SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): December 21, 1998
GALVESTON'S STEAKHOUSE CORP.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Delaware 000-23739 94-3248672
(State of Incorporation) (Commission File Number) (IRS Employer Identification No.)
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151 East Allesandro Boulevard
Riverside, California 92508
(Address of principal executive offices) (Zip Code)
(909) 789-7606
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
As previously reported on September 14, 1998, Galveston's
Steakhouse Corp., a Delaware corporation (the "Registrant"), and Tri-Core
Steakhouse, Inc., a Delaware corporation and a wholly owned subsidiary of the
Registrant (the "Merger Sub"), on the one hand, and Paragon Steakhouse
Restaurant, Inc., a Delaware corporation ("Paragon"), and Kyotaru Co., Ltd., a
Japanese corporation and the sole stockholder of Paragon ("Kyotaru"), on the
other hand, entered into a Merger Agreement (the "Merger Agreement"), pursuant
to which the Merger Sub was to merge with and into Paragon such that Paragon
was to become a wholly owned subsidiary of the Registrant (the "Merger").
Pursuant to the terms of the Merger Agreement, the Registrant was to acquire
from Kyotaru all the issued and outstanding common stock of Paragon. The
closing of the transaction occurred on December 21, 1998.
2
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Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
The financial statements are unavailable as of the date of
this filing. Such information will be filed on or before the
sixtieth day following the filing date of this Current
Report on Form 8-K.
(b) Pro forma financial information.
The pro forma financial information is unavailable as of the
date of this filing. Such information will be filed on or
before the sixtieth day following the filing date of this
Current Report on Form 8-K.
(c) Exhibits
2.1 First Amendment to Merger Agreement dated August 31, 1998,
by and among Galveston's Steakhouse Corp. and Tri-Core
Steakhouse, Inc., on the one hand, and Paragon Steakhouse
Restaurants, Inc. and Kyotaru Co., Ltd., on the other hand.
2.2 Second Amendment to Merger Agreement dated August 31, 1998,
by and among Galveston's Steakhouse Corp. and Tri-Core
Steakhouse, Inc., on the one hand, and Paragon Steakhouse
Restaurants, Inc. and Kyotaru Co., Ltd., on the other hand.
2.3 Third Amendment to Merger Agreement dated August 31, 1998,
by and among Galveston's Steakhouse Corp. and Tri-Core
Steakhouse, Inc., on the one hand, and Paragon Steakhouse
Restaurants, Inc. and Kyotaru Co., Ltd., on the other hand.
2.4 Form of Certificate of Merger of Tri-Core Steakhouse, Inc.,
a Delaware corporation with and into Paragon Steakhouse
Restaurants, Inc., a Delaware corporation.
2.5 Form of Agreement not to Compete
2.6 Form of Management Agreement
2.7 Form of Non-negotiable Promissory Note
3
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dated: January 4, 1999
GALVESTON'S STEAKHOUSE CORP.
By: /s/ Hiram J. Woo
----------------------------
Name: Hiram J. Woo
Title: President and Chief Financial Officer
4
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EXHIBIT INDEX
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Exhibit Description
Number
------- ----------------------------------------------------------------------------------------------
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2.1 First Amendment to Merger Agreement dated August 31, 1998, by and among Galveston's Steakhouse
Corp. and Tri-Core Steakhouse, Inc., on the one hand, and Paragon Steakhouse Restaurants, Inc.
and Kyotaru Co., Ltd., on the other hand.
2.2 Second Amendment to Merger Agreement dated August 31, 1998, by and among Galveston's Steakhouse
Corp. and Tri-Core Steakhouse, Inc., on the one hand, and Paragon Steakhouse Restaurants, Inc.
and Kyotaru Co., Ltd., on the other hand.
2.3 Third Amendment to Merger Agreement dated August 31, 1998, by and among Galveston's Steakhouse
Corp. and Tri-Core Steakhouse, Inc., on the one hand, and Paragon Steakhouse Restaurants, Inc.
and Kyotaru Co., Ltd., on the other hand.
2.4 Form of Certificate of Merger of Tri-Core Steakhouse, Inc., a Delaware corporation with and
into Paragon Steakhouse Restaurants, Inc., a Delaware corporation.
2.5 Form of Agreement not to Compete
2.6 Form of Management Agreement
2.7 Form of Non-negotiable Promissory Note
</TABLE>
5
Exhibit 2.1
FIRST AMENDMENT TO MERGER AGREEMENT
THIS FIRST AMENDMENT TO MERGER AGREEMENT dated as of September 14, 1998
(this "Amendment") is entered into by and among GALVESTON'S STEAKHOUSE CORP., a
Delaware corporation ("Buyer"), and TRI-CORE STEAKHOUSE, INC., a Delaware
corporation ("Merger Sub"), on the one hand, and PARAGON STEAKHOUSE RESTAURANTS,
INC., a Delaware corporation (the "Company"), and KYOTARU CO., LTD., a Japanese
corporation (the "Parent Company"), on the other hand, amending that certain
Merger Agreement dated as of August 31, 1998, by and among Buyer and Merger Sub,
on the one hand, and the Company and the Parent Company, on the other hand (the
"Merger Agreement"). Buyer, Merger Sub, the Company and the Parent Company are
collectively referred to herein as the "Parties."
RECITALS
WHEREAS, the Parties executed the Merger Agreement as of August 31,
1998 pursuant to which Merger Sub will be merged with and into the Company in
accordance with Delaware General Corporation Law and the terms of the Merger
Agreement;
WHEREAS, pursuant to Section 9.20 of the Merger Agreement, the Merger
Agreement shall not be deemed an effective or binding obligation of the Parties
until the execution of a letter agreement, which shall be mutually acceptable to
the Parties, between the Company and Credit Suisse First Boston amending that
certain Loan Agreement dated as of August 30, 1996, by and among the Company,
Paragon of Michigan, Inc. and Credit Suisse First Boston (the "Letter
Agreement");
WHEREAS, pursuant to Section 9.20 of the Merger Agreement, a mutually
acceptable Letter Agreement must be executed on or before fourteen (14) days
following the execution of the Merger Agreement;
WHEREAS, the Parties have agreed to change the date by which the Letter
Agreement must be executed to twenty-five (25) days following the execution of
the Merger Agreement; and
WHEREAS, the Parties agree that the Merger Agreement should be amended
to correspond with the agreed upon date.
NOW, THEREFORE, in consideration of good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the Parties hereto agree
to amend the Merger Agreement as follows:
6
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AGREEMENT
Section 1. Effectiveness. The Parties hereby amend Section 9.20 of the
Merger Agreement to change the deadline for the execution of the Letter
Agreement from "fourteen (14) days" to "twenty-five (25)" following the
execution of the Merger Agreement.
Section 2. Execution in Counterparts. This Amendment may be executed in
any number of counterparts, each of which shall for all purposes be deemed to be
an original and all such counterparts shall together constitute but one and the
same instrument.
Section 3. Ratification and Reaffirmation of the Merger Agreement.
Except as hereby expressly amended, the Merger Agreement shall remain unchanged.
Section 4. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of California.
Section 5. Interpretation. In the event of any conflict between the
provisions of the Merger Agreement and the provisions of this Amendment, the
provisions of this Amendment shall control.
Section 6. Binding Effect. This Amendment shall inure to the benefit
of and shall be binding upon the Parties and their respective successors and
assigns.
[signatures follow]
7
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their respective officers, attorneys-in-fact or trustees thereunto
duly authorized as of the day and year first above written.
GALVESTON'S STEAKHOUSE CORP.,
a Delaware corporation
By: /s/ Richard M. Lee
-----------------------------
Name: Richard M. Lee
Title: Chief Executive Officer
PARAGON STEAKHOUSE RESTAURANTS, INC.,
a Delaware corporation
By: /s/ Richard S. Kay
---------------------------
Name: Richard S. Kay
Title: President
TRI-CORE STEAKHOUSE, INC.,
a Delaware corporation
By: /s/ Richard M. Lee
---------------------------
Name: Richard M. Lee
Title: President
KYOTARU CO., LTD.,
a Japanese corporation
By: /s/ Terry Oshima
---------------------------
Name: Terry Oshima
Title: Attorney-in-Fact
APPROVED AND ACCEPTED:
By: /s/ Tokiyoshi Yano
---------------------------
Name: Tokiyoshi Yano
Title: Deputy Trustee of Kyotaru Co., Ltd.
8
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Exhibit 2.2
SECOND AMENDMENT TO MERGER AGREEMENT
THIS SECOND AMENDMENT TO MERGER AGREEMENT dated as of September 25,
1998 (this "Amendment") is entered into by and among GALVESTON'S STEAKHOUSE
CORP., a Delaware corporation ("Buyer"), and TRI-CORE STEAKHOUSE, INC., a
Delaware corporation ("Merger Sub"), on the one hand, and PARAGON STEAKHOUSE
RESTAURANTS, INC., a Delaware corporation (the "Company"), and KYOTARU CO.,
LTD., a Japanese corporation (the "Parent Company"), on the other hand, amending
that certain Merger Agreement dated as of August 31, 1998, as amended by the
certain First Amendment to Merger Agreement date as of September 14, 1998, by
and among Buyer and Merger Sub, on the one hand, and the Company and the Parent
Company, on the other hand (collectively, the "Merger Agreement"). Buyer, Merger
Sub, the Company and the Parent Company are collectively referred to herein as
the "Parties."
RECITALS
WHEREAS, the Parties executed the Merger Agreement as of August 31,
1998 pursuant to which Merger Sub will be merged with and into the Company in
accordance with Delaware General Corporation Law and the terms of the Merger
Agreement;
WHEREAS, the Parties executed the First Amendment to Merger Agreement
as of September 14, 1998 pursuant to which the Parties agreed to extend the
required execution date of a letter agreement, which shall be mutually
acceptable to the Parties, between the Company and Credit Suisse First Boston
amending that certain Loan Agreement dated as of August 30, 1996, by and among
the Company, Paragon of Michigan, Inc. and Credit Suisse First Boston (the
"Letter Agreement").
WHEREAS, pursuant to Section 9.20 of the Merger Agreement, the Merger
Agreement shall not be deemed an effective or binding obligation of the Parties
until the execution of the Letter Agreement;
WHEREAS, pursuant to Section 9.20 of the Merger Agreement, a mutually
acceptable Letter Agreement must be executed on or before twenty-five (25) days
following the execution of the Merger Agreement;
WHEREAS, the Parties have agreed to change the date by which the Letter
Agreement must be executed to thirty-five (35) days following the execution of
the Merger Agreement; and
WHEREAS, the Parties agree that the Merger Agreement should be amended
to correspond with the agreed upon date.
9
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NOW, THEREFORE, in consideration of good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the Parties hereto agree
to amend the Merger Agreement as follows:
AGREEMENT
Section 7. Effectiveness. The Parties hereby amend Section 9.20 of the
Merger Agreement to change the deadline for the execution of the Letter
Agreement from "twenty-five (25)" to "thirty-five (35)" days following the
execution of the Merger Agreement.
Section 8. Execution in Counterparts. This Amendment may be executed in
any number of counterparts, each of which shall for all purposes be deemed to be
an original and all such counterparts shall together constitute but one and the
same instrument.
Section 9. Ratification and Reaffirmation of the Merger Agreement.
Except as hereby expressly amended, the Merger Agreement shall remain unchanged.
Section 10. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of California.
Section 11. Interpretation. In the event of any conflict between the
provisions of the Merger Agreement and the provisions of this Amendment, the
provisions of this Amendment shall control.
Section 12. Binding Effect. This Amendment shall inure to the benefit
of and shall be binding upon the Parties and their respective successors and
assigns.
[signatures follow]
10
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their respective officers, attorneys-in-fact or trustees thereunto
duly authorized as of the day and year first above written.
GALVESTON'S STEAKHOUSE CORP.,
a Delaware corporation
By: /s/ Richard M. Lee
---------------------------
Name: Richard M. Lee
Title: Chief Executive Officer
PARAGON STEAKHOUSE RESTAURANTS, INC.,
a Delaware corporation
By: /s/ Richard S. Kay
---------------------------
Name: Richard S. Kay
Title: President
TRI-CORE STEAKHOUSE, INC.,
a Delaware corporation
By: /s/ Richard M. Lee
---------------------------
Name: Richard M. Lee
Title: President
KYOTARU CO., LTD.,
a Japanese corporation
By: /s/ Terry Oshima
---------------------------
Name: Terry Oshima
Title: Attorney-in-Fact
APPROVED AND ACCEPTED:
By: /s/ Tokiyoshi Yano
---------------------------
Name: Tokiyoshi Yano
Title: Deputy Trustee of Kyotaru Co., Ltd.
11
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Exhibit 2.3
THIRD AMENDMENT TO MERGER AGREEMENT
THIS THIRD AMENDMENT TO MERGER AGREEMENT dated as of December 7, 1998
(this "Third Amendment") is entered into by and among GALVESTON'S STEAKHOUSE
CORP., a Delaware corporation ("Buyer"), and TRI-CORE STEAKHOUSE, INC., a
Delaware corporation ("Merger Sub"), on the one hand, and PARAGON STEAKHOUSE
RESTAURANTS, INC., a Delaware corporation (the "Company"), and KYOTARU CO.,
LTD., a Japanese corporation (the "Parent Company"), on the other hand, amending
that certain Merger Agreement dated as of August 31, 1998, as amended by that
certain First Amendment to Merger Agreement dated as of September 14, 1998 and
that certain Second Amendment to Merger Agreement dated as of September 25,
1998, by and among Buyer and Merger Sub, on the one hand, and the Company and
the Parent Company, on the other hand (collectively, the "Merger Agreement").
Buyer, Merger Sub, the Company and the Parent Company are collectively referred
to herein as the "Parties." All capitalized terms used but not defined in this
Third Amendment shall have the meanings ascribed to them in the Merger
Agreement.
RECITALS
WHEREAS, the Parties executed the Merger Agreement dated as of August
31, 1998 pursuant to which Merger Sub will be merged with and into the Company
in accordance with Delaware General Corporation Law and the terms of the Merger
Agreement;
WHEREAS, the Parties executed the First Amendment to Merger Agreement
as of September 14, 1998 and the Second Amendment to Merger Agreement as of
September 25, 1998, pursuant to which the Parties agreed to extend the required
execution date of a letter agreement, which shall be mutually acceptable to the
Parties, between the Company and Credit Suisse First Boston amending that
certain Loan Agreement dated as of August 30, 1996, by and among the Company,
Paragon of Michigan, Inc. and Credit Suisse First Boston (the "Letter
Agreement"); and
WHEREAS, the Parties have agreed to further amend the Merger Agreement
pursuant to this Third Amendment.
NOW, THEREFORE, in consideration of good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the Parties hereto agree
to amend the Merger Agreement as follows:
AGREEMENT
Section 1. Definitions. The following definitions contained in Article
I of the Merger Agreement are deleted in their entirety: "Holdback Agent,"
"Holdback Escrow Agreement," "J.W. Childs Holdback," "J.W. Childs Holdback
Agent," "Leasehold Consent Holdback" and "Leasehold Consent Holdback Agent."
12
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Section 2. Closing Date. Notwithstanding anything to the contrary
contained in Sections 2.02 and 8.03 of the Merger Agreement, unless the Parties
otherwise mutually agree in writing, the Closing Date shall be the Friday of the
first full calendar week following the Parent Company's delivery of the Japanese
Approvals in accordance with Section 9.20 of the Merger Agreement.
Section 3. Conversion of Company Shares. Section 2.04(f) of the
Merger Agreement is hereby deleted in its entirety and the following is hereby
substituted in lieu thereof:
Conversion of Company Shares. At and as of the Effective Time and
in accordance with Section 2.05 below, the Company Shares shall be
converted into the right to receive from Buyer an amount in the
aggregate equal to Six Hundred Thousand Dollars ($600,000) in cash plus
a promissory note (the "Note") issued by the Buyer to the Parent
Company in the principal amount of Six Hundred Thousand Dollars
($600,000) and having the terms and provisions set forth in a
promissory note in the form attached hereto as Exhibit I (collectively,
the "Merger Consideration"); provided, however, (i) the principal
amount of the Note shall be reduced to Three Hundred Fifty Thousand
Dollars ($350,000) should Buyer pay the principal amount of the Note in
full, together with any interest accrued thereon, within sixty (60)
calendar days following the Closing, or (ii) the principal amount of
the Note shall be reduced to Four Hundred Thousand Dollars ($400,000)
should Buyer pay the principal amount of the Note in full, together
with any interest accrued thereon, within one hundred twenty (120)
calendar days following the Closing. No Company Share shall be deemed
to be outstanding or to have any rights other than those set forth
above in this Section 2.04(f) after the Effective Time.
Section 4. Procedures for Payment. Section 2.05 of the Merger Agreement
is hereby deleted in its entirety and the following is hereby substituted in
lieu thereof:
2.05 Procedures for Payment. At the Closing, and against the
surrender by the Parent Company of the stock certificate or
certificates representing the Company Shares in accordance with
Section 7.01 hereof, the Merger Consideration shall be paid by the
Buyer to the Parent Company as follows:
(a) The sum of One Hundred Thousand Dollars ($100,000)
shall be paid by Buyer to the Parent Company by wire transfer of
immediately available funds to a bank account designated in writing by
the Parent Company;
(b) The Deposit shall be credited against the Merger
Consideration and deemed paid by the Buyer to the Parent Company upon
the disbursement thereof to the Parent Company in the amount of
$114,000 and to BT Alex Brown Incorporated in the amount of $386,000
for an aggregate amount of Five Hundred Thousand Dollars ($500,000), in
each case, in accordance with the Escrow Agreement; and
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(c) Buyer shall deliver to the Parent Company the Note
in the form attached hereto as Exhibit I.
Section 5. Intercompany Debt. Section 6.15 of the Merger Agreement is
hereby amended by the addition of the following provision as the final sentence
thereof:
"The Company shall execute and deliver to the Parent Company,
and the Parent Company shall execute and deliver to the Company, a
Mutual General Release in the form attached hereto as Exhibit "A" to
this Third Amendment (the "Mutual General Release")."
Section 6. Covenants. Article VI of the Merger Agreement is hereby
amended by the addition of the following provision at the end thereof:
6.19 Title. The Parent Company and the Company shall use all
Commercially Reasonable Efforts to take all actions and do all things
required to remove (or expunge) those certain Affidavits of Contract
Affecting Real Estate (the "Affidavits") filed by or on the behalf of
J.W. Childs Equity Partners, L.P. from the title of the Real Property;
provided, however, that such removal (or expungement) shall not be a
condition to Closing.
Section 7. Conditions to Closing. The Parties hereby agree as follows
with respect to Sections 7.01 and 7.02 of the Merger Agreement:
(a) The Parent Company, on behalf of itself and the Company,
and Buyer and Merger Sub hereby waive each of the conditions contained
in the first sentence of Sections 7.02(b) and 7.01(k) of the Merger
Agreement, respectively, only to the extent they apply to the J.W.
Childs Litigation and any pending or threatened litigation commenced by
Credit Suisse First Boston.
(b) Section 7.01(j) of the Merger Agreement is hereby deleted
in its entirety and the following is hereby substituted in lieu
thereof:
Intercompany Debt and Liabilities. All debt owed by Company and
its Subsidiaries to the Parent Company or any Affiliate of the Parent
Company shall have been canceled. The Parent Company shall have
executed and delivered the Mutual General Release to the Company.
(c) Section 7.02(h) of the Merger Agreement is hereby deleted
in its entirety and the following is hereby substituted in lieu
thereof:
Intercompany Debt and Liabilities. All debt owed by Parent
Company and any of its Affiliates or Subsidiaries, including, without
limitation, Kyotaru USA, Inc., to the Company and its Subsidiaries
shall have been canceled. The Company shall have executed and delivered
the Mutual General Release to the Parent Company.
14
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(d) Section 7.02 of the Merger Agreement is hereby amended by
the insertion of the following as Section 7.02(j):
Execution and Delivery of the Indemnity Agreement. Richard M.
Lee and Hiram J. Woo, in their individual capacities, shall have
executed and delivered to the Parent Company the Indemnity Agreement
in the form attached hereto as Exhibit "B" to this Third Agreement
(the "Indemnity Agreement").
Section 8. Closing Date/Extended Closing Date. Section 8.03 of the
Merger Agreement is hereby deleted in its entirety and the Parties specifically
agree that Buyer shall have no obligation to make the Additional Deposit.
Section 9. Indemnification. Section 9.03 of the Merger Agreement is
hereby deleted in its entirety.
Section 10. Limitations on Indemnity. Section 9.04 of the Merger
Agreement is hereby deleted in its entirety and the following is substituted in
lieu thereof:
9.04. Limitation of Indemnity. From and
after the Closing, the Parent Company shall have no liability or
obligation to provide any indemnity to the Company, Buyer or
Merger Sub in connection with the Merger, the J.W. Childs
Litigation or otherwise related in any way to the Company or
any of its Subsidiaries or the transactions contemplated by this
Agreement.
Section 11. Defense of the J.W. Childs Litigation. Section 9.05 of the
Merger Agreement is hereby deleted in its entirety and the following is
substituted in lieu thereof:
9.05. Defense of the J.W. Childs Litigation.
(a) In the event of and upon the Closing, the Parties agree that
(i) Buyer shall have the right and authority to control the defense of
the Company in connection with the J.W. Childs Litigation, including
any compromise or settlement thereof, (ii) the Parent Company and
Kyotaru USA, Inc., a Delaware corporation ("KUSA"), shall retain the
right and authority to control the defense of the Parent Company and
KUSA in connection with the J.W. Childs Litigation, including any
compromise or settlement thereof, (iii) each of the Company, the Parent
Company and KUSA shall have the right, at its sole cost and expense, to
employ and engage attorneys of its own choice to handle and defend
itself in connection with the J.W. Childs Litigation, (iv) each of the
Company, the Parent Company and KUSA shall have the right and authority
to compromise or settle the J.W. Childs Litigation with respect to
claims asserted against itself in its sole and absolute discretion;
provided, however, that the Company, the Parent Company and KUSA shall
be individually responsible for any damages, settlements, and all costs
and expenses related to its compromise or settlement of the J.W. Childs
Litigation, and (v) each of the Company, the Parent Company and
15
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KUSA will keep the other Parties reasonably informed of the progress of
any such defense, compromise or settlement.
(b) The Parent Company and the Company agree to defend, and
shall cause their legal counsel to use all Commercially Reasonable
Efforts to defend, the J.W. Childs Litigation through the Closing Date.
(c) Immediately following the Closing, the Parent Company and
the Company each agree to (i) cause their legal counsel to provide
Buyer with a copy of all of its files, current as of the Closing Date,
relating to the J.W. Childs Litigation, (ii) provide and to cause their
legal counsel to provide Buyer any other documents and information
reasonably requested by Buyer's legal counsel in the investigation,
trial and defense of the Company in connection with the J.W. Childs
Litigation after the Closing (excluding attorney-client privileged
communications and privileged attorney work product dated as of or
subsequent to the date of the Closing and prepared by the Parent
Company's legal counsel), provided that the Parent Company and its
legal counsel may retain any and all original documents and provide
copies in lieu thereof, (iii) cause the substitution of the attorneys
of record for the Company, and (iv) use all Commercially Reasonable
Efforts to obtain the cooperation of potential witnesses. Nothing in
this Agreement shall be deemed an assignment of, or an obligation to
assign, any claims or potential claims against J.W. Childs Equity
Partners, L.P. by either of the Company, the Parent Company or KUSA to
one another or to Buyer; provided, however, that the Company shall
assign such claims to or shall otherwise authorize the Parent Company
as may be reasonably necessary to enable the Parent Company to pursue
the removal (or expungement) of the Affidavits pursuant to Section 6.19
of this Third Amendment.
(d) Each of Buyer, the Company and the Parent Company agrees to
use all Commercially Reasonable Efforts to cooperate with the other
Parties in connection with their respective defense of the J.W. Childs
Litigation.
(e) The provisions of this Section 9.05 shall survive the
Closing.
Section 12. Effectiveness. The Parties hereby acknowledge and agree
that the Merger Agreement (other than Sections 6.06 and 9.20 thereof) shall not
be deemed an effective or binding obligation of any Party until the Parent
Company obtains the Japanese Approval of this Third Amendment and provides
documentation to Buyer evidencing the receipt of such Japanese Approval. If the
Parent Company does not obtain and provide documentation evidencing the receipt
of the Japanese Approval of this Third Amendment within twenty-one (21) days of
the execution of this Third Amendment, the Merger Agreement shall (other than
Sections 6.06 and 9.20 thereof) remain ineffective and non-binding for all
purposes and shall not be effective or binding upon the receipt of the Japanese
Approval of this Third Amendment subsequent to the twenty first (21st) day after
the execution of this Third Amendment, without the express written
16
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consent of the Buyer. Section 6.06 of the Merger Agreement shall be deemed an
effective and binding obligation of the Company and the Parent Company effective
as of the date hereof, notwithstanding the current lack of receipt of the
Japanese Approval of this Third Amendment; provided, however, that Section 6.06
shall expire and shall be of no further force or effect if the Parent Company
fails to obtain and provide to Buyer documentation evidencing the receipt of the
Japanese Approval of this Third Amendment within twenty-one (21) days of the
execution of this Third Amendment.
Section 13. Japanese Approvals. Notwithstanding anything to the
contrary contained in the Merger Agreement, the Parent Company, at its sole cost
and expense, shall obtain the Japanese Approval of this Third Amendment and
deliver evidence thereof to Buyer within twenty-one (21) days of the execution
of this Third Amendment. In addition, each occasion where the Merger Agreement
contemplates the Parent Company obtaining the Japanese Approvals and delivering
evidence thereof to Buyer, including, without limitation, Section 6.09, shall be
deemed to refer to the Parent Company's receipt and delivery of the Japanese
Approval of this Third Amendment in accordance with this Section 13.
Section 14. Indemnification. Buyer and the Company, jointly and
severally, shall indemnify, defend and hold harmless the Parent Company and its
directors, officers, employees, trustees and affiliates from and against any and
all losses, damages, claims, costs and expenses and any other liability
whatsoever (including, without limitation, reasonable attorneys' fees, charges
and costs) incurred by reason of or arising out of any claim, demand or
litigation relating to any legal proceedings commenced on account of any failure
to obtain consent to the Merger from (i) the lessor of any leasehold Real
Property leased by the Company or any of its Subsidiaries, (ii) the lessor under
any equipment lease arrangement between the Company or any of its Subsidiaries
and such lessor, or (iii) Credit Suisse First Boston. The provisions of this
Section 14 shall survive the Closing.
Section 15. Payment of Expenses. Section 6.18 of the Merger Agreement
is hereby amended by the insertion of "(including, without limitation, all
expenses incurred in connection with the J.W. Childs Litigation)" after the
phrase "professional fees" appearing in the fifth line of Section 6.18.
Section 16. Execution in Counterparts. This Third Amendment may be
executed in any number of counterparts, each of which shall for all purposes be
deemed to be an original and all such counterparts shall together constitute but
one and the same instrument.
Section 17. Ratification and Reaffirmation of the Merger Agreement.
Except as hereby expressly amended, the Merger Agreement shall remain unchanged.
Section 18. Governing Law. This Third Amendment shall be governed by
and construed in accordance with the laws of the State of California.
17
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Section 19. Interpretation. In the event of any conflict between the
provisions of the Merger Agreement and the provisions of this Third Amendment,
the provisions of this Third Amendment shall control.
Section 20. Binding Effect. This Third Amendment shall inure to the
benefit of and shall be binding upon the Parties and their respective successors
and assigns.
[signatures follow]
18
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Third Amendment
to be executed by their respective officers, attorneys-in-fact or trustees
thereunto duly authorized as of the day and year first above written.
GALVESTON'S STEAKHOUSE CORP.,
a Delaware corporation
By: /s/ Richard M. Lee
---------------------------
Name: Richard M. Lee
Title: Chief Executive Officer
PARAGON STEAKHOUSE RESTAURANTS, INC.,
a Delaware corporation
By: /s/ Richard S. Kay
---------------------------
Name: Richard S. Kay
Title: President
TRI-CORE STEAKHOUSE, INC.,
a Delaware corporation
By: /s/ Richard M. Lee
---------------------------
Name: Richard M. Lee
Title: President
KYOTARU CO., LTD.,
a Japanese corporation
By: /s/ Terry Oshima
---------------------------
Name: Terry Oshima
Title: Attorney-in-Fact
APPROVED AND ACCEPTED:
By: /s/ Tokiyoshi Yano
---------------------------
Name: Tokiyoshi Yano
Title: Deputy Trustee of Kyotaru Co., Ltd.
19
<PAGE>
Exhibit 2.4
CERTIFICATE OF MERGER
OF
TRI-CORE STEAKHOUSE, INC.,
a Delaware corporation
with and into
PARAGON STEAKHOUSE RESTAURANTS, INC.,
a Delaware corporation
(Pursuant to Section 251 of the
Delaware General Corporation Law)
Pursuant to the provisions of Section 251 of the Delaware General
Corporation Law ("DGCL"), Paragon Steakhouse Restaurants, Inc., a Delaware
corporation, does hereby certify as follows:
FIRST: The names and states of incorporation of each of the
constituent corporations of the merger are as follows:
Name of Corporation State of Incorporation
- -------------------- ----------------------
Tri-Core Steakhouse, Inc. Delaware
Paragon Steakhouse Restaurants, Inc. Delaware
SECOND: A Merger Agreement (the "Merger Agreement") between the parties
to the merger has been approved, adopted, certified, executed and acknowledged
by each of the constituent corporations in accordance with the requirements of
Section 251(c) of the DGCL.
THIRD: Paragon Steakhouse Restaurants, Inc., a Delaware corporation
(the "Surviving Corporation") shall be the surviving corporation of the merger.
FOURTH: The Certificate of Incorporation of Surviving Corporation
shall be amended as set forth in Exhibit A attached hereto and made a part
hereof.
FIFTH: The executed Merger Agreement is on file at the office of the
Surviving Corporation, the address of which is 10200 Willow Creek Road, San
Diego, California 92131.
SIXTH: A copy of the Merger Agreement will be furnished by the
Surviving Corporation, on request and without cost, to any stockholder of any
constituent corporation.
20
<PAGE>
IN WITNESS WHEREOF, Paragon Steakhouse Restaurants, Inc., a Delaware
corporation, has caused this Certificate of Merger to be signed by a duly
authorized officer thereof this ___ day of December, 1998.
Paragon Steakhouse Restaurants, Inc., a
Delaware corporation
By: __________________________________
Richard Kay, President
21
<PAGE>
EXHIBIT A
CERTIFICATE OF INCORPORATION
OF
PARAGON STEAKHOUSE RESTAURANTS, INC.
ARTICLE ONE
The name of the corporation is Paragon Steakhouse Restaurants, Inc.
ARTICLE TWO
The address of the corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle, Delaware 19801. The name of its registered agent at such
address is The Corporation Trust Company.
ARTICLE THREE
The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
ARTICLE FOUR
The total number of shares of stock which the corporation has authority
to issue is One Thousand (1,000) shares of Common Stock, with a par value of
$0.01 per share.
ARTICLE FIVE
The name and mailing address of the sole incorporator are as follows:
V.A. Brookens
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
ARTICLE SIX
The corporation is to have perpetual existence.
22
<PAGE>
ARTICLE SEVEN
In furtherance and not in limitation of the powers conferred by
statute, the board of directors of the corporation is expressly authorized to
make, alter or repeal the by-laws of the corporation.
ARTICLE EIGHT
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws of the corporation may provide. The books of the
corporation may be kept 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. Election of directors need not be by written ballot unless
the by-laws of the corporation so provide.
ARTICLE NINE
To the fullest extent permitted by the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended, a director of
this corporation shall not be liable to the corporation or its stockholders for
monetary damages for a breach of fiduciary duty as a director. Any repeal or
modification of this ARTICLE NINE shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
ARTICLE TEN
The corporation expressly elects not to be governed by Section 203 of
the General Corporation Law of the State of Delaware.
ARTICLE ELEVEN
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 herein and by the laws of the State of Delaware, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
23
<PAGE>
Exhibit 2.5
AGREEMENT NOT TO COMPETE
This Agreement Not To Compete ("Agreement") dated as of December 18,
1998, is executed and delivered by Kyotaru U.S.A., Inc., a Delaware corporation
("KUSA"), and Kyotaru Co., Ltd. ("Parent Company"), in favor of Galveston's
Steakhouse Corp., a Delaware corporation ("Buyer"), and is made
contemporaneously with the Closing of a transaction in which Buyer will acquire
from Parent Company all of the outstanding capital stock of Paragon Steakhouse
Restaurants, Inc., a Delaware corporation ("Company"), through a reverse
subsidiary merger of Tri-Core Steakhouse, Inc., which is a wholly-owned
subsidiary of Buyer ("Merger Sub"), with and into Company (the "Merger").
RECITALS
WHEREAS Company and its Subsidiaries are engaged primarily in the
business of operating steakhouse restaurants;
WHEREAS Parent Company is the sole stockholder of Company and KUSA;
WHEREAS Company, Parent Company, Buyer and Merger Sub are parties to a
Merger Agreement dated as of August 31, 1998 (the "Merger Agreement");
WHEREAS Parent Company and KUSA acknowledge and agree that Parent
Company and KUSA have technical expertise associated with the Company's
business. In addition, Parent Company and KUSA have valuable business contacts
with professionals in the restaurant industry. Furthermore, Company's reputation
and goodwill are an integral part of Company's business success throughout the
areas where it conducts its business. If Parent Company or KUSA deprive Buyer of
any of Company's goodwill or in any manner uses their reputation and goodwill in
competition with Buyer, Buyer will be deprived of the benefits it has bargained
for pursuant to this Agreement and the Merger Agreement; and
WHEREAS Because Parent Company and KUSA have the ability to compete
with Buyer in the operation of its business, Buyer, therefore, desires that
Parent Company and KUSA enter into this Agreement. But for Parent Company's and
KUSA's entry into this Agreement, Buyer and Merger Sub would not have entered
into the Merger Agreement and would not consummate the Merger. Parent Company
and KUSA, in exchange for Buyer's and Merger Sub's entry into the Merger
Agreement and their consummation of the Merger, desire to enter into this
Agreement.
AGREEMENT
NOW THEREFORE, as a material inducement to Buyer and Merger Sub to
effect the Merger in accordance with the terms and conditions of the Merger
Agreement, and for other
24
<PAGE>
good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereby agree as follows:
1. Defined Terms. Capitalized terms used herein without
definition shall have the meanings ascribed to them in the Merger Agreement.
2. Term. The term of this Agreement shall commence on the
Closing Date and shall expire on the third anniversary of the Closing Date
(the "Term").
3. Covenant Not To Compete.
(a) During the Term of this Agreement, neither
Parent Company nor KUSA nor any of their respective Subsidiaries or Affiliates,
unless acting in accordance with Buyer's prior written consent, shall, directly
or indirectly, own, manage, join, operate or control, or participate in the
ownership, management, operation or control of, or be connected as a director,
officer, employee, partner, consultant or otherwise with, or permit their names
to be used by or in connection with, any profit or non-profit business or
organization which is engaged in the steakhouse restaurant business (as such
business is conducted by the Company and its Subsidiaries as the date hereof) or
any similar business within the Territory (as defined below) for so long as and
over so much of the Territory that the Company or any of its Subsidiaries
continues to carry on the steakhouse restaurant business; provided, however,
that nothing herein shall be deemed or construed to prohibit the Parent Company
or KUSA from owning or holding 5% or less of the capital stock or other equity
interests in any entity or organization whose capital stock or equity interests
are traded on an established securities exchange or market. The covenants
contained in this ss.3(a) shall extend to (i) those states of the United States
listed on Annex I hereto, which include, without limitation, those counties
listed on Annex II hereto; and (ii) in any other states and counties in which
the Company conducts business as of the date hereof (collectively, the
"Territory").
(b) Neither the Parent Company nor KUSA shall,
directly or indirectly, either for itself or any other Person, (i) induce or
attempt to induce any executive or managerial employee of the Company to leave
the employ of the Company, (ii) interfere with the relationship between the
Company and any executive or managerial employee of the Company in any way,
(iii) employ, or otherwise engage as an employee, independent contractor, or
otherwise, any executive or managerial employee of the Company, or (iv) induce
or attempt to induce any customer, supplier, licensee, or business relation of
the Company to cease doing business with the Company, or otherwise interfere
with the relationship between any customer, supplier, licensee, or business
relation of the Company in any way.
4. Severability of Provisions. If any covenant set forth in this
Agreement is determined by any court to be unenforceable by reason of its
extending for too great a period of time or over too great a geographic area, or
by reason of its being too extensive in any other respect, such covenant shall
be interpreted to extend only for the longest period of time and over the
greatest geographic area, and to otherwise have the broadest application as
shall be
25
<PAGE>
enforceable. The invalidity or unenforceability of any particular provision of
this Agreement shall not affect the other provisions hereof, which shall
continue in full force and effect. Without limiting the foregoing, the covenants
contained herein shall be construed as separate covenants, covering their
respective subject matters, with respect to each of the separate cities,
counties and states of the United States and each political subdivision thereof
included within the Territory.
5. Injunctive Relief. Parent Company and KUSA each acknowledge that (a)
the provisions of ss.3 and ss.4 are reasonable and necessary to protect the
legitimate interests of Buyer, and (b) any violation of ss.3 or ss.4 will result
in irreparable injury to Buyer, the exact amount of which will be difficult to
ascertain, and that the remedies at law for any such violation would not be
reasonable or adequate compensation to Buyer for such a violation. Accordingly,
Parent Company and KUSA agree that if Parent Company and/or KUSA violate the
provisions of ss.3 or ss.4, in addition to any other remedy which may be
available at law or in equity, Buyer shall be entitled to specific performance
and injunctive relief without the necessity of proving actual damages or posting
a bond or other security.
6. Extension of Term. In the event of any violation of ss.3 or ss.4 of
this Agreement by Parent Company or KUSA, the Term shall be extended by the
period of the duration of such violation.
7. 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 if given in the manner and to the
address(es) set forth in the Merger Agreement.
8. Entire Agreement; Amendments. This Agreement and the Merger
Agreement constitute the complete, final and exclusive statement of the
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. No amendment, supplement, modification
or rescission of this Agreement shall be binding unless executed in writing by
the parties. The parties expressly acknowledge that they have not relied upon
any prior agreements, understandings, negotiations, or discussions, whether oral
or written.
9. 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 acquires all of the Capital Stock of the Company or all
or substantially all of the assets of the Company and its Subsidiaries and which
assumes all obligations and liabilities hereunder.
10. Attorneys' Fees. In the event Parent Company or KUSA shall fail to
perform any of their obligations under this Agreement, Parent Company and KUSA
hereby agree that all reasonable expenses, including, but not limited to,
reasonable attorneys' fees, which may be incurred by Buyer in enforcing this
Agreement shall be paid by Parent Company and KUSA.
26
<PAGE>
11. Choice of Law; Venue. 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 any choice of law rules that
would require the application of the laws of any other jurisdiction). In the
event of any dispute hereunder, the parties agree that the exclusive venue shall
be in a court of competent jurisdiction in the State of California, County of
Orange.
12. Succession: This Agreement shall be binding upon and inure to
the benefit of the parties to this Agreement and their respective successors
and permitted assigns.
13. Waiver. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement will
operate as a waiver of such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude any other or
further exercise of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement can be discharged by one
party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver that may be given by
a party will be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party will be deemed to be a waiver
of any obligation of such party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in this
Agreement.
[signatures follow]
27
<PAGE>
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.
KYOTARU U.S.A., INC.,
a Delaware corporation
By: _________________________
Its:_________________________
KYOTARU CO., LTD.
a Japanese corporation
By: _________________________
Its:_________________________
GALVESTON'S STEAKHOUSE CORP.,
a Delaware corporation
By: _________________________
Its:_________________________
28
<PAGE>
ANNEX I
The covenants contained in this Agreement shall extend to the following
States: Arizona, California, Illinois, Indiana, Michigan, Nevada, North
Carolina, Ohio, Utah, Virginia and Wisconsin.
29
<PAGE>
ANNEX II
The covenants in this Agreement shall extend to the following counties:
<TABLE>
<S> <C>
(i) the Counties of Maricopa, Pima and Yuma, each of which is located in the State of
Arizona;
(ii) the Counties of Alameda, Contra Costa, Kern, Orange, Placer, Riverside, Sacramento,
San Diego, San Mateo, San Francisco, Santa Clara, Solano, Sonoma, Stanislaus and
Ventura, each of which is located in the State of California;
(iii) the Counties of Champaign, Peoria and Sangamon, each of which is located in the State
of Illinois
(iv) the Counties of Johnson, Marion, St. Joseph and Tippecanoe, each of which is located
in the State of Indiana;
(v) the Counties of Eaton, Ingham, Kalamazoo, Kent, Lewanee, Macomb, Oakland, Washtenaq
and Wayne, each of which is located in the State of Michigan;
(vi) the County of Clark, which is located in the State of Nevada;
(vii) the County of Wake, which is located in the State of North Carolina;
(viii) the Counties of Butler, Cuyahoga, Hamilton, Lorain,
Lucas, Montgomery and Stark, each of which is located
in the State of Ohio;
(ix) the County of Salt Lake, which is located in the State of Utah;
(x) the County of Independent City, which is located in the State of Virginia; and
(xi) the County of Dane, which is located in the State of Wisconsin.
</TABLE>
30
<PAGE>
Exhibit 2.6
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the "Agreement") is made as of December ___,
1998, by and between Galveston's Steakhouse Corp., a Delaware corporation (the
"Buyer"), and Paragon Steakhouse Restaurants, Inc., a Delaware corporation (the
"Parties").
WITNESSETH:
WHEREAS, on or before the date hereof, Buyer has entered into that
certain Merger Agreement dated as of August 31, 1998 by and among Buyer and
Tri-Core Steakhouse, Inc., a Delaware corporation (the "Merger Sub"), on the one
hand, and the Company and Kyotaru Co., Ltd., on the other hand (the "Merger
Agreement"), pursuant to which the Merger Sub will be merged with and into the
Company (the "Merger");
WHEREAS the Parties acknowledge that, upon the Closing of the Merger,
Buyer will not have been issued by the proper governmental authority a license
to sell and serve alcohol in Buyer's own name or its nominee's own name at each
of the restaurants currently operated by the Company and listed on Annex A
attached hereto (the "Restaurants");
WHEREAS, pursuant to the terms of the Merger Agreement, the Company has
agreed to enter into this Agreement and to cooperate with Buyer in securing
liquor license transfers for each of the Restaurants;
WHEREAS, Buyer has requested upon consummation of the Merger that it or
its nominee be allowed to operate, manage, and control all liquor sales at each
of the Restaurants pursuant to the same rights currently held by the Company
under those certain liquor licenses in the name of the Company covering the
Restaurants (individually, an "Existing License", and collectively, the
"Existing Licenses"), for a period commencing on the date hereof and terminating
the date Buyer or its nominee obtains new liquor licenses in its own name
serving each of the Restaurants (the "Interim Period"), and, if permitted by the
applicable laws, the Company is willing to allow Buyer to do so on the terms and
conditions set forth below;
WHEREAS, in the event the applicable laws do not permit Buyer to manage
and control all liquor sales at any Restaurant pursuant to an Existing License
or pursuant to a temporary liquor license issued to Buyer by the applicable
authorities permitting such management and control, Buyer has requested that the
Company continue to operate and manage each Restaurant where Buyer is not
permitted by the applicable laws to manage and control liquor sales, and the
Company is willing to operate such Restaurants on the terms and conditions set
forth below; and
WHEREAS, but for the Company's entry into this Agreement, Buyer would
not have entered into the Merger Agreement or consummated the Merger.
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<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the premises contained in the
Merger Agreement and herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
1. Issuance of New Licenses. Buyer or its nominee shall promptly apply
directly to the appropriate State and County and City authorities for new
permanent liquor licenses in Buyer's or its nominee's name, permitting Buyer or
its nominee to operate, manage and control liquor sales at each Restaurant
(individually, the "New License," and collectively, the "New Licenses"). Buyer
or its nominee shall use commercially reasonable efforts to obtain the New
Licenses on the earliest practicable date. The Company agrees to reasonably
cooperate with Buyer in Buyer's efforts to obtain the New Licenses. All costs
and expenses incurred in obtaining the New Licenses, however, shall be borne by
Buyer. The Company shall not be responsible for the failure or refusal of any
governmental authority to grant the New Licenses, and such refusal or failure
shall not excuse Buyer from timely performance of any of Buyer's obligations
during the Interim Period as set forth in this Agreement.
2. Operating Under Existing Licenses.
a. The Company hereby agrees and authorizes Buyer to operate,
manage and control during the Interim Period all liquor sales
at each Restaurant pursuant to the Company's rights under the
Existing License for each Restaurant. The authorization
granted in this ss.2(a) by the Company to Buyer shall
terminate, with respect to each Restaurant separately, on (i)
the date Buyer or its nominee obtains a New License, or (ii)
the date on which the Company receives notice from the
applicable government authorities that Buyer's use of the
Existing License for any Restaurant is in violation of any
applicable law. Any termination pursuant to this ss.2(a)(ii)
shall apply only to the Restaurant subject to the governance
of the complaining authority, and, in no event, shall it
terminate the authorization granted to Buyer with respect to
the remaining Restaurants.
b. The Buyer shall have absolute control over all operations
of the Restaurants during the Interim Period, including the
purchase and sale of all food and beverages, including
alcoholic beverages, and over any employees engaged in
operations of the Restaurants. The Buyer shall operate and
manage the Restaurants with the standards of quality
consistent with the past custom and practice of the Company.
c. All costs and expenses incurred in connection with the
operations of the Restaurants shall be paid by and be the sole
responsibility of Buyer, and Buyer shall be entitled to all
proceeds and profits of alcoholic beverage sales and other
sales at the Restaurants.
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<PAGE>
d. In the event the authorization granted in ss.2(a) is
terminated for the reason stated in ss.2(a)(ii) above, Buyer
warrants and represents to the Company that from the date of
written notice of such termination, there shall be no sale or
service of beer, wine, or other alcoholic beverage at the
applicable Restaurant until the Company begins to operate such
Restaurant pursuant to the terms of ss. 3 of this Management
Agreement.
3. Operating Agreements.
a. In the event any applicable law prohibits the arrangement
contemplated in ss.2(a) of this Agreement for any Restaurant,
or if the arrangement contemplated in ss.2(a) is terminated
pursuant to ss.2(a)(ii) for any Restaurant, the Company hereby
agrees upon notice of such event, to operate such Restaurant
pursuant to the terms of this ss.3. The agreements in this
ss.3 shall terminate as to each Restaurant on the date Buyer
obtains a New License for such Restaurant, unless otherwise
mutually agreed to in writing by the parties. In the event
this ss.3 applies to any Restaurant, Buyer hereby grants the
Company the authority, subject to the limitations and
conditions herein set forth, to direct, supervise and manage
the operation of the Restaurants.
b. The Company shall be responsible for the operation of the
Restaurants, as applicable, in a first-class manner consistent
with past custom and practice, and the Company's duties and
responsibilities shall include, without limitation, the
following:
(A) Supervision and training of on-site general managers,
floor managers and kitchen managers;
(B) Development of media, marketing and coordination of
sales programs;
(C) Continuous adjustment of menu and food prices based
upon market conditions;
(D) Continuous adjustment of wine lists and bar items;
(E) Control of food, liquor and wine costs;
(F) Supervision of quality and service at each Restaurant;
(G) Supervision of maintenance projects and remodeling;
(H) Supervision and purchasing of all food, liquor, wine
and supplies;
33
<PAGE>
(I) Reviewing and purchasing all insurance policies;
(J) Supervision and hiring of personnel and control of
employee wages and employee benefits consistent with
past custom and practice;
(K) Maintain the restaurant and all furniture, fixtures
and other equipment therein and appurtenant thereto
in good repair; and
(L) Generally, to provide all such services and expertise
and first-class restaurant consistent with past
custom and practice.
c. The Company shall keep daily sales reports, weekly sales
reports, and monthly sales reports. The Company shall submit
weekly sales reports by mailing the same to Buyer at Buyer's
address as listed in the Merger Agreement. The Company agrees
to maintain for Buyer proper and suitable records and books of
accounts to be kept in accordance with past custom and
practice. Such records and books of accounts shall properly
record all receipts and disbursements connected with the
management and operation of the Restaurants and shall, at all
times, be open to the inspection and audit of any officer of
Buyer, or any authorized representative of Buyer. All books,
records, bills, receipts, bank books, check books, check
vouchers, correspondence, lists, files, index cards, and books
of account relating to lessees, concessionaires, patrons, and
employees of the Restaurants, and other data and records
pertaining, or in any manner, relating to the management and
operation of the Restaurants shall, at all times, be safely
kept and preserved by the Company.
d. Buyer shall, at all times, have the right to inspect the
Restaurants, their operation, and inspect their books of
accounts. In the event that Buyer requests information, the
Company, upon reasonable notice, shall promptly respond to
such inquiries for information. Buyer shall, at all times and
without the consent or concurrence of the Company, have the
right to make any changes to the Company's operation of the
Restaurants and require that the Company implement such
changes; provided, however, that Buyer will not direct the
Company to implement any changes regarding the serving of
alcohol.
e. The gross receipts of each Restaurant operated by the
Company pursuant to this ss.3 shall be the exclusive property
of Buyer. Pursuant to the duties and obligations covered in
this ss.3, the Company shall use such gross receipts to
satisfy all operating expenses of each such Restaurant
operated by the Company under this ss.3 as they become due and
payable. Such operating expenses include, but are not limited
to; employee salaries, rent or mortgage payments, food,
equipment and related supplies, and any other similar expenses
which arise in the Ordinary Course of Business. In the event
that any receipts remain following the disbursement of
operating expense payments, such sums shall be immediately
turned over to Buyer.
34
<PAGE>
4. Miscellaneous.
a. This Agreement shall not be assigned in whole or in part
by either party hereto.
b. All notices or communications to be given by any
party to another party shall be made in accord with those
procedures provided for in the Merger Agreement.
c. This Agreement may be modified only by a writing signed by
both parties. The parties shall file a copy of any amendment
to this Agreement with each government authority with whom the
parties filed this Agreement.
d. Each party shall bear its own legal, accounting, and
other expenses in connection with the preparation of this
Agreement and the transaction contemplated hereby.
e. 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 any choice of
law rules that would require the application of the laws of
any other jurisdiction).
f. Any controversy or claim arising out of this Agreement
shall be resolved by arbitration in accordance with ss.9.18
of the Merger Agreement.
g. If any party commences an action against any other to
enforce any of the terms of this Agreement or because of the
breach by any party of any of the terms hereof, the losing or
defaulting party shall pay to the prevailing party the
reasonable attorneys' fees, costs and expenses incurred in
connection with the prosecution or defense of such action.
h. The Company acknowledges that (a) the provisions of ss.2
and ss.3 are reasonable and necessary to protect the
legitimate interests of Buyer, and (b) any violation of ss.2
and ss.3 will result in irreparable injury to Buyer, the exact
amount of which will be difficult to ascertain, and (c) that
the remedies at law for any such violation would not be
reasonable or adequate compensation to Buyer for such a
violation. Accordingly, the Company agrees that if it violates
the provisions of ss.2 or ss.3, in addition to any other
remedy which may be available at law or in equity, Buyer shall
be entitled to specific performance and injunctive
35
<PAGE>
relief, without posting bond or other security, and without
the necessity of proving actual damages.
i. Buyer hereby agrees to indemnify, defend and hold the
Company and its directors, officers, harmless from and against
any and all claims, losses, liabilities, fines, penalties,
costs, damages, expenses of any nature whatsoever (including
without limitation attorneys' fees and expenses) arising from
the use of the Existing Licenses by Buyer or its nominee
during the Interim Period.
j. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
GALVESTON'S STEAKHOUSE CORP.,
a Delaware corporation
By: __________________________
Its: __________________________
PARAGON STEAKHOUSE RESTAURANTS,
INC., a Delaware corporation
By: __________________________
Its: __________________________
36
<PAGE>
Exhibit 2.7
NON-NEGOTIABLE PROMISSORY NOTE
$600,000, December __, 1998
FOR VALUE RECEIVED, GALVESTON'S STEAKHOUSE CORP., a Delaware
corporation ("Maker"), promises to pay to KYOTARU CO., LTD., a Japanese
corporation ("Payee"), in lawful money of the United States of America, the
principal sum of Six Hundred Thousand Dollars ($600,000), together with interest
in arrears on the unpaid principal balance at an annual rate equal to 6.9%, in
the manner provided below. Interest shall be calculated on the basis of a year
of 365 or 366 days, as applicable, and charged for the actual number of days
elapsed.
This Note has been executed and delivered pursuant to and in accordance
with the terms and conditions of that certain Merger Agreement, dated August 31,
1998, as amended by that certain First Amendment to Merger Agreement dated as of
September 14, 1998, that certain Second Amendment to Merger Agreement dated as
of September 25, 1998 and that certain Third Amendment to Merger Agreement dated
as of December 7, 1998, by and among Maker and Tri-Core Steakhouse, Inc., a
Delaware corporation, on the one hand, and the Payee and Paragon Steakhouse
Restaurants, Inc., a Delaware corporation, on the other hand (collectively, the
"Merger Agreement"), and is subject to the terms and conditions of the Merger
Agreement, which are, by this reference, incorporated herein and made a part
hereof. Capitalized terms used in this Note without definition shall have the
respective meanings set forth in the Merger Agreement.
1. PAYMENTS
1.1 PRINCIPAL AND INTEREST
The principal amount of this Note shall be due and payable in one
installment on December __, 1999. Interest on the principal balance of this Note
shall be due and payable quarterly, commencing ninety (90) calendar days from
the date hereof.
1.2 MANNER OF PAYMENT
All payments of principal and interest on this Note shall be made by
wire transfer of immediately available funds to an account designated by Payee
in writing. If any payment of principal or interest on this Note is due on a day
which is not a Business Day, such payment shall be due on the next succeeding
Business Day, and such extension of time shall be taken into account in
calculating the amount of interest payable under this Note. "Business Day" means
any day other than a Saturday, Sunday or legal holiday in the State of
California.
1.3 PREPAYMENT
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Maker may, without premium or penalty, at any time and from time to
time, prepay all or any portion of the outstanding principal balance due under
this Note, provided that each such prepayment is accompanied by accrued interest
on the amount of principal prepaid calculated to the date of such prepayment.
Any partial prepayments shall be applied to installments of principal in inverse
order of their maturity. Notwithstanding anything contained herein to the
contrary, the principal amount of this Note shall be reduced from Six Hundred
Thousand Dollars ($600,000) to (i) Three Hundred Fifty Thousand Dollars
($350,000) should Maker prepay this Note in full, together with all accrued
interest thereon, within sixty (60) calendar days of the date first written
above, or (ii) Four Hundred Thousand Dollars ($400,000) should Maker prepay this
Note in full, together with all accrued interest thereon, within one hundred
twenty (120) calendar days of the date first written above, in which case the
interest accrued on the principal amount shall be calculated on the basis of the
reduced principal amount of Three Hundred Fifty Thousand Dollars ($350,000) or
Four Hundred Thousand Dollars ($400,000), as applicable.
2. DEFAULTS
2.1 EVENT OF DEFAULT
The occurrence of any one or more of the following events with
respect to Maker shall constitute an event of default hereunder ("Event of
Default"):
(a) If Maker shall fail to pay when due any payment of
principal or interest on this Note and such failure continues for five
(5) days after Payee notifies Maker of such failure in writing.
(b) If Maker (i) files or suffers the filing of a petition in
bankruptcy, either voluntarily or involuntarily, (ii) institutes or
suffers the commencement of any proceeding under any bankruptcy,
reorganization, arrangement, dissolution, winding up or insolvency laws
relating to the relief of debtors or the appointment of a receiver,
custodian or trustee, or (iii) makes an assignment for the benefit of
creditors.
2.2 REMEDIES
Upon the occurrence of an Event of Default hereunder (unless all Events
of Default have been cured or waived by Payee), Payee may, at its option, (i) by
written notice to Maker, declare the entire unpaid principal balance of this
Note, together with all accrued interest thereon, immediately due and payable
regardless of any prior forbearance, and (ii) exercise any and all rights and
remedies available to it under applicable law, including, without limitation,
the right to collect from Maker all sums due under this Note. Maker shall pay
all reasonable costs and expenses incurred by or on behalf of Payee in
connection with Payee's exercise of any or all of its rights and remedies under
this Note, including, without limitation, reasonable attorneys' fees.
2.3 COVENANTS
For so long as any portion of principal or interest remains unpaid
under this Note, Maker shall:
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(a) give written notice to Payee, within three (3) calendar days of the
occurrence of any Event of Default; and
(b) during any period of time an Event of Default exists, permit any
representative of Payee, upon one (1) days' prior notice and during regular
business hours, to inspect, visit and make copies of any of the corporate and
financial books, records, documents and premises of Maker and to discuss the
finances, accounts and affairs of Maker with the principal officers of Maker.
3. MISCELLANEOUS
3.1 WAIVER
The rights and remedies of Payee under this Note shall be cumulative
and not alternative. No waiver by Payee of any right or remedy under this Note
shall be effective unless in a writing signed by Payee. Neither the failure nor
any delay in exercising any right, power or privilege under this Note will
operate as a waiver of such right, power or privilege and no single or partial
exercise of any such right, power or privilege by Payee will preclude any other
or further exercise of such right, power or privilege or the exercise of any
other right, power or privilege. To the maximum extent permitted by applicable
law, (a) no claim or right of Payee arising out of this Note can be discharged
by Payee, in whole or in part, by a waiver or renunciation of the claim or right
unless in a writing signed by Payee, (b) no waiver that may be given by Payee
will be applicable except in the specific instance for which it is given, and
(c) no notice to or demand on Maker will be deemed to be a waiver of any
obligation of Maker or of the right of Payee to take further action without
notice or demand as provided in this Note. Maker hereby waives presentment,
demand, protest and notice of dishonor and protest.
3.2 NOTICES
Any notice required or permitted to be given hereunder shall be given
in accordance with Section 9.12 of the Merger Agreement.
3.3 SEVERABILITY
If any provision in this Note is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Note will remain
in full force and effect. Any provision of this Note held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
3.4 GOVERNING LAW
This Note will be governed by the laws of the State of California
without regard to conflicts of laws principles.
3.5 PARTIES IN INTEREST
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This Note shall bind Maker and its successors and assigns. This Note
shall not be assigned or transferred by Payee without the express prior written
consent of Maker, except by will, in default thereof, by operation of law, or to
any successor or transferee in connection with the Payee's reorganization
proceedings in Japan.
3.6 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Note are provided for convenience only
and will not affect its construction or interpretation.
All words used in this Note will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
words "hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific section or subsection hereof.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the date first stated above.
GALVESTON'S STEAKHOUSE CORP.,
a Delaware corporation
By:
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Richard M. Lee, Chief Executive Officer
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