<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 3, 1998
REGISTRATION NO. 333-59749
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE AMENDMENT NO. 3 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
P.F. CHANG'S CHINA BISTRO, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 5812 86-0815086
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
5090 NORTH 40TH STREET, SUITE 160
PHOENIX, AZ 85018
(602) 957-8986
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ROBERT T. VIVIAN
CHIEF FINANCIAL OFFICER
P.F. CHANG'S CHINA BISTRO, INC.
5090 NORTH 40TH STREET, SUITE 160
PHOENIX, AZ 85018
(602) 957-8986
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
CAMERON JAY RAINS, ESQ. CECIL SCHENKER, P.C.
SCOTT M. STANTON, ESQ. J. PATRICK RYAN, ESQ.
CHRISTIAN WAAGE, ESQ. AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
GRAY CARY WARE & FREIDENRICH LLP 300 CONVENT STREET, SUITE 1500
4365 EXECUTIVE DRIVE, SUITE 1600 SAN ANTONIO, TX 78205
SAN DIEGO, CA 92121 (210) 281-7000
(619) 677-1400
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
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, check the following box. [ ]
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 effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
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> 2
The undersigned registrant hereby amends Part II and exhibits to its
Registration Statement on Form S-1, Registration number 333-59749 as set forth
in the pages attached hereto.
<PAGE> 3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Common Stock being registered. The Company is paying all of the expenses
incurred on behalf of the Selling Stockholders (other than underwriting
discounts and commissions). All amounts shown are estimates except for the
registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee............................................ $ 16,963
NASD filing fee............................................. 6,250
Nasdaq National Market fee.................................. 41,250
Blue sky qualification fees and expenses.................... 5,000
Printing and engraving expenses............................. 200,000
Legal fees and expenses..................................... 300,000
Accounting fees and expenses................................ 150,000
Transfer agent and registrar fees........................... 10,000
Fee for Custodian for Selling Stockholders.................. 10,000
Miscellaneous............................................... 60,537
--------
Total............................................. $800,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the DGCL permits indemnification of officers, directors, and
other corporate agents under certain circumstances and subject to certain
limitations. The Registrant's Amended and Restated Certificate of Incorporation
and By-laws provide that the Registrant shall indemnify its directors, officers,
employees and agents to the full extent permitted by the DGCL, including
circumstances in which indemnification is otherwise discretionary under Delaware
law. In addition, the Registrant has entered into separate indemnification
agreements with its directors and executive officers which require the
Registrant, among other things, to indemnify them against certain liabilities
which may arise by reason of their status or service (other than liabilities
arising from acts or omissions not in good faith or willful misconduct).
These indemnification provisions and the indemnification agreements entered
into between the Registrant and its executive officers and directors may be
sufficiently broad to permit indemnification of the Registrant's executive
officers and directors for liabilities (including reimbursement of expenses
incurred) arising under the Securities Act of 1933, as amended (the "Securities
Act").
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant and
its officers and directors for certain liabilities arising under the Securities
Act, or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since July 31, 1995, the Registrant and its Predecessors have sold and
issued the following unregistered securities:
(a) Issuances of Shares of Common Stock.
On January 31, 1996, the Registrant issued a total of 500 shares of Common
Stock to Paul Fleming in exchange for an aggregate purchase price of $100.00, or
$0.20 per share. On February 28, 1996, the Registrant issued a total of
2,499,500 shares of Common Stock to Paul and Kelly Fleming in exchange for their
interests in the Predecessors.
(b) Issuances of Shares of Preferred Stock.
On February 1, 1996, the Registrant sold shares of Series A Convertible
Redeemable Preferred Stock ("Series A Preferred Stock") convertible into
2,487,500 shares of Common Stock and Warrants exercisable for shares of Series A
Preferred Stock convertible into 621,875 shares of Common Stock to accredited
II-1
<PAGE> 4
investors for an aggregate purchase price of $9,950,000. In September 1996, the
Company issued additional shares of Series A Preferred Stock convertible into
189,635 shares of Common Stock to accredited investors for an aggregate purchase
price of $758,540. On March 31, 1998, June 30, 1998 and September 30, 1998, the
Company issued shares of Series A Preferred Stock as paid-in-kind dividends to
holders of Series A Preferred Stock convertible into an aggregate of 122,284
shares of Common Stock.
On May 1, 1997, the Registrant sold shares of Series B Convertible
Redeemable Preferred Stock convertible into 758,565 shares of Common Stock to
accredited investors for an aggregate offering price of $6,599,519.
(c) Option Issuances to, and Exercises by, Employees and Directors.
From June 28, 1996 to September 27, 1998, the Registrant issued options to
purchase a total of 1,130,885 shares of Common Stock at a weighted-average
exercise price of $4.61 per share to 54 employees. No consideration was paid to
the Registrant by any recipient of any of the foregoing options for the grant of
any such options. As of September 27, 1998, no employees had exercised their
options.
(d) Warrants
In connection with the original capitalization of the Company, warrants to
purchase shares of Series A Preferred Stock convertible into 62,190 shares of
Common Stock at $4.00 per common share were issued to an investment bank. The
warrants expire February 28, 2001.
There were no underwriters employed in connection with any of the
transactions set forth in Item 15.
The issuances described in Items 15(a) and 15(b) were deemed to be exempt
from registration under the Securities Act in reliance on Section 4(2) of the
Securities Act as transactions by an issuer not involving a public offering. In
addition, the issuances described in Item 15(c) were deemed exempt from
registration under the Securities Act in reliance on Rule 701 promulgated
thereunder as transactions pursuant to compensatory benefit plans and contracts
relating to compensation. The recipients of securities in each such transaction
represented their intention to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the share certificates and other instruments
issued in such transactions. All recipients either received adequate information
about the Registrant or had access, through employment or other relationships,
to such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Company, as amended.
3.2* By-laws.
4.1 Specimen Common Stock Certificate.
4.2* Amended and Restated Registration Rights Agreement dated May
1, 1997.
5.1* Opinion of Gray Cary Ware & Freidenrich LLP.
10.1* Form of Indemnification Agreement for directors and
executive officers.
10.2* 1998 Stock Option Plan and forms of agreement thereunder.
10.3* 1997 Restaurant Manager Stock Option Plan and forms of
Agreement thereunder.
10.4* 1996 Stock Option Plan and forms of Agreement thereunder.
10.5* 1998 Employee Stock Purchase Plan.
10.6* Employment Agreement between Paul M. Fleming and the Company
dated January 1, 1996, as amended September 2, 1998.
10.7* Series A Preferred Stock Purchase Agreement dated February
1, 1996.
10.8* Series B Preferred Stock Purchase Agreement dated May 1,
1997.
10.9 Amended and Restated Revolving Line of Credit Loan Agreement
between the Company and FFCA dated November 10, 1998.
10.10* Office Lease between the Company and U.S. West Business
Resources, Inc. dated February 15, 1997.
21.1* List of Subsidiaries.
</TABLE>
II-2
<PAGE> 5
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
<C> <S>
23.1 Consent of Independent Auditors (see page II-5).
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1* Power of Attorney (see page II-4).
27.1* Financial Data Schedule.
</TABLE>
- ------------------------------
* Filed with the Registrant's Registration Statement on Form S-1 (File No.
333-59749).
(b) Financial Statement Schedules.
None.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement 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 Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, employee or agent of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer, employee or agent in connection with the securities being
registered hereunder, 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 whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective; and
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Scottsdale,
County of Maricopa, State of Arizona, on the 3rd day of December 1998.
P.F. Chang's China Bistro, Inc.
By: RICHARD L. FEDERICO*
------------------------------------
Richard L. Federico
Chief Executive Officer and
President
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<C> <S> <C>
RICHARD L. FEDERICO* Chief Executive Officer, December 3, 1998
- --------------------------------------------------- President and Director
Richard L. Federico (Principal Executive
Officer)
/s/ ROBERT T. VIVIAN Chief Financial Officer and December 3, 1998
- --------------------------------------------------- Secretary (Principal
Robert T. Vivian Financial and Accounting
Officer)
PAUL M. FLEMING* Director December 3, 1998
- ---------------------------------------------------
Paul M. Fleming
J. MICHAEL CHU* Director December 3, 1998
- ---------------------------------------------------
J. Michael Chu
GERALD R. GALLAGHER* Director December 3, 1998
- ---------------------------------------------------
Gerald R. Gallagher
R. MICHAEL WELBORN* Director December 3, 1998
- ---------------------------------------------------
R. Michael Welborn
JAMES G. SHENNAN, JR.* Director December 3, 1998
- ---------------------------------------------------
James G. Shennan, Jr.
YVES SISTERON* Director December 3, 1998
- ---------------------------------------------------
Yves Sisteron
*By: /s/ ROBERT T. VIVIAN December 3, 1998
---------------------------------------------
Robert T. Vivian,
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 7
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the captions "Selected
Consolidated Financial and Operating Data" and "Experts" and to the use of our
report dated January 26, 1998, except Note 11 as to which the date is August 27,
1998, in Amendment No. 3 to the Registration Statement (Form S-1 No. 333-59749)
and related Prospectus of P.F. Chang's China Bistro, Inc. for the registration
of 3,967,500 shares of its common stock.
/s/ ERNST & YOUNG LLP
Phoenix, Arizona
December 2, 1998
II-5
<PAGE> 8
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Company, as amended.
3.2* By-laws.
4.1 Specimen Common Stock Certificate.
4.2* Amended and Restated Registration Rights Agreement dated May
1, 1997.
5.1* Opinion of Gray Cary Ware & Freidenrich LLP.
10.1* Form of Indemnification Agreement for directors and
executive officers.
10.2* 1998 Stock Option Plan and forms of agreement thereunder.
10.3* 1997 Restaurant Manager Stock Option Plan and forms of
Agreement thereunder.
10.4* 1996 Stock Option Plan and forms of Agreement thereunder.
10.5* 1998 Employee Stock Purchase Plan.
10.6* Employment Agreement between Paul M. Fleming and the Company
dated January 1, 1996, as amended September 2, 1998.
10.7* Series A Preferred Stock Purchase Agreement dated February
1, 1996.
10.8* Series B Preferred Stock Purchase Agreement dated May 1,
1997.
10.9* Amended and Restated Revolving Line of Credit Loan Agreement
between the Company and FFCA dated November 10, 1998.
10.10* Office Lease between the Company and U.S. West Business
Resources, Inc. dated February 15, 1997.
21.1* List of Subsidiaries.
23.1 Consent of Independent Auditors (see page II-5).
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1* Power of Attorney (see page II-4).
27.1* Financial Data Schedule.
</TABLE>
- ------------------------------
* Filed with the Registrant's Registration Statement on Form S-1 (File No.
333-59749).
** To be filed by amendment.
(b) Financial Statement Schedules.
None.
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
P.F. CHANG'S CHINA BISTRO, INC.
FIRST: The name of the corporation (hereinafter referred to as the
"Corporation") is:
P.F. CHANG'S CHINA BISTRO, INC.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1013 Centre Road, Wilmington, New Castle County, Delaware
19805-1297. The name of its registered agent at such address is The
Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The aggregate number of all classes of shares which the
Corporation shall have authority to issue is Ten Million (10,000,000) shares
divided into two classes of which Two Million (2,000,000) shares of par value
$.01 per share shall be designated Preferred Stock and Eight Million (8,000,000)
shares of par value $.01 per share shall be designated Common Stock.
At all times, each holder of common stock of the Corporation shall be
entitled to one vote for each share of common stock held by such stockholder
standing in the name of such stockholder on the books of the Corporation.
The Board of Directors is authorized, subject to limitations
prescribed by law, to provide for the issuance of shares of Preferred Stock in
one or more series, to establish the
1
<PAGE> 2
number of shares to be included in each such series, and to fix the
designations, powers, preferences, and rights of the shares of each such
series, and any qualifications, limitations or restrictions thereof.
FIFTH: The name and address of the Incorporator is as follows:
Paul M. Fleming
2201 E. Camelback Road
Phoenix, Arizona 85016
SIXTH: In furtherance and not in limitation of the power conferred
by statute, the Board of Directors is expressly authorized to make, alter or
repeal the Bylaws of the Corporation.
SEVENTH: No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for the breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involved intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit.
If the Delaware General Corporation Law is amended to authorize
corporate actions further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended. Any repeal or modification of this Article
SEVENTH by the shareholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification. The Corporation may adopt such provisions with
respect to indemnification of
2
<PAGE> 3
directors, officers, or employees of the Corporation, consistent with this
Article SEVENTH, as may be set forth from time to time in the Bylaws of the
Corporation or a resolution adopted by the Board of Directors.
EIGHTH: Election of directors need not be by written ballot unless the
Bylaws of the Corporation shall so provide.
NINTH: The Corporation reserves the right to amend, alter, change or
repeal any provisions contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by the law of the State of Delaware. All
rights conferred upon stockholders herein are granted subject to this
reservation.
I, THE UNDERSIGNED, being the sole incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the General Corporation Law
of the State of Delaware, do make this certificate, herein declaring and
certifying that this is my act and deed and the facts herein stated are true,
and accordingly have hereunto set my hand this 30th day of January, 1996.
/s/ Paul M. Fleming
-------------------------
Paul M. Fleming,
Sole Incorporator
3
<PAGE> 4
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
P.F. CHANG'S CHINA BISTRO, INC.
P.F. Chang's China Bistro, Inc., a corporation organized and existing under
and by virtue of the General Corporation's Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the corporation, by unanimous written
consent, adopted a resolutions proposing and declaring advisable the
following amendments to the Certificate of Incorporation of the
corporation:
RESOLVED, that Article IV of the Certificate of Incorporation of
P.F. Chang's China Bistro, Inc., a Delaware corporation (the
"Corporation"), is amended in its entirety to read as follows:
FOURTH: The aggregate number of all classes of shares which
the Corporation shall have authority to issue is Thirty Million
(30,000,000) shares divided into two classes of which Ten Million
(10,000,000) shares of par value $.001 per share shall be
designated Preferred Stock and Twenty Million (20,000,000) shares
of par value $.001 per share shall be designated Common Stock.
At all times, each holder of Common Stock of the Corporation
shall be entitled to one vote for each share of Common Stock held
by such stockholder standing in the name of such stockholder on
the books of the Corporation.
The Board of Directors is authorized, subject to limitations
prescribed by law, to provide for the issuance of shares of
Preferred Stock in one or more series, to establish the number of
shares to be included in each such series, and to fix the
designations, powers, preferences, and rights of the
<PAGE> 5
shares of each such series, and any qualifications, limitations,
or restrictions thereof.
FURTHER RESOLVED that the resolutions of the Board of Directors as
set forth in the Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of Preferred Stock and
Qualifications, Limitations and Restrictions Thereof of Series A
Convertible Preferred Stock of P.F. Chang's China Bistro, Inc. are
amended to increase the number of shares designated as "Series A
Convertible Preferred Stock" to 7,500,000 shares and to change the par
value of such shares to $.001 per share.
FURTHER RESOLVED that in order to effect a 10:1 stock split of the
outstanding capital stock of the Corporation, effective upon the date
of filing (the "Effective Date") of a Certificate of Amendment with the
Secretary of State of the State of Delaware, each issued and
outstanding share of the Corporation's capital stock, including without
limitation all issued and outstanding shares of Common Stock and Series
A Convertible Preferred Stock and options and warrants exercisable for
such shares, shall be divided into 10 shares of validly issued, fully
paid and non-assessable stock of the same class or series. As soon as
practicable after the Effective Date, the Corporation shall request in
writing the holders of its capital stock outstanding as of the
Effective Date to surrender certificates representing the Corporation's
capital stock to the Corporation and each such shareholder shall
receive upon such surrender a stock certificate or certificates to
evidence and represent the number of shares of post-split capital stock
to which such shareholder is entitled.
SECOND: That in lieu of a meeting and vote of stockholders, the stockholders
have given written consent to the amendments in accordance with the
provisions of Section 228 of the General Corporation Law of the State
of Delaware and written notice of the adoption of the amendments has
been given as provided in Section 228 of the General Corporation Law of
the State of Delaware to every stockholder entitled to such notice.
<PAGE> 6
THIRD: That the amendments were duly adopted in accordance with the applicable
provisions of Sections 242 and 228 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, P.F. Chang's China Bistro, Inc. has caused this
certificate to be signed by Richard L. Federico, its President, this 24th day
of April, 1997.
P.F. Chang's China Bistro, Inc.
By /s/ R. L. Federico
-------------------------------
Richard L. Federico, President
<PAGE> 7
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS OF PREFERRED
STOCK AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
SERIES A
CONVERTIBLE PREFERRED STOCK
OF
P.F. CHANG'S CHINA BISTRO, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
P.F. CHANG'S CHINA BISTRO, INC., a Delaware corporation (the
"Corporation"), certifies that pursuant to the authority contained in Article
FOURTH of its Certificate of Incorporation (the "Certificate of Incorporation")
and in accordance with the provisions of Section 151 of the General Corporation
Law of the State of Delaware (the "DGCL"), the Board of Directors of the
Corporation by written consent dated as of April 30, 1997, duly adopted the
following resolution, which resolution (i) amended and restated prior
resolutions of the Board of Directors of the Corporation adopted by written
consent as of February 22, 1996 pursuant to which the Corporation had originally
established the Series A Preferred Stock (as defined below), (ii) was approved
by written consent of the holders of the Series A Preferred Stock, and (iii)
remains in full force and effect on the date hereof:
RESOLVED, that, pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation in accordance with the
provisions of its Certificate of Incorporation, a series of Preferred Stock of
the Corporation be and hereby is established, consisting of 7,700,000 shares,
$.001 par value per share, to be designated the "Series A Convertible Preferred
Stock" (hereinafter, "Series A Preferred Stock"); that the Board of Directors be
and hereby is authorized to issue such shares of Series A Preferred Stock from
time to time and for such consideration and on such terms as the Board of
Directors shall determine; and that, subject to the limitations provided by law
and by the Certificate of Incorporation, the voting powers, preferences and
relative, participating, optional and other special rights, and qualifications,
limitations and restrictions thereof shall be as follows:
<PAGE> 8
1. Certain Definitions.
Unless the context otherwise requires, the terms defined in this
paragraph 1 shall have, for all purposes of this resolution, the meanings herein
specified (with terms defined in the singular having comparable meanings when
used in the plural).
"Affiliate" shall have the meaning given to such term under Rule
12b-2 of the rules promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934.
"Annual Per Share Cash Dividend Amount" shall mean a cash payment
equal to ten percent (10%) per annum of the Liquidation Price of one share of
the Series A Preferred Stock.
"Annual Per Share PIK Dividend Amount" shall mean a fraction of
one share of Series A Preferred Stock equal to six percent (6%) per annum of one
share of the Series A Preferred Stock.
"Business Day" shall mean a day other than a Saturday, a Sunday or
any other day on which banking institutions in New York, New York are authorized
or obligated by law to close.
"Common Equity" shall mean all shares now or hereafter authorized
of any class of common stock of the Corporation, however, designated, including
the Comon Stock, and any other stock of the Corporation, howsoever designated,
authorized after the Initial Issue Date, which has the right (subject always to
prior rights of any class or series of preferred stock) to participate in the
distribution of the assets and earnings of the Corporation without limit as to
per share amount.
"Common Stock" shall mean the common stock, par value $.001 per
share, of the Corporation.
"Corporation's Affiliates" shall mean (i) PFCCB Scottsdale,
L.L.C., an Arizona limited liability company; (ii) PFCCB Newport Beach, L.L.C.,
an Arizona limited liability company; (iii) P.F. Chang's III, L.L.C., an Arizona
limited liability company; (iv) P.F. Chang's IV, L.L.C., an Arizona limited
liability company; (v) PFC Building III Limited Partnership, an Arizona limited
partnership; (vi) PFCCB LouTex Joint Venture, an Arizona general partnership;
and (vii) PFCCB NUC LLC, an Arizona limited liability company.
"Conversion Date" shall have the meaning set forth in subparagraph
4.1(b) below.
2
<PAGE> 9
"Debt" shall mean any indebtedness, contingent or otherwise, of
any person in respect of borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such person or only to a portion
thereof) or evidenced by bonds, notes, debentures or similar instruments or
letters of credit or representing the balance deferred and unpaid of the
purchase price of any property or interest therein, except any such balance that
constitutes a trade payable, if and to the extent such indebtedness would appear
as a liability upon a balance sheet of such person prepared on a consolidated
basis in accordance with generally accepted accounting principles.
"Debt to Equity Ratio" shall mean the ratio of (i) the total
Indebtedness to (ii) Total Stockholders' Equity.
"Delinquent Mandatory Redemption Price" shall mean, with respect
to each share of Series A Preferred Stock, $2.00 (adjusted for stock splits,
subdivisions, combinations and similar transactions), plus all accrued and
unpaid dividends payable in respect of such a share of the Series A Preferred
Stock, plus an amount thereon accruing from the Mandatory Redemption Date
relating thereto at the Increasing Rate.
"Final Mandatory Redemption Date" shall mean May 1, 2004 or, if
such day is not a Business Day, the next succeeding Business Day.
"Increasing Rate" shall mean, with respect to any obligation, an
annual rate equal to the Prime Rate, plus (i) two percent, plus (ii) one percent
after the first completed six-month period that the obligation subject to the
Increasing Rate has been outstanding and has not been paid in full.
"Indebtedness" shall mean the Debt of the Corporation or a
subsidiary of the Corporation plus, to the extent not otherwise included, (i)
the guaranty of any Debt of any other person; and (ii) obligations in respect of
borrowed money secured by any Lien to which any property or asset owned or held
by the Corporation or a subsidiary is subject, whether or not the obligations
secured thereby shall have been assumed by the Corporation or such subsidiary;
and (iii) capitalized lease obligations.
"Initial Issue Date" shall mean the date that shares of Series A
Preferred Stock are first issued by the Corporation.
"Initial Mandatory Redemption Date" shall mean May 1, 2003 or, if
such day is not a Business Day, the next succeeding Business Day.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or other security interest of
any kind or nature whatsoever (excluding preferred stock or equity related
preferences) including, without limitation, those created by, arising under or
evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capital
3
<PAGE> 10
lease obligation, or any financing lease having substantially the same economic
effect as any of the foregoing.
"Liquidation Price" shall mean $2.00 per share of Series A
Preferred Stock (adjusted for stock splits, subdivisions, combinations and
similar transactions), plus all accrued and unpaid dividends payable in respect
of such share of Series A Preferred Stock pursuant to subparagraph 2(c).
"Mandatory Redemption Date" shall mean the Initial Mandatory
Redemption Date and the Final Mandatory Redemption Date.
"Mandatory Redemption Obligation" shall have the meaning set forth
in subparagraph 5(c) below.
"Non-Investor Directors" shall mean those directors elected to the
Corporation's Board of Directors other than those directors that are elected
solely by the holders of Series A Preferred Stock or Parity Stock pursuant to
the Shareholders Agreement.
"Parity Stock" shall mean any class or series of capital stock of
the Corporation ranking on a parity with the Series A Preferred Stock as to (i)
priority of payment of cash and stock dividends and other distributions, (ii)
priority of payment upon liquidation, dissolution or winding up of the
Corporation, and (iii) the time of, and priority of payment upon, any mandatory
redemption. For purposes of this definition, differences between any class or
series of capital stock and the Series A Preferred Stock as to the amount of the
liquidation price (or other fixed amount) to which any cash dividend rate is
applied, the amount of the liquidation price payable upon liquidation,
dissolution or winding up of the Corporation, the amount of the redemption price
payable upon any mandatory redemption, or the time when cash or stock dividends
or other distributions shall begin to accrue, shall not be considered in
determining whether such class or series of capital stock is on a parity with
the Series A Preferred Stock.
"PIK Dividends" shall mean the "paid-in-kind" dividends as set
forth in subparagraph 2(a) below.
"PIK Dividend Payment Date" shall mean March 31, June 30,
September 30, and December 31, of each year during the PIK Dividend Payment
Period.
"PIK Dividend Payment Period" shall mean the period from, and
including, January 1, 1998, to and including the Final Mandatory Redemption
Date.
"PIK Dividend Period" shall mean the period from, and including,
January 1, 1998, to, but not including, the first PIK Dividend Payment Date and
thereafter, each quarterly period, including any PIK Dividend Payment Date to,
but not including, the next PIK Dividend Payment Date.
4
<PAGE> 11
"PIK Record Date" shall mean the date that is ten Business Days
prior to any PIK Dividend Payment Date.
"Preferred Cash Dividends" shall mean the cash dividends as set
forth in subparagraph 2(f) below.
"Prime Rate" shall mean the rate announced as the "prime rate" by
NationsBank, N.A. whether or not such rate is actually charged.
"Pro Rata" shall mean, in the case of stock dividends, stock
dividends of the same class or series as the stock upon which the dividends are
being paid and that are proportionate to the number of outstanding shares of
such stock, and, in the case of cash dividends or dividends in property, cash
dividends or dividends in property that are proportionate to the liquidation
price of the class or series of stock upon which the dividends are being paid.
"Qualified Initial Public Offering" shall mean an underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933 of shares of the Common Stock, (i) the aggregate gross
proceeds of which equal or exceed $15,000,000 and (ii) the per share offering
price of which equals or exceeds $10.00; provided, however, that the per share
offering price referred to in clause (ii) shall be adjusted to reflect the
effect of any stock split or any subdivision, reclassification, combination or
like event of or with respect to outstanding shares of Common Stock occurring
after May 1, 1997.
"Quoted Price" shall mean with respect to any security the
arithmetic mean of the last bid and ask price for one (1) share of the
applicable security as reported by the National Association of Securities
Dealers, Inc., Automatic Quotations System, National Market System ("NASDAQ"),
or, if the applicable security is listed or admitted for trading on a securities
exchange, the arithmetic mean of the high and low trading prices during the
relevant trading day for one (1) share of the applicable security on the
principal exchange on which the applicable security is listed or admitted for
trading (which shall be for consolidated trading if applicable to such
exchange), in each case, on the Trading Day in question.
"Redemption Price" shall mean, with respect to each share of
Series A Preferred Stock, $2.00 (adjusted for stock splits, subdivisions,
combinations and similar transactions) plus all accrued and unpaid dividends
payable in respect of such share of the Series A Preferred Stock.
"Series A Directors" shall mean those members of the Board of
Directors of the Corporation elected solely by the holders of the Series A
Preferred Stock pursuant to the Shareholders Agreement.
5
<PAGE> 12
"Shareholders Agreement" shall mean the Amended and Restated
Shareholders Agreement among the Corporation and the holders of the Common
Stock, Series A Preferred Stock and Parity Stock dated as of May 1, 1997, as the
same may be amended from time to time.
"Stock Purchase Agreement" shall mean the Stock Purchase Agreement
among the Corporation, Paul Fleming and the Purchasers listed therein dated as
of February 1, 1996, as the same may be amended from time to time.
"Subordinate Stock" shall mean the Common Equity and any class or
series of capital stock of the Corporation, however designated, which is not
entitled to receive (i) any dividends unless all dividends required to have been
paid or declared and set apart for payment on the Series A Preferred Stock shall
have been so paid or declared and set apart for payment or (ii) any assets upon
liquidation, dissolution or winding up of the affairs of the Corporation until
the Series A Preferred Stock shall have received the entire amount to which such
stock is entitled upon such liquidation, dissolution or winding up.
"Total Stockholders' Equity" shall mean the stockholders' equity
of the Corporation as it appears in the monthly balance sheet of the
Corporation.
"Trading Days" shall mean any day on which any market in which the
applicable security is then traded and in which a Quoted Price may be
ascertained is open for business.
2. Dividends.
(a) The record holders of Series A Preferred Stock on each PIK
Record Date shall receive on each PIK Dividend Payment Date during the PIK
Dividend Payment Period per share dividends in additional fully paid and
nonassessable shares of Series A Preferred Stock legally available for such
purpose (such dividends being herein called "PIK Dividends"). PIK Dividends
shall be paid by delivering to the record holders of Series A Preferred Stock a
number of shares of Series A Preferred Stock equal to (i) the number of shares
of Series A Preferred Stock held by such holder on the applicable PIK Record
Date, multiplied by (ii) twenty-five percent (25%) of the Annual Per Share PIK
Dividend Amount. Except as set forth in subparagraph 2(b) below, the Corporation
shall not issue fractional shares of Series A Preferred Stock to which holders
may become entitled pursuant to this subparagraph, but in lieu thereof, the
Corporation shall at the option of the holder either (i) deliver its check in an
amount equal to the applicable fraction of one (1) share of Series A Preferred
Stock multiplied by $2.00 (adjusted for stock splits, subdivisions, combinations
or other similar transactions) (the "PIK Cash Dividend Payment") or (ii) defer
delivery of the fractional PIK Cash Dividend Payment to the holder and apply
such amount to PIK Dividends issued to such holder on the subsequent PIK
Dividend Date. Any additional shares of Series A Preferred Stock issued pursuant
to this paragraph shall be governed by this
6
<PAGE> 13
resolution and shall be subject in all respects, except as to the date of
issuance and date from which PIK Dividends accrue and cumulate as set forth
below, to the same terms as the shares of Series A Preferred Stock originally
issued hereunder; provided, however, in no event shall any PIK Dividends accrue
prior to January 1, 1998.
(b) Prior to each PIK Record Date immediately preceding each PIK
Dividend Payment Date, the Board of Directors of the Corporation shall declare
PIK Dividends on the Series A Preferred Stock in accordance with subparagraph
2(a) above, payable on the next PIK Dividend Payment Date. PIK Dividends (which
shall include, for purposes of this subparagraph, any PIK Cash Dividend Payment
due pursuant to subparagraph 2(a)) on shares of Series A Preferred Stock shall
accrue and be cumulative from the later of (i) January 1, 1998 and (ii) the date
of issuance of such shares, notwithstanding the failure of the Board of
Directors to declare and/or issue PIK Dividends with respect to any PIK Dividend
Period. PIK Dividends shall be payable in arrears during the PIK Dividend
Payment Period on each PIK Dividend Payment Date, commencing on the first PIK
Dividend Payment Date subsequent to January 1, 1998, and for shares issued as
PIK Dividends, commencing on the first PIK Dividend Payment Date after such
shares are issued. If any PIK Dividend Payment Date occurs on a day that is not
a Business Day, any accrued PIK Dividends otherwise payable on such PIK Dividend
Payment Date shall be paid on the next succeeding Business Day. PIK Dividends
shall be paid on each PIK Dividend Payment Date to the holders of record of the
Series A Preferred Stock as their names shall appear on the share register of
the Corporation on the PIK Record Date immediately preceding such PIK Dividend
Payment Date. If a PIK Cash Dividend Payment on account of PIK Dividends that
would otherwise be issued as fractional shares may not legally be paid in the
full amount to which shares of Series A Preferred Stock are entitled with
respect to any PIK Dividend Period, dividends in the full preferential amount
hereby provided shall be, to the extent legally and contractually permissible,
declared and paid as PIK Dividends in the form of shares of Series A Preferred
Stock (including fractional shares thereof). PIK Dividends on account of arrears
for any past PIK Dividend Periods may be declared and paid at any time to the
holders of record on the PIK Record Dates applicable to such past PIK Dividend
Periods.
(c) In addition to the PIK Dividends and the PIK Cash Dividend
Payments referred to in subparagraph 2(a) hereof and the Preferred Cash
Dividends referred to in subparagraph 2(f), at any time during which any shares
of Series A Preferred Stock remain outstanding, the Corporation may declare, pay
or set apart for payment cash and/or property to be distributed or paid as a
dividend in respect of shares of Series A Preferred Stock. The foregoing
notwithstanding, no dividends may be declared or paid on the Series A Preferred
Stock pursuant to this subparagraph 2(c) unless Pro Rata dividends are
contemporaneously declared or paid on any then outstanding Parity Stock.
(d) So long as any shares of Series A Preferred Stock shall be
outstanding:
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<PAGE> 14
(i) the Corporation shall not declare, pay or set apart
for payment on any Subordinate Stock any dividends or distributions
whatsoever, whether in cash, property or otherwise (other than dividends
payable in shares of the class or series upon which such dividends are
declared or paid, or payable in shares of Common Stock with respect to
Subordinate Stock other than Common Stock, together with cash in lieu of
fractional shares), nor shall any Subordinate Stock be purchased, redeemed
or otherwise acquired by the Corporation or any of its subsidiaries of
which it owns not less than a majority of the outstanding voting power, nor
shall any monies be paid or made available for a sinking fund for the
purchase or redemption of any Subordinate Stock, without the prior written
consent of the holders of at least a majority of the outstanding shares of
Series A Preferred Stock and unless all dividends to which the holders of
Series A Preferred Stock shall have been entitled for all previous PIK
Dividend Periods shall have been (A) paid or (B) declared and a sum of
money, in the case of dividends payable in cash, sufficient for the payment
thereof has been set apart;
(ii) the Corporation shall not declare, pay or set apart
for payment on any Parity Stock any dividends or distributions whatsoever,
whether in cash, property or otherwise, unless Pro Rata dividends are
contemporaneously declared, paid or set apart for payment on the Series A
Preferred Stock; and
(iii) neither the Corporation nor any of its subsidiaries
of which it owns not less than a majority of the outstanding voting power
shall purchase, redeem or otherwise acquire any Parity Stock, nor pay any
monies to or make any monies available for a sinking fund for the purchase
or redemption of any Parity Stock, without the prior written consent of the
holders of at least a majority of the outstanding shares of Series A
Preferred Stock and unless all dividends to which the holders of Series A
Preferred Stock shall have been entitled for all previous PIK Dividend
Periods shall have been (A) paid or (B) declared and a sum of money, in the
case of dividends payable in cash, sufficient for the payment thereof has
been set apart, except that the Corporation may redeem Parity Stock so long
as it contemporaneously redeems a proportionate percentage of the
outstanding Series A Preferred Stock, ratably among the holders thereof.
(e) In the event that full dividends, in cash or property, if
declared, are not paid or made available to the holders of all outstanding
shares of Series A Preferred Stock and Parity Stock and funds or property
available for payment of dividends shall be insufficient to permit payment in
full to holders of all such stock of the full preferential amounts to which they
are then entitled, then the entire amount available for payment of dividends
shall be distributed ratably among all such holders of Series A Preferred Stock
and Parity Stock in proportion to the full amount to which they would otherwise
be respectively entitled.
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<PAGE> 15
(f) Notwithstanding anything to the contrary set forth herein,
with respect to any PIK Dividend otherwise payable on any PIK Dividend Payment
Date pursuant to this paragraph 2, the Corporation may, upon the unanimous
approval of the Non-Investor Directors by vote on or prior to the applicable PIK
Record Date, declare on such PIK Record Date and pay on such PIK Dividend
Payment Date a cash dividend (a "Preferred Cash Dividend") to all record holders
of Series A Preferred Stock on such PIK Record Date in an amount per share equal
to twenty-five percent (25%) of the Annual Per Share Cash Dividend Amount.
Payment of such Preferred Cash Dividend on such PIK Dividend Payment Date shall
be in lieu of the payment of the PIK Dividend on such PIK Dividend Payment Date.
The foregoing notwithstanding, no Preferred Cash Dividend may be declared and
paid on the Series A Preferred Stock unless Pro Rata cash dividends are
contemporaneously declared and then paid on any then outstanding Parity Stock.
(g) Notwithstanding anything contained herein to the contrary, no
dividends on shares of Series A Preferred Stock shall be declared by the Board
of Directors of the Corporation or paid or set apart for payment by the
Corporation at such time if such declaration or payment shall be restricted or
prohibited by law.
3. Distributions Upon Liquidation, Dissolution or Winding Up.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or other winding up of the affairs of the Corporation, before any
payment or distribution shall be made to the holders of Subordinate Stock and
contemporaneously with any payment or distribution to the holders of Parity
Stock, the holders of Series A Preferred Stock shall be entitled to be paid out
of the assets of the Corporation in cash, or, if the Corporation does not have
sufficient cash on hand to pay such amounts, property of the Corporation at its
fair market value as determined by the Board of Directors of the Corporation,
the greater of (i) the Liquidation Price per share of Series A Preferred Stock,
or (ii) such amount per share of Series A Preferred Stock as would have been
payable had each such share been converted into Common Stock pursuant to
paragraph 4 immediately prior to such liquidation, dissolution or other winding
up of the affairs of the Corporation. Immediately preceding such liquidation,
dissolution or winding up, adjustment shall be made for accrued but unpaid
dividends (including, without limitation, PIK Dividends).
(b) If, upon any such liquidation, dissolution or other winding up
of the affairs of the Corporation, the assets of the Corporation shall be
insufficient to permit the payment in full of the Liquidation Price for each
share of the Series A Preferred Stock and the applicable liquidation price for
each share of any Parity Stock then outstanding, then the assets of the
Corporation shall be ratably distributed among the holders of Series A Preferred
Stock and Parity Stock in proportion to the full amounts to which they would
otherwise be respectively entitled if all amounts thereon were paid in full.
Neither the consolidation or merger of the Corporation into or with another
corporation or corporations, nor the sale, lease, transfer or conveyance of all
or any
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<PAGE> 16
portion of the assets of the Corporation to another corporation or any other
entity shall be deemed a liquidation, dissolution or winding up of the affairs
of the Corporation within the meaning of this paragraph 3.
4. Conversion Rights.
4.1 Conversion at the Option of the Holder.
(a) At any time before the close of business on the Final
Mandatory Redemption Date (unless the Corporation shall default in payment of
the Redemption Price or the Delinquent Mandatory Redemption Price, in which
case, the conversion rights set forth in this paragraph shall continue until the
cure of any such default), each holder of Series A Preferred Stock may, at its
option, convert each share of Series A Preferred Stock held by such holder into
one (1) share of Common Stock subject to adjustment pursuant to paragraph 4.3.
Upon such conversion, the rights of the holders of converted Series A Preferred
Stock with respect to the shares of Series A Preferred Stock so converted shall
cease.
(b) To convert Series A Preferred Stock in accordance with this
paragraph 4.1, a holder must (i) surrender the certificate or certificates
evidencing the shares of Series A Preferred Stock to be converted (or a duly
executed affidavit of lost certificate in accordance with the bylaws of the
Corporation), duly endorsed in a form satisfactory to the Corporation, at the
office of the Corporation or transfer agent for the Series A Preferred Stock,
(ii) notify the Corporation at such office in writing that it elects to convert
Series A Preferred Stock, and the number of shares it wishes to convert, (iii)
state in writing the name or names in which it wishes the certificate or
certificates for shares of Common Stock to be issued, and (iv) pay any transfer
or similar tax with respect to the transfer of the shares of Series A Preferred
Stock converted, if required. The date on which the holder satisfies the
foregoing requirements shall be the "Conversion Date." As soon as practical but
in any event within five (5) Business Days of the Conversion Date, the
Corporation shall deliver a certificate for the number of shares of Common Stock
issuable upon the conversion, a check for the amount payable in respect of any
fractional share pursuant to subparagraph 4.1(c) and a new certificate
representing the unconverted portion, if any, of the shares of Series A
Preferred Stock represented by the certificate or certificates surrendered for
conversion. The person in whose name the Common Stock certificate is registered
shall be treated as the stockholder of record on and after the Conversion Date.
Adjustment (or cash payment, if applicable) shall be made for accrued and unpaid
dividends (including, without limitation, PIK Dividends), as of the Conversion
Date, on converted shares of Series A Preferred Stock. PIK Dividends will be
paid on any PIK Dividend Payment Date with respect to Series A Preferred Stock
surrendered for conversion at any time on or after a PIK Record Date for the
payment of a PIK Dividend to the registered holder of Series A Preferred Stock
on such PIK Record Date. If the last day on which Series A Preferred Stock may
be converted is not a Business
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<PAGE> 17
Day, Series A Preferred Stock may be surrendered for conversion on the next
succeeding day that is a Business Day.
(c) The Corporation will not issue a fractional share of Common
Stock upon conversion of Series A Preferred Stock. Instead the Corporation will
deliver its check in an amount equal to the applicable fraction multiplied by
the fair market value of the Common Stock.
(d) If a holder converts shares of Series A Preferred Stock, the
Corporation shall pay any documentary, stamp or similar issue or transfer tax
due on the issue of shares of Common Stock upon the conversion; provided,
however, that pursuant to subparagraph 4.1(b) the holder shall pay any such tax
which is due because the shares are issued in a name other than the holder's
name.
4.2 Mandatory Conversion. Subject to the adjustments set forth
in paragraph 4.3, each share of the Series A Preferred Stock shall be
automatically converted into one (1) share of Common Stock on the date a
Qualified Initial Public Offering is consummated ("Mandatory Conversion Date").
Upon such occurrence resulting in a Mandatory Conversion Date, the Corporation
shall (i) notify all holders of the Series A Preferred Stock not later than five
(5) Business Days subsequent to approval by the Board of Directors of the
Corporation to undertake a Qualified Initial Public Offering, (ii) demand that
all shares representing the Series A Preferred Stock be returned to the
Corporation's offices or to the designated transfer agent, and (iii) pay any
transfer or similar tax with respect to the conversion, if any. As soon as
practical but in any event within thirty (30) days of the Mandatory Conversion
Date, the Corporation shall deliver a certificate to and in the name of the
holder of the Series A Preferred Stock for the number of shares of Common Stock
issuable upon the conversion and a check in an amount calculated in accordance
with subparagraph 4.1(c) for any fractional shares, if any, for the shares of
Series A Preferred Stock represented by the certificate. The name of the person
in which the Series A Preferred Stock was issued shall be treated as the
stockholder of record of the Common Stock in which the Series A Preferred Stock
was converted on and after the Mandatory Conversion Date. Adjustment (or cash
payment, if applicable) shall be made for accrued and unpaid dividends
(including, without limitation, PIK Dividends), as of the Mandatory Conversion
Date, on shares of Series A Preferred Stock converted pursuant to this paragraph
4.2. PIK Dividends will be paid on any PIK Dividend Payment Date with respect to
Series A Preferred Stock converted pursuant to this paragraph 4.2 on or after a
PIK Record Date to the registered holder of Series A Preferred Stock on such PIK
Record Date, and the shares of Series A Preferred Stock received in payment of
such PIK Dividend shall be deemed automatically converted to one (1) share of
Common Stock, subject to adjustment in accordance with paragraph 4.3, effective
as of the Mandatory Conversion Date. Upon such conversion, the rights of the
holders of converted Series A Preferred Stock with respect to the shares of
Series A Preferred Stock so converted shall cease.
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<PAGE> 18
4.3 Certain Matters With Respect to Conversion.
(a) The Corporation has reserved and shall continue to reserve out
of its authorized but unissued Common Stock enough shares of Common Stock to
permit the conversion of the Series A Preferred Stock in full. All shares of
Common Stock which are issued upon conversion of Series A Preferred Stock shall
be duly authorized, validly issued, fully paid and nonassessable. The
Corporation shall comply with all securities laws regulating the offer and
delivery of shares of common stock upon conversion of Series A Preferred Stock
and will list such shares on each national securities exchange on which the
common stock is listed.
(b) If the Corporation:
(i) pays a dividend or makes a distribution on its Common
Stock or any other class of the Corporation's stock other than the Series A
Preferred Stock in shares of its Common Stock;
(ii) subdivides its outstanding shares of Common
Stock into a greater number of shares;
(iii) combines its outstanding shares of Common Stock
into a smaller number of shares;
(iv) issues by reclassification of its Common
Stock any shares of its capital stock;
then an appropriate and proportionate adjustment shall be made to the number of
shares into which each share of Series A Preferred Stock is convertible so that
immediately after the occurrence of such event the holders of Series A Preferred
Stock shall be entitled to receive the same percentage of the issued and
outstanding Common Stock upon conversion of the Series A Preferred Stock as such
holders would have received if converted immediately prior to such dividend,
distribution, subdivision, combination or reclassification. The adjustment shall
become effective immediately after the record date in the case of a dividend or
distribution and immediately after the effective date of a subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
(c) If the Corporation distributes any rights, options or warrants
to all holders of its Common Stock entitling them for a period expiring within
sixty (60) days after the record date referenced in subparagraph (l) below to
purchase additional shares of Common Stock at a price per share less than $2.00
per share (as adjusted to reflect any stock split or any subdivision,
reclassification, combination of or with respect to outstanding shares of Common
Stock or any similar transaction) on that record date, the number of shares of
Common Stock into which each share of Series A Preferred Stock is convertible
shall be adjusted, in accordance with the following formula:
12
<PAGE> 19
N x (O+A)
--------
N' = O + AxP
---
M
where:
N' = the number of shares of Common Stock into which
each share of Series A Preferred Stock is
convertible after such distribution.
O = the number of shares of Common Stock outstanding
on the record date.
N = the number of shares of Common Stock into which
each share of Series A Preferred Stock was
convertible prior to such distribution.
P = the offering price per share of the additional
shares of Common Stock.
M = the current market price per share of Common
Stock on the record date.
A = the number of additional shares of Common Stock
offered.
The adjustment shall be made successively whenever any such
rights, options or warrants are issued and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
the rights, options or warrants. If at the end of the period during which such
warrants, options or rights are exercisable, not all warrants, options or rights
shall have been exercised, the number of shares of Common Stock into which each
share of Series A Preferred Stock is convertible shall be immediately readjusted
to what it would have been if "A" in the above formula had been the number of
shares actually issued.
(d) If the Corporation issues shares of Common Stock for a
consideration per share less than $2.00 per share (as adjusted to reflect the
effect of any stock split or any subdivision, reclassification, combination of
or with respect to outstanding shares of Common Stock or any similar
transaction) on the date the Corporation fixes the offering price of such
additional shares, the number of shares of Common Stock into which each share of
Series A Preferred Stock is convertible shall be adjusted in accordance with the
following formula:
N x A
-----
N' = O + P
-
M
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<PAGE> 20
where:
N' = the number of shares of Common Stock into which
each share of Series A Preferred Stock is
convertible after such issuance.
N = the number of shares of Common Stock into which
each share of Series A Preferred Stock was
convertible prior to such issuance.
O = the number of shares of Common Stock
outstanding immediately prior to the issuance of
such additional shares.
P = the aggregate consideration received for
the issuance of such additional shares.
M = the current market price per share of Common
Stock on the date of issuance of such additional
shares.
A = the number of shares outstanding immediately
after the issuance of such additional shares.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
This subparagraph 4.3(d) does not apply to (i) any transaction or issuance
described in subparagraphs 4.3(b) or 4.3(c) above or subparagraph 4.3(e) below,
including issuances of Common Stock pursuant to warrants, options, rights or
other convertible securities described in subparagraphs 4.3(c) and 4.3(e), (ii)
the conversion of Series A Preferred Stock, or the conversion, exchange or
exercise of other securities convertible into or exchangeable or exercisable for
Common Stock, (iii) Common Stock issued to the Corporation's employees under
bona fide employee benefit plans adopted by the Board of Directors of the
Corporation and approved by the holders of Common Stock when required by law, if
such Common Stock would otherwise be covered by this subparagraph 4.3(d) (but
only to the extent that the aggregate number of shares excluded hereby (together
with the aggregate number of shares issuable upon conversion, exchange or
exercise of the securities excluded by clause (iii) of subparagraph 4.3(e)
below) and issued shall not exceed 15% of the Common Stock of the Corporation on
a fully diluted basis at the time of any such issuance excluding options to
purchase Common Stock held by directors of the Corporation), or (iv) Common
Stock issued in a bona fide public offering pursuant to a firm commitment
underwriting.
(e) If the Corporation issues any options, warrants or other
securities convertible into or exchangeable or exercisable for Common Stock
(other than Series A Preferred Stock or securities issued in transactions
described in subparagraph 4.3(c) above) for a consideration per share of Common
Stock initially deliverable upon
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<PAGE> 21
conversion, exchange or exercise of such securities of less than $2.00 per share
of Common Stock (as adjusted to reflect the effect of any stock split or any
subdivision, reclassification, combination of or with respect to outstanding
shares of Common Stock or any similar transaction) on the date of issuance of
such securities, the number of shares of Common Stock into which each share of
Series A Preferred Stock is convertible shall be adjusted in accordance with the
following formula:
N x (O+D)
---------
N' = O + P
-
M
where:
N' = the number of shares of Common Stock into which
each share of Series A Preferred Stock is
convertible immediately after such issuance.
N = the number of shares of Common Stock into which
each share of Series A Preferred Stock was
convertible immediately prior to such issuance.
O = the number of shares of Common Stock
outstanding immediately prior to the issuance of
such securities.
P = the aggregate consideration received for
the issuance of such securities.
M = the current market price per share of Common
Stock on the date of issuance of such securities.
D = the maximum number of shares deliverable upon
conversion or in exchange for or upon exercise of
such securities at the initial conversion,
exchange or exercise rate.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance. If
all of the Common Stock deliverable upon conversion, exchange or exercise of
such securities has not been issued when such securities are no longer
outstanding, then the number of shares of Common Stock into which each share of
Series A Preferred Stock is convertible shall promptly be readjusted to the
basis of the actual number of shares of Common Stock issued upon conversion,
exchange or exercise of such securities. This subparagraph 4.3(e) does not apply
to (i) the issuance of any such securities in a bona fide public offering
pursuant to a firm commitment underwriting, (ii) the issuance of any such
securities to the Corporation's employees under bona fide employee benefit plans
adopted by the Board of Directors of the Corporation and approved by the holders
of Common Stock when required by law, if such securities would otherwise be
covered
15
<PAGE> 22
by this subparagraph 4.3(e) (but only to the extent that the aggregate number of
shares issuable upon the conversion, exchange or exercise of the aggregate
number of securities excluded hereby (together with the aggregate number of
shares excluded by clause (iii) of subparagraph 4.3(d) above) and issued shall
not exceed 15% of the Common Stock of the Corporation on a fully diluted basis
at the time of any such issuance excluding options to purchase Common Stock held
by directors of the Corporation), or (iii) shares issued as PIK Dividends or as
"paid-in-kind" dividends on any Parity Stock provided such dividends are
required by the terms of such Parity Stock.
(f) If the Corporation (i) distributes any rights, options or
warrants to all holders of its Common Stock entitling them for a period expiring
within sixty (60) days after the record date referenced in subparagraph (l)
herein to purchase additional shares of Common Stock; (ii) issues shares of
Common Stock; or (iii) issues any options, warrants or other securities
convertible into or exchangeable or exercisable for Common Stock (other than
Series A Preferred Stock or securities issued in transactions described in (i)
above) at a price reflecting an implied price per share less than $2.00 per
share, the number of shares of Common Stock into which each share of Series A
Preferred Stock is convertible shall be reduced proportionally to reflect the
price at which the Corporation issued or sold such shares of Common Stock
pursuant to this subparagraph 4.3(f).
(g) For the purpose hereof, the current market price per share of
any security on any date is the average of the Quoted Prices for thirty (30)
consecutive Trading Days commencing forty-five (45) Trading Days before the date
in question. If the Quoted Price is not ascertainable, the current market price
per share of any security on any date shall be the current market price as
determined by the Board of Directors of the Corporation in its reasonable
judgment exercised in good faith. Notwithstanding the foregoing, the current
market price per share of any security shall be deemed to be the greater of (i)
the current market price as determined above and (ii) the Liquidation Price.
(h) For purposes of any computation respecting consideration
received pursuant to subparagraphs 4.3(d) and 4.3(e) above, the following shall
apply:
(i) in case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided that in
no case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Corporation for any underwriting of the issue or
otherwise in connection therewith;
(ii) in the case of the issuance of shares of Common Stock
for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined by the Board of
16
<PAGE> 23
Directors of the Corporation in its reasonable judgment exercised in good
faith (irrespective of the accounting treatment thereof); and
(iii) in the case of the issuance of options, warrants or
other securities convertible into or exchangeable or exercisable for shares
of Common Stock, the aggregate consideration received therefor shall be
deemed to be the consideration received by the Corporation for the issuance
of such options, warrants or other securities plus the additional minimum
consideration, if any, to be received by the Corporation upon the
conversion or exchange or exercise thereof (the consideration in each case
to be determined in the same manner as provided in clauses (i) and (ii) of
this subparagraph 4.3(h)).
(i) No adjustment in the number of shares of Common Stock into
which each share of Series A Preferred Stock is convertible need be made unless
the adjustment would require an increase or decrease of at least one-half of one
percent (.5%) in the number of shares of Common Stock into which each share of
Series A Preferred Stock is convertible. Any adjustments that are not made shall
be carried forward and taken into account in any subsequent adjustment. All
calculations under this paragraph 4.3 shall be made to the nearest cent or to
the nearest 1/100th of a share, as the case may be.
(j) No adjustment in the number of shares of Common Stock into
which each share of Series A Preferred Stock is convertible need be made under
this paragraph 4.3 for (i) rights to purchase Common Stock pursuant to a
Corporation plan for reinvestment of dividends or interest, or (ii) any change
in the par value or change from no par value to par value of the Common Stock.
If an adjustment is made to the number of shares of Common Stock into which each
share of Series A Preferred Stock is convertible upon a record date established
for a distribution subject to this paragraph 4.3 and if such distribution is
subsequently cancelled, the number of shares of Common Stock into which each
share of Series A Preferred Stock is convertible then in effect shall be
readjusted, effective as of the date when the Board of Directors of the
Corporation determines to cancel such distribution, to the number of shares of
Common Stock into which each share of Series A Preferred Stock is convertible as
would have been in effect if such record date had not been fixed. No adjustment
need be made under paragraph 4.3 if the Corporation issues or distributes to
each holder of Series A Preferred Stock the shares of Common Stock, evidences of
indebtedness, assets, rights, options or warrants referred to in such paragraph
which each holder would have been entitled to receive had Series A Preferred
Stock been converted into Common Stock prior to or simultaneously with the
happening of such event or the record date with respect thereto.
(k) Whenever the number of shares of Common Stock into which each
share of Series A Preferred Stock is convertible is adjusted, the Corporation
shall promptly mail to holders of Series A Preferred Stock, first class, postage
prepaid, a notice of the adjustment. The Corporation shall file with the
transfer agent, if any, for
17
<PAGE> 24
Series A Preferred Stock a certificate from the Corporation's independent public
accountants briefly stating the facts requiring the adjustment and the manner of
computing it. Subject to subparagraph 4.3(o) below, the certificate shall be
conclusive evidence that the adjustment is correct.
(l) If:
(i) the Corporation takes any action that would
require an adjustment pursuant to paragraph 4.3;
(ii) the Corporation consolidates or merges with,
or transfers all or substantially all of its assets to, another
corporation, and stockholders of the Corporation must approve the
transaction; or
(iii) there is a dissolution or liquidation of the
Corporation;
a holder of Series A Preferred Stock may want to convert such stock into shares
of Common Stock prior to the record date for or the effective date of the
transaction so that it may receive the rights, warrants, securities or assets
which a holder of shares of Common Stock on that date may receive. Therefore,
the Corporation shall mail to such holders, first class, postage prepaid, a
notice stating the proposed record or effective date, as the case may be. The
Corporation shall mail the notice at least thirty (30) days before such date.
(m) If the Corporation is party to a consolidation or merger which
reclassifies or changes its Common Stock or to the sale of all or substantially
all of the assets of the Corporation, upon consummation of such transaction the
Series A Preferred Stock shall automatically become convertible at the option of
their respective holders into the kind and amount of securities, cash or other
assets which the holder of Series A Preferred Stock would have owned immediately
after the sale, consolidation or merger, if such holder had converted Series A
Preferred Stock immediately before the effective date of the transaction, and an
appropriate adjustment (as determined by the Board of Directors of the
Corporation) shall be made in the application of the provisions herein set forth
with respect to the rights and interests thereafter of the holders of Series A
Preferred Stock, to the end that the provisions set forth herein (including
provisions with respect to liquidation preferences and changes in and other
adjustment of the number of shares of Common Stock into which each share of
Series A Preferred Stock is convertible) shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares of stock or other
securities or property thereafter deliverable upon the conversion of Series A
Preferred Stock. The Corporation shall not effect any such consolidation, merger
or sale, unless prior to the consummation thereof, the successor corporation (if
other than the Corporation) resulting from such consolidation or merger or the
corporation purchasing such assets assumes by written instrument (in a form
reasonably satisfactory to the holders of a majority of the Series A Preferred
Stock then outstanding), the obligation to deliver to each such holder such
18
<PAGE> 25
shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire. If this subparagraph 4.3(m)
applies, subparagraphs 4.3(b), 4.3(c), 4.3(d) and 4.3(e) do not apply.
(n) In any case in which this paragraph 4.3 shall require that an
adjustment as a result of any event become effective from and after a record
date, the Corporation may elect to defer until after the occurrence of such
event (i) the issuance to the holder of any shares of Series A Preferred Stock
converted after such record date and before the occurrence of such event of the
additional shares of Common Stock issuable upon such conversion over and above
the shares issuable immediately prior to adjustment and (ii) the delivery of a
check for any remaining fractional shares as provided in subparagraph 4.1(c)
above.
(o) Whenever the Corporation or its Board of Directors shall be
required to make a determination under this paragraph 4.3, such determination
shall be made in good faith and may be challenged in good faith by the holders
of a majority of the Series A Preferred Stock, and any dispute shall be resolved
promptly (and in no event later than ninety (90) days after any challenge), at
the Corporation's expense, by an investment banking firm of recognized national
standing selected by the Corporation and acceptable to such holders of Series A
Preferred Stock. Any such determination shall be deemed approved if the
requisite holders have not notified the Corporation of any challenge within
thirty (30) days after receiving notice (including a statement in reasonable
detail of the bases therefor) of such determination.
(p) If any event occurs of the type contemplated by the provisions
of this paragraph 4.3 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the
Corporation's Board of Directors shall make an appropriate adjustment to the
number of shares of Common Stock into which each share of Series A Preferred
Stock is convertible so as to protect the rights of the holders of Series A
Preferred Stock; provided that no such adjustment shall increase the number of
shares of Common Stock into which a share of Series A Preferred Stock is
convertible if otherwise adjusted pursuant to another provision of this
paragraph 4.3 or decrease the number of shares of Common Stock issuable upon
conversion of each share of Series A Preferred Stock.
19
<PAGE> 26
5. Mandatory Redemption by the Corporation.
(a) To the extent the Corporation shall have funds legally
available for such payment under the DGCL, the Corporation shall redeem on the
Initial Mandatory Redemption Date at least fifty percent (50%) of the then
outstanding shares of Series A Preferred Stock at the Redemption Price, ratably
among the holders thereof. In addition, to the extent the Corporation shall have
funds legally available for such payment under the DGCL, the Corporation shall
redeem on the Final Mandatory Redemption Date all of the then outstanding shares
of Series A Preferred Stock at the Redemption Price, plus an amount accruing
thereon at the Increasing Rate from the Initial Mandatory Redemption Date.
(b) Shares of Series A Preferred Stock which have been issued and
converted or reacquired in any manner, including as a result of redemption,
shall (upon compliance with any applicable provisions of the DGCL) have the
status of authorized and unissued shares of the class of preferred stock of the
Corporation undesignated as to series, and may be redesignated and reissued as
part of any series of preferred stock of the Corporation; provided, however,
that no such issued and reacquired shares of Series A Preferred Stock shall be
reissued as Series A Preferred Stock.
(c) If on any Mandatory Redemption Date the Corporation is unable
or shall fail to discharge its obligation to redeem all outstanding shares of
Series A Preferred Stock required to be redeemed on such date pursuant to
subparagraph 5(a) and all outstanding shares of Parity Stock required to be
redeemed on such date (the "Mandatory Redemption Obligation"), the Corporation
shall redeem on such Mandatory Redemption Date the number of shares of Series A
Preferred Stock and Parity Stock which it is able to redeem, ratably among the
holders of Series A Preferred Stock and Parity Stock in proportion to the full
amounts to which they would otherwise be respectively entitled if all shares of
Series A Preferred Stock and Parity Stock required to be redeemed on such date
were redeemed. In such a case, the remainder of the Redemption Price payable but
not paid at the Mandatory Redemption Date shall be converted into the Delinquent
Mandatory Redemption Price and shall be discharged as soon as the Corporation is
able to discharge such Delinquent Mandatory Redemption Price out of funds
legally available therefor. If and so long as any Mandatory Redemption
Obligation (or any obligation in respect of the Delinquent Mandatory Redemption
Price) with respect to the Series A Preferred Stock and any Parity Stock shall
not be fully discharged and paid, the Corporation shall not declare or pay any
dividend or make any distribution on, or, directly or indirectly, purchase,
redeem or satisfy any mandatory redemption, sinking fund or other similar
obligation in respect of Subordinate Stock (other than repurchases of shares of
Subordinate Stock in accordance with the terms of restricted stock vesting
agreements with employees of the Corporation approved by the Board of Directors
of the Corporation).
(d) Notwithstanding the foregoing provisions of this paragraph 5,
unless the full cumulative dividends on all outstanding shares of Series A
Preferred Stock and
20
<PAGE> 27
Parity Stock have been paid or contemporaneously are declared and paid for all
dividend periods to and including the Mandatory Redemption Date, none of the
shares of Series A Preferred Stock or Parity Stock shall be redeemed or set
aside for redemption, unless such shares of Series A Preferred Stock and Parity
Stock are redeemed pro rata based upon the full amounts to which the holders
thereof would otherwise be respectively entitled.
(e) Notice of any redemption shall be sent by or on behalf of the
Corporation not more than sixty (60) days nor less than thirty (30) days prior
to any Mandatory Redemption Date, by first class mail, postage prepaid, to all
holders of record of the Series A Preferred Stock at their respective last
addresses as they shall appear on the books of the Corporation; provided,
however, that no failure to give notice or any defect therein or in the mailing
thereof shall affect the validity of the proceedings for the redemption of any
shares of Series A Preferred Stock except as to the holder to whom the
Corporation has failed to give notice or except as to the holder to whom notice
was defective. In addition to any information required by law or by the
applicable rules of any exchange upon which Series A Preferred Stock may be
listed or admitted to trading, such notice shall state: (i) the Mandatory
Redemption Date; (ii) the Redemption Price; (iii) the number of shares of Series
A Preferred Stock to be redeemed; (iv) the place or places where certificates
for such shares are to be surrendered for payment of the Redemption Price; (v)
that dividends on the shares to be redeemed will cease to accrue on the
Mandatory Redemption Date; (vi) the number of shares of Common Stock into which
each share of Series A Preferred Stock is convertible as of the notice date and,
if any transactions are contemplated to occur between the notice date and the
Mandatory Redemption Date which would cause such number of shares of Common
Stock to be adjusted, the number of shares of Common Stock into which each share
of Series A Preferred Stock would be convertible after giving effect to such
transaction(s); (vii) that Series A Preferred Stock called for redemption may be
converted at any time before the close of business on the Mandatory Redemption
Date; and (viii) that holders of Series A Preferred Stock must satisfy the
requirements of subparagraph 4.1(b) above if such holders desire to convert such
shares. Upon the mailing of any such notices of redemption, the Corporation
shall become obligated to redeem at the time of redemption specified therein all
shares called for redemption other than shares converted into Common Stock prior
to the Mandatory Redemption Date.
(f) If notice has been mailed in accordance with subparagraph 5(e)
above and provided that on or before the Mandatory Redemption Date specified in
such notice, all funds necessary for such redemption shall have been set aside
by the Corporation, separate and apart from its other funds in trust for the pro
rata benefit of the holders of the shares so called for redemption, so as to be,
and to continue to be available therefor, then, from and after the Mandatory
Redemption Date, dividends on the shares of the Series A Preferred Stock so
called for redemption shall cease to accrue, and said shares shall no longer be
deemed to be outstanding and shall not have the status of shares of Series A
Preferred Stock, and all rights of the holders thereof as
21
<PAGE> 28
shareholders of the Corporation (except the right to receive from the
Corporation the Redemption Price) shall cease, irrespective of whether any
certificates for shares called for redemption have been surrendered to the
Corporation. Upon surrender, in accordance with said notice, of the certificates
for any shares so redeemed (properly endorsed or assigned for transfer), such
shares shall be redeemed by the Corporation at the Redemption Price and no
holder of shares called for redemption shall be entitled to receive payment of
the Redemption Price therefor until such surrender to the Corporation has been
accomplished or a duly executed affidavit of lost certificate shall have been
delivered to the Corporation. In case fewer than all the shares represented by
any such certificate are redeemed, a new certificate or certificates shall be
issued representing the unredeemed shares without cost to the holder thereof (so
long as such certificate is issued to the holder).
(g) Any funds deposited with a bank or trust company for the
purpose of redeeming Series A Preferred Stock shall be irrevocable except that:
(i) the Corporation shall be entitled to receive from such
bank or trust company the interest or other earnings, if any, earned on any
money so deposited in trust, and the holders of any shares redeemed shall
have no claim to such interest or other earnings; and
(ii) any balance of monies so deposited by the Corporation
and unclaimed by the holders of the Series A Preferred Stock entitled
thereto at the expiration of two (2) years from the applicable Mandatory
Redemption Date shall be repaid, together with any interest or other
earnings earned thereon, to the Corporation, and after any such repayment,
the holders of the shares entitled to the funds so repaid to the
Corporation shall look only to the Corporation for payment without interest
or other earnings.
(h) Notwithstanding anything to the contrary herein, no shares of
Series A Preferred Stock may be redeemed except with funds legally available for
the payment of the Redemption Price.
6. Voting Rights.
(a) Except as otherwise set forth in this paragraph 6 and the
Shareholders Agreement or as otherwise required by law, each share of Series A
Preferred Stock issued and outstanding shall have the right to vote on all
matters presented to the holders of the Common Stock for vote in the number of
votes equal at any time to the number of shares of Common Stock into which each
share of Series A Preferred Stock would then be convertible, and the holders of
the Series A Preferred Stock and Parity Stock shall vote with the holders of the
Common Stock as a single class.
22
<PAGE> 29
(b) In addition to any vote or consent of shareholders required by
law or the Certificate of Incorporation of the Corporation, the affirmative
consent of the holders of a majority of the issued and outstanding shares of
Series A Preferred Stock at the time outstanding, voting as a single class,
given in person or by proxy, either in writing without a meeting or by vote at
any meeting called for the purpose, shall be necessary for effecting or
validating:
(i) (x) Any amendment, alteration or repeal of any of the
provisions of the Certificate of Incorporation (including without
limitation this Certificate of Designation) of the Corporation or (y) any
amendment of the by-laws of the Corporation that materially affects the
rights of the holders of the Series A Preferred Stock;
(ii) Any action by the Corporation or any of its
subsidiaries not approved in advance by all Series A Directors to effect
any amendment, alteration or repeal of any of the provisions of the
articles of organization, operating agreements, certificates of limited
partnership, or partnership agreements of any of the Corporation's
Affiliates or subsidiaries (except such amendments, alterations or repeals
that are ministerial in nature or required to effect a transfer of
ownership interests in the Corporation's Affiliates or subsidiaries (other
than any ownership interest beneficially owned by the Corporation));
(iii) Any authorization, issuance or creation of, or
increase in the authorized amount of, (x) any shares of any class or any
security of any class ranking senior to the shares of Series A Preferred
Stock in the distribution of assets on any liquidation, dissolution or
winding up of the Corporation or in the payment of dividends or requiring
redemption at any time any shares of Series A Preferred Stock are still
outstanding, or (y) any shares of Parity Stock (except shares issued as
"paid-in-kind" dividends on Parity Stock provided Pro Rata dividends have
also been declared and paid on the Series A Preferred Stock);
(iv) Any action by the Corporation or any of its
subsidiaries not approved in advance by all Series A Directors to effect
the authorization, issuance or creation of, or increase in the authorized
amount of, any membership interests, limited partnership interests or other
equity security interests of any of the Corporation's Affiliates or
subsidiaries;
(v) Any increase or decrease (other than by redemption or
conversion) in the total number of authorized shares of Series A Preferred
Stock or any issuance of the currently authorized shares of the Series A
Preferred Stock other than the issuance of shares of Series A Preferred
Stock pursuant to the Stock Purchase Agreement or as PIK Dividends;
(vi) Any transaction or series of related transactions
that entails the sale, lease, assignment, transfer or other conveyance of
assets having a value
23
<PAGE> 30
greater than $10 million (measured by the book value at the date of such
transaction) of the Corporation and its subsidiaries (determined on a
consolidated basis); any sale or issuance of shares of capital stock of any
subsidiary (other than such sales or issuance approved in advance by all
Series A Directors), any consolidation or merger involving the Corporation
or any of such subsidiaries other than a consolidation or merger in which
the Corporation or subsidiary, as the case may be, is the surviving entity
and no change in the capital stock or ownership of the Corporation or the
subsidiary, as the case may be, occurs, or any reclassification or
recapitalization of any capital stock of the Corporation, or any
dissolution, liquidation, or winding up of the Corporation, or any
agreement to become so obligated;
(vii) Any acquisition or series of related acquisitions of
a business, businesses or assets involving aggregate consideration of $10
million or more;
(viii) The incurrence of, or agreement to incur, any
Indebtedness which would result in a Debt to Equity Ratio at the time the
Indebtedness is incurred (after giving effect to such incurrence) of
greater than 1:1, as measured based upon the balance sheet of the
Corporation prepared as of the last day of the immediately preceding month,
with a pro forma adjustment for the Indebtedness incurred and any equity
invested in the Corporation since such date, other than such incurrences or
agreements to incur Indebtedness that have been approved in advance by all
Series A Directors;
(ix) Any action by the Corporation or any of its
subsidiaries not approved in advance by all Series A Directors to effect
the incurrence of, or agreement to incur, any Indebtedness by any of the
Corporation's Affiliates or subsidiaries;
(x) Any loan, advance or guarantee to, or for the benefit
of, or any sale, lease, transfer or disposition of any of the properties or
assets of the Corporation or its subsidiaries to, or for the benefit of, or
any purchase or lease of any property or assets from, or the execution,
performance or amendment of any contract, agreement or understanding with,
or for the benefit of, any Affiliate of the Corporation or its
subsidiaries;
(xi) Any declaration or payment of any dividends on or any
declaration or making of any other distribution, directly or indirectly,
through subsidiaries (excluding dividends and distributions made to all
owners of the Corporation's Affiliates in proportion to their respective
ownership interests) or otherwise, on account of any Parity Stock (unless
Pro Rata dividends have also been declared or paid on the Series A
Preferred Stock) or Subordinate Stock or the setting apart of any sum for
any such purpose;
24
<PAGE> 31
(xii) The appointment or involuntary termination of
the Chairman of the Board, Chief Executive Officer, Chief Financial
Officer, Chief Operating Officer or other senior officers of the
Corporation or its subsidiaries;
(c) The rights of the holders of the Series A Preferred Stock may
be exercised in writing without a meeting or by proxy or in person at a special
meeting of the holders of Series A Preferred Stock, called as hereinafter
provided, or at any annual meeting of stockholders held for the purpose of
electing directors, and thereafter at such annual meetings or by a holder of
Series A Preferred Stock designated in writing by the written consent of the
holders of Series A Preferred Stock.
(d) A special meeting of the holders of Series A Preferred Stock
for purposes of voting on matters with respect to which the holders of such
shares are entitled to vote as a class may be called by the Secretary of the
Corporation or by a holder of Series A Preferred Stock designated in writing by
the holders of ten percent (10%) of the shares of Series A Preferred Stock then
outstanding. Such meeting may be called at the expense of the Corporation by
either such person. At any meeting of the holders of Series A Preferred Stock,
the presence in person or by proxy of the holders of a majority of the shares of
Series A Preferred Stock then outstanding shall constitute a quorum of the
Series A Preferred Stock for the purpose of voting on matters to be acted upon
by holders of the Series A Preferred Stock.
7. Exclusion of Other Rights.
Except as may otherwise be required by law, the shares of Series A
Preferred Stock shall not have any voting powers, preferences and relative,
participating, optional or other special rights, other than those specifically
set forth in this resolution (as such resolution may be amended from time to
time) and in the Certificate of Incorporation of the Corporation.
8. Headings of Subdivisions.
The headings of the various subdivisions hereof are for
convenience of reference only and shall not affect the interpretation of any of
the provisions hereof.
25
<PAGE> 32
9. Severability of Provisions.
If any voting powers, preferences and relative, participating,
optional and other special rights of the Series A Preferred Stock and
qualifications, limitations and restrictions thereof set forth in this
resolution (as such resolution may be amended from time to time) are invalid,
unlawful or incapable of being enforced by reason of any rule of law or public
policy, all other voting powers, preferences and relative, participating,
optional and other special rights of Series A Preferred Stock and
qualifications, limitations and restrictions thereof set forth in this
resolution (as so amended) which can be given effect without the invalid,
unlawful or unenforceable voting powers, preferences and relative,
participating, optional and other special rights of Series A Preferred Stock and
qualifications, limitations and restrictions thereof shall, nevertheless, remain
in full force and effect, and no voting powers, preferences and relative,
participating, optional or other special rights of Series A Preferred Stock and
qualifications, limitations and restrictions thereof herein set forth shall be
deemed dependent upon any other such voting powers, preferences and relative,
participating, optional or other special rights of Series A Preferred Stock and
qualifications, limitations and restrictions thereof unless so expressed herein.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to
be duly executed by an authorized officer and attested by its Secretary, this
_________ day of ______________________, 1997.
P.F. CHANG'S CHINA BISTRO, INC.
By:
------------------------------------
Richard L. Federico, President
Attest:
- ------------------------------------
Robert T. Vivian, Secretary
26
<PAGE> 33
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS OF PREFERRED
STOCK AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
SERIES B
CONVERTIBLE PREFERRED STOCK
OF
P.F. CHANG'S CHINA BISTRO, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
P.F. CHANG'S CHINA BISTRO, INC., a Delaware corporation (the
"Corporation"), certifies that pursuant to the authority contained in Article
FOURTH of its Certificate of Incorporation (the "Certificate of Incorporation")
and in accordance with the provisions of Section 151 of the General Corporation
Law of the State of Delaware (the "DGCL"), the Board of Directors of the
Corporation by written consent dated as of April 30, 1997, duly adopted the
following resolution, which resolution was approved by written consent of the
holders of the Series A Convertible Preferred Stock of the Corporation and
remains in full force and effect on the date hereof:
RESOLVED, that, pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation in accordance with the
provisions of its Certificate of Incorporation, a series of Preferred Stock of
the Corporation be and hereby is established, consisting of 2,300,000 shares,
$.001 par value per share, to be designated the "Series B Convertible Preferred
Stock" (hereinafter, "Series B Preferred Stock"); that the Board of Directors be
and hereby is authorized to issue such shares of Series B Preferred Stock from
time to time and for such consideration and on such terms as the Board of
Directors shall determine; and that, subject to the limitations provided by law
and by the Certificate of Incorporation, the voting powers, preferences and
relative, participating, optional and other special rights, and qualifications,
limitations and restrictions thereof shall be as follows:
1. Certain Definitions.
<PAGE> 34
Unless the context otherwise requires, the terms defined in this
paragraph 1 shall have, for all purposes of this resolution, the meanings herein
specified (with terms defined in the singular having comparable meanings when
used in the plural).
"Affiliate" shall have the meaning given to such term under Rule
12b-2 of the rules promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934.
"Annual Per Share Cash Dividend Amount" shall mean a cash payment
equal to ten percent (10%) per annum of the Liquidation Price of one share of
the Series B Preferred Stock.
"Annual Per Share PIK Dividend Amount" shall mean a fraction of
one share of Series B Preferred Stock equal to six percent (6%) per annum of one
share of the Series B Preferred Stock.
"Business Day" shall mean a day other than a Saturday, a Sunday or
any other day on which banking institutions in New York, New York are authorized
or obligated by law to close.
"Common Equity" shall mean all shares now or hereafter authorized
of any class of common stock of the Corporation, however, designated, including
the Comon Stock, and any other stock of the Corporation, howsoever designated,
authorized after the Initial Issue Date, which has the right (subject always to
prior rights of any class or series of preferred stock) to participate in the
distribution of the assets and earnings of the Corporation without limit as to
per share amount.
"Common Stock" shall mean the common stock, par value $.001 per
share, of the Corporation.
"Corporation's Affiliates" shall mean (i) PFCCB Scottsdale,
L.L.C., an Arizona limited liability company; (ii) PFCCB Newport Beach, L.L.C.,
an Arizona limited liability company; (iii) P.F. Chang's III, L.L.C., an Arizona
limited liability company; (iv) P.F. Chang's IV, L.L.C., an Arizona limited
liability company; (v) PFC Building III Limited Partnership, an Arizona limited
partnership; (vi) PFCCB LouTex Joint Venture, an Arizona general partnership;
and (vii) PFCCB NUC LLC, an Arizona limited liability company.
"Conversion Date" shall have the meaning set forth in subparagraph
4.1(b) below.
"Debt" shall mean any indebtedness, contingent or otherwise, of
any person in respect of borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such person or only to a portion
thereof) or evidenced by bonds, notes, debentures or similar instruments or
letters of credit or representing the balance deferred
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<PAGE> 35
and unpaid of the purchase price of any property or interest therein, except any
such balance that constitutes a trade payable, if and to the extent such
indebtedness would appear as a liability upon a balance sheet of such person
prepared on a consolidated basis in accordance with generally accepted
accounting principles.
"Debt to Equity Ratio" shall mean the ratio of (i) the total
Indebtedness to (ii) Total Stockholders' Equity.
"Delinquent Mandatory Redemption Price" shall mean, with respect
to each share of Series B Preferred Stock, $4.35 (adjusted for stock splits,
subdivisions, combinations and similar transactions), plus all accrued and
unpaid dividends payable in respect of such a share of the Series B Preferred
Stock, plus an amount thereon accruing from the Mandatory Redemption Date
relating thereto at the Increasing Rate.
"Final Mandatory Redemption Date" shall mean May 1, 2004 or, if
such day is not a Business Day, the next succeeding Business Day.
"Increasing Rate" shall mean, with respect to any obligation, an
annual rate equal to the Prime Rate, plus (i) two percent, plus (ii) one percent
after the first completed six-month period that the obligation subject to the
Increasing Rate has been outstanding and has not been paid in full.
"Indebtedness" shall mean the Debt of the Corporation or a
subsidiary of the Corporation plus, to the extent not otherwise included, (i)
the guaranty of any Debt of any other person; and (ii) obligations in respect of
borrowed money secured by any Lien to which any property or asset owned or held
by the Corporation or a subsidiary is subject, whether or not the obligations
secured thereby shall have been assumed by the Corporation or such subsidiary;
and (iii) capitalized lease obligations.
"Initial Issue Date" shall mean the date that shares of Series B
Preferred Stock are first issued by the Corporation.
"Initial Mandatory Redemption Date" shall mean May 1, 2003 or, if
such day is not a Business Day, the next succeeding Business Day.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or other security interest of
any kind or nature whatsoever (excluding preferred stock or equity related
preferences) including, without limitation, those created by, arising under or
evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capital lease obligation, or any financing lease
having substantially the same economic effect as any of the foregoing.
"Liquidation Price" shall mean $4.35 per share of Series B
Preferred Stock (adjusted for stock splits, subdivisions, combinations and
similar transactions), plus all
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<PAGE> 36
accrued and unpaid dividends payable in respect of such share of Series B
Preferred Stock pursuant to subparagraph 2(c).
"Mandatory Redemption Date" shall mean the Initial Mandatory
Redemption Date and the Final Mandatory Redemption Date.
"Mandatory Redemption Obligation" shall have the meaning set forth
in subparagraph 5(c) below.
"Non-Investor Directors" shall mean those directors elected to the
Corporation's Board of Directors other than those directors that are elected
solely by the holders of Series B Preferred Stock or Parity Stock pursuant to
the Shareholders Agreement.
"Parity Stock" shall mean any class or series of capital stock of
the Corporation ranking on a parity with the Series B Preferred Stock as to (i)
priority of payment of cash and stock dividends and other distributions, (ii)
priority of payment upon liquidation, dissolution or winding up of the
Corporation, and (iii) the time of, and priority of payment upon, any mandatory
redemption. For purposes of this definition, differences between any class or
series of capital stock and the Series B Preferred Stock as to the amount of the
liquidation price (or other fixed amount) to which any cash dividend rate is
applied, the amount of the liquidation price payable upon liquidation,
dissolution or winding up of the Corporation, the amount of the redemption price
payable upon any mandatory redemption, or the time when cash or stock dividends
or other distributions shall begin to accrue, shall not be considered in
determining whether such class or series of capital stock is on a parity with
the Series B Preferred Stock.
"PIK Dividends" shall mean the "paid-in-kind" dividends as set
forth in subparagraph 2(a) below.
"PIK Dividend Payment Date" shall mean March 31, June 30,
September 30, and December 31, of each year during the PIK Dividend Payment
Period.
"PIK Dividend Payment Period" shall mean the period from, and
including, April 1, 1999, to and including the Final Mandatory Redemption Date.
"PIK Dividend Period" shall mean the period from, and including,
April 1, 1999, to, but not including, the first PIK Dividend Payment Date and
thereafter, each quarterly period, including any PIK Dividend Payment Date to,
but not including, the next PIK Dividend Payment Date.
"PIK Record Date" shall mean the date that is ten Business Days
prior to any PIK Dividend Payment Date.
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<PAGE> 37
"Preferred Cash Dividends" shall mean the cash dividends as set
forth in subparagraph 2(f) below.
"Prime Rate" shall mean the rate announced as the "prime rate" by
NationsBank, N.A. whether or not such rate is actually charged.
"Pro Rata" shall mean, in the case of stock dividends, stock
dividends of the same class or series as the stock upon which the dividends are
being paid and that are proportionate to the number of outstanding shares of
such stock, and, in the case of cash dividends or dividends in property, cash
dividends or dividends in property that are proportionate to the liquidation
price of the class or series of stock upon which the dividends are being paid.
"Qualified Initial Public Offering" shall mean an underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933 of shares of the Common Stock, (i) the aggregate gross
proceeds of which equal or exceed $15,000,000 and (ii) the per share offering
price of which equals or exceeds $10.00; provided, however, that the per share
offering price referred to in clause (ii) shall be adjusted to reflect the
effect of any stock split or any subdivision, reclassification, combination or
like event of or with respect to outstanding shares of Common Stock occurring
after the Initial Issue Date.
"Quoted Price" shall mean with respect to any security the
arithmetic mean of the last bid and ask price for one (1) share of the
applicable security as reported by the National Association of Securities
Dealers, Inc., Automatic Quotations System, National Market System ("NASDAQ"),
or, if the applicable security is listed or admitted for trading on a securities
exchange, the arithmetic mean of the high and low trading prices during the
relevant trading day for one (1) share of the applicable security on the
principal exchange on which the applicable security is listed or admitted for
trading (which shall be for consolidated trading if applicable to such
exchange), in each case, on the Trading Day in question.
"Redemption Price" shall mean, with respect to each share of
Series B Preferred Stock, $4.35 (adjusted for stock splits, subdivisions,
combinations and similar transactions) plus all accrued and unpaid dividends
payable in respect of such share of the Series B Preferred Stock.
"Series B Director" shall mean that member of the Board of
Directors of the Corporation elected solely by the holders of the Series B
Preferred Stock pursuant to the Shareholders Agreement.
"Shareholders Agreement" shall mean the Amended and Restated
Shareholders Agreement among the Corporation and the holders of the Common
Stock, Series B Preferred Stock and Parity Stock dated as of May 1, 1997, as the
same may be amended from time to time.
5
<PAGE> 38
"Stock Purchase Agreement" shall mean the Stock Purchase Agreement
among the Corporation and the Purchasers listed therein dated as of April 28,
1997, as the same may be amended from time to time.
"Subordinate Stock" shall mean the Common Equity and any class or
series of capital stock of the Corporation, however designated, which is not
entitled to receive (i) any dividends unless all dividends required to have been
paid or declared and set apart for payment on the Series B Preferred Stock shall
have been so paid or declared and set apart for payment or (ii) any assets upon
liquidation, dissolution or winding up of the affairs of the Corporation until
the Series B Preferred Stock shall have received the entire amount to which such
stock is entitled upon such liquidation, dissolution or winding up.
"Total Stockholders' Equity" shall mean the stockholders' equity
of the Corporation as it appears in the monthly balance sheet of the
Corporation.
"Trading Days" shall mean any day on which any market in which the
applicable security is then traded and in which a Quoted Price may be
ascertained is open for business.
2. Dividends.
(a) The record holders of Series B Preferred Stock on each PIK
Record Date shall receive on each PIK Dividend Payment Date during the PIK
Dividend Payment Period per share dividends in additional fully paid and
nonassessable shares of Series B Preferred Stock legally available for such
purpose (such dividends being herein called "PIK Dividends"). PIK Dividends
shall be paid by delivering to the record holders of Series B Preferred Stock a
number of shares of Series B Preferred Stock equal to (i) the number of shares
of Series B Preferred Stock held by such holder on the applicable PIK Record
Date, multiplied by (ii) twenty-five percent (25%) of the Annual Per Share PIK
Dividend Amount. Except as set forth in subparagraph 2(b) below, the Corporation
shall not issue fractional shares of Series B Preferred Stock to which holders
may become entitled pursuant to this subparagraph, but in lieu thereof, the
Corporation shall at the option of the holder either (i) deliver its check in an
amount equal to the applicable fraction of one (1) share of Series B Preferred
Stock multiplied by $4.35 (adjusted for stock splits, subdivisions, combinations
or other similar transactions) (the "PIK Cash Dividend Payment") or (ii) defer
delivery of the fractional PIK Cash Dividend Payment to the holder and apply
such amount to PIK Dividends issued to such holder on the subsequent PIK
Dividend Date. Any additional shares of Series B Preferred Stock issued pursuant
to this paragraph shall be governed by this resolution and shall be subject in
all respects, except as to the date of issuance and date from which PIK
Dividends accrue and cumulate as set forth below, to the same terms as the
shares of Series B Preferred Stock originally issued hereunder; provided,
however, in no event shall any PIK Dividends accrue prior to April 1, 1999.
6
<PAGE> 39
(b) Prior to each PIK Record Date immediately preceding each PIK
Dividend Payment Date, the Board of Directors of the Corporation shall declare
PIK Dividends on the Series B Preferred Stock in accordance with subparagraph
2(a) above, payable on the next PIK Dividend Payment Date. PIK Dividends (which
shall include, for purposes of this subparagraph, any PIK Cash Dividend Payment
due pursuant to subparagraph 2(a)) on shares of Series B Preferred Stock shall
accrue and be cumulative from the later of (i) April 1, 1999 and (ii) the date
of issuance of such shares, notwithstanding the failure of the Board of
Directors to declare and/or issue PIK Dividends with respect to any PIK Dividend
Period. PIK Dividends shall be payable in arrears during the PIK Dividend
Payment Period on each PIK Dividend Payment Date, commencing on the first PIK
Dividend Payment Date subsequent to April 1, 1999, and for shares issued as PIK
Dividends, commencing on the first PIK Dividend Payment Date after such shares
are issued. If any PIK Dividend Payment Date occurs on a day that is not a
Business Day, any accrued PIK Dividends otherwise payable on such PIK Dividend
Payment Date shall be paid on the next succeeding Business Day. PIK Dividends
shall be paid on each PIK Dividend Payment Date to the holders of record of the
Series B Preferred Stock as their names shall appear on the share register of
the Corporation on the PIK Record Date immediately preceding such PIK Dividend
Payment Date. If a PIK Cash Dividend Payment on account of PIK Dividends that
would otherwise be issued as fractional shares may not legally be paid in the
full amount to which shares of Series B Preferred Stock are entitled with
respect to any PIK Dividend Period, dividends in the full preferential amount
hereby provided shall be, to the extent legally and contractually permissible,
declared and paid as PIK Dividends in the form of shares of Series B Preferred
Stock (including fractional shares thereof). PIK Dividends on account of arrears
for any past PIK Dividend Periods may be declared and paid at any time to the
holders of record on the PIK Record Dates applicable to such past PIK Dividend
Periods.
(c) In addition to the PIK Dividends and the PIK Cash Dividend
Payments referred to in subparagraph 2(a) hereof and the Preferred Cash
Dividends referred to in subparagraph 2(f), at any time during which any shares
of Series B Preferred Stock remain outstanding, the Corporation may declare, pay
or set apart for payment cash and/or property to be distributed or paid as a
dividend in respect of shares of Series B Preferred Stock. The foregoing
notwithstanding, no dividends may be declared or paid on the Series B Preferred
Stock pursuant to this subparagraph 2(c) unless Pro Rata dividends are
contemporaneously declared or paid on any then outstanding Parity Stock.
(d) So long as any shares of Series B Preferred Stock shall be
outstanding:
(i) the Corporation shall not declare, pay or set apart
for payment on any Subordinate Stock any dividends or distributions
whatsoever, whether in cash, property or otherwise (other than dividends
payable in shares of the
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<PAGE> 40
class or series upon which such dividends are declared or paid, or payable
in shares of Common Stock with respect to Subordinate Stock other than
Common Stock, together with cash in lieu of fractional shares), nor shall
any Subordinate Stock be purchased, redeemed or otherwise acquired by the
Corporation or any of its subsidiaries of which it owns not less than a
majority of the outstanding voting power, nor shall any monies be paid or
made available for a sinking fund for the purchase or redemption of any
Subordinate Stock, without the prior written consent of the holders of at
least a majority of the outstanding shares of Series B Preferred Stock and
unless all dividends to which the holders of Series B Preferred Stock shall
have been entitled for all previous PIK Dividend Periods shall have been
(A) paid or (B) declared and a sum of money, in the case of dividends
payable in cash, sufficient for the payment thereof has been set apart;
(ii) the Corporation shall not declare, pay or set apart
for payment on any Parity Stock any dividends or distributions whatsoever,
whether in cash, property or otherwise, unless Pro Rata dividends are
contemporaneously declared, paid or set apart for payment on the Series B
Preferred Stock, except that, prior to the commencement of the PIK Dividend
Payment Period, the Corporation may declare and pay dividends on the Series
A Convertible Preferred Stock of the Corporation as required by the terms
thereof as in effect on the Initial Issue Date of the Series B Preferred
Stock; and
(iii) neither the Corporation nor any of its subsidiaries
of which it owns not less than a majority of the outstanding voting power
shall purchase, redeem or otherwise acquire any Parity Stock, nor pay any
monies to or make any monies available for a sinking fund for the purchase
or redemption of any Parity Stock, without the prior written consent of the
holders of at least a majority of the outstanding shares of Series B
Preferred Stock and unless all dividends to which the holders of Series B
Preferred Stock shall have been entitled for all previous PIK Dividend
Periods shall have been (A) paid or (B) declared and a sum of money, in the
case of dividends payable in cash, sufficient for the payment thereof has
been set apart, except that the Corporation may redeem Parity Stock so long
as it contemporaneously redeems a proportionate percentage of the
outstanding Series B Preferred Stock, ratably among the holders thereof.
(e) In the event that full dividends, in cash or property, if
declared, are not paid or made available to the holders of all outstanding
shares of Series B Preferred Stock and Parity Stock and funds or property
available for payment of dividends shall be insufficient to permit payment in
full to holders of all such stock of the full preferential amounts to which they
are then entitled, then the entire amount available for payment of dividends
shall be distributed ratably among all such holders of Series B Preferred Stock
and Parity Stock in proportion to the full amount to which they would otherwise
be respectively entitled.
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<PAGE> 41
(f) Notwithstanding anything to the contrary set forth herein,
with respect to any PIK Dividend otherwise payable on any PIK Dividend Payment
Date pursuant to this paragraph 2, the Corporation may, upon the unanimous
approval of the Non-Investor Directors by vote on or prior to the applicable PIK
Record Date, declare on such PIK Record Date and pay on such PIK Dividend
Payment Date a cash dividend (a "Preferred Cash Dividend") to all record holders
of Series B Preferred Stock on such PIK Record Date in an amount per share equal
to twenty-five percent (25%) of the Annual Per Share Cash Dividend Amount.
Payment of such Preferred Cash Dividend on such PIK Dividend Payment Date shall
be in lieu of the payment of the PIK Dividend on such PIK Dividend Payment Date.
The foregoing notwithstanding, no Preferred Cash Dividend may be declared and
paid on the Series B Preferred Stock unless Pro Rata cash dividends are
contemporaneously declared and then paid on any then outstanding Parity Stock.
(g) Notwithstanding anything contained herein to the contrary, no
dividends on shares of Series B Preferred Stock shall be declared by the Board
of Directors of the Corporation or paid or set apart for payment by the
Corporation at such time if such declaration or payment shall be restricted or
prohibited by law.
3. Distributions Upon Liquidation, Dissolution or Winding Up.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or other winding up of the affairs of the Corporation, before any
payment or distribution shall be made to the holders of Subordinate Stock and
contemporaneously with any payment or distribution to the holders of Parity
Stock, the holders of Series B Preferred Stock shall be entitled to be paid out
of the assets of the Corporation in cash, or, if the Corporation does not have
sufficient cash on hand to pay such amounts, property of the Corporation at its
fair market value as determined by the Board of Directors of the Corporation,
the greater of (i) the Liquidation Price per share of Series B Preferred Stock,
or (ii) such amount per share of Series B Preferred Stock as would have been
payable had each such share been converted into Common Stock pursuant to
paragraph 4 immediately prior to such liquidation, dissolution or other winding
up of the affairs of the Corporation. Immediately preceding such liquidation,
dissolution or winding up, adjustment shall be made for accrued but unpaid
dividends (including, without limitation, PIK Dividends).
(b) If, upon any such liquidation, dissolution or other winding up
of the affairs of the Corporation, the assets of the Corporation shall be
insufficient to permit the payment in full of the Liquidation Price for each
share of the Series B Preferred Stock and the applicable liquidation price for
each share of any Parity Stock then outstanding, then the assets of the
Corporation shall be ratably distributed among the holders of Series B Preferred
Stock and Parity Stock in proportion to the full amounts to which they would
otherwise be respectively entitled if all amounts thereon were paid in full.
Neither the consolidation or merger of the Corporation into or with another
corporation or corporations, nor the sale, lease, transfer or conveyance of all
or any
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<PAGE> 42
portion of the assets of the Corporation to another corporation or any other
entity shall be deemed a liquidation, dissolution or winding up of the affairs
of the Corporation within the meaning of this paragraph 3.
4. Conversion Rights.
4.1 Conversion at the Option of the Holder.
(a) At any time before the close of business on the Final
Mandatory Redemption Date (unless the Corporation shall default in payment of
the Redemption Price or the Delinquent Mandatory Redemption Price, in which
case, the conversion rights set forth in this paragraph shall continue until the
cure of any such default), each holder of Series B Preferred Stock may, at its
option, convert each share of Series B Preferred Stock held by such holder into
one (1) share of Common Stock subject to adjustment pursuant to paragraph 4.3.
Upon such conversion, the rights of the holders of converted Series B Preferred
Stock with respect to the shares of Series B Preferred Stock so converted shall
cease.
(b) To convert Series B Preferred Stock in accordance with this
paragraph 4.1, a holder must (i) surrender the certificate or certificates
evidencing the shares of Series B Preferred Stock to be converted (or a duly
executed affidavit of lost certificate in accordance with the bylaws of the
Corporation), duly endorsed in a form satisfactory to the Corporation, at the
office of the Corporation or transfer agent for the Series B Preferred Stock,
(ii) notify the Corporation at such office in writing that it elects to convert
Series B Preferred Stock, and the number of shares it wishes to convert, (iii)
state in writing the name or names in which it wishes the certificate or
certificates for shares of Common Stock to be issued, and (iv) pay any transfer
or similar tax with respect to the transfer of the shares of Series B Preferred
Stock converted, if required. The date on which the holder satisfies the
foregoing requirements shall be the "Conversion Date." As soon as practical but
in any event within five (5) Business Days of the Conversion Date, the
Corporation shall deliver a certificate for the number of shares of Common Stock
issuable upon the conversion, a check for the amount payable in respect of any
fractional share pursuant to subparagraph 4.1(c) and a new certificate
representing the unconverted portion, if any, of the shares of Series B
Preferred Stock represented by the certificate or certificates surrendered for
conversion. The person in whose name the Common Stock certificate is registered
shall be treated as the stockholder of record on and after the Conversion Date.
Adjustment (or cash payment, if applicable) shall be made for accrued and unpaid
dividends (including, without limitation, PIK Dividends), as of the Conversion
Date, on converted shares of Series B Preferred Stock. PIK Dividends will be
paid on any PIK Dividend Payment Date with respect to Series B Preferred Stock
surrendered for conversion at any time on or after a PIK Record Date for the
payment of a PIK Dividend to the registered holder of Series B Preferred Stock
on such PIK Record Date. If the last day on which Series B Preferred Stock may
be converted is not a Business
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<PAGE> 43
Day, Series B Preferred Stock may be surrendered for conversion on the next
succeeding day that is a Business Day.
(c) The Corporation will not issue a fractional share of Common
Stock upon conversion of Series B Preferred Stock. Instead the Corporation will
deliver its check in an amount equal to the applicable fraction multiplied by
the fair market value of the Common Stock.
(d) If a holder converts shares of Series B Preferred Stock, the
Corporation shall pay any documentary, stamp or similar issue or transfer tax
due on the issue of shares of Common Stock upon the conversion; provided,
however, that pursuant to subparagraph 4.1(b) the holder shall pay any such tax
which is due because the shares are issued in a name other than the holder's
name.
4.2 Mandatory Conversion. Subject to the adjustments set
forth in paragraph 4.3, each share of the Series B Preferred Stock shall be
automatically converted into one (1) share of Common Stock on the date a
Qualified Initial Public Offering is consummated ("Mandatory Conversion Date").
Upon such occurrence resulting in a Mandatory Conversion Date, the Corporation
shall (i) notify all holders of the Series B Preferred Stock not later than five
(5) Business Days subsequent to approval by the Board of Directors of the
Corporation to undertake a Qualified Initial Public Offering, (ii) demand that
all shares representing the Series B Preferred Stock be returned to the
Corporation's offices or to the designated transfer agent, and (iii) pay any
transfer or similar tax with respect to the conversion, if any. As soon as
practical but in any event within thirty (30) days of the Mandatory Conversion
Date, the Corporation shall deliver a certificate to and in the name of the
holder of the Series B Preferred Stock for the number of shares of Common Stock
issuable upon the conversion and a check in an amount calculated in accordance
with subparagraph 4.1(c) for any fractional shares, if any, for the shares of
Series B Preferred Stock represented by the certificate. The name of the person
in which the Series B Preferred Stock was issued shall be treated as the
stockholder of record of the Common Stock in which the Series B Preferred Stock
was converted on and after the Mandatory Conversion Date. Adjustment (or cash
payment, if applicable) shall be made for accrued and unpaid dividends
(including, without limitation, PIK Dividends), as of the Mandatory Conversion
Date, on shares of Series B Preferred Stock converted pursuant to this paragraph
4.2. PIK Dividends will be paid on any PIK Dividend Payment Date with respect to
Series B Preferred Stock converted pursuant to this paragraph 4.2 on or after a
PIK Record Date to the registered holder of Series B Preferred Stock on such PIK
Record Date, and the shares of Series B Preferred Stock received in payment of
such PIK Dividend shall be deemed automatically converted to one (1) share of
Common Stock, subject to adjustment in accordance with paragraph 4.3, effective
as of the Mandatory Conversion Date. Upon such conversion, the rights of the
holders of converted Series B Preferred Stock with respect to the shares of
Series B Preferred Stock so converted shall cease.
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<PAGE> 44
4.3 Certain Matters With Respect to Conversion.
(a) The Corporation has reserved and shall continue to reserve out
of its authorized but unissued Common Stock enough shares of Common Stock to
permit the conversion of the Series B Preferred Stock in full. All shares of
Common Stock which are issued upon conversion of Series B Preferred Stock shall
be duly authorized, validly issued, fully paid and nonassessable. The
Corporation shall comply with all securities laws regulating the offer and
delivery of shares of common stock upon conversion of Series B Preferred Stock
and will list such shares on each national securities exchange on which the
common stock is listed.
(b) If the Corporation:
(i) pays a dividend or makes a distribution on its Common
Stock or any other class of the Corporation's stock other than the Series B
Preferred Stock in shares of its Common Stock;
(ii) subdivides its outstanding shares of Common Stock
into a greater number of shares;
(iii)combines its outstanding shares of Common Stock
into a smaller number of shares;
(iv) issues by reclassification of its Common Stock any
shares of its capital stock;
then an appropriate and proportionate adjustment shall be made to the number of
shares into which each share of Series B Preferred Stock is convertible so that
immediately after the occurrence of such event the holders of Series B Preferred
Stock shall be entitled to receive the same percentage of the issued and
outstanding Common Stock upon conversion of the Series B Preferred Stock as such
holders would have received if converted immediately prior to such dividend,
distribution, subdivision, combination or reclassification. The adjustment shall
become effective immediately after the record date in the case of a dividend or
distribution and immediately after the effective date of a subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
(c) If the Corporation distributes any rights, options or warrants
to all holders of its Common Stock entitling them for a period expiring within
sixty (60) days after the record date referenced in subparagraph (l) below to
purchase additional shares of Common Stock at a price per share less than $4.35
per share (as adjusted to reflect any stock split or any subdivision,
reclassification, combination of or with respect to outstanding shares of Common
Stock or any similar transaction) on that record date, the number of shares of
Common Stock into which each share of Series B Preferred Stock is convertible
shall be adjusted, in accordance with the following formula:
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<PAGE> 45
N x (O+A)
---------
N' = O + AxP
---
M
where:
N' = the number of shares of Common Stock into which
each share of Series B Preferred Stock is
convertible after such distribution.
O = the number of shares of Common Stock outstanding
on the record date.
N = the number of shares of Common Stock into which
each share of Series B Preferred Stock was
convertible prior to such distribution.
P = the offering price per share of the additional
shares of Common Stock.
M = the current market price per share of Common
Stock on the record date.
A = the number of additional shares of Common Stock
offered.
The adjustment shall be made successively whenever any such rights, options or
warrants are issued and shall become effective immediately after the record date
for the determination of stockholders entitled to receive the rights, options or
warrants. If at the end of the period during which such warrants, options or
rights are exercisable, not all warrants, options or rights shall have been
exercised, the number of shares of Common Stock into which each share of Series
B Preferred Stock is convertible shall be immediately readjusted to what it
would have been if "A" in the above formula had been the number of shares
actually issued.
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<PAGE> 46
(d) If the Corporation issues shares of Common Stock for a
consideration per share less than $4.35 per share (as adjusted to reflect the
effect of any stock split or any subdivision, reclassification, combination of
or with respect to outstanding shares of Common Stock or any similar
transaction) on the date the Corporation fixes the offering price of such
additional shares, the number of shares of Common Stock into which each share of
Series B Preferred Stock is convertible shall be adjusted in accordance with the
following formula:
N x A
-----
N' = O + P
-
M
where:
N' = the number of shares of Common Stock into which
each share of Series B Preferred Stock is
convertible after such issuance.
N = the number of shares of Common Stock into which
each share of Series B Preferred Stock was
convertible prior to such issuance.
O = the number of shares of Common Stock
outstanding immediately prior to the issuance of
such additional shares.
P = the aggregate consideration received for the
issuance of such additional shares.
M = the current market price per share of Common
Stock on the date of issuance of such additional
shares.
A = the number of shares outstanding immediately
after the issuance of such additional shares.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
This subparagraph 4.3(d) does not apply to (i) any transaction or issuance
described in subparagraphs 4.3(b) or 4.3(c) above or subparagraph 4.3(e) below,
including issuances of Common Stock pursuant to warrants, options, rights or
other convertible securities described in subparagraphs 4.3(c) and 4.3(e), (ii)
the conversion of Series B Preferred Stock, or the conversion, exchange or
exercise of other securities convertible into or exchangeable or exercisable for
Common Stock, (iii) Common Stock issued to the Corporation's employees under
bona fide employee benefit plans adopted by the Board of Directors of the
Corporation and approved by the holders of Common Stock when required by law, if
such Common Stock would otherwise be covered by this subparagraph 4.3(d) (but
only to the extent that the aggregate number of shares excluded hereby (together
with
14
<PAGE> 47
the aggregate number of shares issuable upon conversion, exchange or exercise of
the securities excluded by clause (iii) of subparagraph 4.3(e) below) and issued
shall not exceed 15% of the Common Stock of the Corporation on a fully diluted
basis at the time of any such issuance excluding options to purchase Common
Stock held by directors of the Corporation), or (iv) Common Stock issued in a
bona fide public offering pursuant to a firm commitment underwriting.
(e) If the Corporation issues any options, warrants or other
securities convertible into or exchangeable or exercisable for Common Stock
(other than Series B Preferred Stock or securities issued in transactions
described in subparagraph 4.3(c) above) for a consideration per share of Common
Stock initially deliverable upon conversion, exchange or exercise of such
securities of less than $4.35 per share of Common Stock (as adjusted to reflect
the effect of any stock split or any subdivision, reclassification, combination
of or with respect to outstanding shares of Common Stock or any similar
transaction) on the date of issuance of such securities, the number of shares of
Common Stock into which each share of Series B Preferred Stock is convertible
shall be adjusted in accordance with the following formula:
N x (O+D)
---------
N' = O + P
-
M
where:
N' = the number of shares of Common Stock into which
each share of Series B Preferred Stock is
convertible immediately after such issuance.
N = the number of shares of Common Stock into which
each share of Series B Preferred Stock was
convertible immediately prior to such issuance.
O = the number of shares of Common Stock
outstanding immediately prior to the issuance of
such securities.
P = the aggregate consideration received for the
issuance of such securities.
M = the current market price per share of Common
Stock on the date of issuance of such securities.
D = the maximum number of shares deliverable upon
conversion or in exchange for or upon exercise of
such securities at the initial conversion,
exchange or exercise rate.
15
<PAGE> 48
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance. If
all of the Common Stock deliverable upon conversion, exchange or exercise of
such securities has not been issued when such securities are no longer
outstanding, then the number of shares of Common Stock into which each share of
Series B Preferred Stock is convertible shall promptly be readjusted to the
basis of the actual number of shares of Common Stock issued upon conversion,
exchange or exercise of such securities. This subparagraph 4.3(e) does not apply
to (i) the issuance of any such securities in a bona fide public offering
pursuant to a firm commitment underwriting, (ii) the issuance of any such
securities to the Corporation's employees under bona fide employee benefit plans
adopted by the Board of Directors of the Corporation and approved by the holders
of Common Stock when required by law, if such securities would otherwise be
covered by this subparagraph 4.3(e) (but only to the extent that the aggregate
number of shares issuable upon the conversion, exchange or exercise of the
aggregate number of securities excluded hereby (together with the aggregate
number of shares excluded by clause (iii) of subparagraph 4.3(d) above) and
issued shall not exceed 15% of the Common Stock of the Corporation on a fully
diluted basis at the time of any such issuance excluding options to purchase
Common Stock held by directors of the Corporation), or (iii) shares issued as
PIK Dividends, shares issued as "paid-in-kind" dividends on the Series A
Convertible Preferred Stock of the Corporation as required by the terms thereof
as in effect on the Initial Issue Date of the Series B Preferred Stock, or
shares issued as "paid-in-kind" dividends on Parity Stock provided such
dividends are required by the terms of such Parity Stock.
(f) If the Corporation (i) distributes any rights, options or
warrants to all holders of its Common Stock entitling them for a period expiring
within sixty (60) days after the record date referenced in subparagraph (l)
herein to purchase additional shares of Common Stock; (ii) issues shares of
Common Stock; or (iii) issues any options, warrants or other securities
convertible into or exchangeable or exercisable for Common Stock (other than
Series B Preferred Stock or securities issued in transactions described in (i)
above) at a price reflecting an implied price per share less than $4.35 per
share, the number of shares of Common Stock into which each share of Series B
Preferred Stock is convertible shall be reduced proportionally to reflect the
price at which the Corporation issued or sold such shares of Common Stock
pursuant to this subparagraph 4.3(f).
(g) For the purpose hereof, the current market price per share of
any security on any date is the average of the Quoted Prices for thirty (30)
consecutive Trading Days commencing forty-five (45) Trading Days before the date
in question. If the Quoted Price is not ascertainable, the current market price
per share of any security on any date shall be the current market price as
determined by the Board of Directors of the Corporation in its reasonable
judgment exercised in good faith. Notwithstanding the foregoing, the current
market price per share of any security shall be deemed to be the greater of (i)
the current market price as determined above and (ii) the Liquidation Price.
16
<PAGE> 49
(h) For purposes of any computation respecting consideration
received pursuant to subparagraphs 4.3(d) and 4.3(e) above, the following shall
apply:
(i) in case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided that in
no case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Corporation for any underwriting of the issue or
otherwise in connection therewith;
(ii) in the case of the issuance of shares of Common Stock
for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined by the Board of Directors of the Corporation in its reasonable
judgment exercised in good faith (irrespective of the accounting treatment
thereof); and
(iii) in the case of the issuance of options, warrants or
other securities convertible into or exchangeable or exercisable for shares
of Common Stock, the aggregate consideration received therefor shall be
deemed to be the consideration received by the Corporation for the issuance
of such options, warrants or other securities plus the additional minimum
consideration, if any, to be received by the Corporation upon the
conversion or exchange or exercise thereof (the consideration in each case
to be determined in the same manner as provided in clauses (i) and (ii) of
this subparagraph 4.3(h)).
(i) No adjustment in the number of shares of Common Stock into
which each share of Series B Preferred Stock is convertible need be made unless
the adjustment would require an increase or decrease of at least one-half of one
percent (.5%) in the number of shares of Common Stock into which each share of
Series B Preferred Stock is convertible. Any adjustments that are not made shall
be carried forward and taken into account in any subsequent adjustment. All
calculations under this paragraph 4.3 shall be made to the nearest cent or to
the nearest 1/100th of a share, as the case may be.
(j) No adjustment in the number of shares of Common Stock into
which each share of Series B Preferred Stock is convertible need be made under
this paragraph 4.3 for (i) rights to purchase Common Stock pursuant to a
Corporation plan for reinvestment of dividends or interest, or (ii) any change
in the par value or change from no par value to par value of the Common Stock.
If an adjustment is made to the number of shares of Common Stock into which each
share of Series B Preferred Stock is convertible upon a record date established
for a distribution subject to this paragraph 4.3 and if such distribution is
subsequently cancelled, the number of shares of Common Stock into which each
share of Series B Preferred Stock is convertible then in effect shall be
readjusted, effective as of the date when the Board of Directors of the
Corporation determines to cancel such distribution, to the number of shares of
Common
17
<PAGE> 50
Stock into which each share of Series B Preferred Stock is convertible as would
have been in effect if such record date had not been fixed. No adjustment need
be made under paragraph 4.3 if the Corporation issues or distributes to each
holder of Series B Preferred Stock the shares of Common Stock, evidences of
indebtedness, assets, rights, options or warrants referred to in such paragraph
which each holder would have been entitled to receive had Series B Preferred
Stock been converted into Common Stock prior to or simultaneously with the
happening of such event or the record date with respect thereto.
(k) Whenever the number of shares of Common Stock into which each
share of Series B Preferred Stock is convertible is adjusted, the Corporation
shall promptly mail to holders of Series B Preferred Stock, first class, postage
prepaid, a notice of the adjustment. The Corporation shall file with the
transfer agent, if any, for Series B Preferred Stock a certificate from the
Corporation's independent public accountants briefly stating the facts requiring
the adjustment and the manner of computing it. Subject to subparagraph 4.3(o)
below, the certificate shall be conclusive evidence that the adjustment is
correct.
(l) If:
(i) the Corporation takes any action that would
require an adjustment pursuant to paragraph 4.3;
(ii) the Corporation consolidates or merges with, or
transfers all or substantially all of its assets to, another corporation,
and stockholders of the Corporation must approve the transaction; or
(iii) there is a dissolution or liquidation of the
Corporation;
a holder of Series B Preferred Stock may want to convert such stock into shares
of Common Stock prior to the record date for or the effective date of the
transaction so that it may receive the rights, warrants, securities or assets
which a holder of shares of Common Stock on that date may receive. Therefore,
the Corporation shall mail to such holders, first class, postage prepaid, a
notice stating the proposed record or effective date, as the case may be. The
Corporation shall mail the notice at least thirty (30) days before such date.
(m) If the Corporation is party to a consolidation or merger which
reclassifies or changes its Common Stock or to the sale of all or substantially
all of the assets of the Corporation, upon consummation of such transaction the
Series B Preferred Stock shall automatically become convertible at the option of
their respective holders into the kind and amount of securities, cash or other
assets which the holder of Series B Preferred Stock would have owned immediately
after the sale, consolidation or merger, if such holder had converted Series B
Preferred Stock immediately before the effective date of the transaction, and an
appropriate adjustment (as determined by the
18
<PAGE> 51
Board of Directors of the Corporation) shall be made in the application of the
provisions herein set forth with respect to the rights and interests thereafter
of the holders of Series B Preferred Stock, to the end that the provisions set
forth herein (including provisions with respect to liquidation preferences and
changes in and other adjustment of the number of shares of Common Stock into
which each share of Series B Preferred Stock is convertible) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares of stock
or other securities or property thereafter deliverable upon the conversion of
Series B Preferred Stock. The Corporation shall not affect any such
consolidation, merge or sale, unless prior to the consummation thereof, the
successor corporation (if other than the Corporation) resulting from such
consolidation or merger or the corporation purchasing such assets assumes by
written instrument (in a form reasonably satisfactory to the holders of a
majority of the Series B Preferred Stock then outstanding), the obligation to
deliver to each such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
acquire. If this subparagraph 4.3(m) applies, subparagraphs 4.3(b), 4.3(c),
4.3(d) and 4.3(e) do not apply.
(n) In any case in which this paragraph 4.3 shall require that an
adjustment as a result of any event become effective from and after a record
date, the Corporation may elect to defer until after the occurrence of such
event (i) the issuance to the holder of any shares of Series B Preferred Stock
converted after such record date and before the occurrence of such event of the
additional shares of Common Stock issuable upon such conversion over and above
the shares issuable immediately prior to adjustment and (ii) the delivery of a
check for any remaining fractional shares as provided in subparagraph 4.1(c)
above.
(o) Whenever the Corporation or its Board of Directors shall be
required to make a determination under this paragraph 4.3, such determination
shall be made in good faith and may be challenged in good faith by the holders
of a majority of the Series B Preferred Stock, and any dispute shall be resolved
promptly (and in no event later than ninety (90) days after any challenge), at
the Corporation's expense, by an investment banking firm of recognized national
standing selected by the Corporation and acceptable to such holders of Series B
Preferred Stock. Any such determination shall be deemed approved if the
requisite holders have not notified the Corporation of any challenge within
thirty (30) days after receiving notice (including a statement in reasonable
detail of the bases therefor) of such determination.
(p) If any event occurs of the type contemplated by the provisions
of this paragraph 4.3 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the
Corporation's Board of Directors shall make an appropriate adjustment to the
number of shares of Common Stock into which each share of Series B Preferred
Stock is convertible so as to protect the rights of the holders of Series B
Preferred Stock; provided that no such adjustment shall increase the number of
shares of Common Stock into which a share of Series B Preferred Stock is
19
<PAGE> 52
convertible if otherwise adjusted pursuant to another provision of this
paragraph 4.3 or decrease the number of shares of Common Stock issuable upon
conversion of each share of Series B Preferred Stock.
5. Mandatory Redemption by the Corporation.
(a) To the extent the Corporation shall have funds legally
available for such payment under the DGCL, the Corporation shall redeem on the
Initial Mandatory Redemption Date at least fifty percent (50%) of the then
outstanding shares of Series B Preferred Stock at the Redemption Price, ratably
among the holders thereof. In addition, to the extent the Corporation shall have
funds legally available for such payment under the DGCL, the Corporation shall
redeem on the Final Mandatory Redemption Date all of the then outstanding shares
of Series B Preferred Stock at the Redemption Price, plus an amount accruing
thereon at the Increasing Rate from the Initial Mandatory Redemption Date.
(b) Shares of Series B Preferred Stock which have been issued and
converted or reacquired in any manner, including as a result of redemption,
shall (upon compliance with any applicable provisions of the DGCL) have the
status of authorized and unissued shares of the class of preferred stock of the
Corporation undesignated as to series, and may be redesignated and reissued as
part of any series of preferred stock of the Corporation; provided, however,
that no such issued and reacquired shares of Series B Preferred Stock shall be
reissued as Series B Preferred Stock.
(c) If on any Mandatory Redemption Date the Corporation is unable
or shall fail to discharge its obligation to redeem all outstanding shares of
Series B Preferred Stock required to be redeemed on such date pursuant to
subparagraph 5(a) and all outstanding shares of Parity Stock required to be
redeemed on such date (the "Mandatory Redemption Obligation"), the Corporation
shall redeem on such Mandatory Redemption Date the number of shares of Series B
Preferred Stock and Parity Stock which it is able to redeem, ratably among the
holders of Series B Preferred Stock and Parity Stock in proportion to the full
amounts to which they would otherwise be respectively entitled if all shares of
Series B Preferred Stock and Parity Stock required to be redeemed on such date
were redeemed. In such a case, the remainder of the Redemption Price payable but
not paid at the Mandatory Redemption Date shall be converted into the Delinquent
Mandatory Redemption Price and shall be discharged as soon as the Corporation is
able to discharge such Delinquent Mandatory Redemption Price out of funds
legally available therefor. If and so long as any Mandatory Redemption
Obligation (or any obligation in respect of the Delinquent Mandatory Redemption
Price) with respect to the Series B Preferred Stock and any Parity Stock shall
not be fully discharged and paid, the Corporation shall not declare or pay any
dividend or make any distribution on, or, directly or indirectly, purchase,
redeem or satisfy any mandatory redemption, sinking fund or other similar
obligation in respect of Subordinate Stock (other than repurchases of shares of
Subordinate Stock in accordance
20
<PAGE> 53
with the terms of restricted stock vesting agreements with employees of the
Corporation approved by the Board of Directors of the Corporation).
(d) Notwithstanding the foregoing provisions of this paragraph 5,
unless the full cumulative dividends on all outstanding shares of Series B
Preferred Stock and Parity Stock have been paid or contemporaneously are
declared and paid for all dividend periods to and including the Mandatory
Redemption Date, none of the shares of Series B Preferred Stock or Parity Stock
shall be redeemed or set aside for redemption, unless such shares of Series B
Preferred Stock and Parity Stock are redeemed pro rata based upon the full
amounts to which the holders thereof would otherwise be respectively entitled.
(e) Notice of any redemption shall be sent by or on behalf of the
Corporation not more than sixty (60) days nor less than thirty (30) days prior
to any Mandatory Redemption Date, by first class mail, postage prepaid, to all
holders of record of the Series B Preferred Stock at their respective last
addresses as they shall appear on the books of the Corporation; provided,
however, that no failure to give notice or any defect therein or in the mailing
thereof shall affect the validity of the proceedings for the redemption of any
shares of Series B Preferred Stock except as to the holder to whom the
Corporation has failed to give notice or except as to the holder to whom notice
was defective. In addition to any information required by law or by the
applicable rules of any exchange upon which Series B Preferred Stock may be
listed or admitted to trading, such notice shall state: (i) the Mandatory
Redemption Date; (ii) the Redemption Price; (iii) the number of shares of Series
B Preferred Stock to be redeemed; (iv) the place or places where certificates
for such shares are to be surrendered for payment of the Redemption Price; (v)
that dividends on the shares to be redeemed will cease to accrue on the
Mandatory Redemption Date; (vi) the number of shares of Common Stock into which
each share of Series B Preferred Stock is convertible as of the notice date and,
if any transactions are contemplated to occur between the notice date and the
Mandatory Redemption Date which would cause such number of shares of Common
Stock to be adjusted, the number of shares of Common Stock into which each share
of Series B Preferred Stock would be convertible after giving effect to such
transaction(s); (vii) that Series B Preferred Stock called for redemption may be
converted at any time before the close of business on the Mandatory Redemption
Date; and (viii) that holders of Series B Preferred Stock must satisfy the
requirements of subparagraph 4.1(b) above if such holders desire to convert such
shares. Upon the mailing of any such notices of redemption, the Corporation
shall become obligated to redeem at the time of redemption specified therein all
shares called for redemption other than shares converted into Common Stock prior
to the Mandatory Redemption Date.
(f) If notice has been mailed in accordance with subparagraph 5(e)
above and provided that on or before the Mandatory Redemption Date specified in
such notice, all funds necessary for such redemption shall have been set aside
by the Corporation, separate and apart from its other funds in trust for the pro
rata benefit of
21
<PAGE> 54
the holders of the shares so called for redemption, so as to be, and to continue
to be available therefor, then, from and after the Mandatory Redemption Date,
dividends on the shares of the Series B Preferred Stock so called for redemption
shall cease to accrue, and said shares shall no longer be deemed to be
outstanding and shall not have the status of shares of Series B Preferred Stock,
and all rights of the holders thereof as shareholders of the Corporation (except
the right to receive from the Corporation the Redemption Price) shall cease,
irrespective of whether any certificates for shares called for redemption have
been surrendered to the Corporation. Upon surrender, in accordance with said
notice, of the certificates for any shares so redeemed (properly endorsed or
assigned for transfer), such shares shall be redeemed by the Corporation at the
Redemption Price and no holder of shares called for redemption shall be entitled
to receive payment of the Redemption Price therefor until such surrender to the
Corporation has been accomplished or a duly executed affidavit of lost
certificate shall have been delivered to the Corporation. In case fewer than all
the shares represented by any such certificate are redeemed, a new certificate
or certificates shall be issued representing the unredeemed shares without cost
to the holder thereof (so long as such certificate is issued to the holder).
(g) Any funds deposited with a bank or trust company for the
purpose of redeeming Series B Preferred Stock shall be irrevocable except that:
(i) the Corporation shall be entitled to receive from such
bank or trust company the interest or other earnings, if any, earned on any
money so deposited in trust, and the holders of any shares redeemed shall
have no claim to such interest or other earnings; and
(ii) any balance of monies so deposited by the Corporation
and unclaimed by the holders of the Series B Preferred Stock entitled
thereto at the expiration of two (2) years from the applicable Mandatory
Redemption Date shall be repaid, together with any interest or other
earnings earned thereon, to the Corporation, and after any such repayment,
the holders of the shares entitled to the funds so repaid to the
Corporation shall look only to the Corporation for payment without interest
or other earnings.
(h) Notwithstanding anything to the contrary herein, no shares of
Series B Preferred Stock may be redeemed except with funds legally available for
the payment of the Redemption Price.
6. Voting Rights.
(a) Except as otherwise set forth in this paragraph 6 and the
Shareholders Agreement or as otherwise required by law, each share of Series B
Preferred Stock issued and outstanding shall have the right to vote on all
matters presented to the holders of the Common Stock for vote in the number of
votes equal at any time to the number of shares of Common Stock into which each
share of Series B
22
<PAGE> 55
Preferred Stock would then be convertible, and the holders of the Series B
Preferred Stock and Parity Stock shall vote with the holders of the Common Stock
as a single class.
(b) In addition to any vote or consent of shareholders required by
law or the Certificate of Incorporation of the Corporation, the affirmative
consent of the holders of a majority of the issued and outstanding shares of
Series B Preferred Stock at the time outstanding, voting as a single class,
given in person or by proxy, either in writing without a meeting or by vote at
any meeting called for the purpose, shall be necessary for effecting or
validating:
(i) (x) Any amendment, alteration or repeal of any of the
provisions of the Certificate of Incorporation (including without
limitation this Certificate of Designation) of the Corporation or (y) any
amendment of the by-laws of the Corporation that materially affects the
rights of the holders of the Series B Preferred Stock;
(ii) Any action by the Corporation or any of its
subsidiaries not approved in advance by the Series B Director to effect any
amendment, alteration or repeal of any of the provisions of the articles of
organization, operating agreements, certificates of limited partnership, or
partnership agreements of any of the Corporation's Affiliates or
subsidiaries (except such amendments, alterations or repeals that are
ministerial in nature or required to effect a transfer of ownership
interests in the Corporation's Affiliates or subsidiaries (other than any
ownership interest beneficially owned by the Corporation));
(iii) Any authorization, issuance or creation of, or
increase in the authorized amount of, (x) any shares of any class or any
security of any class ranking senior to the shares of Series B Preferred
Stock in the distribution of assets on any liquidation, dissolution or
winding up of the Corporation or in the payment of dividends or requiring
redemption at any time any shares of Series B Preferred Stock are still
outstanding, or (y) any shares of Parity Stock (except shares issued as
"paid-in-kind" dividends on Parity Stock provided Pro Rata dividends have
also been declared and paid on the Series B Preferred Stock and except,
prior to the commencement of the PIK Dividend Payment Period, shares issued
as "paid-in-kind" dividends on the Series A Preferred Stock as required by
the terms thereof as in effect on the Initial Issue Date of the Series B
Preferred Stock);
(iv) Any action by the Corporation or any of its
subsidiaries not approved in advance by the Series B Director to effect the
authorization, issuance or creation of, or increase in the authorized
amount of, any membership interests, limited partnership interests or other
equity security interests of any of the Corporation's Affiliates or
subsidiaries;
23
<PAGE> 56
(v) Any increase or decrease (other than by redemption or
conversion) in the total number of authorized shares of Series B Preferred
Stock or any issuance of the currently authorized shares of the Series B
Preferred Stock other than the issuance of shares of Series B Preferred
Stock pursuant to the Stock Purchase Agreement or as PIK Dividends;
(vi) Any transaction or series of related transactions
that entails the sale, lease, assignment, transfer or other conveyance of
assets having a value greater than $10 million (measured by the book value
at the date of such transaction) of the Corporation and its subsidiaries
(determined on a consolidated basis); any sale or issuance of shares of
capital stock of any subsidiary (other than such sales or issuance approved
in advance by the Series B Director), any consolidation or merger involving
the Corporation or any of such subsidiaries other than a consolidation or
merger in which the Corporation or subsidiary, as the case may be, is the
surviving entity and no change in the capital stock or ownership of the
Corporation or the subsidiary, as the case may be, occurs, or any
reclassification or recapitalization of any capital stock of the
Corporation, or any dissolution, liquidation, or winding up of the
Corporation, or any agreement to become so obligated;
(vii) Any acquisition or series of related acquisitions of
a business, businesses or assets involving aggregate consideration of $10
million or more;
(viii) The incurrence of, or agreement to incur, any
Indebtedness which would result in a Debt to Equity Ratio at the time the
Indebtedness is incurred (after giving effect to such incurrence) of
greater than 1:1, as measured based upon the balance sheet of the
Corporation prepared as of the last day of the immediately preceding month,
with a pro forma adjustment for the Indebtedness incurred and any equity
invested in the Corporation since such date, other than such incurrences or
agreements to incur Indebtedness that have been approved in advance by the
Series B Director;
(ix) Any action by the Corporation or any of its
subsidiaries not approved in advance by the Series B Director to effect the
incurrence of, or agreement to incur, any Indebtedness by any of the
Corporation's Affiliates or subsidiaries;
(x) Any loan, advance or guarantee to, or for the benefit
of, or any sale, lease, transfer or disposition of any of the properties or
assets of the Corporation or its subsidiaries to, or for the benefit of, or
any purchase or lease of any property or assets from, or the execution,
performance or amendment of any contract, agreement or understanding with,
or for the benefit of, any Affiliate of the Corporation or its
subsidiaries;
24
<PAGE> 57
(xi) Any declaration or payment of any dividends on or any
declaration or making of any other distribution, directly or indirectly,
through subsidiaries (excluding dividends and distributions made to all
owners of the Corporation's Affiliates in proportion to their respective
ownership interests) or otherwise, on account of any Parity Stock (unless
Pro Rata dividends have also been declared or paid on the Series B
Preferred Stock and except that, prior to the commencement of the PIK
Dividend Payment Period, "paid-in-kind" dividends on the Series A
Convertible Preferred Stock of the Corporation may be paid thereon as
required by the terms thereof as in effect on the Initial Issue Date of the
Series B Preferred Stock) or Subordinate Stock or the setting apart of any
sum for any such purpose;
(xii) The appointment or involuntary termination of the
Chairman of the Board, Chief Executive Officer, Chief Financial Officer,
Chief Operating Officer or other senior officers of the Corporation or its
subsidiaries;
(c) The rights of the holders of the Series B Preferred Stock may
be exercised in writing without a meeting or by proxy or in person at a special
meeting of the holders of Series B Preferred Stock, called as hereinafter
provided, or at any annual meeting of stockholders held for the purpose of
electing directors, and thereafter at such annual meetings or by a holder of
Series B Preferred Stock designated in writing by the written consent of the
holders of Series B Preferred Stock.
(d) A special meeting of the holders of Series B Preferred Stock
for purposes of voting on matters with respect to which the holders of such
shares are entitled to vote as a class may be called by the Secretary of the
Corporation or by a holder of Series B Preferred Stock designated in writing by
the holders of ten percent (10%) of the shares of Series B Preferred Stock then
outstanding. Such meeting may be called at the expense of the Corporation by
either such person. At any meeting of the holders of Series B Preferred Stock,
the presence in person or by proxy of the holders of a majority of the shares of
Series B Preferred Stock then outstanding shall constitute a quorum of the
Series B Preferred Stock for the purpose of voting on matters to be acted upon
by holders of the Series B Preferred Stock.
7. Exclusion of Other Rights.
Except as may otherwise be required by law, the shares of Series B
Preferred Stock shall not have any voting powers, preferences and relative,
participating, optional or other special rights, other than those specifically
set forth in this resolution (as such resolution may be amended from time to
time) and in the Certificate of Incorporation of the Corporation.
8. Headings of Subdivisions.
25
<PAGE> 58
The headings of the various subdivisions hereof are for
convenience of reference only and shall not affect the interpretation of any of
the provisions hereof.
9. Severability of Provisions.
If any voting powers, preferences and relative, participating,
optional and other special rights of the Series B Preferred Stock and
qualifications, limitations and restrictions thereof set forth in this
resolution (as such resolution may be amended from time to time) are invalid,
unlawful or incapable of being enforced by reason of any rule of law or public
policy, all other voting powers, preferences and relative, participating,
optional and other special rights of Series B Preferred Stock and
qualifications, limitations and restrictions thereof set forth in this
resolution (as so amended) which can be given effect without the invalid,
unlawful or unenforceable voting powers, preferences and relative,
participating, optional and other special rights of Series B Preferred Stock and
qualifications, limitations and restrictions thereof shall, nevertheless, remain
in full force and effect, and no voting powers, preferences and relative,
participating, optional or other special rights of Series B Preferred Stock and
qualifications, limitations and restrictions thereof herein set forth shall be
deemed dependent upon any other such voting powers, preferences and relative,
participating, optional or other special rights of Series B Preferred Stock and
qualifications, limitations and restrictions thereof unless so expressed herein.
26
<PAGE> 59
IN WITNESS WHEREOF, the Corporation has caused this Certificate to
be duly executed by an authorized officer and attested by its Secretary, this
________ day of _________________, 1997.
P.F. CHANG'S CHINA BISTRO, INC.
By:
------------------------------------
Richard L. Federico, President
Attest:
- ------------------------------
Robert T. Vivian, Secretary
27
<PAGE> 60
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
P. F. CHANG'S CHINA BISTRO, INC.
P. F. Chang's China Bistro, Inc., 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 the corporation, by unanimous
written consent, adopted a resolution proposing and declaring
advisable the following amendments to the Certificate of
Incorporation of the corporation:
RESOLVED that the definition of "Qualified Initial Public
Offering" set forth in Section 1 of the Certificate of
Designations, Preferences and Relative, Participating,
Optional and Other Special Rights of Preferred Stock and
Qualifications, Limitations and Restrictions Thereof of Series
A Convertible Preferred Stock of P. F. Chang's China Bistro,
Inc. is amended in its entirety to read as follows:
"Qualified Initial Public Offering" shall mean an underwritten
public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, of
shares of Common Stock, (i) the aggregate proceeds of which
equal or exceed $15,000,000 and (ii) the per share offering
price of which equals or exceeds (a) $5.25 if completed on or
before March 31, 1999 or (b) $10.00 if completed after March
31, 1999; provided, however, that the per share offering
prices referred to in clause (ii) shall be adjusted to reflect
the effect of any stock split or any subdivision,
reclassification, combination or like event of or with respect
to outstanding shares of Common Stock occurring after the
initial issuance date.
RESOLVED FURTHER, that the definition of "Qualified Initial
Public Offering" set forth in Section 1 of the Certificate of
Designations, Preferences and Relative, Participating,
Optional and Other Special Rights of Preferred Stock and
<PAGE> 61
Qualifications, Limitations and Restrictions Thereof of Series
B Convertible Preferred Stock of P. F. Chang's China Bistro,
Inc. is amended in its entirety to read as follows:
"Qualified Initial Public Offering" shall mean an underwritten
public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, of
shares of Common Stock, (i) the aggregate proceeds of which
equal or exceed $15,000,000 and (ii) the per share offering
price of which equals or exceeds (a) $5.25 if completed on or
before March 31, 1999 or (b) $10.00 if completed after March
31, 1999; provided, however, that the per share offering
prices referred to in clause (ii) shall be adjusted to reflect
the effect of any stock split or any subdivision,
reclassification, combination or like event of or with respect
to outstanding shares of Common Stock occurring after the
initial issuance date."
RESOLVED FURTHER, that a Section 2(h) be added to the
Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of Preferred
Stock and Qualifications, Limitations and Restrictions thereof
of Series A Convertible Preferred Stock of P.F. Chang's China
Bistro, Inc. to read in full as follows:
"(h) Notwithstanding anything contained herein to the
contrary, in the event the Corporation completes a Qualified
Initial Public Offering on or before December 31, 1998, each
holder of record of Series A Preferred Stock shall be entitled
to receive the PIK Dividend it would have received on
December 31, 1998 if the Qualified Initial Public Offering was
completed after such date."
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given written consent to the amendments in
accordance with the provisions of Section 228 of the General
Corporation Law of the State of Delaware and written notice of
the adoption of the amendments has been given as provided in
Section 228 of the General Corporation Law of the State of
Delaware to every stockholder entitled to such notice.
THIRD: That the amendments were duly adopted in accordance with the
applicable provisions of Sections 242 and 228 of the General
Corporation Law of the State of Delaware.
-2-
<PAGE> 62
IN WITNESS WHEREOF, P. F. Chang's China Bistro, Inc. has
caused this certificate to be signed by Richard L. Federico, its President, this
____ day of November, 1998.
P. F. Chang's China Bistro, Inc.
By: /s/ Richard L. Federico
---------------------------------
Richard L. Federico, President
-3-
<PAGE> 1
COMMON STOCK COMMON STOCK
NUMBER SHARES
INCORPORATED UNDER THE LAWS [P.F. CHANG'S LOGO] SEE REVERSE FOR
OF THE STATE OF DELAWARE CERTAIN DEFINITIONS
CUSIP
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.001 PAR VALUE, OF
P.F. CHANG'S CHINA BISTRO, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
/s/ Robert Vivian [P.F. CHANG'S /s/ illegible signature
CHIEF FINANCIAL OFFICER CORPORATE CHIEF EXECUTIVE OFFICER
AND SECRETARY SEAL] AND PRESIDENT
COUNTERSIGNED AND REGISTERED:
FIRST CHICAGO TRUST COMPANY
OF NEW YORK
TRANSFER AGENT AND REGISTRAR,
BY /S/ ILLEGIBLE SIGNATURE
AUTHORIZED SIGNATURE
<PAGE> 1
EXHIBIT 10.9
SECOND AMENDED AND RESTATED
REVOLVING LINE OF CREDIT
LOAN AGREEMENT
THIS SECOND AMENDED AND RESTATED REVOLVING LINE OF CREDIT LOAN AGREEMENT
(this "Agreement") is made as of November 10, 1998 (the "Effective Date"), by
and between FRANCHISE FINANCE CORPORATION OF AMERICA, a Delaware corporation
("FFCA"), whose address is 17207 North Perimeter Drive, Scottsdale, Arizona
85255, and P. F. CHANG'S CHINA BISTRO, INC., a Delaware corporation ("Debtor"),
whose address is 5090 North 40th Street, Suite 160, Phoenix, Arizona 85018.
PRELIMINARY STATEMENT:
Unless otherwise expressly provided herein, all defined terms used in this
Agreement shall have the meanings set forth in Section 1. Debtor and FFCA
entered into that certain Revolving Line of Credit Loan Agreement dated as of
October 24, 1997, as amended and restated in that certain Amended and Restated
Revolving Line of Credit Loan Agreement dated as of June 29, 1998 (collectively,
the "Original Agreement"). Subsequently, FFCA has agreed to increase the amount
of the Loan and Debtor has agreed to pledge its interest in the Collateral
pursuant to the Security Agreement in order to provide security for the Loan.
This Agreement amends and restates the Original Agreement in order to reflect
the terms and conditions associated with a further increase of the Loan and a
pledge of the Collateral.
AGREEMENT:
In consideration of the mutual covenants and provisions of this Agreement,
the parties agree as follows:
1. DEFINITIONS. The following terms shall have the following
meanings for all purposes of this Agreement:
"Acceleration Event" means (a) a breach or default, after the passage of
all applicable notice and cure or grace periods, under any other agreement,
instrument or promissory note other than the Loan Documents between, among or by
(i) Debtor or any Affiliate of Debtor, and, or for the benefit of, (ii) FFCA
and/or any Affiliate of FFCA, (b) the consummation of a sale of shares of stock
or other ownership interests in Debtor by Paul Fleming, Kelly Fleming, Robert
Vivian and Richard Federico (collectively, the "Primary Shareholders") other
than sales of such stock or ownership interests in Debtor among the Primary
Shareholders, members of the immediate family of the Primary Shareholders or
family trusts, foundations or other legal entities which are owned by and
created for the benefit of the Primary Shareholders, (c) the consummation of a
sale of stock or other ownership interests in Debtor pursuant to a public
offering or private placement pursuant to the Securities Act of 1933 or (d) at
any time that the Primary Shareholders, members of the immediate family of the
Primary Shareholders or family trusts, foundations or other legal entities which
are owned by and created for the benefit of the Primary Shareholders do not own
more than 40% of the stock or other ownership interests in Debtor.
"Action" has the meaning set forth in Section 7.
<PAGE> 2
"Advance" means any advance of the proceeds of the Loan made by FFCA
pursuant to the terms of Section 2.
"Affiliate" means any Person which directly or indirectly controls, is
under common control with, or is controlled by any other Person. For purposes of
this definition, "controls", "under common control with" and "controlled by"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through
ownership of voting securities or otherwise.
"Business Day" means any day on which banks are open for general banking
business in the State of Arizona other than a Saturday, Sunday, a legal holiday
or any other day on which banks in the State of Arizona are required or
authorized by law to close.
"Code" means the United States Bankruptcy Code, 11 U.S.C. Sec. 101 et
seq., as amended.
"Collateral" means Debtor's membership or partnership interest in the
Companies as more particularly described in the Security Agreement.
"Companies" means the Arizona general partnerships and the Arizona limited
liability companies identified on Exhibit G attached hereto.
"Counsel" means Lewis and Roca LLP, licensed in the State of Arizona
(where Debtor maintains its principal place of business) or such other legal
counsel as selected by Debtor and reasonably approved by FFCA.
"Debt" means as to such Person at any time (without duplication): (a) all
obligations of such Person for borrowed money; (b) all obligations of such
Person evidenced by bonds, notes, debentures or other similar instruments; (c)
all obligations of such Person to pay the deferred purchase price of property or
services; (d) all capital lease obligations of such Person; (e) all contingent
obligations or other obligations of others guaranteed by such Person; (f) all
obligations secured by a lien existing on property owned by such Person, whether
or not the obligations secured thereby have been assumed by such Person or are
nonrecourse to the credit of such Person; and (g) all reimbursement obligations
of such Person (whether contingent or otherwise) in respect of letters of
credit, bankers' acceptances, surety or other bonds and similar instruments.
"Effective Date" has the meaning set forth in the introductory
paragraph of this Agreement.
"Event of Default" has the meaning set forth in Section 7.
"Fee" means a draw fee equal to .5% of the amount of each Advance.
"Indemnified Parties" has the meaning set forth in Section 9.
"Joint Venture Agreements" means those Joint Venture Agreements and
Operating Agreements between Debtor and the respective Partners of each
Company.
2
<PAGE> 3
"Loan" means the revolving line of credit in the Maximum Loan Amount and
as described in Section 2.
"Loan Documents" means, collectively, this Agreement, the Note, the
Security Agreement, the UCC Financing Statements, the Negative Pledges and all
other documents, instruments and agreements executed in connection therewith or
contemplated thereby.
"Management Agreements" means the management agreements between Debtor and
a Company with respect to each of the Premises.
"Material Adverse Effect" means a material adverse effect on (i) the
financial condition of Debtor or the Companies, as applicable or (ii) the
ability of Debtor or the Companies, as applicable, to perform its obligations
under the Loan Documents.
"Maturity Date" shall have the meaning set forth in the Note.
"Maximum Loan Amount" means $25,000,000.00.
"Negative Pledges" means the amended and restated negative pledge
agreements dated as of the Effective Date executed by the Companies in favor of
FFCA in the form of Exhibit F attached hereto. A Negative Pledge will be
executed for each of the Premises.
"Note" means the second amended and restated promissory note dated as of
the Effective Date executed by Debtor in favor of FFCA in the form of Exhibit A
attached to this Agreement, as such Note may be amended and/or amended and
restated and/or substituted from time to time as contemplated by Section 2. The
term "Note" shall also include all additional promissory notes executed and
delivered by Debtor to FFCA from time to time as contemplated by Section 2.
"Partners" means, as applicable, the general partners (other than Debtor)
for each of the Companies that are general partnerships and the members (other
than Debtor) of the Companies that are limited liability companies.
"Person" shall mean any individual, corporation, partnership, limited
liability company, trust, unincorporated organization, governmental authority or
any other form of entity.
"Premises" means the parcels of real estate owned or leased by the Debtor
described in Exhibit D attached hereto, all rights, privileges and appurtenances
associated therewith, and all buildings, fixtures and other improvements now or
hereafter located thereon (whether or not affixed to such real estate).
"Security Agreement" means the amended and restated security agreement
dated as of the Effective Date executed by Debtor in favor of FFCA in the form
of Exhibit E attached to this Agreement, as such Security Agreement may be
amended from time to time.
"Subsidiary" means any corporation or other entity of which at least a
majority of the outstanding shares of stock or other ownership interests having
by the terms thereof ordinary voting power to elect a majority of the board of
directors (or Persons performing similar functions) of such corporation
(irrespective of whether or not at the time stock of any other class
3
<PAGE> 4
or classes of such corporation or entity shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by Debtor or one or more of the Subsidiaries or
by Debtor and one or more of the Subsidiaries.
"UCC Financing Statements" means those UCC financing statements required
by FFCA to be executed and delivered by Debtor that are necessary to perfect
FFCA's security interest in the Collateral.
2. REVOLVING LINE OF CREDIT. A. On the terms and subject to the
satisfaction by Debtor of the conditions set forth in this Agreement, FFCA
agrees to make the Loan to Debtor, which Loan will be in the form of Advances
made from time to time as provided in this Agreement. The outstanding aggregate
principal amount of the Loan shall not exceed the Maximum Loan Amount at any
time. So long as no event has occurred which is, or with the passage of time or
the giving of notice or both under the Loan Documents would constitute, an Event
of Default or an Acceleration Event, Debtor may borrow, prepay and reborrow,
from the Effective Date until the Maturity Date, an amount up to the Maximum
Loan Amount. Debtor shall not request an Advance in an amount less than
$500,000.00 and no more than once in a calendar month.
B. Simultaneously with the execution and delivery of this Agreement,
Debtor shall execute and deliver to FFCA the Note. The obligation of Debtor to
pay the outstanding aggregate principal amount of all Advances plus accrued
interest thereon shall be evidenced by the Note. Debtor irrevocably authorizes
FFCA to make or cause to be made, at or about the time of any Advance or at the
time of FFCA's receipt of any payment of the principal amount of the Note, an
appropriate notation in FFCA's records reflecting the amount of such Advance or
payment, as applicable. The outstanding aggregate principal amount of the Note
plus accrued interest thereon set forth in FFCA's records maintained with
respect to the Note (which may include computer records) shall, absent manifest
error, be prima facie evidence of the outstanding aggregate principal amount
plus accrued interest thereon due and owing to FFCA, but the failure to record,
or any error in so recording, any such amount on FFCA's records shall not limit
or otherwise affect the obligations of Debtor under the Note to make payments
when due. Notwithstanding the foregoing, Debtor agrees to execute such
amendments to the Note, amendments and restatements of the Note and/or
substitute and/or additional promissory notes in the form of the Note as FFCA
may reasonably request to evidence Debtor's obligations to FFCA under the Loan
Documents.
C. Debtor shall notify FFCA at least five Business Days before the
Business Day on which Debtor desires to receive an Advance; provided, however,
Debtor acknowledges that each Advance shall be made on the first Business Day of
the month immediately following the month in which Debtor notifies FFCA of its
desire to receive such Advance. Each such notice shall be in the form of Exhibit
B attached hereto (each, a "Notice"), and shall set forth the requested amount
of each Advance and such other information required by the Notice. Each Notice
shall constitute a certification by Debtor that the representations and
warranties of Debtor set forth in the Loan Documents, are true, correct and
complete in all material respects as of the date of such Notice and as of the
date of such requested Advance and that Debtor has satisfied each of the
conditions precedent set forth in this Agreement. FFCA's obligation to fund each
Advance shall
4
<PAGE> 5
be subject to the satisfaction of the following conditions precedent as of the
date of the requested Advance:
(i) no event shall have occurred which is, or with the passage of
time or the giving of notice or both under the Loan Documents would
constitute, an Event of Default or an Acceleration Event;
(ii) Debtor shall be in compliance with each of the covenants set
forth in Section 5;
(iii) the outstanding principal balance of the Loan, together with
the amount of the requested Advance, must not exceed the Maximum Loan
Amount; and
(iv) there shall have been no material adverse change in Debtor's
business, operations, assets or financial condition since the Effective
Date, as determined by FFCA in its reasonable discretion.
Upon Debtor's satisfaction of the foregoing conditions, FFCA will disburse the
requested Advance in immediately available funds to such account as Debtor shall
have specified in the Notice or as otherwise directed by Debtor in the Notice.
D. The Loan shall bear interest at a variable rate of interest as set
forth in the Note and shall be payable in arrears on the first day of each month
based on the then outstanding principal balance of the Note. Debtor shall have
the right to prepay (without premium or penalty) the Note in whole or in part at
any time provided that any such prepayment shall only be made on a regularly
scheduled payment date upon not less than 10 days prior written notice from
Debtor to FFCA. Debtor shall pay on the Maturity Date, and there shall become
absolutely due and payable on the Maturity Date, the outstanding principal
amount of the Loan and all accrued but unpaid interest thereon.
E. As security for the Loan, Debtor agrees to pledge its interest in
the Collateral pursuant to the Security Agreement. In addition, Debtor will
execute and deliver the Negative Pledges. A Negative Pledge will be recorded in
the real estate records of each county where each of the Premises is located.
E. All costs and expenses of the transaction described in this
Agreement shall be paid by Debtor, including, without limitation, the attorneys'
fees of Debtor and the reasonable attorneys' fees and expenses of FFCA.
F. FFCA's obligation to provide the Loan is further subject to the
delivery to FFCA of Counsel's opinion in form and substance reasonably
satisfactory to FFCA.
G. The Fee shall be paid at the time of each Advance from each Advance
and shall be deemed nonrefundable and fully earned with each Advance.
3. REPRESENTATIONS AND WARRANTIES OF FFCA. The representations and
warranties of FFCA contained in this Section are being made by FFCA as of the
Effective Date to induce Debtor to enter into this Agreement and consummate the
transactions contemplated herein, and
5
<PAGE> 6
Debtor has relied, and will continue to rely, upon such representations and
warranties from and after the execution of this Agreement. FFCA represents and
warrants to Debtor as follows:
A. Organization of FFCA. FFCA has been duly formed, is validly
existing and has taken all necessary action to authorize the execution,
delivery and performance by FFCA of this Agreement.
B. Authority of FFCA. The person who has executed this Agreement on
behalf of FFCA is duly authorized so to do.
C. Enforceability. Upon execution by FFCA, this Agreement shall
constitute the legal, valid and binding obligation of FFCA, enforceable
against FFCA in accordance with its terms.
All representations and warranties of FFCA made in this Agreement shall
survive the execution of this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF DEBTOR. The representations and
warranties of Debtor contained in this Section are being made by Debtor as of
the Effective Date and the date of each Advance to induce FFCA to enter into
this Agreement and consummate the transactions contemplated herein, and FFCA has
relied, and will continue to rely, upon such representations and warranties from
and after the Effective Date and the date of each Advance.
Debtor represents and warrants to FFCA as follows:
A. Information and Financial Statements. Debtor has delivered to
FFCA financial statements (either audited financial statements or, if
Debtor does not have audited financial statements, certified financial
statements) and certain other information concerning itself, which
financial statements and other information are true, correct and complete
in all material respects; and no material adverse change has occurred with
respect to any such financial statements and other information provided to
FFCA since the date such financial statements and other information were
prepared or delivered to FFCA. Debtor understands that FFCA is relying
upon such financial statements and information and Debtor represents that
such reliance is reasonable. All such financial statements were prepared
in accordance with generally accepted accounting principles consistently
applied (except as otherwise noted in such financial statements) and
accurately reflect as of the Effective Date the financial condition of
each individual or entity to which they pertain.
B. Organization and Authority of Debtor. Debtor is duly organized or
formed, validly existing and in good standing under the laws of the State
of Delaware and qualified as a foreign corporation to do business in any
jurisdiction where such qualification is required. All necessary corporate
action has been taken to authorize the execution, delivery and performance
of the Loan Documents. The person(s) who have executed the Loan Documents
on behalf of Debtor are duly authorized so to do.
C. Organization and Authority of Companies. The Companies are duly
organized or formed, validly existing and in good standing under the laws
of the states where they were organized and qualified as foreign
partnerships or foreign limited liability companies to do business in any
jurisdiction where such qualification is required.
6
<PAGE> 7
D. Enforceability of Documents. Upon execution by Debtor, the
Loan Documents shall constitute the legal, valid and binding
obligations of Debtor, enforceable against Debtor in accordance with
their respective terms.
E. Litigation. There are no suits, actions, proceedings or
investigations pending or, to the actual knowledge of Debtor,
threatened against or involving Debtor, the Companies, the Collateral,
the Premises or any of Debtor's or any of the Companies' assets before
any court, arbitrator, or administrative or governmental body which
might reasonably result in a Material Adverse Effect.
F. Absence of Breaches or Defaults. Neither Debtor nor any of
the Companies are in default beyond any applicable grace period under
any other document, instrument or agreement to which Debtor or any of
the Companies is a party (including, without limitation, the
Partnership Agreements and the Management Agreements) or by which the
Debtor, the Companies, the Collateral, the Premises or any of the
property of Debtor or any of the Companies is subject or bound which
would have a Material Adverse Effect or would materially interfere with
or prevent Debtor's or the Companies performance under the Loan
Documents. The authorization, execution, delivery and performance of
the Loan Documents will not result in a Material Adverse Effect or
result in any breach or default under any other document, instrument or
agreement to which Debtor or any of the Companies is a party
(including, without limitation, the Partnership Agreements and the
Management Agreements) or by which Debtor, the Companies, the
Collateral, the Premises or any of the property of Debtor is subject or
bound which would materially interfere with or prevent Debtor's or the
Companies' performance under the Loan Documents. The authorization,
execution, delivery and performance of the Loan Documents will not
violate any applicable law, statute, regulation, rule, ordinance, code,
rule or order.
G. Licenses, Permits, Consents and Approvals. Debtor or the
Companies has all required licenses, permits, consents and approvals,
both governmental and private, to use and operate the Collateral, the
Premises and the rest of their assets and conduct their business in the
intended manner.
H. Insolvency; Net Worth. Debtor is not insolvent within the
meaning of the Code. Debtor has a net worth of at least $10,000,000.00,
as determined in accordance with generally accepted accounting
principles consistently applied, except that for purposes of
calculating Debtor's net worth hereunder, convertible preferred stock
issued by Debtor shall be treated as equity.
I. Taxes. Debtor and the Companies have paid, in the ordinary
course of business, all taxes, assessments, levies and other
governmental charges which have been levied or imposed upon Debtor, the
Companies, the Collateral, the Premises and/or Debtor's and properties
and would be due and payable.
J. Title to Collateral; First Priority Security Interest.
Debtor owns, and with respect to Collateral acquired after the date
hereof, Debtor will own, legally and beneficially, the Collateral, free
and clear of any lien, security interest, pledge, hypothecation, claim
or other encumbrance, or any right or option on the part of any third
7
<PAGE> 8
person to purchase or otherwise acquire or obtain any lien or security
interest in the Collateral or any part thereof, except for the lien and
security interest granted in the Security Agreement in favor of FFCA.
Upon the execution of the Loan Documents by the applicable parties,
Secured Party shall have a valid first priority lien upon and security
interest in the Collateral.
K. Title to Premises. Debtor holds either (i) fee title to the
Premises, (ii) a leasehold interest in the land relating to the
Premises and fee title to the buildings and improvements located
thereon or (iii) a leasehold interest in the Premises, free and clear
of all liens, encumbrances, charges and security interests of any
nature whatsoever, except as otherwise disclosed in writing to FFCA.
L. Collateral Genuine. The Collateral is genuine, free from
any restriction on transfer, duly and validly authorized and issued,
constitutes the valid and legally binding obligation of the Companies,
enforceable in accordance with its terms, is fully paid and
non-assessable, and is hereby duly and validly pledged and hypothecated
to FFCA in accordance with law. The interests listed on Schedule II
represent one hundred (100%) percent of the issued and outstanding
interests of the Companies. There are no other interests issued and
outstanding and there are no other interests in the Companies.
M. No Actions. No action has been brought or is threatened
which would in any way prohibit or restrict the execution and delivery
of any of the Loan Documents by Debtor or the performance in all
respects of Debtor thereunder.
All representations and warranties of Debtor made in this Agreement
shall survive the execution of this Agreement and each Advance.
5. COVENANTS. Debtor covenants to FFCA from and after the Effective
Date as follows:
A. Books, Records and Inspections. Debtor shall, at all
reasonable times upon prior written notice from FFCA and during normal
business hours, (i) provide FFCA and FFCA's officers, employees,
agents, advisors, attorneys and accountants with access to Debtor's
personal and real properties and books and records, and (ii) allow such
persons to make such inquires of Debtor's officers and employees and to
make copies and perform such verifications as FFCA considers reasonably
necessary; provided, however, all such inspections, copies and
verifications shall be at FFCA's sole cost and expense and FFCA shall
reasonably attempt to minimize, during any such activity, interference
with the operation of Debtor's business and FFCA shall keep any
information obtained confidential; provided, however, FFCA shall not be
required to keep confidential (1) any information which had previously
been made public, (2) information that FFCA is required to disclose by
court order, supoena or under federal or state law, or (3) information
received by FFCA from a third party.
B. Net Worth. At all times while the obligations of Debtor to
FFCA pursuant to the Loan Documents are outstanding, Debtor shall
maintain a net worth of at least $10,000,000.00, as determined in
accordance with generally accepted accounting principles
8
<PAGE> 9
consistently applied, except that for purposes of calculating Debtor's
net worth hereunder convertible preferred stock issued by Debtor shall
be treated as equity.
C. Reporting Obligations. Debtor will provide FFCA with each
of the following:
(i) Financial Statements. Within 45 days after the
end of each fiscal quarter and within 120 days after the end
of each fiscal year of Debtor, Debtor shall deliver to FFCA
complete financial statements of Debtor including a balance
sheet, profit and loss statement, cash flow statement and all
other related schedules for the fiscal period then ended. All
such financial statements shall be prepared in accordance with
generally accepted accounting principles, consistently applied
from period to period, and shall be certified to be accurate
and complete by Debtor (or the Treasurer or other appropriate
officer of Debtor). Debtor understands that FFCA is relying
upon such financial statements and Debtor represents that such
reliance is reasonable. The financial statements delivered to
FFCA need not be audited, but Debtor shall deliver to FFCA
copies of any audited financial statements of Debtor which may
be prepared, as soon as they are available.
(ii) Event of Default or Acceleration Event.
Promptly, but in any event within five days, after Debtor
becomes aware of an Event of Default or an Acceleration Event,
written notification to an officer of FFCA specifying the
nature and period of existence thereof and what action Debtor
is taking or proposes to take with respect thereto.
(iii) Litigation. Within ten days after Debtor
becomes aware of any action, suit or proceeding pending or
threatened in writing against or involving Debtor and/or
Debtor's properties, except for those actions, suits or
proceedings (1) for which damages of less than $250,000 have
been sought, threatened or are likely to be incurred and (2)
which Debtor in good faith determines will be covered by its
insurance (including worker's compensation claims), Debtor
shall notify FFCA of such action, suit or proceeding and in
such notice specify the nature thereof, whether the alleged
liability therein is covered by insurance then in effect and,
if so covered, the monetary coverage thereof, and what action
Debtor is taking or proposes to take with respect thereto.
(iv) Certificates. At the time of each Advance, a
certificate of an officer of Debtor, substantially in the form
attached hereto as Exhibit B.
(v) Auditors' Reports. Promptly upon receipt thereof,
a copy of each report submitted to Debtor by its independent
accountants in connection with any annual, interim or special
audit made by it of the books of Debtor.
(vi) Other Information. Debtor shall deliver to FFCA
promptly after the receipt of written request therefor
information concerning Debtor requested by FFCA that is
required to satisfy all requirements applicable to FFCA
pursuant to
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<PAGE> 10
the Securities Exchange Act of 1934 and all other regulatory
laws applicable to FFCA or to which FFCA is subject or bound.
D. Payment of Taxes, Etc. Unless Debtor shall contest the
amount or validity thereof in the manner described below, Debtor shall
pay all taxes, assessments and governmental charges or levies imposed
upon it or upon its income or profits, or upon any properties belonging
to it, prior to the date on which penalties attach thereto, and all
lawful claims which, if unpaid, might become a lien upon any of its
properties. Debtor may, at its own expense, contest or cause to be
contested such taxes, assessments, governmental charges or levies or
other claims (i) in good faith, (ii) by proper proceedings, and (iii)
against which adequate reserves in accordance with generally accepted
accounting principles are being maintained.
E. Organization of Debtor. Debtor will continue to be a
corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction and qualified to do business in any
jurisdiction where such qualification is required.
F. Licenses, Permits, Consents and Approvals. Debtor shall
maintain in full force and effect all required licenses, permits,
consents and approvals, both governmental and private, to use and
operate its assets and conduct its business in the intended manner.
G. Use of Proceeds. Debtor shall use the proceeds of the Loan
for (i) the purchase of interests of minority owners of Debtor, (ii)
working capital and (iii) construction or renovation of P.F. Chang's
China Bistro restaurants.
H. Debt. Debtor shall not, and shall not permit any Subsidiary
to, incur, create, assume or permit to exist any Debt, except (a) Debt
to FFCA or Affiliates of FFCA; (b) Debt incurred pursuant to trade
accounts arising in the ordinary course of business that are not past
due by more than 30 days; (c) letters of credit for deposits not to
exceed $15,000.00 each and (d) existing Debt described on the attached
Exhibit C and any extensions, substitutions or renewals thereof.
I. Fundamental Changes. Debtor shall not consolidate with or
merge into any Person or permit any Person to merge into it; provided
that the Companies may enter into a consolidation or merger with any
person if (i) the survivor formed by or resulting from such
consolidation or merger is the Companies and (ii) at the time of such
consolidation or merger and immediately after giving effect thereto no
Event of Default or Acceleration Event shall have occurred and be
continuing.
J. Disposition of Assets. Without the prior written consent of
FFCA, Debtor shall not, directly or indirectly, sell, assign, lease,
transfer or otherwise dispose of all or substantially all of its assets
(other than in the ordinary course of business for full and fair
consideration).
K. No New Subsidiaries. Without the prior written consent of
FFCA, Debtor shall not, and shall not permit any of its Subsidiaries
to, acquire, incorporate or otherwise organize any Subsidiary, which
was not in existence as of the Effective Date.
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<PAGE> 11
L. Transactions With Affiliates. Without the prior written
consent of FFCA, Debtor will not enter into, and will not permit any
Subsidiary to enter into, any transaction, including, without
limitation, the purchase, sale, or exchange of property or the
rendering of any service, with any Affiliate of Debtor or such
Subsidiary, except transactions for fair value in accordance with
reasonable commercial standards.
M. Maintenance of Assets. Debtor shall maintain, keep and
preserve, and will cause each Subsidiary to maintain, keep and
preserve, all of its tangible and intangible property and other assets
that are necessary and useful in proper conduct of its business.
N. Amendment of Joint Venture Agreements. Without the prior
written approval of FFCA in its sole and absolute discretion, Debtor
shall not amend or terminate any of the Joint Venture Agreements or the
Management Agreements nor shall it permit any of the Joint Venture
Agreements or the Management Agreements to be amended or terminated.
O. Title; First Priority Lien. Debtor shall maintain good and
marketable fee simple title to the Collateral, free and clear of all
liens, encumbrances, charges and other exceptions to title. Debtor
shall maintain good and marketable title to or valid and binding
leasehold interests in, as applicable, the Premises, free and clear of
all liens, encumbrances, charges and other exceptions to title.
6. TRANSACTION CHARACTERIZATION. This Agreement is a contract to extend
a financial accommodation (as such term is used in the Code) for the benefit of
Debtor. It is the intent of the parties hereto that the business relationship
created by this Agreement, the Note and the other Loan Documents is solely that
of creditor and debtor and has been entered into by both parties in reliance
upon the economic and legal bargains contained in the Loan Documents. None of
the agreements contained in the Loan Documents is intended, nor shall the same
be deemed or construed, to create a partnership between Debtor and FFCA, to make
them joint venturers, to make Debtor an agent, legal representative, partner,
subsidiary or employee of FFCA, nor to make FFCA in any way responsible for the
debts, obligations or losses of Debtor.
7. DEFAULT AND REMEDIES. A. Each of the following shall be deemed an
event of default by Debtor, after notice, to the extent required hereunder, and
after the expiration of any applicable grace or cure period without the cure
thereof (each, an "Event of Default"):
(1) If any representation or warranty of Debtor set forth in
any of the Loan Documents is false in any material respect when made or
becomes false in any material respect, or if Debtor renders any
materially false statement or account;
(2) If any principal, interest or other monetary sum due under
the Note or any other Loan Document is not paid within five days from
the date when due and FFCA shall have given notice of such failure to
Debtor and such failure shall not have been cured by Debtor within five
days from the delivery of such notice;
(3) If Debtor fails to observe or perform any of the other
covenants (except as otherwise provided below), conditions, or
obligations of this Agreement other than the covenants in Sections 5.B,
5.H, 5.I, 5.J, 5.N and 5.O of this Agreement or there is a breach
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<PAGE> 12
or default under any other Loan Document beyond any applicable notice
or cure period; provided, however, if any such event does not involve
the payment of any monetary sum, is not the result of a willful or
intentional act or omission of Debtor, does not place any rights or
property of FFCA in immediate jeopardy, and is within the reasonable
power of Debtor to promptly cure after receipt of notice thereof, all
as determined by FFCA in its reasonable discretion, then such event
shall not constitute an Event of Default hereunder, unless otherwise
expressly provided herein, unless and until FFCA shall have given
Debtor notice thereof and a period of 30 days shall have elapsed,
during which period Debtor may correct or cure such event, upon failure
of which an Event of Default shall be deemed to have occurred hereunder
(except as otherwise provided in the following sentence) without
further notice or demand of any kind being required. If such
nonmonetary event cannot reasonably be cured within such 30-day period,
as determined by FFCA in its reasonable discretion, and Debtor is
diligently pursuing a cure of such event, then an Event of Default
shall not be deemed to have occurred hereunder upon the expiration of
such 30-day period and Debtor shall have a reasonable period to cure
such event beyond such 30-day period, which shall not exceed 90 days
after receiving notice of the event from FFCA. If Debtor shall fail to
correct or cure such event within such 90-day period, an Event of
Default shall be deemed to have occurred hereunder without further
notice or demand of any kind being required;
(4) If Debtor fails to observe or perform any of the covenants
in Sections 5.B, 5.H, 5.I, 5.J, 5.N or 5.O of this Agreement; or
(5) If Debtor becomes insolvent within the meaning of the
Code, files or notifies FFCA that it intends to file a petition under
the Code, initiates a proceeding under any similar law or statute
relating to bankruptcy, insolvency, reorganization, winding up or
adjustment of debts (collectively, an "Action"), becomes the subject of
either an involuntary Action or petition under the Code without such
involuntary Action or petition being dismissed within 30 days of filing
or, if Debtor is diligently proceeding to dismiss such petition, such
longer period of time as if required, but in no event shall such longer
period of time be greater than 90 days, or is not generally paying its
debts as the same become due.
B. Upon and during the continuance of an Event of Default,
subject to the limitations, notices and cure periods set forth in
subsection A, or an Acceleration Event, FFCA shall have no obligation
to fund any Advance to Debtor and FFCA may declare all obligations of
Debtor under the Note, this Agreement and any other Loan Document to be
due and payable, and the same shall thereupon become due and payable
without any presentment, demand, protest or notice of any kind except
as expressly provided herein. Thereafter, FFCA may exercise, at its
option, concurrently, successively or in any combination, all remedies
available at law or in equity, including without limitation any one or
more of the remedies available under the Note or any other Loan
Document. Neither the acceptance of this Agreement nor its enforcement
shall prejudice or in any manner affect FFCA's right to realize upon or
enforce any other security now or hereafter held by FFCA, it being
agreed that FFCA shall be entitled to enforce this Agreement and any
other security now or hereafter held by FFCA in such order and manner
as it may in its absolute discretion determine. No remedy herein
conferred upon or reserved to FFCA is intended to be exclusive of any
other remedy given hereunder or now or hereafter existing at law or in
equity or by statute. Every power or remedy given by any of the Loan
Documents to FFCA,
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<PAGE> 13
or to which FFCA may be otherwise entitled, may be exercised,
concurrently or independently, from time to time and as often as may be
deemed expedient by FFCA.
8. ASSIGNMENTS BY FFCA. FFCA may assign in whole or in part its rights
under this Agreement. Upon any unconditional assignment of FFCA's entire right
and interest hereunder, FFCA shall automatically be relieved, from and after the
date of such assignment, of liability for the performance of any obligation of
FFCA contained herein arising after the date of the assignment provided that any
assignee shall be bound by all of FFCA's obligations hereunder accruing from and
after the date of such assignment.
9. INDEMNITY. Debtor agrees to indemnify, hold harmless and defend FFCA
and each of its directors, officers, shareholders, employees, successors,
assigns, agents, experts, licensees, affiliates, lenders, mortgagees and
trustees, as applicable (collectively, the "Indemnified Parties"), from and
against any and all losses, costs, claims, liabilities, damages and expenses,
including, without limitation, reasonable attorneys' fees (collectively,
"Losses"), arising as the result of a breach of any of the representations,
warranties, covenants, agreements or obligations of Debtor set forth in this
Agreement, but excluding Losses suffered by an Indemnified Party directly
arising out of such Indemnified Party's gross negligence or willful misconduct.
10. MISCELLANEOUS PROVISIONS.
A. Notices. All notices, consents, approvals or other
instruments required or permitted to be given by either party pursuant
to this Agreement shall be in writing and given by (i) hand delivery,
(ii) facsimile, (iii) express overnight delivery service or (iv)
certified or registered mail, return receipt requested, and shall be
deemed to have been delivered upon (a) receipt, if hand delivered, (b)
transmission, if delivered by facsimile (and if a copy of such notice
is also mailed by certified or registered mail, return receipt
requested, and deposited with the U.S. Postal Service no later than the
first business day after the notice was transmitted by facsimile), (c)
the next business day following the date of deposit with the delivery
service, if delivered by express overnight delivery service, or (d) the
third business day following the day of deposit of such notice with the
United States Postal Service, if sent by certified or registered mail,
return receipt requested. Notices shall be provided to the parties and
addresses (or facsimile numbers, as applicable) specified below:
If to Debtor: P. F. Chang's China Bistro, Inc.
5090 North 40th Street, Suite 160
Phoenix, AZ 85018
Attention: Mr. Robert T. Vivian
Telephone: (602) 957-8986
Telecopy: (602) 957-8998
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<PAGE> 14
With a copy to: Kenneth Van Winkle, Jr., Esq.
Lewis and Roca LLP
40 North Central Avenue
Phoenix, AZ 85004-4429
Telephone: (602) 262-5311
Telecopy: (602) 262-5747
If to FFCA: Dennis L. Ruben, Esq.
Executive Vice President and
General Counsel
Franchise Finance Corporation of America
17207 North Perimeter Drive
Scottsdale, AZ 85255
Telephone: (602) 585-4500
Telecopy: (602) 585-2226
B. Waiver and Amendment. No provisions of this Agreement shall
be deemed waived or amended except by a written instrument
unambiguously setting forth the matter waived or amended and signed by
the party against which enforcement of such waiver or amendment is
sought. Waiver of any matter shall not be deemed a waiver of the same
or any other matter on any future occasion.
C. Captions. Captions are used throughout this Agreement for
convenience of reference only and shall not be considered in any manner
in the construction or interpretation hereof.
D. FFCA's Liability. Notwithstanding anything to the contrary
provided in this Agreement, it is specifically understood and agreed,
such agreement being a primary consideration for the execution of this
Agreement by FFCA, that (i) there shall be absolutely no personal
liability on the part of any shareholder, director, officer or employee
of FFCA, with respect to any of the terms, covenants and conditions of
this Agreement or the other Loan Documents, (ii) Debtor waives all
claims, demands and causes of action against FFCA's officers,
directors, employees and agents in the event of any breach by FFCA of
any of the terms, covenants and conditions of this Agreement or the
other Loan Documents to be performed by FFCA and (iii) Debtor shall
look solely to the assets of FFCA for the satisfaction of each and
every remedy of Debtor in the event of any breach by FFCA of any of the
terms, covenants and conditions of this Agreement or the other Loan
Documents to be performed by FFCA, such exculpation of liability to be
absolute and without any exception whatsoever.
E. Severability. The provisions of this Agreement shall be
deemed severable. If any part of this Agreement shall be held
unenforceable, the remainder shall remain in full force and effect, and
such unenforceable provision shall be reformed by such court so as to
give maximum legal effect to the intention of the parties as expressed
therein.
F. Construction Generally. This is an agreement between
parties who are experienced in sophisticated and complex matters
similar to the transaction contemplated by
14
<PAGE> 15
this Agreement and is entered into by both parties in reliance upon the
economic and legal bargains contained herein and shall be interpreted
and construed in a fair and impartial manner without regard to such
factors as the party which prepared the instrument, the relative
bargaining powers of the parties or the domicile of any party. Debtor
and FFCA were each represented by legal counsel competent in advising
them of their obligations and liabilities hereunder.
G. Other Documents. Each of the parties agrees to sign such
other and further documents as may be reasonably necessary to carry out
the intentions expressed in this Agreement.
H. Attorneys' Fees. In the event of any judicial or other
adversarial proceeding between the parties concerning this Agreement,
the prevailing party shall be entitled to recover its reasonable
attorneys' fees and other costs in addition to any other relief to
which it may be entitled. References in this Agreement to the
attorneys' fees and/or costs of a party shall mean both the reasonable
fees and costs of independent outside counsel retained by such party
with respect to this transaction and the reasonable fees and costs of
the party's in-house counsel incurred in connection with this
transaction.
I. Entire Agreement. This Agreement and the other Loan
Documents, together with any other certificates, instruments or
agreements to be delivered in connection therewith, constitute the
entire agreement between the parties with respect to the subject matter
hereof, and there are no other representations, warranties or
agreements, written or oral, between Debtor and FFCA with respect to
the subject matter of this Agreement.
J. Forum Selection; Jurisdiction; Venue; Choice of Law. Debtor
acknowledges that this Agreement was substantially negotiated in the
State of Arizona, the Agreement was signed and delivered by FFCA and
Debtor in the State of Arizona, all payments under the Note will be
delivered in the State of Arizona and there are substantial contacts
between the parties and the transactions contemplated herein and the
State of Arizona. For purposes of any action or proceeding arising out
of this Agreement or any of the other Loan Documents, the parties
hereto hereby expressly submit to the jurisdiction of all federal and
state courts located in the State of Arizona and Debtor consents that
it may be served with any process or paper by registered mail or by
personal service within or without the State of Arizona in accordance
with applicable law. Furthermore, Debtor waives and agrees not to
assert in any such action, suit or proceeding that it is not personally
subject to the jurisdiction of such courts, that the action, suit or
proceeding is brought in an inconvenient forum or that venue of the
action, suit or proceeding is improper. It is the intent of the parties
hereto that all provisions of this Agreement shall be governed by and
construed under the laws of the State of Arizona. Nothing in this
Section shall limit or restrict the right of FFCA to commence any
proceeding in the federal or state courts located in a state other than
Arizona to the extent FFCA deems such proceeding necessary or advisable
to exercise remedies available under this Agreement or the other Loan
Documents.
K. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
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<PAGE> 16
L. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of Debtor and FFCA and their respective successors
and permitted assigns, including, without limitation, any United States
trustee, any debtor in possession or any trustee appointed from a
private panel.
M. Survival. All representations, warranties, agreements,
obligations and indemnities of Debtor and FFCA set forth in this
Agreement shall survive the execution of this Agreement and each
Advance.
N. Waiver of Jury Trial and Punitive, Consequential, Special
and Indirect Damages. DEBTOR AND FFCA HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY WITH
RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING,
CLAIM OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST
THE OTHER OR ITS SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF
OR IN CONNECTION WITH THIS AGREEMENT OR ANY DOCUMENT CONTEMPLATED
HEREIN OR RELATED HERETO. THIS WAIVER BY THE PARTIES HERETO OF ANY
RIGHT EITHER MAY HAVE TO A TRIAL BY JURY HAS BEEN NEGOTIATED AND IS AN
ESSENTIAL ASPECT OF THEIR BARGAIN. FURTHERMORE, DEBTOR HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE
TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES FROM FFCA
WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING,
CLAIM OR COUNTERCLAIM BROUGHT BY DEBTOR AGAINST FFCA OR ITS SUCCESSORS
WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THE
WAIVER BY DEBTOR OF ANY RIGHT IT MAY HAVE TO SEEK PUNITIVE,
CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES HAS BEEN NEGOTIATED BY THE
PARTIES HERETO AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN.
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<PAGE> 17
IN WITNESS WHEREOF, Debtor and FFCA have entered into this Agreement as
of the date first above written.
FFCA:
FRANCHISE FINANCE CORPORATION OF
AMERICA, a Delaware corporation
By /s/STEPHEN Y. SCHWANZ
Printed Name STEPHEN Y. SCHWANZ
Its VICE PRESIDENT
DEBTOR:
P. F. CHANG'S CHINA BISTRO, INC., a
Delaware corporation
By /s/ROBERT VIVIAN
Printed Name ROBERT VIVIAN
Its CFO/SECRETARY
17
<PAGE> 18
STATE OF ARIZONA ]
] SS.
COUNTY OF MARICOPA ]
The foregoing instrument was acknowledged before me on November 10,
1998 by Stephen Y. Schwanz, Vice President of Franchise Finance Corporation of
America, a Delaware corporation, on behalf of the corporation.
/s/ Kelly A. Hallford
Notary Public
[STAMP]
My Commission Expires:
7/9/2002
STATE OF ARIZONA ]
] SS.
COUNTY OF MARICOPA ]
The foregoing instrument was acknowledged before me on November 10,
1998 by Robert Vivian, CFO of P. F. Chang's China Bistro, Inc., a Delaware
corporation, on behalf of the corporation.
/s/ Elizabeth L. Lehman
Notary Public
[STAMP]
My Commission Expires:
June 23, 2001
18
<PAGE> 19
EXHIBIT A
FORM OF NOTE
<PAGE> 20
SECOND AMENDED AND RESTATED
PROMISSORY NOTE
Dated as of November 10, 1998
$25,000,000.00 Scottsdale, Arizona
THIS SECOND AMENDED AND RESTATED PROMISSORY NOTE (this "Note") executed by
P.F. CHANG'S CHINA BISTRO, INC., a Delaware corporation ("Debtor"), amends and
restates that certain Promissory Note dated as of October 24, 1997 in the
principal amount of $10,000,000.00 and that certain Amended and Restated
Promissory Note dated as of June 29, 1998 in the principal amount of
$20,000,000.00, both payable to FRANCHISE FINANCE CORPORATION OF AMERICA, a
Delaware corporation ("FFCA").
Debtor, for value received, hereby promises to pay to FFCA, whose address
is 17207 North Perimeter Drive, Scottsdale, Arizona 85255, or order, on or
before the Maturity Date (as defined below), the principal sum of TWENTY-FIVE
MILLION AND NO/100 DOLLARS ($25,000,000.00), or such much thereof as may be
outstanding from time to time, in accordance with that certain Second Amended
and Restated Revolving Line of Credit Loan Agreement dated as of the date of
this Note between Debtor and FFCA, as such agreement may be amended from time
to time (the "Loan Agreement").
Initially capitalized terms which are not otherwise defined in this Note
shall have the meanings set forth in the Loan Agreement. The following terms
shall have the following meanings for all purposes of this Note:
"Applicable Margin" means an annual percentage equal to 6.00%.
"Adjustable Rate" means an annual interest rate equal to the sum of the
Adjustable Rate Basis plus the Applicable Margin.
"Adjustable Rate Basis" means, for any Interest Period, the annual
interest rate (rounded upwards, if necessary, to the nearest 1/100th of one
percent) appearing on Telerate Page 3750 (or any successor page) as the London
interbank offered rate for deposits in dollars at approximately 11:00 a.m.
(London time) on the Adjustable Rate Reset Date for a term comparable to such
Interest Period. If for any reasons such rate is not available, the term
"Adjustable Rate Basis" shall mean, for any Interest Period, the annual
interest rate (rounded upwards, if necessary, to the nearest 1/100th of one
percent) appearing on Reuters Screen LIBO Page as the London interbank offered
rate for deposits in dollars at approximately 11:00 a.m. (London time) on the
Adjustable Rate Reset Date for a term comparable to such Interest Period
provided, however, if more than one rate is specified on the Reuters Screen
LIBO Page, the applicable rate shall be the arithmetic mean of all such rates.
Notwithstanding the provisions of the foregoing two sentences, if, the annual
interest rate charge to FFCA under its then existing LIBOR based credit
facility (the "FFCA Credit Facility") is determined by a methodology other than
as described in such sentences, the
<PAGE> 21
Adjustable Rate Basis shall be determined in accordance with the
methodology for determining the annual interest rate under the FFCA Credit
Facility.
"Adjustable Rate Reset Date" means the fifteenth day of each calendar
month, or the next succeeding Business Day if such day is not a Business
Day, prior to the next Interest Period.
"Business Day" means any day on which FFCA is open for business in the
State of Arizona, other than a Saturday, Sunday or a legal holiday.
"Interest Period" means (i) initially, the period beginning on the
date of this Note and ending on the last day of the calendar month in which
such date occurs, and (ii) thereafter, the period beginning on the first
day of the calendar month and ending on the last day of such calendar
month.
"Maturity Date" means December 31, 1998.
Debtor shall pay FFCA interest on the outstanding principal amount of this
Note at the Adjustable Rate, on the basis of a 360-day year for the actual
number of days elapsed, in arrears. Commencing on December 1, 1998, and on the
first day of each calendar month thereafter until the Maturity Date, Debtor
shall pay FFCA interest which has accrued at the Adjustable Rate on the
outstanding principal balance of this Note during the preceding Interest Period.
FFCA shall notify Debtor in writing on or before the twenty-fifth day of each
calendar month during the term of this Note of FFCA's determination of the
interest payable on the first day of the next succeeding calendar month. All
outstanding principal and unpaid accrued interest shall be paid on the Maturity
Date.
Each payment hereunder shall be applied first to any past due payments
under this Note (including payment of all Costs (as herein defined)), then to
accrued interest at the Adjustable Rate, and the balance, after the payment of
such accrued interest, if any, shall be applied to the unpaid principal balance
of this Note; provided, however, each payment hereunder while an Event of
Default under this Note has occurred and is continuing shall be applied as FFCA
in its sole discretion may determine.
Upon execution of this Note, Debtor shall establish arrangements whereby
all payments hereunder are transferred by wire or other means directly from
Debtor's bank account to such account as FFCA may designate or as FFCA may
otherwise designate.
Debtor may prepay this Note as provided in the Loan Agreement.
An "Event of Default" shall be deemed to have occurred under this Note if
any principal, interest or other monetary sum due under this Note is not paid
within five days from the date when due and FFCA shall have given notice of such
failure to Debtor and such failure shall not have been cured by Debtor within
five days from the delivery of such notice. Upon the occurrence of (i) an Event
of Default under this Note or (ii) an Event of Default or an Acceleration Event
under any of the other Loan Documents, then, in any of such events, time being
of the essence hereof, FFCA may declare the entire unpaid principal balance of
this Note, accrued interest, if any, and all other sums due under this Note, the
other Loan Documents and
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<PAGE> 22
any other document further securing this Note, due and payable at once without
written notice to Debtor.
All past-due principal and/or interest shall bear interest at the lesser
of the highest rate for which the undersigned may legally contract or the rate
of 18% per annum (the "Default Rate"), and such Default Rate shall continue to
apply following a judgment in favor of FFCA under this Note. If Debtor fails to
make any payment or installment due under this Note within five days of its due
date, Debtor shall pay to FFCA in addition to any other sum due FFCA under this
Note or any other Loan Document a late charge equal to 10% of such past-due
payment or installment.
All payments of principal and interest due hereunder shall be made (i)
without deduction of any present and future taxes, levies, imposts, deductions,
charges or withholdings, which amounts shall be paid by Debtor, and (ii)
without any other right of abatement, reduction, setoff, defense, counterclaim,
interruption, deferment or recoupment for any reason whatsoever. Debtor will
pay the amounts necessary such that the gross amount of the principal and
interest received by FFCA is not less than that required by this Note.
No delay or omission on the part of FFCA in exercising any remedy, right
or option under this Note shall operate as a waiver of such remedy, right or
option. In any event, a waiver on any one occasion shall not be construed as a
waiver or bar to any such remedy, right or option on a future occasion.
Debtor hereby waives presentment, demand for payment, notice of dishonor,
notice of protest, and protest, and except as otherwise provided in the Loan
Documents, all other notices or demands in connection with delivery,
acceptance, performance, default or endorsement of this Note.
All notices, consents, approvals or other instruments required or
permitted to be given by either party pursuant to this Note shall be in writing
and given by (i) hand delivery, (ii) facsimile, (iii) express overnight
delivery service or (iv) certified or registered mail, return receipt
requested, and shall be deemed to have been delivered upon (a) receipt, if hand
delivered, (b) transmission, if delivered by facsimile (and if a copy of such
notice is also mailed by certified or registered mail, return receipt
requested, and deposited with the U.S. Postal Service no later than the first
business day after the notice was transmitted by facsimile), (c) the next
business day, following the date of deposit with the delivery service, if
delivered by express overnight delivery service, or (d) the third business day
following the day of deposit of such notice with the United States Postal
Service, if sent by certified or registered mail, return receipt requested.
Notices shall be provided to the parties and addresses (or facsimile numbers,
as applicable) specified below:
If to Debtor: P.F. Chang's China Bistro, Inc.
5090 North 40th Street, Suite 160
2201 East Camelback Road
Phoenix, AZ 85018
Attention: Mr. Robert T. Vivian
Telephone: (602) 957-8986
Telecopy: (602) 957-8998
3
<PAGE> 23
With a copy to: Kenneth Van Winkle, Jr., Esq.
Lewis and Roca LLP
40 North Central Avenue
Phoenix, AZ 85004-4429
Telephone: (602) 262-5311
Telecopy: (602) 262-5747
If to FFCA: Dennis L. Ruben, Esq.
Executive Vice President and General
Counsel
Franchise Finance Corporation of America
17207 North Perimeter Drive
Scottsdale, AZ 85255
Telephone: (602) 585-4500
Telecopy: (602) 585-2226
or to such other address or such other person as either party may from time to
time hereafter specify to the other party in a notice delivered in the manner
provided above.
Should any indebtedness represented by this Note be collected at law or in
equity, or in bankruptcy or other proceedings, or should this Note be placed in
the hands of attorneys for collection after default, Debtor shall pay, in
addition to the principal and interest due and payable hereon, all costs of
collecting or attempting to collect this Note (the "Costs"), including
reasonable attorneys' fees and expenses of FFCA (including those fees and
expenses incurred in connection with any appeal and those of FFCA's in-house
counsel) whether or not a judicial action is commenced by FFCA.
This Note may not be amended or modified except by a written agreement duly
executed be Debtor and FFCA. In case any one or more of the provisions contained
in this Note shall be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Note, and this Note shall be construed as if such
provision had never been contained herein or therein.
Notwithstanding anything to the contrary in any of the Loan Documents, the
obligations of Debtor to FFCA under this Note and any other Loan Documents are
subject to the limitation that payments of interest and late charges to FFCA
shall not be required to the extent that receipt of any such payment by FFCA
would be contrary to provisions of applicable law limiting the maximum rate of
interest that may be charged or collected by FFCA. The portion of any such
payment received by FFCA that is in excess of the maximum interest permitted by
such provisions of law shall be credited to the principal balance of this Note
or if such excess portion exceeds the outstanding principal balance of this
Note, then such excess portion shall be refunded to Debtor. All interest paid or
agreed to be paid to FFCA shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and/or spread throughout the full term of this
Note (including, without limitation, the period of any renewal or extension
thereof) so that interest for such full term shall not exceed the maximum amount
permitted by applicable law.
<PAGE> 24
It is the intent of the parties hereto that the business relationship
created by this Note and the other Loan Documents is solely that of creditor
and debtor and has been entered into by both parties in reliance upon the
economic and legal bargains contained in the Loan Documents. None of the
agreements contained in the Loan Documents, is intended, nor shall the same be
deemed or construed, to create a partnership between FFCA and Debtor, to make
them joint venturers, to make Debtor an agent, legal representative, partner,
subsidiary or employee of FFCA, nor to make FFCA in any way responsible for the
debts, obligations or losses of Debtor.
FFCA, by accepting this Note, and Debtor acknowledge and warrant to
each other that each has been represented by independent counsel and Debtor has
executed this Note after being fully advised by said counsel as to its effect
and significance. This Note shall be interpreted and construed in a fair and
impartial manner without regard to such factors as the party which prepared the
instrument, the relative bargaining powers of the parties or the domicile of
any party.
Debtor acknowledges that this Note was substantially negotiated in the
State of Arizona, the Note was executed and delivered in the State of Arizona,
all payments under this Note will be delivered in the State of Arizona and
there are substantial contacts between the parties and the transactions
contemplated herein and the State of Arizona. For purposes of any action or
proceeding arising out of this Note, the parties hereto expressly submit to the
jurisdiction of all federal and state courts located in the State of Arizona.
Debtor consents that it may be served with any process or paper by registered
mail or by personal service within or without the State of Arizona in
accordance with applicable law. Furthermore, Debtor waives and agrees not to
assert in any such action, suit or proceeding that it is not personally subject
to the jurisdiction of such courts, that the action, suit or proceeding is
brought in an inconvenient forum or that venue of the action, suit or
proceeding is improper. It is the intent of Debtor and FFCA that all provisions
of this Note shall be governed by and construed under the laws of the State of
Arizona. Nothing contained in this paragraph shall limit or restrict the right
of FFCA to commence any proceeding in the federal or state courts located in
any state in which FFCA deems such proceeding necessary or advisable to
exercise remedies available under the Loan Documents.
FFCA, BY ACCEPTING THIS NOTE, AND DEBTOR HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY WITH
RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR
COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR ITS
SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS
NOTE, THE RELATIONSHIP OF FFCA AND DEBTOR AND/OR ANY CLAIM FOR INJURY OR
DAMAGE, OR ANY EMERGENCY OR STATUTORY REMEDY. THIS WAIVER BY THE PARTIES HERETO
OF ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY HAS BEEN NEGOTIATED AND IS AN
ESSENTIAL ASPECT OF THEIR BARGAIN. FURTHERMORE, DEBTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO SEEK PUNITIVE,
CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES FROM FFCA WITH RESPECT TO ANY AND
ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT
BY DEBTOR AGAINST FFCA OR ITS SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT
OF OR IN CONNECTION WITH THIS
5
<PAGE> 25
NOTE OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THE WAIVER BY
DEBTOR OF ANY RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND
INDIRECT DAMAGES HAS BEEN NEGOTIATED BY THE PARTIES HERETO AND IS AN ESSENTIAL
ASPECT OF THEIR BARGAIN.
This obligation shall bind Debtor and its successors and assigns, and the
benefits hereof shall inure to FFCA and its successors and assigns. FFCA may
assign its rights under this Note as set forth in the Loan Agreement.
6
<PAGE> 26
IN WITNESS WHEREOF, Debtor has executed and delivered this Note effective
as of the date set forth above.
P.F. CHANG'S CHINA BISTRO, INC.,
a Delaware corporation
By________________________________
Printed Name______________________
Title_____________________________
7
<PAGE> 27
AMENDED AND RESTATED
SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT (this "Agreement") is made
and entered into as of November 10, 1998 by and between P.F. CHANG'S CHINA
BISTRO, INC., a Delaware corporation ("Debtor"), whose principal place of
business is located at 5090 North 40th Street, Suite 160, Phoenix, Arizona
85015, and FRANCHISE FINANCE CORPORATION OF AMERICA, a Delaware corporation
("FFCA"), whose address is 17207 North Perimeter Drive, Scottsdale, Arizona
85255.
PRELIMINARY STATEMENT:
Debtor and FFCA entered into that certain Security Agreement dated as of
June 29, 1998 (the "Original Agreement") in connection with that certain
Amended and Restated Revolving Line of Credit Loan Agreement dated as of June
29, 1998 (the "Amended Credit Agreement"). Subsequently, FFCA has agreed to
increase the amount of the Loan and Debtor has agreed to pledge its interest in
the Collateral pursuant to this Agreement in order to provide security for the
Loan. This Agreement amends and restates the Original Agreement in order to
reflect the terms and conditions associated with an increase of the Loan and a
pledge of the Collateral. Capitalized terms not defined herein shall have the
respective meanings set forth in the Amended Credit Agreement dated as of the
date hereof between Debtor and FFCA.
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises hereinafter set forth, FFCA and Debtor agree as follows:
1. Debtor's Obligation; Security Interest Created. FFCA has agreed to
advance to Debtor the Loan, as evidenced by the execution and delivery of the
Note to FFCA, and Debtor shall pay other sums advanced or expended by FFCA
pursuant to the terms of the Loan Documents, and perform all other terms and
conditions of Debtor set forth in the Loan Documents (collectively, the
"Obligations"). To secure the payment of the Obligations, Debtor hereby grants
to FFCA a security interest in its general partnership or membership interests
in the Companies identified on Exhibit A attached hereto (the "Collateral").
2. Default. Any action or event which would constitute an Event of
Default (a "Default") and shall permit FFCA to exercise and pursue the remedies
specified in Section 3 below.
3. Remedies for Default. In the event that Debtor is, or is deemed to be,
in Default hereunder, FFCA shall have all rights and remedies of a secured
party in, to and against the Collateral granted by the Uniform Commercial Code
in the State of Arizona and otherwise available at law or in equity, including,
without limitation: (i) the right to declare all payments due under the Loan
Documents immediately due and payable and the right to recover all fees and
expenses (including reasonable attorney fees) in connection with the collection
or enforcement thereof, which fees and expenses shall constitute additional
Obligations of Debtor hereunder;
<PAGE> 28
(ii) the right to act as, and Debtor hereby constitutes and appoints FFCA,
Debtor's true, lawful and irrevocable attorney-in-fact (which appointment shall
be deemed coupled with an interest) to demand, receive and enforce payments and
to give receipts, releases, satisfaction for and to sue for moneys payable to
Debtor under or with respect to any of the Collateral under this Agreement, and
actions taken pursuant to this appointment may be taken either in the name of
Debtor or in the name of FFCA with the same force and effect as if this
appointment had not been made; (iii) the right to take immediate and exclusive
possession of the Collateral, or any part thereof; (iv) the right to hold,
maintain, preserve and prepare the Collateral for sale, until disposed of; (v)
the right to dispose of the Collateral; (vi) the right to require Debtor to
assemble and package the Collateral and make it available to FFCA for its
possession at a place to be designated by FFCA which is reasonably convenient
to the FFCA; (vii) the right to sell, hold or otherwise dispose of all or any
part of the Collateral; (viii) the right to sue for specific performance of any
obligation under the Loan Documents or to recover damages for breach thereof;
(ix) the right at any time to amend or terminate the Management Agreements
and/or the Joint Venture Agreements; (x) the right to receive all cash
distributions or payments payable in respect of the Collateral; and (xi) the
right to exercise or cause to be exercised all voting rights and partnership or
limited liability company, as applicable, powers in respect of the Collateral.
The remedies of FFCA hereunder are cumulative and the exercise of any one or
more of the remedies provided for herein or under the Uniform Commercial Code
or other applicable law shall not be construed as a waiver or any of the other
remedies of FFCA so long as any part of the Obligations secured hereby remains
unsatisfied. FFCA shall be entitled to receive on demand, as additional
Obligations hereunder, interest at the lower of 18% per annum or the highest
rate permitted by applicable law on all amounts not paid when due under the
Note or this Agreement, for the period such amounts are overdue. FFCA shall
have no duty to mitigate any loss to the Debtor occasioned by enforcement of
any remedy hereunder and shall have no duty of any kind to any subordinated
creditor of Debtor.
4. APPLICATION OF PROCEEDS. Should FFCA exercise the rights and remedies
specified in Section 3 hereof, any proceeds received thereby shall be first
applied to pay the costs and expenses, including reasonable attorneys' fees,
incurred by FFCA as a result of Debtor's Default. The remainder of any
proceeds, net of FFCA's costs and expenses, shall be applied to the
satisfaction of the Obligations and, so long as Debtor is not in Default
hereunder, any excess shall be paid over to Debtor. If Debtor is in Default
hereunder, any excess may be held by FFCA for a reasonable time and either
applied to the Obligations or paid over to Debtor.
5. APPLICABLE LAW. Debtor acknowledges that this Agreement was
substantially negotiated in the State of Arizona, the executed Agreement was
delivered in the State of Arizona, all payments under the Loan Documents will
be delivered in the State of Arizona and there are substantial contacts between
the parties and the transactions contemplated herein and the State of Arizona.
For purposes of any action or proceeding arising out of this Agreement, the
parties hereto expressly submit to the jurisdiction of all federal and state
courts located in the State of Arizona. Debtor consents that it may be served
with any process or paper by registered mail or by personal service within or
without the State of Arizona in accordance with applicable law. Furthermore,
Debtor waives and agrees not to assert in any such action, suit or proceeding
2
<PAGE> 29
that it is not personally subject to the jurisdiction of such courts, that the
action, suit or proceeding is brought in an inconvenient forum or that venue of
the action, suit or proceeding is improper. It is the intent of the parties
hereto that all provisions of this Agreement shall be governed by and construed
in accordance with the laws of the State of Arizona. To the extent that a court
of competent jurisdiction finds Arizona law inapplicable with respect to any
provisions hereof, then, as to those provisions only, the laws of the state
where the Collateral is located shall be deemed to apply. Nothing contained in
this paragraph shall limit or restrict the right of FFCA to commence any
proceeding in the federal or state courts located in the state in which the
Collateral is located to the extent FFCA deems such proceeding necessary or
advisable to exercise remedies available under the Loan Documents.
6. Nonassignability. This Agreement may not by assigned by Debtor without
the consent of FFCA. However, FFCA may assign its rights under this Agreement to
any third party without the prior consent of Debtor.
7. Possession. Until a Default occurs, Debtor may retain possession of the
Collateral, shall be entitled to all distributions as a result of its interests
in the Companies and may use it in any lawful manner not inconsistent with this
Agreement, with the provisions of any policies of insurance thereon or the other
Loan Documents.
8. Waiver. No Default hereunder by Debtor shall be deemed to have been
waived by FFCA except by a writing to that effect signed by FFCA and no waiver
of any Default shall operate as a waiver of any other Default on a future
occasion. No modification, rescission, waiver, release or amendment of any
provision of this Agreement shall be made except by a written agreement signed
by Debtor and FFCA.
9. Severability. In case any one or more of the provisions contained herein
or in the Note shall be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision hereof, and this Agreement shall be construed as if such
provision had never been contained herein or therein.
10. Notices; Amendments; Waivers. All notices, demands, designations,
certificates, requests, offers, consents, approvals, appointments and other
instruments given pursuant to this Agreement (collectively called "Notices")
shall be in writing and given by (i) hand delivery, (ii) facsimile, (iii)
express overnight delivery service or (iv) certified or registered mail, return
receipt requested, and shall be deemed to have been delivered upon (a) receipt,
if hand delivered, (b) transmission, if delivered by facsimile, (c) the next
business day, if delivered by express overnight delivery service, or (d) the
third business day following the day of deposit of such notice with the United
States Postal Service, if sent by certified or registered mail, return receipt
requested. Notices shall be provided to the parties and addresses (or facsimile
numbers, as applicable) specified below:
3
<PAGE> 30
If to Debtor: P.F. Chang's China Bistro, Inc.
5090 North 40th Street, Suite 160
2201 East Camelback Road
Phoenix, AZ 85018
Attention: Mr. Robert T. Vivian
Telephone: (602) 957-8986
Telecopy: (602) 957-8998
With a copy to: Kenneth Van Winkle, Jr., Esq.
Lewis and Roca LLP
40 North Central Avenue
Phoenix, AZ 85004-4429
Telephone: (602) 262-5357
Telecopy: (602) 262-5747
If to FFCA: Dennis L. Ruben, Esq.
Senior Vice President and General Counsel
Franchise Finance Corporation of America
17207 North Perimeter Drive
Scottsdale, AZ 85255
Telephone: (602) 585-4500
Telecopy: (602) 585-2226
or to such other address or such other person as either party may from time to
time hereafter specify to the other party in a notice delivered in the manner
provided above. Whenever in this Agreement the giving of Notice is required,
the giving thereof may be waived in writing at any time by the person or
persons entitled to receive such Notice.
11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each thereof shall be deemed to be an original, and all
such counterparts shall constitute but one and the same instrument.
12. HEADINGS. The headings appearing in this Agreement have been
inserted for convenient reference only and shall not modify, define, limit or
expand the express provisions of this Agreement.
13. CHARACTERIZATION; INTERPRETATION. It is the intent of the parties
hereto that the business relationship created by the Note, this Agreement and
the other Loan Documents is solely that of creditor and debtor and has been
entered into by both parties in reliance upon the economic and legal bargains
contained in the Loan Documents. None of the agreements contained in the Loan
Documents is intended, nor shall the same be deemed or construed, to create a
partnership between FFCA and Debtor, to make them joint venturers, to make
Debtor an agent, legal representative, partner, subsidiary or employee of FFCA,
nor to make FFCA in any way responsible for the debts, obligations or losses of
Debtor.
4
<PAGE> 31
FFCA and Debtor acknowledge and warrant to each other that each has
been represented by independent counsel and has executed this Agreement after
being fully advised by said counsel as to its effect and significance. This
Agreement shall be interpreted and construed in a fair and impartial manner
without regard to such factors as the party, which prepared the instrument, the
relative bargaining powers of the parties or the domicile of any party.
14. TIME OF THE ESSENCE. Time is of the essence in the performance
of each and every obligation under this Agreement.
15. WAIVER OF JURY TRIAL AND PUNITIVE, CONSEQUENTIAL, SPECIAL AND
INDIRECT DAMAGES. FFCA AND DEBTOR HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY WITH RESPECT
TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR
COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR ITS
SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT, THE RELATIONSHIP OF FFCA AND DEBTOR, DEBTOR'S USE OR OCCUPANCY OF
THE COLLATERAL, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY EMERGENCY OR
STATUTORY REMEDY. THIS WAIVER BY THE PARTIES HERETO OF ANY RIGHT EITHER MAY
HAVE TO A TRIAL BY JURY HAS BEEN NEGOTIATED AND IS AN ESSENTIAL ASPECT OF THEIR
BARGAIN. FURTHERMORE, DEBTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES THE RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND
INDIRECT DAMAGES FROM FFCA WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY
ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY DEBTOR AGAINST FFCA OR ITS
SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR ANY DOCUMENTS CONTEMPLATED HEREIN OR RELATED HERETO. THE WAIVER BY
DEBTOR OF ANY RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND
INDIRECT DAMAGES HAS BEEN NEGOTIATED BY DEBTOR AND FFCA AND IS AN ESSENTIAL
ASPECT OF THEIR BARGAIN.
5
<PAGE> 32
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first above written.
DEBTOR:
P.F. CHANG'S CHINA BISTRO, INC.,
a Delaware corporation
By
----------------------------------
Printed Name
------------------------
Its
---------------------------------
SECURED PARTY:
FRANCHISE FINANCE CORPORATION OF
AMERICA, a Delaware corporation
By
----------------------------------
Printed Name
------------------------
Title
-------------------------------
6
<PAGE> 33
EXHIBIT A
COMPANIES
PFCCB NUC LLC, an Arizona limited liability company
PFCCB Southeastern LLC, an Arizona limited liability company
PFCCB Mid-Atlantic LLC, an Arizona limited liability company
PFCCB LouTex Joint Venture, an Arizona general partnership
PFCCB Florida Joint Venture, an Arizona general partnership
<PAGE> 34
EXHIBIT F
NEGATIVE PLEDGE
<PAGE> 35
AMENDED AND RESTATED
NEGATIVE PLEDGE AGREEMENT
THIS AMENDED AND RESTATED NEGATIVE PLEDGE AGREEMENT (this "Agreement") is
made as of November 10, 1998 by P.F. CHANG'S CHINA BISTRO, INC., a Delaware
corporation ("Debtor") whose principal place of business is located at 5090
North 40th Street, Suite 160, Phoenix, Arizona 85015 for the benefit of
FRANCHISE FINANCE CORPORATION OF AMERICA, a Delaware corporation ("FFCA"), whose
address is 17207 North Perimeter Drive, Scottsdale, Arizona 85255.
PRELIMINARY STATEMENTS
This Agreement amends and restates that certain Negative Pledge Agreement
date as of June 29, 1998 executed by Debtor in favor of FFCA. Capitalized
terms not defined herein shall have the respective meanings set forth in that
certain Second Amended and Restated Revolving Line of Credit Loan Agreement
(the "Loan Agreement") dated as of the date hereof between FFCA and Debtor.
Debtor either holds (i) fee title to the property legally described on the
attached Exhibit A, and fee title to the buildings and improvements located
thereon or (iii) a leasehold interest in the real property legally described on
the attached Exhibit A (in any case, the "Premises"). FFCA has agreed to make
the Loan to Debtor. In consideration of the Loan and as a security for the Loan,
Debtor has agreed to execute and deliver this Agreement.
AGREEMENT
1. NEGATIVE PLEDGE. Debtor agrees that it shall not sell, assign,
mortgage, grant, bargain, convey, pledge or encumber by deed of trust, security
agreement or other consensual monetary lien in or on Debtor's interest in the
Premises or any portion thereof or permit Debtor's interest in the Premises or
any part thereof to be sold, assigned, mortgaged, granted, bargained, conveyed,
pledged or encumbered by deed of trust, security agreement or other consensual
monetary lien without the prior written consent of FFCA, which consent may be
withheld in FFCA's sole discretion. Any sale, assignment, mortgage, grant,
bargain, conveyance, pledge or consensual encumbrance in breach of the
preceding sentence shall be null and void and of no force and effect, and shall
constitute an "Event of Default" under the Loan Agreement. Debtor acknowledges
that a material inducement to FFCA's willingness to advance the Loan is the
execution and delivery by Debtor of this Agreement.
2. RECORDATION. Debtor agrees that, at FFCA's election, this Agreement
will be recorded in the real property records of the country where the Premises
is located to provide constructive notice of the terms and conditions of this
Agreement; provided, however, that this Agreement does not encumber or affect
any landlord's or lessor's interest in the Premises.
3. RELEASE. FFCA agrees that at such time as the obligations of Debtor
under the Loan Documents are paid and satisfied in full, FFCA shall execute a
release of this Agreement.
<PAGE> 36
4. MISCELLANEOUS PROVISIONS.
A. Notices. All notices, consents, approvals or other instruments
required or permitted to be given by either party pursuant to this Agreement
shall be in writing and given by (i) hand delivery, (ii) facsimile, (iii)
express overnight delivery service or (iv) certified or registered mail, return
receipt requested, and shall be deemed to have been delivered upon (a) receipt,
if hand delivered, (b) electronic confirmation of transmission, if delivered by
facsimile, (c) the next business day, if delivered by express overnight
delivery service, or (d) the third business day following the day of deposit of
such notice with the United States Postal Service, if sent by certified or
registered mail, return receipt requested. Notices shall be provided to the
parties and addresses (or facsimile numbers, as applicable) specified below:
If to Debtor: P.F. Chang's China Bistro, Inc.
5090 North 40th Street, Suite 160
Phoenix, AZ 85018
Attention: Mr. Robert T. Vivian
Telephone: (602) 957-8986
Telecopy: (602) 957-8998
With a copy to: Kenneth Van Winkle, Jr., Esq.
Lewis and Roca LLP
40 North Central Avenue
Phoenix, AZ 85004-4429
Telephone: (602) 262-5311
Telecopy: (602) 262-5747
If to FFCA: Dennis L. Ruben, Esq.
Executive Vice President and
General Counsel
Franchise Finance Corporation of America
17207 North Perimeter Drive
Scottsdale, AZ 85255
Telephone: (602) 585-4500
Telecopy: (602) 585-2226
B. Waiver and Amendment. No provisions of this Agreement shall be deemed
waived or amended except by a written instrument unambiguously setting forth
the matter waived or amended and signed by the party against which enforcement
of such waiver or amendment is sought. Waiver of any matter shall not be deemed
a waiver of the same or any other matter on any future occasion.
C. Captions. Captions are used throughout this Agreement for convenience
of reference only and shall not be considered in any manner in the construction
or interpretation hereof.
2
<PAGE> 37
D. Severability. The provisions of this Agreement shall be deemed
severable. If any part of this Agreement shall be held unenforceable, the
remainder shall remain in full force and effect, and such unenforceable
provision shall be reformed by such court so as to give maximum legal effect to
the intention of the parties as expressed therein.
E. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of Debtor and FFCA and their respective successors and permitted
assigns, including, without limitation, any United States trustee, any debtor
in possession or any trustee appointed from a private panel.
F. Forum Selection; Jurisdiction; Venue; Choice of Law. Debtor and FFCA
acknowledge that this Agreement was substantially negotiated in the State of
Arizona, the Agreement was signed and delivered by Debtor in the State of
Arizona, and there are substantial contacts between the parties and the
transactions contemplated herein and the State of Arizona. For purposes of any
action or proceeding arising out of this Agreement, the parties hereto hereby
expressly submit to the jurisdiction of all federal and state courts located in
the State of Arizona and Debtor consents that it may be served with any process
or paper by registered mail or by personal service within or without the State
of Arizona in accordance with applicable law. Furthermore, Debtor waives and
agrees not to assert in any such action, suit or proceeding that it is not
personally subject to the jurisdiction of such courts, that the action, suit or
proceeding is brought in an inconvenient forum or that venue of the action, suit
or proceeding is improper. It is the intent of the parties hereto that all
provisions of this Agreement shall be governed by and construed under the laws
of the State of Arizona. To the extent that a court of competent jurisdiction
finds Arizona law inapplicable with respect to any provisions hereof, then, as
to those provisions only, the laws of the state where the Premises is located
shall be deemed to apply. Nothing in this Section shall limit or restrict the
right of FFCA to commence any proceeding in the federal or state courts located
in the state in which the Premises are located to the extent FFCA deems such
proceeding necessary or advisable to exercise remedies available under this
Agreement.
H. Waiver of Jury Trial and Punitive, Consequential, Special and
Indirect Damages. DEBTOR AND FFCA HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY WITH RESPECT
TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR
COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR ITS
SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THIS WAIVER BY
THE PARTIES HERETO OF ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY HAS BEEN
NEGOTIATED AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN. FURTHERMORE, DEBTOR
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO
SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES FROM FFCA WITH
RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR
COUNTERCLAIM BROUGHT BY DEBTOR AGAINST FFCA OR ITS SUCCESSORS WITH RESPECT TO
ANY
3
<PAGE> 38
MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY DOCUMENT
CONTEMPLATED HEREIN OR RELATED HERETO. THE WAIVER BY DEBTOR OF ANY RIGHT IT MAY
HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES HAS BEEN
NEGOTIATED BY THE PARTIES HERETO AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN.
I. Costs. Debtor shall be responsible for the payment of all
out-of-pocket costs and expenses incurred by Debtor and FFCA in connection with
this Agreement, including, without limitation, reasonable attorneys' fees and
recording and filing fees and charges.
4
<PAGE> 39
IN WITNESS WHEREOF, Debtor has caused this Agreement to be executed
and delivered as of the day and year first above written.
P.F. CHANG'S CHINA BISTRO, INC.,
a Delaware corporation
By_____________________________
Printed Name___________________
Its____________________________
5
<PAGE> 40
STATE OF ARIZONA ]
] SS.
COUNTY OF MARICOPA ]
The foregoing instrument was acknowledged before me on November , 1998 by
, of P.F. Chang's China Bistro, Inc., a
Delaware corporation, on behalf of the corporation.
---------------------------------
Notary Public
My Commission Expires:
- -----------------------------------
6
<PAGE> 41
EXHIBIT G
COMPANIES
PFCCB NUC LLC, an Arizona limited liability company
PFCCB Southeastern LLC, an Arizona limited liability company
PFCCB Mid-Atlantic LLC, an Arizona limited liability company
PFCCB LouTex Joint Venture, an Arizona general partnership
PFCCB Florida Joint Venture, an Arizona general partnership
