AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 13, 1999
REGISTRATION NO. 333-________
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
STEAKHOUSE PARTNERS, INC.
------------------------------
(NAME OF REGISTRANT AS SPECIFIED 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.)
10200 WILLOW CREEK ROAD
SAN DIEGO, CA 92131
(619) 689-2333
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES
AND PRINCIPAL PLACE OF BUSINESS)
----------------------
RICHARD M. LEE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
STEAKHOUSE PARTNERS, INC.
10200 WILLOW CREEK ROAD
SAN DIEGO, CA 92131
(619) 689-2333
---------------------------------------------------------
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
===============================================================================
COPY TO:
HANK GRACIN, ESQ.
LEHMAN & EILEN LLP
50 CHARLES LINDBERGH BLVD., SUITE 505
UNIONDALE, NEW YORK 11553
TELEPHONE: (516) 222-0888
FACSIMILE: (516) 222-0948
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the registration statement becomes effective.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. /x/
<PAGE>
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 this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective 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. / /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------
Title of each Proposed maximum Proposed maximum Amount of
class of securities Amount to be offering price per aggregate offering Registration
to be registered registered share (1) (2) price (1) Fee
- ------------------- ------------- ------------------ ------------------ ------------
<S> <C> <C> <C> <C>
Common Stock 705,197 shares $7.375 $5,200,828 $1,445.83(3)
<FN>
- -----------------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 promulgated under the Securities Act of 1933,
as amended.
(2) The closing price of the Common Stock of the Registrant on August 11, 1999
on the NASDAQ SmallCap Market was $7.375 per share.
(3) The registration fee has been calculated by multiplying the aggregate
offering price by .000278. The registration fee is enclosed herewith.
</FN>
</TABLE>
Pursuant to Rule 416, there are also registered hereby such additional
indeterminate number of shares as may become issuable as dividends or to prevent
dilution resulting from stock splits, stock dividends or similar transactions.
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.
<PAGE>
Pursuant to Rule 429 of the Securities Act of 1933, the prospectus included
in this registration statement also relates to certain unsold securities of the
Registrant registered under registration statement No. 333-69137 and to certain
unsold securities of the Registrant registered under registration statement No.
333-29093.
SUBJECT TO COMPLETION DATED AUGUST 13, 1999
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the Registration Statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS
STEAKHOUSE PARTNERS, INC.
705,197 SHARES OF COMMON STOCK
----------------------------
The 705,197 shares of common stock are being offered by the selling
stockholders. The common stock is currently traded on the NASDAQ SmallCap Market
under the symbol "SIZL." On August 11, 1999 the last sale price of the common
stock as reported on NASDAQ was $7.375 per share.
The common stock may be sold by the selling stockholders directly or
through underwriters, dealers or agents in market transactions or privately
negotiated transactions.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
This investment involves a high degree of risk. Carefully consider the
risk factors beginning on page 6 in this prospectus.
------------------------
The date of this Prospectus is _______, 1999.
------------------------
<PAGE>
No person has been authorized in connection with this offering to give
any information or to make any representation other than as contained in this
Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized by Steakhouse Partners. This Prospectus
does not constitute an offer to sell or the solicitation of an offer to buy any
securities covered by this Prospectus in any state or other jurisdiction to any
person to whom it is unlawful to make such offer or solicitation in such state
or jurisdiction. Neither the delivery of this Prospectus nor any sales made
hereunder shall, under any circumstances, create an implication that there has
been no change in the affairs of Steakhouse Partners since the date hereof.
WHERE YOU CAN GET MORE INFORMATION
At your request, we will provide you, without charge, a copy of any
exhibits to our registration statement incorporated by reference in this
prospectus. If you want more information, write or call us at:
Steakhouse Partners, Inc.
10200 Willow Creek Road
San Diego, California 92131
Telephone No.: (619) 689-2333
Facsimile No.: (619) 689-0231
Our fiscal year ends on December 28, 1999. We furnish our shareholders
annual reports containing audited financial statements and other appropriate
reports. In addition, we are a reporting company and file annual, quarterly and
current reports, proxy statements and other information with the SEC. You may
read and copy any reports, statements or other information we file at the SEC's
public reference room in Washington D.C. You can request copies of these
documents, upon payment of a duplicating fee, by writing to the SEC. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. Our SEC filings are also available to the public on the SEC
Internet site at http:\\www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to these documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below, which we have already filed with the
SEC, and any future filings we make with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934 until the selling shareholders
sell all of the securities offered by this prospectus.
STEAKHOUSE PARTNERS, INC. SEC FILINGS (FILE NO. 000-23739) PERIOD
- --------------------------------------------------------------------------------
Annual Report on Form 10KSB Year ended December 29, 1998
Quarterly Report on Form 10QSB Quarter Ended March 23, 1999
Quarterly Report on Form 10QSB Quarter Ended June 15, 1999
This prospectus is part of a registration statement we filed with the
SEC. You should rely on the information incorporated by reference or provided in
this prospectus. We have not authorized anyone to provide you with different
information. We are not making an offer of these securities in any state where
the offer is not permitted. You should not assume that the information in this
prospectus or the documents incorporated by reference is accurate as of any date
other than the date on the front of this prospectus or those documents.
<PAGE>
TABLE OF CONTENTS
Page No.
PROSPECTUS SUMMARY............................................................1
THE OFFERING..................................................................2
RISK FACTORS..................................................................3
SELECTED FINANCIAL AND OPERATING DATA.........................................9
INDEMNIFICATION..............................................................10
MARKET PRICE OF COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.....................................11
REGISTRATION RIGHTS..........................................................11
USE OF PROCEEDS FROM SALE OF COMMON STOCK....................................12
SELLING SECURITYHOLDERS AND PLAN OF DISTRIBUTION.............................12
DESCRIPTION OF SECURITIES....................................................14
DIVIDEND POLICY..............................................................16
LEGAL MATTERS................................................................16
EXPERTS ....................................................................17
<PAGE>
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in
this prospectus. It is not complete and may not contain all of the information
that is important to you. To understand this offering fully, you should read the
entire prospectus carefully, including the risk factors and financial
statements.
This prospectus and the documents incorporated in this prospectus by
reference may contain forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. These
forward-looking statements are based on current expectations, estimates and
projections about Steakhouse Partners' industry, management's beliefs and
assumptions made by management. Words such as "anticipates," "expects,"
"intends," "plans," "believes," "seeks," "estimates," variations of such words
and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and are
subject to certain risks, uncertainties and assumptions that are difficult to
predict.
Accordingly, actual results may differ materially from those expressed
or forecasted in any such forward-looking statements. Such risks and
uncertainties include those risk factors and such other uncertainties noted
herein and in the documents incorporated herein by reference. Steakhouse
Partners assumes no obligation to update publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
Steakhouse Partners, Inc.
10200 Willow Creek Road
San Diego, California 92131
Telephone No. (619) 689-2333
Facsimile No. (619) 689-0231
<PAGE>
THE OFFERING
Common Stock Offered by Selling Stockholders... 705,197 shares
Common Stock to be offered by Steakhouse
Partners..................................... 0 shares
Common Stock Outstanding Before Offering (1)... 3,314,522 shares
Common Stock Outstanding After Offering........ 3,314,522 shares
Use of Proceeds................................ All of the shares offered from
time to time by this prospectus
are being offered by the
selling stockholders.
Steakhouse Partners shall not
receive any proceeds from these
sales of its stock.
- -------------------------
(1) Based on shares outstanding as of August 11, 1999.
2
<PAGE>
RISK FACTORS
Investing in Steakhouse Partners' shares is very risky. You should be
able to bear a complete loss of your investment. You should carefully consider
the following factors, among others.
OUR PRINCIPAL SUBSIDIARY IS IN DEFAULT UNDER ITS MORTGAGE LOAN AGREEMENT AND IF
WE DO NOT OBTAIN A WAIVER OF THE COVENANT VIOLATIONS IT COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR OPERATIONS AND FINANCIAL RESULTS.
As of December 29, 1998, Paragon Steakhouse Restaurants, Inc., our
principal subsidiary, was not in compliance with certain financial ratio loan
covenants under its mortgage loan agreement. To date we have not obtained a
formal waiver for the covenant violations. If we do not obtain a waiver of the
covenant violations it could have a material adverse effect on our operations
and financial results. Paragon is in technical default under the terms of the
mortgage loan agreement. We are exploring opportunities to refinance the
mortgage loan agreement and have so informed the financing company.
To date, the financing company has not declared an event of default
under the mortgage loan agreement. If we do not obtain the agreement of the
financing company to waive the covenant violations it could have a material
adverse effect on our operations and financial results, including but not
limited to foreclosure upon Paragon's owned land, buildings and the improvements
thereon. We can give no assurance that we will be able to obtain the agreement
of the financing company to waive the covenant violations of Paragon before we
effect a refinancing of the mortgage loan agreement or that we will be able to
obtain the refinancing.
OUR PRINCIPAL SUBSIDIARY MAY NOT BE ABLE TO CONTINUE AS A GOING CONCERN AND IF
IT CEASES OPERATIONS IT WOULD HAVE A MATERIAL ADVERSE EFFECT ON OUR OPERATIONS
AND FINANCIAL RESULTS.
The financial statements regarding Paragon which are incorporated by
reference into this prospectus have been prepared assuming that Paragon will
continue as a going concern; however, the financial condition of Paragon raises
substantial doubt about the ability of Paragon to continue as a going concern.
If Paragon ceases operations, it would have a material adverse effect on our
operations and financial results. Paragon has suffered substantial losses in
recent years. In addition, Paragon is not in compliance with certain loan
covenants under the terms of its mortgage loan agreement and such covenants have
not been waived or amended. If the lender demanded payment of the balance
outstanding, it is likely Paragon would not have available funds to meet the
lender's demand.
WE HAVE INCURRED LOSSES FROM INCEPTION AND MAY NEVER GENERATE SUBSTANTIAL
PROFITS, IF ANY AT ALL.
We were organized in May, 1996 and have incurred losses from inception.
We may never generate substantial profits, if any at all. We incurred a net loss
of $2,961,728, or $1.39 per share, on revenues of $6,519,421 for the fiscal year
ended December 29, 1998 and a net loss of $1,077,967, or $1.36 per share, on
revenues of $1,867,671 for the fiscal year ended December 30, 1997. As of March
23, 1999 we had an accumulated deficit of $6,578,252. Our ability to operate
profitably is dependent upon the successful execution of our business plans.
3
<PAGE>
WE HAVE NO SIGNIFICANT EXPERIENCE IN OPERATING A LARGE CHAIN OF RESTAURANTS AND
IF WE ARE NOT SUCCESSFUL IN OPERATING OUR RESTAURANTS IT WOULD HAVE A MATERIAL
ADVERSE EFFECT ON US.
We have no significant experience in operating a large chain of
restaurants or effectuating restaurant expansion. If we are not successful in
operating our restaurants or must close some restaurants, including the
restaurants acquired in the Paragon transaction, it would have a material
adverse effect upon us. We cannot assure you that we will be able to
successfully operate the restaurants acquired in the Paragon transaction. On
December 21, 1998 we completed our acquisition of Paragon, which then operated
seventy-three (73) steakhouse restaurants. Before the acquisition, we operated
only four (4) steakhouse restaurants. At present, we operate a total of
seventy-seven (77) restaurants. Our ability to successfully operate a
significantly larger number of restaurants depends on a number of factors,
including but not limited to:
* the availability, staffing, training and retention of skilled management
personnel;
* securing required governmental approvals and permits;
* adequately supervising construction and renovations;
* securing adequate financing; and
* achieving profitable operations.
IF WE ARE UNABLE TO OBTAIN ADDITIONAL FUNDS IN A TIMELY MANNER OR ON ACCEPTABLE
TERMS, WE MAY HAVE TO CURTAIL OR SUSPEND THE EXPANSION OF OUR OPERATIONS AND, AS
A LAST RESORT, CURRENT OPERATIONS, EITHER OF WHICH COULD LEAD TO OVERALL LOWER
REVENUES, WHICH COULD HAVE A SIGNIFICANT ADVERSE EFFECT ON OUR BUSINESS
RELATIONSHIPS, FINANCIAL RESULTS AND PROSPECTS.
If we were unable to obtain additional funds in a timely manner or on
acceptable terms, we may have to curtail or suspend, first, the expansion of our
operations, and, then, as a last resort, current operations, either of which
could lead to overall lower revenues, which could have a significant adverse
effect on our business relationships, financial results and prospects. For
example, in a cash crunch, we might have to suspend the opening of new
restaurants or reduce our expenditures on the advertising and promotion of our
existing restaurants, either of which could lead to less business for us and
lower overall revenues. We anticipate that our capital resources will be
sufficient to satisfy our capital requirements for the next 12 months. It is
possible, however, that due to unforeseen events, our capital resources and cash
generated from operations will be insufficient to fund our business during this
period. As a result, we would need to raise additional funds.
4
<PAGE>
FAILURE TO COMPLY WITH GOVERNMENT REGULATIONS COULD ADVERSELY AFFECT OUR
OPERATING PERFORMANCE.
Our restaurant operations are subject to the following laws and
government regulations:
* National and local health and sanitation laws and regulations;
* National and local employment and safety laws and regulations; and
* Local zoning, building code and land-use regulations.
We cannot assure you that we will be able to fully comply with all such
laws and regulations. Failure to comply with any of these laws or regulations,
or the loss of our liquor licenses, would have a material adverse effect on our
business. In addition, each of our restaurants must obtain licenses from
regulatory authorities allowing it to sell liquor, beer and wine, and each
restaurant must obtain a food service license from local health authorities.
Each restaurant's liquor license must be renewed annually and may be revoked at
any time for cause.
We may be subject to "dram-shop" liability, which generally provides a
person injured by an intoxicated person with the right to recover damages from
an establishment that wrongfully served alcoholic beverages to the intoxicated
person. We carry liquor liability coverage as part of our comprehensive general
liability insurance.
ADVERSE ECONOMIC CONDITIONS IN A LIMITED NUMBER OF STATES COULD HAVE A NEGATIVE
EFFECT ON OUR BUSINESS.
Our restaurants are located in eleven states, predominantly on the West
Coast and in the Great Lakes region. Adverse economic conditions in these states
could have an adverse effect on our financial results. Each of our restaurants
represents a significant investment and long-term commitment which limits our
ability to respond quickly or effectively to changes in local competitive
conditions or other changes that could affect our operations.
IF WE ARE UNABLE TO COMPETE EFFECTIVELY WITH OUR COMPETITORS, MANY OF WHICH HAVE
BEEN IN EXISTENCE LONGER THAN US, HAVE A MORE ESTABLISHED MARKET PRESENCE AND
HAVE SUBSTANTIALLY GREATER RESOURCES THAN US, WE WILL NOT BE ABLE TO INCREASE
REVENUES OR GENERATE PROFITS.
Our ability to increase revenues and operate profitably is directly
related to our ability to compete effectively with our competitors. Many of our
competitors have been in existence longer than us, have a more established
market presence and have substantially greater financial, marketing and other
resources than us, which give them competitive advantages over us.
Key competitive factors include:
* the quality and value of the food products offered;
* the quality of service;
* the price of the food products offered;
* the restaurant locations; and
* the ambiance of facilities.
We compete with national and regional chains, as well as individually
owned restaurants. The number of steakhouse restaurants with operations
generally similar to the concepts operated
5
<PAGE>
by us has grown substantially in the last several years. As our competitors
expand operations in various geographic areas, competition among steakhouse
restaurants with concepts similar to ours can be expected to intensify. Such
increased competition could adversely affect our revenues. In addition, the
restaurant industry has few non-economic barriers to entry. We cannot assure you
that third parties will not be able to successfully imitate and implement our
concepts.
UNFORESEEN COST INCREASES COULD ADVERSELY AFFECT OUR PROFITABILITY.
Our profitability is highly sensitive to increases in food, labor and
other operating costs. Our restaurants' dependence on frequent deliveries of
fresh food supplies means that shortages or interruptions in supply caused by
bad weather or other conditions could materially and adversely affect the
availability and cost of ingredients which in turn could materially and
adversely affect our profitability. In addition, unfavorable trends or
developments concerning the following factors could adversely affect our
results:
* inflation, food, labor and employee benefit costs (including increases in
hourly wage and minimum unemployment tax rates); and
* rent increases resulting from the rent escalation provisions in the
various restaurants' leases.
THE YEAR 2000 PROBLEM COULD CAUSE US TO SUFFER BUSINESS INTERRUPTIONS, OR
SHUTDOWN, REPUTATIONAL HARM OR LEGAL LIABILITY, AND AS A RESULT, MATERIAL
FINANCIAL LOSS.
We recognize that we, like all other businesses, are at risk if key
suppliers in utilities, communications, transportation, banking and government
are not ready for the year 2000. It is also possible that our computer software
applications, internal accounting, inventory tracking and other business
systems, working either alone or in conjunction with those of third parties who
do business with us, will not accept input of, store, manipulate and output
dates in the year 2000 or after without error. If any of this were to happen, we
may suffer business interruptions or shutdown, harm to our reputation or legal
liability and, as a result, material financial loss.
FUTURE SALES OF THE COMMON STOCK SOLD BY THE SELLING STOCKHOLDERS MAY CAUSE THE
MARKET PRICE OF OUR COMMON STOCK TO DROP.
Sales of substantial amounts of common stock, such as the shares sold
to the selling stockholders, or the perception that these sales could occur,
could result in lower market prices for our common stock and could impair our
ability to raise additional capital through the sale of our equity services or
through debt financing. We sold an aggregate of 705,197 shares of common stock
to the selling stockholders named in this prospectus. These shares may be sold
without restriction or further registration under the Securities Act of 1933, as
amended, as long as the prospectus covering the sales remains current and
effective.
IF WE ARE NOT ABLE TO RETAIN OUR KEY EXECUTIVES, IT WILL BE MORE DIFFICULT FOR
US TO MANAGE OUR OPERATIONS AND OUR OPERATING PERFORMANCE COULD BE ADVERSELY
AFFECTED.
Our success depends upon the contributions of our executive officers
and our other key personnel. The loss of the services of any of our executive
officers or other key personnel could have a significant adverse effect on our
business and operating results. We cannot assure you that we will be successful
in attracting and retaining key personnel.
6
<PAGE>
BECAUSE IT MAY BE DIFFICULT TO EFFECT A CHANGE IN CONTROL OF STEAKHOUSE PARTNERS
WITHOUT CURRENT MANAGEMENT'S CONSENT, A POTENTIAL SUITOR WHO OTHERWISE MIGHT BE
WILLING TO PAY A PREMIUM FOR ACQUIRING OUR COMPANY MAY DECIDE NOT TO ATTEMPT AN
ACQUISITION OF STEAKHOUSE PARTNERS.
Our executive officers, directors, and their affiliates beneficially
own 1,579,462 shares of our common stock. This represents approximately 38.2% of
the common stock issued and outstanding. As discussed below, our executive
officers also collectively own 1,000,000 shares of Series B Preferred Stock and
1,750,000 shares of Series C Preferred Stock, each of which carries voting
rights with the Common Stock on a one vote per share basis. Such concentration
of ownership and voting power may have the effect of delaying, deferring or
preventing a change in control of Steakhouse Partners. Potential suitors who
otherwise might be willing to pay a premium to acquire Steakhouse Partners may
decide not to try to acquire us because it may be difficult to effect a change
in control of Steakhouse Partners without current management's consent.
As of the date of this prospectus, 1,000,000 shares of Series B
Convertible Preferred Stock are outstanding, all of which are owned by Richard
M. Lee, our Chairman and Chief Executive Officer. The Series B Preferred carries
voting rights along with the common stock on a one-vote-per-share basis. In
addition, as of the date of this prospectus 1,750,000 shares of a newly
authorized Series C Convertible Preferred Stock are outstanding, all of which
are owned by Richard M. Lee and Hiram J. Woo, our President. The Series C
Preferred carries rights to vote with the common stock as one class on a one
vote-per-share basis. The issuance of a poison-pill or an additional large block
of stock with voting rights could also have the effect of delaying, deferring or
preventing a change of control of Steakhouse Partners.
In addition, the board of directors has the authority to issue up to
2,250,000 additional shares of preferred stock and to determine the price,
rights, preferences, privileges and restrictions, including voting rights, of
such stock without further shareholder approval. The rights of the holders of
common stock will be subjected to, and may be adversely affected by, the rights
of the holders of any preferred stock that may be issued in the future. Issuance
of additional shares of preferred stock could have the effect of delaying,
deferring or preventing a change in control of Steakhouse Partners.
FUTURE SALES OF COMMON STOCK MAY CAUSE THE MARKET PRICE OF OUR COMMON STOCK TO
DROP.
Future sales of shares of common stock by us and our stockholders could
cause the market price of our common stock to drop. There are currently
1,119,659 restricted shares and 2,193,750 shares of common stock which are
freely tradeable or eligible to have the restrictive legend removed pursuant to
Rule 144(k) promulgated under the Securities Act. Of the 1,119,659 restricted
shares, 414,462 of these shares are currently eligible for resale under Rule
144. The balance of such shares are being registered for resale pursuant to this
prospectus. Sales of substantial amounts of common stock in the public market,
or the perception that the sales may occur, could have a significant adverse
effect on the market price of our common stock.
7
<PAGE>
SHAREHOLDERS MAY NOT BE ABLE TO RE-SELL THEIR STOCK OR MAY HAVE TO SELL AT
PRICES SUBSTANTIALLY LOWER THAN THE PRICE THEY PAID FOR IT.
The trading price for our common stock has been highly volatile and
could continue to be subject to significant fluctuations in response to
variations in our quarterly operating results, general conditions in the
restaurant 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
our common stock, as well as the price that holders may achieve for their shares
upon any future sale.
8
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
The following selected financial and operating data should be read in
conjunction with Steakhouse Partners' consolidated financial statements and the
notes thereto and Management's Discussion and Analysis of Financial Condition
and Results of Operations" included in Steakhouse Partners' Annual Reports on
Form 10-KSB for the Twelve Months Ended December 29, 1998 and December 30, 1997.
The balance sheet data and statement of operations data as of and for the years
ended December 29, 1998 and December 30, 1997 are derived from the consolidated
financial statements of Steakhouse Partners, incorporated by reference herein,
that have been audited by Singer Lewak Greenbaum & Goldstein LLP, independent
accountants.
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------
December 29, December 30,
1998 1997
------------ ------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues, net......................................................... $ 6,519,421 $ 1,867,671
Cost of Sales......................................................... 6,160,522 2,006,351
----------- -----------
Gross profit (loss)................................................... 358,899 (138,680)
Total operating expenses..................................... 2,219,992 416,100
----------- -----------
Loss from operations.................................................. (1,861,093) (554,780)
Total other income (expenses)................................ (816,466) (523,187)
----------- -----------
Extraordinary Loss on extinguishment of debt.......................... (278,125) --
Loss before provision for income taxes and
extraordinary item............................................... (6,044) --
----------- -----------
Net loss.............................................................. $(2,961,728) $(1,077,967)
----------- -----------
Basic loss per share after extraordinary item......................... ($1.39) ($1.36)
----------- -----------
Diluted loss per share after extraordinary item....................... ($1.39) ($1.36)
----------- -----------
Weighted-average shares outstanding .................................. 2,135,241 790,296
BALANCE SHEET DATA:
Working Capital (Deficit)............................................. (39,122,838) (2,338,536)
Total assets.......................................................... 67,446,977 2,252,033
Long-term debt, net of current portion................................ 12,298,830 818,999
Stockholders' equity.................................................. 1,551,705 (1,414,706)
</TABLE>
9
<PAGE>
INDEMNIFICATION
Steakhouse Partners' Bylaws require Steakhouse Partners, to the fullest
extent permitted or required by Delaware law, to (i) indemnify its directors and
officers against any and all liabilities and (ii) advance any and all reasonable
expenses incurred in any proceeding to which any such director or officer is a
party or in which such director or officer is deposed or called to testify as a
witness because he or she is or was a director or officer of Steakhouse
Partners. Generally, Delaware statutory law permits indemnification of a
director upon a determination that he or she acted in good faith and in a manner
he or she reasonably believed to be in, or not opposed to, the best interests of
the corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The right to
indemnification granted in Steakhouse Partners' Bylaws is not exclusive of any
other rights to indemnification against liabilities or the advancement of
expenses which a director or officer may be entitled to under any written
agreement, Board resolution, vote of stockholders, Delaware law or otherwise.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 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 such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
10
<PAGE>
MARKET PRICE OF COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Common Stock of Steakhouse Partners has been traded on the NASDAQ
SmallCap Market under the symbol "SIZL" since February 27, 1998, the date of
Steakhouse Partners' initial public offering. As of August 11, 1999, the last
sale price as reported on NASDAQ was $7.375 per share.
The following table sets forth the range of high and low closing prices
for Steakhouse Partners' Common Stock for each quarterly period indicated, as
reported by brokers and dealers making a market in the capital stock. Such
quotations reflect inter-dealer prices without retail markup, markdown or
commission, and may not necessarily represent actual transactions:
COMMON STOCK
QUARTER ENDED HIGH LOW
- -------------------- ----------------------- -------------------------
June 30, 1999 $7.313 $4.00
March 31, 1999 $8.625 $4.00
December 31, 1998 $7.375 $4.125
September 30, 1998 $5.375 $2.50
June 30, 1998 $6.00 $4.25
March 31, 1998* $5.625 $4.844
* From the initial time of trading in March 2, 1998, the closing price was
$5.031.
We have not paid any dividends on our common stock. We currently intend
to retain any earnings for use in our business, and do not anticipate paying
cash dividends in the foreseeable future.
As of July 30, 1999, there were approximately 800 record holders of
our common stock.
REGISTRATION RIGHTS
In connection with our private placement of 705,197 shares of common
stock on June 11, 1999, June 17, 1999 and July 15, 1999 and pursuant to the
terms of four (4) subscription agreements dated as of June 11, 1999, June 17,
1999, July 15, 1999 and July 15, 1999 by and between Steakhouse Partners and
each of the selling stockholders, we are obligated to use our best efforts to
cause this registration statement to become effective by October 8, 1999. We are
further obligated to register and qualify the registerable shares under such
state securities laws as the
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<PAGE>
selling stockholders may reasonably request. We will bear the reasonable
expenses of the registration and qualification of the shares under the
Securities Act and state securities laws other than any underwriting discounts
and commissions and the expenses of counsel for the selling stockholders.
If the registration statement is not effective by October 8, 1999, then
Steakhouse Partners must make payments to the selling stockholders in such
amounts and at such times as are determined pursuant to Section 5(b)(iii) of the
subscription agreements, which states that the amount to be paid by us to the
selling stockholders shall be equal to two (2%) percent per month of the
purchase price paid by the selling stockholders for the common stock. Thus, if
the registration statement is not effective by October 8, 1999, then for the
period from October 8, 1999 to November 7, 1999, we must pay to the selling
stockholders a penalty of $86,520. If the registration statement still is not
effective on November 7, 1999, then for the period from November 7, 1999 to
December 7, 1999, we must pay to the selling stockholders an additional penalty
of $86,520 and so on.
USE OF PROCEEDS FROM SALE OF COMMON STOCK
None of the proceeds from the sale of the common stock registered
hereunder by the selling stockholders will accrue to Steakhouse Partners.
Through private placement, Steakhouse Partners has obtained $2,001,000
of financing from the sale of 363,818 shares of Common Stock to Merseyside
Pension Fund and BNP Securities Ltd., exclusive of fees and other expenses
related to this sale.
Through private placement, Steakhouse Partners obtained $2,025,000 of
financing from the sale of 300,000 shares of Common Stock to RS Diversified
Growth Fund, RS/NE Diversified Growth Fund, The Paisley Pacific Fund LP and The
Paisley Fund LP, exclusive of fees and other expenses related to this sale.
Through private placement, Steakhouse Partners has obtained $300,000 of
financing from the sale of 41,379 shares of Common Stock to D. Jonathan
Merriman, exclusive of fees and other expenses related to the sale.
We intend to apply the net proceeds of the sale of the common stock for
working capital purposes.
SELLING SECURITYHOLDERS AND PLAN OF DISTRIBUTION
The selling stockholders whose shares of common stock are being
registered hereby are Merseyside Pension Fund ("Merseyside"), BNP Securities
Ltd. ("BNP"), RS Diversified Growth Fund, RS/NE Diversified Growth Fund, The
Paisley Pacific Fund LP, The Paisley Fund LP, and D. Jonathan Merriman.
Merseyside is an English corporation with a principal place of business
at Castle Chambers, 416 Cook Street, Liverpool, England.
BNP is a British Virgin Islands corporation with a principal place of
business at 24 Boulevard Princess Charlotte, ML 9800, Monaco.
RS Diversified Growth Fund is a Delaware corporation with a principal
place of business at 388 Market Street, San Francisco, California 94111.
RS/NE Diversified Growth Fund is a Delaware corporation with a
principal place of business at 388 Market Street, San Francisco, California
94111.
The Paisley Pacific Fund LP is a Delaware limited partnership with a
principal place of business at 388 Market Street, San Francisco, California,
94111.
The Paisley Fund LP is a Delaware limited partnership with a principal
place of business at 388 Market Street, San Francisco, California 94111.
D. Jonathan Merriman is an individual with a business address at 600
California Street, San Francisco, California 94123.
No selling stockholder has any affiliation with Steakhouse Partners or
its officers, directors, promoters or principal shareholders.
Neither Merseyside nor BNP has a domestic agent for service of process.
It may be difficult for United States investors to effect service within the
United States upon Merseyside
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<PAGE>
and/or BNP and their respective officers and directors, or to realize in the
United States upon judgments rendered against Merseyside and/or BNP and their
respective officers and directors by courts of the United States predicated upon
civil liabilities under the Securities Act of 1933 or state securities laws.
Steakhouse Partners has agreed to register the public offering of the
selling stockholders' shares of common stock under the Securities Act and to pay
all expenses in connection therewith other than brokerage commissions and
discounts in connection with the sale of the common stock and the expenses of
counsel.
The following table sets forth the names of the selling stockholders,
the number of shares of common stock owned beneficially by each of the selling
stockholders as of August 5, 1999, the number of shares which may be offered
for resale pursuant to this prospectus and the number of shares of common stock
owned beneficially by each of the selling stockholders after the offering.
The information included below is based upon information provided by
the selling stockholders. Because the selling stockholders may offer all, some
or none of their common stock, no definitive estimate as to the number of shares
thereof that will be held by the selling stockholders after such offering can be
provided and the following table has been prepared on the assumption that all
shares of common stock offered under this prospectus will be sold.
<TABLE>
<CAPTION>
SHARES OF SHARES OF
COMMON STOCK SHARES OF COMMON STOCK
BENEFICIALLY COMMON BENEFICIALLY
NAME OF SELLING OWNED PRIOR TO STOCK BEING OWNED AFTER
STOCKHOLDER OFFERING (1)(2) OFFERED OFFERING (3) PERCENT (4)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Merseyside Pension Fund 182,000 182,000 0 0.0%
BNP Securities Ltd. 181,818 181,818 0 0.0%
RS Diversified Growth
Fund 115,000 115,000 0 0.0%
RS/NE Diversified
Growth Fund 55,000 55,000 0 0.0%
The Paisley Pacific Fund LP 120,000 120,000 0 0.0%
The Paisley Fund LP 10,000 10,000 0 0.0%
D. Jonathan Merriman 41,379 41,379 0 0.0%
- -----------------------
(1) Each of the parties listed has sole voting and investment power with respect
to all shares of Common Stock indicated.
(2) As required by regulations of the Securities and Exchange Commission,
the number of shares shown as beneficially owned includes shares which
can be purchased within 60 days after August 5, 1999.
(3) Assumes the sale of all shares offered hereby.
(4) Based upon 3,314,522 shares outstanding.
</TABLE>
The selling stockholders' shares may be offered and sold from time to
time as market conditions permit, provided that a registration statement
covering such shares is effective at the time of such offer and/or sale. Under
Section 10(a)(3) of the Securities Act of 1933, as amended, when a prospectus is
used more than nine months after the effective date of the registration
statement, the information contained therein must be as of a date not more than
16 months prior to such use.
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<PAGE>
The selling stockholders' shares may be offered and sold in the NASDAQ
SmallCap market, or otherwise, at prices and terms then prevailing or at prices
related to the then-current market price, or in negotiated transactions. The
selling stockholders' shares may be sold by one or more of the following
methods, without limitation: (i) a block trade in which a broker or dealer so
engaged will attempt to sell the shares as agent but may position and resell a
portion of the block as principal to facilitate the transaction; (ii) purchases
by a broker or dealer as principal and resale by such broker or dealer for its
accounts pursuant to this prospectus; (iii) ordinary brokerage transactions and
transactions in which the broker solicits purchases; and (iv) transactions
between sellers and purchasers without a broker or dealer. In effecting sales,
brokers or dealers engaged by the selling stockholders may arrange for other
brokers or dealers to participate. Such brokers or dealers may receive
commissions or discounts from selling stockholders in amounts to be negotiated.
Such brokers and dealers and any other participating brokers and dealers may be
deemed to be "underwriters" within the meaning of the Securities Act, in
connection with such sales.
DESCRIPTION OF SECURITIES
The authorized capital stock of Steakhouse Partners 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 Steakhouse Partners' common
stock and preferred stock do not purport to be complete and are subject to, and
qualified in their entirety by, the provisions of Steakhouse Partners'
certificate of incorporation and the provisions of applicable law.
COMMON STOCK
As of the date of this Prospectus, there are 3,273,143 shares of Common
Stock issued and outstanding held by approximately 800 holders of record.
Holders of Common Stock are entitled to one vote for each share held of record
on all matters 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 Steakhouse
Partners, 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.
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<PAGE>
PREFERRED STOCK
Steakhouse Partners 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 to occur of: (i) eight (8)
years after the closing date of Steakhouse Partners' initial public offering; or
(ii) the first fiscal year of Steakhouse Partners in which Steakhouse Partners'
annual net profits equal or exceed $3.5 million. Upon conversion of the Series B
Preferred, the holder will be required to pay to Steakhouse Partners, in cash, a
conversion price per share equal to $7.50.
The Series B Preferred carries no dividends prior to March 2, 2000, the
second anniversary of the closing of the Steakhouse Partners' initial public
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 March 2, 2000. Thereafter, if the above conversion
test 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
Steakhouse Partners within three years of any such conversion of the Series B
Preferred shares, Steakhouse Partners 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.
Steakhouse Partners has issued 1,750,000 shares of a new series of
preferred stock, designated as the Series C Convertible Preferred Stock, to
Richard M. Lee and Hiram J. Woo.
The holders of shares of the Series C Preferred Stock have the
right to vote on all matters with the holders of the Common Stock, voting
together as a single class, on a one vote per share basis. The shares of the
Series C Preferred Stock are convertible into shares of Common Stock, at
the option of the holder, at any time upon the earlier to occur of (i) March 2,
2006 or (ii) the date it is determined that Steakhouse Partners' net profits for
any fiscal year have equaled or
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<PAGE>
exceeded $4.2 million (the "Conversion Test"). Upon conversion of the Series C
Preferred Stock, the holder will be required to pay to Steakhouse Partners a
conversion price per share equal to $8.53.
The shares of Series C Preferred Stock may not be redeemed by
Steakhouse Partners absent the unanimous consent of the holders thereof. The
holders of outstanding Series C Preferred Stock shall not be entitled to receive
dividends prior to March 2, 2000, the second anniversary of the closing date of
Steakhouse Partners' initial public offering. Thereafter, in the event the
Conversion Test is satisfied, the Series C Preferred Stock will participate in
any dividends declared on the Common Stock, on an "as converted" basis.
In the event of a voluntary or involuntary liquidation, dissolution or
winding up of Steakhouse Partners prior to March 2, 2000, or at any time
thereafter if the Conversion Test is not satisfied, the holders of Series C
Preferred Stock shall be entitled to $0.001 per share. In the event of a
voluntary or involuntary liquidation, dissolution or winding up of Steakhouse
Partners after the satisfaction of the Conversion Test, the holders of Series C
Preferred Stock shall be entitled to share with the holders of Common Stock pari
passu in the assets of Steakhouse Partners, on an "as converted" basis.
If and to the extent that the shares of Common Stock issuable upon
conversion of the Series C Preferred Stock are not includable in a registration
statement on Form S-8, at the request of the holders thereof, delivered to
Steakhouse Partners within three years of any such conversion of the Series C
Preferred shares, Steakhouse Partners 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 C Preferred Stock. The Board of Directors may change or otherwise adjust
the terms of the above-described Series C Preferred Stock in its sole
discretion.
The Board of Directors of Steakhouse Partners, without further action
by the stockholders, has authority to issue all or any portion of the additional
2,250,000 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
Steakhouse Partners.
DIVIDEND POLICY
Steakhouse Partners 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. Steakhouse Partners intends to retain any
earnings for use in Steakhouse Partners' operations and to finance the expansion
of its business.
LEGAL MATTERS
The validity of the securities offered hereby has been passed upon for
Steakhouse Partners by Lehman & Eilen LLP, Uniondale, New York. Hank Gracin,
Esq., counsel to Lehman & Eilen LLP, owns 4,496 shares of common stock of
Steakhouse Partners.
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<PAGE>
EXPERTS
The audited financial statements of Steakhouse Partners, Inc. for the
years ended December 29, 1998 and December 30, 1997 incorporated by reference
into this Prospectus have been audited by Singer Lewak Greenbaum & Goldstein
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 Steakhouse Partners'
ability to continue as a going concern, as described in Note 1 to the audited
financial statements of Steakhouse Partners, Inc.
17
<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 STEAKHOUSE PARTNERS. 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 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 No.
--------
Prospectus Summary...........................................1
The Offering.................................................2
Risk Factors.................................................3
Selected Financial and Operating Data........................9
Indemnification.............................................10
Market Price of Common Equity and Related
Stockholder Matters.......................................11
Registration Rights.........................................11
Use of Proceeds from Sale of Common Stock...................12
Selling Securityholders and Plan of Distribution............12
Description of Securities...................................14
Dividend Policy.............................................16
Legal Matters...............................................16
Experts.....................................................17
705,197 SHARES
STEAKHOUSE PARTNERS, INC.
COMMON STOCK
------------------------------
PROSPECTUS
------------------------------
AUGUST 13, 1999
<PAGE>
STEAKHOUSE PARTNERS, INC.
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses for the issuance and distribution of the shares
of Common Stock registered hereby are set forth in the following table.
SEC registration fee................................................. $1,445.83
Legal fees and expenses.............................................. 30,000
Accounting fees and expenses......................................... 3,000
Blue sky fees and expenses (including counsel fees).................. 3,000
Printing and engraving expenses...................................... 1,000
Miscellaneous........................................................ 1,554.17
---------
Total................................................................ $ 40,000
=========
ITEM 15. 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 has entered into Indemnification Agreements with its
executive officers and directors. These Indemnification Agreements 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 Steakhouse Partners or of any subsidiary of Steakhouse
Partners or of any other company or enterprise in which they are serving at the
request of Steakhouse Partners. No indemnity will be provided to any director or
II-1
<PAGE>
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 Steakhouse Partners 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 presently has in effect directors and officers liability
insurance which it believes is adequate in amount and scope of coverage.
ITEM 16. EXHIBITS.
The following exhibits are filed as part of this Registration
Statement:
1.1(1) Form of Underwriting Agreement.
3.1(1) Restated Certificate of Incorporation of Galveston's
Steakhouse Corp.
3.2(1) Certificate of Correction to Restated Certificate of
Incorporation of Galveston's Steakhouse Corp.
3.3(1) Certificate of Amendment to Restated Certificate of
Incorporation of Galveston's Steakhouse Corp.
3.4(1) By-Laws of Galveston's Steakhouse Corp.
3.5(1) Certificate of Amendment to Restated Certificate of
Incorporation of Galveston's Steakhouse Corp.
3.6(1) Certificate of Amendment to Restated Certificate of
Incorporation of Galveston's Steakhouse Corp.
3.7(5) Certificate of Amendment to Restated Certificate of
Incorporation of Galveston's Steakhouse Corp.
4.1(1) Form of Specimen of Common Stock Certificate.
4.2(1) Form of Underwriter's Warrant Agreement.
5.1(6) Opinion of Lehman & Eilen LLP, counsel to Steakhouse Partners
concerning the legality of securities being registered.
10.1(1) Lease between Walter Bollenbacher Family Trust and TLC Corp.
(Seller) dated November 1, 1994 and assigned to Galveston's
Steakhouse Corp. June 25, 1996. (re: Torrance).
10.2(1) Lease between University Plaza, Ltd. and Galveston's Steakhouse
Corp. dated September 4, 1996. (re: Fullerton).
10.3(1) Lease between Mission Grove Plaza, LP and Kent Andersen
(Seller) dated March 8, 1993 and assigned to Galveston's
Steakhouse Corp. March 1, 1997. (re: Riverside).
10.4(1) Lease between E & R Co-ownership (The Family Corner) and
Galveston's Steakhouse Corp. dated February 1, 1997. (re:
Norco).
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<PAGE>
10.5(1) Employment Contract between Galveston's Steakhouse Corp. and
Hiram J. Woo dated June 3, 1996.
10.6(1) Employment Contract between Galveston's Steakhouse Corp. and
Richard M. Lee dated June 3, 1996.
10.7(1) Asset Purchase Agreement between Galveston's Steakhouse Corp.
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.
10.8(1) Escrow Instruction with Jean Allen Escrow Co., Inc. dated
February 20, 1996 reference to Asset Purchase Agreement cited
in 10.9 above.
10.9(1) Note Payable in the amount of $375,000 to Ron Walton, et. al.
with extension of Due Date to August 29, 1997.
10.10(1) Note Payable in the amount of $870,000 to Ron Walton, et. al.
10.13(1) Asset Purchase Agreement between Galveston's Steakhouse Corp.
as buyer and Kent & Jenny Andersen as sellers dated September
23, 1996.
10.14(1) 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(1) Galveston's Steakhouse Corp. Omnibus Stock Plan.
10.16(1) Richard M. Lee Stock Option Agreement.
10.17(1) Hiram J. Woo Stock Option Agreement.
10.18(2) Merger Agreement dated August 31, 1998 by and among Galveston's
Steakhouse Corp., Tri-Core Steakhouse, Inc., Paragon Steakhouse
Restaurants, Inc. and Kyotaru Co. Ltd.
10.17(3) 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.
10.18(3) 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.
II-3
<PAGE>
10.21(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.
10.22(3) Form of Agreement Not to Compete.
10.21(3) Form of Management Agreement.
10.22(3) Form of Non-negotiable Promissory Note.
II-4
<PAGE>
10.23(6) Securities Purchase Agreement dated June 11, 1999 by and
between Galveston's Steakhouse Corp. and Merseyside Pension
Fund.
10.24(6) Securities Purchase Agreement dated June 17, 1999 by and
between Galveston's Steakhouse Corp. and BNP Securities Ltd.
10.25(5) Securities Purchase Agreement dated July 15, 1999 by and among
Galveston's Steakhouse Corp., RS Diversified Growth Fund, RS/NE
Diversified Growth Fund, The Paisley Pacific Fund LP and The
Paisley Fund LP.
10.26(5) Securities Purchase Agreement dated July 15, 1999 by and
between Galveston's Steakhouse Corp. and D. Jonathan Merriman.
23.1(5) Consent of Singer Lewak Greenbaum & Goldstein LLP.
23.2(6) Consent of Lehman & Eilen LLP, counsel to Steakhouse Partners
(included in their opinion filed as Exhibit 5.1).
27.1(4) Financial Data Schedule.
99.1(2) Press release dated September 1, 1998.
--------------------
(1) Incorporated by reference from Registration Statement on Form SB-2
(File No. 333-29093).
(2) Incorporated by reference from Form 8-K, Current Report, filed with the
SEC on September 14, 1998.
(3) Incorporated by reference from Form 8-K, Current Report, filed with the
SEC on January 4,1999.
(4) Incorporated by reference from Annual Report on Form 10-KSB,
filed with the SEC on April 13, 1999.
(5) Filed herewith.
(6) To be filed by amendment.
ITEM 17. UNDERTAKINGS.
(a) 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. In the event that a claim for
indemnification against such liabilities (other than the payment by Steakhouse
Partners of expenses incurred or paid by a director, officer or controlling
person of Steakhouse Partners in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the 1933 Act, and
will be governed by the final adjudication of such issue.
II-5
<PAGE>
(b) That, subject to the terms and conditions of Section 13(a) of the Securities
Exchange Act of 1934, it will file with the Securities and Exchange Commission
such supplementary and periodic information, documents and reports as may be
prescribed by any rule or regulation of the Commission heretofore or hereafter
dully adopted pursuant to authority conferred in that section.
(c) That any post-effective amendment filed will comply with the applicable
form, rules and regulations of the Commission in effect at the time such
post-effective amendment is filed.
(d) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the 1933 Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(e) That, for the purpose of determining any liability under the 1933 Act, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(f) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of this
offering.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
STEAKHOUSE PARTNERS CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT
MEETS ALL THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED IN SAN DIEGO, CALIFORNIA, ON THIS 13TH DAY OF AUGUST, 1999.
STEAKHOUSE PARTNERS, INC.
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.
/s/Richard M. Lee Chairman of the Board of Directors August 13, 1999
- ---------------------- and Chief Executive Officer
Richard M. Lee
/s/Hiram J. Woo Director, President, Secretary and August 13, 1999
- ---------------------- Chief Financial Officer (Principal
Hiram J. Woo Financial and Accounting Officer
/s/Tom Edler Director August 13, 1999
- ----------------------
Tom Edler
/s/Mark W. Goudge Director August 13, 1999
- ----------------------
Mark W. Goudge
/s/Tod Lindner Director August 13, 1999
- ----------------------
Tod Lindner
II-7
<PAGE>
EXHIBIT INDEX
1.1(1) Form of Underwriting Agreement.
3.1(1) Restated Certificate of Incorporation of Galveston's
Steakhouse Corp.
3.2(1) Certificate of Correction to Restated Certificate of
Incorporation of Galveston's Steakhouse Corp.
3.3(1) Certificate of Amendment to Restated Certificate of
Incorporation of Galveston's Steakhouse Corp.
3.4(1) By-Laws of Galveston's Steakhouse Corp.
3.5(1) Certificate of Amendment to Restated Certificate of
Incorporation of Galveston's Steakhouse Corp.
3.6(1) Certificate of Amendment to Restated Certificate of
Incorporation of Galveston's Steakhouse Corp.
3.7(5) Certificate of Amendment to Restated Certificate of
Incorporation of Galveston's Steakhouse Corp.
4.1(1) Form of Specimen of Common Stock Certificate.
4.2(1) Form of Underwriter's Warrant Agreement.
5.1(6) Opinion of Lehman & Eilen LLP, counsel to Steakhouse Partners
concerning the legality of securities being registered.
10.1(1) Lease between Walter Bollenbacher Family Trust and TLC Corp.
(Seller) dated November 1, 1994 and assigned to Galveston's
Steakhouse Corp. June 25, 1996. (re: Torrance).
10.2(1) Lease between University Plaza, Ltd. and Galveston's Steakhouse
Corp. dated September 4, 1996. (re: Fullerton).
10.3(1) Lease between Mission Grove Plaza, LP and Kent Andersen
(Seller) dated March 8, 1993 and assigned to Galveston's
Steakhouse Corp. March 1, 1997. (re: Riverside).
10.4(1) Lease between E & R Co-ownership (The Family Corner) and
Galveston's Steakhouse Corp. dated February 1, 1997. (re:
Norco).
10.5(1) Employment Contract between Galveston's Steakhouse Corp. and
Hiram J. Woo dated June 3, 1996.
10.6(1) Employment Contract between Galveston's Steakhouse Corp. and
Richard M. Lee dated June 3, 1996.
10.7(1) Asset Purchase Agreement between Galveston's Steakhouse Corp.
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.
II-8
<PAGE>
10.8(1) Escrow Instruction with Jean Allen Escrow Co., Inc. dated
February 20, 1996 reference to Asset Purchase Agreement cited
in 10.9 above.
10.9(1) Note Payable in the amount of $375,000 to Ron Walton, et. al.
with extension of Due Date to August 29, 1997.
10.10(1) Note Payable in the amount of $870,000 to Ron Walton, et. al.
10.13(1) Asset Purchase Agreement between Galveston's Steakhouse Corp.
as buyer and Kent & Jenny Andersen as sellers dated September
23, 1996.
10.14(1) 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(1) Galveston's Steakhouse Corp. Omnibus Stock Plan.
10.16(1) Richard M. Lee Stock Option Agreement.
10.17(1) Hiram J. Woo Stock Option Agreement.
10.18(2) Merger Agreement dated August 31, 1998 by and among Galveston's
Steakhouse Corp., Tri-Core Steakhouse, Inc., Paragon Steakhouse
Restaurants, Inc. and Kyotaru Co. Ltd.
10.17(3) 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.
10.18(3) 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.
10.21(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.
10.22(3) Form of Agreement Not to Compete.
10.21(3) Form of Management Agreement.
10.22(3) Form of Non-negotiable Promissory Note.
II-9
<PAGE>
10.23(6) Securities Purchase Agreement dated June 11, 1999 by and
between Galveston's Steakhouse Corp. and Merseyside Pension
Fund.
10.24(6) Securities Purchase Agreement dated June 17, 1999 by and
between Galveston's Steakhouse Corp. and BNP Securities Ltd.
10.25(5) Securities Purchase Agreement dated July 15, 1999 by and among
Galveston's Steakhouse Corp., RS Diversified Growth Fund, RS/NE
Diversified Growth Fund, The Paisley Pacific Fund LP and The
Paisley Fund LP.
10.26(5) Securities Purchase Agreement dated July 15, 1999 by and
between Galveston's Steakhouse Corp. and D. Jonathan Merriman.
23.1(5) Consent of Singer Lewak Greenbaum & Goldstein LLP.
23.2(6) Consent of Lehman & Eilen LLP, counsel to Steakhouse Partners
(included in their opinion filed as Exhibit 5.1).
27.1(4) Financial Data Schedule.
II-10
<PAGE>
99.1(2) Press release dated September 1, 1998.
--------------------
(1) Incorporated by reference from Registration Statement on Form SB-2
(File No. 333-29093).
(2) Incorporated by reference from Form 8-K, Current Report, filed with the
SEC on September 14, 1998.
(3) Incorporated by reference from Form 8-K, Current Report, filed with the
SEC on January 4, 1999.
(4) Incorporated by reference from Annual Report on Form 10-KSB,
filed with the SEC on April 13, 1999.
(5) Filed herewith.
(6) To be filed by amendment.
II-11
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
0F 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 said corporation by the unanimous
written consent of its members, filed with the minutes of the Board, adopted the
following resolutions proposing and declaring advisable the following amendments
to the Restated Certificate of Incorporation of said corporation:
RESOLVED, that the Restated Certificate of
Incorporation of Galveston's Steakhouse Corp. be amended
by changing the First Article thereof so that, as
amended, said Article shall be and read as follows:
"FIRST. The name of the Company is: STEAKHOUSE PARTNERS,
INC."
RESOLVED, that the Restated Certificate of
Incorporation of Galveston's Steakhouse Corp. be amended
by changing the Fifth Article thereof so that, as
amended, said Article shall be and read as follows:
"FIFTH. The number of directors of the corporation shall
be fixed by the by-laws, subject to the provisions of
this certificate of incorporation and to the provisions
of the laws of the State of Delaware.
<PAGE>
The board of directors shall be divided into
three classes, designated Class I, Class II and Class
III, as nearly equal in number as possible, and the term
of office of directors of one class shall expire at each
annual meeting of stockholders, and in all cases as to
each director until his successor shall be elected and
shall qualify (except in cases where no successor is
elected due to a reduction in the size of the board) or
until his earlier resignation, removal from office,
death or incapacity. Additional directorships resulting
from an increase in the number of directors shall be
apportioned among the classes as equally as possible.
Vacancies, including vacancies created by an increase in
the size of the board of directors, shall be filled by
the affirmative vote of a majority of the remaining
board of directors then in office, though less than a
quorum. The initial term of office of directors of Class
I shall expire at the annual meeting of stockholders in
2000; that of Class II shall expire at the annual meeting
of stockholders in 2001; and that of Class III shall
expire at the annual meeting of stockholders in 2002;
and in all cases as to each director until his
succcessor shall be elected and shall qualify (except in
cases where no successor is elected due to a reduction
in the size of the board) or until his earlier
resignation, removal from office, death or incapacity.
At each annual meeting of stockholders, the number of
directors equal to the number of directors of the class
whose term expires at the time of such meeting (or, if
less, the number of directors properly nominated and
qualified for election) shall be elected to hold office
until the third succeeding annual meeting of
stockholders after their election. Any director or the
entire board of directors may be removed, for cause
only, by a majority of the entire board of directors or
by holders of not less than seventy-five (75%) percent
of the outstanding shares then entitled to vote at an
election of directors.
In furtherance and not in limitation of the
powers conferred by statute, the board of directors is
expressly authorized:
To make, alter, amend or repeal the by-laws of
the corporation.
By resolution passed by the majority of the
whole board, to designate one or more committees, each
committee to consist of two or more of the directors of
the corporation, which, to the extent provided in the
resolution or in the by-laws of the corporation, shall
have and may exercise the powers of the board of
directors 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. Such committee or committees shall have such
name or names as may be determined from time to time by
resolution adopted by the board of directors."
2
<PAGE>
RESOLVED, that the Restated Certificate of
Incorporation of Galveston's Steakhouse Corp. be amended
by changing the Eighth Article thereof so that, as
amended, said Article shall be and read as follows:
"EIGHTH. Any amendment to this Certificate of
Incorporation shall require the affirmative vote of
seventy-five (75%) percent of the shares of each class
outstanding and entitled to vote thereon."
SECOND: That pursuant to a meeting and vote of stockholders, the
holders of a majority of the outstanding stock entitled to vote thereon have
approved said amendments in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
THIRD: That the aforesaid amendments were duly adopted in accordance
with the applicable provisions of Section 242 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 Hiram J. Woo, its President, this 29th day of July,
1999.
/s/ Hiram J. Woo
--------------------------
Hiram J. Woo, President
EXHIBIT 10.23
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of
acceptance set forth below, is entered into by and between GALVESTON'S
STEAKHOUSE CORP., a Delaware corporation, with headquarters located at 10200
Willow Creek Road, San Diego, CA 92131 (the "Company"), and the undersigned (the
"Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under Regulation D ("Regulation
D" as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 Act"), and/or
Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to
the conditions of this Agreement, such number of shares (the "Shares") of Common
Stock, $.01 par value per share (the "Common Stock") of the Company set forth on
the signature page of this Agreement, subject to acceptance of this Agreement by
the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
A. PURCHASE. The undersigned hereby agrees to purchase from the
Company the Shares set forth on the signature page of this Agreement. The
purchase price for the Shares shall be as set forth on the signature page hereto
and shall be payable in United States Dollars.
B. FORM OF PAYMENT. The Buyer shall pay the purchase price for the
Shares by wiring immediately available good funds in United States Dollars to
the Company at EAB, 600 Old Country Road, Garden City, New York 11530
ABA#021001486 for credit to Lehman & Eilen LLP Acct# 065-62510-5 against
delivery of the Shares.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
A. Without limiting Buyer's right to sell the Common Stock pursuant
to the Registration Statement (as defined below), the Buyer is purchasing the
Shares for its own account for investment only and not with a view towards the
public sale or distribution thereof and not with a view to or for sale in
connection with any distribution thereof;
B. The Buyer is (i) an "accredited investor" as that term is defined
in Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3), and (ii) experienced in making investments of the kind described
in this Agreement and the related documents, (iii) able, by reason of the
business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the Shares;
C. All subsequent offers and sales of the Shares by the Buyer shall
be made pursuant to registration of the Shares under the 1933 Act or pursuant to
an exemption from registration;
<PAGE>
D. The Buyer understands that the Shares are being offered and sold
to it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the Shares;
E. The Buyer and its advisors, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Shares which have been requested
by the Buyer. The Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries. Without limiting the generality of
the foregoing, the Buyer has also had the opportunity to obtain and to review
the Company's (1) Quarterly Reports on Form 10-QSB for the fiscal quarter ended
March 29, 1999 and (2) Annual Report on Form 10-KSB for the fiscal year ended
December 29, 1998 (the "Company's SEC Documents").
F. The Buyer understands that its investment in the Shares involves
a high degree of risk;
G. The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Shares;
H. This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
A. CONCERNING THE SHARES. There are no preemptive rights of any
stockholder of the Company, as such, to acquire the Common Stock.
B. REPORTING COMPANY STATUS. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado, and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary other than those jurisdictions in which the failure to
so qualify would not have a material and adverse effect on the business,
operations, properties, prospects or condition (financial or otherwise) of the
Company. The Company has registered its Common Stock pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Common Stock is listed and traded on the NASDAQ/Small Cap Market.
C. AUTHORIZED SHARES. The Shares have been duly authorized and, when
issued to Buyer, will be duly and validly issued, fully paid and non-assessable
and will not subject the holder thereof to personal liability by reason of being
such holder.
D. SECURITIES PURCHASE AGREEMENT. This Agreement and the
transactions contemplated hereby, have been duly and validly authorized by the
Company, this Agreement has been duly executed and delivered by the Company and
this Agreement, when executed and delivered by the Company, will be, a valid and
binding agreement of the Company enforceable in accordance with its terms,
subject as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium, and other similar laws affecting the enforcement of
creditors' rights generally.
2
<PAGE>
E. NON-CONTRAVENTION. The execution and delivery of this Agreement
by the Company, the issuance of the Shares, and the consummation by the Company
of the other transactions contemplated by this Agreement do not and will not
conflict with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default under (i) the articles of incorporation
or by-laws of the Company, (ii) any indenture, mortgage, deed of trust, or other
material agreement or instrument to which the Company is a party or by which it
or any of its properties or assets are bound, (iii) to its knowledge, any
existing applicable law, rule, or regulation or any applicable decree, judgment,
or (iv) to its knowledge, order of any court, United States federal or state
regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, except such
conflict, breach or default which would not have a material adverse effect on
the transactions contemplated herein. The Company is not in violation of any
material laws, governmental orders, rules, regulations or ordinances to which
its property, real, personal, mixed, tangible or intangible, or its businesses
related to such properties, are subject.
F. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market is required to be obtained by the Company for the issuance
and sale of the Shares to the Buyer as contemplated by this Agreement, except
such authorizations, approvals and consents that have been obtained.
G. SEC DOCUMENTS, FINANCIAL STATEMENTS. The Common Stock of the
Company is registered pursuant to Section 12(g) of the Exchange Act and the
Company has filed on a timely basis all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Exchange Act, including material filed pursuant to
Section 13(a) or 15(d), in addition to one or more registration statements and
amendments thereto heretofore filed by the Company with the SEC under the Act
(all of the foregoing including filings incorporated by reference therein being
referred to herein as the "SEC Documents"). The Company, through its agent, has
delivered to the Buyer true and complete copies of the SEC Documents (except for
exhibits and incorporated documents). The Company has not provided to the Buyer
any information which, according to applicable law, rule or regulation, should
have been disclosed publicly by the Company but which has not been so disclosed,
other than with respect to the transactions contemplated by this Agreement.
As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Act or the Exchange Act as the
case may be and the rules and regulations of the SEC promulgated thereunder and
other federal, state and local laws, rules and regulations applicable to such
SEC Documents, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
H. ABSENCE OF CERTAIN CHANGES. Since March 29, 1999, there has been
no material adverse change and no material adverse development in the business,
properties, operations, financial condition, or results of operations of the
Company.
I. FULL DISCLOSURE. There is no fact known to the Company (other
than general economic conditions known to the public generally) or as disclosed
in the documents referred to in Section 2(e), that has not been disclosed
3
<PAGE>
in writing to the Buyer that (i) would reasonably be expected to have a material
adverse effect on the business or financial condition of the Company or (ii)
would reasonably be expected to materially and adversely affect the ability of
the Company to perform its obligations pursuant to this Agreement.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
A. TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) the Shares
have not been registered under the provisions of the 1933 Act and may not be
transferred unless (A) subsequently registered thereunder, as provided for
herein, or (B) the Buyer shall have delivered to the Company an opinion of
counsel, reasonably satisfactory in form, scope and substance to the Company, to
the effect that the Shares to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration; and (2) any sale of the Shares
made in reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Shares under circumstances in which the seller,
or the person through whom the sale is made, may be deemed to be an underwriter,
as that term is used in the 1933 Act, may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder.
B. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that until
such time as the Shares have been registered under the 1933 Act as contemplated
hereby and sold in accordance with an effective registration statement
("Registration Statement"), the Shares shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such Shares):
THESE SHARES (THE "SHARES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION
IS NOT REQUIRED.
C. FILINGS. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Shares to the Buyer under any United
States laws and regulations, or by any domestic securities exchange or trading
market, and to provide a copy thereof to the Buyer promptly after such filing.
D. REPORTING STATUS. So long as the Buyer beneficially owns any of
the Shares, the Company shall file all reports required to be filed with the SEC
pursuant to Section 13 or 15(d) of the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination.
5. COVENANT TO REGISTER.
A. For purposes of this Section, the following definitions shall
apply:
(i) The terms "register," "registered," and "registration" refer to
a registration under the 1933 Act, effected by preparing and filing a
registration statement or similar document in compliance with the 1933 Act, and
the declaration or ordering of effectiveness of such registration statement,
document or amendment thereto.
(ii) The term "Registrable Securities" means the Shares, and any
securities of the Company or securities of any successor corporation issued as
or issuable upon the conversion or exercise of any warrant, right or other
security that is issued as a dividend or other distribution with respect to, or
in exchange for, or in replacement of, the Shares.
(iii) The term "holder of Registrable Securities" means the
Purchaser and any permitted assignee of registration rights pursuant to Section
5(g).
4
<PAGE>
B. (i) The Company shall use its best efforts to prepare and file a
registration statement on Form S-3 within thirty (30) days of the date hereof
and cause such registration statement to become effective as soon as possible,
but no later than one hundred and twenty (120) days from the date of this
Agreement.
(ii) The Company may suspend the effectiveness of any registration
effected pursuant to this Subsection (b) in the event and for such period of
time as, such a suspension is required by the rules and regulations of the
Securities and Exchange Commission ("SEC"). The Company will use its best
efforts to cause such suspension to terminate at the earliest possible date.
(iii) If a registration statement covering all Registrable
Securities is not effective by one hundred and twenty (120) days after the date
of this Agreement (the "Target Date"), the Company shall pay Purchaser as
liquidated damages an amount equal to two percent (2%) of the total Purchase
Price of the Shares for each thirty (30) day period following the Target Date
until such time as the registration statement is declared effective. Such
payment shall be made to the Purchaser by cashier's check or wire transfer in
immediately available funds to such account as shall be designated in writing by
the Purchaser.
C. Whenever required under this Section 5 to effect the registration
of any Registrable Securities, the Company shall, as expeditiously as reasonably
possible:
(i) Prepare and file with the SEC a registration statement or
amendment thereto with respect to such Registrable Securities and use its best
efforts to cause such registration to become effective as provided in Section
5(b)(i) hereof, and keep such registration statement effective for so long as
any holder of Registrable Securities desires to dispose of the securities
covered by such registration statement; provided, however, that in no event
shall the Company be required to keep the Registration statement effective for a
period greater than three (3) years from the Closing Date;
(ii) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
1933 Act with respect to the disposition of all securities covered by such
registration statement and notify the holders of the filing and effectiveness of
such Registration statement and any amendments or supplements;
(iii) Furnish to each holder of Registrable Securities such numbers
of copies of a current prospectus, including a preliminary prospectus,
conforming with the requirements of the 1933 Act, copies of the registration
statement any amendment or supplement to any thereof and any documents
incorporated by reference therein, and such other documents as such holder of
Registrable Securities may reasonably require in order to facilitate the
disposition of Registrable Securities owned by such holder of Registrable
Securities;
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or "Blue Sky"
laws of such jurisdictions as shall be reasonably requested by the holder of
Registrable Securities;
(v) Notify each holder of Registrable Securities immediately of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and use its best efforts to promptly update and/or
correct such prospectus.
D. Upon request of the Company, each holder of Registrable
Securities will furnish to the Company in
5
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connection with any registration under this Section such information regarding
itself, the Registrable Securities and other securities of the Company held by
it, and the intended method of disposition of such securities as shall be
reasonably required to effect the registration of the Registrable Securities
held by such holder of Registrable Securities.
E. (i) To the fullest extent permitted by law, the Company shall
indemnify, defend and hold harmless each holder of Registrable Securities which
are included in a registration statement and each of its officers, directors,
employees, agents, partners or controlling persons (within the meaning of the
1933 Act) (each, an "indemnified party") from and against, and shall reimburse
such indemnified party with respect to, any and all claims, suits, demands,
causes of action, losses, damages, liabilities, costs or expenses
("Liabilities") to which such indemnified party may become subject under the
1933 Act or otherwise, arising from or relating to (A) any untrue statement or
alleged untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or supplement
thereto, or (B) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading; provided,
however, that the Company shall not be liable in any such case to the extent
that any such Liability arises out of or is based upon an untrue statement or
omission so made in strict conformity with information furnished by such
indemnified party in writing specifically for use in the registration statement.
(ii) In the event of any registration under the 1933 Act of
Registrable Securities, each holder of such Registrable Securities hereby
severally agrees to indemnity, defend and hold harmless the Company, and its
officers, directors, employees, agents, partners, or controlling persons (within
the meaning of the 1933 Act) (each, an "indemnified party") from and against,
and shall reimburse such indemnified party with respect to, any and all
Liabilities to which such indemnified party may become subject under the 1933
Act or otherwise, arising from or relating to (A) any untrue statement or
alleged untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or supplement
thereto, or (B) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading; PROVIDED,
THAT such holders will be liable in any such case to the extent and only to the
extent, that any such Liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, prospectus or amendment or supplement thereto in
reliance upon and in conformity with written information furnished by such
holder specifically for use in the preparation thereof, and such Liability may
in no event exceed the value of the Registrable Securities so registered.
(iii) Promptly after receipt by any indemnified party of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against another party (the "indemnifying party")
hereunder, notify such party in writing thereof, but the omission so to notify
such party shall not relieve such party from any Liability which it may have to
the indemnified party other than under this Section and shall only relieve it
from any Liability which it may have to the indemnified party under this Section
if and to the extent an indemnifying party is materially prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and such indemnified party shall notify an indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel reasonably satisfactory to such indemnified party, and, after
notice from the indemnifying party to the indemnified party of its election so
to assume and undertake the defense thereof, the indemnifying party shall not be
liable to the indemnified party under this Section for any legal expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected; provided, however, that if the defendants in any such action
include both parties and the indemnified party shall have reasonably concluded
that there may be reasonable defenses available to them which are different from
or additional to those available to the indemnifying party or if the interests
of the indemnified party reasonably may be deemed to conflict with the interests
of the indemnifying party, the indemnified party shall have the right to select
a separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the reasonable expenses and fees
of one such separate counsel and other reasonable expenses related to such
participation to be reimbursed by the indemnifying party as incurred.
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F. (i) With respect to the inclusion of Registrable Securities in a
registration statement, all fees, costs and expenses of and incidental to such
registration, inclusion and public offering shall be borne by the Company;
provided, however, that any security holders participating in such registration
shall bear their pro-rata share of the underwriting discounts and commissions,
if any, incurred by them in connection with such registration.
(ii) The fees, costs and expenses of registration to be borne by the
Company as provided in this Subsection (f) shall include, without limitation,
all registration, filing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, and all legal fees and
disbursements and other expenses of complying with state securities or Blue Sky
laws of any jurisdiction or jurisdictions in which securities to be offered are
to be registered and qualified. Subject to appropriate agreements as to
confidentiality, the Company shall make available to the holders of Registrable
Securities and their counsel its documents and personnel for due diligence
purposes, provided that the fees and disbursements of counsel and accountants
for the selling security holders shall be orne by the respective selling
security holders.
G. The rights to cause the Company to register all or any portion of
Registrable Securities pursuant to this Section 5 may be assigned by Purchaser
to a proper transferee or assignee as described herein. Within a reasonable time
after such transfer, the Purchaser shall notify the Company of the name and
address of such transferee or assignee, and the securities with respect to which
such registration rights are being assigned. Such assignment shall be effective
only if, (i) the Purchaser agrees in writing with the transferee or assignee to
assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such transfer or assignment (subject to the
purchase price of the shares being kept confidential by the Purchaser and such
transferee or assignee, (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (A) the name and
address of such transferee or assignee, (B) the Registrable Securities with
respect to which such registration rights are being assigned, (iii) following
such transfer or assignment, the further disposition of the Registrable
Securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time that the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the purchase agreement covering
the transaction and (vi) such transferee shall be an "accredited investor", as
that term is defined in Rule 501 of Regulation D, promulgated under the 1933
Act.
6. GOVERNING LAW: MISCELLANEOUS. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of New York. A
facsimile transmission of this signed Agreement shall be legal and binding on
all parties hereto. This Agreement may be signed in one or more counterparts,
each of which shall be deemed an original. The headings of this Agreement are
for convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
7. NOTICES. Any notice required or permitted hereunder shall be
given in writing (unless otherwise specified herein) and shall be deemed
effectively given, (i) on the date delivered, (a) by personal delivery, or (b)
if advance copy is given by fax, (ii) seven business days after deposit in the
United States Postal Service by regular or certified mail, or (iii) three
business days mailing by international express courier, with postage and fees
prepaid, addressed to each of the other parties thereunto entitled at the
following addresses, or at such other addresses as a party may designate by ten
days advance written notice to each of the other parties hereto.
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<PAGE>
COMPANY: GALVESTON'S STEAKHOUSE CORP.
10200 Willow Creek Road
San Diego, CA 92131
Attn: Hiram J. Woo
Telecopier No.: (619) 635-3976
with a copy to:
Lehman & Eilen, Esqs.
50 Charles Lindbergh Blvd.
Uniondale, New York 11553
Attention: Hank Gracin, Esq.
Telecopier No.: (516) 222-0948
BUYER: At the address set forth on the signature page of this
Agreement.
8. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer
or one of its officers thereunto duly authorized as of the date set forth below.
For the purchase price of $5.50 per Share, the Buyer tenders herewith
the full purchase price of:
$1,001,000 for 182,000 Shares
P.O. Box 120, Castle Chambers Merseyside Pension Fund
----------------------------- -----------------------
Address Printed Name of Subscriber
416 Cook Street, Liverpool, England
-----------------------------------
By:/s/A.R. Borrows
---------------------------
Fax No.__________________________ (Signature of Authorized Person)
A.R. Borrows - Senior Investment Manager
-------------------------------------------
U.K. Printed Name and Title
-----------------------------
Jurisdiction of Incorporation
or Organization
This Agreement has been accepted as of the date set
forth below.
GALVESTON'S STEAKHOUSE CORP.
By:/s/ Hiram Woo
--------------------------
Hiram J. Woo, President
Dated: 6/11/99
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<PAGE>
EXHIBIT 10.24
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of acceptance
set forth below, is entered into by and between GALVESTON'S STEAKHOUSE CORP., a
Delaware corporation, with headquarters located at 10200 Willow Creek Road, San
Diego, CA 92131 (the "Company"), and the undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under Regulation D ("Regulation
D" as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 Act"), and/or
Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to
the conditions of this Agreement, such number of shares (the "Shares") of Common
Stock, $.01 par value per share (the "Common Stock") of the Company set forth on
the signature page of this Agreement, subject to acceptance of this Agreement by
the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
A. PURCHASE. The undersigned hereby agrees to purchase from the
Company the Shares set forth on the signature page of this Agreement. The
purchase price for the Shares shall be as set forth on the signature page hereto
and shall be payable in United States Dollars.
B. FORM OF PAYMENT. The Buyer shall pay the purchase price for the
Shares by wiring immediately available good funds in United States Dollars to
the Company at EAB, 600 Old Country Road, Garden City, New York 11530
ABA#021001486 for credit to Lehman & Eilen LLP Acct# 065-62510-5 against
delivery of the Shares.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
A. Without limiting Buyer's right to sell the Common Stock pursuant
to the Registration Statement (as defined below), the Buyer is purchasing the
Shares for its own account for investment only and not with a view towards the
public sale or distribution thereof and not with a view to or for sale in
connection with any distribution thereof;
B. The Buyer is (i) an "accredited investor" as that term is defined
in Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3), and (ii) experienced in making investments of the kind described
in this Agreement and the related documents, (iii) able, by reason of the
business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the Shares;
C. All subsequent offers and sales of the Shares by the Buyer shall
be made pursuant to registration of the Shares under the 1933 Act or pursuant to
an exemption from registration;
<PAGE>
D. The Buyer understands that the Shares are being offered and sold
to it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgements and understandings of
the Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the Shares;
E. The Buyer and its advisors, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Shares which have been requested
by the Buyer. The Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries. Without limiting the generality of
the foregoing, the Buyer has also had the opportunity to obtain and to review
the Company's (1) Quarterly Reports on Form 10-QSB for the fiscal quarter ended
March 29, 1999 and (2) Annual Report on Form 10-KSB for the fiscal year ended
December 29, 1998 (the "Company's SEC Documents").
F. The Buyer understands that its investment in the Shares involves
a high degree of risk;
G. The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Shares;
H. This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
A. CONCERNING THE SHARES. There are no preemptive rights of any
stockholder of the Company, as such, to acquire the Common Stock.
B. REPORTING COMPANY STATUS. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado, and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary other than those jurisdictions in which the failure to
so qualify would not have a material and adverse effect on the business,
operations, properties, prospects or condition (financial or otherwise) of the
Company. The Company has registered its Common Stock pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Common Stock is listed and traded on the NASDAQ/Small Cap Market.
C. AUTHORIZED SHARES. The Shares have been duly authorized and, when
issued to Buyer, will be duly and validly issued, fully paid and non-assessable
and will not subject the holder thereof to personal liability by reason of being
such holder.
D. SECURITIES PURCHASE AGREEMENT. This Agreement and the
transactions contemplated hereby, have been duly and validly authorized by the
Company, this Agreement has been duly executed and delivered by the Company and
this Agreement, when executed and delivered by the Company, will be, a valid and
binding agreement of the Company enforceable in accordance with its terms,
subject as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium, and other similar laws affecting the enforcement of
creditors' rights generally.
2
<PAGE>
E. NON-CONTRAVENTION. The execution and delivery of this Agreement
by the Company, the issuance of the Shares, and the consummation by the Company
of the other transactions contemplated by this Agreement do not and will not
conflict with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default under (i) the articles of incorporation
or by-laws of the Company, (ii) any indenture, mortgage, deed of trust, or other
material agreement or instrument to which the Company is a party or by which it
or any of its properties or assets are bound, (iii) to its knowledge, any
existing applicable law, rule, or regulation or any applicable decree, judgment,
or (iv) to its knowledge, order of any court, United States federal or state
regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, except such
conflict, breach or default which would not have a material adverse effect on
the transactions contemplated herein. The Company is not in violation of any
material laws, governmental orders, rules, regulations or ordinances to which
its property, real, personal, mixed, tangible or intangible, or its businesses
related to such properties, are subject.
F. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market is required to be obtained by the Company for the issuance
and sale of the Shares to the Buyer as contemplated by this Agreement, except
such authorizations, approvals and consents that have been obtained.
G. SEC DOCUMENTS, FINANCIAL STATEMENTS. The Common Stock of the
Company is registered pursuant to Section 12(g) of the Exchange Act and the
Company has filed on a timely basis all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Exchange Act, including material filed pursuant to
Section 13(a) or 15(d), in addition to one or more registration statements and
amendments thereto heretofore filed by the Company with the SEC under the Act
(all of the foregoing including filings incorporated by reference therein being
referred to herein as the "SEC Documents"). The Company, through its agent, has
delivered to the Buyer true and complete copies of the SEC Documents (except for
exhibits and incorporated documents). The Company has not provided to the Buyer
any information which, according to applicable law, rule or regulation, should
have been disclosed publicly by the Company but which has not been so disclosed,
other than with respect to the transactions contemplated by this Agreement.
As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Act or the Exchange Act as the
case may be and the rules and regulations of the SEC promulgated thereunder and
other federal, state and local laws, rules and regulations applicable to such
SEC Documents, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
H. ABSENCE OF CERTAIN CHANGES. Since March 29, 1999, there has been
no material adverse change and no material adverse development in the business,
properties, operations, financial condition, or results of operations of the
Company.
I. FULL DISCLOSURE. There is no fact known to the Company (other
than general economic conditions known to the public generally) or as disclosed
in the documents referred to in Section 2(e), that has not been disclosed
3
<PAGE>
in writing to the Buyer that (i) would reasonably be expected to have a material
adverse effect on the business or financial condition of the Company or (ii)
would reasonably be expected to materially and adversely affect the ability of
the Company to perform its obligations pursuant to this Agreement.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
A. TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) the Shares
have not been registered under the provisions of the 1933 Act and may not be
transferred unless (A) subsequently registered thereunder, as provided for
herein, or (B) the Buyer shall have delivered to the Company an opinion of
counsel, reasonably satisfactory in form, scope and substance to the Company, to
the effect that the Shares to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration; and (2) any sale of the Shares
made in reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Shares under circumstances in which the seller,
or the person through whom the sale is made, may be deemed to be an underwriter,
as that term is used in the 1933 Act, may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder.
B. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that until
such time as the Shares have been registered under the 1933 Act as contemplated
hereby and sold in accordance with an effective registration statement
("Registration Statement"), the Shares shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such Shares):
THESE SHARES (THE "SHARES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION
IS NOT REQUIRED.
C. FILINGS. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Shares to the Buyer under any United
States laws and regulations, or by any domestic securities exchange or trading
market, and to provide a copy thereof to the Buyer promptly after such filing.
D. REPORTING STATUS. So long as the Buyer beneficially owns any of
the Shares, the Company shall file all reports required to be filed with the SEC
pursuant to Section 13 or 15(d) of the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination.
5. COVENANT TO REGISTER.
A. For purposes of this Section, the following definitions shall
apply:
(i) The terms "register," "registered," and "registration" refer to
a registration under the 1933 Act, effected by preparing and filing a
registration statement or similar document in compliance with the 1933 Act, and
the declaration or ordering of effectiveness of such registration statement,
document or amendment thereto.
(ii) The term "Registrable Securities" means the Shares, and any
securities of the Company or securities of any successor corporation issued as
or issuable upon the conversion or exercise of any warrant, right or other
security that is issued as a dividend or other distribution with respect to, or
in exchange for, or in replacement of, the Shares.
(iii) The term "holder of Registrable Securities" means the
Purchaser and any permitted assignee of registration rights pursuant to Section
5(g).
4
<PAGE>
B. (i) The Company shall use its best efforts to prepare and file a
registration statement on Form S-3 within thirty (30) days of the date hereof
and cause such registration statement to become effective as soon as possible,
but no later than one hundred and twenty (120) days from the date of this
Agreement.
(ii) The Company may suspend the effectiveness of any registration
effected pursuant to this Subsection (b) in the event and for such period of
time as, such a suspension is required by the rules and regulations of the
Securities and Exchange Commission ("SEC"). The Company will use its best
efforts to cause such suspension to terminate at the earliest possible date.
(iii) If a registration statement covering all Registrable
Securities is not effective by one hundred and twenty (120) days after the date
of this Agreement (the "Target Date"), the Company shall pay Purchaser as
liquidated damages an amount equal to two percent (2%) of the total Purchase
Price of the Shares for each thirty (30) day period following the Target Date
until such time as the registration statement is declared effective. Such
payment shall be made to the Purchaser by cashier's check or wire transfer in
immediately available funds to such account as shall be designated in writing by
the Purchaser.
C. Whenever required under this Section 5 to effect the registration of
any Registrable Securities, the Company shall, as expeditiously as reasonably
possible:
(i) Prepare and file with the SEC a registration statement or
amendment thereto with respect to such Registrable Securities and use its best
efforts to cause such registration to become effective as provided in Section
5(b)(i) hereof, and keep such registration statement effective for so long as
any holder of Registrable Securities desires to dispose of the securities
covered by such registration statement; provided, however, that in no event
shall the Company be required to keep the Registration statement effective for a
period greater than three (3) years from the Closing Date;
(ii) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
1933 Act with respect to the disposition of all securities covered by such
registration statement and notify the holders of the filing and effectiveness of
such Registration statement and any amendments or supplements;
(iii) Furnish to each holder of Registrable Securities such numbers
of copies of a current prospectus, including a preliminary prospectus,
conforming with the requirements of the 1933 Act, copies of the registration
statement any amendment or supplement to any thereof and any documents
incorporated by reference therein, and such other documents as such holder of
Registrable Securities may reasonably require in order to facilitate the
disposition of Registrable Securities owned by such holder of Registrable
Securities;
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or "Blue Sky"
laws of such jurisdictions as shall be reasonably requested by the holder of
Registrable Securities;
(v) Notify each holder of Registrable Securities immediately of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and use its best efforts to promptly update and/or
correct such prospectus.
D. Upon request of the Company, each holder of Registrable Securities
will furnish to the Company in
5
<PAGE>
connection with any registration under this Section such information regarding
itself, the Registrable Securities and other securities of the Company held by
it, and the intended method of disposition of such securities as shall be
reasonably required to effect the registration of the Registrable Securities
held by such holder of Registrable Securities.
E. (i) To the fullest extent permitted by law, the Company shall
indemnify, defend and hold harmless each holder of Registrable Securities which
are included in a registration statement and each of its officers, directors,
employees, agents, partners or controlling persons (within the meaning of the
1933 Act) (each, an "indemnified party") from and against, and shall reimburse
such indemnified party with respect to, any and all claims, suits, demands,
causes of action, losses, damages, liabilities, costs or expenses
("Liabilities") to which such indemnified party may become subject under the
1933 Act or otherwise, arising from or relating to (A) any untrue statement or
alleged untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or supplement
thereto, or (B) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading; provided,
however, that the Company shall not be liable in any such case to the extent
that any such Liability arises out of or is based upon an untrue statement or
omission so made in strict conformity with information furnished by such
indemnified party in writing specifically for use in the registration statement.
(ii) In the event of any registration under the 1933 Act of
Registrable Securities, each holder of such Registrable Securities hereby
severally agrees to indemnity, defend and hold harmless the Company, and its
officers, directors, employees, agents, partners, or controlling persons (within
the meaning of the 1933 Act) (each, an "indemnified party") from and against,
and shall reimburse such indemnified party with respect to, any and all
Liabilities to which such indemnified party may become subject under the 1933
Act or otherwise, arising from or relating to (A) any untrue statement or
alleged untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or supplement
thereto, or (B) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading; PROVIDED,
THAT such holders will be liable in any such case to the extent and only to the
extent, that any such Liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, prospectus or amendment or supplement thereto in
reliance upon and in conformity with written information furnished by such
holder specifically for use in the preparation thereof, and such Liability may
in no event exceed the value of the Registrable Securities so registered.
(iii) Promptly after receipt by any indemnified party of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against another party (the "indemnifying party")
hereunder, notify such party in writing thereof, but the omission so to notify
such party shall not relieve such party from any Liability which it may have to
the indemnified party other than under this Section and shall only relieve it
from any Liability which it may have to the indemnified party under this Section
if and to the extent an indemnifying party is materially prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and such indemnified party shall notify an indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel reasonably satisfactory to such indemnified party, and, after
notice from the indemnifying party to the indemnified party of its election so
to assume and undertake the defense thereof, the indemnifying party shall not be
liable to the indemnified party under this Section for any legal expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected; provided, however, that if the defendants in any such action
include both parties and the indemnified party shall have reasonably concluded
that there may be reasonable defenses available to them which are different from
or additional to those available to the indemnifying party or if the interests
of the indemnified party reasonably may be deemed to conflict with the interests
of the indemnifying party, the indemnified party shall have the right to select
a separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the reasonable expenses and fees
of one such separate counsel and other reasonable expenses related to such
participation to be reimbursed by the indemnifying party as incurred.
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F. (i) With respect to the inclusion of Registrable Securities in a
registration statement, all fees, costs and expenses of and incidental to such
registration, inclusion and public offering shall be borne by the Company;
provided, however, that any security holders participating in such registration
shall bear their pro-rata share of the underwriting discounts and commissions,
if any, incurred by them in connection with such registration.
(ii) The fees, costs and expenses of registration to be borne by the
Company as provided in this Subsection (f) shall include, without limitation,
all registration, filing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, and all legal fees and
disbursements and other expenses of complying with state securities or Blue Sky
laws of any jurisdiction or jurisdictions in which securities to be offered are
to be registered and qualified. Subject to appropriate agreements as to
confidentiality, the Company shall make available to the holders of Registrable
Securities and their counsel its documents and personnel for due diligence
purposes, provided that the fees and disbursements of counsel and accountants
for the selling security holders shall be borne by the respective selling
security holders.
G. The rights to cause the Company to register all or any portion of
Registrable Securities pursuant to this Section 5 may be assigned by Purchaser
to a proper transferee or assignee as described herein. Within a reasonable time
after such transfer, the Purchaser shall notify the Company of the name and
address of such transferee or assignee, and the securities with respect to which
such registration rights are being assigned. Such assignment shall be effective
only if, (i) the Purchaser agrees in writing with the transferee or assignee to
assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such transfer or assignment (subject to the
purchase price of the shares being kept confidential by the Purchaser and such
transferee or assignee, (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (A) the name and
address of such transferee or assignee, (B) the Registrable Securities with
respect to which such registration rights are being assigned, (iii) following
such transfer or assignment, the further disposition of the Registrable
Securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time that the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the purchase agreement covering
the transaction and (vi) such transferee shall be an "accredited investor", as
that term is defined in Rule 501 of Regulation D, promulgated under the 1933
Act.
6. GOVERNING LAW: MISCELLANEOUS. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of New York. A
facsimile transmission of this signed Agreement shall be legal and binding on
all parties hereto. This Agreement may be signed in one or more counterparts,
each of which shall be deemed an original. The headings of this Agreement are
for convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
7. NOTICES. Any notice required or permitted hereunder shall be
given in writing (unless otherwise specified herein) and shall be deemed
effectively given, (i) on the date delivered, (a) by personal delivery, or (b)
if advance copy is given by fax, (ii) seven business days after deposit in the
United States Postal Service by regular or certified mail, or (iii) three
business days mailing by international express courier, with postage and fees
prepaid, addressed to each of the other parties thereunto entitled at the
following addresses, or at such other addresses as a party may designate by ten
days advance written notice to each of the other parties hereto.
COMPANY: GALVESTON'S STEAKHOUSE CORP.
10200 Willow Creek Road
San Diego, CA 92131
Attn: Hiram J. Woo
Telecopier No.: (619) 635-3976
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with a copy to:
Lehman & Eilen, Esqs.
50 Charles Lindbergh Blvd.
Uniondale, New York 11553
Attention: Hank Gracin, Esq.
Telecopier No.: (516) 222-0948
BUYER: At the address set forth on the signature page of this
Agreement.
8. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer
or one of its officers thereunto duly authorized as of the date set forth below.
For the purchase price of $5.50 per Share, the Buyer tenders herewith
the full purchase price of:
$1,000,000 for 181,818 Shares
24 Boulevard Princess Charlotte BNP Securities Ltd.
------------------------------- ------------------------------
Address Printed Name of Subscriber
ML 9800, Monaco
-------------------------------
By:/s/Anthony Field
------------------------------
Fax No._______________________ (Signature of Authorized Person)
Anthony Field, Director
------------------------------
British Virgin Islands Printed Name and Title
-----------------------------
Jurisdiction of Incorporation
or Organization
This Agreement has been accepted as of the date set
forth below.
GALVESTON'S STEAKHOUSE CORP.
By:/s/ Hiram Woo
------------------------
Hiram J. Woo, President
Dated: 6/17/99
------------------------
8
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EXHIBIT 10.25
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of acceptance
set forth below, is entered into by and between GALVESTON'S STEAKHOUSE CORP., a
Delaware corporation, with headquarters located at 10200 Willow Creek Road, San
Diego, CA 92131 (the "Company"), and the undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under Regulation D ("Regulation
D" as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 Act"), and/or
Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to
the conditions of this Agreement, such number of shares (the "Shares") of Common
Stock, $.01 par value per share (the "Common Stock") of the Company set forth on
the signature page of this Agreement, subject to acceptance of this Agreement by
the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase. The undersigned hereby agrees to purchase from the Company
the Shares set forth on the signature page of this Agreement. The purchase price
for the Shares shall be as set forth on the signature page hereto and shall be
payable in United States Dollars.
b. Form of Payment. The Buyer shall pay the purchase price for the
Shares by wiring immediately available good funds in United States Dollars to
the Company at East-West Bank, 4355 Geary Blvd., San Francisco, California
94121, ABA No. 3220-7038-1 for credit to Steakhouse Partners, Inc., Account
No. 84700038, against delivery of the Shares.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
a. Without limiting Buyer's right to sell the Common Stock pursuant to
the Registration Statement (as defined below), the Buyer is purchasing the
Shares for its own account for investment only and not with a view towards the
public sale or distribution thereof and not with a view to or for sale in
connection with any distribution thereof;
b. The Buyer is (i) an "accredited investor" as that term is defined in
Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3), and (ii) experienced in making investments of the kind described
in this Agreement and the related documents, (iii) able, by reason of the
business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the Shares;
c. All subsequent offers and sales of the Shares by the Buyer shall be
made pursuant to registration of the Shares under the 1933 Act or pursuant to an
exemption from registration;
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d. The Buyer understands that the Shares are being offered and sold to
it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgements and understandings of
the Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the Shares;
e. The Buyer and its advisors, have been furnished with all materials
relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Shares which have been requested by the
Buyer. The Buyer and its advisors, if any, have been afforded the opportunity to
ask questions of the Company and have received complete and satisfactory answers
to any such inquiries. Without limiting the generality of the foregoing, the
Buyer has also had the opportunity to obtain and to review the Company's (1)
Quarterly Reports on Form 10-QSB for the fiscal quarter ended March 29, 1999 and
(2) Annual Report on Form 10-KSB for the fiscal year ended December 29, 1998
(the "Company's SEC Documents").
f. The Buyer understands that its investment in the Shares involves a
high degree of risk;
g. The Buyer understands that no United States federal or state agency
or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Shares;
h. This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
a. Concerning the Shares. There are no preemptive rights of any
stockholder of the Company, as such, to acquire the Common Stock.
b. Reporting Company Status. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado, and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary other than those jurisdictions in which the failure to
so qualify would not have a material and adverse effect on the business,
operations, properties, prospects or condition (financial or otherwise) of the
Company. The Company has registered its Common Stock pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Common Stock is listed and traded on the NASDAQ/Small Cap Market.
c. Authorized Shares. The Shares have been duly authorized and, when
issued to Buyer, will be duly and validly issued, fully paid and non-assessable
and will not subject the holder thereof to personal liability by reason of being
such holder.
d. Securities Purchase Agreement. This Agreement and the transactions
contemplated hereby, have been duly and validly authorized by the Company, this
Agreement has been duly executed and delivered by the Company and this
Agreement, when executed and delivered by the Company, will be, a valid and
binding agreement of the Company enforceable in accordance with its terms,
subject as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium, and other similar laws affecting the enforcement of
creditors' rights generally.
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<PAGE>
e. Non-contravention. The execution and delivery of this Agreement by
the Company, the issuance of the Shares, and the consummation by the Company of
the other transactions contemplated by this Agreement do not and will not
conflict with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default under (i) the articles of incorporation
or by-laws of the Company, (ii) any indenture, mortgage, deed of trust, or other
material agreement or instrument to which the Company is a party or by which it
or any of its properties or assets are bound, (iii) to its knowledge, any
existing applicable law, rule, or regulation or any applicable decree, judgment,
or (iv) to its knowledge, order of any court, United States federal or state
regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, except such
conflict, breach or default which would not have a material adverse effect on
the transactions contemplated herein. The Company is not in violation of any
material laws, governmental orders, rules, regulations or ordinances to which
its property, real, personal, mixed, tangible or intangible, or its businesses
related to such properties, are subject.
f. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market is required to be obtained by the Company for the issuance
and sale of the Shares to the Buyer as contemplated by this Agreement, except
such authorizations, approvals and consents that have been obtained.
g. SEC Documents, Financial Statements. The Common Stock of the Company
is registered pursuant to Section 12(g) of the Exchange Act and the Company has
filed on a timely basis all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Exchange Act, including material filed pursuant to Section
13(a) or 15(d), in addition to one or more registration statements and
amendments thereto heretofore filed by the Company with the SEC under the Act
(all of the foregoing including filings incorporated by reference therein being
referred to herein as the "SEC Documents"). The Company, through its agent, has
delivered to the Buyer true and complete copies of the SEC Documents (except for
exhibits and incorporated documents). The Company has not provided to the Buyer
any information which, according to applicable law, rule or regulation, should
have been disclosed publicly by the Company but which has not been so disclosed,
other than with respect to the transactions contemplated by this Agreement.
As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Act or the Exchange Act as the
case may be and the rules and regulations of the SEC promulgated thereunder and
other federal, state and local laws, rules and regulations applicable to such
SEC Documents, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
h. Absence of Certain Changes. Since March 29, 1999, there has been no
material adverse change and no material adverse development in the business,
properties, operations, financial condition, or results of operations of the
Company.
i. Full Disclosure. There is no fact known to the Company (other than
general economic conditions known to the public generally) or as disclosed in
the documents referred to in Section 2(e), that has not been disclosed in
writing to the Buyer that (i) would reasonably be expected to have a material
adverse effect on the business or financial condition of the Company or (ii)
would reasonably be expected to materially and adversely affect the ability of
the Company to perform its obligations pursuant to this Agreement.
3
<PAGE>
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Buyer acknowledges that (1) the Shares
have not been registered under the provisions of the 1933 Act and may not be
transferred unless (A) subsequently registered thereunder, as provided for
herein, or (B) the Buyer shall have delivered to the Company an opinion of
counsel, reasonably satisfactory in form, scope and substance to the Company, to
the effect that the Shares to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration; and (2) any sale of the Shares
made in reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Shares under circumstances in which the seller,
or the person through whom the sale is made, may be deemed to be an underwriter,
as that term is used in the 1933 Act, may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder.
b. Restrictive Legend. The Buyer acknowledges and agrees that until
such time as the Shares have been registered under the 1933 Act as contemplated
hereby and sold in accordance with an effective registration statement
("Registration Statement"), the Shares shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such Shares):
THESE SHARES (THE "SHARES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION
IS NOT REQUIRED.
c. Filings. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Shares to the Buyer under any United
States laws and regulations, or by any domestic securities exchange or trading
market, and to provide a copy thereof to the Buyer promptly after such filing.
d. Reporting Status. So long as the Buyer beneficially owns any of the
Shares, the Company shall file all reports required to be filed with the SEC
pursuant to Section 13 or 15(d) of the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination.
5. COVENANT TO REGISTER.
a. For purposes of this Section, the following definitions shall
apply:
(i) The terms "register," "registered," and "registration"
refer to a registration under the 1933 Act, effected by preparing and filing a
registration statement or similar document in compliance with the 1933 Act, and
the declaration or ordering of effectiveness of such registration statement,
document or amendment thereto.
(ii) The term "Registrable Securities" means the Shares, and
any securities of the Company or securities of any successor corporation issued
as or issuable upon the conversion or exercise of any warrant, right or other
security that is issued as a dividend or other distribution with respect to, or
in exchange for, or in replacement of, the Shares.
(iii) The term "holder of Registrable Securities" means the
Purchaser and any permitted assignee of registration rights pursuant to Section
5(g).
b. (i) The Company shall use its best efforts to prepare and
file a registration statement on Form
4
<PAGE>
S-3 within thirty (30) days of the date hereof and cause such registration
statement to become effective as soon as possible, but no later than one hundred
and twenty (120) days from the date of this Agreement.
(ii) The Company may suspend the effectiveness of any
registration effected pursuant to this Subsection (b) in the event and for such
period of time as, such a suspension is required by the rules and regulations of
the Securities and Exchange Commission ("SEC"). The Company will use its best
efforts to cause such suspension to terminate at the earliest possible date.
(iii) If a registration statement covering all Registrable
Securities is not effective by one hundred and twenty (120) days after the date
of this Agreement or if such Registration Statement shall not have been filed
with the SEC within thirty (30) days of the date of this agreement,
(collectively the "Target Date"), the Company shall pay Purchaser as liquidated
damages an amount equal to two percent (2%) of the total Purchase Price of the
Shares for each thirty (30) day period following the Target Date until such time
as the registration statement is declared effective or, in the case of a late
filing, is filed. Such payment shall be made to the Purchaser by cashier's check
or wire transfer in immediately available funds to such account as shall be
designated in writing by the Purchaser.
c. Whenever required under this Section 5 to effect the registration of
any Registrable Securities, the Company shall, as expeditiously as reasonably
possible:
(i) Prepare and file with the SEC a registration statement or
amendment thereto with respect to such Registrable Securities and use its best
efforts to cause such registration to become effective as provided in Section
5(b)(i) hereof, and keep such registration statement effective for so long as
any holder of Registrable Securities desires to dispose of the securities
covered by such registration statement; provided, however, that in no event
shall the Company be required to keep the Registration statement effective for a
period greater than three (3) years from the Closing Date;
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement and notify the holders of the filing and
effectiveness of such Registration statement and any amendments or supplements;
(iii) Furnish to each holder of Registrable Securities such
numbers of copies of a current prospectus, including a preliminary prospectus,
conforming with the requirements of the 1933 Act, copies of the registration
statement any amendment or supplement to any thereof and any documents
incorporated by reference therein, and such other documents as such holder of
Registrable Securities may reasonably require in order to facilitate the
disposition of Registrable Securities owned by such holder of Registrable
Securities;
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
"Blue Sky" laws of such jurisdictions as shall be reasonably requested by the
holder of Registrable Securities;
(v) Notify each holder of Registrable Securities immediately
of the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue statement of
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and use its best efforts to promptly update and/or
correct such prospectus.
d. Upon request of the Company, each holder of Registrable Securities
will furnish to the Company in connection with any registration under this
Section such information regarding itself, the Registrable Securities and other
securities of the Company held by it, and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
the Registrable Securities held by such holder of Registrable Securities.
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e. (i) To the fullest extent permitted by law, the Company shall
indemnify, defend and hold harmless each holder of Registrable Securities which
are included in a registration statement and each of its officers, directors,
employees, agents, partners or controlling persons (within the meaning of the
1933 Act) (each, an "indemnified party") from and against, and shall reimburse
such indemnified party with respect to, any and all claims, suits, demands,
causes of action, losses, damages, liabilities, costs or expenses
("Liabilities") to which such indemnified party may become subject under the
1933 Act or otherwise, arising from or relating to (A) any untrue statement or
alleged untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or supplement
thereto, or (B) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading; provided,
however, that the Company shall not be liable in any such case to the extent
that any such Liability arises out of or is based upon an untrue statement or
omission so made in strict conformity with information furnished by such
indemnified party in writing specifically for use in the registration statement.
(ii) In the event of any registration under the 1933 Act of
Registrable Securities, each holder of such Registrable Securities hereby
severally agrees to indemnity, defend and hold harmless the Company, and its
officers, directors, employees, agents, partners, or controlling persons (within
the meaning of the 1933 Act) (each, an "indemnified party") from and against,
and shall reimburse such indemnified party with respect to, any and all
Liabilities to which such indemnified party may become subject under the 1933
Act or otherwise, arising from or relating to (A) any untrue statement or
alleged untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or supplement
thereto, or (B) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading; provided,
that such holders will be liable in any such case to the extent and only to the
extent, that any such Liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, prospectus or amendment or supplement thereto in
reliance upon and in conformity with written information furnished by such
holder specifically for use in the preparation thereof, and such Liability may
in no event exceed the value of the Registrable Securities so registered.
(iii) Promptly after receipt by any indemnified party of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against another party (the "indemnifying
party") hereunder, notify such party in writing thereof, but the omission so to
notify such party shall not relieve such party from any Liability which it may
have to the indemnified party other than under this Section and shall only
relieve it from any Liability which it may have to the indemnified party under
this Section if and to the extent an indemnifying party is materially prejudiced
by such omission. In case any such action shall be brought against any
indemnified party and such indemnified party shall notify an indemnifying party
of the commencement thereof, the indemnifying party shall be entitled to
participate in and, to the extent it shall wish, to assume and undertake the
defense thereof with counsel reasonably satisfactory to such indemnified party,
and, after notice from the indemnifying party to the indemnified party of its
election so to assume and undertake the defense thereof, the indemnifying party
shall not be liable to the indemnified party under this Section for any legal
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation and of liaison with
counsel so selected; provided, however, that if the defendants in any such
action include both parties and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to them which are
different from or additional to those available to the indemnifying party or if
the interests of the indemnified party reasonably may be deemed to conflict with
the interests of the indemnifying party, the indemnified party shall have the
right to select a separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the reasonable
expenses and fees of one such separate counsel and other reasonable expenses
related to such participation to be reimbursed by the indemnifying party as
incurred.
f. (i) With respect to the inclusion of Registrable Securities in a
registration statement, all fees, costs and expenses of and incidental to such
registration, inclusion and public offering shall be borne by the Company;
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<PAGE>
provided, however, that any security holders participating in such registration
shall bear their pro-rata share of the underwriting discounts and commissions,
if any, incurred by them in connection with such registration.
(ii) The fees, costs and expenses of registration to be borne
by the Company as provided in this Subsection (f) shall include, without
limitation, all registration, filing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, and all legal fees and
disbursements and other expenses of complying with state securities or Blue Sky
laws of any jurisdiction or jurisdictions in which securities to be offered are
to be registered and qualified. Subject to appropriate agreements as to
confidentiality, the Company shall make available to the holders of Registrable
Securities and their counsel its documents and personnel for due diligence
purposes, provided that the fees and disbursements of counsel and accountants
for the selling security holders shall be borne by the respective selling
security holders.
g. The rights to cause the Company to register all or any portion of
Registrable Securities pursuant to this Section 5 may be assigned by Purchaser
to a proper transferee or assignee as described herein. Within a reasonable time
after such transfer, the Purchaser shall notify the Company of the name and
address of such transferee or assignee, and the securities with respect to which
such registration rights are being assigned. Such assignment shall be effective
only if, (i) the Purchaser agrees in writing with the transferee or assignee to
assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such transfer or assignment (subject to the
purchase price of the shares being kept confidential by the Purchaser and such
transferee or assignee, (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (A) the name and
address of such transferee or assignee, (B) the Registrable Securities with
respect to which such registration rights are being assigned, (iii) following
such transfer or assignment, the further disposition of the Registrable
Securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time that the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the purchase agreement covering
the transaction and (vi) such transferee shall be an "accredited investor", as
that term is defined in Rule 501 of Regulation D, promulgated under the 1933
Act.
6. GOVERNING LAW: MISCELLANEOUS. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of New York. A
facsimile transmission of this signed Agreement shall be legal and binding on
all parties hereto. This Agreement may be signed in one or more counterparts,
each of which shall be deemed an original. The headings of this Agreement are
for convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
7. NOTICES. Any notice required or permitted hereunder shall be given
in writing (unless otherwise specified herein) and shall be deemed effectively
given, (i) on the date delivered, (a) by personal delivery, or (b) if advance
copy is given by fax, (ii) seven business days after deposit in the United
States Postal Service by regular or certified mail, or (iii) three business days
mailing by international express courier, with postage and fees prepaid,
addressed to each of the other parties thereunto entitled at the following
addresses, or at such other addresses as a party may designate by ten days
advance written notice to each of the other parties hereto.
COMPANY: GALVESTON'S STEAKHOUSE CORP.
10200 Willow Creek Road
San Diego, CA 92131
Attn: Hiram J. Woo
Telecopier No.: (619) 635-3976
7
<PAGE>
with a copy to:
Lehman & Eilen, Esqs.
50 Charles Lindbergh Blvd.
Uniondale, New York 11553
Attention: Hank Gracin, Esq.
Telecopier No.: (516) 222-0948
BUYER: At the address set forth on the signature
page of this Agreement.
8. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer
or one of its officers thereunto duly authorized as of the date set forth below.
For the purchase price of $6.75 per Share, the Buyer tenders herewith
the full purchase price of:
$2,025,000 for 300,000 Shares
<TABLE>
<CAPTION>
<S> <C> <C> <C>
388 Market St. 2nd floor RS Diversified Growth Fund 115,000 shares The Paisley Pacific Fund LP 120,000 shares
San Francisco, CA 94111 RS/NE Diversified Growth Fund 55,000 shares The Paisley Fund LP 10,000 shares
- ------------------------ --------------------------------
Address Printed Name of Subscribers
</TABLE>
By: /s/ John Seabern
--------------------------------
Fax No. (415) 591-2856 (Signature of Authorized Person)
John Seabern, Vice President
--------------------------------
Printed Name and Title
- -----------------------------
Jurisdiction of Incorporation
or Organization
This Agreement has been accepted as of the date set forth below.
GALVESTON'S STEAKHOUSE CORP.
By: /s/ Hiram Woo
-------------------------------
Hiram J. Woo, President
Dated: July 15, 1999
8
<PAGE>
EXHIBIT 10.26
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of acceptance
set forth below, is entered into by and between GALVESTON'S STEAKHOUSE CORP., a
Delaware corporation, with headquarters located at 10200 Willow Creek Road, San
Diego, CA 92131 (the "Company"), and the undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under Regulation D ("Regulation
D" as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 Act"), and/or
Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to
the conditions of this Agreement, such number of shares (the "Shares") of Common
Stock, $.01 par value per share (the "Common Stock") of the Company set forth on
the signature page of this Agreement, subject to acceptance of this Agreement by
the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase. The undersigned hereby agrees to purchase from the Company
the Shares set forth on the signature page of this Agreement. The purchase price
for the Shares shall be as set forth on the signature page hereto and shall be
payable in United States Dollars.
b. Form of Payment. The Buyer shall pay the purchase price for the
Shares by wiring immediately available good funds in United States Dollars to
the Company at East-West Bank, 4355 Geary Blvd., San Francisco, California
94121, ABA No. 3220-7038-1 for credit to Steakhouse Partners, Inc., Account
No. 84700038, against delivery of the Shares.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
a. Without limiting Buyer's right to sell the Common Stock pursuant to
the Registration Statement (as defined below), the Buyer is purchasing the
Shares for its own account for investment only and not with a view towards the
public sale or distribution thereof and not with a view to or for sale in
connection with any distribution thereof;
b. The Buyer is (i) an "accredited investor" as that term is defined in
Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3), and (ii) experienced in making investments of the kind described
in this Agreement and the related documents, (iii) able, by reason of the
business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the Shares;
c. All subsequent offers and sales of the Shares by the Buyer shall be
made pursuant to registration of the Shares under the 1933 Act or pursuant to an
exemption from registration;
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<PAGE>
d. The Buyer understands that the Shares are being offered and sold to
it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgements and understandings of
the Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the Shares;
e. The Buyer and its advisors, have been furnished with all materials
relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Shares which have been requested by the
Buyer. The Buyer and its advisors, if any, have been afforded the opportunity to
ask questions of the Company and have received complete and satisfactory answers
to any such inquiries. Without limiting the generality of the foregoing, the
Buyer has also had the opportunity to obtain and to review the Company's (1)
Quarterly Reports on Form 10-QSB for the fiscal quarter ended March 29, 1999 and
(2) Annual Report on Form 10-KSB for the fiscal year ended December 29, 1998
(the "Company's SEC Documents").
f. The Buyer understands that its investment in the Shares involves a
high degree of risk;
g. The Buyer understands that no United States federal or state agency
or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Shares;
h. This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
a. Concerning the Shares. There are no preemptive rights of any
stockholder of the Company, as such, to acquire the Common Stock.
b. Reporting Company Status. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado, and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary other than those jurisdictions in which the failure to
so qualify would not have a material and adverse effect on the business,
operations, properties, prospects or condition (financial or otherwise) of the
Company. The Company has registered its Common Stock pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Common Stock is listed and traded on the NASDAQ/Small Cap Market.
c. Authorized Shares. The Shares have been duly authorized and, when
issued to Buyer, will be duly and validly issued, fully paid and non-assessable
and will not subject the holder thereof to personal liability by reason of being
such holder.
d. Securities Purchase Agreement. This Agreement and the transactions
contemplated hereby, have been duly and validly authorized by the Company, this
Agreement has been duly executed and delivered by the Company and this
Agreement, when executed and delivered by the Company, will be, a valid and
binding agreement of the Company enforceable in accordance with its terms,
subject as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium, and other similar laws affecting the enforcement of
creditors' rights generally.
2
<PAGE>
e. Non-contravention. The execution and delivery of this Agreement by
the Company, the issuance of the Shares, and the consummation by the Company of
the other transactions contemplated by this Agreement do not and will not
conflict with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default under (i) the articles of incorporation
or by-laws of the Company, (ii) any indenture, mortgage, deed of trust, or other
material agreement or instrument to which the Company is a party or by which it
or any of its properties or assets are bound, (iii) to its knowledge, any
existing applicable law, rule, or regulation or any applicable decree, judgment,
or (iv) to its knowledge, order of any court, United States federal or state
regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, except such
conflict, breach or default which would not have a material adverse effect on
the transactions contemplated herein. The Company is not in violation of any
material laws, governmental orders, rules, regulations or ordinances to which
its property, real, personal, mixed, tangible or intangible, or its businesses
related to such properties, are subject.
f. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market is required to be obtained by the Company for the issuance
and sale of the Shares to the Buyer as contemplated by this Agreement, except
such authorizations, approvals and consents that have been obtained.
g. SEC Documents, Financial Statements. The Common Stock of the Company
is registered pursuant to Section 12(g) of the Exchange Act and the Company has
filed on a timely basis all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Exchange Act, including material filed pursuant to Section
13(a) or 15(d), in addition to one or more registration statements and
amendments thereto heretofore filed by the Company with the SEC under the Act
(all of the foregoing including filings incorporated by reference therein being
referred to herein as the "SEC Documents"). The Company, through its agent, has
delivered to the Buyer true and complete copies of the SEC Documents (except for
exhibits and incorporated documents). The Company has not provided to the Buyer
any information which, according to applicable law, rule or regulation, should
have been disclosed publicly by the Company but which has not been so disclosed,
other than with respect to the transactions contemplated by this Agreement.
As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Act or the Exchange Act as the
case may be and the rules and regulations of the SEC promulgated thereunder and
other federal, state and local laws, rules and regulations applicable to such
SEC Documents, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
h. Absence of Certain Changes. Since March 29, 1999, there has been no
material adverse change and no material adverse development in the business,
properties, operations, financial condition, or results of operations of the
Company.
i. Full Disclosure. There is no fact known to the Company (other than
general economic conditions known to the public generally) or as disclosed in
the documents referred to in Section 2(e), that has not been disclosed in
writing to the Buyer that (i) would reasonably be expected to have a material
adverse effect on the business or financial condition of the Company or (ii)
would reasonably be expected to materially and adversely affect the ability of
the Company to perform its obligations pursuant to this Agreement.
3
<PAGE>
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Buyer acknowledges that (1) the Shares
have not been registered under the provisions of the 1933 Act and may not be
transferred unless (A) subsequently registered thereunder, as provided for
herein, or (B) the Buyer shall have delivered to the Company an opinion of
counsel, reasonably satisfactory in form, scope and substance to the Company, to
the effect that the Shares to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration; and (2) any sale of the Shares
made in reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Shares under circumstances in which the seller,
or the person through whom the sale is made, may be deemed to be an underwriter,
as that term is used in the 1933 Act, may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder.
b. Restrictive Legend. The Buyer acknowledges and agrees that until
such time as the Shares have been registered under the 1933 Act as contemplated
hereby and sold in accordance with an effective registration statement
("Registration Statement"), the Shares shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such Shares):
THESE SHARES (THE "SHARES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION
IS NOT REQUIRED.
c. Filings. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Shares to the Buyer under any United
States laws and regulations, or by any domestic securities exchange or trading
market, and to provide a copy thereof to the Buyer promptly after such filing.
d. Reporting Status. So long as the Buyer beneficially owns any of the
Shares, the Company shall file all reports required to be filed with the SEC
pursuant to Section 13 or 15(d) of the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination.
5. COVENANT TO REGISTER.
a. For purposes of this Section, the following definitions shall
apply:
(i) The terms "register," "registered," and "registration"
refer to a registration under the 1933 Act, effected by preparing and filing a
registration statement or similar document in compliance with the 1933 Act, and
the declaration or ordering of effectiveness of such registration statement,
document or amendment thereto.
(ii) The term "Registrable Securities" means the Shares, and
any securities of the Company or securities of any successor corporation issued
as or issuable upon the conversion or exercise of any warrant, right or other
security that is issued as a dividend or other distribution with respect to, or
in exchange for, or in replacement of, the Shares.
(iii) The term "holder of Registrable Securities" means the
Purchaser and any permitted assignee of registration rights pursuant to Section
5(g).
b. (i) The Company shall use its best efforts to prepare and
file a registration statement on Form
4
<PAGE>
S-3 within thirty (30) days of the date hereof and cause such registration
statement to become effective as soon as possible, but no later than one hundred
and twenty (120) days from the date of this Agreement.
(ii) The Company may suspend the effectiveness of any
registration effected pursuant to this Subsection (b) in the event and for such
period of time as, such a suspension is required by the rules and regulations of
the Securities and Exchange Commission ("SEC"). The Company will use its best
efforts to cause such suspension to terminate at the earliest possible date.
(iii) If a registration statement covering all Registrable
Securities is not effective by one hundred and twenty (120) days after the date
of this Agreement or if such Registration Statement shall not have been filed
with the SEC within thirty (30) days of the date of this agreement,
(collectively the "Target Date"), the Company shall pay Purchaser as liquidated
damages an amount equal to two percent (2%) of the total Purchase Price of the
Shares for each thirty (30) day period following the Target Date until such time
as the registration statement is declared effective or, in the case of a late
filing, is filed. Such payment shall be made to the Purchaser by cashier's check
or wire transfer in immediately available funds to such account as shall be
designated in writing by the Purchaser.
c. Whenever required under this Section 5 to effect the registration of
any Registrable Securities, the Company shall, as expeditiously as reasonably
possible:
(i) Prepare and file with the SEC a registration statement or
amendment thereto with respect to such Registrable Securities and use its best
efforts to cause such registration to become effective as provided in Section
5(b)(i) hereof, and keep such registration statement effective for so long as
any holder of Registrable Securities desires to dispose of the securities
covered by such registration statement; provided, however, that in no event
shall the Company be required to keep the Registration statement effective for a
period greater than three (3) years from the Closing Date;
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement and notify the holders of the filing and
effectiveness of such Registration statement and any amendments or supplements;
(iii) Furnish to each holder of Registrable Securities such
numbers of copies of a current prospectus, including a preliminary prospectus,
conforming with the requirements of the 1933 Act, copies of the registration
statement any amendment or supplement to any thereof and any documents
incorporated by reference therein, and such other documents as such holder of
Registrable Securities may reasonably require in order to facilitate the
disposition of Registrable Securities owned by such holder of Registrable
Securities;
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
"Blue Sky" laws of such jurisdictions as shall be reasonably requested by the
holder of Registrable Securities;
(v) Notify each holder of Registrable Securities immediately
of the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue statement of
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and use its best efforts to promptly update and/or
correct such prospectus.
d. Upon request of the Company, each holder of Registrable Securities
will furnish to the Company in connection with any registration under this
Section such information regarding itself, the Registrable Securities and other
securities of the Company held by it, and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
the Registrable Securities held by such holder of Registrable Securities.
5
<PAGE>
e. (i) To the fullest extent permitted by law, the Company shall
indemnify, defend and hold harmless each holder of Registrable Securities which
are included in a registration statement and each of its officers, directors,
employees, agents, partners or controlling persons (within the meaning of the
1933 Act) (each, an "indemnified party") from and against, and shall reimburse
such indemnified party with respect to, any and all claims, suits, demands,
causes of action, losses, damages, liabilities, costs or expenses
("Liabilities") to which such indemnified party may become subject under the
1933 Act or otherwise, arising from or relating to (A) any untrue statement or
alleged untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or supplement
thereto, or (B) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading; provided,
however, that the Company shall not be liable in any such case to the extent
that any such Liability arises out of or is based upon an untrue statement or
omission so made in strict conformity with information furnished by such
indemnified party in writing specifically for use in the registration statement.
(ii) In the event of any registration under the 1933 Act of
Registrable Securities, each holder of such Registrable Securities hereby
severally agrees to indemnity, defend and hold harmless the Company, and its
officers, directors, employees, agents, partners, or controlling persons (within
the meaning of the 1933 Act) (each, an "indemnified party") from and against,
and shall reimburse such indemnified party with respect to, any and all
Liabilities to which such indemnified party may become subject under the 1933
Act or otherwise, arising from or relating to (A) any untrue statement or
alleged untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or supplement
thereto, or (B) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading; provided,
that such holders will be liable in any such case to the extent and only to the
extent, that any such Liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, prospectus or amendment or supplement thereto in
reliance upon and in conformity with written information furnished by such
holder specifically for use in the preparation thereof, and such Liability may
in no event exceed the value of the Registrable Securities so registered.
(iii) Promptly after receipt by any indemnified party of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against another party (the "indemnifying
party") hereunder, notify such party in writing thereof, but the omission so to
notify such party shall not relieve such party from any Liability which it may
have to the indemnified party other than under this Section and shall only
relieve it from any Liability which it may have to the indemnified party under
this Section if and to the extent an indemnifying party is materially prejudiced
by such omission. In case any such action shall be brought against any
indemnified party and such indemnified party shall notify an indemnifying party
of the commencement thereof, the indemnifying party shall be entitled to
participate in and, to the extent it shall wish, to assume and undertake the
defense thereof with counsel reasonably satisfactory to such indemnified party,
and, after notice from the indemnifying party to the indemnified party of its
election so to assume and undertake the defense thereof, the indemnifying party
shall not be liable to the indemnified party under this Section for any legal
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation and of liaison with
counsel so selected; provided, however, that if the defendants in any such
action include both parties and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to them which are
different from or additional to those available to the indemnifying party or if
the interests of the indemnified party reasonably may be deemed to conflict with
the interests of the indemnifying party, the indemnified party shall have the
right to select a separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the reasonable
expenses and fees of one such separate counsel and other reasonable expenses
related to such participation to be reimbursed by the indemnifying party as
incurred.
f. (i) With respect to the inclusion of Registrable Securities in a
registration statement, all fees, costs and expenses of and incidental to such
registration, inclusion and public offering shall be borne by the Company;
6
<PAGE>
provided, however, that any security holders participating in such registration
shall bear their pro-rata share of the underwriting discounts and commissions,
if any, incurred by them in connection with such registration.
(ii) The fees, costs and expenses of registration to be borne
by the Company as provided in this Subsection (f) shall include, without
limitation, all registration, filing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, and all legal fees and
disbursements and other expenses of complying with state securities or Blue Sky
laws of any jurisdiction or jurisdictions in which securities to be offered are
to be registered and qualified. Subject to appropriate agreements as to
confidentiality, the Company shall make available to the holders of Registrable
Securities and their counsel its documents and personnel for due diligence
purposes, provided that the fees and disbursements of counsel and accountants
for the selling security holders shall be borne by the respective selling
security holders.
g. The rights to cause the Company to register all or any portion of
Registrable Securities pursuant to this Section 5 may be assigned by Purchaser
to a proper transferee or assignee as described herein. Within a reasonable time
after such transfer, the Purchaser shall notify the Company of the name and
address of such transferee or assignee, and the securities with respect to which
such registration rights are being assigned. Such assignment shall be effective
only if, (i) the Purchaser agrees in writing with the transferee or assignee to
assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such transfer or assignment (subject to the
purchase price of the shares being kept confidential by the Purchaser and such
transferee or assignee, (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (A) the name and
address of such transferee or assignee, (B) the Registrable Securities with
respect to which such registration rights are being assigned, (iii) following
such transfer or assignment, the further disposition of the Registrable
Securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time that the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the purchase agreement covering
the transaction and (vi) such transferee shall be an "accredited investor", as
that term is defined in Rule 501 of Regulation D, promulgated under the 1933
Act.
6. GOVERNING LAW: MISCELLANEOUS. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of New York. A
facsimile transmission of this signed Agreement shall be legal and binding on
all parties hereto. This Agreement may be signed in one or more counterparts,
each of which shall be deemed an original. The headings of this Agreement are
for convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
7. NOTICES. Any notice required or permitted hereunder shall be given
in writing (unless otherwise specified herein) and shall be deemed effectively
given, (i) on the date delivered, (a) by personal delivery, or (b) if advance
copy is given by fax, (ii) seven business days after deposit in the United
States Postal Service by regular or certified mail, or (iii) three business days
mailing by international express courier, with postage and fees prepaid,
addressed to each of the other parties thereunto entitled at the following
addresses, or at such other addresses as a party may designate by ten days
advance written notice to each of the other parties hereto.
COMPANY: GALVESTON'S STEAKHOUSE CORP.
10200 Willow Creek Road
San Diego, CA 92131
Attn: Hiram J. Woo
Telecopier No.: (619) 635-3976
7
<PAGE>
with a copy to:
Lehman & Eilen, Esqs.
50 Charles Lindbergh Blvd.
Uniondale, New York 11553
Attention: Hank Gracin, Esq.
Telecopier No.: (516) 222-0948
BUYER: At the address set forth on the signature
page of this Agreement.
8. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer
or one of its officers thereunto duly authorized as of the date set forth below.
For the purchase price of $7.25 per Share, the Buyer tenders herewith
the full purchase price of:
$300,000 for 41,379 Shares
600 California Street
San Francisco, CA 94123 D. Jonathan Merriman
- ------------------------ --------------------------------
Address Printed Name of Subscriber
By: /s/ D. Jonathan Merriman
--------------------------------
Fax No. (Signature of Authorized Person)
--------------------------------
Printed Name and Title
- -----------------------------
Jurisdiction of Incorporation
or Organization
This Agreement has been accepted as of the date set forth below.
GALVESTON'S STEAKHOUSE CORP.
By: /s/ Hiram Woo
-------------------------------
Hiram J. Woo, President
Dated: July 15, 1999
8
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report, dated March 31, 1999, which appears in the
Annual Report on Form 10-KSB of Steakhouse Partners, Inc. (formerly Galveston's
Steakhouse Corp.) and subsidiaries for the years ended December 29, 1998 and
December 30, 1997. We also consent to the reference to our Firm under the
caption "Experts" in the aforementioned Registration Statement.
/s/ Singer Lewak Greenbaum & Goldstein LLP
-----------------------------------------
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
August 11, 1999
