such failure cannot
reasonable be cured within the said ten ( 10 ) days after written notice thereof
to LESSEE.
c) LESSEE shall become insolvent, or shall make a transfer in fraud of
creditors, or shall make an assignment for the benefit of creditors.
d) LESSEE shall file petition under any section or chapter of the
National Bankruptcy Act, as amended, or under any similar law or statute of the
United States or any State thereof, or LESSEE shall be adjudged bankrupt or
insolvent in proceedings files against LESSEE thereunder.
e) A receiver or trustee shall be appointed for all or substantially
all of the assets of lessee.
2. Upon the occurrence of any such events or default by LESSEE, LESSOR shall
have the option to pursue any one or more of the following remedies without any
notice of demand whatsoever:
a) Terminate this Lease, in which event LESSEE shall immediately
surrender the premises to LESSOR, and if LESSEE fails to do so, LESSOR may,
without prejudice to any other remedy which it may have for possession or
arrearages in rent, enter upon and take possession of the premises or any part
thereof, by force if necessary, without being liable for prosecution of any
claim or damages therefore; and LESSEE agrees to pay LESSOR on demand the amount
of all loss and damage which LESSOR may suffer by reason of such termination,
whether through inability to relet the premises on satisfactory terms or
otherwise, including the worth at the time of award of the amount by which the
unpaid rent for the balance of the term of the Lease after the time of award
exceeds the amount of such rental loss that the LESSEE proves could be
reasonable avoided ( such amount to computed by discounting the amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of the
award, plus 1% ).
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b) Continue this Lease in full force and effect, and the Lease will
continue in effect as long as LESSOR does not terminated LESSEE'S right to
possession, and LESSOR shall have the right to collect rent when due. During the
time LESSEE is in default LESSOR can enter the premises and relet them or any
part of them for period shorter or longer than the remaining term of this Lease,
and LESSEE shall pay all costs incurred in reletting the premises and the rent
due under this Lease, less the rent LESSOR receives from subletting. No acts by
LESSOR allowed by this paragraph shall terminate this Lease unless LESSOR
notifies LESSEE that LESSOR elects to terminate this Lease.
c) Enter upon the premises by force if necessary without being liable
to prosecution or any claim for damages therefore, and do whatever LESSEE is
obligated to do under the terms of this Lease, and LESSEE agrees to reimburse
LESSOR on demand for expenses which LESSOR may incur in effecting compliance
with LESSEE'S obligation under this Lease, and LESSEE further agrees that LESSOR
shall not be liable for any damages resulting to the LESSEE from such action,
whether caused by negligence of LESSOR or otherwise.
3. Pursuit of any of the foregoing remedies shall not preclude pursuit of any of
the other remedies herein provided or any other remedies provided by law, nor
shall pursuit of any remedy herein provided constitute a forfeiture or waiver of
any rent due to LESSOR hereunder or of any damages accruing to LESSOR by reason
of the violation of any of the terms, conditions and covenants herein contained.
4. The LESSEE'S sole remedy in the event of a default by LESSOR under this
Lease, shall be an action for damages, injunction or specific performance, and
not the withholding of rent or the termination of the Lease.
23. SUBORDINATION. LESSEE accepts this Lease subject and subordinate to any
recorded mortgage, deed of trust, or other lien presently existing upon the
premises. LESSOR is hereby vested with full power and authority to subordinate
LESSEE'S interest hereunder to any mortgage, deed of trust or other lien
hereafter placed on the premises, and LESSEE agrees upon demand to execute such
further instruments, subordinating this Lease as LESSOR may request provided
such further subordination shall be upon the express condition that this LEASE
shall be recognized by the mortgage and that the rights of LESSEE shall remain
in full force and effect during the term of this Lease so long as LESSEE shall
continue to perform all of the covenants of this Lease.
24. LESSEE'S CONDUCT OF BUSINESS. LESSEE covenants and agrees that, continuously
and uninterruptedly during the term hereof, it will operate and conduct within
the premises a business that is required to operate and conduct under the
provisions of Paragraph 5, and that it will staff the premises with sufficient
sales personnel, stock, the premises with adequate merchandise, and will
exercise sound business practices, due diligence and efficiency so as to
maximize Net Sales for the mutual benefit of LESSOR and LESSEE. LESSEE agrees
that it will not at any time during the term of this Lease, carry any stock of
goods nor do anything in or about the premises that will in any way increase the
insurance rates upon the building of which the premises are a part. LESSEE shall
continuously, during the entire term hereof, keep the premises open for business
and cause
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LESSEE'S business to be conducted therein during the usual business
hours of each and every business day as is customary for businesses of like
character in the city in which the premises are located to be open for business.
25. WAIVER OF DEFAULT. No waiver by the parties hereto of any default or breach
of any term, condition or covenant of this Lease shall be deemed to be a waiver
of any subsequent default or breach of the same or any other term, condition or
covenant contained herein.
26. FORCE MAJEURE. LESSOR or LESSEE shall not be required to perform any term,
condition or covenant in this Lease so long as the commencement of the term of
this Lease is delayed or prevented by force majeure, which shall mean Acts of
God, strikes, lockouts, material or labor restrictions by any governmental
authority, civil riot, floods, and any other cause not reasonably with the
control of LESSOR or LESSEE and which by the exercise of due diligence LESSOR or
LESSEE is unable, wholly or in part, to prevent or overcome.
27. PARKING AND COMMON AREA CONTROL. The Common Area of the Shopping Center is
defined as that space beyond the exterior walls of all buildings and within the
exterior boundaries of the real property described in Exhibit B ( Legal
Description ) attached hereto. The Common Area consists of, but is not limited
to, all walkways, driveways, sidewalks, parking areas, landscaped areas, loading
zones and plazas. Such Common Areas shall be available for the non-exclusive use
of LESSEE, provided that the condemnation or other taking of any or all of the
Common Areas by any public authority, or a sale thereof in lieu of condemnation,
shall not constitute a violation of this provision.
LESSOR shall at all times have the right and privilege of determining
and changing the nature and extent of the automobile parking and Common Area,
and of modifying the plot plan of the Shopping Center and the Common Area
provided such modification does not adversely affect the operation of LESSEE'S
business.
LESSOR shall also have the right to establish, and from time to time to
change, alter and demand, and to enforce against LESSEE and other users of the
Common Area such reasonable rules and regulations as may be deemed necessary and
advisable for the Area. LESSEE shall faithfully observe and comply with all such
rules and regulations including all modifications thereof and additions thereto
from time to time put unto effect by LESSOR. LESSOR shall not be responsible to
LESSEE for the violation or nonperformance by any other less or occupant of the
Shopping Center of any rules and regulations. It is specifically agreed that
LESSEE and LESSEE'S employees are restricted from parking in the Shopping Center
parking lot unless LESSOR designated a portion of the parking lot for employee
parking.
28. NET, NET, NET LEASE. LESSOR and LESSEE understand and agree that this Lease
is what is commonly known in the business as a " net, net, net Lease." LESSEE
recognizes and acknowledges without limiting the generality of any other terms
or provisions of the Lease, that it is the intent of the parties hereto that any
and all rentals in this Lease provided to be paid by LESSEE to LESSOR, shall be
net to LESSOR, and any and all expenses incurred in connection with the premises
and the Center, or in connection with the operations thereon, including any and
all taxes, assessments, general or special license fees,
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<PAGE>
insurance premiums, public utility bills and costs or repair, maintenance,
management, and operation of the premises and the Center and all buildings,
structures, permanent fixtures and other improvements comprised therein,
together with the appurtenances thereto, shall be paid by LESSEE, in addition
to the rentals herein provided for, as its sole and exclusive proper costs and
expenses. LESSOR may add an amount equal to 10% of such costs to cover LESSOR'S
administrative costs.
29. ESTOPPEL CERTIFICATE. LESSEE shall at any time from time to time upon not
less than ten (10) days prior written notice from LESSOR execute, acknowledge
and deliver to LESSOR a statement in writing certifying that the Lease is
unmodified and in full force and effect ( or if modified, stating the nature of
such modification and certifying that this Lease, as so modified, is in full
force and effect ) and the dates to which the rental and other charges are paid
in advance, if any, and acknowledging that there are not, to LESSEE'S knowledge,
any uncured defaults on the part of LESSOR hereunder, or specifying such
defaults if any are claimed. If is expressly understood and agreed that any such
statement may be relied upon by any prospective purchaser or encumbrance of all
or any portion of the real property of which the premises are part.
LESSEE'S failure to deliver such statement with such time shall be
conclusive upon LESSEE that that this Lease is in full force and effect, without
modification except as may be represented by LESSOR, that there are no uncured
defaults in LESSOR'S performance, and that not more that two (2) months rental
has been paid in advance.
30. CONSENTS. Wherever I the Lease the consent of one party is required to
an act or the other party, such consent shall not unreasonably be withheld.
Similarly wherever in the Lease one party is required to do an act to the
satisfaction or specification of the other party, such satisfaction or
specification shall be reasonable.
31. EFFECTIVENESS OF LEASE. Except as provided herein, all other provisions
of the Lease shall remain unchanged and in full force and effect in accordance
with their terms.
32. WAIVER. Except as otherwise specifically provided in this Lease, LESSEE
hereby waives and relinquishes any right which LESSEE may have to terminate the
Lease or withhold rent on account of any damages, destruction or state of
disrepair of the premises.
33. NOTICES. Unless applicable law requires a different method of giving notice,
any and all notices, demands or other communications required or desired to be
given hereunder by any party shall be in writing and shall be validly given or
made to another party if served either personally or if deposited in the United
States mail, certified or registered, postage prepaid. If such notice, demand or
other communication is served personally, service shall be conclusively deemed
made at the time of such personal service. If such notice, demand or other
communication is given by mail, such shall be conclusively deemed given
seventy-two (72) hours after the deposit thereof in the United States mail
addressed to the party to whom such notice, demand or other communication is to
be given as follows:
TO LESSOR: E & R FAMILY CORNER
P.O. BOX 910
NORCO, CA 91760
( 909 ) 737-6735
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<PAGE>
TO LESSEE: TEXAS LOOSEY'S STEAKHOUSE & SALOON
1752 CLEMENT STREET
SAN FRANCISCO, CA 94121-2321
( 415 ) 668-3179
Any party hereto may change its address for the purpose of receiving
notices, demands and other communications as herein provided by a written notice
given in the manner aforesaid to the other party or parties hereto.
34. EQUITABLE RELIEF. It is agreed that the rights granted to the parties
hereunder are of a special and unique kind and character and that, if there is a
breach by any party of any material provision of this Agreement, the other party
or parties would not have an adequate remedy at law. It is expressly agreed,
thereafter, that the rights of the parties hereunder may be enforced by
equitable relief as is provided under the laws of the State of California.
35. FINDER'S OR BROKER'S FEES. Each of the parties represents and warrants that
it has not dealt with any broker or finder in connection with any of the
transactions contemplated by this Agreement, and insofar as it knows, no broker
or other person is entitled to any commission or finder's fee in connection with
the transactions contemplated by this Agreement. The parties hereto each agree
to indemnify and hold harmless one another against any loss, liability, damage,
cost, claim or expense, including interest, penalties and reasonable attorney's
fees, that it shall incur or suffer by reason of a brokerage commission or
finder's fee payable because of any act, omission or statement or the
indemnifying party.
36. FULL AUTHORITY. Each of the parties and signatories to this Agreement
represents and warrants that he has the full right, power, legal capacity and
authority to enter into and perform the party's respective obligations hereunder
and no approvals or consents of any other person are necessary in connection
herewith.
37. MISCELLANEOUS.
a) Applicable Law. This agreement shall, in all respects, be
governed by the laws of the State of California applicable to agreements
executed and to be wholly performed with California.
b) Severability. Nothing contained herein shall be construed so as to
require the commission of any act contrary to law, and wherever there is any
conflict between any provisions contained herein and may present or future
statute, law, ordinance or regulation contrary to which the parties have no
legal right to contract, the latter shall prevail; but the provision of this
Agreement which is affected shall be curtailed and limited only to the extent
necessary to bring it within the requirements of the law. Neither party shall
have any liability to the other arising out of or based upon this Lease by
reason of the failure of any of these provisions.
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c) Medications or Amendments. No amendment, change or modification
of this Agreement shall be valid, unless in writing and signed by all of the
parties hereto.
d) Successors and Assigns. The terms, conditions and covenants
contained in this Lease shall apply to, inure to the benefit of, and be binding
upon the parties hereto and their respective successors in interest and legal
representatives except as otherwise herein expressly provided. All rights,
powers, privileges, immunities and duties of LESSOR under this Lease including
but not limited to any notice required or permitted to be delivered by LESSOR to
LESSEE hereunder may at LESSOR'S option, be exercised or performed by LESSOR'S
agent or attorney.
e) Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties with respect to its subject matter
and any and all prior agreements, understandings or representations with respect
to its subject matter are hereby terminated and canceled in their entirety and
are of no further force or effect.
f) Number and Gender. In this Agreement, the masculine, feminine
or neuter gender, and the singular or plural number, shall each be deemed to
include the others whenever the context so requires.
g) Captions. The captions appearing at the commencement of the
sections hereof are descriptive only and for convenience in reference.
Should there be any conflict between any such caption and the section at the
head of which it appears, the section and not such caption shall control and
govern the construction of the Agreements.
37. OPTION Provided the LESSEE is not then in default hereunder, LESSEE shall
have the right to extend the term of this Lease and all the provisions in this
Lease, for Three (3) Five (5) year option following expiration of the initial
term by giving written notice of exercise of the option to LESSOR at least four
months, but not more than eight months before the expiration of the then current
lease term or option term.
EXECUTED BY LESSEE THIS day of 19 .
---------------- ------------------ ----------
LESSEE: TEXAS LOOSEY STEAKHOUSE & SALOON.
By: .
Hiram J. Woo
EXECUTED BY LESSOR this day of 19 .
------------- ------------------- ----------
LESSOR: FAMILY CORNER
By: .
MARY RUBINSTEIN
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ADDENDUM 1 TO LEASE BY AND BETWEEN E & R CO-OWNERSHIP, dba FAMILY CORNER
("LANDLORD " ) AND HIRAM J. WOO, dba TEXAS LOOSEY'S STEAKHOUSE & SALOON
( "TENANT " ) WITH RESPECT TO THE PREMISES AT 1825 HANMER AVE., #A-E, NORCO,
CALIFORNIA
By this Addendum, Landlord and Tenant intend to supplement the provisions of
their Lease in the following respect:
SEC. 2 TERM
SEC. 3 RENT
The Term & the Rent of this Lease are hereby broken down as follows:
February 1997 through June 1998
(17 months ) to be at rate of 1.20 per
square foot, 4260 square ft. $5,112.00
CAM 1,065.00
----------
$6,177.00
July 1998 - June 2001 - or 3 years
to be at the rate of $1.10 per sq. Ft. 4,686.00
CAM 1,061.00
---------
$5,751.00
The final 2 years of this Lease
1.20 per sq. Ft. 5,112.00
CAM 1,065.00
--------
$6,177.00
AGREED UPON THIS DATE ______________________________________________.
________________________________ _______________________________
HIRAM J. WOO MARY RUBINSTEIN,
FAMILY CORNER
15
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EXHIBIT 10.5
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT made as of ___________________ 1996, by and between Texas Loosey's
Steakhouse & Saloon, Inc., a Delaware corporation having its principal office at
1752 Clement Street, San Francisco, California 94121 (hereinafter referred to as
the "Company"), and Michael Dunmire, currently residing at
_______________________ ______________, California, (hereinafter referred to as
"Director of Operations").
WHEREAS, the Company desires to employ Director of Operations, and Director of
Operations desires to be employed by the Company, pursuant to the terms and
conditions hereof;
NOW THEREFORE, in consideration of the premises and of the mutual promises
herein contained, the parties hereto agree as follows;
1. EMPLOYMENT. The Company hereby employs Director of Operations and
Director of Operations hereby agrees to be employed by the Company, subject to
the terms and condition hereinafter set forth.
2. TERM. The initial term of this agreement shall be on The date hereof (the
"Employment Date") and shall continue for a period of four (4) years from that
date, subject to prior termination in accordance with the term hereof.
Thereafter, the term of this Agreement may be extended for such additional
period or periods as shall be mutually agreed to in writing by Director of
Operations and the Company.
3. DUTIES. The Director of Operations shall perform such duties and functions as
a Director of Operations of the Company as are determined by the Chief Operating
Officer and/or Designee (C/E/O) of the Company, including, without limitation,
overseeing the Company's operations. In the performance of his duties Director
of Operations shall comply with the policies of and be subject to the reasonable
direction of the C/E/O of the Company. The Director of Operations agrees to
devote his entire working time, attention and energies to the performance of the
business of the Company and of any of its subsidiaries or affiliates by which he
may be employed; and Director of Operations shall not, directly or indirectly,
alone or as a member of any partnership, or as an officer, director or employee
of any other corporation, partnership or other organization, be actively engaged
in or concerned with any other duties or pursuits which interfere with the
performance of his duties hereunder, or which even if non-interfering, may be
inimical to or contrary to the best interests of the Company.
4. COMPENSATION. As compensation for the services to be render by Director of
Operations hereunder, the Company agrees to pay or cause to be paid to Director
of Operations and Director of Operations agrees to accept, an annual salary of
$40,000.00 payable in bi-weekly installments, provided however, that effective
upon Company's initial public offering , such annual salary shall be increased
to $60,000.00.
5. ADDITIONAL COMPENSATION. The Company shall grant to the Director of
Operations, effective as of the date hereof, stock options/Bonus Plan (the
"option") to purchase up to 35,000 shares of the company's common stock at an
exercise price equal to the initial public offering price per share. The Options
shall not be exercisable on any respect until the first anniversary of their
date of grant and shall thereafter be exercisable over a four year period in
accordance with the following vesting schedule:
ANNIVERSARY DATE OF GRANT NUMBER OF VESTED SHARE
------------------------------------------------------
First Anniversary Date 5,000
Second Anniversary Date 5,000
Third Anniversary Date 10,000
Fourth Anniversary Date 15,000
The Company may also pay Director of Operations such other additional
compensation as may from time to time be determined by the company.
<PAGE>
6. EMPLOYEE BENEFITS. During the period Director of Operations is employed
hereunder, Director of Operations shall be permitted to participate in all group
health, hospitalization and disability insurance programs, pension plans and
similar benefits that are now or may become available to employees of the
Company. During the period Director of Operations is employed hereunder,
Director of Operations shall be entitled to vacations in accordance with the
vacation policy of the Company.
7. REIMBURSEMENT OF EXPENSES. During the period Director of Operations is
employed hereunder, the Company will reimburse Director of Operations for
reasonable and necessary out-of-pocket expenses advanced or expended by Director
of Operations or incurred by him on the behalf of the Company in connection with
his duties hereunder in accordance with its customary policies and practices,
provided, however, that Director of Operations shall not expend or incur any
such expenses, individually or in the aggregate, in excess of ($300.00) without
the prior written approval of the C/E/O or President of the Company. The Company
further agrees to reimburse Director of Operations in respect of his moving
expenses to Orange County, California, subject to a maximum reimbursement of
$2,000.00.
8. TERMINATION OF EMPLOYMENT, EFFECT OF TERMINATION.
(a) The Director of Operation's employment hereunder may be terminated at
any time upon written notice by the Company, upon the occurrence of any of the
following events:
(i) the death of Director of Operations
(ii) the disability of the Director of Operations as defined
in paragraph (b), or
(iii) the determination that there is cause (as hereinafter
defined) for termination upon ten (10) day's prior written
notice to Director of Operations.
(b) For purposes hereof, the term "disability" shall mean the inability of
Director of Operations, due to illness, accident or any other physical or mental
incapacity, to perform in a normal manner for a period of (3) consecutive months
or for a total of six (6) months (whether or not consecutive) in any twelve (12)
month period during the term of the agreement.
(c) For purposes hereof, "cause" shall mean and be limited to (i) Director
of Operations' conviction (which, through lapse of time or otherwise, is not
subject to appeal) of any crime or offense involving money or other property of
the Company or its subsidiaries or which constitutes a Felony in the
jurisdiction involved; (ii) Director of Operations' performance of any act or
failure to act, for which if he were prosecuted and convicted, a crime or
offense involving money or property of the Company or its subsidiaries, or which
would constitute a felony in the jurisdiction involved would have occurred,
(iii) Director of Operations' breach of any of the representations, warranties
or covenants set forth in this Agreement, or (iv) Director of Operations'
continuing, repeated, willful failure or refusal to perform his duties required
by this Agreement, provided that Director of Operations shall have first
received written notice from the Company stating with specificity the nature of
such failure and refusal and affording Director of Operations an opportunity, as
soon as practicable, to correct the acts or omissions complained of. Whether or
not "cause" shall exist in each case shall be determined by the C/E/O and/or
President of the Company in their sole discretion.
(d) In the event the Director of Operations is terminated by the Company as
hereinabove provided, Director of Operations (or his estate, as the case may be)
will be entitled to only his accrued salary through the termination date and
nothing more.
9. REPRESENTATIONS AND AGREEMENTS OF DIRECTOR OF OPERATIONS.
The Director of Operations represents and warrants that he is free to enter into
this Agreement and to perform the duties required hereunder, and that there are
no employment contracts, restrictive covenants or other restrictions preventing
the performance of his duties hereunder.
<PAGE>
10. NON-COMPETITION.
(a) Director of Operations agrees that if his employment is terminated for
any reason or if he leaves the employ of the Company for any reason, for a
period of three (3) years from that date of such termination of employment, he
will not directly or indirectly, as owner, partner, joint venture, stockholder,
employee, broker, agent, principal, trustee, corporate officer or director,
licenser or in any capacity whatsoever engage in, become financially interested
in, be employed by, render consulting services to, or have any connection with,
any business which is competitive with the business activities of the Company or
its subsidiaries ("Competitive Business"), in any geographic area where, during
the time of his employment, the business of the Company or any of its
subsidiaries is being or had been conducted in any manner whatsoever, or hire or
attempt to hire for any Competitive Business any employee of the Company or any
subsidiary thereof, or solicit, call on or induce others to solicit or call on
directly or indirectly, any customers or prospective customers of the Company
for the purpose of inducing them to purchase or lease a product or service which
may compete with any product or service of the Company; provided, however that
Director of Operations may own any securities of any corporation which is
engaged in such business and is publicly owned and traded but in an amount not
to exceed at any time one percent of any class of stock or securities of such
company.
(b) If any portion of the restrictions set forth in paragraph (a) should,
for any reason whatsoever be declared invalid by a court of competent
jurisdiction, the validity or enforceability of the remainder of restrictions
shall not thereby be adversely affected.
(c) The Director of Operations declares that the foregoing territorial and
time limitations are reasonable and properly required for the adequate
protection of the business of the Company. In the event any such territorial or
time limitation is deemed to be unreasonable by a court of competent
jurisdiction. Director of Operations agrees to the reduction of either said
territorial or time limitation to such area or period which said court shall
have deemed reasonable.
(d) The existence of any claim or cause of action by Director of Operations
against the Company or any subsidiary other than this Agreement shall not
constitute a defense to the enforcement by the Company or any subsidiary of
foregoing restrictive covenants, but such claim or cause of action shall be
litigated separately.
11. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
The Director of Operations shall not, during the term of this Agreement, and at
any time following termination of this Agreement , directly or indirectly,
disclose or permit to be known, to any person, firm or corporation, any
confidential information acquired by him during the course of or as an incident
to his employment hereunder, relating to the Company or any of its subsidiaries,
the directors of the Company or its subsidiaries, any client of the Company or
any of its subsidiaries, or any corporation, partnership or other entity owned
or controlled, directly or indirectly, by any of the foregoing, or in which any
of the foregoing has a beneficial interest, including, but not limited to, the
business affairs of each of the foregoing. Such confidential information shall
include, but shall not be limited to proprietary information, trade secrets,
know-how, market studies and forecast, competitive analyses, the substance of
agreements with clients and others, client list and any other documents
embodying such confidential information.
12. AMENDMENT OR ALTERATION. No amendment or alteration of the terms of
this Agreement shall be valid unless made in writing and signed by both of the
parties hereto.
13. GOVERNING LAW. All matters concerning the validity, construction,
interpretation and performance under this Agreement shall be governed by the
State of California, without giving effect to any conflict of laws, principles
thereunder.
14. SEVERABILITY. The holding of any provision of the Agreement to be
illegal, invalid or unenforceable by a court of competent jurisdiction shall not
affect any other provision of this Agreement, which shall remain in full force
and effect.
<PAGE>
15. NOTICES. Any notices required or permitted to be given hereunder shall be
sufficient if in writing, and if delivered by hand or sent by certified mail to
the addresses set forth above or such other address as either party may from
time to time designate in writing to the other, and shall be deemed given as of
the date of delivery or mailing.
16. WAIVER OR BREACH. It is agreed that a waiver by either party of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach by that same party.
17. ENTIRE AGREEMENT AND BINDING EFFECT. This Agreement contains the entire
agreement of the parties with respect to the subject matter hereof and shall be
binding upon and inure to the benefit of the parties hereto and their respective
legal representatives, heir, distributes, successors and assign.
18. ASSIGNMENT. This Agreement may not be transferred or assigned by either
party without the prior written consent of the other party, provided however,
that if the Company transfer the Texas Loosey's business to a new corporation
formed as the successor-in-interest to the Company ("Newco") the Company shall
be entitled to assign all of its rights and obligations hereunder to Newco and
thereafter all reference to the Company herein will apply to, and deemed to
refer to Newco.
19. SURVIVAL. The termination of Director of Operations' employment
hereunder shall not affect the enforceability of Section 10 or 11 hereof.
20. FURTHER ASSURANCES. The parties agree to execute and deliver all such
further instrument and take such other and further action as may be reasonably
necessary or appropriate to carry out the provisions of this Agreement.
21. HEADING. The section heading appearing in this Agreement are for
purposes of easy reference and shall not be considered a part of the Agreement
or in any way modify, amend or affect its provisions.
22. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall not be an original, but all of which together,
shall constitute one instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written.
Texas Loosey's Steakhouse & Saloon, Inc.
By:
- ---------------------------------------
Richard M. Lee, Chairman & CEO
- ---------------------------------------
Michael R. Dunmire
S/S# ###-##-####
<PAGE>
EXHIBIT 10.6
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT made as of ___________________ 1996, by and between Texas Loosey's
Steakhouse & Saloon, Inc., a Delaware corporation having its principal office at
1752 Clement Street, San Francisco, California 94121 (hereinafter referred to as
the "Company"), and Rebecca L. Rotman, currently residing at
_____________________ ______________, California, (hereinafter referred to as
"Director of Training").
WHEREAS, the Company desires to employ Director of Training, and Director of
Training desires to be employed by the Company, pursuant to the terms and
conditions hereof;
NOW THEREFORE, in consideration of the premises and of the mutual promises
herein contained, the parties hereto agree as follows;
1. EMPLOYMENT. The Company hereby employs Director of Training and
Director of Training hereby agrees to be employed by the Company, subject to
the terms and condition hereinafter set forth.
2. TERM. The initial term of this agreement shall be on The date hereof (the
"Employment Date") and shall continue for a period of four (4) years from that
date, subject to prior termination in accordance with the term hereof.
Thereafter, the term of this Agreement may be extended for such additional
period or periods as shall be mutually agreed to in writing by Director of
Training and the Company.
3. DUTIES. The Director of Training shall perform such duties and functions as a
Director of Training of the Company as are determined by the Chief Executive
Officer and/or Designee (CEO) of the Company, including, without limitation,
overseeing the Company's operations. In the performance of his duties Director
of Training shall comply with the policies of and be subject to the reasonable
direction of the CEO of the Company. The Director of Training agrees to devote
her entire working time, attention and energies to the performance of the
business of the Company and of any of its subsidiaries or affiliates by which
she may be employed; and Director of Training shall not, directly or indirectly,
alone or as a member of any partnership, or as an officer, director or employee
of any other corporation, partnership or other organization, be actively engaged
in or concerned with any other duties or pursuits which interfere with the
performance of her duties hereunder, or which even if non-interfering, may be
inimical to or contrary to the best interests of the Company.
4. COMPENSATION. As compensation for the services to be render by Director of
Training hereunder, the Company agrees to pay or cause to be paid to Director of
Training and Director of Training agrees to accept, an annual salary of
$32,000.00 payable in bi-weekly installments, provided however, that effective
upon Company's initial public offering, such annual salary shall be increased to
$50,000.00.
5. ADDITIONAL COMPENSATION. The Company shall grant to the Director of Training,
effective as of the date hereof, stock options/Bonus Plan (the "option") to
purchase up to 25,000 shares of the company's common stock at an exercise price
equal to the initial public offering price per share. The Options shall not be
exercisable on any respect until the first anniversary of their date of grant
and shall thereafter be exercisable over a four year period in accordance with
the following vesting schedule:
ANNIVERSARY DATE OF GRANT NUMBER OF VESTED SHARE
First Anniversary Date 3,500
Second Anniversary Date 3,500
Third Anniversary Date 7,500
Fourth Anniversary Date 10,500
The Company may also pay Director of Training such other additional compensation
as may from time to time be determined by the company.
6. EMPLOYEE BENEFITS. During the period Director of Training is employed
hereunder, Director of Training shall be permitted to participate in all group
health, hospitalization and disability insurance programs, pension plans and
similar benefits that are now or may become available to employees of the
Company. During the period Director of Training is employed hereunder, Director
of Training shall be entitled to vacations in accordance with the vacation
policy of the Company.
7. REIMBURSEMENT OF EXPENSES. During the period Director of Training is employed
hereunder, the Company will reimburse Director of Training for reasonable and
necessary out-of-pocket expenses advanced or expended by Director of Training or
incurred by her on the behalf of the Company in connection with her duties
hereunder in accordance with its customary policies and practices, provided,
however, that Director of Training shall not expend or incur any such expenses,
individually or in the aggregate, in excess of ($300.00) without the prior
written approval of the C/E/O or President of the Company. The Company further
agrees to reimburse Director of Training in respect of her moving expenses to
Orange County, California, subject to a maximum reimbursement of $2,000.00.
8. TERMINATION OF EMPLOYMENT, EFFECT OF TERMINATION.
(a) The Director of Training's employment hereunder may be terminated
at any time upon written notice by the Company, upon the occurrence of any of
the following events:
(i) the death of Director of Training
(ii) the disability of the Director Training as
defined in paragraph (b), or
(iii) the determination that there is cause (as
hereinafter defined) for termination upon ten (10)
day's prior written notice to Director of Training.
(b) For purposes hereof, the term "disability" shall mean the inability
of Director of Training, due to illness, accident or any other physical or
mental incapacity, to perform in a normal manner for a period of (3) consecutive
months or for a total of six (6) months (whether or not consecutive) in any
twelve (12) month period during the term of the agreement.
(c) For purposes hereof, "cause" shall mean and be limited to (i)
Director of Training's conviction (which, through lapse of time or otherwise, is
not subject to appeal) of any crime or offense involving money or other property
of the Company or its subsidiaries or which constitutes a Felony in the
jurisdiction involved; (ii) Director of Training's performance of any act or
failure to act, for which if she were prosecuted and convicted, a crime or
offense involving money or property of the Company or its subsidiaries, or which
would constitute a felony in the jurisdiction involved would have occurred,
(iii) Director of Training's breach of any of the representations, warranties or
covenants set forth in this Agreement, or (iv) Director of Training's
continuing, repeated, willful failure or refusal to perform his duties required
by this Agreement, provided that Director of Training shall have first received
written notice from the Company stating with specificity the nature of such
failure and refusal and affording Director of Training an opportunity, as soon
as practicable, to correct the acts or omissions complained of. Whether or not
"cause" shall exist in each case shall be determined by the C/E/O or President
of the Company in their sole discretion.
(d) In the event the Director of Training is terminated by the Company
as hereinabove provided, Director of Training (or his estate, as the case may
be) will be entitled to only her accrued salary through the termination date and
nothing more.
9. REPRESENTATIONS AND AGREEMENTS OF DIRECTOR OF TRAINING.
The Director of Training represents and warrants that she is free to enter into
this Agreement and to perform the duties required hereunder, and that there are
no employment contracts, restrictive covenants or other restrictions preventing
the performance of her duties hereunder.
10. NON-COMPETITION.
(a) Director of Training agrees that if her employment is terminated
for any reason or if she leaves the employ of the Company for any reason, for a
period of three (3) years from that date of such termination of employment, she
will not directly or indirectly, as owner, partner, joint venture, stockholder,
employee, broker, agent, principal, trustee, corporate officer or director,
licenser or in any capacity whatsoever engage in, become financially interested
in, be employed by, render consulting services to, or have any connection with,
any business which is competitive with the business activities of the Company or
its subsidiaries ("Competitive Business"), in any geographic area where, during
the time of her employment, the business of the Company or any of its
subsidiaries is being or had been conducted in any manner whatsoever, or hire or
attempt to hire for any Competitive Business any employee of the Company or any
subsidiary thereof, or solicit, call on or induce others to solicit or call on
directly or indirectly, any customers or prospective customers of the Company
for the purpose of inducing them to purchase or lease a product or service which
may compete with any product or service of the Company; provided, however that
Director of Training may own any securities of any corporation which is engaged
in such business and is publicly owned and traded but in an amount not to exceed
at any time one percent of any class of stock or securities of such company.
(b) If any portion of the restrictions set forth in paragraph (a)
should, for any reason whatsoever be declared invalid by a court of competent
jurisdiction, the validity or enforceability of the remainder of restrictions
shall not thereby be adversely affected.
(c) The Director of Training declares that the foregoing territorial
and time limitations are reasonable and properly required for the adequate
protection of the business of the Company. In the event any such territorial or
time limitation is deemed to be unreasonable by a court of competent
jurisdiction. Director of Training agrees to the reduction of either said
territorial or time limitation to such area or period which said court shall
have deemed reasonable.
(d) The existence of any claim or cause of action by Director of
Training against the Company or any subsidiary other than this Agreement shall
not constitute a defense to the enforcement by the Company or any subsidiary of
foregoing restrictive covenants, but such claim or cause of action shall be
litigated separately.
11. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
The Director of Training shall not, during the term of this Agreement, and at
any time following termination of this Agreement , directly or indirectly,
disclose or permit to be known, to any person, firm or corporation, any
confidential information acquired by her during the course of or as an incident
to his employment hereunder, relating to the Company or any of its subsidiaries,
the directors of the Company or its subsidiaries, any client of the Company or
any of its subsidiaries, or any corporation, partnership or other entity owned
or controlled, directly or indirectly, by any of the foregoing, or in which any
of the foregoing has a beneficial interest, including, but not limited to, the
business affairs of each of the foregoing. Such confidential information shall
include, but shall not be limited to proprietary information, trade secrets,
know-how, market studies and forecast, competitive analyses, the substance of
agreements with clients and others, client list and any other documents
embodying such confidential information.
12. AMENDMENT OR ALTERATION. No amendment or alteration of the terms of this
Agreement shall be valid unless made in writing and signed by both of the
parties hereto.
13. GOVERNING LAW. All matters concerning the validity, construction,
interpretation and performance under this Agreement shall be governed by
the State of California, without giving effect to any conflict of laws,
principles thereunder.
14. SEVERABILITY. The holding of any provision of the Agreement to be illegal,
invalid or unenforceable by a court of competent jurisdiction shall not
affect any other provision of this Agreement, which shall remain in full
force and effect.
15. NOTICES. Any notices required or permitted to be given hereunder shall be
sufficient if in writing, and if delivered by hand or sent by certified mail to
the addresses set forth above or such other address as either party may from
time to time designate in writing to the other, and shall be deemed given as of
the date of delivery or mailing.
16. WAIVER OR BREACH. It is agreed that a waiver by either party of a
breach of any provision of this Agreement shall not operate or be construed
as a waiver of any subsequent breach by that same party.
17. ENTIRE AGREEMENT AND BINDING EFFECT. This Agreement contains the entire
agreement of the parties with respect to the subject matter hereof and shall be
binding upon and inure to the benefit of the parties hereto and their respective
legal representatives, heir, distributes, successors and assign.
18. ASSIGNMENT. This Agreement may not be transferred or assigned by either
party without the prior written consent of the other party, provided however,
that if the Company transfer the Texas Loosey's business to a new corporation
formed as the successor-in-interest to the Company ("Newco") the Company shall
be entitled to assign all of its rights and obligations hereunder to Newco and
thereafter all reference to the Company herein will apply to, and deemed to
refer to Newco.
19. SURVIVAL. The termination of Director of Training employment hereunder
shall not affect the enforceability of Section 10 or 11 hereof.
20. FURTHER ASSURANCES. The parties agree to execute and deliver all such
further instrument and take such other and further action as may be reasonably
necessary or appropriate to carry out the provisions of this Agreement.
21. HEADING. The section heading appearing in this Agreement are for
purposes of easy reference and shall not be considered a part of the Agreement
or in any way modify, amend or affect its provisions.
22. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall not be an original, but all of which together,
shall constitute one instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written.
Texas Loosey's Steakhouse & Saloon, Inc.
By:
- ---------------------------------------
Richard M. Lee, Chairman & CEO
- ---------------------------------------
Rebecca L. Rotman
S/S# ###-##-####
<PAGE>
EXHIBIT 10.7
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT made as of June 3, 1996, by and between TEXAS LOOSEY'S
STEAKHOUSE & SALOON, INC., a Delaware corporation having its principal office at
151 E. Alessandro Blvd., Riverside, California 92508 (hereinafter referred to
as the "Company"), and HIRAM J. WOO (hereinafter referred to as "Executive").
W I T N E S S E T H
WHEREAS, the Company desires to employ Executive, and Executive desires
to be employed by the Company, pursuant to the terms and conditions hereof;
NOW THEREFORE, in consideration of the premises and of the mutual
promises herein contained, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs Executive and Executive
hereby agrees to be employed by the Company, subject to the terms and
conditions hereinafter set forth.
2. TERM. The initial term of this Agreement shall begin on the date
hereof (the "Employment Date") and shall continue for a period of four (4) years
from that date, subject to prior termination in accordance with the terms
hereof. Thereafter, the term of this Agreement may be extended for such
additional period or periods as shall be mutually agreed to in writing by
Executive and the Company.
3. DUTIES. The Executive shall perform such duties and functions as
President and Secretary of the Company as are determined from time to time by
the Board of Directors of the Company. In the performance of his duties,
Executive shall comply with the policies of and be subject to the reasonable
direction of the Board of Directors of the Company.
The Executive agrees to devote his entire working time, attention and
energies to the performance of the business of the Company and of any of its
subsidiaries or affiliates by which he may be employed; and Executive shall not,
directly or indirectly, alone or as a member of any partnership, or as an
officer, director or employee of any other corporation, partnership or other
organization, be actively engaged in or concerned with any other duties or
pursuits which interfere with the performance of his duties hereunder, or which,
even if non-interfering, may be inimical to or contrary to the best interests of
the Company.
4. COMPENSATION. As compensation for the services to be rendered by
Executive hereunder, the Company agrees to pay or cause to be paid to
Executive, and Executive agrees to accept, an annual salary of $45,000.00
payable in bi-weekly installments; provided, however, that following any initial
public offering by the Company such annual salary shall be increased to
$80,000.00.
5. ADDITIONAL COMPENSATION. The Company shall grant to the Executive,
effective as of the date hereof, stock options (the "Options") to purchase
up to 82,500 shares of the Company's common stock at an exercise price of $1.00
per share.
<PAGE>
The Company may also pay Executive such other additional compensation
as may from time to time be determined by the Company.
6. EMPLOYEE BENEFITS. During the period Executive is employed
hereunder, Executive shall be permitted to participate in all group health,
hospitalization and disability insurance programs, pension plans and similar
benefits that are now or may become available to employees of the Company.
During the period Executive is employed hereunder, Executive shall be entitled
to vacations in accordance with the vacation policy of the Company.
7. REIMBURSEMENT OF EXPENSES. During the period Executive is employed
hereunder, the Company shall reimburse Executive for reasonable and necessary
out-of-pocket expenses advanced or expended by Executive or incurred by him for
or on behalf of the Company in connection with his duties hereunder in
accordance with its customary policies and practices.
8. TERMINATION OF EMPLOYMENT; EFFECT OF TERMINATION.
(a) The Executive's employment hereunder may be terminated at
any time upon written notice by the Company, upon the occurrence of any of the
following events:
(i) the death of Executive;
(ii) the disability of Executive (as defined in
paragraph (b)); or
(iii) the determination that there is cause (as
hereinafter defined) for such termina tion upon ten (10) days' prior
written notice to Executive.
(b) For purposes hereof, the term "disability" shall mean the
inability of Executive, due to illness, accident or any other physical or mental
incapacity, to perform his duties in a normal manner for a period of three (3)
consecutive months or for a total of six (6) months (whether or not consecutive)
in any twelve (12) month period during the term of this Agreement.
(c) For purposes hereof, "cause" shall mean and be limited to
(i) Executive's conviction (which, through lapse of time or otherwise, is not
subject to appeal) of any crime or offense involving money or other property of
the Company or its subsidiaries or which constitutes a felony in the
jurisdiction involved; (ii) Executive's performance of any act or his failure to
act, for which if he were prosecuted and convicted, a crime or offense involving
money or property of the Company or its subsidiaries, or which would constitute
a felony in the jurisdiction involved would have occurred, (iii) Executive's
breach of any of the representa tions, warranties or covenants set forth in this
Agreement, or (iv) Executive's continuing, repeated, wilful failure or refusal
to perform his duties required by this Agreement, provided that Executive shall
have first received written notice from the Company stating with specificity the
nature of such failure and refusal and affording Executive an opportunity, as
soon as practicable, to correct the acts or omissions complained of. Whether or
not "cause" shall exist in each case shall be determined by the Board of
Directors of the Company in its sole discretion.
(d) In the event that the Executive's employment is terminated
by the Company as hereinabove
2
<PAGE>
provided, Executive (or his estate, as the case may be) will be entitled to
only his accrued salary through the termination date and nothing more.
9. REPRESENTATIONS AND AGREEMENTS OF EXECUTIVE.
The Executive represents and warrants that he is free to enter into
this Agreement and to perform the duties required hereunder, and that there are
no employment contracts, restrictive covenants or other restrictions preventing
the performance of his duties hereunder.
10. NON-COMPETITION.
(a) Executive agrees that if his employment is terminated for
any reason or if he leaves the employ of the Company for any reason, for a
period of one (1) year from the date of such termination of employment, he will
not directly or indirectly, as owner, partner, joint venture, stockholder,
employee, broker, agent, principal, trustee, corporate officer or director,
licensor or in any capacity whatsoever engage in, become financially interested
in, be employed by, render consulting services to, or have any connection with,
any business which is competitive with the business activities of the Company or
its subsidiaries ("Competitive Business"), in any geographic area where, during
the time of his employment, the business of the Company or any of its
subsidiaries is being or had been conducted in any manner whatsoever, or hire or
attempt to hire for any Competitive Business any employee of the Company or any
subsidiary thereof, or solicit, call on or induce others to solicit or call on,
directly or indirectly, any customers or prospective customers of the Company
for the purpose of inducing them to purchase or lease a product or service which
may compete with any product or service of the Company; provided, however, that
Executive may own any securities of any corporation which is engaged in such
business and is publicly owned and traded but in an amount not to exceed at any
one time one percent of any class of stock or securities of such company.
(b) If any portion of the restrictions set forth in paragraph
(a) should, for any reason whatsoever, be declared invalid by a court of
competent jurisdiction, the validity or enforceability of the remainder of such
restrictions shall not thereby be adversely affected.
(c) The Executive declares that the foregoing territorial and
time limitations are reasonable and properly required for the adequate
protection of the business of the Company. In the event any such territorial or
time limitation is deemed to be unreasonable by a court of competent
jurisdiction, Executive agrees to the reduction of either said territorial or
time limitation to such area or period which said court shall have deemed
reasonable.
(d) The existence of any claim or cause of action by Executive
against the Company or any subsidiary other than under this Agreement shall not
constitute a defense to the enforcement by the Company or any subsidiary of the
foregoing restrictive covenants, but such claim or cause of action shall be
litigated separately.
11. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) The Executive shall not, during the term of this
Agreement, and at any time following termination of this Agreement,
directly or indirectly, disclose or permit to be known, to any person, firm or
3
<PAGE>
corporation, any confidential information acquired by him during the course of
or as an incident to his employment hereunder, relating to the Company or any of
its subsidiaries, the directors of the Company or its subsidiaries, any client
of the Company or any of its subsidiaries, or any corporation, partnership or
other entity owned or controlled, directly or indirectly, by any of the
foregoing, or in which any of the foregoing has a beneficial interest,
including, but not limited to, the business affairs of each of the foregoing.
Such confidential information shall include, but shall not be limited to,
proprietary information, trade secrets, know-how, market studies and forecasts,
competitive analyses, the substance of agreements with clients and others,
client lists and any other documents embodying such confidential information.
(b) All information and documents relating to the Company, its
affiliates as hereinabove described (or other business affairs) shall be the
exclusive property of the Company, and Executive shall use his best efforts to
prevent any publication or disclosure thereof. Upon termination of Executive's
employment with the Company, all documents, records, reports, writings and other
similar documents containing confidential information, including copies thereof,
then in Executive's possession or control shall be returned and left with the
Company.
12. RIGHT TO INJUNCTION. The Executive recognizes that the services to
be rendered by him hereunder are of a special, unique, unusual, extraordinary
and intellectual character involving skill of the highest order and giving them
peculiar value, the loss of which cannot be adequately compensated for in
damages. In the event of a breach of this Agreement by Executive, the Company
shall be entitled to injunctive relief or any other legal or equitable remedies.
Executive agrees that the Company may recover by appropriate action the amount
of the actual damage caused the Company by any failure, refusal or neglect of
Executive to perform his agreements, representations and warranties herein
contained. The remedies provided in this Agreement shall be deemed cumulative
and the exercise of one shall not preclude the exercise of any other remedy at
law or in equity for the same event or any other event.
13. AMENDMENT OR ALTERATION. No amendment or alteration of the terms
of this Agreement shall be valid unless made in writing and signed by both
of the parties hereto.
14. GOVERNING LAW. All matters concerning the validity, construction,
interpretation and performance under this Agreement shall be governed by
the laws of the State of New York, without giving effect to any conflict of laws
principles thereunder.
15. SEVERABILITY. The holding of any provision of this Agreement to
be illegal, invalid or unenforceable by a court of competent jurisdiction
shall not affect any other provision of this Agreement, which shall remain in
full force and effect.
16. NOTICES. Any notices required or permitted to be given hereunder
shall be sufficient if in writing, and if delivered by hand or sent by certified
mail to the addresses set forth above or such other address as either party may
from time to time designate in writing to the other, and shall be deemed given
as of the date of the delivery or mailing.
4
<PAGE>
17. WAIVER OR BREACH. It is agreed that a waiver by either party of
a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by that same party.
18. ENTIRE AGREEMENT AND BINDING EFFECT. This Agreement contains the
entire agreement of the parties with respect to the subject matter hereof
and shall be binding upon and inure to the benefit of the parties hereto and
their respective legal representatives, heirs, distributees, successors and
assigns.
19. ASSIGNMENT. This Agreement may not be transferred or assigned by
either party without the prior written consent of the other party.
20. SURVIVAL. The termination of Executive's employment hereunder
shall not affect the enforceability of Sections 10 and 11 hereof.
21. FURTHER ASSURANCES. The parties agree to execute and deliver all
such further instruments and take such other and further action as may be
reasonably necessary or appropriate to carry out the provisions of this
Agreement.
22. HEADINGS. The Section headings appearing in this Agreement are
for purposes of easy reference and shall not be considered a part of this
Agreement or in any way modify, amend or affect its provisions.
23. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together,
shall constitute one instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
TEXAS LOOSEY'S STEAKHOUSE & SALOON, INC.
By: /s/ Richard M. Lee
------------------------------
Richard M. Lee
Chairman and
Chief Executive Officer
/s/ Hiram J. Woo
------------------------------
Hiram J. Woo
5
<PAGE>
EXHIBIT 10.8
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT made as of June 3, 1996, by and between TEXAS LOOSEY'S
STEAKHOUSE & SALOON, INC., a Delaware corporation having its principal office at
151 E. Alessandro Blvd., Riverside, California 92508 (hereinafter referred to
as the "Company"), and RICHARD M. LEE (hereinafter referred to as "Executive").
W I T N E S S E T H
WHEREAS, the Company desires to employ Executive, and Executive desires
to be employed by the Company, pursuant to the terms and conditions hereof;
NOW THEREFORE, in consideration of the premises and of the mutual
promises herein contained, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs Executive and Executive
hereby agrees to be employed by the Company, subject to the terms and
conditions hereinafter set forth.
2. TERM. The initial term of this Agreement shall begin on the date
hereof (the "Employment Date") and shall continue for a period of four (4) years
from that date, subject to prior termination in accordance with the terms
hereof. Thereafter, the term of this Agreement may be extended for such
additional period or periods as shall be mutually agreed to in writing by
Executive and the Company.
3. DUTIES. The Executive shall perform such duties and functions as
Chairman and Chief Executive Officer of the Company as are determined from time
to time by the Board of Directors of the Company. In the performance of his
duties, Executive shall comply with the policies of and be subject to the
reasonable direction of the Board of Directors of the Company.
The Executive agrees to devote his entire working time, attention and
energies to the performance of the business of the Company and of any of its
subsidiaries or affiliates by which he may be employed; and Executive shall not,
directly or indirectly, alone or as a member of any partnership, or as an
officer, director or employee of any other corporation, partnership or other
organization, be actively engaged in or concerned with any other duties or
pursuits which interfere with the performance of his duties hereunder, or which,
even if non-interfering, may be inimical to or contrary to the best interests of
the Company.
4. COMPENSATION. As compensation for the services to be rendered by
Executive hereunder, the Company agrees to pay or cause to be paid to
Executive, and Executive agrees to accept, an annual salary of $50,000.00
payable in bi-weekly installments; provided, however, that following any initial
public offering by the Company such annual salary shall be increased to
$100,000.00.
5. ADDITIONAL COMPENSATION. The Company shall grant to the Executive,
effective as of the date hereof, stock options (the "Options") to purchase
up to 82,500 shares of the Company's common stock at an exercise price of $1.00
per share.
<PAGE>
The Company may also pay Executive such other additional compensation
as may from time to time be determined by the Company.
6. EMPLOYEE BENEFITS. During the period Executive is employed
hereunder, Executive shall be permitted to participate in all group health,
hospitalization and disability insurance programs, pension plans and similar
benefits that are now or may become available to employees of the Company.
During the period Executive is employed hereunder, Executive shall be entitled
to vacations in accordance with the vacation policy of the Company.
7. REIMBURSEMENT OF EXPENSES. During the period Executive is employed
hereunder, the Company shall reimburse Executive for reasonable and necessary
out-of-pocket expenses advanced or expended by Executive or incurred by him for
or on behalf of the Company in connection with his duties hereunder in
accordance with its customary policies and practice.
8. TERMINATION OF EMPLOYMENT; EFFECT OF TERMINATION.
(a) The Executive's employment hereunder may be terminated at
any time upon written notice by the Company, upon the occurrence of any of the
following events:
(i) the death of Executive;
(ii) the disability of Executive (as defined in
paragraph (b)); or
(iii) the determination that there is cause (as
hereinafter defined) for such termina tion upon ten (10) days' prior
written notice to Executive.
(b) For purposes hereof, the term "disability" shall mean the
inability of Executive, due to illness, accident or any other physical or mental
incapacity, to perform his duties in a normal manner for a period of three (3)
consecutive months or for a total of six (6) months (whether or not consecutive)
in any twelve (12) month period during the term of this Agreement.
(c) For purposes hereof, "cause" shall mean and be limited to
(i) Executive's conviction (which, through lapse of time or otherwise, is not
subject to appeal) of any crime or offense involving money or other property of
the Company or its subsidiaries or which constitutes a felony in the
jurisdiction involved; (ii) Executive's performance of any act or his failure to
act, for which if he were prosecuted and convicted, a crime or offense involving
money or property of the Company or its subsidiaries, or which would constitute
a felony in the jurisdiction involved would have occurred, (iii) Executive's
breach of any of the representa tions, warranties or covenants set forth in this
Agreement, or (iv) Executive's continuing, repeated, wilful failure or refusal
to perform his duties required by this Agreement, provided that Executive shall
have first received written notice from the Company stating with specificity the
nature of such failure and refusal and affording Executive an opportunity, as
soon as practicable, to correct the acts or omissions complained of. Whether or
not "cause" shall exist in each case shall be determined by the Board of
Directors of the Company in its sole discretion.
(d) In the event that the Executive's employment is terminated by the
Company as hereinabove
2
<PAGE>
provided, Executive (or his estate, as the case may be) will be entitled to
only his accrued salary through the termination date and nothing more.
9. REPRESENTATIONS AND AGREEMENTS OF EXECUTIVE.
The Executive represents and warrants that he is free to enter into
this Agreement and to perform the duties required hereunder, and that there are
no employment contracts, restrictive covenants or other restrictions preventing
the performance of his duties hereunder.
10. NON-COMPETITION.
(a) Executive agrees that if his employment is terminated for
any reason or if he leaves the employ of the Company for any reason, for a
period of one (1) year from the date of such termination of employment, he will
not directly or indirectly, as owner, partner, joint venture, stockholder,
employee, broker, agent, principal, trustee, corporate officer or director,
licensor or in any capacity whatsoever engage in, become financially interested
in, be employed by, render consulting services to, or have any connection with,
any business which is competitive with the business activities of the Company or
its subsidiaries ("Competitive Business"), in any geographic area where, during
the time of his employment, the business of the Company or any of its
subsidiaries is being or had been conducted in any manner whatsoever, or hire or
attempt to hire for any Competitive Business any employee of the Company or any
subsidiary thereof, or solicit, call on or induce others to solicit or call on,
directly or indirectly, any customers or prospective customers of the Company
for the purpose of inducing them to purchase or lease a product or service which
may compete with any product or service of the Company; provided, however, that
Executive may own any securities of any corporation which is engaged in such
business and is publicly owned and traded but in an amount not to exceed at any
one time one percent of any class of stock or securities of such company.
(b) If any portion of the restrictions set forth in paragraph
(a) should, for any reason whatsoever, be declared invalid by a court of
competent jurisdiction, the validity or enforceability of the remainder of such
restrictions shall not thereby be adversely affected.
(c) The Executive declares that the foregoing territorial and
time limitations are reasonable and properly required for the adequate
protection of the business of the Company. In the event any such territorial or
time limitation is deemed to be unreasonable by a court of competent
jurisdiction, Executive agrees to the reduction of either said territorial or
time limitation to such area or period which said court shall have deemed
reasonable.
(d) The existence of any claim or cause of action by Executive
against the Company or any subsidiary other than under this Agreement shall not
constitute a defense to the enforcement by the Company or any subsidiary of the
foregoing restrictive covenants, but such claim or cause of action shall be
litigated separately.
11. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) The Executive shall not, during the term of this
Agreement, and at any time following termination of this Agreement,
directly or indirectly, disclose or permit to be known, to any person, firm or
3
<PAGE>
corporation, any confidential information acquired by him during the course of
or as an incident to his employment hereunder, relating to the Company or any of
its subsidiaries, the directors of the Company or its subsidiaries, any client
of the Company or any of its subsidiaries, or any corporation, partnership or
other entity owned or controlled, directly or indirectly, by any of the
foregoing, or in which any of the foregoing has a beneficial interest,
including, but not limited to, the business affairs of each of the foregoing.
Such confidential information shall include, but shall not be limited to,
proprietary information, trade secrets, know-how, market studies and forecasts,
competitive analyses, the substance of agreements with clients and others,
client lists and any other documents embodying such confidential information.
(b) All information and documents relating to the Company, its
affiliates as hereinabove described (or other business affairs) shall be the
exclusive property of the Company, and Executive shall use his best efforts to
prevent any publication or disclosure thereof. Upon termination of Executive's
employment with the Company, all documents, records, reports, writings and other
similar documents containing confidential information, including copies thereof,
then in Executive's possession or control shall be returned and left with the
Company.
12. RIGHT TO INJUNCTION. The Executive recognizes that the services to
be rendered by him hereunder are of a special, unique, unusual, extraordinary
and intellectual character involving skill of the highest order and giving them
peculiar value, the loss of which cannot be adequately compensated for in
damages. In the event of a breach of this Agreement by Executive, the Company
shall be entitled to injunctive relief or any other legal or equitable remedies.
Executive agrees that the Company may recover by appropriate action the amount
of the actual damage caused the Company by any failure, refusal or neglect of
Executive to perform his agreements, representations and warranties herein
contained. The remedies provided in this Agreement shall be deemed cumulative
and the exercise of one shall not preclude the exercise of any other remedy at
law or in equity for the same event or any other event.
13. AMENDMENT OR ALTERATION. No amendment or alteration of the terms
of this Agreement shall be valid unless made in writing and signed by both
of the parties hereto.
14. GOVERNING LAW. All matters concerning the validity, construction,
interpretation and performance under this Agreement shall be governed by
the laws of the State of California, without giving effect to any conflict of
laws principles thereunder.
15. SEVERABILITY. The holding of any provision of this Agreement to
be illegal, invalid or unenforceable by a court of competent jurisdiction
shall not affect any other provision of this Agreement, which shall remain in
full force and effect.
16. NOTICES. Any notices required or permitted to be given hereunder
shall be sufficient if in writing, and if delivered by hand or sent by certified
mail to the addresses set forth above or such other address as either party may
from time to time designate in writing to the other, and shall be deemed given
as of the date of the delivery or mailing.
17. WAIVER OR BREACH. It is agreed that a waiver by either party of
a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by that same party.
4
<PAGE>
18. ENTIRE AGREEMENT AND BINDING EFFECT. This Agreement contains the
entire agreement of the parties with respect to the subject matter hereof
and shall be binding upon and inure to the benefit of the parties hereto and
their respective legal representatives, heirs, distributees, successors and
assigns.
19. ASSIGNMENT. This Agreement may not be transferred or assigned by
either party without the prior written consent of the other party.
20. SURVIVAL. The termination of Executive's employment hereunder
shall not affect the enforceability of Sections 10 and 11 hereof.
21. FURTHER ASSURANCES. The parties agree to execute and deliver all
such further instruments and take such other and further action as may be
reasonably necessary or appropriate to carry out the provisions of this
Agreement.
22. HEADINGS. The Section headings appearing in this Agreement are
for purposes of easy reference and shall not be considered a part of this
Agreement or in any way modify, amend or affect its provisions.
23. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which
together, shall constitute one instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
TEXAS LOOSEY'S STEAKHOUSE & SALOON, INC.
By: /s/ Hiram J. Woo
-----------------------------------
Hiram J. Woo
Chairman and
Chief Executive Officer
/s/ Richard M. Lee
-----------------------------------
Richard M. Lee
5
<PAGE>
EXHIBIT 10.9
<PAGE>
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
by and among
TLC Restaurant Mgmt. Corp.,
Better Business Security, Inc.,
River Diego Investment Corp. and
Ron Walton
collectively, as "Sellers,"
and
Texas Loosey's Steakhouse Holdings, Inc.
as "Buyer"
Dated: April 10, 1996
<PAGE>
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE I--DEFINITIONS ..............................................1
1.1. Defined Terms............................................1
1.2. Other Defined Terms .....................................9
ARTICLE II--PURCHASE AND SALE OF ASSETS .............................8
2.1. Transfer of Assets ......................................8
2.2. Assumption of Liabilities ...............................8
2.3. Excluded Liabilities ....................................8
2.4. Purchase Price ..........................................9
2.5. Inventory...............................................10
2.6. Prorations .............................................10
2.7. Closing Costs; Transfer Taxes and Fees .................11
ARTICLE III--CLOSING ...............................................11
3.1. Closing ................................................11
3.2. Conveyances at Closing .................................11
3.3. Escrow .................................................12
ARTICLE IV--REPRESENTATIONS AND WARRANTIES OF SELLERS ..............12
4.1. Organization of Companies ..............................13
4.2. Subsidiaries............................................13
4.3. Authorization ..........................................13
4.4. Absence of Certain Changes or Events ...................13
4.5. Assets .................................................15
4.6. Facilities .............................................15
4.7. Franchise Agreements, Contracts and Commitments ........16
4.8. Permits ................................................18
4.9. No Conflict or Violation ...............................18
4.10. Financial Statements ...................................19
4.11. Books and Records ......................................19
4.12. Litigation .............................................19
4.13. Labor Matters ..........................................19
4.14. Liabilities ............................................20
4.15. Compliance with Law ....................................20
4.16. No Brokers .............................................20
4.17. No Other Agreements to Sell the Assets .................20
4.18. Proprietary Rights .....................................21
4.19. Employees ..............................................21
4.20. Transactions with Certain Persons ......................22
4.21. Tax Matters ............................................22
4.22. Insurance ..............................................23
4.23. Inventory ..............................................23
4.24. Purchase Commitments and Outstanding Bids ..............24
1
<PAGE>
Page
4.25. Payments ...............................................24
4.26. Distributors and Suppliers .............................24
4.27. Compliance With Environmental Laws .....................24
4.28. Banking Relationships ..................................26
4.29. Material Misstatements Or Omissions.....................26
ARTICLE V-- REPRESENTATIONS AND WARRANTIES OF BUYER ................27
5.1. Organization of Buyer ..................................27
5.2. Authorization...........................................27
5.3. No Conflict or Violation. ..............................27
5.4. Litigation .............................................27
5.5. Consents and Approvals . ...............................27
5.6. No Brokers .............................................28
ARTICLE VI--COVENANTS OF SELLERS AND BUYER .........................28
6.1. Further Assurances .....................................28
6.2. Consents; Franchisee and Landlord Estoppel Certificates 28
6.3. No Solicitation ........................................29
6.4. Notification Certain Matters ...........................29
6.5. Investigation by Buyer .................................30
6.6. Conduct of Business ....................................33
ARTICLE VII--CONDITIONS TO SELLERS' OBLIGATIONS ....................33
7.1. Representations, Warranties and Covenants ..............34
7.2 No Actions or Court Orders..............................34
7.3. Opinion of Counsel .....................................34
7.4. Certificates ...........................................35
7.5. Corporate Documents ....................................35
7.6. Assumption Document ....................................35
7.7. Ancillary Agreements ...................................35
ARTICLE VIII--CONDITIONS TO BUYER'S OBLIGATIONS ....................35
8.1. Representations, Warranties and Covenants ..............35
8.2. Consents; Regulatory Compliance and Approval ...........35
8.3. No Actions or Court Orders .............................35
8.4. Opinion of Counsel .....................................36
8.5. Certificates ...........................................37
8.6. Material Changes .......................................37
8.7. Corporate Documents ....................................37
8.8. Due Diligence Review ...................................37
8.9. Financing ..............................................37
8.10. Conveyancing Documents; Release of Encumbrances ........37
8.11. Permits. ...............................................37
8.12. Other Agreements .......................................37
8.13. Fullerton Lease ........................................38
8.14. Westminster Franchise ..................................38
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<PAGE>
Page
8.15. Franchisee Estoppel Certificates .......................38
8.16. Landlord Estoppel Certificates .........................38
8.17. Bulk Sales .............................................38
ARTICLE IX--RISK OF LOSS; CONSENTS TO ASSIGNMENT ...................38
9.1. Risk of Loss ............................................38
9.2. Consents to Assignment ..................................39
9.3. Facility Lease Consents .................................39
ARTICLE X--ACTIONS BY SELLERS AND BUYER AFTER THE CLOSING ..........40
10.1. Books and Records; Tax Matters .........................40
10.2. Survival of Representations, Etc. ......................41
10.3. Indemnifications .......................................41
10.4. Bulk Sales .............................................43
10.5. Name ...................................................43
10.6. Return of Liquor License ...............................43
ARTICLE XI--MISCELLANEOUS ..........................................44
11.1. Termination ............................................44
11.2. Assignment .............................................45
11.3. Notices ................................................45
11.4. Choice of Law ..........................................46
11.5. Termination of Prior Agreement; Entire Agreement;
Amendments and Waivers .................................46
11.6. Multiple Counterparts ..................................46
11.7. Expenses ...............................................46
11.8. Invalidity .............................................46
11.9. Titles; Gender .........................................46
11.10. Publicity ..............................................46
11.11. Confidential Information ...............................47
11.12. Cumulative Remedies. ...................................48
11.13. Service of Process, Consent to Jurisdiction. ...........48
11.14. Arbitration. ...........................................48
11.15. Attorneys' Fees.........................................48
11.16. Nature of Obligations ..................................49
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<PAGE>
EXHIBITS
Exhibit
A Facilities ...................................................A-1
B Allocation of Purchase Price .................................B-1
C Security Agreement ...........................................C-l
D Bill of Sale .................................................D-l
E Assignment of Leases .........................................E-1
F Assignment of Contract Rights ................................F-1
G Assignment of Patents and Trademarks .........................G-1
H Assumption of Certain Liabilities ............................H-1
I Required Consents or Approvals of Buyer ......................I-1
J [Intentionally Omitted]
K Agreement Not to Compete .....................................K-1
L Form of Franchisee's Estoppel Certificate ....................L-1
M Secured Promissory Note ($375,000) ...........................M-1
N Secured Promissory Note ($870,000) ...........................N-1
O Consulting Agreement .........................................O-1
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<PAGE>
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
This Amended and Restated Asset Purchase Agreement, dated as of April 10,
1996 (this "Agreement"), is by and among TLC Restaurant Mgmt. Corp., a
California corporation ("TLC"), Better Business Security, Inc., a California
corporation ("Better Business"), River Diego Investment Corp., a California
corporation ("River Diego"), Ron Walton ("Walton") and Texas Loosey's Steakhouse
Holdings, Inc., a Delaware corporation, formerly named China Coast Foods, Inc.
("Buyer"). TLC, Better Business and River Diego shall be sometimes referred to
collectively as the "Companies"; reference to a "Company" shall mean any one of
the Companies. The Companies together with Walton shall be sometimes referred to
collectively as the "Sellers"; reference to a "Seller" shall mean any one of the
Sellers.
RECITALS A. Sellers and Buyer have previously entered into an Asset
Purchase Agreement dated as of October 2, 1995 (the "Prior Agreement") pursuant
to which provided for the sale to Buyer of certain assets owned by Sellers and
used in the conduct of the Business (as defined below).
B. Buyer and Seller desire to terminate the Prior Agreement and Buyer
desires to purchase from Sellers, and Sellers desire to sell to Buyer, certain
of such assets of Sellers, all upon the terms and subject to the conditions of
this Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the respective covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
1.1. Defined Terms. As used herein, the terms below shall have the
following meanings. Any of such terms, unless the context otherwise
requires, may be used in the singular or plural, depending upon the reference.
"ABC" shall mean the Department of Alcoholic Beverage Control of the
State of California .
"ABC License Requirements" shall mean the Alcoholic Beverage Control Act
(California Business and Professions Code Sections 23000, et seq.) and the
Regulations of the ABC.
"Action" shall mean any action, claim, suit, litigation, proceeding, labor
dispute, arbitral action, governmental audit, inquiry, criminal prosecution,
investigation or unfair labor practice charge or complaint.
<PAGE>
"affiliate" shall have the meaning set forth in the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder.
"Ancillary Agreements" shall mean the Security Agreement, Agreement Not to
Compete, and Consulting Agreement substantially in the forms attached hereto as
Exhibits C, K and 0, respectively.
"Assets" shall mean all of the right, title and interest in and to the
business, properties, assets and rights of any kind, whether tangible or
intangible, real or personal and constituting, or used or useful in connection
with, or related to, the Business owned by Sellers or in which Sellers have
any interest, including without limitation all of Sellers' right, title and
interest in the following:
(a) all Contract Rights, to the extent transferable, and the Franchise
Rights;
(b) all Leases;
(c) all Leasehold Estates;
(d) all Leasehold Improvements;
(e) all Fixtures and Equipment;
(f) all Inventory;
(g) all Books and Records;
(h) all Proprietary Rights relating to the Business;
(i) the Liquor Licenses and to the extent transferable, all Permits;
(j) all computers and software, except those which have been used
predominantly at the corporate office of the Companies located in
Temecula, California;
(k) all available supplies, manuals, menus, sales literature, promotional
literature, customer, prospective customer, supplier and distributor lists, art
work, display units, files, telephone and fax numbers and purchasing records
related to the Business;
(l) all promotional merchandise, including without limitation shirts,
hats and pins;
(m) all rights under or pursuant to all warranties, representations and
guarantees made by suppliers in connection with the Assets or services furnished
to Sellers pertaining to the Business or affecting the Assets, to the extent
such warranties, representations and guarantees are assignable; and
(n) all goodwill related to the Business;
but excluding therefrom the Excluded Assets.
2
<PAGE>
"Bankruptcy Court" shall mean the United States Bankruptcy Court for
the Central District of California.
"Bankruptcy Plan" shall mean the Plan of Reorganization, as amended, of TLC
filed on September 2, 1994 with the Bankruptcy Court pursuant to Chapter 11 of
the United States Bankruptcy Code.
"Books and Records" shall mean copies of any of the following, as may be
reasonably requested by Buyer: (a) all records and lists of the Sellers
pertaining to the Assets, (b) all records and lists pertaining to the Business,
customers, suppliers or personnel of the Companies, (c) all product, business
and marketing plans of the Companies, (d) all books, ledgers, files, reports,
plans, drawings and operating records of every kind maintained by the Sellers,
but excluding the originals of the Companies' minute books, stock books and tax
returns and (e) any information referred to in clauses (a) through (d) which is
computer maintained and stored data and all computer software necessary to
access and process such data.
"Business" shall include all business and operations of Sellers of any
type, kind or nature, conducted at or with respect to the Restaurants and the
business conducted pursuant to the Franchise Agreements.
"Closing Date" shall mean the date upon which the Closing occurs, or such
other date as Buyer and Sellers shall mutually agree upon.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations thereunder.
"Contract" shall mean any agreement, contract, note, loan, evidence of
indebtedness, purchase order, letter of credit, indenture, security or pledge
agreement, franchise agreement, undertaking, practice, covenant not to compete,
employment agreement, license, instrument, obligation or commitment to which any
Seller is a party or is bound and which relates to the Business or the Assets,
whether oral or written, but excluding all Leases, and accounts receivable.
"Contract Rights" shall mean all of Sellers' rights and obligations under
the Contracts listed on Schedule 4.7(b) and not rejected by Buyer and under any
Contracts not so listed which Buyer, in its sole discretion, elects to accept
and assume.
"Copyrights" shall mean registered copyrights, copyright applications
and unregistered copyrights.
"Court Order" shall mean any judgment, decision, consent decree,
injunction, ruling or order of any federal, state or local court or
governmental agency, department or authority that is binding on any person or
its property under applicable law.
"Debt Agreements" shall mean the Security Agreement, Note A and Note B.
"Default" shall mean (a) a breach of or default under any Contract,
Franchise Agreement or Lease, (b) the occurrence of an event that with the
passage of time or the giving of notice or both would constitute a breach of or
default under any Contract, Franchise Agreement or
3
<PAGE>
Lease, or (c) the occurrence of an event that with or without the passage of
time or the giving of notice or both would give rise to a right of termination,
renegotiation or acceleration under any Contract, Franchise Agreement or Lease.
"Disclosure Schedule" shall mean a schedule executed and delivered by
Sellers to Buyer as of the date hereof which sets forth the exceptions to the
representations and warranties contained in Article IV hereof and certain other
information called for by this Agreement. Unless otherwise specified, each
reference in this Agreement to any numbered schedule is a reference to that
numbered schedule which is included in the Disclosure Schedule.
"Employee Plans" shall mean (a) all employee pension benefit plans and
employee welfare benefit plans as defined in Section 3 of ERISA and (b) all
employment, consulting, severance or other similar contracts, arrangements or
policies and all plans, arrangements (written or oral), programs, agreements or
commitments providing for insurance coverage (including without limitation any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits,
life, health, disability or accident benefits or for deferred compensation,
profit-sharing bonuses, stock options, stock appreciation rights, stock
purchases or other forms of incentive compensation or post-retirement
insurance, compensation or benefits, in either case (a) or (b) which (i) any
Seller (or any entity under common control with any Seller or within a
controlled group or affiliated service group with such Seller, within the
meaning of Section 414 of the Code) maintains, administers, contributes to or
is required to contribute to, or at any time prior to the Closing Date, under
which any Seller (or any such other entity) maintained, administered,
contributed to or was required to contribute to, or under which any Seller (or
any such other entity) may incur any liability and (ii) which cover any
employees or former employees of any Seller employed in connection with the
Business.
"Encumbrance" shall mean any claim, lien, pledge, option, charge, easement,
security interest, deed of trust, mortgage, right-of-way, encroachment, building
or use restriction, conditional sales agreement, encumbrance or other right of
third parties, whether voluntarily incurred or arising by operation of law, and
includes, without limitation, any agreement to give any of the foregoing in the
future, and any contingent sale or other title retention agreement or lease in
the nature thereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets," notwithstanding any other provision of this Agreement,
shall mean the following assets of the Companies which are not to be acquired
by Buyer hereunder:
(a) all assets identified in Schedule 1.1 hereto;
(b) all cash and cash equivalents held by the Companies;
(c) all accounts and notes receivable (whether current or noncurrent),
refunds, deposits, prepayments or prepaid expenses (including without
limitation any prepaid insurance premiums) of Sellers;
(d) all Permits, to the extent not transferable; and
4
<PAGE>
(e) all claims, causes of action, choses in action, rights of recovery and
rights of set-off of any kind against any person or entity arising out of or
relating to the Assets to the extent related to the Excluded Liabilities.
"Facilities" shall mean all stores, restaurant buildings, offices,
warehouses, improvements, administration buildings, and all real property and
related facilities which are identified or listed on Exhibit "A" attached
hereto.
"Facility Leases" shall mean all of the leases of Facilities listed on
Schedule 4.6.
"Financial Statements" shall mean the Year-End Financial Statements and
the Interim Financial Statements.
"Fixtures and Equipment" shall mean all of the furniture, fixtures,
furnishings, machinery, supplies, equipment, tooling, molds, patterns, dies,
kitchenware, food-processors, refrigerators, ovens, utensils and other tangible
personal property owned by Sellers and used in connection with the Business,
wherever located (but excluding those located in the headquarters and warehouse
of the Sellers in Temecula, California and that are not used in connection with
the Business) and including any such Fixtures and Equipment in the possession
of any of Sellers' suppliers, including all warranty rights with respect
thereto.
"Former Facility" shall mean each plant, office, manufacturing facility,
store, warehouse, improvement, administrative building and all real property
and related facilities that was owned, leased or operated by any Company at any
time prior to the date hereof, but excluding any Facilities.
"Franchise" shall mean any franchise operating pursuant to a Franchise
Agreement.
"Franchise Agreements" shall mean the franchise agreements identified as
such on Schedule 4.7(a) hereto; reference to a "Franchise Agreement" shall mean
any one of the "Franchise Agreements".
"Franchisee" shall mean any franchisee party to any Franchise Agreement,
franchise, license, territorial or similar Contract to which any Seller is a
party.
"Franchisee Estoppel Certificate" shall mean a consent and estoppel
certificate from a Franchisee of any of the Franchise Agreements substantially
in the form of Exhibit L hereto.
"Franchise Rights" shall mean all of Sellers' rights and obligations under
the Franchise Agreements, but excluding the franchise royalties payable on or
before the Closing Date.
"Insurance Policies" shall mean the insurance policies related to the
Assets listed on Schedule 4.22.
"Interim Financial Statements" shall mean the combined statement of
revenue and expenses of the companies for the twenty-four (24) week period
ended June 17, 1995, together with the notes thereto.
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"Inventory" shall mean all of the Companies' inventory held for sale and
all of the Companies' food items, beverage items, liquor, paper products,
merchandise, wrapping, supply and packaging items and similar items with
respect to the Business, in each case wherever the same may be located.
"Leased Real Property" shall mean all leased property described in the
Facility Leases.
"Leasehold Estates" shall mean all of the Companies rights and obligations
as lessee under the Leases.
"Leasehold Improvements" shall mean all leasehold improvements situated in
or on the Leased Real Property and owned by any Seller.
"Leases" shall mean all of the Facility Leases and all of the existing
leases with respect to the personal or real property of the Sellers listed on
Schedule 4.7(b) and not rejected by Buyer.
"Liabilities" shall mean any direct or indirect liability, indebtedness,
obligation, commitment, expense, claim, deficiency, guaranty or endorsement of
or by any person of any type, whether accrued, absolute, contingent, matured,
unmatured or other.
"Liquor Licenses" shall mean the liquor licenses with respect to all of the
Restaurants, including any and all documents affecting the validity of such
licenses, issued to any of the Sellers by the ABC.
"material adverse effect" or "material adverse change" shall mean with
respect to the Business or the Assets any significant adverse effect or change
in the condition (financial or other), business, results of operations,
prospects, assets, Liabilities or operations of the Business and/or the Assets
or on the ability of any Seller to consummate the transactions contemplated
hereby, or any event or condition which would, with the passage of time,
constitute a "material adverse effect" or "material adverse change."
"ordinary course of business" or "ordinary course" or any similar phrase
shall mean the ordinary course of the Business and consistent with Sellers'
past practice.
"Patents" shall mean all patents and patent applications and registered
design and registered design applications.
"Permits" shall mean all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, or any other person,
necessary or desirable for the past, present or anticipated conduct of, or
relating to the operation of the Business or the ownership of the Assets,
including without limitation the Temporary Liquor Permits but excluding the
Liquor Licenses.
"Proprietary Rights" shall mean all of Sellers' Copyrights, Patents,
Trademarks, Trade Names, technology rights and licenses, computer software
(including without limitation any source or object codes therefor or
documentation relating thereto), trade secrets, recipes, food and
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drink formulas, menus, processes, secret ingredients, franchises, know-how,
inventions, designs, specifications, plans, drawings and intellectual property
rights, that are related to the Business.
"Regulations" shall mean any laws, statutes, ordinances, regulations,
rules, notice requirements, court decisions, agency guidelines, principles of
law and orders of any foreign, federal, state or local government and any other
governmental department or agency, including without limitation Environmental
Laws, energy, motor vehicle safety, public utility, zoning, building and health
codes, occupational safety and health and laws respecting employment practices,
employee documentation, terms and conditions of employment and wages and hours.
"Representative" shall mean any officer, director, principal, attorney,
agent, employee or other representative.
"Restaurant" shall mean one of the Texas Loosey's Chili Parlor and Saloon
restaurants listed on Schedule 4.6(b) hereto. "Restaurants" shall mean any or
all of such Restaurants.
"Tax" shall mean any federal, state, local, foreign or other tax, levy,
impost, fee, assessment or other government charge, including without
limitation income, estimated income, business, occupation, franchise, property,
payroll, personal property, sales, transfer, use, employment, commercial rent,
occupancy, franchise or withholding taxes, and any premium, including without
limitation interest, penalties and additions in connection therewith.
"Temporary Liquor Permits" shall mean temporary operating permits with
respect to all of the Restaurants necessary for the sale of alcoholic beverages
issued by the ABC.
"Trademarks" shall mean registered trademarks, registered service marks,
trademark and service mark applications and unregistered trademarks and service
marks.
"Trade Names" shall mean "Texas Loosey's," "Texas Loosey's Chili Parlor and
Saloon," "Texas Tested Tried and Trusted," designs showing the state of Texas
superimposed on the flag of the State of Texas, any and all variations thereof
and all other trade names used in or useful in connection with, or related to,
the Business.
"Warrants" shall mean (a) agreements, rights to subscribe (including any
preemptive rights), options, warrants, calls, commitments or rights of any
character to purchase or otherwise acquire any common stock or other equity
securities of any Company, and (b) outstanding securities of the Companies that
are convertible into or exchangeable for capital shares or other equity
securities of the Companies.
"Year-End Financial Statements" shall mean the unaudited combined
statement of revenues and expenses of the Companies for the year ended December
30, 1995 and the audited combined statements of revenues and expenses of the
Companies for the years ended December 26, 1992, December 25, 1993 and December
31, 1994, together with the notes thereto.
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1.2. Other Defined Terms. The following terms shall have the meanings
defined for such terms in the Sections set forth below:
Term Section
Assumed Liabilities 2.2
Assumption Documents 3.2(b)
Bulk Sales Act 10.4
Claim 10.3(d)
Claim Notice 10.3(d)
Closing 3.1
Confidential Information 11.11
Damages 10.3(a)
Environmental Conditions 4.27(a)
Environmental Laws 4.27(a)
Excluded Liabilities 2.3
Hazardous Substance 4.27(a)
Permitted Encumbrances 2.1
Proposed Acquisition Transaction 6.3(a)
Purchase Price 2.4
Release 4.27(a)
Rehired Employee 6.7(a)
ARTICLE II.
PURCHASE AND SALE OF ASSETS
2.1. Transfer of Assets. Upon the terms and subject to the conditions
contained herein, at the Closing, Sellers will sell, convey, transfer, assign
and deliver to Buyer, and Buyer will acquire from Sellers, the Assets, free and
clear of all Encumbrances, other than minor liens which in the aggregate are
not substantial in amount, do not materially detract from the value or
transferability of the property or assets subject thereto or interfere with the
present use and have not arisen other than in the ordinary course of business
("Permitted Encumbrances"). The term Permitted Encumbrances shall also include
any liens disclosed in the Disclosure Schedule which Buyer expressly agrees may
encumber the Assets as of the Closing.
2.2. Assumption of Liabilities. Upon the terms and subject to the
conditions contained herein, at the Closing, Buyer shall assume the
Liabilities, and only the Liabilities (the "Assumed Liabilities"), of Sellers
accruing, arising out of, or relating to events or occurrences happening after
the Closing Date under the Contracts, Franchise Agreements and Leases listed on
Schedule 4.7 and not rejected by Buyer, or under Contracts or Leases which are
not listed on Schedule 4.7 but which Buyer, in its sole discretion, elects to
accept and assume, but not including any Liability for any Default under any
such Contract occurring on or prior to the Closing Date.
2.3. Excluded Liabilities. Notwithstanding any other provision of this
Agreement, except for the Assumed Liabilities expressly specified in Section
2.2, Buyer shall not assume, or otherwise be responsible for, any Liabilities of
Sellers, whether liquidated or unliquidated, or known or unknown, whether
arising out of occurrences prior to, at or after the date hereof ("Excluded
Liabilities"), which Excluded Liabilities include, without limitation:
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(a) Any Liability to or in respect of any employees or former employees of
any Seller including without limitation (i) any employment agreement, whether
or not written, between any Seller and any person, (ii) any Liability under any
Employee Plan at any time maintained, contributed to or required to be
contributed to by or with respect to any Seller or under which any Seller may
incur Liability, or any contributions, benefits or Liabilities therefor, or any
Liability with respect to any Seller's withdrawal or partial withdrawal from or
termination of any Employee Plan and (iii) any claim of an unfair labor
practice, or any claim under any state unemployment compensation or worker's
compensation law or regulation or under any federal or state employment
discrimination law or regulation, which shall have been asserted on or prior to
the Closing Date or is based on acts or omissions which occurred on or prior to
the Closing Date;
(b) Any Liability of any Seller in respect of any Tax, except for any
documentary and transfer taxes and any sales, use or other taxes imposed by
reason of the transfers of Assets as provided hereunder;
(c) Any Liability arising from any injury to or death of any person or
damage to or destruction of any property, whether based on negligence, breach
of warranty, strict liability, enterprise liability or any other legal or
equitable theory arising from foods, beverages or goods sold or from services
performed by or on behalf of any Seller or any other person or entity on or
prior to the Closing Date;
(d) Any Liability of any Seller arising out of or related to any Action
against such Seller or any Action which adversely affects the Assets and which
shall have been asserted on or prior to the Closing Date or to the extent the
basis of which shall have arisen on or prior to the Closing Date;
(e) Any accounts payable of any Seller arising before or after the Closing
Date which relate to the period prior to the Closing Date;
(f) Any Liability of any Seller resulting from entering into, performing
its obligations pursuant to or consummating the transactions contemplated by,
this Agreement (including without limitation any Liability of any Seller
pursuant to Article X hereof);
(g) Any Liability related to any Former Facility; and
(h) Any Liability of any Seller under the Franchise Agreements which arose
or were to be performed prior to the Closing Date.
2.4. Purchase Price. At the Closing, upon the terms and subject to the
conditions set forth herein, Buyer shall: (a) pay to Sellers for the sale,
transfer, assignment, conveyance and delivery of the Assets (other than the
Inventory), the aggregate amount of One Million Five Hundred Twenty Thousand
Dollars ($1,520,000) (the "Purchase Price"), consisting of (i) Two Hundred
Seventy-Five Thousand Dollars ($275,000) in cash, which shall be paid directly
to the Internal Revenue Service (the "IRS") and certain California tax
authorities in partial satisfaction of certain tax obligations of Sellers, (ii)
a promissory note in the principal amount of Three Hundred Seventy-five Thousand
Dollars ($375,000) ("Note A"), substantially in the form of Exhibit M attached
hereto, subject, however, to the adjustments as set forth in Section 2.5 and
(iii) a promissory note in the principal amount of Eight Hundred Seventy
Thousand Dollars ($870,000) ("Note B"), substantially in the form of Exhibit N
attached hereto, both Note A and Note B to be secured by the Assets, and (b)
shall
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assume the Assumed Liabilities pursuant to this Agreement. The Purchase
Price shall be allocated among the Assets in the manner required by Section
1060 of the Code and regulations thereunder as shall be mutually agreed to by
the parties prior to the Closing. The Purchase Price so allocated shall be
attached hereto as Exhibit B. Buyer and Sellers agree to each prepare and file
on a timely basis with the Internal Revenue Service substantially identical
initial and supplemental Internal Revenue Service Forms 8594 "Asset Acquisition
Statements Under Section 1060" consistent with Exhibit B.
2.5. Inventory. On the Closing Date, Sellers shall provide Buyer with a
written itemized list of existing Inventory and the wholesale cost of each item
of Inventory paid by the Sellers. At Buyer's election, Buyer or its designated
representative may participate in taking the physical Inventory and preparing
the Inventory list. Buyer shall purchase, at wholesale cost, such Inventory,
provided that such item of Inventory is usable and/or re-sellable. The payment
of such Inventory shall be reflected by increasing the principal amount of Note
A by an amount equal to the purchase price of such Inventory.
2.6. Prorations.
(a) Utilities; Taxes. As promptly as practicable following the Closing
Date, but in no event later than thirty (30) calendar days thereafter, the real
and personal property taxes, water, gas, electricity and other utilities,
common area maintenance reimbursements to lessors, local business or other
license fees or taxes, merchants' association dues and other similar periodic
charges payable with respect to the Assets or the Business shall be prorated
between Buyer and Sellers effective as of the Closing Date. To the extent
practicable, utility meter readings for the Facilities shall be determined as
of the Closing Date. If the real property tax rate for the current tax year is
not established by the Closing Date, the prorations shall be made on the basis
of the rate in effect for the preceding tax year and shall be adjusted when the
exact amounts are determined. All such prorations shall be based upon the most
recent available assessed value of any Facility prior to the Closing Date.
(b) Rents. Sellers shall pay all minimum or base rent under the Leases
through the end of the calendar month in which the Closing Date occurs, and
Buyer shall reimburse Sellers for such rent accrued from the Closing Date
through the end of such month within thirty (30) calendar days following the
Closing Date. Payments of percentage rent, if any, due under the provisions of
the Leases shall be adjusted to the Closing Date as follows. Buyer shall pay
any percentage rent due for periods expiring after the Closing Date, and
Sellers shall be responsible for that portion of such percentage rent paid by
Buyer and due under the Leases based on sales from the commencement of the
current lease year through the Closing Date, and Buyer shall be responsible for
that portion due under the Lease based on sales from and after the Closing
Date. Within thirty (30) calendar days after the Closing Date, Sellers will
furnish to Buyer records which evidence the gross sales of Sellers at each
Facility to the extent necessary to enable Buyer to comply with the percentage
rent provision of each Lease. Buyer shall provide to Sellers, within thirty
(30) calendar days before the annual settlement of percentage rent under any
Lease for the partial year in which Sellers was operating such Facility, a
statement showing the manner of computation of all percentage rent due under
each Lease for such year. Any reimbursement due Buyer from Sellers in respect
of its pro rata share of percentage rent shall be paid within fifteen (15)
calendar days after written demand therefor by Buyer.
(c) Payments in Cash. All payments due under this Section 2.6 shall be
payable in cash.
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2.7. Closing Costs; Transfer Taxes and Fees. Buyer shall be responsible
for any documentary and transfer taxes and any sales, use or other taxes
imposed by reason of the transfers of Assets provided hereunder and any
deficiency, interest or penalty asserted with respect thereto and for any title
searches or insurance premiums for title insurance to be obtained by Buyer.
Buyer shall pay the fees and costs of recording or filing all applicable
conveyancing instruments described in Section 3.2(a). Buyer shall pay all costs
of applying for new Permits and obtaining the transfer of existing Permits
which may be lawfully transferred. Buyer shall pay one-half (1/2) the fees and
other charges incurred in connection with the Escrow as provided in Section
3.3, and Sellers shall be responsible for the remainder.
ARTICLE III.
CLOSING
3.1. Closing. The Closing of the transactions contemplated herein (the
"Closing") shall be held at 10:00 a.m. local time on the Closing Date at the
offices of Latham & Watkins, 650 Town Center Drive, Twentieth Floor, Costa
Mesa, California 92626, unless the parties hereto otherwise agree.
3.2. Conveyances at Closing.
(a) Instruments and Possession. To effect the sale and transfer referred
to in Section 2.1 hereof, Sellers will, at the Closing, execute and deliver to
Buyer:
(i) one or more bills of sale, in the form attached hereto as Exhibit D,
conveying in the aggregate all of Sellers' owned personal property included in
the Assets;
(ii) subject to Sections 9.2 and 9.3, one or more Assignments of Lease
substantially in the form attached hereto as Exhibit E with respect to the
Leases;
(iii) subject to Sections 9.2 and 9.3, one or more Assignments of Contract
Rights, each in the form as shall be mutually agreed to by the parties prior to
the Closing and attached hereto as Exhibit F, with respect to the Contract
Rights and Franchise Rights;
(iv) Assignments of Patents, Trademarks Trade Names and other Proprietary
Rights (including an assignment of all of Sellers' rights, title and interest
to the names "Texas Loosey's," "Texas Loosey's Chili Parlor and Saloon," "Texas
Tested Tried and Trusted" and all variations thereof) each in the form as shall
be mutually agreed to by the parties prior to the Closing and attached hereto
as Exhibit G, in recordable form to the extent necessary to assign such rights;
and
(v) such other instruments as shall be requested by Buyer to vest in Buyer
title in and to the Assets in accordance with the provisions hereof.
(b) Assumption Document. Upon the terms and subject to the conditions
contained herein, at the Closing Buyer shall deliver to Sellers an instrument
of assumption substantially in the form attached hereto as Exhibit H,
evidencing Buyer's assumption, pursuant to Section 2.2, of the Assumed
Liabilities (the "Assumption Document").
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(c) Form of Instruments. To the extent that a form of any document to be
delivered hereunder is not attached as an Exhibit hereto, such documents shall
be in form and substance, and shall be executed and delivered in a manner,
satisfactory to both Buyer and Sellers.
(d) Certificates; Opinions. Buyer and Sellers shall deliver the
certificates, opinions of counsel and other matters described in Articles VII
and VIII, as applicable.
(e) Consents. Subject to Sections 9.2 and 9.3, Sellers shall take all
actions necessary to deliver (and Buyer shall cooperate with Sellers in
connection with the delivery of) all Permits and any other third party consents
required for the valid transfer of the Assets as contemplated by this
Agreement, except for the Liquor Licenses which shall be deposited in an escrow
account as provided in Section 3.3 below.
(f) Ancillary Agreements. Each of the Ancillary Agreements shall be
executed and delivered to the parties thereto.
(g) Books and Records. Sellers shall deliver to Buyer the Books and
Records.
(h) Franchisee Estoppel Certificates. Sellers shall deliver to Buyer
copies of all Franchisee Estoppel Certificates received from Franchisees
to any of the Franchise Agreements.
(i) Landlord Estoppel Certificates. Sellers shall deliver to Buyer copies
of all Landlord Estoppel Certificates received from the landlord or lessor
for all Facility Leases.
3.3. Escrow. On or before the Closing Date, Sellers and Buyer shall enter
into an escrow agreement (the "Escrow Agreement") on terms mutually acceptable
to the parties for the purpose of effecting the transfer of the Liquor Licenses
from Sellers to Buyer and paying certain creditors of Sellers from the proceeds
of Note A and, if necessary, Note B. Sellers and Buyer shall establish an
escrow account (the "Escrow") with, and shall deliver escrow instructions that
are mutually acceptable to, Jean Allen Escrow Company at 4012 Katella Avenue
Suite 103, Los Alamitos, California 90720 (the "Escrow Holder"). At the
Closing, Buyer shall deliver to the Escrow Holder for deposit into the Escrow
(a) Two Hundred Seventy-Five Thousand Dollars ($275,000) constituting the cash
portion of the Purchase Price payable pursuant to Section 2.2, which shall be
paid by the Escrow Holder to the IRS and certain California taxing authorities
in satisfaction of certain tax obligations of Sellers, and (b) an additional
Five Thousand Dollars ($5,000), which shall be applied to the portion of the
Escrow fees and charges payable by Buyer. At the Closing, the Sellers shall
deliver the Liquor Licenses, Note A and Note B to the Escrow Holder for deposit
into the Escrow. The Escrow shall be conducted in accordance with the ABC
License Requirements and the provisions of the Escrow Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller, jointly and severally, hereby represents and warrants to
Buyer as follows, except as otherwise set forth on the Disclosure Schedule,
which representations and warranties are, as of the date hereof, and will be,
as of the Closing Date, true and correct:
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4.1. Organization of Companies. Each Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California with full-corporate power and authority to conduct the Business as
it is presently being conducted and to own and lease its properties and assets.
Each Company is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction where the character of its properties
owned or leased or the nature of its activities make such qualification
necessary. Copies of the Articles of Incorporation and Bylaws of each Company,
and all amendments thereto, heretofore delivered to Buyer are accurate and
complete as of the date hereof. Schedule 4.1 contains a true, correct and
complete list of all jurisdictions in which each Company is qualified to do
business as a foreign corporation.
4.2. Subsidiaries. The Companies have no direct or indirect stock or other
equity or ownership interest in any corporation, association, partnership,
joint venture or other entity.
4.3. Authorization. Each Company has all requisite corporate power and
authority, and has taken all corporate action necessary, to execute and deliver
this Agreement and the Ancillary Agreements, to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. The execution and delivery of this Agreement and the Ancillary
Agreements by each Company and the consummation by such Company of the
transactions contemplated hereby and thereby have been duly approved by the
boards of directors and shareholders of such Company. No other corporate
proceedings on the part of any Company are necessary to authorize this Agreement
and the Ancillary Agreements and the transactions contemplated hereby and
thereby. This Agreement has been duly executed and delivered by each Seller and
is, and upon execution and delivery of the Ancillary Agreements will be, legal,
valid and binding obligation of each Seller, enforceable against each of them in
accordance with its terms.
4.4. Absence of Certain Changes or Events. Since June 17, 1995, there has
not been any:
(a) actual or threatened material adverse change in the financial
condition, working capital, shareholders' equity, assets, Liabilities,
reserves, revenues, income earnings, prospects or Business of any Company;
(b) change in accounting methods, principles or practices by any Company
affecting the Assets, its Liabilities or the Business;
(c) material revaluation by any Seller of any of the Assets, including
without limitation writing down the value of inventory or writing off notes or
accounts receivable;
(d) damage, destruction or loss (whether or not covered by insurance)
materially and adversely affecting the Assets or the Business;
(e) cancellation of any indebtedness or waiver or release of any right or
claim of any Seller relating to its activities or properties which had or will
have a material adverse effect on the Assets or the Business;
(f) declaration, setting aside, or payment of dividends or distributions
by any Seller in respect of any equity securities thereof or any redemption,
purchase or other acquisition of any Seller's securities;
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(g) material increase in the rate of compensation payable or to become
payable to any director, officer or other employee of any Seller or any
consultant, Representative or agent of any Seller, including without limitation
the making of any loan to, or the payment, grant or accrual of any bonus,
incentive compensation, service award or other similar benefit to, any such
person, or the addition to, modification of, or contribution to any Employee
Plan, arrangement, or practice described in the Disclosure Schedule;
(h) adverse change in employee relations which has or is reasonably likely
to have a material adverse effect on the productivity, the financial condition,
results of operations or Business of any Seller or the relationships between
the employees of any Seller and the management of any Seller;
(i) amendment, cancellation or termination of any Contract, Franchise
Agreement, commitment, agreement, Lease, transaction or Permit relating to the
Assets or the Business or entry into any Contract, Franchise Agreement,
commitment, agreement, Lease, transaction or Permit which is not in the
ordinary course of any Seller's business, including without limitation any
employment or consulting agreements;
(j) mortgage, pledge or other encumbrance of any Assets, except purchase
money mortgages arising in the ordinary course of business;
(k) sale, assignment or transfer of any of the Assets, other than in the
ordinary course of business;
(l) incurrence of indebtedness by any Seller for borrowed money or
commitment to borrow money entered into by any Seller, or loans made or agreed
to be made by any Seller, or indebtedness guaranteed by any Seller;
(m) incurrence by any Seller of Liabilities, except Liabilities incurred
in the ordinary course of business, or increase or change in any assumptions
underlying or methods of calculating, any doubtful account contingency or other
reserves of any Seller;
(n) payment, discharge or satisfaction of any Liabilities of any Seller
other than the payment, discharge or satisfaction in the ordinary course of
business of Liabilities set forth or reserved for on the Interim Financial
Statements or incurred in the ordinary course of business;
(o) capital expenditure by any Seller, the execution of any Lease by any
Seller or the incurring of any obligation by any Seller to make any capital
expenditure or execute any Lease;
(p) failure to pay or satisfy when due any Liability of any Seller, except
where the failure would not have a material adverse effect on the Assets or the
Business;
(q) failure of any Seller to carry on diligently the Business in the
ordinary course so as to keep available to Buyer the services of such Seller's
employees, and to preserve for Buyer the Assets and the Business and the
goodwill of such Seller's suppliers, customers, distributors and others having
business relations with it;
(r) disposition or lapsing of any Proprietary Rights or any disposition or
disclosure to any person of any Proprietary Rights not theretofore a matter of
public knowledge;
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(s) existence of any other event or condition which in any one case or in
the aggregate has or might reasonably be expected to have a material adverse
effect- on the Business; or
(t) agreement by any Seller to do any of the things described in the
preceding clauses (a) through (s) other than as expressly provided for herein;
that are in connection with, or related to the Business, other than as set forth
in Schedule 4.4 hereto.
4.5. Assets. Excluding the Leased Real Property, each Seller has and will
transfer good and marketable title to the Assets and upon the consummation of
the transactions contemplated hereby, Buyer will acquire good and marketable
title to all of the Assets, free and clear of any Encumbrances, except for
Permitted Encumbrances. The Assets include without limitation all assets
necessary for the conduct of the Business as presently conducted. Schedule 4.5
contains accurate lists and summary descriptions of all tangible Assets where
the value of an individual item exceeds Five Hundred Dollars ($500) or where an
aggregate of similar items exceeds Five Hundred Dollars ($500). All tangible
assets and properties which are part of the Assets are in good operating
condition and repair and are usable in the ordinary course of business and
conform in all material respects to all applicable Regulations (including
Environmental Laws) relating to their use and operation.
4.6. Facilities.
(a) Actions. Except as set forth on Schedule 4.6 hereto, there are no
pending or, to the best knowledge of Sellers, threatened condemnation
proceedings or other Actions relating to any Facility.
(b) Leases or Other Agreements. Except for Facility Leases listed on
Schedule 4.6, there are no leases, subleases, licenses, occupancy agreements,
options, rights, concessions or other agreements or arrangements, written or
oral, granting to any person the right to purchase, use or occupy any Facility,
or any real property in connection with the Business or any portion thereof or
interest in any such Facility or real property.
(c) Facility Leases and Leased Real Property. With respect to each Facility
Lease, each Seller has and will transfer to Buyer at the Closing an unencumbered
interest in the Leasehold Estate. Each Seller enjoys peaceful and undisturbed
possession of all the Leased Real Property leased by such Seller, and each
Seller has in all material respects performed all the obligations required to be
performed by it through the date hereof.
(d) Certificate of Occupancy. All Facilities have received all required
approvals of governmental authorities (including without limitation Permits and
a certificate of occupancy or other similar certificate permitting lawful
occupancy of the Facilities) required in connection with the operation thereof
and have been operated and maintained in all material respects in accordance
with applicable Regulations.
(e) Utilities. All Facilities are supplied with utilities (including
without limitation water, sewage, disposal, electricity, gas and telephone) and
other services necessary for the operation of such Facilities as currently
operated, and there is no condition which would reasonably he expected to
result in the termination of the present access from any Facility to such
utility services.
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(f) Improvements, Fixtures and Equipment. The improvements constructed on
the Facilities, including without limitation all Leasehold Improvements, and
all Fixtures and Equipment and other tangible assets owned, leased or used by
any Seller at the Facilities are (i) insured to the extent and in a manner
customary in the industry, (ii) structurally sound with no known material
defects, (iii) in good operating condition and repair, subject to ordinary wear
and tear, (iv) not in need of maintenance, repair or correction except for
ordinary routine maintenance and repair, the cost of which would not be
material, (v) sufficient for the operation of the Business as presently
conducted and (vi) in conformity, in all material respects, with all applicable
Regulations. None of the improvements is subject to any commitment or other
arrangement for their sale or use by any affiliate of any Seller or third
parties.
(g) No Special Assessment. No Seller has received notice of any special
assessment relating to any Facility or any portion thereof and there is no
pending or threatened special assessment.
4.7. Franchise Agreements, Contracts and Commitments.
(a) Franchise Agreements. Schedule 4.7(a) sets forth a list of all
Franchise Agreements. With respect to Franchisees, (i) River Diego has entered
into written Franchise Agreements with all of the Franchisees, (ii) except as
described in Section 4.7(a) of the Disclosure Schedule, all rights under the
Franchise Agreements shall continue, unchanged after Closing without the
consent of any person or the payment of any penalty, the incurrence of any
additional obligation or change of any term or provision thereof, (iii) all
agreements and understandings with regard to any advertising fund are set forth
in the Franchise Agreements, (iv) Sellers have delivered to Buyer true, correct
and complete copies of all Franchise Offering Circulars used by Sellers and all
Franchise Agreements listed on Schedule 4.7(a), including all amendments and
supplements thereto, (v) Section 4.7(a) of the Disclosure Schedule reflects a
true, correct and complete list of the Franchisees, and with respect to each
Franchisee, the location of the Franchise, the expiration date of the Franchise
Agreement and a description of any right of the Franchisee to renew or extend
the term of the Franchise Agreement. Sellers have disclosed in writing any
material differences in the Franchise Agreements from the form of Franchise
Agreement which is part of the Company's Offering Circular as in effect when
each respective Franchise Agreement was signed (other than differences in
percentage royalty rate or expiration date). Sellers have complied with all
Regulations relating to the offering, registration and consummation of the
Franchise Agreements, and the transfer of the Franchise Rights as contemplated
by this Agreement. No Franchisee listed on Schedule 4.7(a) which is a party to
a Franchise Agreement has notified any Seller of its cessation or intent to
cease conducting business as a Franchisee. Other than the Franchisees and Texas
Lil's and Corner Deli located in Temecula, California the Sellers and their
affiliates have no other distributors or retail outlets.
(b) Contracts. Schedule 4.7(b) sets forth a complete and accurate list of
all Contracts (excluding Franchise Agreements) relating to the Business, of the
following categories:
(i) Contracts not made in the ordinary course of business;
(ii) Employment contracts and severance agreements, including without
limitation Contracts (A) to employ or terminate executive officers or other
personnel and other contracts with present or former officers, directors or
shareholders of any Company or (B) that will result in the payment by, or the
creation of any Liability to pay on behalf of Buyer or any Seller any
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severance, termination, "golden parachute," or other similar payments to
any present or former personnel following termination of employment or
otherwise as a result of the consummation of the transactions contemplated by
this Agreement;
(iii) Labor or union contracts;
(iv) Distribution, license, technical assistance, sales, commission,
consulting, agency or advertising contracts related to the Assets or the
Business;
(v) Options with respect to any property, real or personal, whether such
Seller shall be the grantor or grantee thereunder;
(vi) Contracts involving future expenditures or Liabilities, actual or
potential;
(vii) Contracts or commitments relating to commission arrangements with
others;
(viii) Promissory notes, loans, agreements, indentures, evidences of
indebtedness, letters of credit, guarantees, or other instruments relating to an
obligation to pay money, whether such Seller shall be the borrower, lender or
guarantor thereunder or whereby any Assets are pledged (excluding credit
provided by any Seller in the ordinary course of business to purchasers of its
products);
(ix) Contracts containing covenants limiting the freedom of any Seller or
any of its officers, directors, shareholders or any affiliates of such Seller,
to engage in any line of business or compete with any person;
(x) Any Contract with the United States, state or local government or any
agency or department thereof;
(xi) Leases of real property;
(xii) Leases of personal property not cancelable (without Liability) within
thirty (30) calendar days.
Sellers have delivered to Buyer true, correct and complete copies of all of the
Contracts and Leases listed on Schedule 4.7(b), including all amendments and
supplements thereto.
(c) Absence of Defaults. All of the Franchise Agreements, Contracts and
Leases to which any Seller is a party or by which it or any of the Assets is
bound or affected are valid, binding and enforceable in accordance with their
terms. Each Seller has fulfilled, or taken all action necessary to enable it to
fulfill when due, all of its material obligations under each of such Franchise
Agreements, Contracts and Leases. All parties to such Franchise Agreements,
Contracts and Leases have complied in all material respects with the provisions
thereof, no party is in Default thereunder and no notice of any claim of
Default has been given to any Seller. Each Seller has no reason to believe that
the products and services called for by any unfinished Contract cannot be
supplied in accordance with the terms of such Contract, including time
specifications, and has no reason to believe that any unfinished Contract will
upon performance by any Seller result in a loss to such
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Seller. With respect to any Leases, no Seller has received any notice of
cancellation or termination under any option or right reserved to the lessor, or
any notice of Default, thereunder. No party to any Franchise Agreement is in
Default of a payment obligation or the performance of any other obligation under
such Franchise Agreement, and no Franchisee has any rescission right with
respect to any Franchise Agreement.
(d) Product Warranty. Each Seller has committed no act, and there has been
no omission, which may result in, and there has been no occurrence which may
give rise to, product liability or Liability for breach of warranty (whether
covered by insurance or not) on the part of any Seller, with respect to
services rendered prior to or on the Closing Date.
(e) Leases. Schedule 4.7(b) also contains a complete and accurate
description of the material terms of all Leases described in clauses (xi) and
(xii) of Section 4.7(b), including without limitation a general description of
the leased property or items, the term, the monthly or annual rent, any and all
renewal options, and any requirements for the consent of third parties to
assignments thereof.
4.8. Permits.
(a) Schedule 4.8 sets forth a complete list of all Permits used in the
operation of the Business or otherwise held by any Seller. Each Seller has, and
at all times has had, all Permits required under any Regulation (including
Environmental Laws) in the operation of its Business or in the ownership of the
Assets, and owns or possesses such Permits free and clear of all Encumbrances.
No Seller is in Default, or has received any notice of any claim of Default,
with respect to any such Permit. Except as otherwise governed by law, all such
Permits are renewable by their terms or in the ordinary course of business
without the need to comply with any special qualification procedures or to pay
any amounts other than routine filing fees and will not be adversely affected
by the completion of the transactions contemplated by this Agreement. No
present or former shareholder, director, officer or employee of any Company or
any affiliate thereof, or any other person, firm, corporation or other entity,
owns or has any proprietary, financial or other interest (direct or indirect)
in any Permit which such Company owns, possesses or uses.
(b) Except as disclosed on Schedule 4.8 hereto, no notice to, declaration,
filing or registration with, or Permit from, any domestic or foreign
governmental or regulatory body or authority, or any other person or entity, is
required to be made or obtained by any Seller in connection with the execution,
delivery or performance of this Agreement and the consummation of the
transactions contemplated hereby.
4.9. No Conflict or Violation. Neither the execution, delivery or
performance of this Agreement nor the consummation of the transactions
contemplated hereby, nor compliance by any Seller with any of the provisions
hereof, will (a) violate or conflict with any provision of the Articles of
Incorporation or Bylaws of any Company, (b) violate, conflict with, or result
in or constitute a Default under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any Encumbrance upon any of
the Assets under, any of the terms, conditions or provisions of any Contract,
Franchise Agreement, Lease or Permit, (i) to which any Seller is a party or
(ii) by which the Assets are bound, (c) violate any Regulation or Court Order,
(d) impose any Encumbrance on the Assets or the Business, except in the case of
each of clauses (a), (b), (c) and (d) above, for such violations, Defaults,
terminations, accelerations or creations of Encumbrances which, in the
aggregate would not have a material adverse
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effect on the Assets, the Business or on the ability of any Seller to
consummate the transactions contemplated hereby.
4.10. Financial Statements. Sellers have heretofore delivered to Buyer the
Financial Statements. The Financial Statements (a) are in accordance with the
books and records of the Companies, (b) have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods covered thereby and (c) fairly and accurately present the consolidated
assets, Liabilities (including all reserves) and financial position of the
Companies as of the respective dates thereof and the consolidated results of
operations and changes in cash flows for the periods then ended (subject, in the
case of the Interim Financial Statements, to normal year-end adjustments).
Except for the combined statements of revenues and expenses of the Companies for
the year ended December 30, 1995, the Year-End Financial Statements have been
examined by Arthur Anderson & Co., independent certified public accountants,
whose report thereon is included with such Year-End Financial Statements. At the
respective dates of the Financial Statements, there were no Liabilities of any
Company, which, in accordance with generally accepted accounting principles,
should have been set forth or reserved for in the Financial Statements or the
notes thereto, which are not set forth or reserved for in the Financial
Statements or the notes thereto.
4.11. Books and Records. Each Company has given Buyer access to Books and
Records and accounts, which accurately and fairly reflect the activities of such
Company. The minute books of each Company previously delivered to Buyer, to the
extent they relate to the actions previously taken by the shareholders, board of
directors and committees of the board of directors of such Company, accurately
and adequately reflect such actions. Schedule 4.11 sets forth a complete list of
all actions previously taken by the shareholders, board of directors and
committees of the board of directors of each Company to the extent that such
actions are not reflected in the minute books of the Companies. The copies of
the stock book records of each Company previously delivered to Buyer are true,
correct and complete, and accurately reflect all transactions effected in such
Company's stock through and including the date hereof. No Company has engaged in
any transaction, maintained any bank account or used any corporate funds except
for transactions, bank accounts and funds which have been and are reflected in
the normally maintained books and records of each Company.
4.12. Litigation. Except as set forth on Schedule 4.12, there are no
Actions pending, threatened or, to the best of any Seller's knowledge,
anticipated (a) against, related to or affecting (i) any Company, the Business
or the Assets (including with respect to Environmental Laws), (ii) any officers
or directors of any Company as such, or (iii) any shareholder of any Company in
such shareholder's capacity as a shareholder of such Company, (b) seeking to
delay, limit or enjoin the transactions contemplated by this Agreement (c) that
involve the risk of criminal liability, or (d) in which any Seller is a
plaintiff. The Bankruptcy Plan was before the Bankruptcy Court as Case No.
SB3-28279 DN, which case has been closed by the Bankruptcy Court as of November
28, 1995. None of the Assets are subject to the jurisdiction of the Bankruptcy
Court. No Seller is in Default with respect to or subject to any Court Order,
and there are no unsatisfied judgments against any Seller, the Business or the
Assets. There is not a reasonable likelihood of an adverse determination of any
pending Actions. There are no Court Orders or agreements with, or liens by, any
governmental authority or quasi-governmental entity relating to any
Environmental Law which regulate, obligate, bind or in any way affect any
Seller or any Facility or Former Facility.
4.13. Labor Matters. No Company is a party to any labor agreement with
respect to its employees with any labor organization, union, group or
association and there are no employee unions
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(nor any other similar labor or employee organizations) under local statutes,
custom or practice. In the past five years, no Company has experienced any
attempt by organized labor or its representatives to make such Company conform
to demands of organized labor relating to its employees or to enter into a
binding agreement with organized labor that would cover the employees of such
Company. There is no labor strike or labor disturbance pending or, to the best
of each Seller's knowledge, threatened against any Seller, nor is any grievance
currently being asserted, and in the past five years no Company has experienced
a work stoppage or other labor difficulty. Each Company is in compliance with
all applicable laws respecting employment practices, employee documentation,
terms and conditions of employment and wages and hours and is not and has not
engaged in any unfair labor practice. There is no unfair labor practice charge
or complaint against any Seller pending before the National Labor Relations
Board or any other domestic or foreign governmental agency arising out of
conduct of the Business, and there are no facts or information which would give
rise thereto.
4.14. Liabilities. Except as set forth on Schedule 4.14 hereto and other
than Excluded Liabilities, no Company has any Liabilities due or to become due,
except Liabilities arising in the ordinary course of business under Contracts,
Leases, Permits and other business arrangements described in the Disclosure
Schedule (and under those Contracts, Leases and Permits which are not required
to be disclosed on the Disclosure Schedule) or in accordance with this
Agreement (none of which relates to any Default under any Contract or Lease,
breach of warranty, tort, infringement or violation of any Regulation or Court
Order or arose out of any Action) and none of which, individually or in the
aggregate, has or would have a material adverse effect on the Business or the
Assets.
4.15. Compliance with Law. Each Seller, in the conduct of the Business,
has not violated and is in compliance with all Regulations and Court Orders
relating to the Assets or the Business or operations of such Seller. No Seller
has received any notice to the effect that, or otherwise been advised that, it
is not in compliance with any such Regulations or Court Orders, and no Seller
has any reason to anticipate that any existing circumstances are likely to
result in violations of any of the foregoing. Without limiting the foregoing,
there is no accusation or investigation pending against any Seller from the
ABC.
4.16. No Brokers. None of the Sellers nor any of their respective officers,
directors, employees, shareholders or affiliates has employed or made any
agreement with any broker, finder or similar agent or any person or firm which
will result in the obligation of Buyer or any of its affiliates to pay any
finder's fee, brokerage fees or commission or similar payment in connection with
the transactions contemplated hereby.
4.17. No Other Agreements to Sell the Assets. None of the Sellers nor any
of their respective officers, directors, shareholders or affiliates have any
commitment or legal obligation, absolute or contingent, to any other person or
firm other than the Buyer to sell, assign, transfer or effect a sale of any of
the Assets (other than inventory in the ordinary course of business), to sell
or effect a sale of a majority of the capital stock of any Company, to effect
any merger, consolidation, liquidation, dissolution or other reorganization of
any Company (other than the reorganization of TLC pursuant to the Bankruptcy
Plan), or to enter into any agreement or cause the entering into of an
agreement with respect to any of the foregoing.
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4.18. Proprietary Rights.
(a) Proprietary Rights. Schedule 4.18 lists all Trademarks used by Sellers
in connection with the Business. Schedule 4.18 also sets forth: (i) for each
trademark, the application serial number or the registration number, the class
of goods covered and the expiration date for each country in which a trademark
has been registered, (ii) for each service mark, the serial number or the
registration number, the class of goods covered and the expiration date for
each country in which a service mark has been registered and (iii) for each
copyright, the copyright number and date of filing for each country in which a
copyright has been filed. No Seller owns, controls or uses any patents or
patent applications in connection with the Business.
(b) Royalties and Licenses. No Seller has any obligation to compensate any
person for the use of any such Proprietary Rights nor has any Seller granted to
any person any license, option or other rights to use in any manner any of its
Proprietary Rights, whether requiring the payment of royalties or not, except
for the rights granted to Franchisees by River Diego pursuant to the Franchise
Agreements.
(c) Ownership and Protection of Proprietary Rights. Each Seller owns and
has the sole right to use each of its Proprietary Rights. Except for
applications pending, all of the trademarks listed in the Disclosure Schedule
have been duly issued and all of the other Proprietary Rights exist, are
registered and are subsisting. No Seller has any patents or pending patent
applications with respect to the Business or the Assets. None of the
Proprietary Rights is involved in any pending or threatened litigation. No
Seller has received any notice of invalidity or infringement of any rights of
others with respect to such trademarks. Each Seller has taken all reasonable
and prudent steps to protect the Proprietary Rights from infringement by any
other firm, corporation, association or person. No other firm, corporation,
association or person (i) has the right to use any Proprietary Rights of any
Seller, (ii) has notified any Seller that it is claiming any ownership of or
right to use such Proprietary Rights, or (iii) to the best of each Seller's
knowledge, is infringing upon any such Proprietary Rights in any way. Each
Seller's use of the Proprietary Rights owned by it is not infringing upon or
otherwise violating the rights of any third party in or to such Proprietary
Rights, and no proceedings have been instituted against or notices received by
any Seller that are presently outstanding alleging that any Seller's use of the
Proprietary Rights infringes upon or otherwise violates any rights of a third
party in or to such Proprietary Rights. All of the Proprietary Rights are valid
and enforceable rights of the Seller owning such rights and will not cease to
be valid and in full force and effect by reason of the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated by this Agreement.
4.19. Employees.
(a) Sellers have previously delivered to Buyer a schedule which (i)
contains a list of all employees of the Companies employed in connection with
the Business, and their wage rates or salaries, as of the date of this
Agreement and (ii) sets forth the dates of employment for such employees.
Schedule 4.19 (x) contains a list of all Employee Plans and (y) identifies all
employment agreements, including collective bargaining agreements, in effect
with respect to any such employees.
(b) With respect to each Employee Plan qualified under Section 401 of the
Code, Sellers have made available to Buyer a true and correct copy of (i) the
most recent annual report (Form 5500) filed with the Internal Revenue Service,
(ii) the document setting forth the Employee
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Plan, (iii) the trust agreement relating to such Employee Plan, (iv) the most
recent summary plan description, and (v) the most recent determination letter
issued by the Internal Revenue Service.
(c) To the knowledge of Sellers, no event has occurred which has resulted
in the creation of any undischarged liability to any Company in connection with
any Employee Plan (except liability for benefits claims and funding obligations
payable in the ordinary course) under ERISA, the Code or any other applicable
law.
4.20. Transactions with Certain Persons. Except as set forth on Schedule
4.20, no officer, director or employee of any Company nor any member of any
such person's immediate family is presently, or within the past five (5) years
has been, a party to any transaction with any Seller relating to the Business,
including without limitation, any contract, agreement or other arrangement (a)
providing for the furnishing of services by, (b) providing for the rental of
real or personal property to or from, or (c) otherwise requiring payments to
(other than for services as officers, directors or employees of any Company)
any such person or corporation, partnership, trust or other entity in which any
such person has an interest as a shareholder, officer, director, trustee or
partner.
4.21. Tax Matters.
(a) Filing of Tax Returns. Each Company (and any affiliated group of which
such Company is now or has been a member) has timely filed with the appropriate
taxing authorities all returns (including without limitation information
returns and other material information) in respect of Taxes required to be
filed through the date hereof and will timely file any such returns required to
be filed on or prior to the Closing Date. The returns and other information
filed are complete and accurate in all material respects. Except as specified
in Schedule 4.21, no Company, nor any group of which any Company now or was a
member, has requested any extension of time within which to file returns
(including without limitation information returns) in respect of any taxes.
Each Company has delivered to Buyer complete and accurate copies of such
Company's federal, state and local tax returns for the years 1991, 1992, 1993
and 1994.
(b) Payment of Taxes. Except as specified in Schedule 4.21 hereto, all
Taxes of each Company, in respect of periods beginning before the Closing Date,
have been timely paid, or will be timely paid, or an adequate reserve has been
established therefor, as set forth in the Disclosure Schedule and none of the
Companies has any material Liability for Taxes in excess of the amounts so paid
or reserves so established.
(c) Audits. Investigations or Claims. Except as set forth in the Disclosure
Schedule, the consolidated federal income tax returns of each Company have been
filed with the IRS for all periods to and including those set forth in the
Disclosure Schedule, and except to the extent shown therein, no material
deficiencies for Taxes, have been claimed, proposed or assessed by any taxing or
other governmental authority against each Company. Except as set forth in the
Disclosure Schedule, there are no pending or, to the best of each Seller's
knowledge, threatened audits, investigations or claims for or relating to any
material additional Liability in respect of Taxes, and there are no matters
under discussion with any governmental authorities with respect to Taxes that in
the reasonable judgment of each Seller is likely to result in a material
additional Liability for Taxes. Except as set forth in the Disclosure Schedule,
no extension of a statute of limitations relating to Taxes is in effect with
respect to each Company.
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(d) Lien. Except as specified in Schedule 4.21, there are no liens for
Taxes (other than for current Taxes not yet due and payable) on the Assets.
(e) Safe Harbor Lease Property. None of the Assets is property that is
required to be treated as being owned by any other person pursuant to the
so-called safe harbor lease provisions of former Section 168(f)(8) of the Code.
(f) Security for Tax-Exempt Obligations. None of the Assets directly or
indirectly secures any debt the interest on which is tax-exempt under Section
103(a) of the Code.
(g) Tax-Exempt Use Property. None of the Assets is "tax-exempt use
property" within the meaning of Section 168(h) of the Code.
(h) Foreign Person. None of the Companies is a person other than a United
States person within the meaning of the Code.
(i) No Withholding. The transaction contemplated herein is not subject to
the tax withholding provisions of Section 3406 of the Code, or of Subchapter A
of Chapter 3 of the Code or of any other provision of law.
4.22. Insurance. Schedule 4.22 contains a complete and accurate list of all
policies or binders of fire, liability, title, worker's compensation, product
liability (which list shall be for 3 years) and other forms of insurance
(showing as to each policy or binder the carrier, policy number, coverage
limits, expiration dates, annual premiums, a general description of the type of
coverage provided, loss experience history by line of coverage) maintained by
any Company on the Business, the Assets or its employees. All insurance coverage
applicable to any of the Companies, the Business and the Assets is in full force
and effect, insures such Company in reasonably sufficient amounts against all
risks usually insured against by persons operating similar businesses or
properties of similar size in the localities where such businesses or properties
are located, provides coverage as may be required by applicable Regulation and
by any and all Contracts to which such Seller is a party and has been issued by
insurers of recognized responsibility. There is no Default under any such
coverage nor has there been any failure to give notice or present any claim
under any such coverage in a due and timely fashion. There are no outstanding
unpaid premiums except in the ordinary course of business and no notice of
cancellation or nonrenewal of any such coverage has been received. There are no
provisions in such insurance policies for retroactive or retrospective premium
adjustments, other than adjustments which may arise based on Sellers' gross
sales. All products liability, general liability and workers' compensation
insurance policies maintained by any Company have been occurrence policies and
not claims made policies. There are no outstanding performance bonds covering or
issued for the benefit of any Company. There are no facts upon which an insurer
might be justified in reducing coverage or increasing premiums on existing
policies or binders. No insurer has advised any Seller that it intends to reduce
coverage, increase premiums or fail to renew existing policy or binder.
4.23. Inventory. The Disclosure Schedule contains a complete and accurate
list of all Inventory as of March 31, 1996 and the addresses at which the
Inventory is located. The Inventory as set forth on the Disclosure Schedule or
arising since March 31, 1996 was acquired and has been maintained in accordance
with the regular business practices of Sellers, consists of new and unused
items of a quality and quantity usable or saleable in the ordinary course of
business, and is valued at reasonable amounts based on the normal valuation
policy of Sellers at prices equal to the lower of
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cost or market value on a first-in-first-out basis. None of such Inventory is
perished, unusable, damaged or unsalable in the ordinary course of business.
4.24. Purchase Commitments and Outstanding Bids. No outstanding purchase or
outstanding lease commitment of any Company presently is in excess of the
normal, ordinary and usual requirements of the Business or was made at any price
in excess of the now current market price or contains terms and conditions more
onerous than those usual and customary in the Business. There is no outstanding
bid, proposal, Contract or unfilled order which relates to the Assets which will
or would, if accepted, have a material adverse effect, individually or in the
aggregate, on the Business or the Assets or will or would, if accepted,
reasonably be expected to result in a net loss to any Company.
4.25. Payments. No Seller has, directly or indirectly, paid or delivered
any fee, commission or other sum of money or item or property, however
characterized, to any finder, agent, client, customer, supplier, government
official or other party, in the United States or any other country, which is in
any manner related to the Business, Assets or operations of Sellers, which is,
or may be with the passage of time or discovery, illegal under any federal,
state or local laws of the United States (including without limitation the U.S.
Foreign Corrupt Practices Act) or any other country having jurisdiction; no
Seller has participated, directly or indirectly, in any boycotts or other
similar practices affecting any of its actual or potential customers, and each
Seller has at all times done business in an open and ethical manner.
4.26. Distributors and Suppliers. Schedule 4.26 sets forth a complete and
accurate list of the names and addresses, on a collective basis, of the ten
largest suppliers of the Business, showing the approximate total purchases in
dollars by Sellers from each such supplier during such fiscal year. Since
January 1, 1995, there has been no adverse change in the business relationship
of any Seller with any distributor or supplier named on Schedule 4.26. No Seller
has received any communication from any distributor or supplier named on
Schedule 4.26 of any intention to terminate or materially reduce supplies to
such Seller.
4.27. Compliance With Environmental Laws.
(a) Definitions. The following terms, when used in this Section 4.27,
shall have the following meanings. Any of these terms may, unless the context
otherwise requires, be used in the singular or the plural depending on the
reference.
(i) "Seller". For purposes of this Section, the term "Seller" shall
include (i) all affiliates of any Company, (ii) all partnerships, joint
ventures and other entities or organizations in which any Company was at any
time or is a partner, joint venturer, member or participant and (iii) all
predecessor or former corporations, partnerships, joint ventures,
organizations, businesses or other entities, whether in existence as of the
date hereof or at any time prior to the date hereof, the assets or obligations
of which have been acquired or assumed by any Seller or to which any Seller has
succeeded.
(ii) "Release" shall mean and include any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping or disposing into the environment or the workplace of any Hazardous
Substance, and otherwise as defined in any Environmental Law.
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(iii) "Hazardous Substance" shall mean any pollutant, contaminant,
chemical, waste and any toxic, infectious, carcinogenic, reactive, corrosive,
ignitible or flammable chemical or chemical compound or hazardous substance,
material or waste, whether solid, liquid or gas, including, without limitation,
any quantity of asbestos in any form, urea formaldehyde, PCB's, radon gas,
crude oil or any fraction thereof, all forms of natural gas, petroleum products
or by- products or derivatives, radioactive substance or material, pesticide
waste waters, sludges, slag and any other substance, material or waste that is
subject to regulation, control or remediation under any Environmental Laws.
(iv) "Environmental Laws" shall mean all Regulations which regulate or
relate to the protection or clean-up of the environment, the use, treatment,
storage, transportation, generation, manufacture, processing, distribution,
handling or disposal of, or emission, discharge or other release or threatened
release of, Hazardous Substances or otherwise dangerous substances, wastes,
pollution or materials (whether, gas, liquid or solid), the preservation or
protection of waterways, groundwater, drinking water, air, wildlife, plants or
other natural resources, or the health and safety of persons or property,
including without limitation protection of the health and safety of employees.
Environmental Laws shall include, without limitation, the Federal Insecticide,
Fungicide, Rodenticide Act, Resource Conservation & Recovery Act, Clean Water
Act, Safe Drinking Water Act, Atomic Energy Act, Occupational Safety and Health
Act, Toxic Substances Control Act, Clean Air Act, Comprehensive Environmental
Response, Compensation and Liability Act, Emergency Planning and Community
Right-to-Know Act, Hazardous Materials Transportation Act and all analogous or
related federal, state or local law, each as amended.
(v) "Environmental Conditions" means the introduction into the environment
of any pollution, including, without limitation, any contaminant, irritant or
pollutant or other Hazardous Substance (whether or not upon any Facility or
Former Facility or other property and whether or not such pollution constituted
at the time thereof a violation of any Environmental Law as a result of any
Release of any kind whatsoever of any Hazardous Substance) as a result of which
any Seller has or may become liable to any person or by reason of which any
Facility, Former Facility or any of the Assets may suffer or be subjected to
any lien.
(b) Facilities. The Facilities and all Former Facilities are, and were at
all times when owned, leased or operated by any Seller, owned, leased and
operated by such Seller in compliance with all Environmental Laws and in a
manner that will not give rise to any Liability under any Environmental Laws.
Without limiting the foregoing, (i) there is not and has not been any Hazardous
Substance used, generated, treated, stored, transported, disposed of, handled
or otherwise existing on, under, about or emanating from any Facility or any
Former Facility which were caused by any Seller or any agent or employee
thereof, except for quantities of any such Hazardous Substances stored or
otherwise held on, under or about any such Facility in full compliance with all
Environmental Laws and necessary for the operation of the Business, (ii) each
Seller has at all times used, generated, treated, stored, transported, disposed
of or otherwise handled its Hazardous Substances in compliance with all
Environmental Laws and in a manner that will not result in Liability of any
Seller under any Environmental Law, (iii) there is not now and has not been at
any time when any Seller owned, leased or operated any Facility or Former
Facility, any underground or above-ground storage tank or pipeline at any
Facility or Former Facility where the installation, use, maintenance, repair,
testing, closure or removal of such tank or pipeline was not in compliance with
all Environmental Laws and there has been no Release from or rupture of any
such tank or pipeline, including without limitation any Release from or in
connection with the filling or emptying of such tank, and (iv) no Seller
manufactures or distributes any product in the State of California which
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requires the warning mandated by the California Safe Drinking Water and Toxic
Enforcement Act of 1986 ("Proposition 65").
(c) Notice of Violation. No Seller has received any notice of alleged,
actual or potential responsibility for, or any inquiry or investigation
regarding, (i) any Release or threatened Release of any Hazardous Substance at
any location, whether at the Facilities, the Former Facilities or otherwise or
(ii) an alleged violation of or non-compliance with the conditions of any
Permit required under any Environmental Law or the provisions of any
Environmental Law. No Seller has received notice of any other claim, demand or
Action by any individual or entity alleging any actual or threatened injury or
damage to any person, property, natural resource or the environment arising
from or relating to any Release or threatened Release of any Hazardous
Substances at, on, under, in, to or from any Facilities or Former Facilities,
or in connection with any operations or activities of any Seller.
(d) Environmental Conditions. To the best of each Seller's knowledge,
there are no present or past Environmental Conditions in any way relating to
the Business or at any Facility or Former Facility.
(e) Environmental Audits or Assessments. True, complete and correct copies
of the written reports, and all parts thereof, including any drafts of such
reports if such drafts are in the possession or control of any Seller, of all
environmental audits or assessments which have been conducted at any Facility
or Former Facility within the past five years, either by any Seller or any
attorney, environmental consultant or engineer engaged by any Seller for such
purpose, have been delivered to Buyer and a list of all such reports, audits
and assessments and any other similar report, audit or assessment of which any
Seller has knowledge is included on the Disclosure Schedule.
(f) Releases or Waivers. No Seller has released any other person from any
claim under any Environmental Law or waived any rights concerning any
Environmental Condition.
(g) Notices, Warnings and Records. Each Seller has given all notices and
warnings, made all reports, and has kept and maintained all records required by
and in compliance with all Environmental Laws.
4.28. Banking Relationships. Schedule 4.28 sets forth a complete and
accurate description of all arrangements that each Company has with any banks,
savings and loan associations or other financial institutions providing for
checking accounts, safe deposit boxes, borrowing arrangements, and certificates
of deposit or otherwise, indicating in each case account numbers, if
applicable, and the person or persons authorized to act or sign on behalf of
such Company in respect of any of the foregoing.
4.29. Material Misstatements Or Omissions. No representations or
warranties by any Seller in this Agreement, nor any document, exhibit,
statement, certificate or schedule heretofore or hereinafter furnished to Buyer
pursuant hereto, or in connection with the transactions contemplated hereby,
including without limitation the Disclosure Schedule, contains or will contain
any untrue statement of a material fact, or omits or will omit to state any
material fact necessary to make the statements or facts contained therein not
misleading. Each Seller has disclosed all events, conditions and facts
materially affecting the Business, and the prospects and financial condition of
such Seller.
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ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as follows, which
representations and warranties are, as of the date hereof, and will be, as of
the Closing Date, true and correct:
5.1. Organization of Buyer. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
5.2. Authorization. Buyer has all requisite corporate power and authority,
and has taken all corporate action necessary, to execute and deliver this
Agreement and the Ancillary Agreements, to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. The execution and delivery of this Agreement and the Ancillary
Agreements by Buyer and the consummation by Buyer of the transactions
contemplated hereby and thereby have been duly approved by the board of
directors of Buyer. No other corporate proceedings on the part of Buyer are
necessary to authorize this Agreement and the Ancillary Agreements and the
transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by Buyer and is, and upon execution and delivery of the
Ancillary Agreements, will be legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with their terms.
5.3. No Conflict or Violation. Neither the execution, delivery or
performance of this Agreement nor the consummation of the transactions
contemplated hereby, nor compliance by Buyer with any of the provisions hereof,
will (a) violate or conflict with any provision of the Certificate of
Incorporation or Bylaws of Buyer, (b) violate, conflict with, or result in or
constitute a Default under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any Encumbrance upon any of Buyer's assets
under, any of the terms, conditions or provisions of any contract,
indebtedness, note, bond, indenture, security or pledge agreement, commitment,
license, lease, franchise, permit, agreement, authorization, concession, or
other instrument or obligation to which Buyer is a party, (c) violate any
Regulation or Court Order, except, in the case of each of clauses (a), (b) and
(c) above, for such violations, Defaults, terminations, accelerations or
creations of Encumbrances which, in the aggregate, would not have a material
adverse effect on the business of Buyer or its ability to consummate the
transactions contemplated hereby.
5.4. Litigation. Except as set forth on Schedule 5.4, there are no Actions
pending, threatened or, to the best of Buyer's knowledge, anticipated (a)
against, related to or affecting (i) Buyer, (ii) any officers or directors of
Buyer or (iii) any shareholder of Buyer in such shareholder's capacity as a
shareholder of Buyer, (b) seeking to delay, limit or enjoin the transactions
contemplated by this Agreement (c) that involve the risk of criminal liability,
or (d) in which Buyer is a plaintiff. Buyer is neither in Default with respect
to nor subject to any Court Order, and there are no unsatisfied judgments
against Buyer. There is not a reasonable likelihood of an adverse determination
of any pending Actions.
5.5. Consents and Approvals. Except as set forth on Exhibit I hereto, no
notice to, declaration, filing or registration with, or authorization, consent
or approval of, or permit from, any domestic or foreign governmental or
regulatory body or authority, or any other person or entity, is required to be
made or obtained by Buyer in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby.
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5.6. No Brokers. Neither Buyer nor any of its officers, directors,
employees, shareholders or affiliates has employed or made any agreement with
any broker, finder or similar agent or any person or firm which will result in
the obligation of any Seller or any of its respective affiliates to pay any
finder's fee, brokerage fees or commission or similar payment in connection
with the transactions contemplated hereby.
ARTICLE Vl.
COVENANTS OF SELLERS AND BUYER
Each Seller, on the one hand, and Buyer, on the other hand, each covenant
with the other as follows:
6.1. Further Assurances. Upon the terms and subject to the conditions
contained herein, the parties agree, both before and after the Closing, (i) to
use all reasonable efforts to take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement,
(ii) to execute any documents, instruments or conveyances of any kind which may
be reasonably necessary or advisable to carry out any of the transactions
contemplated hereunder, and (iii) to cooperate with each other in connection
with the foregoing. Without limiting the foregoing, the parties agree to use
their respective best efforts (A) to obtain all necessary waivers, consents and
approvals from other parties to the Contracts, Leases and Franchise Agreements
to be assumed by Buyer; provided, however that Buyer shall not be required to
make any payments, commence litigation or agree to modifications of the terms
thereof in order to obtain any such waivers, consents or approvals, (B) to
obtain all necessary Permits as are required to be obtained under any
Regulations, (C) to defend all Actions challenging this Agreement or the
consummation of the transactions contemplated hereby, (D) to lift or rescind
any injunction or restraining order or other Court Order adversely affecting
the ability of the parties to consummate the transactions contemplated hereby,
(E) to give all notices to, and make all registrations and filings with third
parties, including without limitation all actions necessary to comply with the
procedures of the "Bulk Sales Act" and any submissions of information requested
by any governmental authorities, and (F) to fulfill all conditions to this
Agreement. Each Seller and Buyer will commence all action required under this
Section 6.1 by a date which is early enough to allow the transactions
contemplated hereunder to be consummated by the Closing Date.
6.2. Consents; Franchisee and Landlord Estoppel Certificates. Sellers
shall use their reasonable good faith efforts to obtain all consents, including
Franchise Estoppel Certificates from each Franchisee and Landlord Estoppel
Certificates from each landlord or lessor under each Facility Lease. Buyer
shall assist and cooperate with Sellers in connection therewith, including the
furnishing of any reasonable information regarding Buyer requested by any
Franchisee or other third party. Sellers shall keep Buyer reasonably informed
as to their progress with respect to obtaining such consents. Sellers
acknowledge and agree that no terms or provisions of any Franchise, Lease or
other Contract shall be modified or amended in connection with obtaining the
consents without the prior written consent of Buyer, which consent shall not be
unreasonably withheld. Sellers shall take, or cause to be taken, all actions
necessary, proper or advisable to ensure that neither the IRS nor any
California taxing authority takes any enforcement or other action against any
of the Assets or the Business on account of unpaid Taxes of any Seller either
prior to or after the Closing.
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6.3. No Solicitation.
(a) No Solicitation. From the date hereof through the Closing or the
earlier termination of this Agreement, each of the Sellers and their
Representatives shall not, and shall cause each of their respective
shareholders or Representatives (including without limitation investment
bankers, attorneys and accountants), not to, directly or indirectly, enter
into, solicit, initiate or continue any discussions or negotiations with, or
encourage or respond to any inquiries or proposals by, or participate in any
negotiations with, or provide any information to, or otherwise cooperate in any
other way with, any corporation, partnership, person or other entity or group,
other than Buyer and its Representatives, concerning any sale of all or a
portion of the Assets or the Business, or of any shares of capital stock of any
Company, or any merger, consolidation, liquidation, dissolution or similar
transaction involving any Company (each such transaction being referred to
herein as a "Proposed Acquisition Transaction"). Each Seller shall not,
directly or indirectly, through any officer, director, employee,
representative, agent or otherwise, solicit, initiate or encourage the
submission of any proposal or offer from any person (including, without
limitation, a "person" as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended) or entity relating to any Proposed
Acquisition Transaction or participate in any negotiations regarding, or
furnish to any other person any information with respect to such Seller for the
purposes of, or otherwise cooperate in any way with, or assist or participate
in, facilitate or encourage, any effort or attempt by any other person to seek
or effect a Proposed Acquisition Transaction. Each Seller hereby represents
that it is not now engaged in discussions or negotiations with any party other
than Buyer with respect to any of the foregoing. Each Seller shall notify Buyer
promptly (orally and in writing) if any such written offer, or any inquiry or
contact with any person with respect thereto, is made and shall provide Buyer
with a copy of such offer and shall keep Buyer informed on the status of any
negotiations regarding such offer. Each Seller agrees not to release any third
party from, or waive any provision of, any confidentiality or standstill
agreement to which such Seller is a party.
(b) Notification. Each Seller will immediately notify Buyer if any
discussions or negotiations are sought to be initiated, any inquiry or proposal
is made, or any information is requested with respect to any Proposed
Acquisition Transaction and notify Buyer of the terms of any proposal which it
may receive in respect of any such Proposed Acquisition Transaction, including
without limitation the identity of the prospective purchaser or soliciting
party.
6.4. Notification of Certain Matters. From the date hereof through the
Closing, each Seller shall give prompt notice to Buyer of (a) the occurrence,
or failure to occur, of any event which occurrence or failure would be likely
to cause any representation or warranty contained in this Agreement or in any
exhibit or schedule hereto to be untrue or inaccurate in any material respect
and (b) any material failure of any Seller, or any of its respective
affiliates, or of any of its respective shareholders or Representatives, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement or any exhibit or schedule hereto;
provided, however, that such disclosure shall not be deemed to cure any breach
of a representation, warranty, covenant or agreement or to satisfy any
condition. Each Seller shall promptly notify Buyer of any Default, the threat
or commencement of any Action, or any development that occurs before the
Closing that could in any way materially affect any Seller, the Assets or the
Business.
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6.5. Investigation by Buyer.
From the date hereof through the Closing Date:
(a) Each Seller shall, and shall cause its officers, directors, employees
and agents to, afford the Representatives of Buyer and its affiliates complete
access at all reasonable times to the Assets for the purpose of inspecting the
same, and to the officers, employees, agents, attorneys, accountants,
properties, Books and Records (one day's notice shall be given by Buyer to
Sellers for the inspection of such Books and Records) and Contracts of such
Seller, and shall furnish Buyer and its Representatives all financial,
operating and other data and information as Buyer or its affiliates, through
their respective Representatives, may reasonably request, including an
unaudited consolidated balance sheet and the related statements of income,
retained earnings and cash flow for each month from the Interim Balance Sheet
Date through the Closing Date within fifteen (15) calendar days after the end
of each four (4) weeks which financial statements shall (a) be true, correct
and complete, (b) be in accordance with the books and records of such Seller
and (c) accurately set forth the assets, Liabilities and financial condition,
results of operations and other information purported to be set forth therein
in accordance with generally accepted accounting principles consistently
applied.
(b) (i) Buyer shall have the right, at its sole cost and expense to (A)
conduct tests of the soil surface or subsurface waters and air quality at, in,
on, beneath or about the Leased Real Property, and such other procedures as may
be recommended by an independent environmental consultant selected by Buyer
(the "Consultant") based on its reasonable professional judgment, in a manner
consistent with good engineering practice, (B) inspect records, reports,
permits, applications, monitoring results, studies, correspondence, data and
any other information or documents relevant to environmental conditions or
environmental noncompliance, and (C) inspect all buildings and equipment at the
Leased Real Property, including without limitation the visual inspection of the
Facilities for asbestos-containing construction materials; provided, in each
case, such tests and inspections shall be conducted only (1) during regular
business hours; and (2) in a manner which will not unduly interfere with the
operation of the Business and/or the use of, access to or egress from the
Leased Property.
(ii) Buyer's right to conduct tests, inspect records and other documents,
and visually inspect all buildings and equipment at the Leased Real Property
shall also be subject to the following terms and conditions:
(A) All testing performed on Buyer's behalf shall be conducted by the
Consultant;
(B) Each Seller shall have the right to accompany the Consultant as it
performs testing;
(C) Except as otherwise required by law, any information concerning the
Leased Real Property gathered by Buyer or the Consultant as the result of, or
in connection with, the testing shall be kept confidential in accordance with
subsection (D) below and shall not be revealed to, or discussed with, anyone
other than Representatives of Buyer or Representatives of such Seller who
agrees to comply with the provisions of subsection (D) below; and
(D) In the event that any party to this Agreement or any party set forth in
subsection (C) above is requested or required to disclose information described
in
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subparagraph (b)(i), Buyer shall provide such Seller or such Seller shall
provide Buyer, as the case may be, with prompt notice of such request so that
Seller or Buyer, as the case may be, may seek an appropriate protective order or
waiver by the other party's compliance with this Agreement. If, in the absence
of a protective order or the receipt of a waiver hereunder, such party is
nonetheless, in the opinion of its counsel, compelled to disclose such
information to any tribunal or else stand liable for contempt or suffer other
censure or penalty, such party will furnish only that portion of the information
which is legally required and will exercise its reasonable efforts to obtain
reliable assurance that confidential treatment will be afforded to the disclosed
information. The requirements of this subparagraph shall not apply to
information in the public domain or lawfully acquired on a nonconfidential basis
from others.
6.6. Conduct of Business. From the date hereof through the Closing, Sellers
shall, except as contemplated by this Agreement, or as consented to by Buyer in
writing, operate the Business in the ordinary course of business and
substantially in accordance with past practice and will not take any action
inconsistent with this Agreement or with the consummation of the Closing.
Without limiting the generality of the foregoing, no Seller shall, except as
specifically contemplated by this Agreement or as consented to by Buyer in
writing:
(a) change or amend the Articles of Incorporation or Bylaws of such Seller;
(b) enter into, extend, materially modify, terminate or renew any Contract,
Lease or Franchise Agreement, except in the ordinary course of business;
(c) sell, assign, transfer, convey, lease, mortgage, pledge or otherwise
dispose of or encumber any of the Assets, or any interests therein, except in
the ordinary course of business;
(d) fail to acquire, produce, maintain or sell inventory consistent with
past business practices of each Company, or fail to have sufficient provisions
for food, liquor and supplies to be available on the Closing Date so as to
ensure that no interruption in operations will result following the Closing;
(e) incur any Liability for long-term interest bearing indebtedness,
guarantee the obligations of others, indemnify others or, except in the
ordinary course of business, incur any other Liability;
(f) (i) take any action with respect to the grant of any bonus, severance
or termination pay (otherwise than pursuant to policies or agreements of such
Seller in effect on the date hereof that are described on the Disclosure
Schedule) or with respect to any increase of benefits payable under its
severance or termination pay policies or agreements in effect on the date
hereof or increase in any manner the compensation or fringe benefits of any
employee or pay any benefit not required by any existing Employee Plan or
policy;
(ii) make any change in the key management structure of such Seller,
including without limitation the hiring of additional officers or the
termination of existing officers;
(iii) adopt, enter into or amend any Employee Plan, agreement (including
without limitation any collective bargaining or employment agreement), trust,
fund or other arrangement for the benefit or welfare of any employee, except
for any such amendment as may be required to comply with applicable
Regulations; or
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(iv) fail to maintain all Employee Plans in accordance with applicable
Regulations;
(g) acquire by merger or consolidation with, or merge or consolidate with,
or purchase substantially all of the assets of, or otherwise acquire any
material assets or business of any corporation, partnership, association or
other business organization or division thereof;
(h) declare, set aside, make or pay any dividend or other distribution in
respect of such Seller's capital stock;
(i) fail to expend funds for budgeted capital expenditures or commitments
for the benefit of the Business;
(j) willingly allow or permit to be done, any act by which any of the
Insurance Policies may be suspended, impaired or canceled;
(k) (i) fail to pay its accounts payable and any debts owed or obligations
due to it, or pay or discharge when due any Liabilities, in the ordinary course
of business; or
(ii) fail to collect its accounts receivable in the ordinary course of
business;
(l) fail to maintain the Assets in substantially their current state of
repair, excepting normal wear and tear, or fail to replace consistent with
Seller's past practice, inoperable, worn-out or obsolete or destroyed Assets;
(m) make any loans or advances to any partnership, firm or corporation,
or, except for expenses incurred in the ordinary course of business, any
individual;
(n) fail to comply with all Regulations applicable to it, the Assets and
the Business;
(o) intentionally do any other act which would cause any representation or
warranty of such Seller in this Agreement to be or become untrue in any material
respect;
(p) issue, repurchase or redeem or commit to issue, repurchase or redeem,
any shares of such Seller's capital stock, any options or other rights to
acquire such stock or any securities convertible into or exchangeable for such
stock;
(q) fail to use its best efforts to (i) retain such Seller's employees and
(ii) maintain the Business so that such employees will remain available to
Buyer on and after the Closing Date, (iii) maintain existing relationships with
suppliers, customers and others having business dealings with such Seller and
(iv) otherwise preserve the goodwill of the Business so that such relationships
and goodwill will be preserved on and after the Closing Date; or
(r) enter into any agreement, or otherwise become obligated, to do any
action prohibited hereunder.
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6.7. Employee Matters.
(a) Buyer may extend offers of employment to those of Sellers' employees
whom it desires to hire (such employees are hereinafter referred to as the
"Rehired Employees"), which offers shall be on terms and conditions which Buyer
shall determine in its sole discretion. Notwithstanding the foregoing, nothing
in this Agreement shall impose upon Buyer an obligation to hire or offer to
hire any of Sellers' employees or to interview any of Sellers' employees for
positions of employment with Buyer. Each Seller shall terminate the employment
of all of the Rehired Employees immediately prior to the Closing and shall pay
such Rehired Employees (and all other employees formerly employed in connection
with the Business) all amounts due under the Employee Plans (including
severance, accrued vacation, and other benefits). Sellers shall cooperate with
and use its best efforts to assist Buyer in its efforts to secure satisfactory
employment arrangements with the Rehired Employees. Prior to the Closing,
Sellers shall cooperate with Buyer to assist Buyer in evaluating Sellers'
employees employed in connection with the Business, including providing Buyer
with reasonable access (on a confidential basis) to pertinent employee records.
Prior to the Closing, Buyer shall provide notice to Sellers of any employees
that Buyer does not anticipate employing.
(b) Sellers shall be solely responsible for all of the Employee Plans and
all obligations and liabilities thereunder. Buyer shall not assume any of the
Employee Plans or any obligation or liability thereunder.
(c) Nothing contained in this Agreement shall confer upon any Rehired
Employee any right with respect to continuance of employment by Buyer, nor
shall anything herein interfere with the right of Buyer to terminate the
employment of any of the Rehired Employees at any time, with or without cause,
or restrict Buyer in the exercise of its independent business judgment in
modifying any of the terms and conditions of the employment of the Rehired
Employees.
(d) No provision of this Agreement shall create any third party beneficiary
rights in any Rehired Employee, any beneficiary or dependents thereof, or any
collective bargaining representative thereof, with respect to the compensation,
terms and conditions of employment and benefits that may be provided to any
Rehired Employee by Buyer or under any benefit plan which Buyer may maintain.
(e) After the Closing Date, no Seller shall, directly or indirectly, hire
or offer employment to or seek to hire or offer employment to any Rehired
Employee or any other employee of Buyer or any successor or affiliate of Buyer
which is engaged in the Business, unless Buyer first terminates the employment
of such employee or gives its written consent to such employment or offer of
employment.
ARTICLE VII.
CONDITIONS TO SELLERS' OBLIGATIONS
The obligations of Sellers to consummate the transactions provided for
hereby are subject, in the discretion of Sellers, to the satisfaction, on or
prior to the Closing Date, of each of the following conditions, any of which may
be waived by Sellers:
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7.1. Representations, Warranties and Covenants. All representations and
warranties of Buyer contained in this Agreement shall be true and correct in
all material respects at and as of the date of this Agreement and at and as of
the Closing Date, except as and to the extent that the facts and conditions
upon which such representations and warranties are based are expressly required
or permitted to be changed by the terms hereof, and Buyer shall have performed
and satisfied in all material respects all agreements and covenants required
hereby to be performed by it prior to or on the Closing Date.
7.2. No Actions or Court Orders. No Action by any governmental authority or
other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to damage Buyer, the Assets or the Business materially if
the transactions contemplated hereby are consummated, including without
limitation any material adverse effect on the right or ability of Buyer to own,
operate, possess or transfer the Assets after the Closing. There shall not be
any Regulation or Court Order that makes the purchase and sale of the Business
or the Assets contemplated hereby illegal or otherwise prohibited.
7.3. Opinion of Counsel. Buyer shall have delivered to Sellers an opinion
of Latham & Watkins, counsel to Buyer, dated as of the Closing Date, in form
and substance reasonably satisfactory to Sellers, to the effect that:
(a) Incorporation. Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware.
(b) Corporate Power and Authority. Buyer has the necessary corporate power
and authority to enter into this Agreement and the Debt Agreements and to
consummate the transactions contemplated hereby and thereby;
(c) Corporate Action and Enforceability. The execution, delivery and
performance of this Agreement and the Debt Agreements by Buyer have been duly
authorized by all necessary corporate action of Buyer, and this Agreement and
the Debt Agreements have been duly executed and delivered by Buyer, and
constitute legally valid and binding obligations of Buyer, enforceable against
Buyer in accordance with their terms, except as limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally or by equitable principles (whether considered in
an action at law or in equity), (ii) limitations imposed by federal or state
law or equitable principles upon the availability of specific performance,
injunctive relief or other equitable remedies, or (iii) other customary
limitations reasonably satisfactory to Sellers' counsel; and
(d) No Breach of Contracts. Neither the execution and delivery of this
Agreement or the Debt Agreements by Buyer nor the consummation of the
transactions contemplated hereby or thereby will (i) violate the Certificate of
Incorporation or Bylaws of Buyer or (ii) to the actual knowledge of such
counsel, violate any Court Order applicable to Buyer.
In rendering such opinions, such counsel may rely as they deem advisable
(a) as to matters governed by the laws of jurisdictions other than states in
which they maintain offices, upon opinions of local counsel satisfactory to
such counsel, and (b) as to factual matters, upon certificates and assurances
of public officials and officers of Buyer. In addition, such opinions may be
subject to such additional qualifications and exceptions as are reasonably
acceptable to counsel to Sellers.
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7.4. Certificates. Buyer shall furnish Sellers with such certificates of
its officers and others to evidence compliance with the conditions set forth in
this Article VII as may be reasonably requested by Sellers.
7.5. Corporate Documents. Sellers shall have received from Buyer
resolutions adopted by the board of directors of Buyer approving this
Agreement, the Ancillary Agreements and the transactions contemplated hereby or
thereby, certified by Buyer's corporate secretary.
7.6. Assumption Document. Buyer shall have executed and delivered the
Assumption Document.
7.7. Ancillary Agreements. Buyer shall have executed and delivered the
Ancillary Agreements to which Buyer is a party.
ARTICLE VIII.
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the transactions provided for
hereby are subject, in the discretion of Buyer, to the satisfaction, on or
prior to the Closing Date, of each of the following conditions, any of which
may be waived by Buyer:
8.1. Representations. Warranties and Covenants. All representations and
warranties of Sellers contained in this Agreement shall be true and correct in
all material respects at and as of the date of this Agreement and at and as of
the Closing Date, except as and to the extent that the facts and conditions
upon which such representations and warranties are based are expressly required
or permitted to be changed by the terms hereof, and Sellers shall have
performed and satisfied in all material respects all agreements and covenants
required hereby to be performed by them prior to or on the Closing Date.
8.2. Consents; Regulatory Compliance and Approval. All Permits, consents,
approvals and waivers from governmental authorities and other parties necessary
to the consummation of the transactions contemplated hereby and for the
operation of the Business by Buyer (including, without limitation, the Temporary
Liquor Permits and all required third party consents to the assignment of the
Leases, Contracts and Franchise Agreements to be assumed by Buyer) shall have
been obtained. Buyer shall be satisfied that all approvals required under any
Regulations to carry out the transactions contemplated by this Agreement shall
have been obtained and that the parties shall have complied with all Regulations
applicable to the Acquisition.
8.3. No Actions or Court Orders. No Action by any governmental authority or
other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to damage Buyer, the Assets or the Business materially if
the transactions contemplated hereby are consummated, including without
limitation any material adverse effect on the right or ability of Buyer to own,
operate, possess or transfer the Assets after the Closing. Without limiting the
generality of the foregoing, Buyer shall be satisfied that neither the IRS nor
any California taxing authority has taken or will take any enforcement or other
action against or with respect to any of the Assets on account of any unpaid
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Taxes of any Seller. There shall not be any Regulation or Court Order that makes
the purchase and sale of the Business or the Assets contemplated hereby illegal
or otherwise prohibited.
8.4. Opinion of Counsel. Sellers shall have delivered to Buyer an opinion
of counsel to Sellers, dated as of the Closing Date, in form and substance
reasonably satisfactory to Buyer, to the effect that:
(a) Incorporation. Each Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
California;
(b) Corporate Power and Authority. Each Company has the necessary corporate
power and authority to enter into this Agreement and the Debt Agreements and to
consummate the transactions contemplated hereby and thereby; and each Company
has the necessary corporate power and authority to own, lease and operate the
Assets and other properties and to conduct the Business as presently conducted;
(c) Corporate Action and Enforceability. The execution, delivery and
performance of this Agreement and the Debt Agreements by each Company have been
duly authorized by all necessary corporate action of such Company, and this
Agreement and the Debt Agreements have been duly executed and delivered by the
Sellers, and no approval of the stockholders of such Company is required in
connection therewith or, if required, such approval has been duly obtained in
accordance with the provisions of such Company's Articles of Incorporation and
Bylaws and applicable law, and this Agreement and each Debt Agreement
constitute legally valid and binding obligations of each Seller, enforceable
against such Seller in accordance with their terms, except as limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditors' rights generally or by equitable principles (whether
considered in an action at law or in equity), (ii) limitations imposed by
federal or state law or equitable principles upon the availability of specific
performance, injunctive relief or other equitable remedies, or (iii) other
customary limitations reasonably satisfactory to Buyer's counsel;
(d) No Breach of Contracts. Neither the execution and delivery of this
Agreement or the Debt Agreements by any Seller nor the consummation of the
transactions contemplated hereby or thereby will (i) violate the Articles of
Incorporation or Bylaws of such Company, (ii) cause a Default under any term or
provision of any Franchise Agreements known to such counsel to which such
Seller is a party or (iii) to the actual knowledge of such counsel, violate any
Court Order applicable to such Seller;
(e) No Violation of Law. The sale of the Franchises were made pursuant to a
current registration filed with the Commissioner of Corporations under the
California Franchise Investment Law of 1971, as amended; and no Permit of, or
filing with, any governmental authority or, to the best knowledge of such
counsel, any other person, is required for the execution and delivery of this
Agreement or the Debt Agreements by any Seller or the consummation by such
Seller of the transactions contemplated hereby and thereby, except as set forth
in this Agreement, the Disclosure Schedule, the exhibits hereto or the Debt
Agreements; and
(f) Transfer and Assignment. The documents to be delivered by Sellers at
the Closing to effect the transfer and assignment to Buyer of all rights, title
and interest of Sellers in and to the Assets are effective to do so, subject to
(i) the effects of bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors' rights generally and equitable
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principles (whether considered in an action at law or in equity), (ii)
limitations imposed by federal or state law or equitable principles upon the
availability of specific performance, injunctive relief or other equitable
remedies, or (iii) other customary limitations reasonably satisfactory to
Buyer's counsel.
In rendering such opinions, such counsel may rely as they deem advisable
(a) as to matters governed by the laws of jurisdictions other than states in
which they maintain offices, upon opinions of local counsel satisfactory to
such counsel, and (b) as to factual matters, upon certificates and assurances
of public officials and officers of the Companies. In addition, such opinions
may be subject to such additional qualifications and exceptions as are
reasonably acceptable to counsel to Buyer.
8.5. Certificates. Sellers shall have furnished Buyer with such
certificates of its officers and others to evidence compliance with the
conditions set forth in this Article VIII as may be reasonably requested by
Buyer.
8.6. Material Changes. Since June 17, 1995, there shall not have been any
material adverse change with respect to the Business or the Assets.
8.7. Corporate Documents. Buyer shall have received from Sellers
resolutions adopted by the boards of directors of each Company approving this
Agreement and the Ancillary Agreements and the transactions contemplated hereby
and thereby, certified by each Company's corporate secretary.
8.8. Due Diligence Review. Buyer and its Representatives shall have
conducted a due diligence review of each Seller's Books and Records, Financial
Statements, and other records and accounts of the Business, and in the sole
discretion of Buyer, Buyer shall be satisfied on the basis of such review that
there has been no breach of the representations and warranties or the
pre-closing covenants of any Seller made pursuant to this Agreement. Such
review shall have no effect whatsoever on the Liability of any Seller to Buyer
under this Agreement or otherwise for breach of any representations,
warranties, or covenants of such Seller hereunder.
8.9. Financing. Buyer shall have received proceeds from a Private
Placement Bridge Financing in an amount not less than Seven Hundred Fifty
Thousand Dollars ($750,000).
8.10. Conveyancing Documents; Release of Encumbrances. Sellers shall have
executed and delivered each of the documents described in Section 3.2 hereof so
as to effect the transfer and assignment to Buyer of all right, title and
interest in and to the Assets and Sellers shall have filed (where necessary) and
delivered to Buyer all documents necessary to release the Assets from all
Encumbrances (other than Permitted Encumbrances), which documents shall be in a
form reasonably satisfactory to Buyer's counsel.
8.11. Permits. Buyer shall have obtained or been granted the right to use
all Permits necessary to its operation of the Business including the Temporary
Liquor Permits, but excluding the Liquor Licenses.
8.12. Other Agreements. Sellers shall have executed and delivered the
Ancillary Agreements in the forms attached as exhibits hereto. Buyer shall have
entered into such employment and non-competition agreements or arrangements
with such Rehired Employees as Buyer deems necessary or appropriate for the
continued operation of the Business, on such terms as may be
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mutually agreeable to Buyer and such parties, and such employment agreements
shall be in full force and effect as of the Closing.
8.13. Fullerton Lease. Buyer shall have entered into a lease, to operate a
Restaurant at 2720 East Nutwood, Fullerton, California, on terms acceptable to
Buyer and substantially similar to the terms of the current Fullerton Lease.
8.14. Westminster Franchise. Sellers shall have terminated and caused the
termination of the franchise agreement entered into on September 15, 1988 with
TL Cow, Inc. and/or Vinay Pai and any and all related agreements or arrangements
relating to the franchise restaurant located in Westminster, California,
including but not limited to the Management Agreement, as amended, between TLC
and TL Cow, Inc. (collectively, the "Westminster Agreements"). Buyer shall be
satisfied that all rights and obligations, including without limitation all
rights to the Proprietary Rights, arising from the Westminster Agreements shall
have been terminated.
8.15. Franchisee Estoppel Certificates. Sellers shall have delivered to
Buyer a Franchisee Estoppel Certificate from each of the Franchisees which are
parties to Franchise Agreements as of the Closing Date.
8.16. Landlord Estoppel Certificates. Sellers shall have delivered to
Buyer a Landlord Estoppel Certificate from each landlord or lessor for all
Facility Leases as of the Closing Date.
8.17. Bulk Sales. Sellers and Buyer shall comply with the procedures of the
"Bulk Sales Act" or similar law of any or all of the states in which the Assets
are situated or of any other state which may be asserted to be applicable to the
transactions contemplated hereby, including without limitation any notice
required in compliance with Division 6 of the California Commercial Code.
Sellers shall furnish Buyer and Escrow Holder with the information necessary to
prepare such notice, including without limitation all names and business
addresses used by it within the last three (3) years and the location of all the
Assets to be transferred under this Agreement, at least fifteen (15) days before
the Closing Date.
ARTICLE IX.
RISK OF LOSS: CONSENTS TO ASSIGNMENT
9.1. Risk of Loss. From the date hereof through the Closing Date, all risk
of loss or damage to the property included in the Assets shall be borne by
Sellers, and thereafter shall be borne by Buyer. If any portion of the Assets
is destroyed or damaged by fire or any other cause on or prior to the Closing
Date, other than use, wear or loss in the ordinary course of business, Sellers
shall give written notice to Buyer as soon as practicable after, but in any
event within five (5) calendar days of, discovery of such damage or
destruction, the amount of insurance, if any, covering such Assets and the
amount, if any, which any Seller is otherwise entitled to receive as a
consequence. Prior to the Closing, Buyer shall have the option, which shall be
exercised by written notice to Sellers within ten (10) calendar days after
receipt of Seller's notice or if there is not ten (10) calendar days prior to
the Closing Date, as soon as practicable prior to the Closing Date, of (a)
accepting such Assets in their destroyed or damaged condition in which event
Buyer shall be entitled to the proceeds of any insurance or other proceeds
payable with respect to such loss and to such indemnification for any uninsured
portion of such loss pursuant to Section 10.3, and the full Purchase Price
shall be paid for
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such Assets, (b) excluding such Assets from this Agreement, in which event the
Purchase Price shall be reduced by the amount allocated to such Assets, as
mutually agreed between the parties or (c) terminating this Agreement in
accordance with Section 11.1. If Buyer accepts such Assets, then after the
Closing, any insurance or other proceeds shall belong, and shall be assigned to,
Buyer without any reduction in the Purchase Price; otherwise, such insurance
proceeds shall belong to Sellers.
9.2. Consents to Assignment. Anything in this Agreement to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign any
Contract, Lease, Franchise Agreement, Permit or any claim or right or any
benefit arising thereunder or resulting therefrom if an attempted assignment
thereof, without the consent of a third party thereto, would constitute a
Default thereof or in any way adversely affect the rights of Buyer thereunder.
If such consent is not obtained, or if an attempted assignment thereof would be
ineffective or would affect the rights thereunder so that Buyer would not
receive all such rights, Sellers will cooperate with Buyer, in all reasonable
respects, to provide to Buyer the benefits under any such Contract, Lease,
Franchise Agreement, Permit or any claim or right, including without limitation
enforcement for the benefit of Buyer of any and all rights of any Seller against
a third party thereto arising out of the Default or cancellation by such third
party or otherwise. Nothing in this Section 9.2 shall affect Buyer's right to
terminate this Agreement under Sections 8.2 and 11.1 in the event that any
consent or approval to the transfer of any Asset is not obtained.
9.3. Facility Lease Consents. With respect to any Facility Lease, if any
Seller has not obtained any required consents by the Closing Date, or the
lessor has given any notice of intention either to terminate or exercise a
right of first refusal or has commenced or threatened to comrnence litigation
to enjoin such assignment or to terminate such Facility Lease, the following
provisions shall apply:
(a) Facility Lease--Reasonable Consent. As to any Facility Lease requiring
that the lessor or other party shall not unreasonably withhold its consent to
such Seller's assignment, Buyer shall have the right, to be exercised on or
before the Closing Date by giving written notice to Seller, either (i) to
terminate this Agreement with respect to the Facility affected by such Facility
Lease (including, at the option of Buyer, the sale of all or a portion of the
Assets relating to such Facility), in which case the Purchase Price shall be
reduced by the amount allocated to such Facility and the related Assets or (ii)
to proceed to Closing with respect to such Facility.
(b) Indemnification. Subject to the limitations as set forth in Section
10.3(a), Sellers hereby agree (i) to defend, indemnify and hold Buyer harmless
from and against any and all losses, damages, Liabilities, costs and expenses
(including without limitation reasonable attorneys' fees) of any type
whatsoever suffered by Buyer by reason of the attempted assignment of such
Facility Lease to Buyer, and (ii) if any of the above events result in a final
cancellation or nullification of the applicable Facility Lease or the attempted
assignment from Sellers to Buyer of such Facility Lease, then Sellers shall
repurchase, within thirty (30) calendar days after such cancellation or
nullification, the Facility affected by such Facility Lease (together with, at
Buyer's option, all or a portion of the Assets relating to such Facility) for a
purchase price in an amount equal to the portion of the Purchase Price
allocated to such Facility and the related Assets plus the costs of the then
current Inventory relating to the operations conducted in such Facility.
(c) Facility Lease--Consent Required. As to any Facility Lease requiring
consent, but without a reasonableness standard, either Buyer or such Seller may
so terminate this
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Agreement with respect to the Facility covered by such Facility Lease, and, at
the option of Buyer, the Purchase Price shall be reduced as provided in the
preceding subsection.
(d) Subleases. The parties acknowledge and agree that some of the Facility
Leases may provide that, although the Facility Lease may not be assigned by such
Seller without the written consent of the Consenting Party, such Seller may
sublet the property covered by such Facility Lease without such consent. If any
Consenting Party refuses to give its written consent to an assignment of such
Facility Lease, or conditions its consent on terms unacceptable to Seller or
Buyer, then in lieu of assigning such Facility Lease to Buyer, and with no
adjustment in the Purchase Price, Seller shall sublet the Facility to Buyer on
the same terms and conditions (including rental and other payments) that are
contained in the existing Facility Lease, for the balance of the term thereof
less one day.
ARTICLE X.
ACTIONS BY SELLERS AND BUYER
AFTER THE CLOSING
10.1. Books and Records: Tax Matters.
(a) Books and Records. Each party agrees that it will cooperate with and
make available to the other party, during normal business hours, all Books and
Records, information and employees (without substantial disruption of
employment) retained and remaining in existence after the Closing which are
necessary or useful in connection with any tax inquiry, audit, investigation or
dispute, any litigation or investigation or any other matter requiring any such
Books and Records, information or employees for any reasonable business
purpose. The party requesting any such Books and Records, information or
employees shall bear all of the out-of-pocket costs and expenses (including
without limitation attorneys' fees, but excluding reimbursement for salaries
and employee benefits) reasonably incurred in connection with providing such
Books and Records, information or employees.
(b) Cooperation and Records Retention. Sellers and Buyer shall (i) each
provide the other with such assistance as may reasonably be requested by any of
them in connection with the preparation of any return, audit, or other
examination by any taxing authority or judicial or administrative proceedings
relating to Liability for Taxes, (ii) each retain and provide the other with
any records or other information that may be relevant to such return, audit or
examination, proceeding or determination, and (iii) each provide the other with
any final determination of any such audit or examination, proceeding, or
determination that affects any amount required to be shown on any tax return of
the other for any period. Without limiting the generality of the foregoing,
Buyer and Sellers shall each retain, until the applicable statutes of
limitations (including any extensions) have expired, copies of all tax returns,
supporting work schedules, and other records or information that may be
relevant to such returns for all tax periods or portions thereof ending on or
before the Closing Date and shall not destroy or otherwise dispose of any such
records without first providing the other party with a reasonable opportunity
to review and copy the same.
(c) Payment of Liabilities. Following the Closing Date and prior to any
Seller receiving any portion of the Purchase Price from the Escrow, Sellers
shall pay through the Escrow all
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of the debts and Liabilities of Sellers relating to the Business pursuant to the
Escrow Agreement, including any Liability for Taxes, other than Assumed
Liabilities.
10.2. Survival of Representations, Etc. All of the representations,
warranties, covenants and agreements made by each party in this Agreement or in
any attachment, Exhibit, the Disclosure Schedule, certificate, document or list
delivered by any such party pursuant hereto shall survive the Closing for a
period of (and claims based upon or arising out of such representations,
warranties, covenants and agreements may be asserted at any time before the
date which shall be) two (2) years following the Closing (except with respect
to the representations and warranties set forth in Sections 4.19, 4.21, and
4.27 which shall survive until the expiration of the applicable statute of
limitations (with extensions) with respect to the matters addressed in such
sections). Each party hereto shall be entitled to rely upon the representations
and warranties of the other party set forth in this Agreement. The termination
of the representations and warranties provided herein shall not affect the
rights of a party in respect of any Claim made by such party in a writing
received by the other party prior to the expiration of the applicable survival
period provided herein.
10.3. Indemnifications.
(a) By Sellers. Each Seller shall, jointly and severally, indemnify, save
and hold harmless Buyer, its affiliates and its Representatives, from and
against any and all costs, losses (including without limitation diminution in
value), Taxes, Liabilities, obligations, damages, lawsuits, deficiencies,
claims, demands, and expenses (whether or not arising out of third-party
claims), including without limitation interest, penalties, costs of mitigation,
losses in connection with any Environmental Law (including without limitation
any clean-up or remedial action), lost profits and other losses resulting from
any shutdown or curtailment of operations, damages to the environment,
attorneys' fees and all amounts paid in investigation, defense or settlement of
any of the foregoing (herein, "Damages"), incurred in connection with, arising
out of, resulting from or incident to (i) any breach of any representation or
warranty or the inaccuracy of any representation, made by Sellers in or
pursuant to this Agreement; (ii) any breach of any covenant or agreement made
by Sellers in or pursuant to this Agreement; (iii) any Excluded Liability or
(iv) any Liability imposed upon Buyer by reason of Buyer's status as transferee
of the Business or the Assets.
The term "Damages" as used in this Section 10.3 is not limited to matters
asserted by third parties against any Seller or Buyer, but includes Damages
incurred or sustained by any Seller or Buyer in the absence of third party
claims. Payments by Buyer of amounts for which Buyer is indemnified hereunder,
and payments by any Seller of amounts for which such Seller is indemnified,
shall not be a condition precedent to recovery. Sellers' obligation to indemnify
Buyer, and Buyer's obligation to indemnify Sellers, shall not limit any other
rights, including without limitation rights of contribution which either party
may have under statute or common law. Notwithstanding the foregoing, Sellers
shall in no circumstances be liable for Damages or any other liability under
this Agreement for any amounts aggregating more than the amount of the Purchase
Price.
(b) By Buyer. Buyer shall indemnify and save and hold harmless Sellers, its
affiliates and subsidiaries, and its Representatives from and against any and
all Damages incurred in connection with, arising out of, resulting from or
incident to (i) any breach of any representation or warranty or the inaccuracy
of any representation, made by Buyer in or pursuant to this Agreement; (ii) any
breach of any covenant or agreement made by Buyer in or pursuant to this
Agreement; or (iii) from and after the Closing, any Assumed Liability.
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(c) Cooperation. The indemnified party shall cooperate in all reasonable
respects with the indemnifying party and such attorneys in the investigation,
trial and defense of such lawsuit or action and any appeal arising therefrom;
provided, however, that the indemnified party may, at its own cost, participate
in the investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom. The parties shall cooperate with each other in any
notifications to insurers.
(d) Defense of Claims. If a claim for Damages (a "Claim") is to be made by
a party entitled to indemnification hereunder against the indemnifying party,
the party claiming such indemnification shall, subject to Section 10.2, give
written notice (a "Claim Notice") to the indemnifying party as soon as
practicable after the party entitled to indemnification becomes aware of any
fact, condition or event which may give rise to Damages for which
indemnification may be sought under this Section 10.3. If any lawsuit or
enforcement action is filed against any party entitled to the benefit of
indemnity hereunder, written notice thereof shall be given to the indemnifying
party as promptly as practicable (and in any event within fifteen (15) calendar
days after the service of the citation or summons). The failure of any
indemnified party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the indemnifying party
demonstrates actual damage caused by such failure. After such notice, if the
indemnifying party shall acknowledge in writing to the indemnified party that
the indemnifying party shall be obligated under the terms of its indemnity
hereunder in connection with such lawsuit or action, then the indemnifying
party shall be entitled, if it so elects at its own cost, risk and expense, (i)
to take control of the defense and investigation of such lawsuit or action,
(ii) to employ and engage attorneys of its own choice to handle and defend the
same unless the named parties to such action or proceeding include both the
indemnifying party and the indemnified party and the indemnified party has been
advised in writing by counsel that there may be one or more legal defenses
available to such indemnified party that are different from or additional to
those available to the indemnifying party, in which event the indemnified party
shall be entitled, at the indemnifying party's cost, risk and expense, to
separate counsel of its own choosing, and (iii) to compromise or settle such
claim, which compromise or settlement shall be made only with the written
consent of the indemnified party, such consent not to be unreasonably withheld.
If the indemnifying party fails to assume the defense of such claim within
fifteen (15) calendar days after receipt of the Claim Notice, the indemnified
party against which such claim has been asserted will (upon delivering notice
to such effect to the indemnifying party) have the right to undertake, at the
indemnifying party's cost and expense, the defense, compromise or settlement of
such claim on behalf of and for the account and risk of the indemnifying party;
provided, however, that such Claim shall not be compromised or settled without
the written consent of the indemnifying party, which consent shall not be
unreasonably withheld. In the event the indemnified party assumes the defense
of the claim, the indemnified party will keep the indemnifying party reasonably
informed of the progress of any such defense, compromise or settlement. The
indemnifying party shall be liable for any settlement of any action effected
pursuant to and in accordance with this Section 10.3 and for any final judgment
(subject to any right of appeal), and the indemnifying party agrees to
indemnify and hold harmless an indemnified party from and against any Damages
by reason of such settlement or judgment.
(e) Seller's Right of Offset. Anything in this Agreement to the contrary
notwithstanding, any Seller may elect to pay to Buyer any amount as to which
such Seller is obligated to indemnify Buyer pursuant to any provision of this
Section 10.3, up to the aggregate principal balances of Notes A and/or B then
outstanding, by means of a reduction in the then outstanding balance of either
or both of Note A and Note B in the amount so designated by such Seller (the
"Offset Amount"). Following delivery by such Seller to Buyer of notice of such
Seller's election to utilize such offset, the outstanding principal balance of
Note A and/or Note B, as the case may be,
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shall be decreased in an amount equal to the Offset Amount. The exercise by
Seller of such offset rights shall not eliminate any indemnification obligations
of such Seller or any other Seller to Buyer in excess of the Offset Amount.
(f) Product and Warranty Liability. The provisions of this Section 10.3
shall cover, without limitation, all Liabilities of whatsoever kind, nature or
description relating, directly or indirectly, to product liability, litigation
or claims against Buyer or Sellers in connection with, arising out of, or
relating to products sold from the Facilities by Buyer or Sellers.
(g) Brokers and Finders. Pursuant to the provisions of this Section 10.3,
Buyer and Sellers shall each indemnify, hold harmless and defend the other
party from the payment of any and all broker's and finder's expenses,
commissions, fees or other forms of compensation which may be due or payable
from or by the indemnifying party, or may have been earned by any third party
acting on behalf of the indemnifying party in connection with the negotiation
and execution hereof and the consummation of the transactions contemplated
hereby.
(h) Representatives. No individual Representative of any party shall be
personally liable for any Damages under the provisions contained in this Section
10.3. Nothing herein shall relieve either party of any Liability to make any
payment expressly required to be made by such party pursuant to this Agreement.
(i) Failure to Close. Notwithstanding the provisions of this Section 10.3,
in the event the Closing does not take place, the sole and exclusive remedy for
both parties shall be as set forth under clause (iii) of Section 11. l(b) of
this Agreement.
10.4. Bulk Sales. Sellers and Buyer shall comply with the procedures of the
"Bulk Sales Act" or similar law of any or all of the states in which the Assets
are situated or of any other state which may be asserted to be applicable to the
transactions contemplated hereby. Sellers hereby agree that the indemnity
provisions of Section 10.3 hereof shall apply to any Damages of Buyer arising
out of or resulting from the failure of any Seller or Buyer to comply with any
such laws.
10.5. Name and Name Change. Sellers hereby grant to Buyer, effective as of
the Closing Date, the right to use the names "Texas Loosey's," "Texas Loosey's
Chili Parlor and Saloon," "Texas Tested Tried and Trusted" and any and all
variations thereof for any lawful business or other lawful purpose whatsoever,
and Sellers shall have no right whatsoever to such names. In addition, if
requested by Buyer, TLC shall file an amendment to its Articles of
Incorporation to change its corporate name to a name acceptable to Buyer, in
its reasonable discretion, such name to have no reference to "Texas Loosey's,"
"TLC" or any other name or mark that has such a near resemblance thereto as may
be likely to cause confusion or mistake to the public, or to otherwise deceive
the public. Such amendment shall be in a form acceptable for filing with the
Secretary of State of the State of California.
10.6. Return of Liquor License. Following any event of default by Buyer
under the Security Agreement which is not cured by Buyer within any applicable
grace period, Buyer shall cooperate with Sellers, and shall at the request of
Sellers execute and deliver such documents and releases as may be required or
necessary in order to transfer the Liquor Licenses (or any subsequent liquor
license issued to Buyer with respect to the Business) to Sellers and to enable
Sellers to utilize such liquor licenses in the operation of the Business by
Sellers following the exercise by Sellers of any remedies of Sellers available
to them under the Security Agreement.
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ARTICLE XI.
MISCELLANEOUS
11. 1. Termination.
(a) Termination. This Agreement may be terminated at any time prior to
Closing:
(i) By mutual written consent of Buyer and Sellers;
(ii) By Buyer or Sellers if the Closing shall not have occurred on or
before thirty (30) days after the date hereof; provided however, that this
provision shall not be available to Buyer if Sellers have the right to
terminate this Agreement under clause (iv) of this Section 11.1(a), and this
provision shall not be available to Sellers if Buyer has the right to terminate
this Agreement under clause (iii) of this Section ll.l(a);
(iii) By Buyer if there is a material breach of any representation or
warranty set forth in Article IV hereof or any covenant or agreement to be
complied with or performed by Sellers pursuant to the terms of this Agreement
or the failure of a condition set forth in Article VIII to be satisfied (and
such condition is not waived in writing by Buyer) on or prior to the Closing
Date, or the occurrence of any event which results or would result in the
failure of a condition set forth in Article VIII to be satisfied on or prior to
the Closing Date, provided that Buyer may not terminate this Agreement prior to
the Closing if Sellers have not had an adequate opportunity to cure such
failure; or
(iv) By Sellers if there is a material breach of any representation or
warranty set forth in Article V hereof or of any covenant or agreement to be
complied with or performed by Buyer pursuant to the terms of this Agreement or
the failure of a condition set forth in Article VII to be satisfied (and such
condition is not waived in writing by Sellers) on or prior to the Closing Date,
or the occurrence of any event which results or would result in the failure of
a condition set forth in Article VII to be satisfied on or prior to the Closing
Date; provided that, Sellers may not terminate this Agreement prior to the
Closing Date if Buyer has not had an adequate opportunity to cure such failure.
(b) In the Event of Termination. In the event of termination of this
Agreement:
(i) Each party will redeliver all documents, work papers and other
material of any other party relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to the party
furnishing the same;
(ii) The provisions of Section 11.11 (relating to confidentiality) shall
continue in full force and effect; and
(iii) If this Agreement is terminated pursuant to clause (iii) of Section
11. l(a), Sellers agree to pay Buyer's expenses in connection with the due
diligence, legal work, and financing expenses for this transaction up to a
maximum reimbursement of Seventy Thousand Dollars ($70,000); if this Agreement
is terminated pursuant to clause (iv) of Section 11. l(a), Buyer agrees to pay
Sellers' expenses in connection with the legal work for this transaction and
the audit of the
44
<PAGE>
Business up to a maximum reimbursement of Sixty-Five Thousand Dollars ($65,000).
The foregoing provisions shall not limit or restrict the availability of
specific performance or other injunctive relief to the extent that specific
performance or such other relief would otherwise be available to a party
hereunder.
11.2. Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by any party without the prior written
consent of the other parties; except that Buyer may, without such consent,
assign all such rights and obligations to a wholly-owned subsidiary (or a
partnership controlled by Buyer) or subsidiaries of Buyer or to a successor in
interest to Buyer which shall assume all obligations and Liabilities of Buyer
under this Agreement. Subject to the foregoing, this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, and no other person shall have any right,
benefit or obligation under this Agreement as a third party beneficiary or
otherwise.
11.3. Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted if transmitted by telecopy, electronic or digital transmission
method; the day after it is sent, if sent for next day delivery to a domestic
address by recognized overnight delivery service (, FED EX); and upon receipt,
if sent by certified or registered mail, return receipt requested. In each case
notice shall be sent to:
If to Sellers, addressed to:
Mr. Ron Walton
30075 Ynez Road
Temecula, California 92592
With a copy to:
Miller & Holguin
1801 Century Park East, 7th Floor
Los Angeles, California 90067
Attention: Henry A. Holguin, Esq.
If to Buyer, addressed to:
Texas Loosey's Steakhouse Holdings, Inc.
1752 Clement Street
San Francisco, California 94121
Attention: Hiram J. Woo
With a copy to:
Latham & Watkins
650 Town Center Drive, Suite 2000
Costa Mesa, California 92626
Attention: Cary K. Hyden, Esq.
45
<PAGE>
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
11.4. Choice of Law. This Agreement shall be construed, interpreted and the
rights of the parties determined in accordance with the laws of the State of
California (without reference to the choice of law provisions of California
law), except with respect to matters of law concerning the internal corporate
affairs of any corporate entity which is a party to or the subject of this
Agreement, and as to those matters the law of the jurisdiction under which the
respective entity derives its powers shall govern.
11.5. Termination of Prior Agreement; Entire Agreement; Amendments and
Waivers. The Prior Agreement is hereby terminated in its entirety and shall be
of no further force or effect. This Agreement, the Ancillary Agreements,
together with all exhibits and schedules hereto and thereto (including the
Disclosure Schedule), constitute the entire agreement among the parties
pertaining to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties, including without limitation all letters of intent and agreements in
principle. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto. No amendment, supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
11.6. Multiple Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.7. Expenses. Except as otherwise specified in this Agreement, each party
hereto shall pay its own legal, accounting, out-of-pocket and other expenses
incident to this Agreement and to any action taken by such party in preparation
for carrying this Agreement into effect.
11.8. Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
11.9. Titles: Gender. The titles, captions or headings of the Articles and
Sections herein, and the use of a particular gender, are for convenience of
reference only and are not intended to be a part of or to affect or restrict
the meaning or interpretation of this Agreement.
11.10. Publicity. Neither Buyer nor any of the Sellers, nor any of their
affiliates, shall make any public announcements prior to the Closing (including,
without limitation, any announcement to any employees, customers or suppliers)
in respect of this Agreement or otherwise communicate with any news media,
except as the parties may mutually agree. Sellers shall, and shall cause its
attorneys, accountants and other representatives to, cooperate with Buyer and
its affiliates in providing required disclosure pursuant to the federal
securities laws, including in connection with any registration statements of
Buyer or its affiliates.
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<PAGE>
11.11. Confidential Information.
(a) No Disclosure. The parties acknowledge that the transaction described
herein is of a confidential nature and shall not be disclosed except to
consultants, advisors and affiliates, or as required by law, until such time as
the parties make a public announcement regarding the transaction as provided in
Section 11.10.
(b) Preservation of Confidentiality. In connection with the negotiation of
this Agreement, the preparation for the consummation of the transactions
contemplated hereby, and the performance of obligations hereunder, Buyer
acknowledges that it will have access to confidential information relating to
Sellers, including technical, manufacturing or marketing or financial
information, ideas, recipes, formulas, methods, developments, inventions,
improvements, business plans, trade secrets, scientific or statistical data,
diagrams, drawings, specifications or other proprietary information relating
thereto, together with all analyses, compilations, studies or other documents,
records or data prepared by any Seller or Buyer or their respective
Representatives which contain or otherwise reflect or are generated from such
information ("Confidential Information"). The term "Confidential Information"
does not include information received by Buyer in connection with the
transactions contemplated hereby which (i) is or becomes generally available to
the public other than as a result of a disclosure by Buyer or its
Representatives, (ii) was within Buyer's possession prior to its being
furnished to Buyer by or on behalf of Sellers in connection with the
transactions contemplated hereby, provided that the source of such information
was not known by Buyer to be bound by a confidentiality agreement with or other
contractual, legal or fiduciary obligation of confidentiality to any Seller or
any other Person with respect to such information or (iii) becomes available to
Buyer on a non-confidential basis from a source other than Sellers or any of
their respective Representatives, provided that such source is not bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to any Seller or any other Person with respect to
such information.
(c) Buyer shall treat all Confidential Information as confidential,
preserve the confidentiality thereof and not disclose any Confidential
Information, except to its Representatives and Affiliates who need to know such
Confidential Information in connection with the transactions contemplated
hereby. Buyer shall use all reasonable efforts to cause its Representatives to
treat all Confidential Information as confidential, preserve the
confidentiality thereof and not disclose any Confidential Information. Buyer
shall be responsible for any breach of this Agreement by any of its
Representatives. If, however, Confidential Information is disclosed, Buyer
shall immediately notify Sellers in writing and take all reasonable steps
required to prevent further disclosure.
(d) Until the Closing or the termination of this Agreement, all
Confidential Information shall remain the property of the party who originally
possessed such information. In the event of the termination of this Agreement
for any reason whatsoever, Buyer shall, and shall cause its Representatives to,
return to Sellers all Confidential Information (including all copies, summaries
and extracts thereof) furnished to Buyer by Sellers in connection with the
transactions contemplated hereby.
(e) If Buyer or any of its Representatives or Affiliates is requested or
required (by oral questions, interrogatories, requests for information or
documents in legal proceedings, subpoena, civil investigative demand or other
similar process) or is required by operation of law to disclose any Confidential
Information, Buyer shall provide Sellers with prompt written notice of such
request or requirement, which notice shall, if practicable, be at least 48 hours
prior to making such disclosure,
47
<PAGE>
so that Sellers may seek a protective order or other appropriate remedy and/or
waive compliance with the provisions of this Agreement. If, in the absence of a
protective order or other remedy or the receipt of such a waiver, Buyer or any
of its Representatives are nonetheless, in the opinion of counsel, legally
compelled to disclose Confidential Information, then Buyer may disclose that
portion of the Confidential Information which such counsel advises is legally
required to be disclosed, provided that Buyer uses its reasonable efforts to
preserve the confidentiality of the Confidential Information, whereupon such
disclosure shall not constitute a breach of this Agreement.
11.12. Cumulative Remedies. All rights and remedies of either party hereto
are cumulative of each other and of every other right or remedy such party may
otherwise have at law or in equity, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
11.13. Service of Process. Consent to Jurisdiction.
(a) Service of Process. Each parties hereto irrevocably consents to the
service of any process, pleading, notices or other papers by the mailing of
copies thereof by registered, certified or first class mail, postage prepaid,
to such party at such party's address set forth herein, or by any other method
provided or permitted under California law.
(b) Consent and Jurisdiction. Each party hereto irrevocably and
unconditionally (1) agrees that any suit, action or other legal proceeding
arising out of this Agreement may be brought in the United States District
Court for the Central District of California or, if such court does not have
jurisdiction or will not accept jurisdiction, in any court of general
jurisdiction in the County of Orange, California; (2) consents to the
jurisdiction or any such court in any such suit, action or proceeding; and (3)
waives any objection which such party may have to the laying of venue of any
such suit, action or proceeding in any such court.
11.14. Arbitration. Notwithstanding anything herein to the contrary, in the
event that there shall be a dispute among the parties arising out of or relating
to this Agreement, including without limitation the indemnities provided in
Article X, or the breach thereof, the parties agree that such dispute shall be
resolved by final and binding arbitration in Orange County, California,
administered by three (3) arbitrators, one to be selected directly by each party
and the third arbitrator to be selected by the two arbitrators so chosen. Such
arbitration proceeding shall be conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect or such
other procedures as the parties may agree to prior to the Closing. Depositions
may be taken and other discovery may be obtained during such arbitration
proceedings to the same extent as authorized in civil judicial proceedings. Any
award issued as a result of such arbitration shall be final and binding between
the parties thereto, and shall be enforceable by any court having jurisdiction
over the party against whom enforcement is sought. The fees and expenses of such
arbitration (including reasonable attorneys' fees) or any action to enforce an
arbitration award shall be paid by the party that does not prevail in such
arbitration.
11.15. Attorneys' Fees. If any party to this Agreement brings an action to
enforce its rights under this Agreement, the prevailing party shall be entitled
to recover its costs and expenses, including without limitation reasonable
attorneys' fees, incurred in connection with such action including any appeal of
such action.
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<PAGE>
11.16. Nature of Obligations. The obligations of Sellers under this
Agreement shall be joint and several.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their respective behalf, by their respective officers
thereunto duly authorized, all as of the day and year first above written.
"BUYER"
TEXAS LOOSEY'S STEAKHOUSE HOLDINGS, INC.
a Delaware corporation
By
/s/ Richard M. Lee
Richard M. Lee, Chairman and
Chief Executive Officer
"SELLERS "
TLC RESTAURANT MGMT. CORP.,
a California corporation
By
/s/ Ron Walton
Ron Walton, President
BETTER BUSINESS SECURITY, INC.,
a California corporation
By
/s/ Ron Walton
Ron Walton, President
RIVER DIEGO INVESTMENT CORP.,
a California corporation
By
/s/ Ron Walton
Ron Walton, President
/s/ Ron Walton
Ron Walton
49
<PAGE>
Extension Agreement
It is mutually agreed to extend the terms of Note "A" between the Buyers "Texas
Loosey's Steakhouse & Saloon Inc." and Sellers "TLC Restaurant Mgmt, River-Diego
Investment Corp., Better Business Security Inc., and Ron Walton under the
following conditions:
I. EXTENDED DUE DATE Sellers agree to extend the now in default Note "A" from
the current due date of February 19, 1997 to an extended due date of June 19,
1997.
A) Seller will extend the due date an additional sixty (60) days to August 19,
1997 provided Buyer's "Texas Loosey's Steakhouse and Saloon Inc." have submitted
their registration statement of a public offering to the Securities and Exchange
Commission.
II. CONSIDERATION In consideration for Sellers extending the due date on Note
"A" (as stated above) Buyer agrees to:
A) Pay ten (10%) percent interest on Note "A" from August 19, 1996 through
February 19, 1997.
B) Increase the interest rate to fifteen (15%) percent on Note "A" from
February 20, 1997 until paid in full.
C) Buyers agree to increase the total consideration of Walton's consulting
agreement from $180,000.00 to $190,000.00 and continue the monthly, payment rate
of five thousand dollars ($5,000.00) per month until IPO is realized, at which
time payments will increase to $7,500.00 per month as per the Consulting
Agreement.
D) Buyers agree to continue to pay the interest only payment as required under
the terms of Note "B", directly to Walton (Sellers Agent) outside of escrow and
without off sets.
It is mutually agreed that should Buyer default on either Note "B" or the
Consulting Agreement during the terms of this Extension Agreement, the Extension
Agreement will automatically be revoked and Note "A" will again be in default,
at which time Seller will take whatever action necessary to recover possession
of said Business and Buyer will cooperate fully with Seller in returning
possession to Seller.
Agreed and accepted on this 24 day of March 1997.
Seller: TLC Restaurant Mgmt. Corp., River-Diego Investment Corp., and Better
Business Securities Corp., and Ron Walton
/s/ Ron Walton
Ron Walton (Agent)
Buyer: Texas Loosey's Steakhouse and Saloon Inc.
/s/ Hiram J Woo
Hiram J Woo (President)
<PAGE>
EXHIBIT 10.10
<PAGE>
JEAN ALLEN ESCROW CO., INC. ESCROW NO. 7602
4012 KATELLA AVENUE, SUITE #103 --------------------
LOS ALAMITOS, CALIFORNIA 90720 ESCROW OFFICER CHERI L. PARKS
TELEPHONE (310) 799-3344 ----------------
FACSIMILE (310) 799-3345 DATE FEBRUARY 20, 1996
-------------------------
--SALE OF BUSINESS ESCROW INSTRUCTIONS\PAGE ONE--
**THESE ESCROW INSTRUCTIONS SUPERCEDE & REPLACE ONES DATED lO-16-95
AND 2-6-96,**
This agreement made this 20TH DAY OF FEBRUARY, 1996, Between
TLC RESTAURANT MANAGEMENT CORP., A CALIFORNIA CORPORATION
BETTER BUSINESS SECURITY, INC., A CALIFORNIA CORPORATION
RIVER DIEGO INVESTMENT CORP., A CALIFORNIA CORPORATION
RON WALTON
whose mailing address is: P. O. BOX 1697, TEMECULA, CA 92593
hereinafter known and designated as the Sellers, and
TEXAS LOOSEY'S STEAK HOUSE HOLDING, INC., A DELAWARE CORPORATION
whose mailing address is: 1752 CLEMENT ST., SAN FRANCISCO, CA 94121
hereinafter known and designated as the Buyers.
WITNESSETH:
Whereas the Sellers are the owners of the RESTAURANT businesses
known as: "TEXAS LOOSEY'S CHILI PARLOR AND SALOON OF TORRANCE"
located at: 22252 PALOS VERDES BOULEVARD, TORRANCE CA 90505
"TEXAS LOOSEY'S CHILI PARLOR AND SALOON OF FULLERTON"
located at: 2720 E. NUTWOOD AVENUE, FULLERTON, CA 92631
"TEXAS LOOSEY'S CHILI PARLOR AND SALOON OF MORENO VALLEY'
located at: 24811 SUNNYMEAD BOULEVARD, MORENO VALLEY, CA 92553
And whereas, the Sellers agree to sell and the Buyers agree to purchase the said
businesses from the Sellers on the following terms and conditions:
1. Purchase price of Assets and Franchise $1,520,000.00
Rights related to the TEXAS LOOSEY'S CHILI
PARLOR AND SALOON RESTAURANTS pursuant to
that certain ASSET PURCHASE AGREEMENT DATED
OCTOBER 2, 1995 AS AMENDED by and between
the Parties hereto.
Inventory of Merchandise--priced at $ NONE
current wholesale prices.
Total Purchase Price $1,520,000.00
Buyers Deposit in Escrow upon execution of these $ 275,000.00
Escrow Instructions $280,000.00 ($275,000.00
shall be applied to the Purchase Price and
$5,000.00 shall be applied to Buyers escrow
closing costs and charges. Said deposit shall be
made pursuant to the terms and conditions of the
ASSET PURCHASE AGREEMENT DATED OCTOBER 2, 1995
AS AMENDED; however said deposit shall be made
prior to the Buyers physical possession of the
business premises with temporary liquor licenses.)
Promissory Note "A", Security Agreement and $ 375,000.00
Assignment of Lease and Collateral Security
--In favor of Sellers.
Promissory Note "B", Security Agreement and $ 870,000.00
Assignment of Lease and Collateral Security
- --In favor of Sellers.
<PAGE>
- PAGE TWO -
This Escrow shall close on the 2ND day of APRIL, 1996 or after when permanent
ON-SALE GENERAL LIQUOR LICENSE NO. 47-99593, ON-SALE GENERAL LIQUOR LICENSE NO.
47-148856 and ON-SALE GENERAL LIQUOR LICENSE NO. 47-264095 have been transferred
into the names of the within-named Buyers according to the rules and regulations
of the Department of Alcoholic Beverage Control Board; and the parties agree to
do all things necessary to close said Escrow on the above date.
2. The Sellers agree to transfer to the Buyers the aforementioned valid ON-SALE
GENERAL LIQUOR LICENSES to the licensed premises.
3. The parties hereto agree to pay all Escrow Charges including but not limited
to Chattel Searches and Publication Costs on a basis of 50% from the Buyers and
50% from the Sellers.
4. No inventory of merchandise shall be included in the selling and
purchase price.
5. Possession of premises shall be granted the Buyers as of actual date
TEMPORARY ON-SALE GENERAL LIQUOR LICENSES have been issued to the within-named
Buyers according to the rules and regulations of the Department of Alcoholic
Beverage Control Board provided that all funds have been deposited into escrow
as required under Paragraph No. 1, all pro rations and security deposits have
been paid outside of escrow, all executed Promissory Notes have been deposited
into escrow, evidence of Buyers liability insurance has been deposited into
escrow and providing that $275,000.00 has been distributed to the Sellers'
creditors as required under Paragraph No. 20 of these Instructions.
6. WITH THE EXCEPTION OF THE PRO RATIONS FOR THE PERSONAL PROPERTY TAXES, you as
escrow holders are authorized and instructed NOT TO MAKE ANY PRO RATIONS through
this escrow transaction, and the Parties agree that any PRO RATIONS necessary
shall be handled OUTSIDE OF ESCROW pursuant to the terms and conditions of the
ASSET PURCHASE AGREEMENT DATED OCTOBER 2, 1995 AS AMENDED.
You as escrow holders are authorized and instructed to ADJUST the INTEREST on
the Promissory Note and Security Agreement reflected in Paragraph No. 1 herein
to the actual date physical possession has been granted Buyers by Sellers as the
interest shall commence on the date of possession.
7. The undersigned Buyers agree to negotiate ASSIGNMENTS OF THE
LEASES together with ASSIGNMENTS OF LEASE AS COLLATERAL SECURITY
covering the business premises known as:
2252 PALOS VERDES BOULEVARD, TORRANCE CA 90505
2720 E. NUTWOOD AVENUE, FULLERTON, CA 92631
24811 SUNNYMEAD BOULEVARD, MORENO VALLEY, CA 92553
After the Buyers have successfully obtained the executed ASSIGNMENTS OF LEASES
and ASSIGNMENTS OF LEASE AS COLLATERAL SECURITY, the Buyers agree to deposit a
copy of same into escrow prior to the transfer of the liquor licenses and to
provide evidence of same directly to the Department of Alcoholic Beverage
Control Board.
The Buyers agree to reimburse the Sellers OUTSIDE OF ESCROW prior to the date of
possession the amounts of the LEASE SECURITY DEPOSITS of the existing leases now
held by Lessors; and you as escrow holders shall not be concerned therewith.
8. THERE IS NO REAL ESTATE BROKER INVOLVED IN THIS ESCROW
TRANSACTION.
9. Buyers shall reimburse Sellers through escrow sales tax on fixtures and
equipment based on the value of $ TO BE GIVEN LATER or as required by the State
Board of Equalization.
<PAGE>
- PAGE THREE -
10. The allocation of the purchase price of $1,520,000.00 shall be furnished
escrow holders at a later date and approved in writing by Buyers and Sellers.
11. The purchase price shall include all items as indicated in that certain
ASSET PURCHASE AGREEMENT DATED OCTOBER 2, 1995 AS AMENDED which includes all
FURNITURE, FIXTURES AND EQUIPMENT indicated on SCHEDULE 4.5 of said AGREEMENT.
12. It is mutually agreed between the Sellers and Buyers, the parties hereto,
that no representations have been made by either party other than those
specifically set forth in these Escrow Instructions or the ASSET PURCHASE
AGREEMENT DATED OCTOBER 2, 1995 AS AMENDED together with all its attachments.
13. The Buyers and Sellers agree to furnish JEAN ALLEN ESCROW CO., INC. with
releases from the STATE BOARD OF EQUALIZATION, EMPLOYMENT DEVELOPMENT DEPARTMENT
and INTERNAL REVENUE SERVICE prior to the close of escrow. The undersigned
Buyers and Sellers authorize and instruct escrow holders to pay said agencies
prior to the close and completion of escrow as indicated in Paragraph No. 20 of
these Instructions.
14. The sellers agree to accept; and the Buyers agree to execute, as a part of
the purchase price, Promissory Note "A" in the principal amount of $375,000.00,
referred to on Page One; bearing no interest (EXCEPT AS STIPULATED BELOW),
payable in ONE (1) INSTALLMENT of $375,000.00 all due and payable SIX (6) MONTHS
after actual date physical possession has been granted buyers by Sellers. Note
to be delivered to Sellers at the close of this transaction. Note shall be
secured by a Security Agreement covering all securable assets of said business
together with an Assignment of Lease as Collateral Security. (A PROMISSORY NOTE
AND SECURITY SATISFACTORY TO BOTH BUYERS AND SELLERS SHALL BE DEPOSITED INTO
ESCROW, AND APPROVED IN WRITING BY BUYERS AND SELLERS.)
Said Promissory Note shall contain the following recitals:
"In the event of sale, transfer, assignment or removal of personal property
located at 22252 PALOS VERDES BOULEVARD, TORRANCE, CA 90505, 2720 E. NUTWOOD
AVENUE, FULLERTON, CA 92631 or 24811 SUNNYMEAD BOULEVARD, MORENO VALLEY, CA
92553, securing this Note, the unpaid balance of principal and interest, if any,
then due on the Note shall become due and payable at the option of the holders
of said Note."
"This Note shall not bear any interest unless this Note is in default at which
time it shall bear interest at the rate of TEN (10%) per annum from the
commencing from the date of possession of business premises by Promissors until
paid."
"A default of Promissory Note 'A' or 'B' shall result in the acceleration of the
unpaid principal and interest, if any, then due under the Note not in default at
the sole option of the holders of said Note.
15. You as escrow holders shall prepare a Uniform Commercial Code Form UCC-1,
"Financing Statement," securing the aforementioned Promissory Note to reflect as
Item No. 6 thereon the following recital:
"Furniture, removeable trade fixtures, equipment, accounts, contract rights,
tradename, tradestyle, franchise rights and franchise agreements (present and
future), leasehold, inventory and additions thereof, proceeds of the same or
similar type hereafter acquired by the Debtors, together with the proceeds of
any insurance policies covering the herein described collateral located at 22252
PALOS VERDES BOULEVARD, TORRANCE CA 90505, 2720 E. NUTWOOD AVENUE, FULLERTON, CA
92631 and 24811 SUNNYMEAD BOULEVARD, MORENO VALLEY, CA 92553."
<PAGE>
- PAGE THREE...CONTINUED -
Further, you shall use the above recital on Exhibit "A," Schedule of Collateral,
which shall be attached to the Security Agreement referred to above. (SAID
EXHIBIT "A" SHALL BE A DUPLICATE OF SCHEDULE 4.5 OF THE ASSET PURCHASE
AGREEMENT.)
The Uniform Commercial Code Form UCC-1, Financing Statement, is to be filed
within Ten (10) days after date physical possession has been granted Buyers,
with the Secretary of State, Uniform Commercial Code Division, in Sacramento,
California and the respective County Recorder.
16. The Sellers agree to accept: and the buyers agree to execute, as a part of
the purchase price, Promissory Note "B" in the principal amount o $870,000.00,
referred to on Page One. Said Note shall bear interest at the rate of EIGHT (8%)
percent per annum (compounded monthly) from the date of possession and no
payments shall be due under said Note for SIX (6) Months following said
possession date Thereafter, said Note shall be payable in INTEREST ONLY
installments of $6,035.90 or more per month commencing SEVEN (7) months
following the date of possession and continuing monthly thereafter for a period
of TWELVE (12) months from the date of the first INTEREST ONLY installment at
which time said Note shall be payable in principal and interest installments of
$10,984.85 or more per month (BASED ON A TEN YEAR AMORTIZATION WITH INTEREST AT
EIGHT (8%) PERCENT PER ANNUM, COMPOUNDED ANNUALLY) and shall continue monthly
thereafter for an additional FORTY-ONE (41) MONTHS at which time all remaining
principal and accrued interest shall become all due and payable in full; Note to
be delivered to Sellers at the close of this transaction. Note shall be secured
by a Security Agreement covering all securable assets of said business together
with an Assignment of Lease as Collateral Security. (A PROMISSORY NOTE AND
SECURITY SATISFACTORY TO BOTH BUYERS AND SELLERS SHALL BE DEPOSITED INTO ESCROW,
AND APPROVED IN WRITING BY BUYERS AND SELLERS.)
Said Promissory Note shall contain the following recitals:
"In the event of sale, transfer, assignment or removal of personal property
located at 22252 PALOS VERDES BOULEVARD, TORRANCE, CA 90505, 2720 E. NUTWOOD
AVENUE, FULLERTON, CA 92631 or 24811 SUNNYMEAD BOULEVARD, MORENO VALLEY, CA
92553, securing this Note, the unpaid balance of principal and interest, then
due on the Note shall become due and payable at the option of the holders of
said Note."
"Promissors agree to pay a late charge penalty of EIGHT (8%) percent of any
installment not paid within TEN (10) days of the due date of said installment."
"A default of Promissory Note 'A' or 'B' shall result in the acceleration of the
unpaid principal and interest, if any, then due under the Note not in default at
the sole option of the holders of said Note.
17. You as escrow holders shall prepare a Uniform Commercial Code Form UCC-1,
"Financing Statement," securing the aforementioned Promissory Note to reflect as
Item No. 6 thereon the following recital:
"Furniture, removeable trade fixtures, equipment, accounts, contract rights,
tradename, tradestyle, franchise rights and franchise agreements (present and
future), leasehold, inventory and additions thereof, proceeds of the same or
similar type hereafter acquired by the Debtors, together with the proceeds of
any insurance policies covering the herein described collateral located at 22252
PALOS VERDES BOULEVARD, TORRANCE CA 90505, 2720 E. NUTWOOD AVENUE, FULLERTON, CA
92631 and 24811 SUNNYMEAD BOULEVARD, MORENO VALLEY, CA 92553."
<PAGE>
- PAGE THREE...CONTINUED -
Further, you shall use the above recital on Exhibit "A," Schedule of Collateral,
which shall be attached to the Security Agreement referred to above. (SAID
EXHIBIT "A" SHALL BE A DUPLICATE OF SCHEDULE 4.5 OF THE ASSET PURCHASE
AGREEMENT.)
The Uniform Commercial Code Form UCC-1, Financing Statement, is to be filed
within Ten (10) days after date physical possession has been granted Buyers,
with the Secretary of State, Uniform Commercial Code Division, in Sacramento,
California and the respective County Recorders.
18. The Buyers named herein agree to execute and deliver a Reassignment of
Lease mentioned in Paragraph No. 7 of these Instructions in favor of the holder
of Promissory Note referred to as Paragraph No. 14 and 16 of these Instructions
as security collateral for the performance of said Note and instruct you as
escrow holders to deliver said Reassignment of Lease and Lease to the holders
of Promissory Note at the close of this transaction.
19. The Buyers named herein agree to assume existing insurance or maintain
insurance coverage subject to Sellers approval during the term of said
Promissory Note referred to in Paragraph No. 14 and 16 of these Instructions
with a first loss payable clause in favor of the Sellers attached to the
business policy in favor of the Sellers, original of which shall be delivered to
Sellers outside of escrow prior to actual date physical possession is granted
Buyers by Sellers.
20. UPON ESCROW HOLDERS RECEIPT OF THESE ESCROW INSTRUCTIONS DULY EXECUTED BY
THE BUYERS AND SELLERS AND THE DOWN PAYMENT OF $275,000.00, THE UNDERSIGNED
PARTIES HEREBY AUTHORIZE AND INSTRUCT ESCROW HOLDERS TO IMMEDIATELY REMIT THE
ENTIRE SUM OF S275,000.00 TO THE FOLLOWING TAXING AGENCIES TO BE APPLIED TO
SELLERS' UNPAID TAX LIABILITIES:
A) INTERNAL REVENUE SERVICE
B) EMPLOYMENT DEVELOPMENT DEPARTMENT
C) STATE BOARD OF EQUALIZATION
D) FRANCHISE TAX BOARD
THE AMOUNTS TO BE PAID TO THE ABOVE TAXING AGENCIES SHALL BE BASED UPON WRITTEN
DEMANDS FROM AGENCIES AND/OR SELLERS APPROVED IN WRITING BY THE SELLERS WITH NO
FURTHER AUTHORIZATION FROM THE BUYERS. AT THE CLOSE AND COMPLETION OF ESCROW,
ESCROW HOLDERS ARE AUTHORIZED AND INSTRUCTED TO CHARGE THE AMOUNTS SO DISBURSED
TO THE ACCOUNT OF THE SELLERS.
THE UNDERSIGNED PARTIES ARE FULLY AWARE THAT ESCROW HOLDERS ARE DISBURSING SAID
FUNDS PRIOR TO THE CLOSE AND COMPLETION OF ESCROW FROM FUNDS ON DEPOSIT IN
ESCROW. THE PARTIES HERETO ARE FULLY AWARE THAT AFTER SUCH FUNDS ARE DISBURSED,
SUCH FUNDS SHALL BE NON-REFUNDABLE FROM SAID TAXING AGENCIES, AND THE PARTIES DO
HEREBY AGREE TO HOLD YOU AS ESCROW HOLDERS HARMLESS OF ALL LIABILITY FOR
DISBURSING SUCH FUNDS.
THE PARTIES DO AGREE THAT IN THE EVENT THIS ESCROW TRANSACTION IS CANCELLED OR
TERMINATED DUE TO THE DEFAULT OF THE BUYERS, THE FUNDS PAID TO THE TAXING
AGENCIES IN THE SUM OF $275,000.00 SHALL BE DEEMED AS LIQUIDATED DAMAGES AND THE
SELLERS SHALL NOT BE REQUIRED TO REIMBURSE THE BUYERS FOR SAID FUNDS AND THE
BUYERS SHALL HAVE NO RECOURSE TO PURSUE SELLERS FOR ANY REIMBURSEMENT.
THE PARTIES DO AGREE THAT IN THE EVENT THIS ESCROW TRANSACTION IS
CANCELLED OR TERMINATED DUE TO THE DEFAULT OF THE SELLERS, THE SELLERS
AGREE TO REIMBURSE THE BUYERS FOR THE FUNDS PAID TO THE TAXING
AGENCIES IN THE SUM OF $275,000.00. IN SUCH EVENT, THE BUYERS AGREE
<PAGE>
- PAGE THREE...CONTINUED -
will be for the fiscal year beginning July 1, 1995 and ending June 30, 1996, all
or part of which may follow Buyers' possession date, Sellers will be responsible
for the entire taxes billed and warrant to pay the same prior to the delinquent
date and to hold Buyers harmless of and against any liability for the same. YOU
AS ESCROW HOLDERS ARE AUTHORIZED AND INSTRUCTED TO PRO RATE SAME AS OF THE DATE
OF POSSESSION.
27. Buyers acknowledge that the County Personal Property Taxes will be billed in
the name of the Buyers, Buyers having been in possession as of the lien date of
March 1, 1996. However, since the taxes will be for the fiscal year beginning
July 1, 1996 and ending June 30, 1997, Buyers will be responsible for the entire
taxes billed and warrant to pay the same prior to the delinquent date and to
hold Sellers harmless of and against any liability for the same.
28. The parties hereto hereby instruct you as escrow holder, on their
behalf and at their expense, to:
(A) Record and publish a Notice to Creditors of Bulk Sale and Intention to
transfer Liquor License.
(B) Obtain for the benefit of the Parties hereto an updated Search for
Liens from the Secretary of State, Sacramento, California on:
(i.) Seller Name--at any and all addresses
(ii.) Business Name--at business address
Escrow holder is authorized and instructed to obtain demands
and releases of any liens shown on said report and pay said
demands, subject to Sellers' approval, from Buyers' down
payment unless otherwise instructed by the parties hereto. No
title insurance or guarantee is being obtained in connection
with this report and escrow holder is relieved of all
responsibility and/or liability for the sufficiency or
correctness of said report and for any liens which
may be filed after date of said report and prior to close
of escrow.
(C) Obtain a County Search for Abstracts of Judgement and Tax Liens from
the county in which business is located on:
(i.) Seller Name--at business address
(ii.) Business Name--at business address
Escrow holder is authorized and instructed to obtain demands and
releases of any liens shown on said report and pay said demands,
subject to Sellers' approval, from Buyers' down payment. No
title insurance or guarantee is being obtained in connection
with this report and escrow holder is relieved of all
responsibility and/or liability for the sufficiency or
correctness of said report and for any liens which may be
filed after date of said report and prior to close of escrow.
(D) Within TEN (10) days of Buyers' possession, if earlier, file a Uniform
Commercial Code Financing Statement, together with such other
applicable amending UCC forms as may be handed you, if any, with the
Secretary of State and respective counties.
Further, the parties authorize payment, from funds on deposit in escrow, of the
charges for any and all of these procedures, when required or billed. You as
escrow holders are authorized and instructed to charge the respective parties on
a 50-50 basis for all the above charges EXCEPTING as otherwise stipulated
hereinabove.
29. Buyers shall cause to be handed you Corporate Resolution reflecting thereon
authorization for execution of all documents enabling said Buyers to purchase
subject assets prior to date physical possession is granted Buyers by Sellers or
within Fifteen (15) days from the opening of this escrow transaction.
<PAGE>
- PAGE THREE...CONTINUED -
TO ACCEPT AND THE SELLERS AGREE TO EXECUTE A PROMISSORY NOTE IN THE PRINCIPAL
AMOUNT OF $275,000.00 WITH INTEREST AT THE RATE OF EIGHT (8%) PERCENT PER ANNUM,
FROM THE DATE THAT THIS ESCROW TRANSACTION HAS BEEN CANCELLED, POSSESSION OF
PREMISES HAS BEEN RETURNED TO SELLERS, AND WRITTEN INSTRUCTIONS FROM BUYERS AND
SELLERS HAVE BEEN DEPOSITED INTO ESCROW, PAYABLE AT $5,576.01 OR MORE PER MONTH.
FIRST PAYMENT ON SAID NOTE SHALL COMMENCE THIRTY (30) DAYS FOLLOWING THE
CANCELLATION OF THIS ESCROW AS STIPULATED ABOVE PROVIDED POSSESSION HAS BEEN
RETURNED TO SELLERS AND SHALL CONTINUE MONTHLY THEREAFTER FOR A PERIOD OF FIVE
(5) YEARS FROM THE DATE OF THE FIRST PRINCIPAL AND INTEREST INSTALLMENT, AT
WHICH TIME ALL REMAINING PRINCIPAL AND ACCRUED INTEREST SHALL BECOME ALL DUE AND
PAYABLE IN FULL. INITIAL HERE:
- -------- -------- -------- -------- -------
(SELLER) (SELLER) (SELLER) (SELLER) (BUYER)
21. The parties hereto agree to direct you and you are hereby directed, after
the requirements for transfer as provided in Section 24049 are satisfied, to pay
out of the purchase price or consideration the claims of the bonafide creditors
of the Sellers who file their claims with you before you are notified by the
Department of Alcoholic Beverage Control Board of its approval of the transfer
of the ON-SALE GENERAL LIQUOR LICENSES involved in this transaction, or if the
purchase price or consideration is not sufficient to pay such claims in full, to
distribute the consideration in accordance with Section 24074 of the Business
and Professions Code; and you shall make the payment or distribution within a
reasonable time after the completion of the transfer of said Licenses.
22. Subject to the precedent recording requirements, the parties shall
immediately, and no later than Fourteen (14) days frorn opening date of escrow,
make the first available appointment with the proper office of the Department of
Alcoholic Beverage Control and shall cause an application to be made at the
proper district office of the Department of Alcoholic Beverage Control for the
transfer of the alcoholic beverage licenses intended to be transferred, at which
time, Buyers shall pay the liquor license transfer fees, liquor license fees,
incidental fees, required by the Department, and the close of this escrow shall
be subject to the Department's approval of the transfer and permanent issuance
of the liquor licenses to the Buyers.
23. Sellers warrant and represent to Buyers, there are no pending citations,
violations or disciplinary proceedings against the ON-SALE GENERAL LIQUOR
LICENSES involved herein, and should any occur during the term of this escrow,
the Sellers agree to do all necessary things, including stipulating, making an
offer in compromise and paying any assessment imposed or acceptable by the
Department of Alcoholic Beverage Control to dispose of such action in the
earliest possible manner within the prescribed time period in order to complete
the ON-SALE GENERAL LIQUOR LICENSE transfers to the Buyers.
24. The Buyers warrant that there is nothing in the Buyers' record, criminal or
otherwise, that would prevent the issuance of said liquor licenses to the within
named Buyers. The Buyers further represent and warrant as of the closing date of
escrow that Buyers have never been convicted of a felony and as far as known to
Buyers, Buyers are qualified to hold the Alcoholic Beverage Licenses to be
transferred hereunder.
25. It is understood and agreed between the Parties hereto that there is no
Merchandise Inventory involved so far as this transaction is concerned; and you
as escrow holders shall be held harmless in connection therewith.
26. Buyers acknowledge that the County Personal Property Taxes were
billed in the name of the Sellers, Sellers having been the owner of
record as of the lien date of March 1, 1995. However, since the taxes
<PAGE>
- PAGE THREE...CONTINUED -
30. Sellers shall cause to be handed you Corporate Resolution reflecting thereon
authorization for execution of all documents enabling said Sellers to sell
subject assets within Fifteen (15) days form the opening of this escrow
transaction.
31. Sellers warrant that the Selling corporations involved herein this escrow
are corporations duly organized, validly existing, and in good standing under
the laws of the State of California and have full power to enter into this
escrow transaction and consummate this transaction in its entirety.
32. Buyers warrant that the Buying corporation involved herein this escrow is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware and has full power to enter into this escrow
transaction and consummate this transaction in its entirety.
33. The parties expressly acknowledge and agree that upon the transfer of the
California alcoholic beverage license to the Buyers and ownership of the funds
deposited or to be deposited in escrow toward the purchase price has passed to
the Sellers, subject to the interest therein of Sellers bona fide creditors, if
any, but in any event, Buyers have no claim to or interest therein, and escrow
holder shall proceed pursuant to the provisions of the California Alcoholic
Beverage Control Act, to treat and distribute such funds accordingly with no
further liability in so doing.
34. The parties acknowledge that certain funds for escrow costs, pro rations and
reimbursements, usually referred to as closing costs of the Buyers are paid at
and with the intent of closing the escrow. It is hereby agreed that the payment
of such funds by the Buyers, in the amount furnished Buyers by escrow holder,
shall constitute Buyers acknowledgment and approval of the close of escrow.
35. The Buyers and Sellers are entering into this escrow ready, willing and able
to consummate the sale and purchase of said businesses and have investigated
same to their entire satisfaction.
36. In the event that Buyers or Sellers utilize "facsimile" transmitted signed
documents, Buyers and Sellers hereby agree to accept and hereby agree to
instruct you as escrow holders to rely upon such documents as if they bore
original signatures. Buyers and Sellers herein acknowledge and agree to provide
to the other party, within Seventy-Two (72) hours of transmission, such
documents bearing original signatures, by US Express Mail. Buyers and Sellers
further acknowledge and agree that documents with non-original signatures may
not be accepted for recording by the County Recorder or filing by the Secretary
of State of California, thus making it impossible for the closing of a customary
escrow without submission of original documents.
37. The parties herein instruct you as escrow holders that if for any reason you
are required to hold funds after the scheduled closing date of escrow, escrow
holders are instructed without further signatures required to withhold an escrow
fee of $50.00 per month from the funds on deposit with escrow holders regardless
of who deposited such funds. Said HOLD-OPEN fee will only be charged and
collected by escrow holders after holding said funds for 90 days after the date
set for disbursement, including the scheduled closing date, of the funds held.
Additionally the parties herein irrevocably instruct you as escrow holders to
automatically cancel this escrow without further instructions when all funds on
deposit have been disbursed.
38. THE UNDERSIGNED PARTIES UNDERSTAND AND AGREE THAT THE ASSET PURCHASE
AGREEMENT DATED OCTOBER 2, 1995 AS AMENDED (PRIOR TO THE DATE PHYSICAL
POSSESSION IS GRANTED BUYERS BY SELLERS) BY AND BETWEEN THE PARTIES IS HEREBY
INCORPORATED INTO THIS ESCROW; HOWEVER, THE PARTIES
<PAGE>
- PAGE THREE...CONTINUED -
FURTHER AGREE THAT THESE ESCROW INSTRUCTIONS CONSTITUTE THE SOLE INSTRUCTIONS TO
ESCROW HOLDERS. THE UNDERSIGNED PARTIES HEREBY ACKNOWLEDGE THAT YOU AS ESCROW
ORDERS ARE BOUND AND INSTRUCTED ONLY BY THESE ESCROW INSTRUCTIONS. SHOULD THE
ASSET PURCHASE AGREEMENT CONTAIN ANY INSTRUCTIONS TO ESCROW HOLDERS, YOU AS
ESCROW HOLDERS SHALL NOT BE CONCERNED OR LIABLE IN CONNECTION THEREWITH.
39. The undersigned Parties, being the Buyers and Sellers, hereby acknowledge
that these Escrow Instructions shall be subject to satisfactory negotiations of
the AMENDMENT TO THE ASSET PURCHASE AGREEMENT AND CONSULTING AGREEMENT between
the Buyers and Sellers as verified in writing prior to the date physical
possession is granted Buyers by Sellers.
40. In the event a dispute arises by and between the Parties, you as escrow
holders are authorized and instructed to proceed with the documentation
necessary to transfer the funds held in escrow into an interest bearing account,
and the undersigned Parties hereby agree to execute and deliver any
documentation necessary to complete such transfer of funds.
- --------------------------------------------------------------------------------
JEAN ALLEN ESCROW CO., INC. IS LICENSED BY THE DEPARTMENT OF CORPORATIONS, STATE
OF CALIFORNIA; SAID LICENSE IS DATED MARCH 21, 1974 AND IS NUMBERED 963-0480.
- --------------------------------------------------------------------------------
<PAGE>
- PAGE FOUR -
It is understood and agreed between the buyer and seller, that in the event any
claims be received into escrow for any taxes due under the Alcoholic Beverage
Tax Law, the Sales and Use Tax Law, the Personal Income Tax Law, or the Bank and
Corporation Tax Law, or on unsecured property as defined in Section 134 of the
Revenue and Taxation Code, or for payments due under the Unemployment Insurance
Code, you are authorized and instructed to pay the same at close of escrow, or
prior to close, if said payment is a condition precedent to the transfer of the
Alcoholic Beverage License, as set forth in Section 24049 of Business and
Professions Code, from the funds deposited in escrow, you are instructed to
credit such payment to the Buyer against the purchase price. This being your
instruction and authorization to make such payment without further authority for
so doing.
It is understood and agreed between the buyer and seller, that after the
requirements for transfer of the Alcoholic Beverage License, as provided for in
Section 24049 of the Business and Professions Code, are satisfied, you are
authorized and instructed to pay out of the purchase price or consideration, the
claims of the bonafide creditors of the seller who filed their claims with you
before you were notified by the Department of Alcoholic Beverage Control of its
approval of the transfer of the License, or in the event the purchase price or
consideration is not sufficient to pay the claims in full, you are authorized
and instructed to distribute the consideration as follows:
FIRST, to the United States for claims based on income or withholding taxes; and
thereafter for claims based on any tax other than specified in Section 24049;
SECOND, to the payment of claims for wages, salaries, or fringe benefits of
employees of the seller or transferor earned or accruing prior to the sale,
transfer, or opening of an escrow for the sale thereof;
THIRD, to the payment of claims of secured creditors to the extent of the
proceeds which arise from the sale of the security;
FOURTH, to the payment of claims on mechanics' liens;
FIFTH, to the payment of escrow fees and the payment of claims for prevailing
brokerage fees for services rendered and claims for reasonable attorney's fees
for service rendered;
SIXTH, to the payment of claims for goods sold and delivered to the transferor
for resale at his licensed premises and the payment of claims for service
rendered, performed, or supplied in connection with the operation of the
licensed business;
SEVENTH, to the payment of other claims which have been reduced to court-ordered
judgments, including claims for court-ordered support of minor child;
EIGHTH, to the payment of all other claims. The payment of these claims if
sufficient assets are not available for the payment of the claims in full shall
be paid pro rata;
In the event the Seller disapproves for payment any claim in full or in part,
you shall notify the creditor who filed said claim of such full or partial
disapproval, and you shall hold the amount or pro rata amount of said disallowed
claim for a period of 25 days following, mailing of notice of disapproval to the
said creditor, if the amount held is not levied upon by the creditor whose claim
is disapproved during the 25 day period, then you are authorized and instructed
to pay the amount so held over to the seller.
It is understood and agreed between the buyer and seller herein, that all claims
filed in escrow, prior to notification to you of the transfer of the license,
shall be treated as and shall be construed as being bonafide claims, and you are
authorized and instructed to pay the same without any further approval from the
seller herein, unless the seller notifies you in writing to the contrary, within
5 days from the date you furnish the seller with a list of claims filed in
escrow, either by personal delivery of said list to seller, or upon said list
being mailed by you to the seller at the seller's address set forth on Page One
hereof, or the most current address furnished you in writing by seller.
It is understood and agreed between the buyer and seller herein, that in the
event the purchase price or consideration is in the form of a promissory note or
a promise to pay in favor of the seller, or any portion of the purchase price or
consideration is in the form of a promissory note or a promise to pay in favor
of the seller and the cash consideration is not sufficient to pay the creditors
in full, then you are authorized and instructed to retain said note or promise
in escrow, and the buyer agrees upon notice from you to pay said amounts as
provided therein, into escrow, and you are to pay said amount pro rata from time
to time to the bonafide creditors, until such time as the bonafide creditors
claims have been paid in full, or the obligation due the seller has been fully
satisfied, which ever occurs first.
You are authorized and instructed by the buyer and seller herein to comply with
the instructions contained herein without any liability on your part for so
doing.
<PAGE>
- -PAGE FIVE-
I
The Parties hereto do hereby agree to open, and do so open, an escrow at the
office of JEAN ALLEN ESCROW CO., INC., for the purpose of completing the sale
and purchase in accordance with all of the provisions of the Uniform Commercial
Code of the State of California and provisions of Section 6102 et seq. of the
California Commercial Code and the provisions of Sections 24049 and 24074 of the
California Business and Professions Code and all laws pertaining to the subject
matter of said escrow, and the Seller and Buyer instruct the escrow holders to
comply with the provisions of those Code Sections.
All parties to this escrow agreement agree that they or any of them will, on
demand of the Jean Allen Escrow Co., Inc., sign, make, execute, and deliver unto
the Jean Allen Escrow Co., Inc. all necessary papers and documents as may be
required of them or any of them, and furnish to Jean Allen Escrow Co., Inc. all
records, papers and documents necessary or requisite to the completion of all
steps necessary to the consummation of the sale of the business contemplated in
this escrow agreement. All parties hereto agree to comply with the terms of this
escrow agreement promptly and without unnecessary delay.
II
No notice, demand or change of instructions shall be of any effect in this
escrow unless given in writing by all parties affected thereby. In the event
conflicting demands are made by any party hereto, or by any third person, or
conflicting notices are served upon the escrow holder with respect to this
escrow holder with respect to this escrow, whether said escrow has been
completed or not, all of the parties hereto expressly agree that the escrow
holder shall have the absolute right at its election to do either or all of the
following:
(a) Withhold and stop all further proceedings in the performance of this
escrow; withhold the re-delivery of any and all monies, papers, documents,
contracts or deeds deposited in the escrow; file a suit in interpleader or
intervention, if that becomes reasonably necessary in its judgement, obtain
an order from the court requiring the parties to interplead or intervene as it
deems fit, proper and necessary; and litigate in any court of competent
jurisdiction their several claims or rights or demands of any nature
whatsoever, amongst or between any and all of the parties including third
persons, if any, arising out of or connected with the said escrow.
(b) In the event such interpleader suit or action in intervention is brought,
it is understood that Jean Allen Escrow Co., Inc., as escrow holder, shall be
fully released and discharged from all obligations to further perform any and
all duties or obligations imposed upon it in this escrow, and the parties hereto
jointly and severally agree to pay said Jean Allen Escrow Co., Inc., a
corporation, all costs, expenses, charges, and reasonable attorney's fees
expended by it, or which is incurred by it, or which it may incur in connection
with the said escrow, or which may affect any right, title or interest therein
or herein of either party; and such amounts of money thereof shall become a part
of the judgment therefor to be rendered in such suit or action. In this
connection it is understood and agreed by and between all of the parties hereto
that said Jean Allen Escrow Co., Inc., a corporation, shall have the right, in
its discretion, to withhold any and all papers, documents, deeds and instruments
deposited in the said escrow, until the final determination of the said suit or
action; and it is further agreed by the parties hereto that the said Jean Allen
Escrow Co., Inc. is hereby given a first lien on any and all monies deposited in
said escrow and on any and all papers, instruments, documents, deeds, and
everything deposited in said escrow, for its fee, costs, charges, attorney's
fee, and all other necessary expense until the final determination of such suit
or action.
III
The parties authorize Jean Allen Escrow Co., Inc. to pay from any funds
deposited in escrow all charges for publications, recordations, filings and
chattel and security interest searches when incurred. The parties authorize Jean
Allen Escrow Co., Inc. to pay from funds deposited in escrow at the close
thereof or following notice of cancellation or recission or following a failure
of the parties to comply with the terms of Paragraph I hereof all escrow fees,
attorney's fees or other charges incurred in connection with the escrow, whether
incurred for account of buyer or seller.
IV
It is specifically understood by the parties hereto that the Jean Allen Escrow
Co., Inc., is a stake holder only under the laws of the State of California, and
for the escrow fee charged, shall not be required to perform any other services
or duties other than the ordinary services or duties as such stakeholder.
However, should it become necessary in the completion of this escrow to render
additional services other than as a stakeholder, then and in that event the said
escrow holder shall be entitled compensation for such services, which shall
become an additional cost and charge of this escrow, and said escrow holder may
reimburse itself immediately for the reasonable amount of said additional
services rendered by it, to all of which the parties hereto jointly and
severally agree.
V
The escrow holder is not to be held liable for the sufficiency or correctness
as to form, manner or execution, or validity of any instrument deposited in
escrow, nor as to the identity, authority, or rights of any person executing
the same, nor for failure to comply with any of the provisions of any
agreement, contract or instrument filed or referred to in said escrow, and
its duties hereunder shall be limited to the safekeeping of such money,
instruments or other documents received by it as escrow holder and of the
disposition of same in accordance with the written instruments and
instructions accepted in this escrow, and as otherwise agreed in this
agreement.
<PAGE>
-PAGE SIX-
VI
It is understood by the parties hereto that in consideration of Jean Allen
Escrow Co., Inc. acting as escrow holder, that it shall in no case or event be
liable for the failure for any of the conditions of this escrow, or damage
caused by the exercise of its discretion in any particular manner, or for any
other reason, except gross negligence or wilful misconduct with reference to
the said escrow, and it shall not be liable or responsible for its failure to
ascertain the terms or conditions, or to comply with any of the provisions of,
any agreement, contract, or other document or written instrument filed herein,
or referred to in the escrow, nor shall it be liable or responsible for or on
account of any fraud of any nature whatsoever, for forgeries of any nature
whatsoever, or for false personations.
VII
All the parties hereto further agree, jointly and severally, to pay on demand,
as well as to indemnify and hold the escrow holder harmless, of and from any and
all costs, damages, judgments, attorney's fees, expenditures, obligations,
expenses and liabilities of any kind or nature which in good faith, the escrow
holder may incur or sustain in connection with, or arising out of this escrow,
and the escrow holder is hereby given a lien upon all of the rights, titles and
interests of each of the undersigned in all escrow papers and other property and
monies deposited in escrow, to protect the escrow holder's rights and to
indemnify and reimburse said escrow holder under this escrow, including an
expert witness fee if that becomes necessary.
VIII
The escrow holder is hereby authorized to pay such claims of the creditors of
the seller as have been approved by the seller and if the amount of approved
bills plus the amount held to cover disputed and unapproved bills aggregate more
than the amount accruing to the account of the Seller after deducting expenses,
the Seller agrees to make up the deficiency by depositing sufficient amount of
money in escrow on or before seven days following the time set out above.
IX
It is understood that the escrow holder will not be liable to the buyer or
secured party, or any other party, on account of any property included hereunder
which is subject to conditional sale or lease contracts or other form of lease,
contract or agreement, or chattel mortgage or on account of liens of any kind or
nature whatsoever, or from defects in title which may exist with respect to any
property. It is understood by the parties to this escrow that no chattel search
is required covering the property involved herein and Jean Allen Escrow Co.,
Inc. is hereby relieved of all liability for not procuring such chattel search
unless specifically provided for in this escrow. In the event, however, a
chattel search is required by the parties hereto, and one is procured, it is
understood that said buyer shall pay the costs thereof and which sum shall be an
additional charge or cost or expense of said escrow; that furthermore such
report as received from a reputable company rendering such chattel search
reports, shall be conclusive and binding on the parties hereto.
X
The Jean Allen Escrow Co., Inc. is not to be concerned with any unpaid
insurance, personal property tax, retail sales, beverage, unemployment, old age
or social security taxes or contributions or any other tax, unless otherwise
specifically instructed in this escrow.
XI
This Agreement shall inure to the benefit of, and be binding upon the heirs,
executors, administrators and assigns of each of the parties hereto. Words used
in this Agreement in the present tense include the future as well as the
present; words used in the masculine gender include the feminine and neuter; the
singular number includes the plural, and the plural the singular; and the word
"person" includes a corporation as well as a natural person.
XII
All funds received in this escrow shall be deposited with a Federally insured
bank with other escrow funds and all disbursements shall be made by check of
Jean Allen Escrow Co., Inc. For the purpose of pro-rating, "Close of Escrow"
shall mean the date for the payment of the consideration as set forth in the
Notice to CREDITORS of BULK TRANSFER. Make all pro-rations on the basis of a
30-day month. All documents and funds due the respective parties herein are to
be mailed to the addresses set out below their respective signatures, unless
otherwise instructed. Our signatures on any documents and instructions
pertaining to this escrow indicate our unconditional approval of same. In the
event deposit in escrow is made by personal check, the maker, and party
depositing said check, hereby agrees that the amount drawn in this check is on
deposit to the credit of the maker in the bank indicated on check free and clear
from any claims and the maker hereby guarantees payment of this check and agrees
not to stop payment of same. If for any reason this check is not paid when
presented for payment, and is placed in the hands of an attorney for collection,
the maker hereby agrees to pay attorney's fee and such other costs as the court
may allow.
XIII
Should any paragraph, clause or provision of this agreement be construed or
interpreted by a court of competent jurisdiction to be void, or invalid, or
unenforcible, such decision shall affect only those paragraphs, clauses or
provisions so construed or interpreted, and shall in no event affect the
remaining paragraphs, clauses or provisions of this agreement.
<PAGE>
-PAGE SEVEN-
XIV
In the event the seller rejects or refuses to approve any creditors' claims
which have been filed in this escrow prior to the close of escrow, then in such
event, the escrow holder is hereby authorized to withhold from the funds due the
seller an amount equal to the amount of said claim and to withhold said amount
until the disputed claim has been settled between the parties.
XV
The buyer and seller hereby authorize and empower the Jean Allen Escrow Co.,
Inc. to pay off any existing liens or charges against any personal property
connected with or the subject of this escrow upon being notified thereof by such
lien holder; the sum so paid by Jean Allen Escrow Co., Inc. shall be for the
account of the seller and shall be deducted from all monies due such seller.
XVI
If these instructions require the preparation and execution of any promissory
note or other writing which evidences an indebtedness or chose in action, or any
security agreement or other document which is intended to create a security
interest in real or personal property, then the parties agree to furnish Jean
Allen Escrow Co., Inc. appropriate forms to accomplish the said requirements.
Should the parties elect to use any such form made available to them by Jean
Allen Escrow Co., Inc., it is agreed that Jean Allen Escrow Co., Inc. has made
available such forms as an accommodation only, and Jean Allen Escrow Co., Inc.
shall not be liable to the parties for the selection of the forms or their
correctness and sufficiency.
XVII
XVIII
These instructions may be executed in counterparts, each of which shall be
deemed an original regardless of the date of its execution and delivery. All
such counterparts, together shall constitute one and the same document.
XIX
The foregoing terms, conditions, provisions and instructions have been read
and are understood and agreed to by each of the parties hereto.
Receipt of a copy of these escrow instructions is hereby acknowledged by the
buyer and the seller.
TEXAS LOOSEY'S STEAK HOUSE HOLDING, INC., TLC RESTAURANT MANAGEMENT CORP.,
A DELAWARE CORPORATION A CALIFORNIA CORPORATION
BY BY
- ------------------------------------ --------------------------------
RICHARD M. LEE, CHAIRMAN/CEO Buyer RON WALTON, PRESIDENT Seller
BETTER BUSINESS SECURITY, INC.,
A CA CORP.
BY BY
- ------------------------------------ --------------------------------
HIRAM WOO, PRESIDENT Buyer RON WALTON, PRESIDENT Seller
RIVER DIEGO INVESTMENT CORP.,
A CA CORP
BY
- ------------------------------------ --------------------------------
Buyer RON WALTON, PRESIDENT Seller
- ------------------------------------ --------------------------------
Buyer RON WALTON, Seller
- ------------------------------------ --------------------------------
Buyer Seller
- ------------------------------------ --------------------------------
Buyer Seller
<PAGE>
EXHIBIT "A"
Furniture, removeable trade fixtures, equipment, accounts, contract rights,
tradename, tradestyle, franchise rights and franchise agreements (present and
future), leasehold, inventory and additions thereof, proceeds of the same or
similar type hereafter acquired by the Debtors, together with the proceeds of
any insurance policies covering the herein described collateral located at 22252
PALOS VERDES BOULEVARD, TORRANCE CA 90505, 2720 E. NUTWOOD AVENUE, FULLERTON, CA
92631 and 24811 SUNNYMEAD BOULEVARD, MORENO VALLEY, CA 92553.
SCHEDULE
Schedule 4.5--ASSETS
TORRANCE
FURNITURE, FIXTURES, & EQUIPMENT
INVENTORY
<TABLE>
<CAPTION>
NORTH DINING ROOM
----------------------
QUANTITY DESCRIPTION
<S> <C>
15 6 ft. straight back pleated naugahyde and fabric booths
15 4 ft. straight back pleated naugahyde and fabric booths
30 Metal wall mount table bases
8 Brass floor mount table bases
7 30" x 48" formica and oak trimmed table tops
8 30" x 72" formica and oak trimmed table tops
15 5 light brass and glass hanging light fixtures
1 36" x 68" custom exit door with leaded glass windows
1 Set panic hardware
1 lot 48' x 50' french pane mirrored wall complete with bric-a-brack shelf
5 Custom painted pictures with frames
3 Metal wall mount TV brackets
1 Oak wall mount TV shelves
4 19" Sharp remote color TV's
1 L-shaped formica and oak waitress station complete with water and ice
station, glass and cup storage, trash dumps
1 6 ft. formica and oak overhead cabinet
2 10' x 12' backlit overhead mirror and leaded glass ceiling treatment
2 42" oak and brass fly fans, complete with 5-light fixture
1 36" x 50" formica and oak taco bar, complete with brass and glass sneeze rail
and two built-in electric heating elements
40 Artificial flowers and basket arrangements
4 Music speakers wall mount
150 Yards Atlas Visions carpeting
4 Oak high chairs
4 Plastic booster chairs
SOUTH DINING ROOM
----------------------
12 4 ft. straight back pleated naugahyde and fabric booths
8 30" x 48" formica and oak trimmed table tops
</TABLE>
INITIAL HERE: Page 1 of 17
- ------ ------- ------ ------ ------ -------
<PAGE>
SCHEDULE
Schedule 4.5--ASSETS, continued
<TABLE>
<CAPTION>
TORRANCE, continued
<S> <C>
6 Metal wall mount table base
5 Metal floor mount table base
3 6" round formica table tops
30 Oak and naugahyde chairs
3 4 ft. oak and glass booth dividers
2 10' x 12' backlit overhead mirror and leaded glass ceiling treatment
1 36" x 68" custom entry door with leaded glass windows and brass
hardware
6 5 light brass and glass hanging light fixtures
2 42" oak and brass fly fans, complete with 5-light fixture
3 19" Sharp remote color TV
2 Oak wall mount TV shelves
1 Metal wall mount TV brackets
1 3' x 4' neon "Tickle My Ribs" sign
1 L-shaped formica and oak waitress station, complete with water and ice
station, glass and cup storage, trash dump
2 6 ft. formica and oak overhead cabinet
4 Music speakers wall mount
26 Artificial flower and basket arrangements
1 8' x 8' oak and leaded glass room divider
1 5 ft. oak and glass hostess station
1 6 ft. formica hostess storage cabinet
11 Lace window covering with brass fixtures
5 Mauve pleated window shades
1 3-light brass tract lighting
1 5-light and brass hurricane hanging light fixture
1 Neon "Open" sign
2 5 ft. oak and metal waiting benches
LOUNGE
---------------
1 8' x 5' oak, etched glass and formica stand up bar room divider
1 13' x 5' oak, etched glass and formica stand up bar room divider
1 24' x 12' oak and leaded glass with recessed lighting overhead bar
1 lot Miscellaneous brass overhead glass racks
16 Chrome and naugahyde bar stools
16 Naugahyde and wood bar chairs
</TABLE>
INITIAL HERE: Page 2 of 17
- ------ ------ ------ ------ ------- ------
<PAGE>
SCHEDULE
Schedule 4.5--ASSETS, continued
<TABLE>
<CAPTION>
TORRANCE, continued
<S> <C>
4 24" x 24" formica with oak trim table tops
4 Metal floor mount table bases
1 Electric popcorn maker on wheeled base
8 Naugahyde and oak chairs
1 18' x 3' french pane mirrored wall complete with bric-a-brack shelf
13 Artificial flower and basket arrangements
1 Honeywell air purifier
2 Perlick formica and oak trim 2-door reach-in coolers
1 6 ft. formica and oak liquor display cabinet
1 18 ft. stainless steel underbar unit complete with two speed stations
and (1) three compartment sink and (2) mixer station
1 12' x 2' rectangular island bar formica and oak with two waitress
stations and oak bar rails
2 Four tap brass beer towers complete with drains and refrigeration
1 19" Sony color TV
1 Metal wall mount TV brackets
2 Shure column speaker
1 Shure amplifier
1 Mitsubishi big screen TV with formica base cabinet
2 Music speakers wall mount
1 3' x 5' Texas Loosey's painted sign
4 Brass ceiling mount stage lights with dimmer controls
1 lot Miscellaneous bar glasses and small ware
2 Hamilton Beach bar blenders
1 Polar Beer custom long-draw beer system
OFFICE
-----------------
1 FDS 200 TEC P.O.S. system, complete with CPU, (3) waitress terminals, (4)
keyboards, (5) remote printers, and power packs and office printer and
operating software
1 IBM compatible 386 PC, complete with miscellaneous software,
Okidata printer, and modem
2 Modular Data credit card terminals with Star printers
1 lot 4 phone (4) line telephone system
1 8' x 8' walk-in modular beer cooler complete with remote compressor and fan coil unit
</TABLE>
INITIAL HERE: Page 3 of 17
- ------ ------ ------ ------ ------- ------
<PAGE>
SCHEDULE
Schedule 4.5--ASSETS, continued
<TABLE>
<CAPTION>
TORRANCE, continued
<S> <C>
1 Atlas chest freezer
1 lot Miscellaneous file cabinets
1 lot Miscellaneous storage cabinets
1 lot Miscellaneous metal storage shelves
1 2 compartment safe (no combo)
1 Set (8) compartment employee lockers
1 13" Sharp remote color TV
1 Teal five disc CD player
1 Tracker satellite system
1 JVC amplifier
1 H.Q. VCR Player
1 Sharp UX171 fax machine
1 Channel Plus TV channel system
1 2 compartment major safe
1 Office desk
2 Office chairs
1 lot Miscellaneous office shelves and cabinets
1 Canon MP210 calculator
1 Motion sensor silent alarm system
KITCHEN
----------------
1 18' X 5' stainless steel chef's dish-up counter complete with salad station. ice
cream freezer, refrigeration under counter, (6) gas full size hot inserts and
chef's cold table and s/s overhead pass through shelf with dual heat lamps
1 26" Delfield sandwich cold table
1 5 ft. US Range double oven with 36" grill and (4) burners
1 5 ft. Jade s/s cheese melter
1 Pitco fryolator 3-fryer and dump station gas unit
1 4 H. Jade gas grill
1 4 H. Jade gas broiler
1 10' H. custom s/s refrigerator/freezer base
1 22' H. s/s exhaust hood complete with s/s backflashing, nine head fire exhaust
system and make-up air
1 10' x 10' s/s custom walk-in cooler complete with remote compressor
and fan coil unit
1 lot Miscellaneous metal storage shelves (for above unit)
</TABLE>
INITIAL HERE Page 4 of 17
- ------ ------ ------ ------ ------- ------
<PAGE>
SCHEDULE
Schedule 4.5--ASSETS, continued
<TABLE>
<CAPTION>
TORRANCE, continued
<S> <C>
1 9' x 8' custom walk-in cooler complete with remote compressor
and fan coil unit
1 lot Miscellaneous metal storage shelves (for above unit)
2 Goldstar microwave ovens
1 Chitwood s/s double over smoker
1 Groem s/s 40 gallon steak kettle
1 7 ft. s/s work table, complete with overhead pot racks and (2) s/s
ingredient bins
1 Utility s/s self contained single door freezer reach-in
1 Hobart 60 qt. mixer with attachments
1 8' x 4' s/s exhaust hood complete
1 Kidde fire exhaust system
1 3-drawer s/s Toastmaster bun warmer
1 24" x 24" s/s two shelf equipment base
1 3 spindle Hamilton Beach malt mixer
2 Plastic ingredient bins
1 7'6" s/s two compartment sinks with drains
1 6 ft. s/s work table with under shelf and can opener
2 S/S L-shaped wall shelf with brackets
2 6 ft. s/s wall shelves with brackets
1 Globe s/s meat slicer
1 U-shaped s/s dirty dish station complete with disposal and rinse hose
1 Nemco electric potato cutter
1 6 ft. s/s clean dish storage shelf
1 10 ft. s/s wall shelf
1 lot Miscellaneous pots, pans, inserts, dishes, glasses, flatware, coffee
mugs, and baskets
1 7 ft. s/s wall shelf with brackets
1 4 tier plastic chemical storage rack
1 Manitowoc ice maker
1 Nemco onion cutter
</TABLE>
INITIAL HERE: Page 5 of 17
- ------ ------ ------ ------ ------- ------
<PAGE>
SCHEDULE
Schedule 4.5--ASSETS, continued
FULLERTON
FURNITURE, FIXTURES, EQUIPMENT
INVENTORY
NORTHWEST DINING ROOM
----------------------------------
<TABLE>
<CAPTION>
QUANTITY DESCRIPTION
<S> <C>
14 4 ft. straight back pleated naugahyde booths
3 24" x 47" formica with oak trim table tops
4 30" x 47" formica with oak trim table tops
7 Metal floor mount table bases
4 6 ft. round formica with oak trim table tops
4 Heavy metal table bases
26 Oak and naugahyde chairs
1 8 ft. formica with oak trim waitress station complete with ice bin, water station,
2 trash dump and glass storage
1 8 ft. formica overhead cabinet
1 2 pot bun coffer warmer
11 Custom western pictures with wood frames
1 27" Sharp remote color TV
1 Metal wall hung TV bracket
7 5-light brass and glass hanging light fixtures
2 3-light brass tract lighting
1 36" x 6'8" custom exit door with panic hardware
2 1' x 7' leaded glass door panels
5 Lace window covers with brass fixtures
2 Mauve pleated window shades
50 Linear ft. custom bric-a-brack shelving
41 Miscellaneous artificial nower and basket arrangements
1 Honeywell air purifier (ceiling mounted)
1 10' x 12' backlit overhead mirror and leaded glass ceiling treatment
1 42" oak and brass fly fan complete with five light brass light
fixture
1 30" x 43" formica with oak trim table top with metal base
275 Yards Atlas Visions carpet
</TABLE>
INITIAL HERE: Page 6 of 17
- ------ ------ ------ ------ ------- ------
<PAGE>
SCHEDULE
Schedule 4.5--ASSETS, ontinued
<TABLE>
<CAPTION>
FULLERTON, continued
LOUNGE
-------------
<S> <C>
1 6 ft. formica and oak taco bar complete with glass and oak sneeze
rails and (3) electric heating elements
1 3-light brass tract light
1 Zenith big screen projector TV complete with remote control screen
4 6 ft. straight back pleated naugahyde booths
2 30" x 72" formica with oak trim table tops
2 Metal floor mount table bases
1 19" Sony remote color TV
4 24" Sharp remote color TV's
3 Metal wall mount TV brackets
1 Neon "Open" sign
11 Lace window covering with brass fixtures
4 Mauve pleated window shades
2 36" round oak claw foot stand up tables
12 Beige padded naugahyde bar chairs
24 Wood and naugahyde bar stools
3 24" x 24" formica with oak time table tops
1 30" x 30" formica with oak time table tops
4 Meal floor mounted table bases
8 Oak and naugahyde chairs
1 12' x 24' oak and leaded glass rectangular overhead bar with
recessed lighting
1 12' x 24' rectangular oak and formica island bar with two s/s waitress stations
2 4 tap brass beer towers
1 Electric popcorn maker with wheel base
2 Custom painted pictures with wood frames
1 24 ft. custom s/s under bar with (2) bar stations and three
compartment sink, (2) mixer stations, and dish storage
2 6 ft. formica liquor display stations back light
1 24" refrigerated mug chiller
2 Hamilton Beach bar blenders
1 18 ft. oak and formica stand up bar
1 8 ft. formica and oak waitress stations complete with ice and water, trash
dump and glass storage
14 4 ft. straight back pleated naugahyde booths
</TABLE>
INITIAL HERE: Page 7 of 17
- ------ ------ ------ ------ ------- ------
<PAGE>
SCHEDULE
Schedule 4.5--ASSETS, continued
<TABLE>
<CAPTION>
FULLERTON, continued
<S> <C>
7 Metal wall mount table bases
7 30" x 47" formica with oak trim table tops
95 Lineal ft. of custom bric-a-brack wall shelves
35 Miscellaneous artificial flower and basket arrangements
4 5 light brass and glass hanging 5-light fixtures
1 42" oak and brass fly fan complete with 5-light fixture
1 10' x 12' backlit overhead mirror and leaded glass ceiling treatment
1 7 ft. rectangular backlit overhead mirror and leaded glass ceiling treatment
3 42" oak and brass fly fan complete with light fixture
2 Honeywell air purifier (ceiling mounted)
1 Polar Beer long draw beer systems
1 4 ft. oak and glass hostess counter
1 17 ft. oak, formica and glass hostess back bar cabinets
1 4 phone (4) line phone systems
2 Custom entry doors with leaded glass windows and brass hardware
1 lot Brass hanging glass racks
1 lot Miscellaneous bar glass and small ware
4 36" round PVC tables
3 42" square PVC and glass tables
30 PVC chairs
6 Cloth umbrellas
3 Plexiglass face backlit exterior signs
(1) 3' x 8' (2) 4' x 10'
7 Gas patio heaters with mounting brackets
1 lot 500 lineal ft. dazzle exterior decorative lighting
SOUTH DINING ROOM
-------------------------
16 4 ft. straight back pleated naugahyde booths
10 30" x 47" formica with oak trim table tops
2 24" x 24" formica with oak trim table tops
2 6 ft. round formica with oak trim table tops
14 Metal floor mount table bases
5 5-light brass and glass hanging light fixtures
1 10' x 12' backlit overhead mirror and leaded glass ceiling treatment
10 Custom painted western pictures with frames
</TABLE>
INITIAL HERE: Page 8 of 17
- ------ ------ ------ ------ ------- ------
<PAGE>
SCHEDULE
Schedule 4.5--ASSETS, continued
<TABLE>
<CAPTION>
FULLERTON, continued
<S> <C>
1 42" oak and brass fly fan with 5-light fixture
1 lot 24 ft. of leaded glass booth dividers
22 Oak and naugahyde chairs
1 U-shaped formica and oak waitress station complete with ice, water, trash
dump, and glass storage
1 Brass railroad hanging light fixture
KITCHEN
--------------------
1 60 gallon Groem gas steam kettle
1 Double oven Chitwood smoker oven
1 4' x 4' s/s exhaust hood with motor
1 4' x 5' s/s exhaust hood with motor
1 11 ft. s/s 3-compartment sink with 2 drains
1 6 ft. s/s pot rack
1 Nemco electric french fry cutter
1 Nemco onion cutter
1 11 ft. s/s dirty dish table with under shelf and overhead storage
1 Garbage disposal
1 Fisher rinse hose unit
1 7'6" s/s clean dish table with under shelf and dish storage
1 4 ft. (4) tier metal dish storage rack
1 10 ft. s/s work table with under shelf
1 5 ft. s/s work table with under shelf
1 3 ft. s/s table with hand sink and can opener
1 5 ft. s/s work table with under shelf and drawer
1 US Berkel electric meat slicer
1 lot Miscellaneous pots, pans, utensils, inserts, glasses, coffee mugs, and baskets
1 60 qt. Hobart mixer with attachments ..
1 Groem s/s electric 20 qt. steam kettle
1 Modular 11' x 11' walk-in cooler complete with remote compressor and fan
coil unit (food)
1 10' x 7' walk-in cooler complete with remote compressor and fan coil unit
(beer)
1 lot Miscellaneous metal storage shelves for above coolers
2 30" plastic air curtain for coolers
</TABLE>
INITIAL HERE: Page 9 of 17
- ------ ------ ------ ------ ------- ------
<PAGE>
SCHEDULE
Schedule 4.5--ASSETS, continued
<TABLE>
<CAPTION>
FULLERTON, continued
<S> <C>
1 Dean s/s 3 fryer and dump station fryer unit
1 4 ft. Jade gas grill
1 3 ft. Jade gas grill
1 Jade (6) burner gas top
1 3 ft. Jade s/s charbroiler
1 6 ft. s/s US Range cheese melter
1 Custom 16 ft. s/s refrigerator base unit complete with remote compressor and
fan coil
1 26 ft. s/s chef's line complete with refrigerator base, (3) gas hot inserts,
(4) electric hot inserts, hand sink and drawers, remote compressor
1 10 ft. s/s double pass through shelf with heat lamps
1 26" under counter reach-in freezer unit
1 22 ft. s/s exhaust hood complete with fire system and make-up air
1 lot Miscellaneous dry storage shelves and ingredient bins
KITCHEN WAITRESS STATION
-------------------------------------
1 15 ft. formica cabinet complete with sink, dry storage and cup storage with
built-in cold table (non-working)
2 Microwave ovens
1 Hamilton Beach (3) spindle malt mixer
1 Silver King milk dispenser
1 26 ft. formica cabinet complete with refrigerated under bar, built-in ice cream
freezer, glass and dirty dish storage and two drawer bun warmer
1 9 ft. wall mount dessert case (non-working)
1 Raetone 2 door s/s reach-in freezer
4 Eliason easy swing kitchen door
OFFICE
---------------------
1 lot Miscellaneous metal metro storage shelves
1 IBM compatible 386 PC complete with software, Okidata printer and modem
1 FDS 200 TEC P.O.S. system complete with (4) waitress terminals, (7) remote
printers, (1) CPU and office printer
1 Major two compartment money safe
1 Panasonic VCR
</TABLE>
INITIAL HERE: Page 10 of 17
- ------ ------ ------ ------ ------- ------
<PAGE>
SCHEDULE
Schedule 4.5 --ASSETS, continued
<TABLE>
<CAPTION>
FULLERTON, continued
<S> <C>
1 Tracker satellite system
1 Teal five disc CD player
1 13" remote color TV
1 Muzak A-230 amplifier
1 Sharp UX183 fax machine
1 Office desk with 2 file cabinets
1 8 ft. built-in storage cabinets
2 Office chairs
1 Sharp calculator
1 lot Miscellaneous metal storage shelves
1 Built-in cash drawer metal cabinet
1 Motion sensor silent alarm system
MORENO VALLEY
FURNITURE, FIXTURES, & EQUIPMENT
INVENTORY
SOUTHWEST DINING ROOM
-----------------------------
24 4 ft. straight back pleated naugahyde booths
12 Metal floor mounted table bases
12 30" x 47" formica with oak trim table tops
4 48" round formica and oak table tops
4 Heavy metal floor mounted table bases
20 Oak back padded seat chairs
10 Brass and etched glass booth dividers
15 Custom framed southwest prints
2 Sharp 20" remote color TV's
2 Metal wall mount TV brackets
12 Metal hanging light fixtures
3 42" brass fly fans with light kit
1 Honeywell air purifier (ceiling mounted)
5 Ceiling mounted music speakers
1 Mauve pleated window blind
2 Electric exit signs
</TABLE>
INITIAL HERE: Page 11 of 17
- ------ ------ ------ ------ ------- ------
<PAGE>
SCHEDULE
Schedule 4.5--ASSETS, continued
<TABLE>
<CAPTION>
MORENO VALLEY, continued
NORTH DINING ROOM
------------------------------
<S> <C>
25 4 ft. pleated straight back naugahyde booths
1 4' x 8' pleated naugahyde horseshoe booth
3 2 ft. pleated straight back naugahyde booths
13 30" x 47" formica with oak trim table tops
1 24" x 30" formica with oak trim table top
1 30" x 48" formica with oak trim table top
15 Metal floor mount table bases
1 9'6" custom formica and oak waitress station complete with water, ice, and
trash dump
1 9'6 custom formica and oak overhead cabinet
3 Sharp 13" remote color TV's
2 Sharp 20" remote color TV's
1 Metal wall mount TV bracket
1 Mounted Texas longhorn head
18 Custom framed southwest prints
9 Brass and etched glass booth dividers
14 Metal hanging light fixtures
1 Modular Data credit card terminal with Star printer
10 Artificial flower arrangements
1 Custom oak and formica planter/booth divider
3 4 ft. glass block booth dividers
10 Mauve vertical blinds
10 Fabric window valances
7 Ceiling mount music speakers
4 Electric exit signs
1 42" brass and oak fly fan complete with 5-light fixture
1 lot 50 lineal ft. dazzle decorative lighting
1 12 ft. L-shaped custom glass, oak, and formica lighted hostess station
1 Custom formica and oak hostess cabinet
1 6 ft. pleated straight back naugahyde waiting booth
1 10 ft. pleated straight back naugahyde waiting booth
1 Custom oak and glass sound equipment cabinet
1 Channel Plus TV controller
</TABLE>
INITIAL HERE: Page 12 of 17
- ------ ------ ------ ------ ------- ------
<PAGE>
SCHEDULE
Schedule 4.5--ASSETS, continued
<TABLE>
<CAPTION>
MORENO VALLEY, continued
<S> <C>
1 Neon "Open" sign
330 Yards Atlas Visions carpet
2 Fire extinguisher
1 Eliason easy swing kitchen door
LOUNGE
---------------
3 30" round formica and oak stand-up table
3 42" high heavy metal table bases
23 Padded back and seat naugahyde and wood bar stools
6 Padded back and seat naugahyde and wood arm bar chairs
1 48" round formica and oak table top
1 Heavy metal floor mount table base
4 Oak back padded seat chairs
1 10' x 20' rectangular island bar oak and formica complete with two waitress
s/s stations
2 4 ft. brass overhead glass racks
1 5 ft. Perlick refrigerated bottle box
2 5 ft. liquor display cases
1 20 ft. custom s/s under bar unit complete with two bar stations and one (3)
well glass sink, (2) blender shelves
2 Hamilton Beach bar blenders
1 lot Miscellaneous bar glasses
2 Brass six tap beer towers
1 Modular Data credit card terminal with Star printer
4 Sharp 13" remote color TV's
2 Sharp 25" remote color TV's
1 Sony 19" remote color TV
1 Custom TV cabinet for (2)13" TV's
1 10 ft. custom waitress station complete with water and ice, trash dumps, and
glass storage
1 10 ft. custom overhead cabinet
3 Metal wall mount TV brackets
1 lot 30' x 4' custom wall mirror with oak trim
2 Eliason easy swing kitchen doors
3 Custom framed southwest prints
</TABLE>
INITIAL HERE: Page 13 of 17
- ------ ------ ------ ------ ------- ------
<PAGE>
SCHEDULE
Schedule 4.5--ASSETS, continued
<TABLE>
<CAPTION>
MORENO VALLEY, continued
<S> <C>
1 7 ft. custom oak, formica, and glass taco bar complete with (2) electric heating
elements and trash dump
1 Commercial electric popcorn maker on cart base
2 Electric exit signs
1 10' x 20' custom bar overhead with recessed lighting
1 lot 75 ft. dazzle decorative lighting
1 Set 8 ft. Texas longhorn horns
4 Artificial flower arrangements
1 Honeywell air purifier ceiling mounted
4 Music speakers ceiling mounted
1 Fire extinguisher
2 (4) light brass fixture
BALCONY DINING
-------------------------
6 2 ft. straight back pleated naugahyde booths
4 4 ft. straight back pleated naugahyde booths
3 24" x 30" formica with oak trim table tops
2 30" x 47" formica with oak trim table tops
5 Metal floor mount table base
1 Custom 5' x 5' planter, high chair and cabinet storage oak and formica
8 Artificial flower arrangements
1 20 ft. custom oak and formica room divider
3 Custom carousel horses mounted on brass poles
5 Metal hanging light fixtures
3 Mauve vertical blinds
3 Fabric window valances
3 Brass and etched glass booth dividers
4 Oak high chairs
4 Glass block and oak booth dividers
6 Ceiling mount music speakers
2 Custom framed southwest prints
1 Honeywell air purifier ceiling mounted
1 lot Stage lighting with remote control
1 17 ft. pleated straight back naugahyde booth
1 12 ft. pleated straight back naugahyde booth
</TABLE>
INITIAL HERE: Page 14 of 17
- ------ ------ ------ ------ ------- ------
<PAGE>
SCHEDULE
Schedule 4.5--ASSETS, continued
<TABLE>
<CAPTION>
MORENO VALLEY, continued
<S> <C>
2 24" x 30" formica with oak trim table top
1 30" x 4' formica with oak trim table top
2 30" x 6' formica with oak trim table top
7 Metal floor mount table bases
1 12' x 4' custom western wall mural
1 Mounted Texas longhorn head
1 7 ft. custom glass block, oak and etched glass room divider
1 4' x 8' elevated stage
1 lot Miscellaneous custom hand rails
1 Sharp 20" remote color TV
1 42" brass and oak fly fan with 5-light fixture
1 Metal wall mount TV bracket
KITCHEN
-------
1 Custom 14 ft. s/s waitress station complete with (3) door Delfield refrigerated
cold table, (1) Wells electric bun warmer, (1) two door ice cream freezer, and
(1) cola dispenser (built-in; owned by Pepsi)
1 (1) spindle Hamilton Beach malt mixer
1 14 ft. s/s shelf with brackets
1 Traulsen s/s (2) door reach-in refrigerator
1 15'6" s/s custom shelf
1 14' s/s two shelf pass through window complete with (2) Hatco heat lamps
1 lot Miscellaneous dishes, pots, pans, utensils, inserts, glasses, coffee mugs,
baskets
1 Hobart single gas convection oven
1 Groem 60 gallon gas steam kettle
1 Chitwood s/s double smoker oven
1 4' x 10' s/s exhaust hood complete with s/s flashing.and motor assembly
1 4' x 19' s/s exhaust hood complete with s/s flashing and motor assembly
1 Range guard fire exhaust system
1 8 ft. custom s/s refrigerator and freezer equipment base
1 3 ft. DCS gas charbroiler
1 3 ft. Vulcan gas grill
1 Dean s/s three fryer and filtering fryer unit
1 6 ft. custom s/s refrigerator equipment base unit
</TABLE>
INITIAL HERE: Page 15 of 17
- ------ ------ ------ ------ ------- ------
<PAGE>
SCHEDULE
Schedule 4.5 --ASSETS, continued
<TABLE>
<CAPTION>
MORENO VALLEY, continued
<S> <C>
1 Imperial (4) burner gas unit
1 Imperial 24" gas grill
1 US Range 6 ft. s/s cheese melter
2 5 ft. s/s Randell self contained refrigerated sandwich table
1 Four hole gas steam table
2 15" x 30" s/s trash dumps and spacers
1 S/S heating lamp
1 Sharp microwave oven
1 Sanyo microwave oven
1 12 ft. s/s prep table with sink and under shelf
1 9 ft. s/s shelf and brackets
1 Hobart meat slicer
1 Edlund s/s knife holder
1 7 ft. s/s prep table with drain with attachments under shelf and can opener
1 Hobart grinder motor
1 Nemco onion cutter
1 Hobart 20 qt. mixer with attachments
1 Nemco electric potato cutter
1 Pelouze receiving scale
1 7' x 16' custom walk-in cooler complete with remote compressor and fan coil unit
1 5' x 7' custom walk-in freezer complete with fan coil unit and remote compressor
1 3 ft. Mars air door
1 American Appliance 100 gallon gas water heater
1 Custom s/s U-shaped dishwashing unit complete with s/s overhead shelf, (1)
1 Fisher rinse hose, (1) SS100 garbage disposal, and two tub pot sink with drain boards
1 7 ft. s/s clean dish shelf
4 Miscellaneous size metal metro shelves
1 Polar beer long draw beer system
OFFICE
---------------------------
1 FDS 300 TEC P.O.S. cash register system complete with (4) server
</TABLE>
INITIAL HERE: Page 16 of 17
- ------ ------ ------ ------ ------- ------
<PAGE>
SCHEDULE
Schedule 4.5--ASSETS, continued
<TABLE>
<CAPTION>
MORENO VALLEY, continued
<S> <C>
terminals, (5) keyboards, (6) remote printers, (1) CPU, and printer complete
with software
1 IBM compatible 386 personal computer with Okidata printer and associated
software
1 Major two compartment money safe
2 4' x 6' metal storage cabinets
1 6' x 10' formica desk top complete with (2) drawer file cabinet
1 Metal (4) drawer file cabinet
1 Merlin phone system, (4) phone (4) lines with intercom
1 Manitowoc ice maker
1 8' x 14' cold storage modular walk-in cooler complete with remote compressor
and fan coil unit
3 4 ft. (3) tier keg racks
2 4 ft. metal metro shelves
13 Miscellaneous size metal metro shelves
1 2' x 12' formica counter
4 Padded back and seat wood and naugahyde arm chairs
4 Miscellaneous cork boards
1 Silent alarm system complete
2 12 opening employee lockers metal
2 4 opening employee lockers metal
1 Sharp EL-1196G calculator
1 10 ft. formica and oak overhead shelf
3 Swivel office chairs
1 lot Miscellaneous office supplies and equipment
1 Double face plexiglass exterior pole sign
2 Single face plexiglass exterior pole sign
1 Individual neon letters exterior sign Restaurant and Lounge
1 lot 100 lineal ft. neon tubing exterior
1 6 ft. metal and canvas entry awning
</TABLE>
DATED THIS 16TH DAY OF AUGUST , 1996.
READ AND APPROVED:
TLC RESTAURANT MANAGEMENT CORP., TEXAS LOOSEY'S STEAKOUSE SALOON, INC.,
A CALIFORNIA CORPORATION A DELAWARE CORPORATION
BY: BY:
---------------------------------- -------------------------------------
RON WALTON, PRESIDENT RICHARD M. LEE,
BETTER BUSINESS SECURITY, INC., CHAIRMAN/CEO
A CA CORPORATION
BY: BY:
---------------------------------- -------------------------------------
RON WALTON, PRES. HIRAM WOO, PRES.
RIVER DIEGO INVESTMENT CORP.,
A CA CORPORATION
BY:
----------------------------------
RON WALTON, PRES.
- ----------------------------------
RON WALTON, AN INDIVIDUAL
Page 17 of 17
<PAGE>
EXHIBIT 10.11
<PAGE>
EXHIBIT M
SECURED PROMISSORY NOTE
$375,000.00 Costa Mesa, California
8-19, 1996
This secured promissory note ("Note") evidences a portion of the purchase
price payable by Texas Loosey's Steakhouse Holdings, Inc., a Delaware
corporation ("Maker"), under the Amended and Restated Asset Purchase Agreement
dated as of April 10, 1996 (the "Purchase Agreement") by and among TLC
Restaurant Mgmt. Corp., a California corporation ("TLC"), Better Business
Security, Inc., a California corporation, River Diego Investment Corp., a
California corporation, Ron Walton (collectively, the "Payees") and Maker. This
Note is secured by a Security Agreement of even date herewith (the "Security
Agreement") by and among Maker and Payees.
1. Promise to Pay. For value received, Maker hereby promises to pay to Ron
Walton, as agent for the Payees, at his office at 30075 Ynez Road, Temecula,
California 92592 or to such other party or at such other place as Payees may
from time to time in writing designate, the principal sum of Three Hundred
Seventy-Five Thousand Dollars ($375,000.00), or such other amount as may result
from the adjustments provided in Sections 2.5 and 3.4 of the Purchase Agreement,
on the terms set forth in this Note.
2. Interest. This Note shall not accrue interest, except as provided in
Section 5 of this Note.
3. Principal Payment. The entire unpaid principal balance of this Note
shall be due and payable on the earlier of six months following the Closing Date
(as defined in the Purchase Agreement) or the date that Maker has caused a
registration statement in connection with a public offering of securities by
Maker to be filed with the Securities and Exchange Commission.
4. Prepayment. Maker shall have the right to prepay the whole or any part of
the unpaid principal of this Note at any time without the payment of any
additional consideration therefor.
5. Default Rate. Amounts not paid when due hereunder shall bear interest from
the due date until such amounts are paid at the rate of eight percent (8%) per
annum; provided, however, that in the event such interest rate would violate any
applicable usury law, the default rate shall be the highest lawful interest rate
permitted under such usury law.
6. Acceleration. At the option of Payees, this Note shall be immediately due
and payable upon the occurrence at any time of any of the following events:
(i) Any event of default under this Note which is not cured by Maker within
ten (10) days following receipt by Maker of a notice thereof from Payees;
(ii) The admission by any party liable hereon, whether as maker, endorser,
guarantor, surety or otherwise, of its inability to pay its debts as they
mature, or an assignment for the benefit of the creditors of any of the
foregoing parties;
M-1
<PAGE>
(iii) The commencement of proceedings in bankruptcy, or for the
reorganization of any party liable hereon, whether as maker, endorser,
guarantor, surety or otherwise, or for the readjustment of any of the debts of
any of the foregoing parties, under the federal Bankruptcy Code, as amended, or
any part thereof, or under any other laws, whether state or federal, for the
relief of debtors, now or hereafter existing, by any of the foregoing parties,
or against any of the foregoing parties, which shall not be discharged within
thirty (30) days of their commencement;
(iv) The appointment of a receiver, trustee or custodian for any party
liable hereon, whether as maker, endorser, guarantor, surety or otherwise, or
for any substantial part of the assets of any of the foregoing parties, or the
institution of proceedings for the dissolution or the full or partial
liquidation of any of the foregoing parties, and such receiver or trustee shall
not be discharged within thirty (30) days of his or its appointment, or such
proceedings shall not be discharged within thirty (30) days of their
commencement, or the discontinuance of the business or the material change in
the nature of the business of any of the foregoing parties; or
(v) The dissolution of Maker.
7. Remedies. All rights and remedies of Payees under this Note and the
Security Agreement are cumulative and in additional to all other rights and
remedies available under the Purchase Agreement, at law or in equity, and all
such rights and remedies may be exercised singly, successively and/or
concurrently. Failure to exercise any right or remedy shall not be deemed a
waiver of such right or remedy.
8. Waivers. Maker hereby expressly waives presentment, protest and demand,
notice of protest, demand and dishonor and nonpayment of this Note and all other
notices and demands of every kind that would otherwise be available in
connection with this Note.
9. Partial Exercise. No single or partial exercise of any power hereunder or
under the Purchase Agreement shall preclude other or further exercise thereof or
the exercise of any other power hereunder or thereunder. No delay or omission on
the part of Payees in exercising any right hereunder or under the Purchase
Agreement shall operate as a waiver of such right or of any other right
hereunder or thereunder.
10. Costs of Collection. If this Note is not paid when due Maker promises to
pay, on demand, all costs of collection, including, but not limited to,
reasonable attorneys' fees and costs.
11. Notice. All notices, requests, demands and other communications which are
required or may be given under this Note shall be in writing and shall be deemed
to have been duly given if given in the manner and to the address(es) set forth
in Section 11.3 of the Purchase Agreement.
12. Governing, Law and Forum. This Note is to be governed by, and construed
and enforced in accordance with, the internal laws, and not the laws pertaining
to conflict or choice of laws, of the State of California. The exclusive forum
for the determination of any action relating to the validity and enforceability
hereof shall be either an appropriate court of said State or that court of the
United States which includes said State within its territorial jurisdiction.
M-2
<PAGE>
13. Severability. Every provision of this Note is intended to be severable. In
the event any term or provision is declared illegal, invalid or unenforceable
for any reason whatsoever by a court of competent jurisdiction, such illegality,
invalidity or unenforceability shall not affect the balance of the terms and
provisions of this Note, which shall remain binding and enforceable.
"Maker"
----------------------------------------
Texas Loosey's Steakhouse Holdings, Inc.
M-3
<PAGE>
EXHIBIT 10.12
<PAGE>
EXHIBIT N
SECURED PROMISSORY NOTE
$870,000.00 Costa Mesa, California
8-19, 1996
This secured promissory note ("Note") evidences a portion of the purchase
price payable by Texas Loosey's Steakhouse Holdings, Inc., a Delaware
corporation ("Maker"), under the Amended and Restated Asset Purchase Agreement
dated as of April 10, 1996 (the "Purchase Agreement") by and among TLC
Restaurant Mgmt. Corp., a California corporation, Better Business Security,
Inc., a California corporation, River Diego Investment Corp., a California
corporation, Ron Walton (collectively, the "Payees") and Maker. This Note is
secured by a Security Agreement of even date herewith (the "Security Agreement")
by and between Maker and Payees.
1. Promise to Pay. For value received, Maker hereby promises to pay to Ron
Walton, as agent for the Payees, at his office at 30075 Ynez Road, Temecula,
California 92592 or to such other party or at such other place as Payees may
from time to time in writing designate, the principal sum of Eight Hundred
Seventy Thousand Dollars ($870,000.00), on the terms set forth in this Note.
2. Interest. Interest shall accrue on the outstanding principal balance at
the rate of eight percent (8%) per annum, simple interest, from the date hereof.
3. Principal and Interest Payments.
(i) Installments--Public Offering. If Maker has caused a registration
statement in connection with a public offering of securities by Maker to be
filed with the Securities and Exchange Commission on or before the last day of
the sixth month following the Closing Date (as defined in the Purchase
Agreement) (such last day herein referred to as the "Six Month Date"), then
unpaid principal and interest shall be amortized on a ten (10) year basis
commencing on the Six Month Date, and shall be due and payable in equal monthly
installments of $10,977.72, with the first such installment due and payable on
the last day of the month immediately following the Six Month Date and the
remaining installments due and payable on the last day of each month thereafter.
For purposes hereof, interest accrued from the date hereof to the Six Month Date
shall be added to principal that is unpaid as of the Six Month Date, and such
interest shall be due and payable, with interest thereon, accordingly.
(ii) Installments--No Public Offering. If Maker has not caused a
registration statement in connection with a public offering of securities by
Maker to be filed with the Securities and Exchange Commission on or before the
Six Month Date, then monthly interest-only payments of $6,032.00 shall be due
and payable commencing on the last day of the month immediately following the
Six Month Date and on the last day of each month thereafter to and including the
twelfth month following the Six Month Date. Thereafter, unpaid principal and
interest shall be amortized on a ten (10) year basis commencing on the last day
of the twelfth month following the Six Month Date, and shall be due and payable
in equal monthly installments of $10,977.72, with the first such installment due
and payable on the last day of the thirteenth month following the Six Month
Date, and the remaining installments due and payable on the last day of each
month thereafter.
N-1
<PAGE>
For purposes hereof, interest accrued from the date hereof to the Six Month Date
shall be added to principal that is unpaid as of the Six Month Date, and such
interest shall be due and payable, with interest thereon, accordingly.
(iii) Maturity. The entire unpaid principal balance of this Note, together
with all accrued and unpaid interest, shall be due and payable on the fifth
anniversary of the date hereof.
4. Prepayment. Maker shall have the right to prepay the whole or any part
of the unpaid principal of this Note at any time without the payment of any
additional consideration therefor; provided, however, that any such prepayment
of principal shall be accompanied by payment of any unpaid interest which has
accrued through the date of prepayment.
5. Cross-Default. An event of default under Note A (as defined in the Purchase
Agreement) which is not cured within ten (10) days following receipt by Maker of
notice thereof from Payees shall also constitute an event of default under this
Note.
6. Default Payment. In the event payment of any installment hereunder is
made more than ten (10) days after the date it is due, a late penalty fee of
eight percent (8%) of such installment amount shall be charged.
7. Acceleration. At the option of Payees, this Note shall be immediately
due and payable upon the occurrence at any time of any of the following events:
(i) Any event of default under this Note which is not cured by Maker within
ten (10) days following receipt by Maker of a notice thereof from Payees;
(ii) The admission by any party liable hereon, whether as maker, endorser,
guarantor, surety or otherwise, of its inability to pay its debts as they
mature, or an assignment for the benefit of the creditors of any of the
foregoing parties;
(iii) The commencement of proceedings in bankruptcy, or for the
reorganization of any party liable hereon, whether as maker, endorser,
guarantor, surety or otherwise, or for the readjustment of any of the debts of
any of the foregoing parties, under the federal Bankruptcy Code, as amended, or
any part thereof, or under any other laws, whether state or federal, for the
relief of debtors, now or hereafter existing, by any of the foregoing parties,
or against any of the foregoing parties, which shall not be discharged within
thirty (30) days of their commencement;
(iv) The appointment of a receiver, trustee or custodian for any party
liable hereon, whether as maker, endorser, guarantor, surety or otherwise, or
for any substantial part of the assets of any of the foregoing parties, or the
institution of proceedings for the dissolution or the full or partial
liquidation of any of the foregoing parties, and such receiver or trustee shall
not be discharged within thirty (30) days of his or its appointment, or such
proceedings shall not be discharged within thirty (30) days of their
commencement, or the discontinuance of the business or the material change in
the nature of the business of any of the foregoing parties; or
(v) The dissolution of Maker.
N-2
<PAGE>
8. Remedies. All rights and remedies of Payees under this Note and the
Security Agreement are cumulative and in additional to all other rights and
remedies available under the Purchase Agreement, at law or in equity, and all
such rights and remedies may be exercised singly, successively and/or
concurrently. Failure to exercise any right or remedy shall not be deemed a
waiver of such right or remedy.
9. Waivers. Maker hereby expressly waives presentment, protest and demand,
notice of protest, demand and dishonor and nonpayment of this Note and all other
notices and demands of every kind that would otherwise be available in
connection with this Note.
10. Partial Exercise. No single or partial exercise of any power hereunder or
under the Purchase Agreement shall preclude other or further exercise thereof or
the exercise of any other power hereunder or thereunder. No delay or omission on
the part of Payees in exercising any right hereunder or under the Purchase
Agreement shall operate as a waiver of such right or of any other right
hereunder or thereunder.
11. Costs of Collection. If this Note is not paid when due Maker promises
to pay, on demand, all costs of collection, including, but not limited to,
reasonable attorneys' fees and costs.
12. Notice. All notices, requests, demands and other communications which are
required or may be given under this Note shall be in writing and shall be deemed
to have been duly given if given in the manner and to the address(es) set forth
in Section 11.3 of the Purchase Agreement.
13. Governing Law and Forum. This Note is to be governed by, and construed and
enforced in accordance with, the internal laws, and not the laws pertaining to
conflict or choice of laws, of the State of California. The exclusive forum for
the determination of any action relating to the validity and enforceability
hereof shall be either an appropriate court of said State or that court of the
United States which includes said State within its territorial jurisdiction.
14. Severability. Every provision of this Note is intended to be severable. In
the event any term or provision is declared illegal, invalid or unenforceable
for any reason whatsoever by a court of competent jurisdiction, such illegality,
invalidity or unenforceability shall not affect the balance of the terms and
provisions of this Note, which shall remain binding and enforceable.
"Maker"
----------------------------------------
Texas Loosey's Steakhouse Holdings, Inc.
N-3
<PAGE>
EXHIBIT 10.13
<PAGE>
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
KENT & JENNY ANDERSEN
AS "SELLERS,"
AND
TEXAS LOOSEY'S STEAKHOUSE & SALOON, INC.
AS "BUYER"
DATED SEPTEMBER 23, 1996
ASSET PURCHASE AGREEMENT
1
<PAGE>
This Asset Purchase Agreement dated as of September 23, 1996 (this
"Agreement"), is by and between Kent & Jenny Andersen ("seller") and Texas
Loosey's Steakhouse & Saloon, Inc., a Delaware corporation ("Buyer"). Texas
Loosey's Chili Parlor & Saloon of Norco and Riverside shall be sometimes
referred to collectively as "Company".
RECITALS
Buyer desires to purchase from Sellers, and Sellers desire to sell
to Buyer, certain of such assets of Sellers, all upon the terms and subject to
the conditions of this Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the respective covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Defined Terms. As used herein, the terms below shall have the following
meanings. Any of such terms, unless the context otherwise requires, may be used
in the singular or plural, depending upon the reference.
"ABC" shall mean the Department of Alcoholic Beverage Control of the State
of California.
"ABC License Requirements" shall mean the Alcoholic Beverage Control Act
(California Business and Professions Code Sections 23000, et seq.) and the
Regulations of the ABC.
"Action" shall mean any action, claim, suit, litigation, proceeding, labor
dispute, arbitral action, governmental audit, inquiry, criminal prosecution,
investigation or unfair labor practice charge or complaint.
"affiliate" shall have the meaning set forth in the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder.
"Ancillary Agreements" shall mean the Security Agreement, Agreement Not to
Compete, and Consulting Agreement substantially in the forms attached hereto as
Exhibits C, K and O respectively.
"Assets" shall mean all of the right, title and interest in and to the
business, properties, assets and rights of any kind, whether tangible or
intangible, real or personal and constituting, or used or useful in connection
with, or related to, the Business owned by Sellers or in which Sellers have any
interest, including without limitation all of Sellers' right, title and interest
in the following:
(a) all Contract Rights, to the extent transferable,
and the Franchise Rights;
(b) all Leases;
(c) all Leasehold Estates;
2
<PAGE>
(d) all Leasehold Improvements;
(e) all Fixtures and Equipment; except those
belonging to seller personally;
(f) all Inventory;
(g) all Books and Records;
(h) all Proprietary Rights relating to the Business;
(i) the Liquor Licenses and to the extent
transferable, all Permits;
(j) all computers and software, except those
belonging to seller personally;
(k) all available supplies, manuals, menus, sales
literature, promotional literature, customer,
prospective customer, supplier and distributor lists, art work, display units,
files, telephone and fax numbers and purchasing records related to the Business;
(l) all promotional merchandise, including without
limitation shirts, hats and pins;
(m) all rights under or pursuant to all warranties,
representations and guarantees made by suppliers in connection with the Assets
or services furnished to Seller pertaining to the Business or affecting the
Assets, to the extent such warranties, representations and guarantees are
assignable; and
(n) all goodwill related to the Business;
but excluding therefrom the Excluded Assets.
"Bankruptcy Court" shall mean the United States
Bankruptcy Court for the Central District of California.
"Books and Records" shall mean copies of any of
the following, as may be reasonably requested by Buyer: (a) all records and
lists of the Seller pertaining to the Assets, (b) all records and lists
pertaining to the Business, customers, suppliers or personnel of the Companies,
(c) all product, business and marketing plans of the Companies, (d) all books,
ledgers, files, reports, plans, drawings and operating records of every kind
maintained by the Seller, but excluding the originals of the Companies' minute
books, stock books and tax returns and (e) any information referred to in
clauses (a) through (d) which is computer maintained and stored data and all
computer software necessary to access and process such data.
"Business" shall include all business and operations
of Seller of any type, kind or nature, conducted at or with respect to the
Restaurants pursuant to the Franchise Agreements.
"Closing Date" shall mean the date upon which the
Closing occurs, or such other date as Buyer and Sellers shall mutually agree
upon.
"Code" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations thereunder.
3
<PAGE>
"Contract" shall mean any agreement, contract, note,
loan, evidence of indebtedness, purchase order, letter of credit, indenture,
security or pledge agreement, franchise agreement, undertaking, practice,
covenant not to compete, employment agreement, license, instrument, obligation
or commitment to which Seller is a party or is bound and which relates to the
Business or the Assets, whether oral or written, but excluding all Leases, and
accounts receivable.
"Contract Rights" shall mean all of Seller's rights
and obligations under the Contracts listed on Schedule 4.7(b) and not rejected
by Buyer and under any Contracts not so listed which Buyer, in its sole
discretion, elects to accept and assume.
"Copyrights" shall mean registered copyrights,
copyright applications and unregistered copyrights.
"Court Order" shall mean any judgment, decision,
consent decree, injunction, ruling or order of any federal, state or local court
or governmental agency, department or authority that is binding on any person or
its property under applicable law.
"Debt Agreements" shall mean the Security Agreement
"Default" shall mean (a) a breach of or default under
any Contract, or Lease (b) the occurrence of an event that with the passage of
time or the giving of notice or both would constitute a breach of or default
under any Contract or Lease, or (c) the occurrence of an event that with or
without the passage of time or the giving of notice or both would give rise to a
right of termination, renegotiation or acceleration under any Contract or Lease.
"Disclosure Schedule" shall mean a schedule executed
and delivered by Seller to Buyer as of the date hereof which sets forth the
exceptions to the representations and warranties contained in Article IV hereof
and certain other information called for by this Agreement. Unless otherwise
specified, each reference in this Agreement to any numbered schedule is a
reference to that numbered schedule which is included in the Disclosure
Schedule.
"Employee Plans" shall mean (a) all employee pension
benefit plans and employee welfare benefit plans as defined in Section 3 of
ERISA and (b) all employment, consulting, severance or other similar contracts,
arrangements or policies and all plans, arrangements (written or oral),
programs, agreements or commitments providing for insurance
coverage (including without limitation any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment
benefits, vacation benefits, retirement benefits, life, health,
disability or accident benefits or for deferred compensation, profit-sharing
bonuses, stock options, stock appreciation rights, stock purchases or other
forms of incentive compensation or post-retirement insurance, compensation or
benefits, in either case (a) or (b) which (i) Seller (or any entity under common
control with Seller or within a controlled group or affiliated service group
with Seller, within the meaning of Section 414 of the Code) maintains,
administers, contributes to or is required to contribute to, or at any time
prior to the Closing Date, under which Seller (or any such other entity)
maintained, administered, contributed to or was required to contribute to, or
under which Seller (or any such other entity) may incur any liability and (ii)
which cover any employees or former employees of Seller employed in connection
with the Business.
"Encumbrance" shall mean any claim, lien, pledge,
option, charge, easement, security interest, deed of trust, mortgage,
right-of-way, encroachment, building or use restriction, conditional sales
agreement, encumbrance or other right of third parties, whether voluntarily
incurred or arising by operation of law, and includes, without limitation, any
agreement to give any of the foregoing in the future, and any contingent sale or
other title retention agreement or lease in the nature thereof.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
4
<PAGE>
"Excluded Assets," notwithstanding any other
provision of this Agreement, shall mean the following assets of the Companies
which are not to be acquired by Buyer hereunder:
(a) all assets identified in Schedule 1.1 hereto;
(b) all cash and cash equivalents held by the
Companies;
(c) all accounts and notes receivable (whether
current or noncurrent), refunds, deposits, prepayments or prepaid expenses
(including without limitation any prepaid insurance premiums) of Sellers;
(d) all Permits, to the extent not transferable; and
(e) all claims, causes of action, choses in action,
rights of recovery and rights of set-off of any kind against any person or
entity arising out of or relating to the Assets to the extent related to the
Excluded Liabilities.
"Facilities" shall mean all stores, restaurant
buildings, offices, warehouses, improvements, administration buildings, and all
real property and related facilities which are identified or listed on Exhibit
"A" attached hereto.
"Facility Leases" shall mean all of the leases of
Facilities listed on Schedule 4.6.
"Financial Statements" shall mean the Year-End
Financial Statements and the Interim Financial
Statements.
"Fixtures and Equipment" shall mean all of the
furniture, fixtures, furnishings, machinery,
supplies, equipment, tooling, molds, patterns, dies, kitchenware,
food-processors, refrigerators, ovens, utensils and other tangible personal
property owned by Seller and used in connection with the Business, wherever
located and including any such Fixtures and Equipment in the possession of any
of Seller's suppliers, including all warranty rights with respect thereto.
"Former Facility" shall mean each plant, office,
manufacturing facility, store, warehouse,
improvement, administrative building and all real property and related
facilities that was owned, leased or operated by the Company at any time prior
to the date hereof, but excluding any Facilities.
"Franchise" shall mean any franchise operating
pursuant to a Franchise Agreement.
"Franchise Agreements" shall mean the franchise
agreements identified as such on Schedule 4.7(a) hereto; reference to a
"Franchise Agreement" shall mean any one of the "Franchise Agreements".
"Franchisee" shall mean any franchisee party to any
Franchise Agreement, franchise, license, territorial or similar Contract to
which Seller is a party.
"Insurance Policies" shall mean the insurance
policies related to the Assets listed on Schedule 4.22
"Interim Financial Statements" shall mean the
combined statement of revenue and expenses of the companies for the twenty-four
(42) week period ended September 19, 1996, together with the notes thereto.
"Inventory" shall mean all of the Companies'
inventory held for sale and all of the Companies' food items, beverage items,
liquor, paper products, merchandise, wrapping, supply and packaging items and
similar items with respect to the Business, in each case wherever the same may
be located.
5
<PAGE>
"Leased Real Property" shall mean all leased property
described in the Facility Leases.
"Leasehold Estates" shall mean all of the Companies
rights and obligations as lessee under the Leases.
"Leasehold Improvements" shall mean all leasehold
improvements situated in or on the Leased Real Property and owned by Seller.
"Leases" shall mean all of the Facility Leases and
all of the existing leases with respect to the personal or real property of the
Seller listed on Schedule 4.7(b) and not rejected by Buyer.
"Liabilities" shall mean any direct or indirect
liability, indebtedness, obligation, commitment, expense, claim, deficiency,
guaranty or endorsement of or by any person of any type, whether accrued,
absolute, contingent, matured, unmatured or other.
"Liquor Licenses" shall mean the liquor licenses with
respect to all of the Restaurants, including any and all documents affecting the
validity of such licenses, issued to the Seller by the ABC.
"material adverse effect" or "material adverse
change" shall mean with respect to the Business or the Assets any significant
adverse effect or change in the condition (financial or other), business,
results of operations, prospects, assets, Liabilities or operations of the
Business and/or the Assets or on the ability of Seller to consummate the
transaction contemplated hereby, or any event or condition which would, with the
passage of time, constitute a "material adverse effect" or "material adverse
change."
"ordinary course of business" or "ordinary course"
or any similar phrase shall mean the ordinary course of the Business and
consistent with Seller past practice.
"Patents" shall mean all patents and patent
applications and registered design and registered design applications.
"Permits" shall mean all licenses, permits,
franchises, approvals, authorizations, consents or orders of, or filings with,
any governmental authority, whether foreign, federal, state or local, or any
other person, necessary or desirable for the past, present or anticipated
conduct of, or relating to the operation of the Business or the ownership of the
Assets, including without limitation the Temporary Liquor Permits but excluding
the Liquor Licenses.
"Proprietary Rights" shall mean all of Seller's
Copyrights, Patents, Trademarks, Trade Names, technology rights and licenses,
computer software (including without limitation any source or object codes
therefor or documentation relating thereto), trade secrets, recipes, food and
drink formulas, menus, processes, secret ingredients, franchises, know-how,
inventions, designs, specifications, plans, drawings and intellectual property
rights, that are related to the Business.
"Regulations" shall mean any laws, statutes,
ordinances, regulations, rules, notice requirements, court decisions, agency
guidelines, principles of law and orders of any foreign, federal, state or local
government and any other governmental department or agency, including without
limitation Environmental Laws, energy, motor vehicle safety, public utility,
zoning, building and health codes, occupational safety and health and laws
respecting employment practices, employee documentation, terms and conditions
of employment and wages and hours.
"Representative" shall mean any officer, director,
principal, attorney, agent, employee or other representative.
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"Restaurant" shall mean one of the Texas Loosey's
Chili Parlor and Saloon restaurants listed on Schedule 4.6(b) hereto.
"Restaurants" shall mean any or all of such Restaurants.
"Tax" shall mean any federal, state, local, foreign
or other tax, levy, impost, fee, assessment or other government charge,
including without limitation income, estimated income, business, occupation,
franchise, property, payroll, personal property, sales, transfer, use,
employment, commercial rent, occupancy, franchise or withholding taxes, and any
premium, including without limitation interest, penalties and additions in
connection therewith.
"Temporary Liquor Permits" shall mean temporary
operating permits with respect to all of the Restaurants necessary for the sale
of alcoholic beverages issued by the ABC.
"Trademarks" shall mean registered trademarks,
registered service marks, trademark and service mark applications and
unregistered trademarks and service marks.
"Trade Names" shall mean "Texas Loosey's," "Texas
Loosey's Chili Parlor and Saloon," "Texas Tested Tried and Trusted," designs
showing the state of Texas superimposed on the flag of the State of Texas, any
and all variations thereof and all other trade names used in or useful in
connection with, or related to, the Business.
"Warrants" shall mean (a) agreements, rights to
subscribe (including any preemptive rights), options, warrants, calls,
commitments or rights of any character to purchase or otherwise acquire any
common stock or other equity securities of any Company, and (b) outstanding
securities of the Companies that are convertible into or exchangeable for
capital shares or other equity securities of the Companies.
"Year-End Financial Statements" shall mean the
unaudited combined statement of revenues and expenses of the Companies for the
years ended December 31, 1994, December 30, 1995 and year to date September 28,
1996.
ARTICLE II.
PURCHASE AND SALE OF ASSETS
2.1. Transfer of Assets. Upon the terms and subject to the
conditions contained herein, at the Closing, Seller will sell, convey, transfer,
assign and deliver to Buyer, and Buyer will acquire from Seller, the Assets,
free and clear of all Encumbrances, except two SBA loans in the approximate
amount or $372,549. and two notes due Ron Walton for franchise fees at a
discounted value of $74,673 since assigned from Ron Walton to Buyer and other
minor liens which in the aggregate are not substantial in amount, do not
materially detract from the value or transferability of the property or assets
subject thereto or interfere with the present use and have not arisen other than
in the ordinary course of business ("Permitted Encumbrances"). The term
Permitted Encumbrances shall also include any liens disclosed in the Disclosure
Schedule which Buyer expressly agrees may encumber the Assets as of the Closing.
2.2. Assumption of Liabilities. Upon the terms and subject to
the conditions contained herein, at the Closing, Buyer shall assume the
Liabilities, and only the Liabilities (the "Assumed Liabilities"), of Seller as
indicated in 2.1 above and more specifically if itemized on Exhibit "H".
2.3. Excluded Liabilities. Notwithstanding any other provision
of this Agreement, except for the Assumed Liabilities expressly specified in
Section 2.2, Buyer shall not assume, or otherwise be responsible for, any
Liabilities of Sellers, whether liquidated or unliquidated, or known or unknown,
whether arising out of occurrences prior to, at or after the date hereof
("Excluded Liabilities"), which Excluded Liabilities include, without
limitation:
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(a) Any Liability to or in respect of any
employees or former employees of Seller including without limitation (i) any
employment agreement, whether or not written, between Seller and any person,
(ii) any Liability under any Employee Plan at any time maintained, contributed
to or required to be contributed to by or with respect to Seller or under which
Seller may incur Liability, or any contributions, benefits or Liabilities
therefor, or any Liability with respect to Seller's withdrawal or partial
withdrawal from or termination of any Employee Plan and (iii) any claim of an
unfair labor practice, or any claim under any state unemployment compensation or
worker's compensation law or regulation or under any federal or state employment
discrimination law or regulation, which shall have been asserted on or prior to
the Closing Date or is based on acts or omissions which occurred on or prior to
the Closing Date;
(b) Any Liability of Seller in respect of any
Tax, except for any documentary and transfer taxes and any sales, use or other
taxes imposed by reason of the transfers of Assets as provided hereunder;
(c) Any Liability arising from any injury to or
death of any person or damage to or destruction of any property, whether based
on negligence, breach of warranty, strict liability, enterprise liability or any
other legal or equitable theory arising from foods, beverages or goods sold or
from services performed by or on behalf of Seller or any other person or entity
on or prior to the Closing Date;
(d) Any Liability of Seller arising out of or
related to any Action against such Seller or any Action which adversely affects
the Assets and which shall have been asserted on or prior to the Closing Date
or to the extent the basis of which shall have arisen on or prior to the
Closing Date;
(e) Any accounts payable of Seller arising
before or after the Closing Date which relate to
the period prior to the Closing Date;
(f) Any Liability of Seller resulting from
entering into, performing its obligations pursuant to or consummating the
transactions contemplated by, this Agreement (including without limitation any
Liability of Seller pursuant to Article X hereof);
(g) Any Liability related to any Former
Facility; and
(h) Any Liability of Seller under the
Franchise Agreements which arose or were to be performed prior to the Closing
Date.
2.4. Purchase Price. At the Closing, upon the terms and subject
to the conditions set forth herein Buyer shall; (a) pay to Seller for the sale,
transfer, assignment, conveyance and delivery of the Assets (other than the
Inventory), the aggregate amount of Five hundred sixty three thousand one
hundred seventy seven dollars ($563,177) (the "Purchase Price"), consisting of
(i) Seventy-Five thousand two hundred thirty-four dollars ($75,234) in cash,
which shall be paid into escrow, (ii) a promissory note in the principal amount
of Forty Thousand Seven Hundred thirty-one dollars ($40,731.00), substantially
in the form of Exhibit M attached hereto, to be secured by the Assets (iii)
Assumption of Seller's SBA notes and Ron Waltons's notes totaling $447,212 as
indicated in 2.1 and Exhibit "H". The Purchase Price shall be allocated among
the Assets in the manner required by Section 1060 of the Code and regulations
thereunder as shall be mutually agreed to by the parties prior to the Closing.
The Purchase Price so allocated shall be attached hereto as Exhibit B. Buyer and
Seller agree to each prepare and file on a timely basis with the Internal
Revenue Service substantially identical initial and supplemental Internal
Revenue Service Forms 8594 "Asset Acquisition Statements Under Section 1060"
consistent with Exhibit B.
2.5. Inventory. On the Closing Date, Seller shall provide
Buyer with a written itemized list of existing Inventory and the wholesale cost
of each item of Inventory paid by the Seller. At Buyer's election, Buyer or its
designated representative may participate in taking the physical Inventory and
preparing the Inventory list. Buyer shall
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purchase, at wholesale cost, such Inventory provided that such item of Inventory
is usable and/or re-sellable. The payment of such Inventory shall be paid by
Buyer to Seller in cash at possession and closing.
2.6 Prorations.
(a) Utilities: Taxes. As promptly as practicable following the
Closing Date, but in no event later than thirty (30) calendar days thereafter,
the real and personal property taxes, water, gas, electricity and other
utilities, common area maintenance reimbursements to lessors, total business or
other license fees or taxes, merchants' association dues and other similar
periodic charges payable with respect to the Assets or the Business shall be
prorated between Buyer and Seller effective as of the Closing Date. To the
extent practicable, utility meter readings for the Facilities shall be
determined as of the Closing Date. If the real property tax rate for the current
tax year is not established by the Closing Date, the prorations shall be made on
the basis of the rate in effect for the preceding tax year and shall be adjusted
when the exact amounts are determined. All such prorations shall be based upon
the most recent available assessed value of any Facility prior to the Closing
Date.
(b) Rents. Seller shall pay all minimum or base
rent under the Lease; through the end of the calendar month in which the Closing
Date occurs, and Buyer shall reimburse Seller for such rent accrued
from the Closing Date through the end of such month within thirty
(30) calendar days following the Closing Date. Payments of percentage
rent, if any, due under the provisions of the Leases shall be adjusted
to the Closing Date as follows. Buyer shall pay any percentage rent due
for periods expiring after the Closing Date, and Seller shall be responsible for
that portion of such percentage rent paid by Buyer and due under the Leases
based on sales from the commencement of the current lease year through the
Closing Date, and Buyer shall be responsible for that portion due under the
Lease based on sales from and after the Closing Date. Within thirty (30)
calendar days after the Closing Date, Seller will furnish to Buyer records which
evidence the gross sales of Sellers at each Facility to the extent necessary to
enable Buyer to comply with the percentage rent provision of each Lease. Buyer
shall provide to Seller, within thirty (30) calendar days before the annual
settlement of percentage rent under any Lease for the partial year in which
Seller was operating such Facility, a statement showing the manner of
computation of all percentage rent due under each Lease for such year. Any
reimbursement due Buyer from Seller in respect of its pro rata share of
percentage rent shall be paid within fifteen (15) calendar days after written
demand therefor by Buyer.
(c) Payments in Cash. All payments due under
this Section 2.6 shall be payable in cash.
2.7. Closing Costs: Transfer Taxes and Fees. Buyer shall be
responsible for any documentary and transfer taxes and any sales, use or other
taxes imposed by reason of the transfers of Assets provided hereunder and any
deficiency, interest or penalty asserted with respect thereto and for any title
searches or insurance premiums for title insurance to be obtained by Buyer Buyer
shall pay the fees and costs of recording or filing all applicable conveyancing
instruments described in Section 3.2(a). Buyer shall pay all costs of applying
for new Permits and obtaining the transfer of existing Permits which may be
lawfully transferred. Buyer shall pay one-half (1/2) the fees and other charges
incurred in connection with the Escrow as provided in Section 3.3, and Seller
shall be responsible for the remainder up to a maximum $750.00 with any excess
paid by Buyer.
ARTICLE III.
CLOSING
3.1. Closing. The Closing of the transactions contemplated
herein (the "Closing") shall be held at 10:00 a.m. local time on the Closing
Date at the offices of Jean Allen Escrow Co., 4012 Katella Ave., Los Alamitos,
CA 90720, unless the parties hereto otherwise agree.
3.2. Conveyances at Closing.
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(a) Instruments and Possession. To effect
the sale and transfer referred to in Section 2.1 hereof, Seller will, at the
Closing, execute and deliver to Buyer:
(i) one or more bills of sale, in the
form attached hereto as Exhibit D, conveying in the aggregate all of Seller
owned personal property included in the Assets;
(ii) subject to Sections 9.2 and 9.3, one
or more Assignments of Lease substantially in the form attached hereto as
Exhibit E with respect to the Leases;
(iii) subject to Sections 9.2 and 9.3,
one or more Assignments of Contract Rights, each in the form as shall be
mutually agreed to by the parties prior to the Closing and attached hereto as
Exhibit F, with respect to the Contract Rights and Franchise Rights;
(iv) Assignments of Patents, Trademarks
Trade Names and other Proprietary Rights (including an assignment of all of
Seller's rights, title and interest to the names "Texas Loosey's," "Texas
Loosey's Chili Parlor and Saloon," "Texas Tested Tried and Trust" and all
variations thereof) each in the form as shall be mutually agreed to by the
parties prior to the Closing and attached hereto as Exhibit G, in recordable
form to the extent necessary to assign such rights; and
(v) such other instruments as shall be
requested by Buyer to vest in Buyer title in and to the Assets in accordance
with the provisions hereof.
(b) Assumption Document. Upon the terms and
subject to the conditions contained herein, at the Closing Buyer
shall deliver to Seller an instrument of assumption substantially in the
form attached hereto as Exhibit H, evidencing Buyer's assumption, pursuant to
Section 2.2, of the Assumed Liabilities (the "Assumption Document").
(c) Form of Instruments. To the extent that a
form of any document to be delivered hereunder is not attached as an Exhibit
hereto, such documents shall be in form and substance and shall be executed and
delivered in a manner, satisfactory to both Buyer and Seller.
(d) Consents. Subject to Sections 9.2 and 9.3,
Seller shall take all actions necessary to deliver (and Buyer shall cooperate
with Seller in connection with the delivery of) all Permits and any other third
party consents required for the valid transfer of the Assets as contemplated
by this Agreement, except for the Liquor Licenses which shall be deposited in an
escrow account as provided in Section 3.3 below.
(e) Ancillary Agreements. Each of the Ancillary
Agreements shall be executed and delivered to the parties thereto.
(f) Books and Records. Seller shall deliver to
Buyer the Books and Records.
(g) Landlord Estoppel Certificates. Seller shall
deliver to Buyer copies of all Landlord Estoppel Certificates received from the
landlord or lessor for all Facility Leases.
3.3. Escrow. On or before the Closing Date, Seller and Buyer
shall enter into an escrow agreement (the "Escrow Agreement") on terms mutually
acceptable to the parties for the purpose of effecting the transfer of the
Liquor Licenses from Seller to Buyer and paying certain creditors of Seller from
the proceeds of Note, Seller and Buyer shall establish an escrow account (the
"Escrow") with, and shall deliver escrow instructions that are mutually
acceptable to, Jean Allen Escrow Company at 4012 Katella Avenue Suite 103, Los
Alamitos, California 90720 (the "Escrow
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Holder"). At the Closing, Buyer shall deliver to the Escrow Holder for deposit
into the Escrow (a) Seventy Five Thousand Two Hundred thirty-four Dollars
($75,234) the cash portion of the Purchase Price payable pursuant to Section
2.2, and (b) an additional Two Thousand Dollars ($2,000), which shall be applied
to the portion of the Escrow fees and charges payable by Buyer. At the Closing,
the Seller shall deliver the Liquor Licenses and Note to the Escrow Holder for
deposit into the Escrow. The Escrow shall be conducted in accordance with the
ABC License Requirements and the provisions of the Escrow Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as
follows, except as otherwise set forth on the Disclosure Schedule,
representations and warranties are, as of the date hereof, and will be, as of
the Closing Date, true and correct:
4.1 Organization of Companies. The Company is privately owned by
Seller, validly existing and in good standing under the laws of the State of
California with full power and authority to conduct the Business as it is
presently being conducted and to own and lease its properties and assets.
Company is duly qualified to do business and is in good standing in each
jurisdiction where the character of its properties owned or leased or the nature
of its activities make such qualification necessary.
4.2. Subsidiaries. The Companies have no direct or
indirect stock or other equity or ownership interest in any corporation,
association, partnership joint venture or other entity.
4.3. Authorization. Seller has all requisite power and
authority, and has taken all action necessary, to execute and deliver this
Agreement and the Ancillary Agreements to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. This Agreement has been duly executed and delivered by Seller and
is, and upon execution and delivery of the Ancillary Agreements will be, legal,
valid and binding obligation of each Seller, enforceable against seller in
accordance with its terms.
4.4. Absence of Certain Changes or Events. Since August
10, 1996, there has not been any:
(a) actual or threatened material adverse change
in the financial condition, working capital, shareholders' equity, assets,
Liabilities, reserves, revenues, income earnings, prospects or Business of
Companies;
(b) change in accounting methods, principles or
practices by the company affecting the Assets, its Liabilities or the Business;
(c) material revaluation by Seller or any of the
Assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable:
(d) damage, destruction or loss (whether or not
covered by insurance) materially and adversely affecting the Assets or the
Business;
(e) cancellation of any indebtedness or waiver
or release of any right or claim of Seller relating to its activities or
properties which had or will have a material adverse effect on the Assets or
the Business;
(f) declaration, setting aside, or
payment of dividends or distributions by Seller in respect of any equity
securities thereof or any redemption, purchase or other acquisition of Seller's
securities;
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(g) material increase in the rate of
compensation payable or to become payable to any director, officer or
other employee of Seller or any consultant, Representative or agent of Seller,
including without limitation the making of any loan to, or the payment, grant or
accrual of any bonus, incentive compensation, service award or other similar
benefit to, any such person, or the addition to, modification of, or
contribution to any Employee Plan, arrangement, or practice described in the
Disclosure Schedule;
(h) adverse change in employee relations which
has or is reasonably likely to have a material adverse effect on the
productivity, the financial condition, results of operations or Business of
Seller or the relationships between the employees of Seller and the management
of Seller;
(i) amendment, cancellation or termination of
any Contract, Franchise Agreement, commitment, agreement, Lease, transaction or
Permit relating to the Assets or the Business or entry into any Contract,
Franchise Agreement, commitment, agreement, Lease, transaction or Permit which
is not in the ordinary course of Seller's business, including without limitation
any employment or consulting agreements;
(j) mortgage, pledge or other encumbrance of any
Assets, except purchase money mortgages arising in the ordinary course of
business;
(k) sale, assignment or transfer of any of the
Assets, other than in the ordinary course of business;
(1) incurrence of indebtedness by Seller for
borrowed money or commitment to borrow money entered into by Seller, or loans
made or agreed to be made by Seller, or indebtedness guaranteed by Seller;
(m) incurrence by Seller of Liabilities, except
Liabilities incurred in the ordinary, course of business, or increase or change
in any assumptions underlying or methods of calculating, any doubtful account
contingency or other reserves of Seller;
(n) payment, discharge or satisfaction of any
Liabilities of Seller other than the payment, discharge or satisfaction in the
ordinary course of business of Liabilities set forth or reserved for on the
Interim Financial Statements or incurred in the ordinary course of business;
(o) capital expenditure by Seller, the execution
of any Lease by Seller or the incurring of any obligation by Seller to make
any capital expenditure or execute any Lease;
(p) failure to pay or satisfy when due any
Liability of Seller, except where the failure would not have a material adverse
effect on the Assets or the Business;
(q) failure of Seller to carry on diligently
the Business in the ordinary course so as to keep available to Buyer the
services of Seller's employees, and to preserve for Buyer the Assets and the
Business and the goodwill of Seller's suppliers, customers, distributors and
others having business relations with it;
(r) disposition or lapsing of any Proprietary
Rights or any disposition or disclosure to any person of any Proprietary Rights
not theretofore a matter of public knowledge;
(s) existence of any other event or condition
which in any one case or in the aggregate has or might reasonably be expected to
have a material adverse effect on the Business; or
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(t) agreement by Seller to do any of the things
described in the preceding clauses (a) through (s) other than as expressly
provided for herein; that are in connection with, or related to the Business,
other than as set forth in Schedule 4.4 hereto,
4.5. Assets, Excluding the Leased Real Property, Seller has and
will transfer good and marketable title to the Assets and upon the consummation
of the transactions contemplated hereby, Buyer will acquire good and marketable
title to all of the Assets, free and clear of any Encumbrances, except for
Permitted Encumbrances. The Assets include without limitation all assets
necessary for the conduct of the Business as presently conducted. Schedule 4.5
contains accurate lists and summary descriptions of all tangible Assets where
the value of an individual item exceeds Five Hundred Dollars ($500) or where an
aggregate of similar items exceeds Five Hundred Dollars ($500). All tangible
assets and properties which are part of the Assets are in good operating
condition and repair and are usable in the ordinary course of business and
conform in all material respects; to all applicable Regulations (including
Environmental Laws) relating to their use and operation.
4.6. Facilities.
(a) Actions. Except as set forth on Schedule 4.6
hereto, there are no pending or, to the
best knowledge of Seller, threatened condemnation proceedings or other Actions
relating to any Facility.
(b) Leases or Other Agreements. Except for
Facility Leases listed on Schedule 4.6, there are no leases, subleases,
licenses, occupancy agreements, options, rights, concessions or other
agreements or arrangements, written or oral, granting to any person the
right to purchase, use or occupy any Facility, or any real property in
connection with the Business or any portion thereof or interest in any such
Facility or real property.
(c) Facility Leases and Leased Real Property.
With respect to each Facility Lease, Seller has and will transfer to Buyer at
the Closing an unencumbered interest in the Leasehold Estate. Seller enjoys
peaceful and undisturbed possession of all the Leased Real Property leased by
Seller, and Seller has in all material respects performed all the obligations
required to be performed by it through the date hereof.
(d) Certificate of Occupancy. All Facilities
have received all required approvals of governmental authorities (including
without limitation Permits and a certificate of occupancy or other similar
certificate permitting lawful occupancy of the Facilities) required in
connection with the operation thereof and have been operated and maintained in
all material respects in accordance with applicable Regulations.
(e) Utilities. All Facilities are supplied with
utilities (including without limitation water, sewage, disposal, electricity,
gas and telephone) and other services necessary for the operation of such
Facilities as currently operated, and there is no condition which would
reasonably be expected to result in the termination of the present access from
any Facility to such utility services.
(f) Improvements, Fixtures and Equipment. The
improvements constructed on the Facilities, including without limitation all
Leasehold Improvements, and all Fixtures and Equipment and other tangible
assets owned, leased or used by Seller at the Facilities are (i) insured to the
extent and in a manner customary in the industry, (ii) structurally sound with
no known material defects, (iii) in good operating condition and repair, subject
to ordinary wear and tear, (iv) not in need of maintenance, repair or correction
except for ordinary routine maintenance and repair, the cost of which would not
be material, (v) sufficient for the operation of the Business as presently
conducted and (vi) in conformity, in all material respects with all applicable
Regulations. None of the improvements is subject to any commitment or other
arrangement for their sale or use by any affiliate of any Seller or third
parties.
(g) No Special Assessment. Seller has received
notice of any special assessment relating to any Facility or any portion thereof
and there is no pending or threatened special assessment.
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4.7. Contracts and Commitments.
(a) Contracts. Schedule 4.7(a) sets forth a
complete and accurate list of all Contracts (excluding Franchise Agreements)
relating to the Business, of the following categories:
(i) Contracts not made in the ordinary
course of business;
(ii) Employment contracts and severance
agreements, including without limitation Contracts (A) to employ or terminate
executive officers or other personnel and other contracts with present or former
officers, directors or partners of Company or (B) that will result in the
payment by, or the creation of any Liability to pay on behalf of Buyer or Seller
any severance, termination, "golden parachute," or other similar payments to any
present or former personnel following termination of employment or otherwise as
a result of the consummation of the transactions contemplated by this Agreement;
(iii) Labor or union contracts;
(iv) Distribution, license, technical
assistance, sales, commission, consulting, agency or advertising contracts
related to the Assets or the Business;
(v) Options with respect to any
property, real or personal, whether Seller shall be the grantor or grantee
thereunder;
(vi) Contracts involving future
expenditures or Liabilities, actual or potential;
(vii) Contracts or commitments
relating to commission arrangements with others;
(viii) Promissory notes, loans,
agreements, indentures, evidences of indebtedness, letters of credit,
guarantees, or other instruments relating to an obligation to pay money, whether
Seller shall be the borrower, lender or guarantor thereunder or whereby any
Assets are pledged (excluding credit provided by Seller in the ordinary course
of business to purchasers of its products);
(ix) Contracts containing covenants
limiting the freedom of Seller or any of its officers, directors, shareholders
or any affiliates of Seller, to engage in any line of business or compete with
any person;
(x) Any Contract with the United States,
state or local government or any agency or department thereof;
(xi) Leases of real property;
(xii) Leases of personal property not
cancelable (without Liability) within thirty (30) calendar days.
Seller have delivered to Buyer true, correct and complete copies of all of the
Contracts and Leases listed on Schedule 4.7(a), including all amendments and
supplements thereto.
(b) Absence of Defaults. All of the Contracts
and Leases to which Seller is a party or by which it or any of the Assets
is bound or affected are valid, binding and enforceable in accordance with their
terms. Seller has fulfilled, or taken all action necessary to enable
it to fulfill when due, all of its material obligations under each
of Contracts and Leases. All parties to such Contracts and Leases have
complied in all material respects with the provisions thereof, no party is in
Default thereunder and no notice of any claim of Default has been given to
Seller. Seller
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has no reason to believe that the products and services called for by any
unfinished Contract cannot be supplied in accordance with the terms of such
Contract, including time specifications, and has no reason to believe that any
unfinished Contract will upon performance by Seller result in a loss to Seller.
With respect to any Leases, Seller has not received any notice of cancellation
or termination under any option or right reserved to the lessor, or any notice
of Default, thereunder.
(c) Product Warranty. Seller has committed no
act, and there has been no omission, which may result in, and there has been no
occurrence which may give rise to, product liability or Liability for breach of
warranty (whether covered by insurance or not) on the part of Seller, with
respect to services rendered prior to or on the Closing Date.
(d) Leases. Schedule 4.7(a) also contains a
complete and accurate description of the material terms of all Leases described
in clauses (xi) and (xii) of Section 4.7(a), including without limitation a
general description of the leased property or items, the term, the monthly or
annual rent, any and all renewal options, and any requirements for the consent
of third parties to assignments thereof.
4.8. Permits.
(a) Schedule 4.8 sets forth a complete list of
all Permits used in the operation of the Business or otherwise held by Seller.
Seller has, and at all times has had, all Permits required under any Regulation
(including Environmental Laws) in the operation of its Business or in the
ownership of the Assets, and owns or possesses such Permits free and clear of
all Encumbrances. Seller is not in Default, or has received any notice of any
claim of Default, with respect to any such Permit. Except as otherwise
governed by law, all such Permits are renewable by their terms or in the
ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees
and will not be adversely affected by the completion of the transactions
contemplated by this Agreement. No present or former partner, director, officer
or employee of Company or any affiliate thereof, or any other
person, firm corporation or other entity, owns or has any proprietary, financial
or other interest (direct or indirect) in any Permit which Company owns,
possesses or uses.
(b) Except as disclosed on Schedule 4.8 hereto,
no notice to, declaration, filing or registration with, or Permit from, any
domestic or foreign governmental or regulatory body or authority, or any other
person or entity, is required to be made or obtained by Seller in connection
with the execution, delivery or performance of this Agreement and the
consummation of the transactions contemplated hereby.
4.9. No Conflict or Violation. Neither the execution, delivery
or performance of this Agreement nor the consummation of the transactions
contemplated hereby, nor compliance by Seller with any of the provisions hereof,
will (a) violate or conflict with any provision of the Articles of Incorporation
or Bylaws of the Company, (b) violate, conflict with, or result in or constitute
a Default under, or result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration under, or
result in the creation of any Encumbrance upon any of the Assets under, any of
the terms, conditions or provisions of any Contract, Franchise Agreement, Lease
or Permit, (i) to which Seller is a party or (ii) by which the Assets are bound,
(c) violate any Regulation or Court Order, (d) impose any Encumbrance on the
Assets or the Business, except in the case of each of clauses (a), (b), (c) and
(d) above, for such violations, Defaults, terminations, accelerations or
creations of Encumbrances which, in the aggregate would not have a material
adverse effect on the Assets, the Business or on the ability of Seller to
consummate the transactions contemplated hereby.
4.10. Financial Statements. Seller has heretofore delivered
to Buyer the Financial Statements. The Financial Statements (a) are in
accordance with the books and records of the Company, (b) have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods covered thereby and (c) fairly and accurately present
the consolidated assets, Liabilities (including all reserves) and financial
position of
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the Company as of the respective dates thereof and the consolidated results of
operations and changes in cash flows for the periods then ended (subject, in the
case of the Interim Financial Statements, to normal year-end adjustments).
4.11. Books and Records. Company shall give Buyer access
to Books and Records and accounts, which accurately and fairly reflect the
activities of such Company for the purpose of audits.
4.12. Litigation. Except as set forth on Schedule 4.12, there
are no Actions pending, threatened or, to the best of any Seller's knowledge,
anticipated (a) against, related to or affecting (i) Company, the Business or
the Assets (including with respect to Environmental Law), (ii) any principal or
officers of Company as such, or (iii) any owner of Company in such capacity as
an owner/partner of such Company, (b) seeking to delay, limit or enjoin the
transactions contemplated by this Agreement (c) that involve the risk of
criminal liability, or (d) in which Seller is a plaintiff. None of the Assets
are subject to the jurisdiction of the Bankruptcy Court. Seller is not in
Default with respect to or subject to any Court Order, and there are no
unsatisfied judgments against Seller, the Business or the Assets. There is not a
reasonable likelihood of an adverse determination of any pending Actions. There
are no Court Orders or agreements with, or liens by, any governmental authority
or quasi-governmental entity relating to any Environmental Law which regulate,
obligate, bind or in any way affect Seller or any Facility or Former Facility.
4.13. Labor Matters. Company is not a party to any labor
agreement with respect to its employees with any labor organization, union,
group or association and there are no employee unions (nor any other similar
labor or employee organizations) under local statutes, custom or practice. In
the past five years, Company has not experienced any attempt by organized labor
or its representatives to make Company conform to demands of organized labor
relating to its employees or to enter into a binding agreement with organized
labor that would cover the employees of Company. There is no labor strike or
labor disturbance pending or, to the best of Seller's knowledge, threatened
against Seller, nor is any grievance currently being asserted, and in the past
Five years Company has not experienced a work stoppage or other labor
difficulty. Company is in compliance with all applicable laws respecting
employment practices, employee documentation, terms and conditions of employment
and wages and hours and is not and has not engaged in any unfair labor practice.
There is no unfair labor practice charge or complaint against Seller pending
before the National Labor Relations Board or any other domestic or foreign
governmental agency arising out of conduct of the Business, and there are no
facts or information which would give rise thereto.
4.14. Liabilities. Except as set forth on Schedule 4.14 hereto
and other than Excluded Liabilities, Company does not have any Liabilities due
or to become due, except Liabilities arising in the ordinary course of business
under Contracts, Leases, Permits and other business arrangements described in
the Disclosure Schedule (and under those Contracts, Leases and Permits which are
not required to be disclosed on the Disclosure Schedule) or in accordance with
this Agreement (none of which relates to any Default under any Contract or
Lease, breach of warranty, tort, infringement or violation of any Regulation or
Court Order or arose out of any Action) and none of which, individually or in
the aggregate, has or would have a material adverse effect on the Business or
the Assets.
4.15. Compliance with Law. Seller, in the conduct of the
Business, has not violated and is in compliance with all Regulations and Court
Orders relating to the Assets or the Business or operations of such Seller. No
Seller has received notice to the effect that, or otherwise been advised that,
it is not in compliance with any such Regulations or Court Orders, and Seller
does not have any reason to anticipate that any existing circumstances are
likely to result in violations of any of the foregoing. Without limiting the
foregoing, there is no accusation or investigation pending against Seller from
the ABC.
4.16. No Brokers. Seller nor any of their respective officers,
directors, employees, shareholders or affiliates has employed or made any
agreement with any broker, finder or similar agent or any person or firm which
will result in the obligation of Buyer or any of its affiliates to pay any
finder's fee, brokerage fees or commission or similar payment in connection with
the transactions contemplated hereby.
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4.17. No Other Agreements to Sell the Assets. The Seller or any
of its respective officers, directors, shareholders or affiliates have any
commitment or legal obligation, absolute or contingent, to any other person or
firm other than the Buyer to sell, assign, transfer or effect a sale of any of
the Assets (other than inventory in the ordinary course of business), to effect
any merger, consolidation, liquidation, dissolution or other reorganization of
the Company, or to enter into any agreement or cause the entering into of an
agreement with respect to any of the foregoing.
4.18. Employees.
(a) Seller have previously delivered to Buyer a
schedule which (i) contains a list of all employees of the Company employed
in connection with the Business, and their wage rates or salaries, as of the
date of this Agreement and (ii) sets forth the dates of employment for such
employees. Schedule 4.19 (x) contains a list of all Employee Plans and (y)
identifies all employment agreements, including collective bargaining
agreements, in effect with respect to any such employees.
(b) With respect to each Employee Plan qualified
under Section 401 or the Code, Seller have made available to Buyer a true and
correct copy of (i) the most recent annual report (Form 5500) filed with the
Internal Revenue Service, (ii) the document setting forth the Employee Plan,
(iii) the trust agreement relating to such Employee Plan, (iv) the most recent
summary plan description, and (v) the most recent determination letter issued
by the Internal Revenue Service.
(c) To the knowledge of Seller, no event has
occurred which has resulted in the creation of any undischarged liability to
any Company in connection with any Employee Plan (except liability for benefits
claims and funding obligations payable in the ordinary course) under ERISA, the
Code or any other applicable law.
4.19. Tax Matters.
(a) Filing of Tax Returns. The Company (and any
affiliated group of which such Company is now or has been a member) has timely
filed with the appropriate taxing authorities all returns (including without
limitation information returns and other material information) in respect of
Taxes required to be filed through the date hereof and will timely file any
such returns required to be filed on or prior to the Closing Date. The returns
and other information filed are complete and accurate in all material respects.
Except as specified in Schedule 4.20, no Company, nor any group of which Company
now or was a member, has requested any extension of time within which to file
returns (including without limitation information returns) in respect of any
taxes. Company has delivered to Buyer complete and accurate copies of such
Company's federal, state and local tax returns for the years 1994 and 1995.
(b) Payment of Taxes. Except as specified in
Schedule 4.20 hereto, all Taxes of Company, in respect of periods beginning
before the Closing Date, have been timely paid, or will be timely paid, or an
adequate reserve has been established therefor, as set forth in the Disclosure
Schedule and the Company does not have any material Liability for Taxes in
excess of the amounts so paid or reserves so established.
(c) Audits, Investigations or Claims. Except as
set forth in the Disclosure Schedule, the consolidated federal income tax
returns of the Company have been filed with the IRS for all periods to and
including those set forth in the Disclosure Schedule, and except to the extent
shown therein, no material deficiencies for Taxes, have been claimed,
proposed or assessed by any taxing or other governmental authority
against each Company. Except as set forth in the Disclosure Schedule, there are
no pending or, to the best of Seller's knowledge, threatened audits,
investigations or claims for or relating to any material additional Liability in
respect of Taxes, and there are no matters under discussion with any
governmental authorities with respect to Taxes that in the reasonable judgment
of Seller is likely to result in a material additional Liability for Taxes.
Except as set forth in the Disclosure Schedule, no extension of a statute of
limitations relating to Taxes is in effect with respect to Company.
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(d) Lien. Except as specified in Schedule 4.21,
there are no liens for Taxes (other than for current Taxes not yet due and
payable) on the Assets.
(e) Safe Harbor Lease Property. None of the
Assets is property that is required to be treated as being owned by any other
person pursuant to the so-called safe harbor lease provisions of former Section
168(f)(8) of the Code.
(f) Security for Tax-Exempt Obligations. None
of the Assets directly or indirectly secures any debt the interest on which is
tax-exempt under Section 103(a) of the Code.
(g) Tax-Exempt Use Property. None of the Assets
is "tax-exempt use property" within the meaning of Section 168(h) of the Code.
(h) Foreign Person. The Company is not a person
other than a United States person within the meaning of the Code.
(i) No Withholding. The transaction contemplated
herein is not subject to the tax withholding provisions of Section 3406 of the
Code, or of Subchapter A of Chapter 3 of the Code or of any other provision of
law.
4.20 Insurance. Schedule 4.21 contains a complete and accurate
list of all policies or binders of fire, liability, title, worker's
compensation, product liability (which list shall be for 3 years) and other
forms of insurance (showing as to each policy or binder the carrier, policy
number, coverage limits, expiration dates, annual premiums, a general
description of the type of coverage provided, loss experience history by line of
coverage) maintained by Company on the Business, the Assets or its employees.
All insurance coverage applicable to any of the Companies, the Business and the
Assets is in full force and effect, insures Company in reasonably sufficient
amounts against all risks usually insured against by persons operating similar
businesses or properties of similar size in the localities where such businesses
or properties are located, provides coverage as may be required by applicable
Regulation and by any and all Contracts to which Seller is a party and has been
issued by insurers of recognized responsibility. There is no Default under any
such coverage nor has there been any failure to give notice or present any claim
under any such coverage in a due and timely fashion. There are no outstanding
unpaid premiums except in the ordinary course of business and no notice of
cancellation or nonrenewal of any such coverage has been received. There are no
provisions in such insurance policies for retroactive or retrospective premium
adjustments, other than adjustments which may arise based on Seller's gross
sales. All products liability, general liability and workers' compensation
insurance policies maintained by the Company have been occurrence policies and
not claims made policies. There are no outstanding performance bonds covering or
issued for the benefit of the Company. There are no facts upon which an insurer
might be justified in reducing coverage or increasing premiums on existing
policies or binders. No insurer has advised Seller that it intends to reduce
coverage, increase premiums or fail to renew existing policy or binder.
4.21. Purchase Commitments and Outstanding Bids. No outstanding
purchase or outstanding lease commitment of Company presently is in excess of
the normal, ordinary and usual requirements of the Business or was made at any
price in excess of the now current market price or contains terms and conditions
more onerous than those usual and customary in the Business. There is no
outstanding bid, proposal, Contract or unfilled order which relates to the
Assets which will or would, if accepted, have a material adverse effect,
individually or in the aggregate, on the Business or the Assets or will or
would, if accepted, reasonably be expected to result in a net loss to Company.
4.22. Payments. Seller has not, directly or indirectly, paid or
delivered any fee, commission or other sum of money or item or property, however
characterized, to any finder, agent, client, customer, supplier, government
official or other party, in the United States or any other country, which is in
any manner related to the Business, Assets or operations of Sellers, which is,
or may be with the passage of time or discovery, illegal under any federal,
state or local
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laws of the United States (including without limitation the U.S. Foreign Corrupt
Practices Act) or any other country having jurisdiction; Seller has not
participated, directly or indirectly, in any boycotts or other similar practices
affecting any of its actual or potential customers, and Seller has at all times
done business in an open and ethical manner.
4.23. Distributors and Suppliers. Schedule 4.25 sets forth a
complete and accurate list of the names and addresses, on a collective basis, of
the ten largest suppliers of the Business, showing the approximate total
purchases in dollars by Seller from each such supplier during such fiscal year.
Since January 1,1996, there has been no adverse change in the business
relationship of Seller with any distributor or supplier named on Schedule 4.25.
Seller has not received any communication from any distributor or supplier named
on Schedule 4.25 of any intention to terminate or materially reduce supplies to
Seller.
4.24. Compliance With Environmental Laws.
(a) Definitions. The following terms, when used
in this Section 4.26, shall have the following meanings. Any of these terms may,
unless the context otherwise requires, be used in the singular or the plural
depending on the reference.
(i) "Seller". For purposes of this
Section, the term "Seller" shall include (i) all affiliates of any Company,
(ii) all partnerships, joint ventures and other entities or organizations in
which Company was at any time or is a partner, joint venturer, member or
participant and (iii) all predecessor or former corporations, partnerships,
joint ventures organizations, businesses or other entities, whether in existence
as of the date hereof or at any time prior to the date hereof, the assets or
obligations of which have been acquired or assumed by Seller or to which Seller
has succeeded.
(ii) "Release" shall mean and include any
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping or disposing into the environment or the workplace
of any Hazardous Substance, and otherwise as defined in any Environmental Law.
(iii) "Hazardous Substance" shall mean
any pollutant, contaminant, chemical, waste and any toxic, infectious,
carcinogenic, reactive, corrosive, ignitible or flammable chemical or chemical
compound or hazardous substance, material or waste, whether solid, liquid or
gas, including, without limitation, any quantity of asbestos in any form, urea
formaldehyde, PCB's, radon gas, crude oil or any fraction thereof, all forms
of natural gas, petroleum products or byproducts or derivatives, radioactive
substance or material, pesticide waste waters, sludges, slag and any other
substance, material or waste that is subject to regulation, control or
remediation under any Environmental Laws.
(iv) "Environmental Laws" shall mean all
Regulations which regulate or relate to the protection or clean-up of the
environment, the use, treatment, storage, transportation, generation,
manufacture, processing, distribution, handling or disposal of, or emission,
discharge or other release or threatened release of, Hazardous Substances or
otherwise dangerous substances, wastes, pollution or materials (whether, gas,
liquid or solid), the preservation or protection of waterways, groundwater,
drinking water, air, wildlife, plants or other natural resources, or the
health and safety of persons or property, including without limitation
protection of the health and safety of employees. Environmental Laws
shall include, without limitation, the Federal Insecticide, Fungicide,
Rodenticide Act, Resource Conservation & Recovery Act, Clean Water Act, Safe
Drinking Water Act, Atomic Energy Act, Occupational Safety and Health Act, Toxic
Substances Control Act, Clean Air Act, Comprehensive Environmental Response,
Compensation and Liability Act, Emergency Planning and Community Right-to-Know
Act, Hazardous Materials Transportation Act and all analogous or related
federal, state or local law, each as amended.
(v) "Environmental Conditions" means
the introduction into the environment of any pollution, including, without
limitation, any contaminant, irritant or pollutant or other Hazardous Substance
(whether or not upon any Facility or Former Facility or other property and
whether or not such pollution constituted at the time
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thereof a violation of any Environmental Law as a result of any Release of any
kind whatsoever of any Hazardous Substance) as a result of which Seller has or
may become liable to any person or by reason of which any Facility, Former
Facility or any of the Assets may suffer or be subjected to any lien.
(b) Facilities. The Facilities and all Former
Facilities are, and were at all times when owned, leased or operated by Seller,
owned, leased and operated by Seller in compliance with all Environmental Laws
and in a manner that will not give rise to any Liability under any Environmental
Laws. Without limiting the foregoing, (i) there is not and has not been any
Hazardous Substance used, generated, treated, stored, transported, disposed of,
handled or otherwise existing on, under, about or emanating from
any Facility or any Former Facility which were caused by Seller or
any agent or employee thereof, except for quantities of any such Hazardous
Substances stored or otherwise held on, under or about any such
Facility in full compliance with all Environmental Laws and necessary for the
operation of the Business, (ii) Seller has at all times used, generated,
treated, stored, transported, disposed of or otherwise handled its Hazardous
Substances in compliance with all Environmental Laws and in a manner that will
not result in Liability of Seller under any Environmental Law, (iii) there is
not now and has not been at any time when Seller owned, leased or operated any
Facility or Former Facility, any underground or above-ground storage tank or
pipeline at any Facility or Former Facility where the installation, use,
maintenance, repair, testing, closure or removal of such tank or pipeline was
not in compliance with all Environmental Laws and there has been no Release from
or rupture of any such tank or pipeline, including without limitation any
Release from or in connection with the filling or emptying of such tank, and
(iv) Seller does not manufacture or distribute any product in the State of
California which requires the warning mandated by the California Safe Drinking
Water and Toxic Enforcement Act of 1986 ("Proposition 65").
(c) Notice of Violation. Seller has not received
any notice of alleged, actual or potential responsibility for, or any inquiry
or investigation regarding, (i) any Release or threatened Release of
any Hazardous Substance at any location, whether at the Facilities,
the Former Facilities or otherwise or (ii) an alleged violation of or
non-compliance with the conditions of any Permit required under any
Environmental Law or the provisions of any Environmental Law. Seller has not
received notice of any other claim, demand or Action by any individual or entity
alleging any actual or threatened injury or damage to any person, property,
natural resource or the environment arising from or relating to any Release or
threatened Release of any Hazardous Substances at, on, under, in, to or from any
Facilities or Former Facilities, or in connection with any operations or
activities of Seller.
(d) Environmental Conditions To the best of
Seller's knowledge, there are no present or past Environmental Conditions in
any way relating to the Business or at any Facility or Former Facility.
(e) Environmental Audits or Assessments. True,
complete and correct copies of the written reports, and all parts thereof,
including any drafts of such reports if such drafts are in the possession or
control of Seller, of all environmental audits or assessments which have been
conducted at any Facility or Former Facility within the past five years, either
by Seller or any attorney, environmental consultant or engineer engaged by any
Seller for such purpose, have been delivered to Buyer and a list of all such
reports, audits and assessments and any other similar report, audit or
assessment of which Seller has knowledge is included on the Disclosure Schedule.
(f) Releases or Waivers. Seller has not released
any other person from any claim under any Environmental Law or waived any
rights concerning any Environmental Condition.
(g) Notices, Warnings and Records. Seller has
given all notices and warnings, made all reports, and has kept and maintained
all records required by and in compliance with all Environmental Laws.
4.25. Banking Relationships. Schedule 4.25 sets forth a complete
and accurate description of all arrangements that each Company has with any
banks, savings and loan associations or other financial institutions providing
for checking accounts, safe deposit boxes, borrowing arrangements, and
certificates of deposit or otherwise, indicating in each case account numbers,
if applicable, and the person or persons authorized to act or sign on behalf of
such Company in respect of any of the foregoing.
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4.26. Material Misstatements Or Omissions. No representation or
warranties by Seller in this Agreement, nor any document, exhibit, statement,
certificate or schedule heretofore or hereinafter furnished to Buyer pursuant
hereto, or in connection with transactions contemplated hereby, including
without limitation the Disclosure Schedule, contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material fact
necessary to make the statements or facts contained therein not misleading,
Seller has disclosed all events, conditions and facts materially affecting the
Business, and the prospects and financial condition of such Seller.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES BUYER
Buyer hereby represents and warrants to Seller as
follows, which representations and warranties are, as of the date hereof, and
will be, as of the Closing Date, true and correct:
5.1. Organization of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
5.2. Authorization. Buyer has all requisite corporate power and
authority, and has taken all corporate action necessary, to execute and deliver
this Agreement and the Ancillary Agreements, to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. The execution and delivery of this Agreement and the Ancillary
Agreements by Buyer and the consummation by Buyer of the transactions
contemplated hereby and thereby have been duly approved by the board of
directors of Buyer. No other corporate proceedings on the part of Buyer are
necessary to authorize this Agreement and the Ancillary Agreements and the
transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by Buyer and is, and upon execution and delivery of the
Ancillary Agreements, will be legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with their terms.
5.3. No Conflict or Violation. Neither the execution, delivery
or performance this Agreement nor the consummation of the transactions
contemplated hereby, nor compliance by Buyer with any of the provisions hereof
will (a) violate or conflict with any provision of the Certificate of
Incorporation or Bylaws of Buyer, (b) violate, conflict with, or result in or
constitute a Default under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any Encumbrance upon any of Buyer's assets
under, any of the terms, conditions or provisions of any contract, indebtedness,
note, bond, indenture, security or pledge agreement, commitment, license, lease,
franchise, permit, agreement, authorization, concession, or other instrument or
obligation to which Buyer is a party, (c) violate any Regulation or Court Order,
except, in the case of each of clauses (a), (b) and (c) above, for such
violations, Defaults, terminations, accelerations or creations of Encumbrances
which, in the aggregate, would not have a material adverse effect on the
business of Buyer or its ability to consummate the transactions contemplated
hereby.
5.4. Litigation. Except as set forth on Schedule 5.4, there are
no Actions pending, threatened or, to the best of Buyer's knowledge, anticipated
(a) against, related to or affecting (i) Buyer, (ii) any officers or directors
of Buyer or (iii) any shareholder of Buyer in such shareholder's capacity as a
shareholder of Buyer, (b) seeking to delay, limit or enjoin the transactions
contemplated by this Agreement (c) that involve the risk of criminal liability,
or (d) in which Buyer is a plaintiff. Buyer is neither in Default with respect
to nor subject to any Court Order, and there are no unsatisfied judgments
against Buyer. There is not a reasonable likelihood of an adverse determination
of any pending Actions.
5.5. Consents and Approvals. Except as set forth on
Exhibit I hereto, no notice to, declaration, filing or registration with, or
authorization, consent or approval of, or permit from, any domestic or foreign
governmental or regulatory body or authority, or any other person or entity, is
required to be made or obtained by Buyer in connection
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with the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby.
5.6. No Brokers. Neither Buyer nor any of its officers,
directors, employees, shareholders or affiliates has employed or made any
agreement with any broker, finder or similar agent or any person or firm which
will result in the obligation of any Seller or any of its respective affiliates
to pay any finder's fee, brokerage fees or commission or similar payment in
connection with the transactions contemplated hereby.
ARTICLE VI.
COVENANTS OF SELLERS AND BUYERS
Seller, on the one hand, and Buyer, on the other
hand, each covenant with the other as follows:
6.1. Further Assurances. Upon the terms and subject to the
conditions contained herein, the parties agree, both before and after the
Closing, (i) to use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, (ii) to execute any documents, instruments or conveyances of any kind
which may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder, and (iii) to cooperate with each other in
connection with the foregoing. Without limiting the foregoing, the parties agree
to use their respective best efforts (A) to obtain all necessary waivers,
consents and approvals from other parties to the Contracts and Leases to be
assumed by Buyer; provided, however that Buyer shall not be required to make any
payments, commence litigation or agree to modifications of the terms thereof in
order to obtain any such waivers, consents or approvals, (B) to obtain all
necessary Permits as are required to be obtained under any Regulations, (C) to
defend all Actions challenging this Agreement or the consummation of the
transactions contemplated hereby, (D) to lift or rescind any injunction or
restraining order or other Court Order adversely affecting the ability of the
parties to consummate the transactions contemplated hereby, (E) to give all
notices to, and make all registrations and filings with third parties, including
without limitation all actions necessary to comply with the procedures of the
"Bulk Sales Act" and any submissions of information requested by any
governmental authorities, and (F) to fulfill all conditions to this Agreement.
Seller and Buyer will commence all action required under this Section 6.1 by a
date which is early enough to allow the transactions contemplated hereunder to
be consummated by the Closing Date.
6.2. Consents, Franchisee and Landlord Estoppel Certificates.
Sellers shall use their reasonable good faith efforts to obtain all consents,
Landlord Estoppel Certificates from each landlord or lessor under each Facility
Lease. Buyer shall assist and cooperate with Seller in connection therewith,
including the furnishing of any reasonable information regarding Buyer requested
by any third party. Seller shall keep Buyer reasonably informed as to their
progress with respect to obtaining such consents. Seller acknowledge and agree
that no terms or provisions of any Lease or other Contract shall be modified or
amended in connection with obtaining the consents without the prior written
consent of Buyer, which consent shall not be unreasonably withheld. Seller shall
take, or cause to be taken, all actions necessary, proper or advisable to ensure
that neither the IRS nor any California taxing authority takes any enforcement
or other action against any of the Assets or the Business on account of unpaid
Taxes of Seller either prior to or after the Closing.
6.3. No Solicitation.
(a) No Solicitation. From the date hereof
through the Closing or the earlier termination of this Agreement, Seller and
their Representatives shall not, and shall cause each of their respective or
Representatives (including without limitation investment bankers, attorneys
and accountants), not to, directly or indirectly, enter into, solicit, initiate
or continue any discussions or negotiations with, or encourage or respond to
any inquiries or proposals by,
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or participate in any negotiations with, or provide any information to, or
otherwise cooperate in any other way with, any corporation, partnership, person
or other entity or group, other than Buyer and its Representatives, concerning
any sale of all or a portion of the Assets or the Business, or any merger,
consolidation, liquidation, dissolution or similar transaction involving the
Company (each such transaction being referred to herein as a "Proposed
Acquisition Transaction"). Seller shall not, directly or indirectly, through any
officer, director, employee, representative, agent or otherwise, solicit,
initiate or encourage the submission of any proposal or offer from any person
(including, without limitation, a "person" as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended) or entity relating to any Proposed
Acquisition Transaction or participate in any negotiations regarding, or furnish
to any other person any information with respect to such Seller for the purposes
of, or otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other person to seek or
effect a Proposed Acquisition Transaction. Seller hereby represents that it is
not now engaged in discussions or negotiations with any party other than Buyer
with respect to any of the foregoing. Seller shall notify Buyer promptly (orally
and in writing) if any such written offer, or any inquiry or contact with any
person with respect thereto, is made and shall provide Buyer with a copy of such
offer and shall keep Buyer informed on the status of any negotiations regarding
such offer. Seller agrees not to release any third party from, or waive any
provision of, any confidentiality or standstill agreement to which Seller is a
party.
(b) Notification Seller will immediately notify
Buyer if any discussions or negotiations are sought to be initiated, any inquiry
or proposal is made, or any information is requested with respect to any
Proposed Acquisition Transaction and notify Buyer of the terms of any proposal
which it may receive in respect of any such Proposed Acquisition Transaction,
including without limitation the identity of the prospective purchaser or
soliciting party.
6.4. Notification of Certain Matters. From the date hereof
through the Closing, Seller shall give prompt notice to Buyer of (a) the
occurrence, or failure to occur, of any event which occurrence or failure would
be likely to cause any representation or warranty contained in this Agreement or
in any exhibit or schedule hereto to be untrue or inaccurate in any material
respect and (b) any material failure of Seller, or any of its respective
affiliates, or of any of its respective Representatives, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement or any exhibit or schedule hereto; provided, however,
that such disclosure shall not he deemed to cure any breach of a representation,
warranty, covenant or agreement or to satisfy any condition. Seller shall
promptly notify Buyer of any Default, the threat or commencement of any Action,
or any development that occurs before the Closing that could in any way
materially affect Seller, the Assets or the Business.
6.5. Investigation by Buyer
From the date hereof through the Closing Date:
(a) Seller shall, and shall cause its officers,
directors, employees and agents to, afford the Representatives of Buyer
and its affiliates complete access at all reasonable times to the Assets for
the purpose of inspecting the same, and to the officers, employees, agents,
attorneys, accountants, properties, Books and Records (one day's notice shall
be given by Buyer to Seller for the inspection of such Books and Records) and
Contracts of Seller, and shall furnish Buyer and its Representatives all
financial, operating and other data and information as Buyer or its affiliates,
through their respective Representatives, may reasonably request, including
an unaudited statements of income, retained earnings and cash flow for
each month from the interim Balance Sheet Date through the Closing Date
within fifteen (15) calendar days after the end of each four (4) weeks which
financial statements shall (a) be true, correct and complete, (b) be in
accordance with the books and records of such Seller and (c) accurately set
forth the assets, Liabilities and financial condition, results of operations and
other information purported to be set forth therein in accordance with generally
accepted accounting principles consistently applied.
(b) (i) Buyer shall have the right, at its
sole cost and expense to (A) conduct tests of the soil surface or subsurface
waters and air quality at, in, on, beneath or about the Leased Real Property,
and such other procedures as may be recommended by an independent environmental
consultant selected by Buyer (the ("Consultant") based on its reasonable
professional judgment, in a manner consistent with good engineering practice,
(B) inspect records, reports, permits, applications, monitoring results,
studies, correspondence, data and any other information or documents relevant
to environmental conditions or environmental noncompliance, and (C) inspect all
buildings and equipment at the Leased Real Property, including without
limitation the visual inspection of the Facilities for asbestos- containing
construction materials; provided, in each case, such tests and inspections
shall be conducted only (1) during regular business hours; and (2) in a manner
which will not unduly interfere with the operation of the Business and/or the
use of, access to or egress from the Leased Property.
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(ii) Buyer's right to conduct tests,
inspect records and other documents, and visually inspect all buildings and
equipment at the Leased Real Property shall also be subject to to the following
terms and conditions:
(A) All testing performed on
Buyer's behalf shall be conducted by the Consultant;
(B) Seller shall have the right
to accompany the Consultant as it performs testing;
(C) Except as otherwise
required by law, any information concerning the Leased Real Property gathered
by Buyer or the Consultant as the result of, or in connection with, the testing
shall be kept confidential in accordance with subsection (D) below and shall
not be revealed to, or discussed with, anyone other than
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Representatives of Buyer or Representatives of Seller who agrees to comply with
the provisions of subsection (D) below; and
(D) In the event that any
party to this Agreement or any party set forth in subsection (C) above is
requested or required to disclose information described in subparagraph (b)(i),
Buyer shall provide Seller or Seller shall provide Buyer, as the case may be,
with prompt notice of such request so that Seller or Buyer, as the case may be,
may seek an appropriate protective order or waiver by the other party's
compliance with this Agreement . If, in the absence of a protective order or the
receipt of a waiver hereunder, party is nonetheless, in the opinion of its
counsel, compelled to disclose such information to any tribunal or else stand
liable for contempt or suffer other censure or penalty, such party will furnish
only that portion of the information which is legally required and will exercise
its reasonable efforts to obtain reliable assurance that confidential treatment
will be afforded to the disclosed information. The requirements of this
subparagraph shall not apply to information in the public domain or lawfully
acquired on a nonconfidential basis from others.
6.6. Conduct of Business. From the date hereof through the
Closing, Sellers shall, except as contemplated by this Agreement, or as
consented to by Buyer in writing, operate the Business in the ordinary course of
business and substantially in accordance with past practice and will not take
any action inconsistent with this Agreement or with the consummation of the
Closing. Without limiting the generality of the foregoing, Seller shall not,
except as specifically contemplated by this Agreement or as consented to by
Buyer in writing;
(a) enter into, extend, materially modify,
terminate or renew any Contract, or Lease, except in the ordinary course of
business;
(b) sell, assign, transfer, convey, lease,
mortgage, pledge or otherwise dispose of or encumber any of the Assets, or any
interests therein, except in the ordinary course of business;
(c) fail to acquire, produce, maintain or sell
inventory consistent with past business practices of each Company, or fail to
have sufficient provisions for food, liquor and supplies to be available on the
Closing Date so as to ensure that no interruption in operations will result
following the Closing;
(d) incur any Liability for long-term interest
bearing indebtedness, guarantee the obligations of others, indemnify others or,
except in the ordinary course of business, incur any other Liability;
(f) (i) take any action with respect to the
grant of any bonus, severance or termination pay (otherwise than pursuant to
policies or agreements of Seller in effect on the date hereof that are described
on the Disclosure Schedule) or with respect to any increase of benefits payable
under its severance or termination pay policies or agreements in effect on the
date hereof or increase in any manner the compensation or fringe benefits of any
employee or pay any benefit ot required by any existing Employee Plan or policy;
(ii) make any change in the key
management structure of Seller, ncluding without limitation the hiring of
additional officers or the termination of existing officers;
(iii) adopt, enter into or amend any
Employee Plan, agreement (including without imitation any collective bargaining
or employment agreement), trust, fund or ther arrangement for the benefit or
welfare of any employee, except for any such amendment as may be required to
comply with applicable Regulations; or
(iv) fail to maintain all Employee Plans
in accordance with applicable Regulations;
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(g) acquire by merger or consolidation with, or
merge or consolidate with, or purchase substantially all of the assets of, or
otherwise acquire any material assets or business of any corporation,
partnership, association or other business organization or division thereof;
(h) fail to expend funds for budgeted capital
expenditures or commitments for the benefit of the Business;
(i) willingly allow or permit to be done, any
act by which any of the Insurance Policies may be suspended, impaired or
canceled;
(j) (i) fail to pay its accounts payable
and any debts owed or obligations due to it, or pay or discharge when due any
Liabilities, in the ordinary course of business; or
(ii) fail to collect its accounts
receivable in the ordinary course at business;
(k) fail to maintain the Assets in
substantially their current state of repair, excepting normal wear and tear, or
fail to replace consistent with Seller's past practice, inoperable, worn-out or
obsolete or destroyed Assets;
(l) make any loans or advances to any
partnership, firm or corporation, or, except for expenses incurred in the
ordinary course of business, any individual;
(m) fail to comply with all Regulations
applicable to it, the Assets and the Business;
(n) intentionally do any other act which would
cause any representation or warranty of Seller in this Agreement to be or become
untrue in any material respect;
(o) fail to use its best efforts to (i) retain
Seller's employees and (ii) maintain the Business so that such employees will
remain available to Buyer on and after the Closing Date, (iii) maintain existing
relationships with suppliers, customers and others having business dealings
with Seller and (iv) otherwise preserve the goodwill of the Business so that
such relationships and goodwill will be preserved on and after the Closing
Date; or;
(p) enter into any agreement, or otherwise
become obligated, to do any action prohibited hereunder.
6.7. Employee Matters.
(a) Buyer may extend offers of employment to
those of Seller's employees whom it desires to hire (such employees are
hereinafter referred to as the "Rehired Employees"), which offers shall be on
terms and conditions which Buyer shall determine in its sole discretion.
Notwithstanding the foregoing, nothing in this Agreement shall impose upon
Buyer an obligation to hire or offer to hire any of Seller's employees or to
interview any of Seller's employees for positions of employment with Buyer.
Seller shall terminate the employment of all of the Rehired Employees
immediately prior to the Closing and shall pay such Rehired Employees (and all
other employees formerly employed in connection with the Business) all amounts
due under the Employee Plans (including severance, accrued vacation, and other
benefits). Seller shall cooperate with and use its best efforts to assist
Buyer in its efforts to secure satisfactory employment arrangements with the
Rehired Employees. Prior to the Closing, Seller shall cooperate with Buyer to
assist Buyer in evaluating Seller's employees employed in connection with the
Business, including providing Buyer with reasonable access (on a confidential
basis) to pertinent employee records. Prior to the Closing, Buyer shall provide
notice to Seller of any employees that Buyer does not anticipate employing.
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(b) Seller shall be solely responsible for all
of the Employee Plans and all obligations and liabilities thereunder. Buyer
shall not assume any of the Employee Plans or any obligation or liability
thereunder.
(c) Nothing contained in this Agreement shall
confer upon any Rehired Employee any right with respect to continuance of
employment by Buyer, nor shall anything herein interfere with the right of
Buyer to terminate the employment of any of the Rehired Employees at any time,
with or without cause, or restrict Buyer in the exercise of its independent
business judgment in modifying any of the terms and conditions of the employment
of the Rehired Employees
(d) No provision of this Agreement shall create
any third party beneficiary rights in any Rehired Employee, any beneficiary or
dependents thereof, or any collective bargaining representative thereof, with
respect to the compensation, terms and conditions of employment and benefits
that may be provided to any Rehired Employee by Buyer or under any benefit plan
which Buyer may maintain.
(e) After the Closing Date, Seller shall not,
directly or indirectly, hire or offer employment to or seek to hire or offer
employment to any Rehired Employee or any other employee of Buyer or any
successor or affiliate of Buyer which is engaged in the Business, unless Buyer
first terminates the employment of such employee or gives its written consent
to such employment or offer of employment.
ARTICLE VII.
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the transactions
provided for hereby are subject, in the discretion of Seller, to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by Seller:
7.1. Representations, Warranties and Covenants. All
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects at and as of the date of this
Agreement and at and as of the Closing Date, except as and to the extent that
the facts and conditions upon which such representations and warranties are
based are expressly required or permitted to be changed by the terms hereof, and
Buyer shall have performed and satisfied in all material respects all agreements
and covenants required hereby to be performed by it prior to or on the Closing
Date.
7.2. No Actions or Court Orders. No Action by any governmental
authority or other person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected to damage Buyer, the Assets or the Business
materially if the transactions contemplated hereby are consummated, including
without limitation any material adverse effect on the right or ability of Buyer
to own, operate, possess or transfer the Assets after the Closing. There shall
not be any Regulation or Court Order that makes the purchase and sale of the
Business or the Assets contemplated hereby illegal or otherwise prohibited.
7.3. Certifies and confirm that:
(a) Incorporation. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware.
(b) Corporate Power and Authority. Buyer has the
necessary corporate power and authority to enter into this Agreement and the
Debt Agreements and to consummate the transactions contemplated hereby and
thereby;
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(c) Corporate Action and Enforceability. The
execution, delivery and performance of this Agreement and the Debt
Agreements by Buyer have been duly authorized by all necessary corporate
action of Buyer, and this Agreement and the Debt Agreements have been duly
executed and delivered by Buyer, and constitute legally valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their
terms, except as limited by (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally or by
equitable principles (whether considered in an action at law or in equity), (ii)
limitations imposed by federal or state law or equitable principles upon the
availability of specific performance, injunctive relief or other equitable
remedies, or (iii) other customary limitations reasonably satisfactory to
Seller.
(d) No Breach of Contracts. Neither the
execution and delivery of this Agreement or the Debt Agreements by Buyer nor the
consummation of the transactions contemplated hereby or thereby will (i) violate
the Certificate of Incorporation or Bylaws of Buyer or (ii) the actual knowledge
of such counsel, violate any Court Order applicable to Buyer.
7.4. Certificates. Buyer shall furnish Seller with such
certificates of its officers and others to evidence compliance with the
conditions set forth in this Article VII as may be reasonably requested by
Seller.
7.5. Corporate Documents. Seller shall have received
from Buyer resolutions adopted by the board of directors of Buyer approving this
Agreement, the Ancillary Agreements and the transactions contemplated hereby or
thereby, certified by Buyer's corporate secretary.
7.6. Assumption Document. Buyer shall have executed and
delivered the Assumption Document.
7.7. Ancillary Agreements. Buyer shall have executed and
delivered the Ancillary Agreements to which Buyer is a party.
ARTICLE VIII.
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the transactions
provided for hereby are subject, in the discretion of Buyer, to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by Buyer:
8.1. Representations, Warranties and Covenants. All
representations and warranties of Seller contained in this Agreement shall be
true and correct in all material respects at and as of the date of this
Agreement and at and as of the Closing Date, except as and to the extent that
the facts and conditions upon which such representations and warranties are
based are expressly required or permitted to be changed by the terms hereof, and
Seller shall have performed and satisfied in all material respects all
agreements and covenants required hereby to be performed by them prior to or on
the Closing Date.
8.2. Consents: Regulatory Compliance and Approval. All
Permits, consents, approvals and waivers from governmental authorities and other
parties necessary to the consummation of the transactions contemplated hereby
and for the operation of the Business by Buyer (including, without limitation,
the Temporary Liquor Permits and all required third party consents to the
assignment of the Leases and Contracts to be assumed by Buyer) shall have been
obtained. Buyer shall be satisfied that all approvals required under any
Regulations to carry out the transactions
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contemplated by this Agreement shall have been obtained and that the parties
shall have complied with all Regulations applicable to the Acquisition.
8.3. No Actions or Court Orders. No Action by any governmental
authority or other person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected to damage Buyer, the Assets or the Business
materially if the transactions contemplated hereby are consummated, including
without limitation any material adverse effect on the right or ability of Buyer
to own, operate, possess or transfer the Assets after the Closing. Without
limiting the generality of the foregoing, Buyer shall be satisfied that neither
the IRS nor any California taxing authority has taken or will take any
enforcement or other action against or with respect to any of the Assets on
account of any unpaid Taxes of Seller. There shall not be any Regulation or
Court Order that makes the purchase and sale of the Business or the Assets
contemplated hereby illegal or otherwise prohibited.
8.4. Seller certifies and confirm that:
(a) Incorporation. Company is a proprietorship
validly existing and in good standing under the laws of the State of California;
(b) Power and Authority. Seller/Company has the
necessary power and authority to enter into this Agreement and the Debt
Agreements and to consummate the transactions contemplated hereby and thereby;
and the Company has the necessary power and authority to own, lease and operate
the Assets and other properties and to conduct the Business as presently
conducted;
(c) Action and Enforceability. The execution,
delivery and performance of this Agreement and the Debt Agreements by the
Company have been duly authorized by all necessary action of the Company, and
this Agreement and the Debt Agreements have been duly executed and delivered by
the Seller, and no other approval from the Company is required in connection
therewith or, if required, such approval has been duly obtained the Company and
this Agreement and each Debt Agreement constitute legally valid and binding
obligations of Seller, enforceable against Seller in accordance with their
terms, except as limited by (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally or by
equitable principles (whether considered in an action at law or in equity), (ii)
limitations imposed by federal or state law or equitable principles upon the
availability of specific performance, injunctive relief or other equitable
remedies, or (iii) other customary limitations reasonably satisfactory to
Buyer's counsel;
(d) No Breach of Contracts. Neither the
execution and delivery of this Agreement or the Debt Agreements by Seller nor
the consummation of the transactions contemplated hereby or thereby will (i)
violate the procedure of Company, (ii) violate any Court Order applicable to
Seller;
(e) Transfer and Assignment. The documents to be
delivered by Seller at the Closing to effect the transfer and assignment to
Buyer of all rights, title and interest of Seller in and to the Assets are
effective to do so, subject to (i) the effects of bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
generally and equitable principles (whether considered in an action at law or
in equity), (ii) limitations imposed by federal or state law or equitable
principles upon the availability of specific performance, injunctive relief or
other equitable remedies, or (iii) other customary limitations reasonably
satisfactory to Buyer.
8.5. Certificates. Seller shall have furnished Buyer with
such certificates of its officers and others to evidence compliance with the
conditions set forth in this Article VIII as may be reasonably requested by
Buyer.
8.6. Material Changes. Since August 10, 1996, there shall
not have been any material adverse change with respect to the Business or the
Assets.
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8.7. Due Diligence Review. Buyer and its Representatives shall
have conducted a due diligence review of Seller's Books and Records, Financial
Statements, and other records and accounts of the Business, and in the sole
discretion of Buyer, Buyer shall be satisfied on the basis of such review that
there has been no breach of the representations and warranties or the
pre-closing covenants of Seller made pursuant to this Agreement. Such review
shall have no effect whatsoever on the Liability of Seller to Buyer under this
Agreement or otherwise for breach of any representations, warranties, or
covenants of Seller hereunder.
8.8. Conveyancing Documents; Release of Encumbrances. Seller
shall have executed and delivered each of the documents described in Section 3.2
hereof so as to effect the transfer and assignment to Buyer of all right, title
and interest in and to the Assets and Seller shall have filed (where necessary)
and delivered to Buyer all documents necessary to release the Assets from all
Encumbrances (other than Permitted Encumbrances), which documents shall be in a
form reasonably satisfactory to Buyer.
8.9. Permits. Buyer shall have obtained or been granted
the right to use all Permits necessary to its operation of the Business
including the Temporary Liquor Permits, but excluding the Liquor Licenses.
8.10. Other Agreements. Seller shall have executed and delivered
the Ancillary Agreements in the forms attached as exhibits hereto. Buyer shall
have entered into such employment and non-competition agreements or arrangements
with such Rehired Employees as Buyer deems necessary or appropriate for the
continued operation of the Business, on such terms as may be mutually agreeable
to Buyer and such parties, and such employment agreements shall be in full force
and effect as of the Closing.
8.11. Landlord Eptoppel Certificates. Seller shall have
delivered to Buyer a Landlord Estoppel Certificate from each landlord or lessor
for all Facility Leases as of the Closing Date.
8.12. Bulk Sales. Seller and Buyer shall comply with the
procedures of the "Bulk Sales Act" or similar law of any or all of the states in
which the Assets are situated or of any other state which may be asserted to be
applicable to the transactions contemplated hereby, including without limitation
any notice required in compliance with Division 6 of the California Commercial
Code. Seller shall furnish Buyer and Escrow Holder with the information
necessary to prepare such notice, including without limitation all names and
business addresses used by it within the last three (3) years and the location
of all the Assets to be transferred under this Agreement, at least fifteen (15)
days before the Closing Date.
ARTICLE IX
RISK OF LOSS; CONSENTS TO ASSIGNMENT
9.1. Risk of Loss. From the date hereof through the Closing
Date, all risk of loss or damage to the property included in the Assets shall be
borne by Seller, and thereafter shall be borne by Buyer. If any portion of the
Assets is destroyed or damaged by fire or any other cause on or prior to the
Closing Date, other than use, wear or loss in the ordinary course of business,
Seller shall give written notice to Buyer as soon as practicable after, but in
any event within five (5) calendar days of, discovery of such damage or
destruction, the amount of insurance, if any, covering such Assets and the
amount, if which any Seller is otherwise entitled to receive as a consequence.
Prior to the Closing Buyer shall have the option, which shall be exercised by
written notice to Seller within ten (10) calendar days after receipt of Seller
notice or if there is not ten (10) calendar days prior to the Closing Date, as
soon as practicable prior to the Closing Date, of (a) accepting such Assets in
their destroyed or damaged condition in which event Buyer shall be entitled to
the proceeds of any insurance or other proceeds payable with respect to such
loss and to such indemnification for any uninsured portion of such loss pursuant
to Section 10.3, and the full Purchase Price shall be paid for such Assets, (b)
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excluding such Assets from this Agreement, in which event the Purchase Price
shall be reduced by the amount allocated to such Assets, as mutually agreed
between the parties or (c) terminating this Agreement in accordance with Section
11.1. If Buyer accepts such Assets, then after the Closing, any insurance or
other proceeds shall belong, and shall be assigned to, Buyer without any
reduction in the Purchase Price; otherwise, such insurance proceeds shall belong
to Seller.
9.2. Consents to Assignment. Anything in this Agreement to the
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign any Contract, Lease, Permit or any claim or right or any benefit arising
thereunder or resulting therefrom if an attempted assignment thereof, without
the consent of a third party thereto, would constitute a Default thereof or in
any way adversely affect the rights of Buyer thereunder. If such consent is not
obtained, or if an attempted assignment thereof would be ineffective or would
affect the rights thereunder so that Buyer would not receive all such rights,
Seller will cooperate with Buyer, in all reasonable respects, to provide to
Buyer the benefits under any such Contract, Lease, Franchise Agreement, Permit
or any claim or right, including without limitation enforcement for the benefit
of Buyer of any and all rights of Seller against a third party thereto arising
out of the Default or cancellation by such third party or otherwise. Nothing in
this Section 9.2 shall affect Buyer's right to terminate this Agreement under
Sections 8.2 and 11.1 in the event that any consent or approval to the transfer
of any Asset is not obtained.
9.3. Facility Lease Consents. With respect to any Facility
Lease, if Seller has not obtained any required consents by the Closing Date, or
the lessor has given any notice of intention either to terminate or exercise a
right of first refusal or has commenced or threatened to commence litigation to
enjoin such assignment or to terminate such Facility Lease, the following
provisions shall apply:
(a) Facility Lease - Reasonable Consent. As to
any Facility Lease requiring that the lessor or other party shall not
unreasonably withhold its consent to Seller's assignment, Buyer shall have the
right, to be exercised on or before the Closing Date by giving written notice to
Seller, either (i) to terminate this Agreement with respect to the Facility
affected by such Facility Lease (including, at the option of Buyer, the sale of
all or a portion of the Assets relating to such Facility), in which case the
Purchase Price shall be reduced by the amount allocated to such Facility and the
related Assets or (ii) to proceed to Closing with respect to such Facility.
(b) Indemnification. Subject to the limitations
as set forth in Section 10.3(a), Seller hereby agrees (i) to defend, indemnify
and hold Buyer harmless from and against any and all losses, damages,
Liabilities, costs and expenses (including without limitation reasonable
attorneys' fees) of any type whatsoever suffered by Buyer by reason of the
attempted assignment of such Facility Lease to Buyer, and (ii) if any of the
above events result in a final cancellation or nullification of the applicable
Facility Lease or the attempted assignment from Seller to Buyer of such Facility
Lease, then Seller shall repurchase, within thirty (30) calendar days after such
cancellation or nullification, the Facility affected by such Facility Lease
(together with, at Buyer's option, all or a portion of the Assets relating to
such Facility) for a purchase price in an amount equal to the portion of the
Purchase Price allocated to such Facility and the related Assets
plus the costs of the then current Inventory relating to the operations
conducted in such Facility.
(c) Facility Lease - Consent Required. As to
any Facility Lease requiring consent, but without a reasonableness standard,
either Buyer or Seller may so terminate this Agreement with respect to the
Facility covered by such Facility Lease, and, at the option of Buyer, the
Purchase Price shall be reduced as provided in the preceding subsection.
(d) Subleases. The parties acknowledge and
agree that some of the Facility Leases may provide that, although the Facility
Lease may not be assigned by Seller without the written consent of the
Consenting Party, Seller may sublet the property covered by such Facility Lease
without such consent. If any Consenting Party refuses to give its written
consent to an assignment of such Facility Lease, or conditions its consent on
terms unacceptable to Seller or Buyer, then in lieu of assigning such Facility
Lease to Buyer, and with no adjustment in the
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Purchase Price, Seller shall sublet the Facility to Buyer on the same terms and
conditions (including rental and other payments) that are contained in the
existing Facility Lease, for the balance of the term thereof less one day.
ARTICLE X.
ACTIONS BY SELLER AND BUYER
AFTER THE CLOSING
10.1. Books and Records: Tax Matters.
(a) Books and Records. Each party agrees that
it will cooperate with and make available to the other party, during normal
business hours, all Books and Records, information and employees (without
substantial disruption of employment) retained and remaining in existence after
the Closing which are necessary or useful in connection with any tax inquiry,
audit, investigation or dispute, any litigation or investigation or any other
matter requiring any such Books and Records, information or employees for any
reasonable business purpose. The party requesting any such Books and Records,
information or employees shall bear all of the out-of-pocket costs and expenses
(including without limitation attorneys' fees, but excluding reimbursement for
salaries and employee benefits) reasonably incurred in connection with providing
such Books and Records, information or employees.
(b) Cooperation and Records Retention. Seller
and Buyer shall (i) each provide the other with such assistance as may
reasonably be requested by any of them in connection with the preparation of
any return, audit, or other examination by any taxing authority or judicial or
administrative proceedings relating to Liability for Taxes, (ii) each retain and
provide the other with any records or other information that may be relevant to
such return, audit or examination proceeding or determination, and (iii) each
provide the other with any final determination of any such audit or examination,
proceeding, or determination that affects any amount required to be shown on
any tax return of the other for any period. Without limiting the generality of
the foregoing, Buyer and Seller shall each retain, until the applicable statutes
of limitations (including any extensions) have expired, copies of all tax
returns, supporting work schedules, and other records or information that may be
relevant to such returns for all tax periods or portions thereof ending on or
before the Closing Date and shall not destroy or otherwise dispose of any such
records without first providing the other party with a reasonable opportunity to
review and copy the same.
(c) Payment of Liabilities. Following the
Closing Date and prior to Seller receiving any portion of the Purchase Price
from the Escrow, Seller shall pay through the Escrow all of the debts and
Liabilities of Seller relating to the Business pursuant to the Escrow Agreement,
including any Liability for Taxes, other than Assumed Liabilities.
10.2. Survival of Representations Etc. All of the
representations, warranties, covenants and agreements made by each party in this
Agreement or in any attachment, Exhibit, the Disclosure Schedule, certificate,
document or list delivered by any such party pursuant hereto shall survive the
Closing for a period of (and claims based upon or arising out of such
representations, warranties, covenants and agreements may be asserted at any
time before the date which shall be) two (2) years following the Closing (except
with respect to the representations and warranties set forth in Sections 4.18,
4.19, and 4.24 which shall survive until the expiration of the applicable
statute of limitations (with extensions) with respect to the matters addressed
in such sections). Each party hereto shall be entitled to rely upon the
representations and warranties of the other party set forth in this Agreement.
The termination of the representations and warranties provided herein shall not
affect the rights of a party in respect of any Claim made by such party in a
writing received by the other party prior to the expiration of the applicable
survival period provided herein.
10.3. Indemnifications.
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(a) By Seller. Seller shall, jointly and
severally, indemnify, save and hold harmless Buyer, its affiliates
and its Representatives, from and against any and all costs, losses
(including without limitation diminution in value), Taxes, Liabilities,
obligations, damages, lawsuits, deficiencies, claims, demands, and expenses
(whether or not arising out of third-party claims), including without limitation
interest, penalties, costs of mitigation, losses in connection with any
Environmental Law (including without limitation any clean-up or remedial
action), lost profits and other losses resulting from any shutdown or
curtailment of operations, damages to the environment, attorneys' fees and all
amounts paid in investigation, defense or settlement of any of the foregoing
(herein, "Damages"), incurred in connection with, arising out of, resulting from
or incident to (i) any breach of any representation or warranty or the
inaccuracy of any representation, made by Seller in or pursuant to this
Agreement; (ii) any breach of any covenant or agreement made by Seller in or
pursuant to this Agreement; (iii) any Excluded Liability or (iv) any Liability
imposed upon Buyer by reason of Buyer's status as transferee of the Business or
the Assets.
The term "Damages" as used in this Section 10.3 is not limited
to matters asserted by third parties against Seller or Buyer, but includes
Damages incurred or sustained by Seller or Buyer in the absence of third party
claims. Payments by Buyer of amounts for which Buyer is indemnified hereunder,
and payments by Seller of amounts for which such Seller is indemnified, shall
not be a condition precedent to recovery. Seller's obligation to indemnify
Buyer, and Buyer's obligation to indemnity Seller, shall not limit any other
rights, including without limitation rights of contribution which either party
may have under statute or common law. Notwithstanding the foregoing, Seller
shall in no circumstances be liable for Damages or any other liability under
this Agreement for any amounts aggregating more than the amount of the Purchase
Price.
(b) By Buyer. Buyer shall indemnify and
save and hold harmless Seller, its affiliates and subsidiaries, and its
Representatives from and against any and all Damages incurred
in connection with, arising out of, resulting from or incident to (i)
any breach of any representation or warranty or the inaccuracy of any
representation, made by Buyer in or pursuant to this Agreement; (ii) any breach
of any covenant or agreement made by Buyer in or pursuant to this Agreement; or
(iii) from and after the Closing, any Assumed Liability.
(c) Cooperation. The indemnified party shall
cooperate in all reasonable respects with the indemnifying party and such
attorneys in the investigation, trial and defense of such lawsuit
or action and any appeal arising therefrom; provided, however, that
the indemnified party may, at its own cost, participate in the investigation,
trial and defense of such lawsuit or action and any appeal arising therefrom.
The parties shall cooperate with each other in any notifications to insurers.
(d) Defense of Claims. If a claim for Damages
(a "Claim") is to be made by a party entitled to indemnification
hereunder against the indemnifying party, the party claiming such
indemnification shall, subject to Section 10.2, give written notice (a
"Claim Notice") to the indemnifying party as soon as practicable after the party
entitled to indemnification becomes aware of any fact, condition or event which
may give rise to Damages for which indemnification may be sought under this
Section 10.3. If any lawsuit or enforcement action is filed against any party
entitled to the benefit of indemnity hereunder, written notice thereof shall be
given to the indemnifying party as promptly as practicable (and in any event
within fifteen (15) calendar days after the service of the citation or summons).
The failure of any indemnified party to give timely notice hereunder shall not
affect rights to indemnification hereunder, except to the extent that the
indemnifying party demonstrates actual damage caused by such failure. After such
notice, if the indemnifying party shall acknowledge in writing to the
indemnified party that the indemnifying party shall be obligated under the terms
of its indemnity hereunder in connection with such lawsuit or action, then the
indemnifying party shall be entitled, if it so elects at its own cost, risk and
expense, (i) to take control of the defense and investigation of such lawsuit or
action, (ii) to employ and engage attorneys of its own choice to handle and
defend the same unless the named parties to such action or proceeding include
both the indemnifying party and the indemnified party and the indemnified party
has been advised in writing by counsel that there may be one or more legal
defenses available to such indemnified party that are different from or
additional to those available to the indemnifying party, in which event the
indemnified party shall be entitled, at the indemnifying party's cost, risk and
expense, to separate counsel of its own choosing, and (iii) to compromise or
settle such claim, which compromise or settlement shall be made only with the
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written consent of the indemnified party, such consent not to be unreasonably
withheld. If the indemnifying party fails to assume the defense of such claim
within fifteen (15) calendar days after receipt of the Claim Notice, the
indemnified party against which such claim has been asserted will (upon
delivering notice to such effect to the indemnifying party) have the right to
undertake, at the indemnifying party's cost and expense, the defense, compromise
or settlement of such claim on behalf of and for the account and risk of the
indemnifying party; provided, however, that such Claim shall not be compromised
or settled without the written consent of the indemnifying party, which consent
shall not be unreasonably withheld. In the event the indemnified party assumes
the defense of the claim, the indemnified party will keep the indemnifying party
reasonably informed of the progress of any such defense, compromise or
settlement. The indemnifying party shall be liable for any settlement of any
action effected pursuant to and in accordance with this Section 10.3 and for any
final judgment (subject to any right of appeal), and the indemnifying party
agrees to indemnify and hold harmless an indemnified party from and against any
Damages by reason of such settlement or judgment.
(e) Seller's Right of Offset. Anything in this
Agreement to the contrary notwithstanding, Seller may elect to pay to
Buyer any amount as to which Seller is obligated to indemnify Buyer
pursuant to any provision of this Section 10.3, up to the aggregate principal
balances of the Note, then outstanding, by means of a reduction
in the then outstanding balance of such Note in the amount so
designated by Seller (the "Offset Amount"). Following delivery by Seller to
Buyer of notice of Seller's election to utilize such offset, the outstanding
principal balance of the Note shall be decreased in an amount equal to the
Offset Amount. The exercise by Seller of such offset rights shall not eliminate
any indemnification obligations of Seller to Buyer in excess of the Offset
Amount.
(f) Product and Warranty Liability.
The provisions of this Section 10.3 shall cover, without limitation, all
Liabilities of whatsoever kind, nature or description relating, directly or
indirectly, to product liability, litigation or claims against Buyer or Seller
in connection with, arising out of, or relating to products sold from the
Facilities by Buyer or Seller.
(g) Broker and Finders. Pursuant to the
provisions of this Section 10.3, Buyer and Seller shall each indemnify, hold
harmless and defend the other party from the payment of any and all broker's and
finder's expenses, commissions, fees or other forms of compensation which may be
due or payable from or by the indemnifying party, or may have been earned
by any third party acting on behalf of the indemnifying party In connection
with the negotiation and execution hereof and the consummation of the
transactions contemplated hereby.
(h) Representatives. No individual
Representative of any party shall be personally liable for any Damages under the
provisions contained in this Section 10.3. Nothing herein shall relieve either
party of any Liability to make any payment expressly required to be made by such
party pursuant to this Agreement.
(i) Failure to Close. Notwithstanding the
provisions of this Section 10.3, in the event the Closing does not take place,
the sole and exclusive remedy for both parties shall be as set forth under
clause (iii) of Section 11.1(b) of this Agreement.
10.4. Bulk Sales. Seller and Buyer shall comply with the
procedures of the "Bulk Sales Act" or similar law of any or all of the states in
which the Assets are situated or of any other state which may be asserted to be
applicable to the transactions contemplated hereby. Seller hereby agree that the
indemnity provisions of Section 10.3 hereof shall apply to any Damages of Buyer
arising out of or resulting from the failure of any Seller or Buyer to comply
with any such laws.
10.5. Name and Name Change. Seller hereby grant to Buyer,
effective as of the Closing Date, the right to use the names "Texas Loosey's,"
"Texas Loosey's Chili Parlor and Saloon," "Texas Tested Tried and Trusted" and
any and all variations thereof for any lawful business or other lawful purpose
whatsoever, and Seller shall have no right whatsoever to such names.
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10.6. Return of Liquor License. Following any event of default
by Buyer under the Security agreement which is not cured by Buyer within any
applicable grace period, Buyer shall cooperate with Seller, and shall at the
request of Seller execute and deliver such documents and releases as may be
required or necessary in order to transfer the Liquor Licenses (or any
subsequent liquor license issued to Buyer with respect to the Business) to
Seller and to enable Seller to utilize such liquor licenses in the operation of
the Business by Seller following the exercise by Sellers of any remedies of
Seller available to them under the Security Agreement.
ARTICLE XI.
MISCELLANEOUS
11.1. Termination.
(a) Termination. This Agreement may be
terminated at any time prior to Closing:
(i) By mutual written consent of Buyer
and Seller;
(ii) By Buyer or Seller if the Closing
shall not have occurred on or before thirty (30) days after the date hereof;
provided however, that this provision shall not be available to Buyer if Seller
has the right to terminate this Agreement under clause (iv) of this Section
11.1(a), and this provision shall not be available to Seller if Buyer has the
right to terminate this Agreement under clause (iii) of this Section 11.1(a);
(iii) By Buyer if there is a material
breach of any representation or warranty set forth in Article IV hereof or any
covenant or agreement to be complied with or performed by Seller pursuant to
the terms of this Agreement or the failure of a condition set forth in
Article VIII to be satisfied (and such condition is not waived in writing
by Buyer) on or prior to the Closing Date, or the occurrence of any event
which results or would result in the failure of a condition set forth
in Article VIII to be satisfied on or prior to the Closing Date, provided
that Buyer may not terminate this Agreement prior to the Closing if Seller has
not had an adequate opportunity to cure such failure; or
(iv) By Seller if there is a material
breach of any representation or warranty set forth in Article V hereof or
of any covenant or agreement to be complied with or performed by Buyer
pursuant to the terms of this Agreement or the failure of a condition set
forth in Article VII to be satisfied (and such condition is not waived
in writing by Sellers) on or prior to the Closing Date, or the occurrence
of any event which results or would result in the failure of a condition set
forth in Article VII to be satisfied on or prior to the Closing Date provided
that, Seller may not terminate this Agreement prior to the Closing Date if Buyer
has not had an adequate opportunity to cure such failure.
(b) In the Event of Termination. In the event
of termination of this Agreement:
(i) Each party will redeliver all
documents, work papers and other material of any other party relating to the
transactions contemplated hereby, whether so obtained before or after the
execution hereof, to the party furnishing the same;
(ii) The provisions of Section 11.11
(relating to confidentiality) shall continue in full force and effect; and
(iii) If this Agreement is terminated
pursuant to clause (iii) of Section 11.1(a), Seller agrees to pay Buyer's
expenses in connection with the due diligence, audit of Business, legal work,
and financing expenses for this transaction up to a maximum reimbursement of
Twenty Thousand Dollars ($20,000); if this Agreement
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is terminated pursuant to clause (iv) of Section 11.1(a), Buyer agrees to pay
Seller's expenses in connection with any legal work for this transaction up to a
maximum reimbursement of Five Thousand Dollars ($5,000). The foregoing
provisions shall not limit or restrict the availability of specific performance
or other injunctive relief to the extent that specific performance or such other
relief would otherwise be available to a party hereunder.
11.2. Assignment. Neither this Agreement nor any of the rights
or obligations hereunder may be assigned by any party without the prior written
consent of the other parties; except that Buyer may, without such consent,
assign all such rights and obligations to a wholly-owned subsidiary (or a
partnership controlled by Buyer) or subsidiaries of Buyer or to a successor in
interest to Buyer which shall assume all obligations and Liabilities of Buyer
under this Agreement. Subject to the foregoing, this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, and no other person shall have any right,
benefit or obligation under this Agreement as a third party beneficiary or
otherwise.
11 3. Notices. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when received if
personally delivered; when transmitted if transmitted by telecopy, electronic or
digital transmission method; the day after it is sent, if sent for next day
delivery to a domestic address by recognized overnight delivery service (e.g..
FED EX); and upon receipt, if sent by certified or registered mail, return
receipt requested. In each case notice shall be sent to:
If to Seller, addressed to;
Mr. & Mrs. Kent & Jenny Andersen
205 Bathurst Rd.
Riverside, California 92592
If to Buyer, addressed to:
Texas Loosey's Steakhouse & Saloon, Inc.
1752 Clement Street
San Francisco, California, 94121
Attention: Hiram J. Woo
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
11.4. Choice of Law. This Agreement shall be construed,
interpreted and the rights of the parties determined in accordance with the laws
of the State of California (without reference to the choice of law provisions of
California law), except with respect to matters of law concerning the internal
corporate affairs of any corporate entity which is a party to or the subject of
this Agreement, and as to those matters the law of the jurisdiction under which
the respective entity derives its powers shall govern.
11.5. Entire Agreement Amendments and Waivers. This Agreement,
the Ancillary Agreements, together with all exhibits and schedules hereto and
thereto (including the Disclosure Schedule), constitute the entire agreement
among the parties pertaining to the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the parties, including without limitation all letters of intent and
agreements in principle. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto. No
amendment, supplement, modification or waiver of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
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11.6. Entire Agreement; Amendments and Waivers. This
Agreement, the Ancillary agreements, together shall constitute one and the
same instrument.
11.7. Expenses. Except as otherwise specified in this
Agreement, each party hereto shall pay its own legal, accounting, out-of-pocket
and other expenses incident to this Agreement and to any action taken by such
party in preparation for carrying this Agreement into effect.
11.8. Invalidity. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
11.9. Titles: Gender. The titles, captions or headings of
the Articles and Sections herein, and the use of a particular gender, are for
convenience of reference only and are not intended to be a part of or to affect
or restrict the meaning or interpretation of this Agreement.
11.10. Publicity. Neither Buyer nor the Seller, nor any of their
affiliates, shall make any public announcements prior to the Closing (including,
without limitation, any announcement to any employees, customers or suppliers)
in respect of this Agreement or otherwise communicate with any news media,
except as the parties may mutually agree. Seller shall, and shall cause its
attorneys, accountants and other representatives to, cooperate with Buyer and
its affiliates in providing required disclosure pursuant to the federal
securities laws, including in connection with any registration statements of
Buyer or its affiliates.
11.11. Confidential Information.
(a) No Disclosure. The parties acknowledge that
the transaction described herein is of a confidential nature and shall not be
disclosed except to consultants, advisors and affiliates, or as required by
law, until such time as the parties make a public announcement regarding the
transaction as provided in Section 11.10.
(b) Preservation of Confidentiality. In
connection with the negotiation of this Agreement, the preparation for the
consummation of the transactions contemplated hereby, and the
performance of obligations hereunder, Buyer acknowledges that it will have
access to confidential information relating to Seller, including technical,
manufacturing or marketing or financial information, ideas, recipes, formulas,
methods, developments, inventions, improvements, business plans, trade secrets,
scientific or statistical data, diagrams, drawings, specifications or other
proprietary information relating thereto, together with all analyses,
compilations, studies or other documents, records or data prepared by Seller or
Buyer or their respective Representatives which contain or otherwise reflect or
are generated from such information ("Confidential Information"). The term
"Confidential Information" does not include information received by Buyer in
connection with the transactions contemplated hereby which (i) is or becomes
generally available to the public other than as a result of a disclosure by
Buyer or its Representatives, (ii) was within Buyer's possession prior to its
being furnished to Buyer by or on behalf of Seller in connection with the
transactions contemplated hereby, provided that the source of such information
was not known by Buyer to be bound by a confidentiality agreement with or other
contractual, legal or fiduciary obligation of confidentiality to Seller or any
other Person with respect to such information or (iii) becomes available to
Buyer on a non-confidential basis from a source other than Seller or any of
their respective Representatives, provided that such source is not bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to Seller or any other Person with respect to such
information.
(c) Buyer shall treat all Confidential
Information as confidential, preserve the confidentiality thereof and not
disclose any Confidential Information, except to its Representatives and
Affiliates who need to know such Confidential Information in connection with
the transactions contemplated hereby. Buyer shall use all reasonable efforts to
cause its Representatives to treat all Confidential Information as confidential,
preserve the
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confidentiality thereof and not disclose any Confidential Information. Buyer
shall be responsible for any breach of this Agreement by any of its
Representatives. If, however, Confidential Information is disclosed, Buyer shall
immediately notify Seller in writing and take all reasonable steps required to
prevent further disclosure.
(d) Until the Closing or the termination of this
Agreement, all Confidential Information shall remain the property of the
party who originally possessed such information. In the event of
the termination of this Agreement for any reason whatsoever, Buyer shall,
and shall cause its Representatives to, return to Seller all Confidential
Information (including all copies, summaries and extracts thereof) furnished to
Buyer by Seller in connection with the transactions contemplated hereby.
(e) If Buyer or any of its Representatives or
Affiliates is requested or required (by oral questions, interrogatories,
requests for information or documents in legal proceedings, subpoena, civil
investigative demand or other similar process) or is required by operation of
law to disclose any Confidential Information, Buyer shall provide Seller with
prompt written notice of such request or requirement, which notice shall,
if practicable, be at least 48 hours prior to making such disclosure,
so that Seller may seek a protective order or other appropriate remedy
and/or waive compliance with the provisions of this Agreement. If, in the
absence of a protective order or other remedy or the receipt of such a waiver,
Buyer or any of its Representatives are nonetheless, in the opinion of counsel,
legally compelled to disclose Confidential Information, then Buyer may disclose
that portion of the Confidential Information which such counsel advises is
legally required to be disclosed provided that Buyer uses its reasonable efforts
to preserve the confidentiality of the Confidential Information, whereupon such
disclosure shall not constitute a breach of this Agreement.
11.12. Cumulative Remedies. All rights and remedies of either
party hereto are cumulative of each other and of every other right or remedy
such party may otherwise have at law or in equity, and the exercise of one or
more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies.
11.13. Service of Process, Consent to Jurisdiction.
(a) Service of Process. Each parties hereto
irrevocably consents to the service of any process, pleading, notices or other
papers by the mailing of copies thereof by registered, certified or first class
mail, postage prepaid, to such party at such party's address set forth herein,
or by any other method provided or permitted under California law.
(b) Consent and Jurisdiction. Each party hereto
irrevocably and unconditionally (1) agrees that any suit, action or other
legal proceeding arising out of this Agreement may be brought in the United
States District Court for the Central District of California or, if such court
does not have jurisdiction or will not accept jurisdiction, in any court of
general jurisdiction in the County of Orange, California; (2) consents to the
jurisdiction or any such court in any such suit, action or proceeding; and
(3) waives any objection which such party way have to the laying of venue
of any such suit, action or proceeding in any such court.
11.14. Arbitration. Notwithstanding anything herein to the
contrary, in the event that there shall be a dispute among the parties arising
out of or relating to this Agreement, including without limitation the
indemnities provided in Article X, or the breach thereof, the parties agree that
such dispute shall be resolved by final and binding arbitration in Orange
County, California, administered by three (3) arbitrators, one to be selected
directly by each party and the third arbitrator to be selected by the two
arbitrators so chosen. Such arbitration proceeding shall be conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect or such other procedures as the parties may agree to
prior to the Closing. Depositions may be taken and other discovery may be
obtained during such arbitration proceedings to the same extent as authorized in
civil judicial proceedings. Any award issued as a result of such arbitration
shall be final and binding between the parties thereto, and shall be enforceable
by any court having jurisdiction over the party against whom enforcement is
sought. The fees and expenses of such
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arbitration (including reasonable attorneys' fees) or any action to enforce an
arbitration award shall be paid by the party that does not prevail in such
arbitration.
11.15. Attorneys' Fees. If any party to this Agreement brings an
action to enforce its rights under this Agreement, the prevailing party shall be
entitled to recover its costs and expenses, including without limitation
reasonable attorneys' fees, incurred in connection with such action, including
any appeal of such action.
11.16. Nature of Obligations. The obligations of Seller
under this Agreement shall be joint and several.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed on their respective behalf, by their
respective officers thereunto duly authorized, all as of the day and year first
above written.
"BUYER"
TEXAS LOOSEY'S STEAKHOUSE & SALOON, INC.
a Delaware corporation
By __________________________________________
Richard M. Lee, Chairman and
Chief Executive Officer
"SELLERS"
By ___________________________________________
Kent Andersen, Proprietor
By ___________________________________________
Jenny Andersen, Proprietor
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EXHIBIT 10.14
<PAGE>
JEAN ALLEN ESCROW CO., INC. ESCROW NO. 7794.
4012 KATELLA AVENUE, SUITE #103 -------------------
LOS ALAMOS, CALIFORNIA 90720 ESCROW OFFICER CHERI L. PARKS.
TELEPHONE (310) 799-3344 ---------------
FACSIMILE (310) 799-3345 DATE OCTOBER 31, 1996
-----------------
--SALE OF BUSINESS ESCROW INSTRUCTIONS\PAGE ONE--
This agreement made this 31st DAY OF OCTOBER, 1996, Between KENT E. ANDERSEN
AND JENNY A. ANDERSEN whose mailing address is: 205 BATHURST ROAD, RIVERSIDE,
CA 92506 hereinafter known and designated as the Sellers, and
TEXAS LOOSEY'S STEAKHOUSE AND SALOON, INC., A DELAWARE CORPORATION whose
mailing address is 1752 CLEMENT ST., SAN FRANCISCO, CA 94121 hereinafter known
and designated as the Buyers.
WITNESSETH:
Whereas the Sellers are the owners of the RESTAURANT businesses known as:
"TEXAS LOOSEY'S OF RIVERSIDE" located at: 151 E. ALESSANDRO, RIVERSIDE,
CALIFORNIA 92508 "TEXAS LOOSEY'S OF NORCO" located at: 1825 HAMNER AVENUE,
SPACE A-E, NORCO, CALIFORNIA 91760
And whereas, the Sellers agree to sell and the Buyers agree to purchase the
said businesses from the Sellers on the following terms and conditions:
1. Purchase price of Assets related to the $563,177.00
"TEXAS LOOSEY'S RESTAURANTS" pursuant to that
certain ASSET PURCHASE AGREEMENT DATED 9-23-96
between the parties hereto.
Inventory of Merchandise--priced at current $ NONE
wholesale prices.
Total Purchase Price $563,177.00
Buyers Deposit in Escrow upon execution of these $ 22,000.00
Escrow Instructions $5,000.00 and Buyers agree to
deposit an additional $17,000.00 cash plus closing
costs into escrow upon demand by escrow holders
prior to the transfer of the liquor licenses
involved in this transaction.
Assume SBA Loan in favor of WELLS FARGO BANK $136,226.25--approx.
in full compliance with Section 24074 of the
Business and Professions Code of the State
of California
Assume SBA Loan in favor of BAY CITIES NATIONAL $237,302.71--approx.
BANKD in full compliance with Section 24074 of the
Business and Professions Code of the State
of California.
Cancellation of Two Notes and Security Agreements $127,907.00
held by Buyer which were originally in favor of
RIVER-DIEGO INVESTMENT CORP. in full compliance
with Section 24074 of the Business and Professions Code
of the State of California.
Promissory Note and Security Agreement--In $ 39,741.04--approx.
favor of Sellers.
<PAGE>
--PAGE TWO--
This Escrow shall close on the 30TH day of DECEMBER, 1996 or after when
permanent ON-SALE GENERAL LIQUOR LICENSE NO. 47-282905 AND ON-SALE GENERAL
LIQUOR LICENSE NO. 47-241658 have been transferred into the names of the
within-named Buyers according to the rules and regulations of the Department of
Alcoholic Beverage Control Board; and the parties agree to do all things
necessary to close said Escrow on the above date.
2. The Sellers agree to transfer to the Buyers the aforementioned valid ON-SALE
GENERAL LIQUOR LICENSES to the licensed premises.
3. The parties hereto agree to pay all Escrow Charges including but not limited
to Chattel Searches and Publication Costs on a basis of 50% PLUS SELLERS' FEES
OVER $750.00 from the Buyers and 50% from the Sellers UPTO A MAXIMUM OF $750.00
4. No inventory of merchandise shall be included in the selling and purchase
price.
5. Possession of premises shall be granted the Buyers as of actual date
TEMPORARY ON-SALE GENERAL LIQUOR LICENSES have been issued to the within-named
Buyers according to the rules and regulations of the Department of Alcoholic
Beverage Control Board provided that all funds have been deposited into escrow
as required under Paragraph No. 1.
6. WITH THE EXCEPTION OF THE PRO RATIONS FOR THE PERSONAL PROPERTY TAXES AND
REAL PROPERTY TAXES AND INTEREST ON THE SBA LOANS BEING ASSUMED, you as escrow
holders are authorized and instructed NOT TO MAKE ANY PRO RATIONS through this
escrow transaction, and the Parties agree that any PRO RATIONS necessary shall
be handled OUTSIDE OF ESCROW pursuant to the terms and conditions of the ASSET
PURCHASE AGREEMENT DATED SEPTEMBER 23, 1996.
You as escrow holders are authorized and instructed to ADJUST the INTEREST on
the Promissory Note and Security Agreement reflected in Paragraph No. 1
herein to the actual date physical possession has been granted Buyers by
Sellers as the interest shall commence on the date of possession.
7. The undersigned Buyers agree to negotiate NEW LEASES OR ASSIGNMENTS OF THE
LEASES covering the business premises known as:
151 E. ALESSANDRO, RIVERSIDE, CALIFORNIA 92508
1825 HAMNER AVENUE, SPACE A-E, NORCO, CALIFORNIA 91760
After the Buyers have successfully obtained the executed NEW LEASES AND/OR
ASSIGNMENTS OF LEASES, the Buyers agree to deposit a copy of same into escrow
prior to the transfer of the liquor licenses and to provide evidence of same
directly to the Department of Alcoholic Beverage Control Board.
The undersigned Buyers and Sellers hereby acknowledge and agree that there
shall be no transfer of any LEASE SECURITY DEPOSIT under the existing leases as
stipulated hereinabove.
8. THERE IS NO REAL ESTATE BROKER INVOLVED IN THIS ESCROW TRANSACTION.
9. Buyers shall reimburse Sellers through escrow sales tax on fixtures and
equipment based on the value of $10,000.00 on "RIVERSIDE STORE"
and $10,000.00 "NORCO STORE" or as required by the State Board of
Equalizationiton.
10. The undersigned Parties, being the Buyers and Sellers, hereby agree to
allocate the purchase price of $563,177.00 as follows:
<PAGE>
--PAGE THREE\ESCROW NO. 7794--
The breakdown of the "RIVERSIDE AND NORCO STORES" are as follows:
FURNITURE, FIXTURES AND EQUIPMENT $ 20,000.00
(10,000.00 FOR EACH LOCATION)
LIQUOR LICENSE $ 45,000.00
LEASEHOLD IMPROVEMENTS $448,177.00
GOODWILL $ 50,000.00
TOTAL PURCHASE PRICE $563,177.00
11. The purchase price shall include all items as indicated in that certain
ASSET PURCHASE AGREEMENT DATED SEPTEMBER 23, 1996 which includes all FURNITURE,
FIXTURES AND EQUIPMENT indicated under said agreement. The undersigned Buyers
and Sellers agree to furnish you as escrow holders a copy of same
upon the close and completion of escrow.
12. It is mutually agreed between the Sellers and Buyers, the parties
hereto, that no representations have been made by either party other than those
specifically set forth in these Escrow Instructions or the ASSET PURCHASE
AGREEMENT DATED SEPTEMBER 23, 1996 together with all its attachments.
13. The Buyers and Sellers agree to furnish JEAN ALLEN ESCROW CO., INC. with
releases from the STATE BOARD OF EQUALIZATION AND EMPLOYMENT DEVELOPMENT
DEPARTMENT prior to the close of escrow.
14. The Buyers expressly agree to assume and perform, as of possession date by
Buyers and as a part of the purchase price, the existing SBA Loan held by WELLS
FARGO BANK, whose address is P.O. BOX 11055, SAN JOSE, CALIFORNIA 95103, with
an approximate unpaid principal balance of $136,226.25, payable $4,062.86 or
more per month, including interest at the rate of ELEVEN (11%) percent per
annum, payments due on the 1ST day of each month. The Sellers warrant said
obligation may be assumed by the Buyers named herein as a part of the purchase
price, and Buyers agree to execute any and all documents required by the
holder of said SBA Loan, in order to affect the assumption thereof. You as
escrow holders are herein authorized and instructed to secure Beneficiary
Statement from the holder of said SBA Loan subject to the approval of the
parties hereto on the principal balance due and owing as of the date Buyers
take physical possession of subject business and premises; and any difference
in the principal balance due and owing shall be adjusted by the PROMISSORY
NOTE AND SECURITY AGREEMENT IN FAVOR OF SELLERS.
The undersigned Parties, being the Buyers and Sellers hereby acknowledge and
agree that the Assumption of the SBA Loan can only be completed after the
creditors' claims of greater or equal priority have been satisfied in full
compliance with Section 24074 of the Business and Professions Code in the State
of California.
In the event that there are insufficient funds to satisfy the creditors of
greater or equal priority, then the aforementioned Assumption shall not be
completed until such time as the said creditors are satisfied.
15. The Buyers expressly agree to assume and perform, as of possession date by
Buyers and as a part of the purchase price, the existing SBA Loan held by BAY
CITIES NATIONAL BANK, whose address is 1333 S. PACIFIC COAST HIGHWAY, REDONDO
BEACH, CA 90277, with an approximate unpaid principal balance of $237,302.71,
payable $3,822.72 or more per month, including interest at the rate of ELEVEN
(11%) percent per annum, payments due on the 1ST day of each month. The Sellers
warrant said obligation may be assumed by the Buyers named herein as a part
of the purchase price, and Buyers agree to execute any and all documents
required by the holder of said SBA Loan, in order to affect the
assumption thereof. You as escrow holders are herein authorized
and instructed to secure Beneficiary Statement from
<PAGE>
--PAGE THREE...CONTINUED\ESCROW NO. 7794--
the holder of said SBA Loan subject to the approval of the parties
hereto on the principal balance due and owing as of the date Buyers take
physical possession of subject business and premises; and any difference in the
principal balance due and owing shall be adjusted by the PROMISSORY NOTE AND
SECURITY AGREEMENT IN FAVOR OF SELLERS.
The undersigned Parties, being the Buyers and Sellers hereby acknowledge and
agree that the Assumption of the SBA Loan can only be completed after the
creditors' claims of greater or equal priority have been satisfied in full
compliance with Section 24074 of the Business and Professions Code in the State
of California.
In the event that there are insufficient funds to satisfy the creditors of
greater or equal priority, then the aforementioned Assumption shall not be
completed until such time as the said creditors are satisfied.
16. The undersigned Parties, being the Buyers and Sellers, hereby agree that
the Buyers shall payoff both SBA Loans as stipulated in Paragraph No. 14 and 15
of these Instructions upon the earlier of: 1) the date which is SIX (6) MONTHS
following the date of possession by Buyers or 2) the date of Initial Public
Offering of the stock in Buyers' corporation.
17. The undersigned Parties, being the Buyers and Sellers, hereby acknowledge
and agree that this escrow transaction involves the cancellation of Two Notes
and Security Agreements with an unpaid balance of $127,907.00 originally held
by RIVER-DIEGO INVESTMENT CORP. and now owned by the Buyers. Upon the close and
completion of escrow, Buyers agree to hand Sellers outside of escrow, the
Original Notes and Security Agreements marked "PAID" together with a full
release of said debts from RIVER-DIEGO INVESTMENT CORP. and RON WALTON; and you
as escrow holders shall not be concerned therewith. The above cancellation of
debts shall only be completed after the creditors' claims of greater or equal
priority have been satisfied in full compliance with Section 24074 of the
Business and Professions Code in the State of California.
In the event that there are insufficient funds to satisfy the creditors of
greater or equal priority, then the aforementioned cancellation of debt shall
not be completed until such time as the said creditors are satisfied.
18. The Sellers agree to accept: and the Buyers agree to execute, as a part of
the purchase price, Promissory Note in the APPROXIMATE principal amount of
$39,741.04 (EXACT BALANCE TO BE ADJUSTED BY THE SBA LOANS AS INDICATED
HEREINABOVE), referred to on Page One, payable INTEREST ONLY APPROXIMATELY OF
$331.18 or more per month, including interest at the rate of TEN (10%) percent
per annum, first payment shall commence Thirty (30) days after date physical
possession has been granted Buyers and continue monthly thereafter for a period
of SIX (6) MONTHS from the date of the first INTEREST ONLY payment, at which
time all remaining principal and accrued interest shall become all due and
payable in full; Note to be delivered to Sellers at the close of this
transaction. Note shall be secured by a Security Agreement covering all
securable assets of said business.
Said Promissory Note shall contain the following recitals:
"In the event of sale, transfer, assignment or removal of personal property
located at 151 E. ALESSANDRO, RIVERSIDE, CALIFORNIA 92508 or 1825
HAMNER AVENUE, SPACE A-E, NORCO, CALIFORNIA 91760, securing this Note, the
unpaid balance of principal and interest, then due on the Note shall become
due and payable at the option of the holders of said Note."
<PAGE>
--PAGE THREE...CONTINUED\ESCROW NO. 7794--
"Promissors agree to pay a late charge penalty of FIVE (5%) percent of any
installment not paid within TEN (10) days of the due date of said installment."
"In the event of Initial Public Offering of Buyers' corporation, the unpaid
balance of principal and interest, then due on this Note shall become due and
payable at the option of the holders of said Note."
19. You as escrow holders shall prepare a Uniform Commercial Code Form UCC-1,
"Financing Statement," securing the aforementioned Promissory Note to reflect
as Item No. 6 thereon the following recital:
"Furniture, removeable trade fixtures, equipment, accounts, contract rights,
leasehold, inventory and additions thereof, proceeds of the same or similar
type hereafter acquired by the Debtors, together with the proceeds of any
insurance policies covering the herein described collateral located at 151 E.
ALESSANDRO, RIVERSIDE, CALIFORNIA 92508 and 1825 HAMNER AVENUE, SPACE
A-E, NORCO, CALIFORNIA 91760."
Further, you shall use the above recital on Exhibit "A," Schedule of
Collateral, which shall be attached to the Security Agreement referred to
above. (SAID EXHIBIT "A" SHALL BE A DUPLICATE OF SCHEDULE IN THE ASSET PURCHASE
AGREEMENT.)
The Uniform Commercial Code Form UCC-1, Financing Statement, is to be filed at
the close of escrow or within Ten (10) days after date physical possession has
been granted Buyers, whichever date is first to occur, with the Secretary of
State, Uniform Commercial Code Division, in Sacramento, California.
20. The Buyers named herein agree to maintain insurance coverage satisfactory
to SBA Lienholders and Sellers during the term of said Loans and Promissory
Note referred to in these Instructions with evidence of same to be delivered to
the SBA Lienholders and Sellers outside of escrow at the close of this
transaction.
21. The parties hereto agree to direct you and you are hereby directed, after
the requirements for transfer as provided in Section 24049 are satisfied, to
pay out of the purchase price or consideration the claims of the bonafide
creditors of the Sellers who file their claims with you before you are notified
by the Department of Alcoholic Beverage Control Board of its approval of the
transfer of the ON-SALE GENERAL LIQUOR LICENSES involved in this transaction,
or if the purchase price or consideration is not sufficient to pay such claims
in full, to distribute the consideration in accordance with Section 24074 of
the Business and Professions Code; and you shall make the payment or
distribution within a reasonable time after the completion of the transfer of
said Licenses.
22. Subject to the precedent recording requirements, the parties shall
immediately, and no later than Fourteen (14) days from opening date of escrow,
make the first available appointment with the proper office of the Department
of Alcoholic Beverage Control and shall cause an application to be made at the
proper district office of the Department of Alcoholic Beverage Control for the
transfer of the alcoholic beverage licenses intended to be transferred, at
which time, Buyers shall pay the liquor license transfer fees, liquor license
fees, incidental fees, required by the Department, and the close of this escrow
shall be subject to the Department's approval of the transfer and permanent
issuance of the liquor licenses to the Buyers.
23. Sellers warrant and represent to Buyers, there are no pending citations,
violations or disciplinary proceedings against the ON-SALE GENERAL LIQUOR
LICENSES involved herein, and should any occur during the term of this escrow,
the Sellers agree to do all necessary things, including stipulating, making an
offer in compromise and paying any
<PAGE>
--PAGE THREE...CONTINUED\ESCROW NO. 7794--
assessment imposed or acceptable by the Department of Alcoholic Beverage
Control to dispose of such action in the earliest possible manner within the
prescribed time period in order to complete the ON-SALE GENERAL LIQUOR LICENSE
transfers to the Buyers.
24. The Buyers warrant that there is nothing in the Buyers' record, criminal or
otherwise, that would prevent the issuance of said liquor licenses to the
within named Buyers. The Buyers further represent and warrant as of the closing
date of escrow that Buyers have never been convicted of a felony and as far as
known to Buyers, Buyers are qualified to hold the Alcoholic Beverage Licenses
to be transferred hereunder.
25. It is understood and agreed between the Parties hereto that there is no
Merchandise Inventory involved so far as this transaction is concerned; and you
as escrow holders shall be held harmless in connection therewith.
26. Buyers acknowledge that the County Personal Property Taxes were billed in
the name of the Sellers, Sellers having been the owner of record as of the lien
date of March 1, 1996. However, since the taxes will be for the fiscal year
beginning July 1, 1996 and ending June 30, 1997, all or part of which may
follow Buyers' possession date, Sellers will be responsible for the entire
taxes billed and warrant to pay the same prior to the delinquent date and to
hold Buyers harmless of and against any liability for the same. YOU AS ESCROW
HOLDERS ARE AUTHORIZED AND INSTRUCTED TO PRO RATE SAME AS OF THE DATE OF
POSSESSION.
27. Sellers hereby warrant to Buyers that the following is a list of all
business names and addresses which have been used by the Sellers within the
last THREE (3) YEARS:
"TEXAS LOOSEY'S OF RIVERSIDE," 151 E. ALESSANDRO, RIVERSIDE, CA
"TEXAS LOOSEY'S OF NORCO," 1825 HAMNER AVENUE, SPACE A-E, NORCO, CA
28. The parties hereto hereby instruct you as escrow holder, on their behalf
and at their expense, to:
(A) Record and publish a Notice to Creditors of Bulk Sale and
Intention to transfer Liquor License.
(B) Obtain for the benefit of the Parties hereto an updated Search
for Liens from the Secretary of State, Sacramento, California on:
(i.) Seller Name--at any and all addresses
(ii.) Business Name--at business address
Escrow holder is authorized and instructed to obtain demands and
releases of any liens shown on said report and pay said demands,
subject to Sellers' approval, from Buyers' down payment unless
otherwise instructed by the parties hereto. No title insurance or
guarantee is being obtained in connection with this report and escrow
holder is relieved of all responsibility and/or liability for the
sufficiency or correctness of said report and for any liens
which may be filed after date of said report and prior to close
of escrow.
(C) Obtain a County Search for Abstracts of Judgment and Tax Liens
from the county in which business is located on:
(i.) Seller Name--at business address
(ii.) Business Name--at business address
Escrow holder is authorized and instructed to obtain demands and
releases of any liens shown on said report and pay said demands,
subject to Sellers' approval, from Buyers' down payment. No title,
insurance or guarantee is being obtained in connection with this
report and escrow holder is relieved of all responsibility
and/or liability for the
<PAGE>
--PAGE THREE...CONTINUED\ESCROW NO. 7794--
sufficiency or correctness of said report and for any liens which may
be filed after date of said report and prior to close of escrow.
(D) Within TEN (10) days of Buyers' possession, if earlier, file a Uniform
Commercial Code Financing Statement, together with such other
applicable amending UCC forms as may be handed you, if any, with the
Secretary of State.
Further, the parties authorize payment, from funds on deposit in escrow, of the
charges for any and all of these procedures, when required or billed. You as
escrow holders are authorized and instructed to charge the respective parties
on a 50-50 basis SUBJECT TO MAXIMUM INDICATED UNDER PARAGRAPH NO. 3 OF THESE
INSTRUCTIONS for all the above charges EXCEPTING as otherwise stipulated
hereinabove.
29. Buyers shall cause to be handed you Corporate Resolution reflecting thereon
authorization for execution of all documents enabling said Buyers to purchase
subject assets prior to date physical possession is granted Buyers by Sellers
or within Fifteen (15) days from the opening of this escrow transaction.
30. Buyers warrant that the Buying corporation involved herein this escrow is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware and has full power to enter into this escrow
transaction and consummate this transaction in its entirety.
31. The parties expressly acknowledge and agree that upon the transfer of the
California alcoholic beverage license to the Buyers and ownership of the funds
deposited or to be deposited in escrow toward the purchase price has passed to
the Sellers, subject to the interest therein of Sellers bona fide creditors, if
any, but in any event, Buyers have no claim to or interest therein, and escrow
holder shall proceed pursuant to the provisions of the California Alcoholic
Beverage Control Act, to treat and distribute such funds accordingly with no
further liability in so doing.
32. The parties acknowledge that certain funds for escrow costs, pro rations
and reimbursements, usually referred to as closing costs of the Buyers are paid
at and with the intent of closing the escrow. It is hereby agreed that the
payment of such funds by the Buyers, in the amount furnished Buyers by escrow
holder, shall constitute Buyers acknowledgement and approval of the close of
escrow.
33. The Buyers and Sellers are entering into this escrow ready, willing and
able to consummate the sale and purchase of said businesses and have
investigated same to their entire satisfaction.
34. In the event that Buyers or Sellers utilize "facsimile" transmitted signed
documents, Buyers and Sellers hereby agree to accept and hereby agree to
instruct you as escrow holders to rely upon such documents as if they bore
original signatures. Buyers and Sellers herein acknowledge and agree to provide
to the other party, within Seventy-Two (72) hours of transmission, such
documents bearing original signatures, by US Express Mail. Buyers and Sellers
further acknowledge and agree that documents with non-original signatures may
not be accepted for recording by the County Recorder or filing by the Secretary
of State of California, thus making it impossible for the closing of a
customary escrow without submission of original documents.
35. The parties herein instruct you as escrow holders that if for any reason
you are required to hold funds after the scheduled closing date of escrow,
escrow holders are instructed without further signatures required to withhold
an escrow fee of $50.00 per month from the funds on deposit with escrow holders
regardless of who deposited such funds.
<PAGE>
--PAGE THREE...CONTINUED\ESCROW NO. 7794--
Said HOLD-OPEN fee will only be charged and collected by escrow holders after
holding said funds for 90 days after the date set for disbursement, including
the scheduled closing date, of the funds held. Additionally the parties herein
irrevocably instruct you as escrow holders to automatically cancel this escrow
without further instructions when all funds on deposit have been disbursed.
36. THE UNDERSIGNED PARTIES UNDERSTAND AND AGREE THAT THE ASSET PURCHASE
AGREEMENT DATED SEPTEMBER 23, 1996 BY AND BETWEEN THE PARTIES IS HEREBY
INCORPORATED INTO THIS ESCROW; HOWEVER, THE PARTIES FURTHER AGREE THAT THESE
ESCROW INSTRUCTIONS CONSTITUTE THE SOLE INSTRUCTIONS TO ESCROW HOLDERS. THE
UNDERSIGNED PARTIES HEREBY ACKNOWLEDGE THAT YOU AS ESCROW HOLDERS ARE BOUND AND
INSTRUCTED ONLY BY THESE ESCROW INSTRUCTIONS. SHOULD THE ASSET PURCHASE
AGREEMENT CONTAIN ANY INSTRUCTIONS TO ESCROW HOLDERS, YOU AS ESCROW HOLDERS
SHALL NOT BE CONCERNED OR LIABLE IN CONNECTION THEREWITH.
- ------------------------------------------------------------------------------
JEAN ALLEN ESCROW CO., INC. IS LICENSED BY THE DEPARTMENT OF CORPORATIONS,
STATE OF CALIFORNIA; SAID LICENSE IS DATED MARCH 21, 1974 AND IS NUMBERED
963-0480.
- ------------------------------------------------------------------------------
<PAGE>
- PAGE FOUR -
It is understood and agreed between the buyer and seller, that in the event any
claims be received into escrow for any taxes due under the Alcoholic Beverage
Tax Law, the Sales and Use Tax Law, the Personal Income Tax Law, or the Bank and
Corporation Tax Law, or on unsecured property as defined in Section 134 of the
Revenue and Taxation Code, or for payments due under the Unemployment Insurance
Code, you are authorized and instructed to pay the same at close of escrow, or
prior to close, if said payment is a condition precedent to the transfer of the
Alcoholic Beverage License, as set forth in Section 24049 of Business and
Professions Code, from the funds deposited in escrow, you are instructed to
credit such payment to the Buyer against the purchase price. This being your
instruction and authorization to make such payment without further authority for
so doing.
It is understood and agreed between the buyer and seller, that after the
requirements for transfer of the Alcoholic Beverage License, as provided for in
Section 24049 of the Business and Professions Code, are satisfied, you are
authorized and instructed to pay out of the purchase price or consideration, the
claims of the bonafide creditors of the seller who filed their claims with you
before you were notified by the Department of Alcoholic Beverage Control of its
approval of the transfer of the License, or in the event the purchase price or
consideration is not sufficient to pay the claims in full, you are authorized
and instructed to distribute the consideration as follows:
FIRST, to the United States for claims based on income or withholding taxes; and
thereafter for claims based on any tax other than specified in Section 24049;
SECOND, to the payment of claims for wages, salaries, or fringe benefits of
employees of the seller or transferor earned or accruing prior to the sale,
transfer, or opening of an escrow for the sale thereof;
THIRD, to the payment of claims of secured creditors to the extent of the
proceeds which arise from the sale of the security;
FOURTH, to the payment of claims on mechanics' liens;
FIFTH, to the payment of escrow fees and the payment of claims for prevailing
brokerage fees for services rendered and claims for reasonable attorney's fees
for service rendered;
SIXTH, to the payment of claims for goods sold and delivered to the transferor
for resale at his licensed premises and the payment of claims for service
rendered, performed, or supplied in connection with the operation of the
licensed business;
SEVENTH, to the payment of other claims which have been reduced to court-ordered
judgments, including claims for court-ordered support of minor child;
EIGHTH, to the payment of all other claims. The payment of these claims if
sufficient assets are not available for the payment of the claims in full shall
be paid pro rata;
In the event the Seller disapproves for payment any claim in full or in part,
you shall notify the creditor who filed said claim of such full or partial
disapproval, and you shall hold the amount or pro rata amount of said disallowed
claim for a period of 25 days following, mailing of notice of disapproval to the
said creditor, if the amount held is not levied upon by the creditor whose claim
is disapproved during the 25 day period, then you are authorized and instructed
to pay the amount so held over to the seller.
It is understood and agreed between the buyer and seller herein, that all claims
filed in escrow, prior to notification to you of the transfer of the license,
shall be treated as and shall be construed as being bonafide claims, and you are
authorized and instructed to pay the same without any further approval from the
seller herein, unless the seller notifies you in writing to the contrary, within
5 days from the date you furnish the seller with a list of claims filed in
escrow, either by personal delivery of said list to seller, or upon said list
being mailed by you to the seller at the seller's address set forth on Page One
hereof, or the most current address furnished you in writing by seller.
It is understood and agreed between the buyer and seller herein, that in the
event the purchase price or consideration is in the form of a promissory note or
a promise to pay in favor of the seller, or any portion of the purchase price or
consideration is in the form of a promissory note or a promise to pay in favor
of the seller and the cash consideration is not sufficient to pay the creditors
in full, then you are authorized and instructed to retain said note or promise
in escrow, and the buyer agrees upon notice from you to pay said amounts as
provided therein, into escrow, and you are to pay said amount pro rata from time
to time to the bonafide creditors, until such time as the bonafide creditors
claims have been paid in full, or the obligation due the seller has been fully
satisfied, which ever occurs first.
You are authorized and instructed by the buyer and seller herein to comply with
the instructions contained herein without any liability on your part for so
doing.
<PAGE>
- -PAGE FIVE-
I
The Parties hereto do hereby agree to open, and do so open, an escrow at the
office of JEAN ALLEN ESCROW CO., INC., for the purpose of completing the sale
and purchase in accordance with all of the provisions of the Uniform Commercial
Code of the State of California and provisions of Section 6102 et seq. of the
California Commercial Code and the provisions of Sections 24049 and 24074 of the
California Business and Professions Code and all laws pertaining to the subject
matter of said escrow, and the Seller and Buyer instruct the escrow holders to
comply with the provisions of those Code Sections.
All parties to this escrow agreement agree that they or any of them will, on
demand of the Jean Allen Escrow Co., Inc., sign, make, execute, and deliver unto
the Jean Allen Escrow Co., Inc. all necessary papers and documents as may be
required of them or any of them, and furnish to Jean Allen Escrow Co., Inc. all
records, papers and documents necessary or requisite to the completion of all
steps necessary to the consummation of the sale of the business contemplated in
this escrow agreement. All parties hereto agree to comply with the terms of this
escrow agreement promptly and without unnecessary delay.
II
No notice, demand or change of instructions shall be of any effect in this
escrow unless given in writing by all parties affected thereby. In the event
conflicting demands are made by any party hereto, or by any third person, or
conflicting notices are served upon the escrow holder with respect to this
escrow holder with respect to this escrow, whether said escrow has been
completed or not, all of the parties hereto expressly agree that the escrow
holder shall have the absolute right at its election to do either or all of the
following:
(a) Withhold and stop all further proceedings in the performance of this
escrow; withhold the re-delivery of any and all monies, papers, documents,
contracts or deeds deposited in the escrow; file a suit in interpleader or
intervention, if that becomes reasonably necessary in its judgement, obtain
an order from the court requiring the parties to interplead or intervene as it
deems fit, proper and necessary; and litigate in any court of competent
jurisdiction their several claims or rights or demands of any nature
whatsoever, amongst or between any and all of the parties including third
persons, if any, arising out of or connected with the said escrow.
(b) In the event such interpleader suit or action in intervention is brought,
it is understood that Jean Allen Escrow Co., Inc., as escrow holder, shall be
fully released and discharged from all obligations to further perform any and
all duties or obligations imposed upon it in this escrow, and the parties hereto
jointly and severally agree to pay said Jean Allen Escrow Co., Inc., a
corporation, all costs, expenses, charges, and reasonable attorney's fees
expended by it, or which is incurred by it, or which it may incur in connection
with the said escrow, or which may affect any right, title or interest therein
or herein of either party; and such amounts of money thereof shall become a part
of the judgment therefor to be rendered in such suit or action. In this
connection it is understood and agreed by and between all of the parties hereto
that said Jean Allen Escrow Co., Inc., a corporation, shall have the right, in
its discretion, to withhold any and all papers, documents, deeds and instruments
deposited in the said escrow, until the final determination of the said suit or
action; and it is further agreed by the parties hereto that the said Jean Allen
Escrow Co., Inc. is hereby given a first lien on any and all monies deposited in
said escrow and on any and all papers, instruments, documents, deeds, and
everything deposited in said escrow, for its fee, costs, charges, attorney's
fee, and all other necessary expense until the final determination of such suit
or action.
III
The parties authorize Jean Allen Escrow Co., Inc. to pay from any funds
deposited in escrow all charges for publications, recordations, filings and
chattel and security interest searches when incurred. The parties authorize Jean
Allen Escrow Co., Inc. to pay from funds deposited in escrow at the close
thereof or following notice of cancellation or recission or following a failure
of the parties to comply with the terms of Paragraph I hereof all escrow fees,
attorney's fees or other charges incurred in connection with the escrow, whether
incurred for account of buyer or seller.
IV
It is specifically understood by the parties hereto that the Jean Allen Escrow
Co., Inc., is a stake holder only under the laws of the State of California, and
for the escrow fee charged, shall not be required to perform any other services
or duties other than the ordinary services or duties as such stakeholder.
However, should it become necessary in the completion of this escrow to render
additional services other than as a stakeholder, then and in that event the said
escrow holder shall be entitled compensation for such services, which shall
become an additional cost and charge of this escrow, and said escrow holder may
reimburse itself immediately for the reasonable amount of said additional
services rendered by it, to all of which the parties hereto jointly and
severally agree.
V
The escrow holder is not to be held liable for the sufficiency or correctness
as to form, manner or execution, or validity of any instrument deposited in
escrow, nor as to the identity, authority, or rights of any person executing
the same, nor for failure to comply with any of the provisions of any
agreement, contract or instrument filed or referred to in said escrow, and
its duties hereunder shall be limited to the safekeeping of such money,
instruments or other documents received by it as escrow holder and of the
disposition of same in accordance with the written instruments and
instructions accepted in this escrow, and as otherwise agreed in this
agreement.
<PAGE>
-PAGE SIX-
VI
It is understood by the parties hereto that in consideration of Jean Allen
Escrow Co., Inc. acting as escrow holder, that it shall in no case or event be
liable for the failure for any of the conditions of this escrow, or damage
caused by the exercise of its discretion in any particular manner, or for any
other reason, except gross negligence or wilful misconduct with reference to
the said escrow, and it shall not be liable or responsible for its failure to
ascertain the terms or conditions, or to comply with any of the provisions of,
any agreement, contract, or other document or written instrument filed herein,
or referred to in the escrow, nor shall it be liable or responsible for or on
account of any fraud of any nature whatsoever, for forgeries of any nature
whatsoever, or for false personations.
VII
All the parties hereto further agree, jointly and severally, to pay on demand,
as well as to indemnify and hold the escrow holder harmless, of and from any and
all costs, damages, judgments, attorney's fees, expenditures, obligations,
expenses and liabilities of any kind or nature which in good faith, the escrow
holder may incur or sustain in connection with, or arising out of this escrow,
and the escrow holder is hereby given a lien upon all of the rights, titles and
interests of each of the undersigned in all escrow papers and other property and
monies deposited in escrow, to protect the escrow holder's rights and to
indemnify and reimburse said escrow holder under this escrow, including an
expert witness fee if that becomes necessary.
VIII
The escrow holder is hereby authorized to pay such claims of the creditors of
the seller as have been approved by the seller and if the amount of approved
bills plus the amount held to cover disputed and unapproved bills aggregate more
than the amount accruing to the account of the Seller after deducting expenses,
the Seller agrees to make up the deficiency by depositing sufficient amount of
money in escrow on or before seven days following the time set out above.
IX
It is understood that the escrow holder will not be liable to the buyer or
secured party, or any other party, on account of any property included hereunder
which is subject to conditional sale or lease contracts or other form of lease,
contract or agreement, or chattel mortgage or on account of liens of any kind or
nature whatsoever, or from defects in title which may exist with respect to any
property. It is understood by the parties to this escrow that no chattel search
is required covering the property involved herein and Jean Allen Escrow Co.,
Inc. is hereby relieved of all liability for not procuring such chattel search
unless specifically provided for in this escrow. In the event, however, a
chattel search is required by the parties hereto, and one is procured, it is
understood that said buyer shall pay the costs thereof and which sum shall be an
additional charge or cost or expense of said escrow; that furthermore such
report as received from a reputable company rendering such chattel search
reports, shall be conclusive and binding on the parties hereto.
X
The Jean Allen Escrow Co., Inc. is not to be concerned with any unpaid
insurance, personal property tax, retail sales, beverage, unemployment, old age
or social security taxes or contributions or any other tax, unless otherwise
specifically instructed in this escrow.
XI
This Agreement shall inure to the benefit of, and be binding upon the heirs,
executors, administrators and assigns of each of the parties hereto. Words used
in this Agreement in the present tense include the future as well as the
present; words used in the masculine gender include the feminine and neuter; the
singular number includes the plural, and the plural the singular; and the word
"person" includes a corporation as well as a natural person.
XII
All funds received in this escrow shall be deposited with a Federally insured
bank with other escrow funds and all disbursements shall be made by check of
Jean Allen Escrow Co., Inc. For the purpose of pro-rating, "Close of Escrow"
shall mean the date for the payment of the consideration as set forth in the
Notice to CREDITORS of BULK TRANSFER. Make all pro-rations on the basis of a
30-day month. All documents and funds due the respective parties herein are to
be mailed to the addresses set out below their respective signatures, unless
otherwise instructed. Our signatures on any documents and instructions
pertaining to this escrow indicate our unconditional approval of same. In the
event deposit in escrow is made by personal check, the maker, and party
depositing said check, hereby agrees that the amount drawn in this check is on
deposit to the credit of the maker in the bank indicated on check free and clear
from any claims and the maker hereby guarantees payment of this check and agrees
not to stop payment of same. If for any reason this check is not paid when
presented for payment, and is placed in the hands of an attorney for collection,
the maker hereby agrees to pay attorney's fee and such other costs as the court
may allow.
XIII
Should any paragraph, clause or provision of this agreement be construed or
interpreted by a court of competent jurisdiction to be void, or invalid, or
unenforcible, such decision shall affect only those paragraphs, clauses or
provisions so construed or interpreted, and shall in no event affect the
remaining paragraphs, clauses or provisions of this agreement.
<PAGE>
-PAGE SEVEN-
XIV
In the event the seller rejects or refuses to approve any creditors' claims
which have been filed in this escrow prior to the close of escrow, then in such
event, the escrow holder is hereby authorized to withhold from the funds due the
seller an amount equal to the amount of said claim and to withhold said amount
until the disputed claim has been settled between the parties.
XV
The buyer and seller hereby authorize and empower the Jean Allen Escrow Co.,
Inc. to pay off any existing liens or charges against any personal property
connected with or the subject of this escrow upon being notified thereof by such
lien holder; the sum so paid by Jean Allen Escrow Co., Inc. shall be for the
account of the seller and shall be deducted from all monies due such seller.
XVI
If these instructions require the preparation and execution of any promissory
note or other writing which evidences an indebtedness or chose in action, or any
security agreement or other document which is intended to create a security
interest in real or personal property, then the parties agree to furnish Jean
Allen Escrow Co., Inc. appropriate forms to accomplish the said requirements.
Should the parties elect to use any such form made available to them by Jean
Allen Escrow Co., Inc., it is agreed that Jean Allen Escrow Co., Inc. has made
available such forms as an accommodation only, and Jean Allen Escrow Co., Inc.
shall not be liable to the parties for the selection of the forms or their
correctness and sufficiency.
XVII
XVIII
These instructions may be executed in counterparts, each of which shall be
deemed an original regardless of the date of its execution and delivery. All
such counterparts, together shall constitute one and the same document.
XIX
The foregoing terms, conditions, provisions and instructions have been read
and are understood and agreed to by each of the parties hereto.
Receipt of a copy of these escrow instructions is hereby acknowledged by the
buyer and the seller.
TEXAS LOOSEY'S STEAKHOUSE & SALOON, INC.,
A DELAWARE CORPORATION
BY BY
- ------------------------------------ --------------------------------
RICHARD M. LEE, CHAIRMAN/CEO Buyer KENT E. ANDERSEN Seller
BY BY
- ------------------------------------ --------------------------------
HIRAM WOO, PRESIDENT Buyer JENNY A. ANDERSEN Seller
BY
- ------------------------------------ --------------------------------
Buyer Seller
- ------------------------------------ --------------------------------
Buyer Seller
- ------------------------------------ --------------------------------
Buyer Seller
- ------------------------------------ --------------------------------
Buyer Seller
<PAGE>
ESTIMATED CLOSING STATEMENT
BUYER
TEXAS LOOSEY'S STEAKHOUSE & SALOON, INC. Estimated Closing Date:
1752 CLEMENT STREET March 3, 1997
SAN FRANCISCO, CA 94121 Escrow No. 7794
Page 1
Property:
TEXAS LOOSEY'S RIVERSIDE/NORCO, RIVERSIDE, NORCO, CA 92500
DEBITS CREDITS
Total Consideration 563,177.00
MERCHANDISE INVENTORY 20,004.23
DEPOSIT(S):
Deposit
By: BUYER 5,000.00
EXISTING & NEW ENCUMBRANCES:
Existing Loan of Record - WELLS FARGO BANK 136,226.25
New Loan to File - KENT E. ANDERSEN 69,241.04
JENNY A. ANDERSEN
Existing Loan of Record - BAY CITIES NATIONAL BANK 237,302.71
ADJUSTMENTS:
CANCELLATION OF NOTES Cr. 74,672 (+) 53,235 Cash 127,907.00
SALES TAX ON $20,000 @ 8.25% 1,650.00
PRORATIONS:
PERSONAL PROPERTY TAXES at $2963.19 per year ESTIMATED 987.00
From 03/01/97 to 07/01/97
REAL PROPERTY TAXES 5,867.50
at $8801.25 per 6 months ESTIMATED
From 03/01/97 to 07/01/97
DISBURSEMENTS:
RECORDATION FEES 21.00
Paid To: RIVERSIDE COUNTY RECORDER
1ST PUBLICATION, ETC. NOTICE 600.00
Paid To: ESCROW DOCUMENTATION, SEARCHES
2ND PUBLICATION, ETC. NOTICE 600.00
Paid To: ESCROW DOCUMENTATION, SEARCHES
UCC AND COUNTY SEARCHES 500.00
Paid To: ESCROW DOCUMENTATION, SEARCHES
MESSENGER FEES 109.90
Paid To: DELIVERIES TODAY
PAYMENT IN FULL OF UCC FILING 150.00
Paid To: SECRETARY OF STATE
MESSENGER FEES 50.00
Paid To: CONSISTENT DELIVERY
ESCROW FEES:
Escrow Fees 2,500.00
Federal Express 15.50
Document Preparation 300.00
RE-DRAW FEES 200.00
FUNDS HELD:
CONTINGENCY FUND/PADDING 400.00
<PAGE>
ESTIMATED CLOSING STATEMENT
BUYER
TEXAS LOOSEY'S STEAKHOUSE & SALOON, INC. Estimated Closing Date:
1752 CLEMENT STREET March 3, 1997
SAN FRANCISCO, CA 94121 Escrow No. 7794
Page 2
Property:
TEXAS LOOSEY'S RIVERSIDE/NORCO, RIVERSIDE, NORCO, CA 92508
DEBITS CREDITS
Balance Due Escrow $ 21,505.13
Totals 602,177.90 602,177.90
NOTICE: This estimated closing statement is subject to changes, corrections or
additions at the time of final computation of closing escrow statement.
JEAN ALLEN ESCROW CO., INC.
By: _________________________
<PAGE>
EXHIBIT 10.15
<PAGE>
GALVESTON'S STEAKHOUSE CORP.
OMNIBUS STOCK PLAN
1. Establishment, Purpose and Types of Awards
Galveston's Steakhouse Corp. hereby establishes the GALVESTON'S
STEAKHOUSE CORP. OMNIBUS STOCK PLAN (the "Plan"). The purpose of the Plan is to
promote the long-term growth and profitability of Galveston's Steakhouse Corp.
(the "Corporation") by (i) providing key people with incentives to improve
stockholder value and to contribute to the growth and financial success of the
Corporation and (ii) enabling the Corporation to attract, retain and reward the
best available persons for positions of substantial responsibility.
The Plan permits the granting of stock options, including nonqualified
stock options and incentive stock options qualifying under Section 422 of the
Code, in any combination (collectively, "Options").
2. Definitions
Under this Plan, except where the context otherwise indicates, the following
definitions apply:
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Change in Control" shall mean: (i) an acquisition of the Company,
which in the sole discretion of the Board immediately prior to such acquisition,
is determined to be an acquisition hostile to, and not in the best interests of,
the stockholders of the Company, or (ii) an acquisition of fifty percent (50%)
or more of the combined voting power of the Company's then outstanding
securities by any person, as such term is used in Sections 13(d) and 14(d)(ii)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") other
than Richard M. Lee, or (iii) a change in the composition of the Board so that
a majority of the members of the Board immediately prior to such change of
control or change in composition of the Board, is determined to be a change
hostile to, and not in the best interests of, the stockholders of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any regulations issued thereunder.
(d) "Committee" shall mean the Board or committee of Board members
appointed pursuant to Section 3 of the Plan to administer the Plan.
(e) "Common Stock" shall mean shares of the Corporation's common
stock, $.01 par value.
(f) "Fair Market Value" of a share of the Corporation's Common Stock
for any purpose on a particular date shall be determined in a manner such as the
Committee shall in good faith determine to be appropriate; provided, however,
that if the Common Stock is publicly traded, then Fair Market Value shall mean
the last reported sale price per share of Common Stock, regular way, or, in case
no such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either
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case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on a national securities
exchange or included for quotation on a system established by the National
Association of Securities Dealers, Inc. ("Nasdaq System"), or if the Common
Stock is not so listed or admitted to trading or included for quotation, the
last quoted price, or if the Common Stock is not so quoted, the average of the
high bid and low asked prices, regular way, in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer in use, the principal other
automated quotations system that may then be in use or, if the Common Stock is
not quoted by any such organization, the average of the closing bid and asked
prices, regular way, as furnished by a professional market maker making a market
in the Common Stock as selected in good faith by the Committee or by such other
source or sources as shall be selected in good faith by the Committee; and,
provided further, that in the case of incentive stock options, the determination
of Fair Market Value shall be made by the Committee in good faith in conformance
with the Treasury Regulations under Section 422 of the Code. If, as the case may
be, the relevant date is not a trading day, the determination shall be made as
of the next preceding trading day. As used herein, the term "trading day" shall
mean a day on which public trading of securities occurs and is reported in the
principal consolidated reporting system referred to above, or if the Common
Stock is not listed or admitted to trading on a national securities exchange or
included for quotation on the Nasdaq System, any day other than a Saturday, a
Sunday or a day in which banking institutions in the State of New York are
closed.
(g) "Grant Agreement" shall mean a written agreement between the
Corporation and a grantee memorializing the terms and conditions of an Option
granted pursuant to the Plan.
(h) "Grant Date" shall mean the date on which the Committee formally
acts to grant an Option to a grantee or such other date as the Committee shall
so designate at the time of taking such formal action.
(i) "Parent" shall mean a corporation, whether now or hereafter
existing, within the meaning of the definition of "parent corporation" provided
in Section 424(e) of the Code, or any successor thereto of similar import.
(j) "Rule 16b-3" shall mean Rule 16b-3 as in effect under the Exchange
Act on the effective date of the Plan, or any successor provision prescribing
conditions necessary to exempt the issuance of securities under the Plan (and
further transactions in such securities) from Section 16(b) of the Exchange Act.
(k) "Subsidiary" and "subsidiaries" shall mean only a corporation or
corporations, whether now or hereafter existing, within the meaning of the
definition of "subsidiary corporation" provided in Section 424(f) of the Code,
or any successor thereto of similar import.
3. Administration
(a) Procedure. The Plan shall be administered by the Board. In the
alternative, the Board may appoint a Committee consisting of not less than two
(2) members of the Board to administer the Plan on behalf of the Board, subject
to such terms and conditions as the Board may prescribe. Once
2
<PAGE>
appointed, the Committee shall continue to serve until otherwise directed by the
Board. From time to time, the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies, however caused,
and remove all members of the Committee and, thereafter, directly administer the
Plan. In the event that the Board is the administrator of the Plan in lieu of a
Committee, the term "Committee" as used herein shall be deemed to mean the
Board.
Members of the Board or Committee who are either eligible for Options
or have been granted Options may vote on any matters affecting the
administration of the Plan or the grant of Options pursuant to the Plan, except
that no such member shall act upon the granting of an Option to himself or
herself, but any such member may be counted in determining the existence of a
quorum at any meeting of the Board or the Committee during which action is taken
with respect to the granting of an Option to him or her.
The Committee shall meet at such times and places and upon such notice
as it may determine. A majority of the Committee shall constitute a quorum. Any
acts by the Committee may be taken at any meeting at which a quorum is present
and shall be by majority vote of those members entitled to vote. Additionally,
any acts reduced to writing or approved in writing by all of the members of the
Committee shall be valid acts of the Committee.
(b) Procedure After Registration of Common Stock.. Upon and after the
point in time that the Common Stock or any other capital stock of the
Corporation becomes registered under Section 12 of the Exchange Act, the Board
shall take all action necessary to cause the Plan to be administered in
accordance with the then effective provisions of Rule 16b-3, provided that any
amendment to the Plan required for compliance with such provisions shall be made
in accordance with Section 10 of the Plan.
(c) Powers of the Committee. The Committee shall have all the powers
vested in it by the terms of the Plan, such powers to include authority, in its
sole and absolute discretion, to grant Options under the Plan, prescribe Grant
Agreements evidencing such Options and establish programs for granting Options.
The Committee shall have full power and authority to take all other actions
necessary to carry out the purpose and intent of the Plan, including, but not
limited to, the authority to:
(i) determine the eligible persons to whom, and the time
or times at which Options shall be granted,
(ii) determine the types of Options to be granted,
(iii) determine the number of shares to be covered by each
Option,
(iv) impose such terms, limitations, restrictions and
conditions upon any such Option as the Committee shall deem appropriate,
(v) modify, extend or renew outstanding Options, accept the
surrender of outstanding Options and substitute new Options, provided that no
such action shall be taken with respect to any outstanding Option which would
adversely affect the grantee without the grantee's consent, and
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<PAGE>
(vi) accelerate or otherwise change the time in which an
Option may be exercised, in whole or in part, including, but not limited to, any
restriction or condition with respect to the vesting or exercisability of an
Option following termination of any grantee's employment.
The Committee shall have full power and authority to administer and interpret
the Plan and to adopt such rules, regulations, agreements, guidelines and
instruments for the administration of the Plan and for the conduct of its
business as the Committee deems necessary or advisable and to interpret same,
all within the Committee's sole and absolute discretion.
(d) Limited Liability. To the maximum extent permitted by law, no member of
the Committee shall be liable for any action taken or decision made in good
faith relating to the Plan or any Option thereunder.
(e) Indemnification. To the maximum extent permitted by law, the members of
the Committee shall be indemnified by the Corporation in respect of all their
activities under the Plan.
(f) Effect of Committee's Decision. All actions taken and decisions and
determinations made by the Committee on all matters relating to the Plan
pursuant to the powers vested in it hereunder shall be in the Committee's sole
and absolute discretion and shall be conclusive and binding on all parties
concerned, including the Corporation, its stockholders, any participants in the
Plan and any other employee of the Corporation, and their respective successors
in interest.
4. Shares Available for the Plan: Maximum Awards
Subject to adjustments as provided in Section 9 of the Plan, the shares
of stock that may be delivered or purchased under the Plan, including with
respect to incentive stock options intended to qualify under Section 422 of the
Code, shall not exceed an aggregate of 400,000 shares of Common Stock of the
Corporation. The Corporation shall reserve said number of shares for Options to
be awarded under the Plan, subject to adjustments as provided in Section 9 of
the Plan. If any Option, or portion of an Option, under the Plan expires or
terminates unexercised, becomes unexercisable or is forfeited or otherwise
terminated, surrendered or canceled as to any shares, the shares subject to such
Option shall thereafter be available for further Options under the Plan unless
such shares would not be deemed available for future Options pursuant to Section
16 of the Exchange Act.
The maximum number of shares of Common Stock subject to Options of any
combination that may be granted during any 12 consecutive month period to any
one individual shall be limited to 400,000 shares. To the extent required by
Section 162(m) of the Code, shares of Common Stock subject to the foregoing
limit with respect to which the related Option is terminated, surrendered or
canceled shall not again be available for grant under this limit.
5. Participation
Participation in the Plan shall be open to all employees, officers and
directors of the Corporation, or of any Parent or Subsidiary of the Corporation,
as may be selected by the Committee from time to time. Notwithstanding the
foregoing, participation in the Plan with respect to awards of incentive stock
4
<PAGE>
options shall be limited to employees of the Corporation or of any Parent or
Subsidiary of the Corporation. To the extent necessary to comply with Rule 16b-3
or to constitute an "outside director" within the meaning of Section 162(m) of
the Code, and only in the event that Rule 16b-3 or Section 162(m) of the Code is
applicable to the Plan or an Option awarded thereunder, Committee members shall
not be eligible to participate in the Plan while members of the Committee.
Options may be granted to such eligible persons and for or with respect
to such number of shares of Common Stock as the Committee shall determine,
subject to the limitations in Section 4 of the Plan. A grant of any type of
Option made in any one year to an eligible person shall neither guarantee nor
preclude a further grant of that or any other type of Option to such person in
that year or subsequent years.
6. Stock Options
Subject to the other applicable provisions of the Plan, the Committee
may from time to time grant to eligible participants nonqualified stock options
or incentive stock options as that term is defined in Section 422 of the Code.
The Options granted shall be subject to the following terms and conditions.
(a) Grant of Option. The grant of an Option shall be evidenced by a
Grant Agreement, executed by the Corporation and the grantee, stating the number
of shares of Common Stock subject to the Option evidenced thereby and the terms
and conditions of such Option, in such form as the Committee may from time to
time determine.
(b) Price. The price per share payable upon the exercise of each Option
("exercise price") shall be determined by the Committee; provided, however, that
in the case of incentive stock options, the exercise price shall not be less
than 100% of the Fair Market Value of the shares on the date the Option is
granted.
(c) Payment. Options may be exercised in whole or in part by payment of
the exercise price of the shares to be acquired in accordance with the
provisions of the Grant Agreement, and/or such rules and regulations as the
Committee may have prescribed, and/or such determinations, orders, or decisions
as the Committee may have made. Payment of the exercise price shall be made in
cash (or cash equivalents acceptable to the Committee) or by such other means as
the Committee may prescribe. The Corporation may make or guarantee loans to
grantees to assist grantees in exercising Options.
If the Common Stock is registered under Section 12(b) or 12(g) of the
Exchange Act, the Committee, subject to such limitations as it may determine,
may authorize payment of the exercise price, in whole or in part, by delivery of
a properly executed exercise notice, together with irrevocable instructions, to:
(i) a brokerage firm designated by the Corporation to deliver promptly to the
Corporation the aggregate amount of sale or loan proceeds to pay the exercise
price and any withholding tax obligations that may arise in connection with the
exercise, and (ii) the Corporation to deliver the certificates for such
purchased shares directly to such brokerage firm.
(d) Terms of Options. The term during which each Option may be exercised
shall be determined by the Committee. In no event shall an Option be exercisable
less than six months nor more
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<PAGE>
than ten years from the date it is granted. Prior to the exercise of the Option
and delivery of the shares certificates represented thereby, the grantee shall
have none of the rights of a stockholder with respect to any shares represented
by an outstanding Option.
(e) Restrictions on Incentive Stock Options. The aggregate Fair Market
Value (determined as of the Grant Date) of shares of Common Stock with respect
to which all incentive stock options first become exercisable by any grantee in
any calendar year under this or another plan of the Corporation and its Parent
and Subsidiary corporations may not exceed $100,000 or such other amount as may
be permitted from time to time under Section 422 of the Code. To the extent that
such aggregate Fair Market Value shall exceed $100,000, or other applicable
amount, such Options (taking Options into account in the order in which they
were granted) shall be treated as nonqualified stock options. In such case, the
Corporation may designate the shares of Common Stock that are to be treated as
stock acquired pursuant to the exercise of an incentive stock option by issuing
a separate certificate for such shares and identifying the certificate as
incentive stock option shares in the stock transfer records of the Corporation.
The exercise price of any incentive stock option granted to a grantee
who owns (within the meaning of Section 422(b)(6) of the Code, after the
application of the attribution rules in Section 424(d) of the Code) more than
10% of the total combined voting power of all classes of shares of the
Corporation or its Parent or Subsidiary corporations (within the meaning of
Sections 422 and 424 of the Code) shall be not less than 110% of the Fair Market
Value of the Common Stock on the grant date and the term of such Option shall
not exceed five years.
Incentive stock options shall only be issued to employees of the
Corporation or of a Parent or Subsidiary of the Corporation.
(f) Other Terms and Conditions. Options may contain such other
provisions, not inconsistent with the provisions of the Plan, as the Committee
shall determine appropriate from time to time. No Option shall be an incentive
stock option unless so designated by the Committee at the time of grant or in
the Grant Agreement evidencing such Option.
7. Withholding of Taxes
The Corporation may require, as a condition to any exercise of an
Option under the Plan or a Grant Agreement (hereinafter referred to as a
"taxable event"), that the grantee pay to the Corporation, in cash, any federal,
state or local taxes of any kind required by law to be withheld with respect to
any taxable event under the Plan. The Corporation, to the extent permitted or
required by law, shall have the right to deduct from any payment of any kind
(including salary or bonus) otherwise due to a grantee any federal, state or
local taxes of any kind required by law to be withheld with respect to any
taxable event under the Plan, or to retain or sell without notice a sufficient
number of the shares to be issued to such grantee to cover any such taxes.
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8. Transferability
To the extent required to comply with Rule 16b-3, and in any event in
the case of an incentive stock option, no Option granted under the Plan shall be
transferable by a grantee otherwise than by will or the laws of descent and
distribution. Unless otherwise determined by the Committee in accord with the
provisions of the immediately preceding sentence, an Option may be exercised
during the lifetime of the grantee, only by the grantee or, during the period
the grantee is under a legal disability, by the grantee's guardian or legal
representative.
9. Adjustments; Business Combinations
In the event of a reclassification, recapitalization, stock split,
stock dividend, combination of shares, or other similar event, the maximum
number and kind of shares reserved for issuance or with respect to which Options
may be granted under the Plan as provided in Section 4 shall be adjusted to
reflect such event, and the Committee shall make such adjustments as it deems
appropriate and equitable in the number, kind and price of shares covered by
outstanding Options made under the Plan, and in any other matters which relate
to Options and which are affected by the changes in the Common Stock referred to
above.
In the event of any proposed Change in Control, the Committee shall
take such action as it deems appropriate to effectuate the purposes of this Plan
and to protect the grantees of Options, which action may include, but without
limitation, any one or more of the following: (i) acceleration or change of the
exercise dates of any Option; (ii) arrangements with grantees for the payment of
appropriate consideration to them for the cancellation and surrender of any
Option; and (iii) in any case where equity securities other than Common Stock of
the Corporation are proposed to be delivered in exchange for or with respect to
Common Stock of the Corporation, arrangements providing that any Option shall
become one or more Options with respect to such other equity securities.
In the event the Corporation dissolves and liquidates (other than
pursuant to a plan of merger or reorganization), then notwithstanding any
restrictions on exercise set forth in this Plan or any Grant Agreement (i) each
grantee shall have the right to exercise his Option at any time up to ten (10)
days prior to the effective date of such liquidation and dissolution; and (ii)
the Committee may make arrangements with the grantees for the payment of
appropriate consideration to them for the cancellation and surrender of any
Option that is 50 canceled or surrendered at any time up to ten (10) days prior
to the effective date of such liquidation and dissolution. The Committee may
establish a different period (and different conditions) for such exercise,
cancellation, or surrender to avoid subjecting the grantee to liability under
Section 16(b) of the Exchange Act Any Option not so exercised, canceled, or
surrendered shall terminate on the last day for exercise prior to such effective
date.
10. Termination and Modification of the Plan
The Board, without further approval of the stockholders, may modify or
terminate the Plan or any portion thereof at any time, except that no
modification shall become effective without prior approval of the stockholders
of the Corporation if stockholder approval is necessary to comply with any tax
or regulatory requirement or rule of any exchange or Nasdaq System upon which
the
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Common Stock is listed or quoted; including for this purpose stockholder
approval that is required for continued compliance with Rule 16b-3 or
stockholder approval that is required to enable the Committee to grant incentive
stock options pursuant to the Plan.
The Committee shall be authorized to make minor or administrative
modifications to the Plan as well as modifications to the Plan that may be
dictated by requirements of federal or state laws applicable to the Corporation
or that may be authorized or made desirable by such laws. The Committee may
amend or modify the grant of any outstanding Option in any manner to the extent
that the Committee would have had the authority to make such Option as so
modified or amended. No modification may be made that would materially adversely
affect any Option previously made under the Plan without the approval of the
grantee.
11. Non-Guarantee of Employment
Nothing in the Plan or in any Grant Agreement thereunder shall confer
any right on an employee to continue in the employ of the Corporation or shall
interfere in any way with the right of the Corporation to terminate an employee
at any time.
12. Termination of Employment
For purposes of maintaining a grantee's continuous status as an
employee and accrual of rights under any Options, transfer of an employee among
the Corporation and the Corporation's Parent or Subsidiaries shall not be
considered a termination of employment. Nor shall it be considered a termination
of employment for such purposes if an employee is placed on military or sick
leave or such other leave of absence which is considered as continuing intact
the employment relationship; in such a case, the employment relationship shall
be continued until the date when an employee's right to reemployment shall no
longer be guaranteed either by law or contract.
13. Written Agreement
Each Grant Agreement entered into between the Corporation and a grantee
with respect to an Option granted under the Plan shall incorporate the terms of
this Plan and shall contain such provisions, consistent with the provisions of
the Plan, as may be established by the Committee.
14. Non-Uniform Determinations
The Committee's determinations under the Plan (including, without
limitation, determinations of the persons to receive Options, the form, amount
and timing of such Options, the terms and provisions of such Options and the
agreements evidencing same) need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, Options under
the Plan, whether or not such persons are similarly situated.
15. Limitation on Benefits
With respect to persons subject to Section 16 of the Exchange Act,
transactions under this Plan
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<PAGE>
are intended to comply with all applicable conditions of Rule 16b-3. To the
extent any provision of the Plan or action by the Committee fails to so comply,
it shall be deemed null and void, to the extent
9
<PAGE>
permitted by law and deemed advisable by the Committee.
10
<PAGE>
16. Listing and Registration
If the Corporation determines that the listing, registration or
qualification upon any securities exchange or upon any Nasdaq System or under
any law, of shares subject to any Option is necessary or desirable as a
condition of, or in connection with, the granting of same or the issue or
purchase of shares thereunder, no such Option may be exercised in whole or in
part and no restrictions on such Option shall lapse, unless such listing,
registration or qualification is effected free of any conditions not acceptable
to the Corporation.
17. Compliance with Securities Laws
The Corporation may require that a grantee, as a condition to exercise
of an Option, and as a condition to the delivery of any share certificate,
provide to the Corporation, at the time of each such exercise and each such
delivery, a written representation that the shares of Common Stock being
acquired shall be acquired by the grantee solely for investment and will not be
sold or transferred without registration or the availability of an exemption
from registration under the Securities Act and applicable state securities laws.
The Corporation may also require that a grantee submit other written
representations which will permit the Corporation to comply with federal and
applicable state securities laws in connection with the issuance of the Common
Stock, including representations as to the knowledge and experience in financial
and business matters of the grantee and the grantee's ability to bear the
economic risk of the grantee's investment. The Corporation may require that the
grantee obtain a "purchaser representative" as, that term is defined in
applicable federal and state securities laws. The stock certificates for any
shares of Common Stock issued pursuant to this Plan may bear a legend
restricting transferability of the shares of Common Stock unless such shares are
registered or an exemption from registration is available under the Securities
Act and applicable state securities laws. The Corporation may notify its
transfer agent to stop any transfer of shares of Common Stock not made in
compliance with these restrictions. Common Stock shall not be issued with
respect to an Option granted under the Plan unless the exercise of such Option
and the issuance and delivery of share certificates for such Common Stock
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act, the Exchange Act, the rules and
regulations promulgated thereunder, and the requirements of any national
securities exchange or Nasdaq System upon which the Common Stock may then be
listed or quoted, and shall be further subject to the approval of counsel for
the Corporation with respect to such compliance to the extent such approval is
sought by the Committee.
18. Governing Law
The validity, construction and effect of the Plan, of Grant Agreements
entered into pursuant to the Plan, and of any rules, regulations, determinations
or decisions made by the Board or Committee relating to the Plan or such Grant
Agreements, and the rights of any and all persons having or claiming to have any
interest therein or thereunder, shall be determined exclusively in accordance
with applicable federal laws and the laws of the State of Delaware, without
regard to its conflict of laws rules and principles.
11
<PAGE>
19. Plan Subject to Certificate of Incorporation and By-Laws
This Plan is subject to the Certificate of Incorporation and By-Laws of
the Corporation, as they may be amended from time to time.
20. Effective Date; Termination Date
The Plan is effective as of , 1997, the date on which the Plan was
adopted by the Board, subject to approval of the stockholders within twelve
months of such date. Unless previously terminated, the Plan shall terminate on
the close of business on
, 2007, ten years from the effective date. Subject to other applicable
provisions of the Plan, all Options granted under the Plan prior to termination
of the Plan shall remain in effect until such Options have been satisfied or
terminated in accordance with the Plan and the terms of such Options.
12
<PAGE>
EXHIBIT 10.16
<PAGE>
STOCK OPTION AGREEMENT
------------------------
THIS AGREEMENT made in Riverside, California, as of the 3rd day of June,
1996, by and between TEXAS LOOSEY'S STEAKHOUSE & SALOON, INC., a Delaware
corporation (hereinafter referred to as the "Company"), and Richard M. Lee
(hereinafter referred to as the "Grantee").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Company has determined to grant to the Grantee a Stock Option
in accordance with the terms and conditions set forth in this Agreement;
NOW, THEREFORE, the Company and the Grantee do hereby agree as follows:
1. The Company hereby grants to the Grantee an option (hereinafter referred
to as the "Option") to purchase from the Company, upon the terms and conditions
hereinafter set forth, an aggregate of 82,500 shares of the Common Stock of the
Company, $.01 par value (hereinafter referred to as the "Common Stock"), at the
purchase price of $1.00 per share.
2. The Option shall be exercisable upon the earlier of: (i) June 3, 1998 or
(ii) one (1) year following the completion of an initial public offering by the
Company.
3. a. The Option may be exercised only as set forth herein.
b. The Option may be exercised in whole or in part only by the
delivery by the Grantee (or his legal representative) of written notice to the
Company, at its principal offices personally or by certified mail. Each such
notice shall state the number of shares with respect to which the Option is
being exercised and shall specify a date, not less than five (5) days nor more
than fifteen (15) days after the date of the delivery of such notice, on which
the shares shall be taken and payment made. Payment for such shares shall be in
any manner the Company deems acceptable, including, in the discretion of the
Company, cash, certified or cashier's check or personal check. The Option shall
not be deemed exercised in whole or in part until payment in the manner
described above has been made.
4. a. If the shares of Common Stock outstanding are changed in number of
class by reason of a split-up, merger, consolidation, recapitalization,
reorganization, reclassification, or any capital adjustment, including a stock
dividend, or if any distribution is made to the holders of Common Stock other
than a cash dividend, an appropriate adjustment shall be made in the number and
class of shares or other securities as to which the Option, or any part thereof
then unexercised, shall be exercisable and the option price per share thereof.
b. Adjustments under this Paragraph 4 shall be made in an equitable
manner by the Board of Directors of the Company, whose determination as to what
adjustments shall be made, and the extent thereof, shall be final, binding and
conclusive.
c. The Grantee shall have no rights as a Shareholder with respect to
shares of Common Stock covered by the Option until payment for such shares shall
have been made in full and until the date of the issuance to him of a stock
certificate for such shares.
5. Nothing herein contained shall impose any obligations upon the Grantee
to exercise the Option or any part thereof.
6. a. The Company may, in its sole discretion, determine not to issue or
deliver any certificates for shares of Common Stock pursuant to the exercise of
this Option prior to (i) the completion of any registration or other
qualification of such shares under any federal or state law or regulation, or
the maintaining in effect of any such registration or other qualification which
the Company shall, in its reasonable discretion upon the advice of counsel,
determine to be necessary or advisable; and (ii) the obtaining of any other
consent approval, or permit from any state or federal governmental agency which
the Company shall, in its reasonable discretion upon the advice of counsel,
determine to be necessary or advisable.
b. Unless the shares of Common Stock to be acquired pursuant to the
exercise of the Option shall have been registered under the Securities Act of
1933, as amended (the "Securities Act"), prior to such exercise, each notice of
the exercise of the Option shall include a representation that any of the
Option shares purchased shall be acquired for investment only and not with a
view to, or for sale in connection with, any public distribution, and that any
subsequent resale of any of such shares either shall be made pursuant to a
registration statement under the Securities Act which has become effective and
is current with regard to the shares being sold, or shall be made pursuant to
an exemption from registration under the Securities Act. In addition, the
certificates representing such shares shall bear a legend in substantially the
following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
(THE "ACT") OR ANY STATE SECURITIES OR "BLUE SKY" LAWS,
AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN COMPLIANCE WITH SUCH ACT AND ANY
APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS.
7. The Option shall not be subject to anticipation, sale, assignment,
pledge, encumbrance or charge except by will or by the laws of descent and
distribution. The Option shall be exercisable during the Grantee's lifetime
solely by the Grantee and after his death, solely by his duly qualified
personal representative or representatives. This Agreement shall be binding upon
the personal representatives, heirs and distributees of the Grantee.
8. No amendment or alteration of the terms of this Option shall be valid
unless made in writing and signed by both of the parties hereto.
9. This Option shall be governed in all respects by the laws of the State
of Delaware.
10. This Option contains the entire agreement of the parties with respect
to the subject matter hereof and shall be binding upon and inure to the benefit
of the parties hereto and their respective legal representatives, heirs,
distributees, successors and assigns.
11. Any notices required or permitted to be given hereunder shall be
sufficient if in writing, and if delivered by hand or sent by certified mail to
the addresses set forth above or such other address as either party may from
time to time designate in writing to the other, and shall be deemed given as of
the date of the delivery or mailing.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
TEXAS LOOSEY'S STEAKHOUSE & SALOON, INC.
By: /s/ Hiram Woo
-----------------------------------------------
Hiram J. Woo, President
/s/ Richard M. Lee
-----------------------------------------------
Richard M. Lee
<PAGE>
EXHIBIT 10.17
<PAGE>
STOCK OPTION AGREEMENT
------------------------
THIS AGREEMENT made in Riverside, California, as of the 3rd day of June,
1996, by and between TEXAS LOOSEY'S STEAKHOUSE & SALOON, INC., a Delaware
corporation (hereinafter referred to as the "Company"), and Hiram J. Woo
(hereinafter referred to as the "Grantee").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Company has determined to grant to the Grantee a Stock Option
in accordance with the terms and conditions set forth in this Agreement;
NOW, THEREFORE, the Company and the Grantee do hereby agree as follows:
1. The Company hereby grants to the Grantee an option (hereinafter referred
to as the "Option") to purchase from the Company, upon the terms and conditions
hereinafter set forth, an aggregate of 82,500 shares of the Common Stock of the
Company, $.01 par value (hereinafter referred to as the "Common Stock"), at the
purchase price of $1.00 per share.
2. The Option shall be exercisable upon the earlier of: (i) June 3, 1998 or
(ii) one (1) year following the completion of an initial public offering by the
Company.
3. a. The Option may be exercised only as set forth herein.
b. The Option may be exercised in whole or in part only by the
delivery by the Grantee (or his legal representative) of written notice to the
Company, at its principal offices personally or by certified mail. Each such
notice shall state the number of shares with respect to which the Option is
being exercised and shall specify a date, not less than five (5) days nor more
than fifteen (15) days after the date of the delivery of such notice, on which
the shares shall be taken and payment made. Payment for such shares shall be in
any manner the Company deems acceptable, including, in the discretion of the
Company, cash, certified or cashier's check or personal check. The Option shall
not be deemed exercised in whole or in part until payment in the manner
described above has been made.
4. a. If the shares of Common Stock outstanding are changed in number of
class by reason of a split-up, merger, consolidation, recapitalization,
reorganization, reclassification, or any capital adjustment, including a stock
dividend, or if any distribution is made to the holders of Common Stock other
than a cash dividend, an appropriate adjustment shall be made in the number and
class of shares or other securities as to which the Option, or any part thereof
then unexercised, shall be exercisable and the option price per share thereof.
b. Adjustments under this Paragraph 4 shall be made in an equitable
manner by the Board of Directors of the Company, whose determination as to what
adjustments shall be made, and the extent thereof, shall be final, binding and
conclusive.
c. The Grantee shall have no rights as a Shareholder with respect to
shares of Common Stock covered by the Option until payment for such shares shall
have been made in full and until the date of the issuance to him of a stock
certificate for such shares.
5. Nothing herein contained shall impose any obligations upon the Grantee
to exercise the Option or any part thereof.
6. a. The Company may, in its sole discretion, determine not to issue or
deliver any certificates for shares of Common Stock pursuant to the exercise of
this Option prior to (i) the completion of any registration or other
qualification of such shares under any federal or state law or regulation, or
the maintaining in effect of any such registration or other qualification which
the Company shall, in its reasonable discretion upon the advice of counsel,
determine to be necessary or advisable; and (ii) the obtaining of any other
consent approval, or permit from any state or federal governmental agency which
the Company shall, in its reasonable discretion upon the advice of counsel,
determine to be necessary or advisable.
b. Unless the shares of Common Stock to be acquired pursuant to the
exercise of the Option shall have been registered under the Securities Act of
1933, as amended (the "Securities Act"), prior to such exercise, each notice of
the exercise of the Option shall include a representation that any of the
Option shares purchased shall be acquired for investment only and not with a
view to, or for sale in connection with, any public distribution, and that any
subsequent resale of any of such shares either shall be made pursuant to a
registration statement under the Securities Act which has become effective and
is current with regard to the shares being sold, or shall be made pursuant to
an exemption from registration under the Securities Act. In addition, the
certificates representing such shares shall bear a legend in substantially the
following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
(THE "ACT") OR ANY STATE SECURITIES OR "BLUE SKY" LAWS,
AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN COMPLIANCE WITH SUCH ACT AND ANY
APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS.
7. The Option shall not be subject to anticipation, sale, assignment,
pledge, encumbrance or charge except by will or by the laws of descent and
distribution. The Option shall be exercisable during the Grantee's lifetime
solely by the Grantee and after his death, solely by his duly qualified
personal representative or representatives. This Agreement shall be binding upon
the personal representatives, heirs and distributees of the Grantee.
8. No amendment or alteration of the terms of this Option shall be valid
unless made in writing and signed by both of the parties hereto.
9. This Option shall be governed in all respects by the laws of the State
of Delaware.
10. This Option contains the entire agreement of the parties with respect
to the subject matter hereof and shall be binding upon and inure to the benefit
of the parties hereto and their respective legal representatives, heirs,
distributees, successors and assigns.
11. Any notices required or permitted to be given hereunder shall be
sufficient if in writing, and if delivered by hand or sent by certified mail to
the addresses set forth above or such other address as either party may from
time to time designate in writing to the other, and shall be deemed given as of
the date of the delivery or mailing.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
TEXAS LOOSEY'S STEAKHOUSE & SALOON, INC.
By: /s/ Richard M. Lee
-----------------------------------------------
Richard M. Lee, Chairman & CEO
/s/ Hiram J. Woo
-----------------------------------------------
HIram J. Woo
EXHIBIT 23.1
<PAGE>
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our
reports (and to all references made to our Firm) included in or made a part of
this registration statement.
ARTHUR ANDERSEN LLP
Orange County, California
June 10, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001017156
<NAME> GALVESTON'S STEAKHOUSE CORP.
<MULTIPLIER> 1
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-END> DEC-31-1996 MAR-31-1997
<CASH> 46,439 79,338
<SECURITIES> 0 0
<RECEIVABLES> 79,235 99,022
<ALLOWANCES> 0 0
<INVENTORY> 30,291 32,332
<CURRENT-ASSETS> 162,390 307,833
<PP&E> 629,610 649,564
<DEPRECIATION> 17,089 31,508
<TOTAL-ASSETS> 1,800,305 1,942,289
<CURRENT-LIABILITIES> 1,695,494 2,005,387
<BONDS> 870,000 870,000
0 0
1,000 1,000
<COMMON> 15,880 16,920
<OTHER-SE> (782,069) (951,018)
<TOTAL-LIABILITY-AND-EQUITY> 1,800,305 1,942,289
<SALES> 416,544 403,942
<TOTAL-REVENUES> 416,544 403,942
<CGS> 153,592 126,381
<TOTAL-COSTS> 542,963 389,843
<OTHER-EXPENSES> 408,293 8,448
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 271,373 134,810
<INCOME-PRETAX> (942,552) (209,501)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (942,552) (209,501)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (942,552) (209,501)
<EPS-PRIMARY> (0.64) (0.43)
<EPS-DILUTED> 0 0
</TABLE>
