<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 1, 1999
POPMAIL.COM, INC.
(Exact name of registrant as specified in its charter)
Minnesota 0-23243 31-1487885
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
4801 West 81st Street, Suite 112, Bloomington, MN 55437
(Address of principal executive offices) (Zip Code)
CAFE ODYSSEY, INC.
(Former Name or Former Address, if Changed Since Last Report)
Registrant's telephone number, including area code: (612) 837-9917
<PAGE> 2
Item 1. CHANGES IN CONTROL OF REGISTRANT.
Pursuant to the Agreement (as hereinafter defined), a change of
control of the Registrant may be deemed to have occurred as of the Effective
Date (as hereinafter defined) as the result of a merger transaction by and
between a subsidiary of the Registrant and popmail.com, inc., a Delaware
corporation ("Old Popmail"). See Item 2 herein for a more detailed description
of such transaction.
Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to an Agreement and Plan of Merger dated as of June 1, 1999
(the "Agreement") by and between the Registrant, Stephen D. King (the
Registrant's principal shareholder, Chairman and Chief Executive Officer), each
of the shareholders of Old Popmail and Cafe Odyssey Acquisition Subsidiary,
Inc., a Delaware corporation and wholly-owned subsidiary of the Registrant
("Acquisition Sub"), Old Popmail merged with and into Acquisition Sub. The
Registrant's shareholders approved the merger on August 19, 1999. The merger
became effective on September 1, 1999 (the "Effective Date"). Prior to the date
of the Agreement, there was no relationship between Old Popmail or its
shareholders and the Registrant or its affiliates, officers, and directors or
any of their respective associates. Following the Effective Date, the
Registrant's Articles of Incorporation were amended to change its corporate name
from Cafe Odyssey, Inc. to PopMail.com, inc.
Pursuant to the Agreement, the parties closed the merger transaction
into escrow on June 30, 1999, at which time Old Popmail's shareholders delivered
their Old Popmail stock certificates into escrow, and the Registrant delivered
certificates for its Series B Convertible Preferred Stock ("Series B") to be
issued to the Popmail shareholders as consideration for the merger. The shares
of Series B Preferred were issued upon consummation of the merger. The Series B
is convertible in the aggregate into approximately 8,635,910 shares of the
Registrant's common stock, subject to adjustment. The Registrant also issued a
warrant to the Old Popmail shareholders (the "Warrant"). The Warrant is
exercisable into 4,407,098 shares of the Registrant's Common Stock, subject to
adjustment, representing the economic equivalent of all of the Company's
options, warrants, and other securities convertible into, or exchangeable
for, common stock which were outstanding on May 3, 1999. Also, as a condition of
the merger, on the Effective Date a warrant exercisable into 900,000 shares
(subject to adjustment) of the Registrant's Common Stock at $3.00 per share
(subject to adjustment) was issued to legacy Maker, Inc.
As an additional condition of the merger, the Registrant repaid
indebtedness of Old Popmail in the amount of approximately $5.1 million to an
affiliate of Old Popmail, LegacyMaker, Inc. Required financing for the merger
was obtained through the private sale of $2.0 million of convertible debt to
Fairview Partners, an Ohio general partnership, $2.2 million of convertible
preferred shares to the Shaar Fund, Ltd., exercise of warrants in the amount of
$750,000, and a promissory note in the amount of $550,000 to LegacyMaker, Inc.
Pursuant to the terms of the Agreement, James L. Anderson, previously
affiliated with Old Popmail was elected as Chairman of the Board of the
Registrant, effective as of September 1, 1999.
The foregoing is qualified in its entirety by reference to the
Agreement and the Warrant which are hereby incorporated by reference herein.
Item 5. OTHER EVENTS
The Registrant completed a private placement of Series D 8% Convertible
Preferred Stock in the amount of $2,200,000. The Registrant's Press Release
dated September 1, 1999, which is filed as Exhibit 99.1 to this Form 8-K, is
incorporated herein by reference.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired. Pursuant to Item
7(a)(4), financial statements required by this item will be filed before
November 15, 1999.
(b) Pro Forma Financial Information. Pursuant to Item 7(b)(2),
financial statements required by this item will be filed before
November 15, 1999.
2
<PAGE> 3
(c) Exhibits
2.0 Agreement and Plan of Merger dated as of June 1, 1999
among Cafe Odyssey, Inc, Stephen D. King, popmail,com,
inc., all of the Holders of Common Stock of popmail.com,
inc. and Cafe Odyssey Acquisition Subsidiary, Inc.
(incorporated herein by reference to Exhibit 2.0 of the
Registrant's Current Report on Form 8-K dated June 22,
1999 and filed on June 25, 1999).
3.1(a) Articles of Incorporation, as amended (Incorporated herein
by reference to Exhibit 3.1 to the Registrant's Quarterly
Report on Form 10-QSB for the quarter ended April 4, 1999)
3.1(b) Certificate of Designation of Series B Convertible
Preferred Stock (Incorporated herein by reference to
Exhibit 3.1(b) to the Registrant's report on Form 8-K
dated June 22, 1999 and filed on June 25, 1999)
3.1(c) Certificate of Designation of Series C 8% Convertible
Preferred Stock (Incorporated herein by reference to
Exhibit 3.1(c) to the Registrant's report on Form 8-K
dated July 13, 1999 and filed on July 23, 1999)
3.1(d) Certificate of Designation of Series D 8% Convertible
Preferred Stock
3.1(e) Articles of Amendment of Articles of Incorporation filed
on September 3, 1999.
10.1 Securities Purchase Agreement, dated July 13, 1999 between
the Registrant and The Shaar Fund Ltd.
10.2 Form of Warrant issued in connection with the Series D 8%
Convertible Preferred Stock
10.3 Registration Rights Agreement, dated July 13, 1999 between
the Registrant and The Shaar Fund Ltd.
10.4 Loan Agreement by and between the Registrant and Fairview
Partners dated as of August 24, 1999.
10.5 Form of Senior Convertible Note dated August 24, 1999.
10.6 Form of Warrant to Purchase Common Stock of the
Registrant issued to Fairview Partners.
10.7 Support Agreement dated as of August 24, 1999 among
Stephen D. King, the Registrant and Fairview Partners.
10.8 First Deed of Trust, Security Agreement and Fixture
Financing Statement dated as of August 24, 1999, between
the Registrant and the Public Trustee of Denver County,
Colorado.
10.9 Agreement Between Landlord and Lender dated as of August
24, 1999 by Denver Pavilions, L.P. and the Registrant.
10.10 Escrow Agreement dated August 25, 1999, by and between
Fairview Partners, the Registrant and Johnson Trust
Company.
10.11 Form of Warrant (Incorporated herein by reference to
Exhibit 10.1 to the Registrant's Quarterly Report on
Form 10-QSB for the quarter ended April 4, 1999)
99.1 Press Release dated September 1, 1999.
3
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
POPMAIL.COM, INC.
Date: September 16, 1999 By: /s/ Thomas W. Orr
----------------------------------
Name: Thomas W. Orr
Title: Chief Financial Officer
4
<PAGE> 1
EXHIBIT 3.1(d)
9T-637 14819
CERTIFICATE OF DESIGNATION OF
SERIES D 8% CONVERTIBLE PREFERRED STOCK
OF
CAFE ODYSSEY, INC.
--------------------------------------------------
Pursuant to Section 302A.401 of the
Business Corporation Act of the State of Minnesota
--------------------------------------------------
Cafe Odyssey, Inc., a corporation organized and existing under the
Business Corporation Act of the State of Minnesota (the "Corporation"), hereby
certifies that the following resolutions were adopted by the Board of Directors
of the Corporation on August 19, 1999 pursuant to authority of the Board of
Directors as required by Section 302A.401, Subdivision 3 of the Business
Corporation Act of the State of Minnesota:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (the "Board of Directors" or the "Board")
in accordance with the provisions of its Article of Incorporation, the Board of
Directors hereby authorizes a series of the Corporation's preferred stock (the
"Preferred Stock"), and hereby states the designation and number of shares, and
fixes the relative rights, preferences, privileges, powers and restrictions
thereof as follows:
Series D 8% Convertible Preferred Stock:
ARTICLE 1
DEFINITIONS
The terms defined in this Article whenever used in this Certificate of
Designation have the following respective meanings:
(a) "Additional Capital Shares" has the meaning set forth in Section
6.1(c).
(b) "Affiliate" has the meaning ascribed to such term in Rule 12b-2
under the Securities Exchange Act of 1934, as amended.
(c) "Business Day" means a day other than Saturday, Sunday or any day
on which banks located in the State of New York are authorized or obligated to
close.
(d) "Capital Shares" means the Common Shares and any other shares of
any other class or series of common stock, whether now or hereafter authorized
and however designated, which have the right to participate in the distribution
of earnings and assets (upon dissolution, liquidation or winding-up) of the
Corporation.
(e) "Closing Date" means August 31, 1999.
(f) "Common Shares" or "Common Stock" means shares of common stock, par
value $0.01 per share, of the Corporation.
1
<PAGE> 2
(g) "Common Stock Issued at Conversion" when used with reference to the
securities issuable upon conversion of the Series D Preferred Stock, means all
Common Shares now or hereafter Outstanding and securities of any other class or
series into which the Series D Preferred Stock hereafter shall have been changed
or substituted, whether now or hereafter created and however designated.
(h) "Conversion Date" means any day on which all or any portion of
shares of the Series D Preferred Stock is converted in accordance with the
provisions hereof.
(i) "Conversion Notice" has the meaning set forth in Section 6.2.
(j) "Conversion Price" means on any date of determination the
applicable price for the conversion of shares of Series D Preferred Stock into
Common Shares on such day as set forth in Section 6.1.
(k) "Conversion Ratio" means on any date of determination the
applicable percentage of the Market Price for conversion of shares of Series D
Preferred Stock into Common Shares on such day as set forth in Section 6.1.
(l) "Corporation" means Cafe Odyssey, Inc., a Minnesota corporation,
and any successor or resulting corporation by way of merger, consolidation, sale
or exchange of all or substantially all of the Corporation's assets, or
otherwise.
(m) "Current Market Price" means on any date of determination the
closing bid price of a Common Share on such day as reported on the Nasdaq
SmallCap Market ("Nasdaq"); provided, if such security bid is not listed or
admitted to trading on the Nasdaq, as reported on the principal national
security exchange or quotation system on which such security is quoted or listed
or admitted to trading, or, if not quoted or listed or admitted to trading on
any national securities exchange or quotation system, the closing bid price of
such security on the over-the-counter market on the day in question as reported
by Bloomberg LP, or a similar generally accepted reporting service, as the case
may be.
(n) "Holder" means The Shaar Fund Ltd., any successor thereto, or any
Person or Persons to whom the Series D Preferred Stock is subsequently
transferred in accordance with the provisions hereof.
(o) "Market Disruption Event" means any event that results in a
material suspension or limitation of trading of the Common Shares on Nasdaq.
(p) "Market Price" per Common Share means the arithmetic mean of the
closing bid prices of the Common Shares as reported on Nasdaq for five Trading
Days during any Valuation Period; provided, if such security bid is not listed
or admitted to trading on the Nasdaq, as reported on the principal national
security exchange or quotation system on which such security is quoted or listed
or admitted to trading, or, if not quoted or listed or admitted to trading on
any national securities exchange or quotation system, the closing bid price of
such security on the over-the-counter market on the day in question as reported
by Bloomberg LP, or a
2
<PAGE> 3
similar generally accepted reporting service, as the case may be, for five
Trading Days during any Valuation Period.
(q) "Outstanding" when used with reference to Common Shares or Capital
Shares (collectively, "Shares"), means, on any date of determination, all issued
and outstanding Shares, and includes all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
Shares; provided, however, that any such Shares directly or indirectly owned or
held by or for the account of the Corporation or any Subsidiary of the
Corporation shall not be deemed "Outstanding" for purposes hereof.
(r) "Person" means an individual, a corporation, a partnership, an
association, a limited liability company, an unincorporated business
organization, a trust or other entity or organization, and any government or
political subdivision or any agency or instrumentality thereof.
(s) "Proposed Transactions" means the Corporation's proposed
acquisition of Popmail.com, Inc. and transactions directly related thereto,
including the proposed Internet Community Concepts and ROI Interactive, LLC
acquisitions.
(t) "Registration Rights Agreement" means that certain Registration
Rights Agreement dated a date even herewith between the Corporation and The
Shaar Fund Ltd.
(u) "Restaurant Divestiture" means any divestiture, sale, transfer,
conveyance or spinoff of all or substantially all of the Corporation's assets
constituting its restaurants.
(v) "SEC" means the United States Securities and Exchange Commission.
(w) "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the SEC thereunder, all as in effect at the time.
(x) "Securities Purchase Agreement" means that certain Securities
Purchase Agreement dated a date even herewith between the Corporation and The
Shaar Fund Ltd.
(y) "Series D Preferred Shares" or "Series D Preferred Stock" means the
shares of Series D 8% Convertible Preferred Stock of the Corporation or such
other convertible Preferred Stock exchanged therefor.
(z) "Stated Value" has the meaning set forth in Article 2.
(aa) "Subsidiary" means any entity of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are owned
directly or indirectly by the Corporation.
(bb) "Trading Day" means any day on which purchases and sales of
securities authorized for quotation on Nasdaq are reported thereon and on which
no Market Disruption Event has occurred.
(cc) "Valuation Event" has the meaning set forth in Section 6.1.
3
<PAGE> 4
(dd) "Valuation Period" means the five Trading Day period immediately
preceding the Conversion Date.
All references to "cash" or "$" herein means currency of the United
States of America.
ARTICLE 2
DESIGNATION AND AMOUNT
The designation of this series, which consists of 2,500 shares of
Preferred Stock, is Series D 8% Convertible Preferred Stock (the "Series D
Preferred Stock"), with a par value of $0.01 per share, and the stated value
shall be $1,000 per share (the "Stated Value").
ARTICLE 3 RANK
The Series D Preferred Stock shall rank (i) prior to the Common Stock;
(ii) prior to any class or series of capital stock of the Corporation hereafter
created other than "Pari Passu Securities" (collectively, with the Common Stock,
"Junior Securities"); and (iii) pari passu with the Corporation's Series A 8%
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C 8%
Convertible Preferred Stock, and any class or series of capital stock of the
Corporation hereafter created specifically ranking on parity with the Series D
Preferred Stock ("Pari Passu Securities").
ARTICLE 4 DIVIDENDS
(a)(i) The Holder shall be entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally available for the
payment of dividends, dividends (subject to Article 4(a)(ii) hereof) at the
rate of 8% per annum (computed on the basis of a 360-day year) (the
"Dividend Rate") on the Liquidation Value (as defined below) of each share
of Series D Preferred Stock on and as of the most recent Dividend Payment
Due Date (as defined below) with respect to each Dividend Period (as
defined below). Dividends on the Series D Preferred Stock shall be
cumulative from the date of issue, whether or not declared for any reason,
including if such declaration is prohibited under any outstanding
indebtedness or borrowings of the Corporation or any of its Subsidiaries,
or any other contractual provision binding on the Corporation or any of its
Subsidiaries, and whether or not there shall be funds legally available for
the payment thereof.
(ii) Each dividend shall be payable in equal quarterly amounts on
each March 31, June 30, September 30 and December 31 of each year (each, a
"Dividend Payment Due Date"), commencing September 30, 1999, to the holders
of record of shares of the Series D Preferred Stock, as they appear on the
stock records of the Corporation at the close of business on any record
date, not more than 60 days or less than 10 days preceding the payment
dates thereof, as shall be fixed by the Board of Directors. For the
4
<PAGE> 5
purposes hereof, "Dividend Period" means the quarterly period
commencing on and including the Issue Date (as defined below) or, if a
dividend has previously been paid, the day after the immediately
preceding Dividend Payment Due Date and ending on and including the
immediately subsequent Dividend Payment Due Date. Accrued and unpaid
dividends for any past Dividend Period may be declared and paid at any
time, without reference to any Dividend Payment Due Date, to holders of
record on such date, not more than 15 days preceding the payment date
thereof, as may be fixed by the Board of Directors.
(iii) At the option of the Corporation, the dividend shall
be paid in cash or through the issuance of duly and validly authorized
and issued, fully paid and nonassessable, freely tradeable shares of
the Common Stock valued at the Market Price. The Common Stock to be
issued in lieu of cash payments shall be registered for resale in the
Registration Statement (as defined in the Registration Rights
Agreement) to be filed by the Corporation to register the Common Stock
issuable upon conversion of the shares of Series D Preferred Stock and
exercise of the Warrants as set forth in the Registration Rights
Agreement. Notwithstanding the foregoing, until such Registration
Statement (as defined in the Registration Rights Agreement) has been
declared effective under the Securities Act by the SEC, payment of
dividends on the Series D Preferred Stock shall be in cash.
(b) Except as provided in Section 4(e) hereof, the Holder shall
not be entitled to any dividends in excess of the cumulative dividends, as
herein provided, on the Series D Preferred Stock. Except as provided in this
Article 4, no interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the Series D Preferred Stock that
may be in arrears.
(c) So long as any shares of the Series D Preferred Stock are
outstanding, no dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on Pari Passu Securities for
any period unless full cumulative dividends required to be paid in cash have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for such payment on the Series D Preferred
Stock for all Dividend Periods terminating on or prior to the date of payment of
the dividend on such class or series of Pari Passu Securities. When dividends
are not paid in full or a sum sufficient for such payment is not set apart, as
aforesaid, all dividends declared upon shares of the Series D Preferred Stock
and all dividends declared upon any other class or series of Pari Passu
Securities shall be declared ratably in proportion to the respective amounts of
dividends accumulated and unpaid on the Series D Preferred Stock and accumulated
and unpaid on such Pari Passu Securities.
(d) So long as any shares of the Series D Preferred Stock are
outstanding, no dividends shall be declared or paid or set apart for payment or
other distribution declared or made upon Junior Securities, nor shall any Junior
Securities be redeemed, purchased or otherwise acquired (other than a
redemption, purchase or other acquisition of shares of Common Stock made for
purposes of an employee incentive or benefit plan (including a stock option
plan) of the Corporation or any subsidiary), (all such dividends, distributions,
redemptions or purchases being hereinafter referred to as a "Junior Securities
Distribution") for any
5
<PAGE> 6
consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation, directly or
indirectly, unless in each case (i) the full cumulative dividends required to be
paid in cash on all outstanding shares of the Series D Preferred Stock and any
other Pari Passu Securities shall have been paid or set apart for payment for
all past Dividend Periods with respect to the Series D Preferred Stock and all
past dividend periods with respect to such Pari Passu Securities, and (ii)
sufficient funds shall have been paid or set apart for the payment of the
dividend for the current Dividend Period with respect to the Series D Preferred
Stock and the current dividend period with respect to such Pari Passu
Securities.
(e) If at any time the Corporation shall declare or pay a dividend on,
or other distribution on, the Common Shares payable in Common Shares (a "Stock
Dividend"), the Board of Directors shall declare a dividend (the "Series D Stock
Dividend") on the aggregate Series D Preferred Shares then outstanding of that
number of Common Shares equal to the number of Common Shares the Holder would
have received had it converted all its then outstanding Series D Preferred
Shares, and exercised the Warrant in full for all the Common Shares then
underlying the Warrant, immediately prior to the Stock Dividend. The Series D
Stock Dividend shall be payable to the Holder concurrently with the payment of
the Stock Dividend to the holders of Common Shares, and the Common Shares issued
pursuant to the Series D Stock Dividend shall be duly and validly authorized and
issued, fully paid and nonassessable.
ARTICLE 5
LIQUIDATION PREFERENCE
(a) If the Corporation shall commence a voluntary case under the
Federal bankruptcy laws or any other applicable Federal or state bankruptcy,
insolvency or similar law, or consent to the entry of an order for relief in an
involuntary case under any law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Corporation or of any substantial part of its property, or make an assignment
for the benefit of its creditors, or admit in writing its inability to pay its
debts generally as they become due, or if a decree or order for relief in
respect of the Corporation shall be entered by a court having jurisdiction in
the premises in an involuntary case under the Federal bankruptcy laws or any
other applicable Federal or state bankruptcy, insolvency or similar law
resulting in the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of 30 consecutive days and, on account of any such event, the Corporation
shall liquidate, dissolve or wind up, or if the Corporation shall otherwise
liquidate, dissolve or wind up (each such event being considered a "Liquidation
Event"), no distribution shall be made to the holders of any shares of capital
stock of the Corporation upon liquidation, dissolution or winding-up unless
prior thereto, the holders of shares of Series D Preferred Stock, subject to
this Article 5, shall have received the Liquidation Preference (as defined in
Article 5(c)) with respect to each share. If upon the occurrence of a
Liquidation Event, the assets and funds available for distribution among the
holders of the Series D Preferred Stock and holders of Pari Passu Securities
shall be insufficient to permit the payment to such holders of the preferential
amounts payable thereon, then the entire assets and funds of the Corporation
legally available for
6
<PAGE> 7
distribution to the Series D Preferred Stock and the Pari Passu Securities shall
be distributed ratably among such shares in proportion to the ratio that the
Liquidation Preference payable on each such share bears to the aggregate
Liquidation Preference payable on all such shares.
(b) At the option of each Holder, the sale, conveyance of disposition
of all or substantially all of the assets of the Corporation, the effectuation
by the Corporation of a transaction or series of related transactions in which
more than 50% of the voting power of the Corporation is disposed of, or the
consolidation, merger or other business combination of the Corporation with or
into any other Person or Persons when the Corporation is not the survivor shall
either: (i) be deemed to be a liquidation, dissolution or winding up of the
Corporation pursuant to which the Corporation shall be required to distribute,
upon consummation of and as a condition to, such transaction an amount equal to
120% (100% if the provisions of this Article 5(b) are triggered by a Restaurant
Divestiture) of the Liquidation Preference with respect to each outstanding
share of Series D Preferred Stock in accordance with and subject to the terms of
this Article 5 or (ii) be treated pursuant to Article 5(c)(iii) hereof;
provided, that all holders of Series D Preferred Stock shall be deemed to elect
the option set forth in clause (i) hereof if at least a majority in interest of
such holders elect such option; provided, further, that the provisions of this
Article 5(b) shall not apply to the Proposed Transaction.
(c) For purposes hereof, the "Liquidation Preference" with respect to a
share of the Series D Preferred Stock shall mean an amount equal to the sum of
(i) the Stated Value thereof, plus (ii) an amount equal to 30% of such Stated
Value, plus (iii) the aggregate of all accrued and unpaid dividends on such
share of Series D Preferred Stock until the most recent Dividend Payment Due
Date; provided that, in the event of an actual liquidation, dissolution or
winding up of the Corporation, the amount referred to in clause (iii) above
shall be calculated by including accrued and unpaid dividends to the actual date
of such liquidation, dissolution or winding up, rather than the Dividend Payment
Due Date referred to above.
ARTICLE 6
CONVERSION OF PREFERRED STOCK
Section 6.1 Conversion; Conversion Price
At the option of the Holder, the shares of Series D Preferred Stock may
be converted, either in whole or in part, into Common Shares (calculated as to
each such conversion to the nearest 1/100th of a share), at any time, and from
time to time following the date of issuance of the Series D Preferred Stock (the
"Issue Date") at a Conversion Price per share of Common Stock equal to 65% of
the Market Price. At the Corporation's option, the amount of accrued and unpaid
dividends as of the Conversion Date shall not be subject to conversion but
instead may be paid in cash as of the Conversion Date; if the Corporation elects
to convert the amount of accrued and unpaid dividends at the Conversion Date
into Common Stock, the Common Stock issued to the Holder shall be valued at the
applicable Conversion Price.
The number of shares of Common Stock due upon conversion of Series D
Preferred Stock shall be (i) the number of shares of Series D Preferred Stock to
be converted, multiplied by (ii) the Stated Value and divided by (iii) the
applicable Conversion Price.
7
<PAGE> 8
Within two Business Days of the occurrence of a Valuation Event, the
Corporation shall send notice (the "Valuation Event Notice") of such occurrence
to the Holder. Notwithstanding anything to the contrary contained herein, if a
Valuation Event occurs during any Valuation Period, a new Valuation Period shall
begin on the Trading Day immediately following the occurrence of such Valuation
Event and end on the Conversion Date; provided that, if a Valuation Event occurs
on the fifth day of any Valuation Period, then the Conversion Price shall be the
Current Market Price of the Common Shares on such day; and provided, further,
that the Holder may, in its discretion, postpone such Conversion Date to a
Trading Day which is no more than five Trading Days after the occurrence of the
latest Valuation Event by delivering a notification to the Corporation within
two Business Days of the receipt of the Valuation Event Notice. In the event
that the Holder deems the Valuation Period to be other than the five Trading
Days immediately prior to the Conversion Date, the Holder shall give written
notice of such fact to the Corporation in the related Conversion Notice at the
time of conversion.
For purposes of this Section 6.1, a "Valuation Event" shall mean an
event in which the Corporation at any time during a Valuation Period takes any
of the following actions:
(a) subdivides or combines its Capital Shares;
(b) makes any distribution on its Capital Shares;
(c) issues any additional Capital Shares (the "Additional Capital
Shares"), otherwise than as provided in the foregoing Sections 6.1(a) and 6.1(b)
above, at a price per share less, or for other consideration lower, than the
Current Market Price in effect immediately prior to such issuances, or without
consideration, except for issuances under employee benefit plans consistent with
those presently in effect and issuances under presently outstanding warrants,
options or convertible securities;
(d) issues any warrants, options or other rights to subscribe for or
purchase any Additional Capital Shares and the price per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to
such warrants, options or other rights shall be less than the Current Market
Price in effect immediately prior to such issuance;
(e) issues any securities convertible into or exchangeable or
exercisable for Additional Capital Shares and the consideration per share for
which Additional Capital Shares may at any time thereafter be issuable pursuant
to the terms of such convertible, exchangeable or exercisable securities shall
be less than the Current Market Price in effect immediately prior to such
issuance;
(f) makes a distribution of its assets or evidences of indebtedness
to the holders of its Capital Shares as a dividend in liquidation or by way of
return of capital or other than as a dividend payable out of earnings or surplus
legally available for the payment of dividends under applicable law or any
distribution to such holders made in respect of the sale of all or substantially
all of the Corporation's assets (other than under the circumstances provided for
in the foregoing Sections 6.1(a) through 6.1(e)); or
8
<PAGE> 9
(g) takes any action affecting the number of Outstanding Capital
Shares, other than an action described in any of the foregoing Sections 6.1(a)
through 6.1(f) hereof, inclusive, which in the opinion of the Corporation's
Board of Directors, determined in good faith, would have a material adverse
effect upon the rights of the Holder at the time of a conversion of the Series D
Preferred Stock.
Section 6.2 Exercise of Conversion Privilege
(a) Conversion of the Series D Preferred Stock may be exercised, in
whole or in part, by the Holder by telecopying an executed and completed notice
of conversion in the form annexed hereto as Annex I (the "Conversion Notice") to
the Corporation. Each date on which a Conversion Notice is telecopied to the
Corporation in accordance with the provisions of this Section 6.2 shall
constitute a Conversion Date. The Corporation shall convert the Preferred Stock
and issue the Common Stock Issued at Conversion, and all voting and other rights
associated with the beneficial ownership of the Common Stock Issued at
Conversion shall vest with the Holder, effective as of the Conversion Date at
the time specified in the Conversion Notice. The Conversion Notice also shall
state the name or names (with addresses) of the persons who are to become the
holders of the Common Stock Issued at Conversion in connection with such
conversion. The Holder shall deliver the shares of Series D Preferred Stock to
the Corporation by express courier within 15 days following the date on which
the telecopied Conversion Notice has been transmitted to the Corporation. Upon
surrender for conversion, the Series D Preferred Stock shall be accompanied by a
proper assignment thereof to the Corporation or be endorsed in blank. As
promptly as practicable after the receipt of the Conversion Notice as aforesaid,
but in any event not more than five Business Days after the Corporation's
receipt of such Conversion Notice, the Corporation shall (i) issue the Common
Stock issued at Conversion in accordance with the provisions of this Article 6,
and (ii) cause to be mailed for delivery by overnight courier to the Holder (x)
a certificate or certificate(s) representing the number of Common Shares to
which the Holder is entitled by virtue of such conversion, (y) cash, as provided
in Section 6.3, in respect of any fraction of a Common Share issuable upon such
conversion and (z) cash in the amount of accrued and unpaid dividends as of the
Conversion Date. Such conversion shall be deemed to have been effected at the
time at which the Conversion Notice indicates so long as the Series D Preferred
Stock shall have been surrendered as aforesaid at such time, and at such time
the rights of the Holder of the Series D Preferred Stock, as such, shall cease
and the Person or Persons in whose name or names the Common Stock Issued at
Conversion shall be issuable shall be deemed to have become the holder or
holders of record of the Common Shares represented thereby and all voting and
other rights associated with the beneficial ownership of such Common Shares
shall at such time vest with such Person or Persons. The Conversion Notice shall
constitute a contract between the Holder and the Corporation, whereby the Holder
shall be deemed to subscribe for the number of Common Shares which it will be
entitled to receive upon such conversion and, in payment and satisfaction of
such subscription (and for any cash adjustment to which it is entitled pursuant
to Section 6.4), to surrender the Series D Preferred Stock and to release the
Corporation from all liability thereon. No cash payment aggregating less than
$1.00 shall be required to be given unless specifically requested by the Holder.
9
<PAGE> 10
(b) If, at any time (i) the Corporation challenges, disputes or denies
the right of the Holder hereof to effect the conversion of the Series D
Preferred Stock into Common Shares or otherwise dishonors or rejects any
Conversion Notice delivered in accordance with this Section 6.2 or (ii) any
third party who is not and has never been an Affiliate of the Holder commences
any lawsuit or proceeding or otherwise asserts any claim before any court or
public or governmental authority which seeks to challenge, deny, enjoin, limit,
modify, delay or dispute the right of the Holder hereof to effect the conversion
of the Series D Preferred Stock into Common Shares, then the Holder shall have
the right, by written notice to the Corporation, to require the Corporation to
promptly redeem the Series D Preferred Stock for cash at a redemption price
equal to 135% of the Stated Value thereof together with all accrued and unpaid
dividends thereon (the "Mandatory Purchase Amount"). Under any of the
circumstances set forth above, the Corporation shall be responsible for the
payment of all costs and expenses of the Holder, including reasonable legal fees
and expenses, as and when incurred in disputing any such action or pursuing its
rights hereunder (in addition to any other rights of the Holder).
Section 6.3 Fractional Shares
No fractional Common Shares or scrip representing fractional Common
Shares shall be issued upon conversion of the Series D Preferred Stock. Instead
of any fractional Common Shares which otherwise would be issuable upon
conversion of the Series D Preferred Stock, the Corporation shall pay a cash
adjustment in respect of such fraction in an amount equal to the same fraction.
No cash payment of less than $1.00 shall be required to be given unless
specifically requested by the Holder.
Section 6.4 Reclassification, Consolidation, Merger or Mandatory
Share Exchange
At any time while the Series D Preferred Stock remains outstanding and
any shares thereof have not been converted, in case of any reclassification or
change of Outstanding Common Shares issuable upon conversion of the Series D
Preferred Stock (other than a change in par value, or from par value to no par
value per share, or from no par value per share to par value or as a result of a
subdivision or combination of outstanding securities issuable upon conversion of
the Series D Preferred Stock) or in case of any consolidation, merger or
mandatory share exchange of the Corporation with or into another corporation
(other than a merger or mandatory share exchange with another corporation in
which the Corporation is a continuing corporation and which does not result in
any reclassification or change, other than a change in par value, or from par
value to no par value per share, or from no par value per share to par value, or
as a result of a subdivision or combination of Outstanding Common Shares upon
conversion of the Series D Preferred Stock), or in the case of any sale or
transfer to another corporation of the property of the Corporation as an
entirety or substantially as an entirety, the Corporation, or such successor,
resulting or purchasing corporation, as the case may be, shall, without benefit
of any additional consideration therefor, execute a new Preferred Stock
providing that the Holder shall have the right to convert such new Preferred
Stock (upon terms and conditions not less favorable to the Holder than those in
effect pursuant to the Series D Preferred Stock) and to receive upon such
exercise, in lieu of each Common Share theretofore issuable upon conversion of
the Series D Preferred Stock, the kind and amount of shares of stock, other
securities, money
10
<PAGE> 11
or property receivable upon such reclassification, change, consolidation,
merger, mandatory share exchange, sale or transfer by the holder of one Common
Share issuable upon conversion of the Series D Preferred Stock had the Series D
Preferred Stock been converted immediately prior to such reclassification,
change, consolidation, merger, mandatory share exchange or sale or transfer. The
provisions of this Section 6.4 shall similarly apply to successive
reclassifications, changes, consolidations, mergers, mandatory share exchanges
and sales and transfers.
Section 6.5 Adjustments to Conversion Ratio
For so long as any shares of the Series D Preferred Stock are
outstanding, if the Corporation: (i) issues and sells pursuant to an exemption
from registration under the Securities Act (A) Common Shares at a purchase price
on the date of issuance thereof that is lower than the Conversion Price, (B)
warrants or options with an exercise price representing a percentage of the
Current Market Price with an exercise price on the date of issuance of the
warrants or options that is lower than the agreed upon exercise price for the
Holder, except for employee stock option agreements or stock incentive
agreements of the Corporation, or (C) convertible, exchangeable or exercisable
securities with a right to exchange at lower than the Current Market Price on
the date of issuance or conversion, as applicable, of such convertible,
exchangeable or exercisable securities, except for stock option agreements or
stock incentive agreements; and (ii) grants the right to the purchaser(s)
thereof to demand that the Corporation register under the Securities Act such
Common Shares issued or the Common Shares for which such warrants or options may
be exercised or such convertible, exchangeable or exercisable securities may be
converted, exchanged or exercised, then the Conversion Ratio shall be reduced to
equal the lowest of any such lower rates.
Section 6.6 Optional Redemption Under Certain Circumstances
At anytime after the date of issuance of the Series D Preferred Stock
until the Mandatory Conversion Date (as defined below), the Corporation, upon
notice delivered to the Holder as provided in Section 6.7, may redeem, in cash,
the Series D Preferred Stock (but only with respect to such shares as to which
the Holder has not theretofore furnished a Conversion Notice in compliance with
Section 6.2), at 135% of the Stated Value thereof (the "Optional Redemption
Price"), together with all accrued and unpaid dividends thereon to the date of
redemption (the "Redemption Date"). Except as set forth in this Section 6.6, the
Corporation shall not have the right to prepay or redeem the Series D Preferred
Stock.
Section 6.7 Notice of Redemption
Notice of redemption pursuant to Section 6.6 shall be provided by the
Corporation to the Holder in writing (by registered mail or overnight courier at
the Holder's last address appearing in the Corporation's security registry) not
less than 10 nor more than 15 days prior to the Redemption Date, which notice
shall specify the Redemption Date and refer to Section 6.6 (including a
statement of the Market Price per Common Share) and this Section 6.7.
11
<PAGE> 12
Section 6.8 Surrender of Preferred Stock
Upon any redemption of the Series D Preferred Stock pursuant to
Sections 6.6 or 6.7, the Holder shall either deliver the Series D Preferred
Stock by hand to the Corporation at its principal executive offices or surrender
the same to the Corporation at such address by express courier. Payment of the
optional Redemption Price specified in Section 6.6 shall be made by the
Corporation to the Holder against receipt of the Series D Preferred Stock (as
provided in this Section 6.8) by wire transfer of immediately available funds to
such account(s) as the Holder shall specify to the Corporation. If payment of
such redemption price is not made in full by the Mandatory Redemption Date or
the Redemption Date, as the case may be, the Holder shall again have the right
to convert the Series D Preferred Stock as provided in Article 6 hereof.
Section 6.9 Mandatory Conversion
On the fifth anniversary of the date of this Agreement (the "Mandatory
Conversion Date"), the Corporation shall convert all Series D Preferred Stock
outstanding at the Conversion Price.
Section 6.10 Certain Conversion Limitations
(a) Notwithstanding anything herein to the contrary, the Holder shall
not have the right, and the Corporation shall not have the obligation, to
convert all or any portion of the Series D Preferred Stock (and the Corporation
shall not have the right to pay dividends on the Series D Preferred Stock in
shares of Common Stock) if and to the extent that the issuance to the Holder of
shares of Common Stock upon such conversion (or payment of dividends) would
result in the Holder being deemed the "beneficial owner" of more than 5% of the
then outstanding shares of Common Stock within the meaning of Section 13(d) of
the Securities Exchange Act of 1934, as amended, and the rules promulgated
thereunder. If any court of competent jurisdiction shall determine that the
foregoing limitation is ineffective to prevent a Holder from being deemed the
beneficial owner of more than 5% of the then outstanding shares of Common Stock,
then the Corporation shall redeem so many of such Holder's shares (the
"Redemption Shares") of Series D Preferred Stock as are necessary to cause such
Holder to be deemed the beneficial owner of not more than 5% of the then
outstanding shares of Common Stock. Upon such determination by a court of
competent jurisdiction, the Redemption Shares shall immediately and without
further action be deemed returned to the status of authorized but unissued
shares of Series D Preferred Stock, and the Holder shall have no interest in or
rights under such Redemption Shares. Any and all dividends paid on or prior to
the date of such determination shall be deemed dividends paid on the remaining
shares of Series D Preferred Stock held by the Holder. Such redemption shall be
for cash at a redemption price equal to the sum of (i) the Stated Value of the
Redemption Shares and (ii) any accrued and unpaid dividends to the date of such
redemption; provided, however, if the redemption is a result of the mandatory
conversion pursuant to Section 6.9, the Corporation may either (i) make such
redemption in cash at a redemption price equal to the sum of (x) 135% of the
Stated Value of such shares and (y) any accrued and unpaid dividends to the date
of such redemption or (ii) extend the Mandatory Conversion Date for a period of
one year.
12
<PAGE> 13
(b) Unless the Corporation shall have obtained the approval of its
voting stockholders to such issuance in accordance with the rules of the Nasdaq
or such other stock market with which the Corporation shall be required to
comply, but only to the extent required thereby, the Corporation shall not issue
shares of Common Stock (i) upon conversion of any shares of Series D Preferred
Stock or (ii) as a dividend on the Series D Preferred Stock, if such issuance of
Common Stock, when added to the number of shares of Common Stock previously
issued by the Corporation (i) upon conversion of shares of the Series D
Preferred Stock, (ii) upon exercise of the Warrants issued pursuant to the terms
of the Securities Purchase Agreement and (iii) in payment of dividends on the
Series D Preferred Stock, would equal or exceed 20% of the number of shares of
the Corporation's Common Stock which were issued and outstanding on the Closing
Date (the "Maximum Issuance Amount"). In the event that a properly executed
Conversion Notice is received by the Corporation which would require the
Corporation to issue shares of Common Stock equal to or in excess of the Maximum
Issuance Amount, the Corporation shall honor such conversion request by (i)
converting the number of shares of Series D Preferred Stock stated in the
Conversion Notice not in excess of the Maximum Issuance Amount and (ii)
redeeming the number of shares of Series D Preferred Stock stated in the
Conversion Notice equal to or in excess of the Maximum Issuance Amount in cash
at a price equal to 125% of the Stated Value of the shares of Series D Preferred
Stock to be so redeemed, together with all accrued and unpaid dividends thereon.
In the event that the Corporation shall elect to pay a dividend in shares of
Common Stock which would require the Corporation to issue shares of Common Stock
equal to or in excess of the Maximum Issuance Amount, the Corporation shall pay
(i) a dividend in shares of Common Stock equal to one less than an amount which
would result in the Corporation issuing shares equal to the Maximum Issuance
Amount and (ii) the balance of the dividend in cash.
ARTICLE 7
VOTING RIGHTS
The holders of the Series D Preferred Stock have no voting power,
except as otherwise provided by the Business Corporation Act of the State of
Minnesota ("MBCA"), in this Article 7, and in Article 8 below.
Notwithstanding the above, the Corporation shall provide each Holder of
Series D Preferred Stock with prior notification of any meeting of the
shareholders (and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Corporation of a record of its
shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed liquidation, dissolution or
winding up of the Corporation, the Corporation shall mail a notice to each
Holder, at least 30 days prior to the consummation of the transaction or event,
whichever is earlier), of the date on which any such action is to be taken for
the purpose of such dividend, distribution, right or other event, and a brief
statement regarding, the amount and character of such dividend, distribution,
right or other event to the extent known at such time.
13
<PAGE> 14
To the extent that under the MBCA the vote of the Holders of the Series
D Preferred Stock, voting separately as a class or series as applicable, is
required to authorize a given action of the Corporation, the affirmative vote or
consent of the Holders of at least a majority of the outstanding shares of
Series D Preferred Stock represented at a duly held meeting at which a quorum is
present or by written consent of a majority of the outstanding shares of Series
D Preferred Stock (except as otherwise may be required under the MBCA) shall
constitute the approval of such action by the class. To the extent that under
the MBCA holders of the Series D Preferred Stock are entitled to vote on a
matter with holders of Common Stock, voting together as one class, each share of
Series D Preferred Stock shall be entitled to a number of votes equal to the
number of shares of Common Stock into which it is then convertible using the
record date for the taking of such vote of shareholders as the date as of which
the Conversion Price is calculated. Holders of the Series D Preferred Stock
shall be entitled to notice of all shareholder meetings or written consents (and
copies of proxy materials and other information sent to shareholders) with
respect to which they would be entitled to vote, which notice would be provided
pursuant to the Corporation's bylaws and the MBCA.
ARTICLE 8
PROTECTIVE PROVISIONS
So long as shares of Series D Preferred Stock are outstanding, the
Corporation shall not, without first obtaining the approval (by vote or written
consent, as provided by the MBCA) of the Holders of at least a majority of the
then outstanding shares of Series D Preferred Stock:
(a) alter or change the rights, preferences or privileges of the Series
D Preferred Stock;
(b) create any new class or series of capital stock having a preference
over the Series D Preferred Stock as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation ("Senior Securities") or alter or
change the rights, preferences or privileges of any Senior Securities so as to
affect adversely the Series D Preferred Stock, except in connection with the
Proposed Transaction;
(c) increase the authorized number of shares of Series D Preferred
Stock; or
(d) do any act or thing not authorized or contemplated by this
Certificate of Designation which would result in taxation of the holders of
shares of the Series D Preferred Stock under Section 305 of the Internal Revenue
Code of 1986, as amended (or any comparable provision of the Internal Revenue
Code as hereafter from time to time amended).
In the event Holders of least a majority of the then outstanding shares
of Series D Preferred Stock agree to allow the Corporation to alter or change
the rights, preferences or privileges of the shares of Series D Preferred Stock,
pursuant to subsection (a) above, so as to affect the Series D Preferred Stock,
then the Corporation will deliver notice of such approved change to the Holders
of the Series D Preferred Stock that did not agree to such alteration or change
(the "Dissenting Holders") and Dissenting Holders shall have the right for a
period of 30
14
<PAGE> 15
days to convert pursuant to the terms of this Certificate of Designation as they
exist prior to such alteration or change or continue to hold their shares of
Series D Preferred Stock.
If at any time the Corporation shall "spin-off" certain of its assets
or businesses by transferring, directly or indirectly, such assets or businesses
to a subsidiary of the Corporation ("Spinco") and making a dividend (the
"Spin-off Dividend") to the Corporation's stockholders of the shares of capital
stock of Spinco, the Corporation shall make a dividend to each Holder of, or
cause Spinco to issue to each Holder, that number of shares of capital stock of
Spinco as such Holder would have received had it converted, immediately prior to
the Spin-off Dividend, each Preferred Share then held by such Holder into Common
Stock.
ARTICLE 9
MISCELLANEOUS
Section 9.1 Loss, Theft, Destruction of Preferred Stock
Upon receipt of evidence satisfactory to the Corporation of the loss,
theft, destruction or mutilation of shares of Series D Preferred Stock and, in
the case of any such loss, theft or destruction, upon receipt of indemnity or
security reasonably satisfactory to the Corporation, or, in the case of any such
mutilation, upon surrender and cancellation of the Series D Preferred Stock, the
Corporation shall make, issue and deliver, in lieu of such lost, stolen,
destroyed or mutilated shares of Series D Preferred Stock, new shares of Series
D Preferred Stock of like tenor. The Series D Preferred Stock shall be held and
owned upon the express condition that the provisions of this Section 9.1 are
exclusive with respect to the replacement of mutilated, destroyed, lost or
stolen shares of Series D Preferred Stock and shall preclude any and all other
rights and remedies notwithstanding any law or statute existing or hereafter
enacted to the contrary with respect to the replacement of negotiable
instruments or other securities without the surrender thereof.
Section 9.2 Who Deemed Absolute Owner
The Corporation may deem the Person in whose name the Series D
Preferred Stock shall be registered upon the registry books of the Corporation
to be, and may treat it as, the absolute owner of the Series D Preferred Stock
for the purpose of receiving payment of dividends on the Series D Preferred
Stock, for the conversion of the Series D Preferred Stock and for all other
purposes, and the Corporation shall not be affected by any notice to the
contrary. All such payments and such conversion shall be valid and effectual to
satisfy and discharge the liability upon the Series D Preferred Stock to the
extent of the sum or sums so paid or the conversion so made.
Section 9.3 Notice of Certain Events
In the case of the occurrence of any event described in Sections 6.1,
6.6 or 6.7 of this Certificate of Designation, the Corporation shall cause to be
mailed to the Holder of the Series D Preferred Stock at its last address as it
appears in the Corporation's security registry, at least 20 days prior to the
applicable record, effective or expiration date hereinafter specified (or, if
such 20 days notice is not possible, at the earliest possible date prior to any
such record,
15
<PAGE> 16
effective or expiration date), a notice stating (x) the date on which a record
is to be taken for the purpose of such dividend, distribution, issuance or
granting of rights, options or warrants, or if a record is not to be taken, the
date as of which the Holders of record of Series D Preferred Stock to be
entitled to such dividend, distribution, issuance or granting of rights, options
or warrants are to be determination or the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding-up is
expected to become effective, and (y) the date as of which it is expected that
Holders of record of Series D Preferred Stock will be entitled to exchange their
shares for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale transfer, dissolution, liquidation
or winding-up.
Section 9.4 Register
The Corporation shall keep at its principal office a register in which
the Corporation shall provide for the registration of the Series D Preferred
Stock. Upon any transfer of the Series D Preferred Stock in accordance with the
provisions hereof, the Corporation shall register such transfer on the Series D
Preferred Stock register.
The Corporation may deem the person in whose name the Series D
Preferred Stock shall be registered upon the registry books of the Corporation
to be, and may treat it as, the absolute owner of the Series D Preferred Stock
for the purpose of receiving payment of dividends on the Series D Preferred
Stock, for the conversion of the Series D Preferred Stock and for all other
purposes, and the Corporation shall not be affected by any notice to the
contrary. All such payments and such conversions shall be valid and effective to
satisfy and discharge the liability upon the Series D Preferred Stock to the
extent of the sum or sums so paid or the conversion or conversions so made.
Section 9.5 Withholding
To the extent required by applicable law, the Corporation may withhold
amounts for or on account of any taxes imposed or levied by or on behalf of any
taxing authority in the United States having jurisdiction over the Corporation
from any payments made pursuant to the Series D Preferred Stock.
Section 9.6 Headings
The headings of the Articles and Sections of this Certificate of
Designation are inserted for convenience only and do not constitute a part of
this Certificate of Designation.
16
<PAGE> 17
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed by its duly authorized officer on August 31, 1999.
CAFE ODYSSEY, INC.
By: /s/ Ronald K. Fuller
---------------------------------
Name: Ronald K. Fuller
Title: President
17
<PAGE> 18
ANNEX I
FORM OF CONVERSION NOTICE
TO: Cafe Odyssey, Inc.
4801 West 81st Street, Suite 112
Bloomington, MN 55437
The undersigned owner of this Series D 8% Convertible Preferred Stock
(the "Series D Preferred Stock") issued by Cafe Odyssey, Inc. (the
"Corporation") hereby irrevocably exercises its option to convert __________
shares of the Series D Preferred Stock into shares of the common stock, par
value $0.01 per share ("Common Stock"), of the Corporation in accordance with
the terms of the Certificate of Designation. The undersigned hereby instructs
the Corporation to convert the number of shares of the Series D Preferred Stock
specified above into Shares of Common Stock Issued at Conversion in accordance
with the provisions of Article 6 of the Certificate of Designation. The
undersigned directs that the Common Stock issuable and certificates therefor
deliverable upon conversion, the Series D Preferred Stock recertificated, if
any, not being surrendered for conversion hereby, together with any check in
payment for fractional Common Stock, be issued in the name of and delivered to
the undersigned unless a different name has been indicated below. All
capitalized terms used and not defined herein have the respective meanings
assigned to them in the Certificate of Designation. So long as the Series D
Preferred Stock shall have been surrendered for conversion hereby, the
conversion pursuant hereto shall be deemed to have been effected at the date and
time specified below, and at such time the rights of the undersigned as a Holder
of the Series D Preferred Stock shall cease and the Person or Persons in whose
name or names the Common Stock Issued at Conversion shall be issuable shall be
deemed to have become the holder or holders of record of the Common Shares
represented thereby and all voting and other rights associated with the
beneficial ownership of such Common Shares shall at such time vest with such
Person or Persons.
Date and time:
----------------------
---------------------------------
Signature
Fill in for registration of Series D Preferred Stock:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please print name and address (including zip code number)
STATE OF MINNESOTA
FILED - DUPLICATE COPY
AUG 31, 1999
/s/ Mary Kiffmeyer
Secretary of State
18
<PAGE> 1
EXHIBIT 3.1(e)
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
CAFE ODYSSEY, INC.
The undersigned, Chief Financial Officer of Cafe Odyssey, Inc., a
Minnesota corporation (the "Corporation"), hereby certifies that the following
Articles of Amendment have been duly adopted by the Board of Directors and the
Shareholders of the Corporation, pursuant to the provisions of the Minnesota
Business Corporation Act.
1. The name of the Corporation is Cafe Odyssey, Inc.
2. Article I of the Corporation's Articles of Incorporation is
amended to read in its entirety as follows:
"ARTICLE I
The name of this Corporation is PopMail.com, inc."
3. This amendment has been adopted pursuant to Chapter 302A of the
Minnesota Statutes, also called the Minnesota Business
Corporation Act.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 3rd
day of September, 1999.
/s/ Thomas W. Orr
------------------------------
Thomas W. Orr
Chief Financial Officer
STATE OF MINNESOTA
FILED - DUPLICATE COPY
SEP 03, 1999
/s/ Mary Kiffmeyer
Secretary of State
<PAGE> 1
EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of August 31,
1999, between Cafe Odyssey, Inc., a Minnesota corporation with principal
executive offices located at 4801 West 81st Street, Suite 112, Bloomington,
Minnesota 55437 (the "COMPANY"), and The Shaar Fund Ltd. ("BUYER").
WHEREAS, Buyer desires to purchase from the Company, and the
Company desires to issue and sell to the Buyer, upon the terms and subject to
the conditions of this Agreement, (i) 2,200 shares of the Company's Series D 8%
Convertible Preferred Stock, par value $0.01 per share (collectively, the
"PREFERRED SHARES"), and (ii) Common Stock Purchase Warrants in the form
attached hereto as Exhibit A (collectively, the "WARRANTS");
WHEREAS, upon the terms and subject to the designations,
preferences and rights set forth in the Company's Certificate of Designation of
Series D 8% Convertible Preferred Stock in the form attached hereto as Exhibit B
(the "CERTIFICATE OF DESIGNATION"), the Preferred Shares are convertible into
shares of the Company's common stock, par value $0.01 per share (the "COMMON
STOCK");
WHEREAS, the Warrants, upon the terms and subject to the
conditions in the Warrants, will for a period of five years be exercisable to
purchase 300,000 shares of Common Stock;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
I. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS
A. TRANSACTION. Buyer hereby agrees to purchase from the
Company, and the Company has offered and hereby agrees to issue and sell to the
Buyer in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended (the "SECURITIES ACT"),
the Preferred Shares and the Warrants to purchase 300,000 shares of Common
Stock.
B. PURCHASE PRICE; FORM OF PAYMENT. The purchase price for the
Preferred Shares and the Warrants to be purchased by Buyer hereunder shall be
$2,200,000 (the "PURCHASE PRICE"). Buyer shall pay the Purchase Price by wire
transfer of immediately available funds to the escrow agent (the "ESCROW AGENT")
identified in those certain Escrow Instructions of even date herewith, a copy of
which is attached hereto as Exhibit C (the "ESCROW INSTRUCTIONS").
Simultaneously with the execution of this Agreement and against receipt by the
Escrow Agent of the Purchase Price, the Company shall deliver one or more duly
authorized, issued and executed certificates (I/N/O Buyer or, if the Company
otherwise has been notified, I/N/O Buyer's nominee) evidencing the Preferred
Shares and the Warrants which the Buyer is purchasing, to the
1
<PAGE> 2
Escrow Agent or its designated depository. By executing and delivering this
Agreement, Buyer and the Company each hereby agrees to observe the terms and
conditions of the Escrow Instructions, all of which are incorporated herein by
reference as if fully set forth herein.
C. METHOD OF PAYMENT. Payment into escrow of the Purchase
Price shall be made by wire transfer of immediately available funds to:
The Bank of New York
48 Wall Street
New York, NY 10038
ABA No.: 021000018
For the Account of: Cadwalader, Wickersham & Taft
Trust Account IOLA Fund
Account No.: 0902061070
Simultaneously with the execution of this Agreement, the Buyer shall deposit
with the Escrow Agent the Purchase Price and the Company shall deposit with the
Escrow Agent the Preferred Shares and the Warrants.
II. BUYER'S REPRESENTATIONS, WARRANTIES; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION
Buyer represents and warrants to and covenants and agrees with
the Company as follows:
A. Buyer is purchasing the Preferred Shares, the Warrants, the
Common Stock issuable upon exercise of the Warrants (the "WARRANT SHARES") and
the shares of Common Stock issuable upon conversion of the Preferred Shares (the
"CONVERSION SHARES" and, collectively with the Preferred Shares, the Warrants
and the Warrant Shares, the "SECURITIES") for its own account, for investment
purposes only and not with a view towards or in connection with the public sale
or distribution thereof in violation of the Securities Act.
B. Buyer is (i) an "ACCREDITED INVESTOR" within the meaning of
Rule 501 of Regulation D under the Securities Act, (ii) experienced in making
investments of the kind contemplated by this Agreement, (iii) capable, by reason
of its business and financial experience, of evaluating the relative merits and
risks of an investment in the Securities, and (iv) able to afford the loss of
its investment in the Securities.
C. Buyer understands that the Securities are being offered and
sold by the Company in reliance on an exemption from the registration
requirements of the Securities Act and equivalent state securities and "blue
sky" laws, and that the Company is relying upon the accuracy of, and Buyer's
compliance with, Buyer's representations, warranties and covenants set forth in
this Agreement to determine the availability of such exemption and the
eligibility of Buyer to purchase the Securities;
E. Buyer acknowledges that in making its decision to purchase
the Securities
2
<PAGE> 3
it has been given an opportunity to review the Commission Filings (as defined in
Section III.H. hereof) and to ask questions of and to receive answers from the
Company's executive officers, directors and management personnel concerning the
terms and conditions of the private placement of the Securities by the Company.
F. Buyer understands that the Securities have not been
approved or disapproved by the Securities and Exchange Commission (the
"COMMISSION") or any state securities commission and that the foregoing
authorities have not reviewed any documents or instruments in connection with
the offer and sale to it of the Securities and have not confirmed or determined
the adequacy or accuracy of any such documents or instruments.
G. This Agreement has been duly and validly authorized,
executed and delivered by Buyer and is a valid and binding agreement of Buyer
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and except as
rights to indemnity and contribution may be limited by federal or state
securities laws or the public policy underlying such laws.
H. Neither Buyer nor its affiliates nor any person acting on
its or their behalf has the intention of entering, or will enter into, prior to
the closing, any put option, short position or other similar instrument or
position with respect to the Common Stock and neither Buyer nor any of its
affiliates nor any person acting on its or their behalf will use at any time
shares of Common Stock acquired pursuant to this Agreement to settle any put
option, short position or other similar instrument or position that may have
been entered into prior to the execution of this Agreement.
III. THE COMPANY'S REPRESENTATIONS
The Company represents and warrants to Buyer that:
A. CAPITALIZATION.
1. The authorized capital stock of the Company consists of
100,000,000 shares, of which _________ shares of Common Stock are
issued and outstanding on August __, 1999, 750 shares of Series A 8%
Convertible Preferred Stock ("Series A Preferred") are issued and
outstanding as of August __, 1999, ____ shares of Series B 8%
Convertible Preferred Stock ("Series B Preferred") as of August __,
1999, and ____ shares of Series C 8% Convertible Preferred Stock
("Series C Preferred") as of August __, 1999. All of the issued and
outstanding shares of Common Stock and preferred stock, if any, have
been duly authorized and validly issued and are fully paid and
nonassessable. As of the date hereof, the Company has outstanding stock
options and warrants to purchase _________ shares of Common Stock. The
Conversion Shares and Warrant Shares have been duly and validly
authorized and reserved for issuance by the Company, and when issued by
the Company upon conversion of, or in lieu of accrued dividends on, the
Preferred Shares and on exercise of the Warrants will be duly and
validly issued, fully paid and nonassessable and will not subject the
holder thereof to
3
<PAGE> 4
personal liability by reason of being such holder. Except as to be
issued in the Proposed Transaction (as defined in the Certificate of
Designation), there are no preemptive, subscription, "call" or other
similar rights to acquire the Common Stock (including the Conversion
Shares and Warrant Shares) that have been issued or granted to any
person.
2. Except as disclosed on Schedule III.A.2. hereto, the
Company does not own or control, directly or indirectly, any interest
in any other corporation, partnership, limited liability company,
unincorporated business organization, association, trust or other
business entity.
B. ORGANIZATION; REPORTING COMPANY STATUS.
1. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Minnesota
and is duly qualified as a foreign corporation in all jurisdictions in
which the failure to so qualify would have a material adverse effect on
the business, properties, prospects, condition (financial or otherwise)
or results of operations of the Company or on the consummation of any
of the transactions contemplated by this Agreement (a "MATERIAL ADVERSE
EFFECT").
2. The Company has registered the Common Stock pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), and has timely filed with the Commission all reports
and information required to be filed by it pursuant to all reporting
obligations under Section 13(a) or 15(d), as applicable, of the
Exchange Act for the 12-month period immediately preceding the date
hereof. The Common Stock is listed and traded on the Nasdaq SmallCap
Market ("Nasdaq") and the Company has not received any notice
regarding, and to its knowledge there is no threat of, the termination
or discontinuance of the eligibility of the Common Stock for such
listing, except for the receipt of notice from Nasdaq regarding the
Company's failure to maintain a minimum bid price for its Common Stock,
which notice is no longer effective.
C. AUTHORIZED SHARES. The Company has duly and validly
authorized and reserved for issuance shares of Common Stock sufficient in number
for the conversion of the Preferred Shares and the exercise of the Warrants,
such number of authorized and reserved shares to be at least 19.9% of the total
outstanding shares of Common Stock on the Closing Date. The Company understands
and acknowledges the potentially dilutive effect to the Common Stock of the
issuance of the Preferred Shares and Warrant Shares upon conversion of the
Preferred Shares and exercise of the Warrants, respectively. The Company further
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Preferred Shares and Warrant Shares upon exercise of the Warrants in
accordance with this Agreement, the Preferred Shares and the Warrants is
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the Company and
notwithstanding the commencement of any case under 11 U.S.C. ss. 101 et seq.
(the "BANKRUPTCY CODE"). In the event the Company is a debtor under the
Bankruptcy Code, the Company hereby waives to the fullest extent permitted any
rights to relief it may have under 11 U.S.C. ss. 362 in respect of the
conversion of the Preferred Shares and the exercise of the Warrants. The Company
agrees,
4
<PAGE> 5
without cost or expense to Buyer, to take or consent to any and all action
necessary to effectuate relief under 11 U.S.C. ss. 362. Schedule III.C. hereto
sets forth (i) all issuances and sales by the Company since the closing of its
initial public offering of its capital stock, and other securities convertible,
exercisable or exchangeable for capital stock of the Company, (ii) the amount of
such securities sold, including any underlying shares of capital stock, (iii)
the purchaser thereof, and (iv) the amount paid therefor.
D. AUTHORITY; VALIDITY AND ENFORCEABILITY. The Company has the
requisite corporate power and authority to file and perform its obligations
under the Certificate of Designation and to enter into the Documents (as
hereinafter defined), and to perform all of its obligations hereunder and
thereunder (including the issuance, sale and delivery to Buyer of the
Securities). The execution, delivery and performance by the Company of the
Documents, and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the filing of the Certificate
of Designation with the Minnesota Secretary of State's office, the issuance of
the Preferred Shares, the Warrants and the issuance and reservation for issuance
of the Conversion Shares and Warrant Shares), has been duly authorized by all
necessary corporate action on the part of the Company. Each of the Documents has
been duly and validly executed and delivered by the Company and the Certificate
of Designation has been duly filed with the Minnesota Secretary of State's
office by the Company and each instrument constitutes a valid and binding
obligation of the Company enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and except as rights to indemnity and contribution may be
limited by federal or state securities laws or the public policy underlying such
laws. The Securities have been duly and validly authorized for issuance by the
Company and, when executed and delivered by the Company, will be valid and
binding obligations of the Company enforceable against it in accordance with
their terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally. For purposes of this Agreement, the term
"DOCUMENTS" means (i) this Agreement; (ii) the Registration Rights Agreement of
even date herewith between the Company and Buyer, a copy of which is annexed
hereto as Exhibit D (the "REGISTRATION RIGHTS AGREEMENT"); (iii) the Certificate
of Designation; (iv) the Warrants; and (v) the Escrow Instructions.
E. AUTHORIZATION OF THE SECURITIES. The authorization,
issuance, sale and delivery of the Preferred Shares and Warrants has been duly
authorized by all requisite corporate action on the part of the Company. As of
the Closing Date, the Preferred Shares and the Warrants, and the Conversion
Shares and the Warrant Shares upon their issuance in accordance with the
Certificate of Designation and the Warrants, respectively, will be validly
issued and outstanding, fully paid and nonassessable, and not subject to any
preemptive rights, rights of first refusal or other similar rights.
F. NON-CONTRAVENTION. The execution and delivery by the
Company of the Documents, the issuance of the Securities, and the consummation
by the Company of the other transactions contemplated hereby and thereby,
including, without limitation, the filing of the Certificate of Designation with
the Minnesota Secretary of State's office, do not and will not
5
<PAGE> 6
conflict with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default (or an event which, with notice, lapse of
time or both, would constitute a default) under (i) the articles of
incorporation or by-laws of the Company or (ii) any indenture, mortgage, deed of
trust or other material agreement or instrument to which the Company is a party
or by which its properties or assets are bound, or any law, rule, regulation,
decree, judgment or order of any court or public or governmental authority
having jurisdiction over the Company or any of the Company's properties or
assets, except as to clause (ii) above such conflict, breach or default which
would not have a Material Adverse Effect.
G. APPROVALS. No authorization, approval or consent of any
court or public or governmental authority is required to be obtained by the
Company for the issuance and sale of the Preferred Shares or the Warrants (and
the Conversion Shares and Warrant Shares) to Buyer as contemplated by this
Agreement, except such authorizations, approvals and consents that have been
obtained by the Company prior to the date hereof.
H. COMMISSION FILINGS. None of the Company's reports and
documents heretofore filed with the Commission pursuant to the Securities Act or
the Exchange Act (collectively, the "COMMISSION FILINGS") contained at the time
they were filed any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
I. ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date
(as defined in Section III.M.), there has not occurred any change, event or
development in the business, financial condition, prospects or results of
operations of the Company, and there has not existed any condition having or
reasonably likely to have, a Material Adverse Effect.
J. FULL DISCLOSURE. There is no fact known to the Company
(other than general economic or industry conditions known to the public
generally) that has not been fully disclosed in writing to the Buyer that (i)
reasonably could be expected to have a Material Adverse Effect or (ii)
reasonably could be expected to materially and adversely affect the ability of
the Company to perform its obligations pursuant to the Documents.
K. ABSENCE OF LITIGATION. There is no action, suit, claim,
proceeding, inquiry or investigation pending or, to the Company's knowledge,
threatened, by or before any court or public or governmental authority which, if
determined adversely to the Company, would have a Material Adverse Effect.
L. ABSENCE OF EVENTS OF DEFAULT. No "EVENT OF DEFAULT" (as
defined in any agreement or instrument to which the Company is a party) and no
event which, with notice, lapse of time or both, would constitute an Event of
Default (as so defined), has occurred and is continuing, which could have a
Material Adverse Effect.
M. FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES. The
Company has made available to Buyer true and complete copies of its audited
balance sheet as at January 3, 1999 and the related audited statements of
operations and cash flows for the fiscal years ended
6
<PAGE> 7
December 28, 1997 and January 3, 1999 including the related notes and schedules
thereto (collectively, the "FINANCIAL STATEMENTS"). Each of the Financial
Statements is complete and correct in all material respects, has been prepared
in accordance with United States General Accepted Accounting Principles ("GAAP")
(subject, in the case of the interim Financial Statements, to normal year end
adjustments and the absence of footnotes) and in conformity with the practices
consistently applied by the Company without modification of the accounting
principles used in the preparation thereof, and fairly presents the financial
position, results of operations and cash flows of the Company as at the dates
and for the periods indicated. For purposes hereof, the audited balance sheet of
the Company as at January 3, 1999 is hereinafter referred to as the "BALANCE
SHEET" and January 3, 1999 is hereinafter referred to as the "BALANCE SHEET
DATE". The Company has no indebtedness, obligations or liabilities of any kind
(whether accrued, absolute, contingent or otherwise, and whether due or to
become due) that would have been required to be reflected in, reserved against
or otherwise described in the Balance Sheet or in the notes thereto in
accordance with GAAP, which was not fully reflected in, reserved against or
otherwise described in the Balance Sheet or the notes thereto or was not
incurred in the ordinary course of business consistent with the Company's past
practices since the Balance Sheet Date.
N. COMPLIANCE WITH LAWS; PERMITS. The Company is in compliance
with all laws, rules, regulations, codes, ordinances and statutes (collectively,
"LAWS") applicable to it or to the conduct of its business, except for such
noncompliance which would not have a Material Adverse Effect. The Company
possesses all permits, approvals, authorizations, licenses, certificates and
consents from all public and governmental authorities which are necessary to
conduct its business, except for those the absence of which would not have a
Material Adverse Effect.
O. RELATED PARTY TRANSACTIONS. Except as set forth on Schedule
III.O. hereto, neither the Company nor any of its officers, directors or
"AFFILIATES" (as such term is defined in Rule 12b-2 under the Exchange Act) has
borrowed any moneys from or has outstanding any indebtedness or other similar
obligations to the Company. Except as set forth on Schedule III.O. hereto,
neither the Company nor any of its officers, directors or Affiliates (i) owns
any direct or indirect interest constituting more than a 1% equity (or similar
profit participation) interest in, or controls or is a director, officer,
partner, member or employee of, or consultant to or lender to or borrower from,
or has the right to participate in the profits of, any person or entity which is
(x) a competitor, supplier, customer, landlord, tenant, creditor or debtor of
the Company, (y) engaged in a business related to the business of the Company,
or (z) a participant in any transaction to which the Company is a party (other
than in the ordinary course of the Company's business) or (ii) is a party to any
contract, agreement, commitment or other arrangement with the Company.
P. INSURANCE. The Company maintains property and casualty,
general liability, workers' compensation, environmental hazard, personal injury
and other similar types of insurance with financially sound and reputable
insurers that is adequate, consistent with industry standards and the Company's
historical claims experience. The Company has not received notice from, and has
no knowledge of any threat by, any insurer (that has issued any
7
<PAGE> 8
insurance policy to the Company) that such insurer intends to deny coverage
under or cancel, discontinue or not renew any insurance policy presently in
force.
Q. SECURITIES LAW MATTERS. Based, in part, upon the
representations and warranties of Buyer set forth in Section II hereof, the
offer and sale by the Company of the Securities is exempt from (i) the
registration and prospectus delivery requirements of the Securities Act and the
rules and regulations of the Commission thereunder and (ii) the registration
and/or qualification provisions of all applicable state securities and "blue
sky" laws. Other than pursuant to an effective registration statement under the
Securities Act, the Company has not issued, offered or sold the Preferred Shares
or any shares of Common Stock (including for this purpose any securities of the
same or a similar class as the Preferred Shares or Common Stock, or any
securities convertible into or exchangeable or exercisable for the Preferred
Shares or Common Stock or any such other securities), and the Company shall not
directly or indirectly take, and shall not permit any of its directors, officers
or Affiliates directly or indirectly to take, any action (including, without
limitation, any offering or sale to any person or entity of the Preferred Shares
or shares of Common Stock), so as to make unavailable the exemption from
Securities Act registration being relied upon by the Company for the offer and
sale to Buyer of the Preferred Shares (and the Conversion Shares) as
contemplated by this Agreement. No form of general solicitation or advertising
has been used or authorized by the Company or any of its officers, directors or
Affiliates in connection with the offer or sale of the Preferred Shares (and the
Conversion Shares) as contemplated by this Agreement or any other agreement to
which the Company is a party.
R. ENVIRONMENTAL MATTERS.
1. The operations of the Company are in compliance with all
applicable Environmental Laws and all permits issued pursuant to
Environmental Laws or otherwise;
2. The Company has obtained or applied for all permits
required under all applicable Environmental Laws necessary to operate
its business;
3. The Company is not the subject of any outstanding
written order of or agreement with any governmental authority or person
respecting (i) Environmental Laws, (ii) Remedial Action or (iii) any
Release or threatened Release of Hazardous Materials;
4. The Company has not received, since January 3, 1999, any
written communication alleging that it may be in violation of any
Environmental Law or any permit issued pursuant to any Environmental
Law, or may have any liability under any Environmental Law;
5. The Company does not have any current contingent
liability in connection with any Release of any Hazardous Materials
into the indoor or outdoor environment (whether on-site or off-site);
8
<PAGE> 9
6. Except as set forth on Schedule III.R.6 hereto, to the
Company's knowledge, there are no investigations of the business,
operations, or currently or previously owned, operated or leased
property of the Company pending or threatened which could lead to the
imposition of any liability pursuant to any Environmental Law;
7. There is not located at any of the properties of the
Company any (A) underground storage tanks, (B) asbestos-containing
material or (C) equipment containing polychlorinated biphenyls; and,
8. The Company has provided to Buyer all environmentally
related audits, studies, reports, analyses, and results of
investigations that have been performed with respect to the currently
or previously owned, leased or operated properties of the Company.
For purposes of this Section III.R.:
"ENVIRONMENTAL LAW" means any foreign, federal, state or local
statute, regulation, ordinance, or rule of common law as now or hereafter in
effect in any way relating to the protection of human health and safety or the
environment including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, the Hazardous Materials Transportation
Act, the Resource Conservation and Recovery Act, the Clean Water Act, the Clean
Air Act, the Toxic Substances Control Act, the Federal Insecticide, Fungicide,
and Rodenticide Act, and the Occupational Safety and Health Act, and the
regulations promulgated pursuant thereto.
"HAZARDOUS MATERIAL" means any substance, material or waste
which is regulated by the United States, Canada or any of its provinces, or any
state or local governmental authority including, without limitation, petroleum
and its by-products, asbestos, and any material or substance which is defined as
a "HAZARDOUS WASTE," "HAZARDOUS SUBSTANCE," "HAZARDOUS MATERIAL," "RESTRICTED
HAZARDOUS WASTE," "INDUSTRIAL WASTE," "SOLID WASTE," "CONTAMINANT," "POLLUTANT,"
"TOXIC WASTE" or "TOXIC SUBSTANCE" under any provision of any Environmental Law;
"RELEASE" means any release, spill, filtration, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, or
leaching into the indoor or outdoor environment, or into or out of any property;
"REMEDIAL ACTION" means all actions to (x) clean up, remove,
treat or in any other way address any Hazardous Material; (y) prevent the
Release of any Hazardous Material so it does not endanger or threaten to
endanger public health or welfare or the indoor or outdoor environment; or (z)
perform pre-remedial studies and investigations or post-remedial monitoring and
care.
S. LABOR MATTERS. The Company is not party to any labor or
collective bargaining agreement and there are no labor or collective bargaining
agreements which pertain to
9
<PAGE> 10
employees of the Company. No employees of the Company are represented by any
labor organization and none of such employees has made a pending demand for
recognition, and there are no representation proceedings or petitions seeking a
representation proceeding presently pending or, to the Company's knowledge,
threatened to be brought or filed, with the National Labor Relations Board or
other labor relations tribunal. There is no organizing activity involving the
Company pending or to the Company's knowledge, threatened by any labor
organization or group of employees of the Company. There are no (i) strikes,
work stoppages, slowdowns, lockouts or arbitrations or (ii) material grievances
or other labor disputes pending or, to the knowledge of the Company, threatened
against or involving the Company. There are no unfair labor practice charges,
grievances or complaints pending or, to the knowledge of the Company, threatened
by or on behalf of any employee or group of employees of the Company.
T. ERISA MATTERS. The Company and its ERISA Affiliates are in
compliance in all material respects with all provisions of ERISA applicable to
it. No Reportable Event has occurred, been waived or exists as to which the
Company or any ERISA Affiliate was required to file a report with the Pension
Benefits Guaranty Corporation, and the present value of all liabilities under
all Plans (based on those assumptions used to fund such Plans) did not, as of
the most recent annual valuation date applicable thereto, exceed the value of
the assets of all such Plans in the aggregate. None of the Company or ERISA
Affiliates has incurred any Withdrawal Liability that could result in a Material
Adverse Effect. None of the Company or ERISA Affiliates has received any
notification that any Multiemployer Plan is in reorganization or has been
terminated within the meaning of Title IV of ERISA, and no Multiemployer Plan is
reasonably expected to be in reorganization or termination where such
reorganization or termination has resulted or could reasonably be expected to
result in increases to the contributions required to be made to such Plan or
otherwise.
For purposes of this Section III.T.:
"ERISA" means the Employee Retirement Income Security Act of
1974, or any successor statute, together with the regulations thereunder, as the
same may be amended from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that was, is or hereafter may become, a member of a group of which
the Company is a member and which is treated as a single employer under Section
414 of the Internal Revenue Code of 1986, as amended (the "INTERNAL REVENUE
CODE").
"MULTIEMPLOYER PLAN" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA to which the Company or any ERISA Affiliate (other
than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
Section 414 of the Internal Revenue Code) is making or accruing an obligation to
make contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.
"PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA or any successor thereto.
10
<PAGE> 11
"PLAN" means any pension plan (other than a Multiemployer
Plan) subject to the provision of Title IV of ERISA or Section 412 of the
Internal Revenue Code that is maintained for employees of the Company or any
ERISA Affiliate.
"REPORTABLE EVENT" means any reportable event as defined in
Section 4043(b) of ERISA or the regulations issued thereunder with respect to a
Plan (other than a Plan maintained by an ERISA Affiliate that is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the
Internal Revenue Code).
"WITHDRAWAL LIABILITY" means liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
U. TAX MATTERS.
1. The Company has filed all Tax Returns which it is
required to file under applicable Laws, except for such Tax Returns in
respect of which the failure to so file does not and could not have a
Material Adverse Effect; all such Tax Returns are true and accurate in
all material respects and have been prepared in compliance with all
applicable Laws; the Company has paid all Taxes due and owing by it
(whether or not such Taxes are required to be shown on a Tax Return)
and have withheld and paid over to the appropriate taxing authorities
all Taxes which it is required to withhold from amounts paid or owing
to any employee, stockholder, creditor or other third parties; and
since the Balance Sheet Date, the charges, accruals and reserves for
Taxes with respect to the Company (including any provisions for
deferred income taxes) reflected on the books of the Company are
adequate to cover any Tax liabilities of the Company if its current tax
year were treated as ending on the date hereof.
2. No claim has been made by a taxing authority in a
jurisdiction where the Company does not file tax returns that such
corporation is or may be subject to taxation by that jurisdiction.
There are no foreign, federal, state or local tax audits or
administrative or judicial proceedings pending or being conducted with
respect to the Company; no information related to Tax matters has been
requested by any foreign, federal, state or local taxing authority;
and, except as disclosed above, no written notice indicating an intent
to open an audit or other review has been received by the Company from
any foreign, federal, state or local taxing authority. There are no
material unresolved questions or claims concerning the Company's Tax
liability. The Company (A) has not executed or entered into a closing
agreement pursuant to Section 7121 of the Internal Revenue Code or any
predecessor provision thereof or any similar provision of state, local
or foreign law; or (B) has not agreed to or is required to make any
adjustments pursuant to Section 481(a) of the Internal Revenue Code or
any similar provision of state, local or foreign law by reason of a
change in accounting method initiated by the Company or any of its
subsidiaries or has any knowledge that the IRS has proposed any such
adjustment or change in accounting method, or has any application
pending with any taxing authority requesting permission for any changes
in accounting methods that
11
<PAGE> 12
relate to the business or operations of the Company. The Company has
not been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Internal Revenue Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Internal
Revenue Code.
3. The Company has not made an election under Section
341(f) of the Internal Revenue Code. The Company is not liable for the
Taxes of another person that is not a subsidiary of the Company under
(A) Treas. Reg. Section 1.1502-6 (or comparable provisions of state,
local or foreign law), (B) as a transferee or successor, (C) by
contract or indemnity or (D) otherwise. The Company is not a party to
any tax sharing agreement. The Company has not made any payments, is
obligated to make payments or is a party to an agreement that could
obligate it to make any payments that would not be deductible under
Section 280G of the Internal Revenue Code.
For purposes of this Section III.U.:
"IRS" means the United States Internal Revenue Service.
"TAX" or "TAXES" means federal, state, county, local, foreign,
or other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"TAX RETURN" means any return, information report or filing
with respect to Taxes, including any schedules attached thereto and including
any amendment thereof.
V. PROPERTY. The Company has good and marketable title to all
real and personal property owned by it, free and clear of all liens,
encumbrances and defects except such as are described on Schedule III.V. hereto
or such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company; and any real property and buildings held under lease by the Company are
held by it under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company.
W. INTELLECTUAL PROPERTY. The Company owns or possesses
adequate and enforceable rights to use all patents, patent applications,
trademarks, trademark applications, trade names, service marks, copyrights,
copyright applications, licenses, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures) and other similar rights and proprietary knowledge (collectively,
"INTANGIBLES") necessary for the conduct of its business as now being conducted
including, but not limited to, those described on Schedule III.W. hereto. The
Company is not infringing upon or in conflict with any right of any other person
with respect to any Intangibles. Except as
12
<PAGE> 13
disclosed on Schedule III.W. hereto, no claims have been asserted by any person
to the ownership or use of any Intangibles and the Company has no knowledge of
any basis for such claim.
X. INTERNAL CONTROLS AND PROCEDURES. The Company maintains
accurate books and records and internal accounting controls which provide
reasonable assurance that (i) all transactions to which the Company is a party
or by which its properties are bound are executed with management's
authorization; (ii) the reported accountability of the Company's assets is
compared with existing assets at regular intervals; (iii) access to the
Company's assets is permitted only in accordance with management's
authorization; and (iv) all transactions to which the Company is a party or by
which its properties are bound are recorded as necessary to permit preparation
of the financial statements of the Company in accordance with GAAP.
Y. PAYMENTS AND CONTRIBUTIONS. Neither the Company nor any of
its directors, officers or, to its knowledge, other employees has (i) used any
Company funds for any unlawful contribution, endorsement, gift, entertainment or
other unlawful expense relating to political activity; (ii) made any direct or
indirect unlawful payment of Company funds to any foreign or domestic government
official or employee, (iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any bribe,
rebate, payoff, influence payment, kickback or other similar payment to any
person with respect to Company matters.
Z. NO MISREPRESENTATION. No representation or warranty of the
Company contained in this Agreement, any schedule, annex or exhibit hereto or
any agreement, instrument or certificate furnished by the Company to Buyer
pursuant to this Agreement, contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, not misleading.
IV. CERTAIN COVENANTS AND ACKNOWLEDGMENTS
A. RESTRICTIVE LEGEND. Buyer acknowledges and agrees that,
upon issuance pursuant to this Agreement, the Securities (and any shares of
Common Stock issued in conversion of the Preferred Shares or exercise of the
Warrants) shall have endorsed thereon a legend in substantially the following
form (and a stop-transfer order may be placed against transfer of the Preferred
Shares, the Warrant Shares and the Conversion Shares until such legend has been
removed):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE, AND ARE BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT
13
<PAGE> 14
OR SUCH OTHER LAWS."
B. FILINGS. The Company shall make all necessary Commission
Filings and "blue sky" filings required to be made by the Company in connection
with the sale of the Securities to the Buyer as required by all applicable Laws,
and shall provide a copy thereof to the Buyer promptly after such filing.
C. REPORTING STATUS. So long as the Buyer beneficially owns
any of the Securities, the Company shall timely file all reports required to be
filed by it with the Commission pursuant to Section 13 or 15(d) of the Exchange
Act.
D. USE OF PROCEEDS. The Company shall use the net proceeds
from the sale of the Securities (excluding amounts paid by the Company for
Buyer's out-of-pocket costs and expenses incurred in connection with the
transactions contemplated by this Agreement and finder's fees in connection with
such sale) solely for funding the proposed acquisition of Popmail.com, Inc. and
transactions related thereto, including the proposed Internet Community Concepts
and ROI Interactive, LLC acquisitions.
E. LISTING. Except to the extent the Company lists its Common
Stock on The New York Stock Exchange or the Nasdaq National Market, the Company
shall use its best efforts to maintain its listing of the Common Stock on
Nasdaq.
F. RESERVED CONVERSION SHARES. The Company at all times from
and after the date hereof shall have a sufficient number of shares of Common
Stock duly and validly authorized and reserved for issuance to satisfy the
conversion, in full, of the 2,200 Preferred Shares and upon the exercise of the
Warrants, such number of authorized and reserved shares to be at least 19.9% of
the total outstanding shares of Common Stock on the Closing Date.
G. FINDER'S FEES. The Company shall pay all finder's fees,
brokerage commissions or like payments in connection with the issuance, purchase
and sale of the Securities, including, without limitation, fees payable by the
Company to Progressive Group, consisting of a 10% placement fee, 3% of
unallocated expenses and warrants to purchase 87,500 shares of Common Stock, and
the Company agrees that Buyer shall have no liability therefor.
V. TRANSFER AGENT INSTRUCTIONS
A. The Company undertakes and agrees that no instruction other
than the instructions referred to in this Section V and customary stop transfer
instructions prior to the registration and sale of the Common Stock pursuant to
an effective Securities Act registration statement will be given to its transfer
agent for the Common Stock and that the Common Stock issuable upon conversion of
the Preferred Shares and exercise of the Warrants otherwise shall be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement and applicable
law. Nothing contained in this Section V.A. shall affect in any way Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of such Common Stock. If, at any time, Buyer provides the Company with an
opinion of counsel reasonably satisfactory to the Company that registration
14
<PAGE> 15
of the resale by Buyer of such Common Stock is not required under the Securities
Act and that the removal of restrictive legends is permitted under applicable
law, the Company shall permit the transfer of such Common Stock and, promptly
instruct the Company's transfer agent to issue one or more certificates for
Common Stock without any restrictive legends endorsed thereon.
B. The Company shall permit Buyer to exercise its right to
convert the Preferred Shares by telecopying an executed and completed Notice of
Conversion (as defined in the Certificate of Designation) to the Company. Each
date on which a Notice of Conversion is telecopied to and received by the
Company in accordance with the provisions hereof shall be deemed a Conversion
Date (as defined in the Certificate of Designation). The Company shall transmit
the certificates evidencing the shares of Common Stock issuable upon conversion
of any Preferred Shares (together with certificates evidencing any Preferred
Shares not being so converted) to Buyer via express courier, by electronic
transfer or otherwise, within five business days after receipt by the Company of
the Notice of Conversion (the "DELIVERY DATE"). Within 15 days after Buyer
delivers the Notice of Conversion to the Company, Buyer shall deliver to the
Company the Preferred Shares being converted.
C. The Company shall permit Buyer to exercise its right to
purchase shares of Common Stock pursuant to exercise of the Warrants in
accordance with its applicable terms of the Warrants. The last date that the
Company may deliver shares of Common Stock issuable upon any exercise of
Warrants is referred to herein as the "WARRANT DELIVERY DATE."
D. The Company understands that a delay in the issuance of the
shares of Common Stock issuable in lieu of cash dividends on the Preferred
Shares, upon the conversion of the Preferred Shares or exercise of the Warrants
beyond the applicable Dividend Payment Due Date (as defined in the Certificate
of Designation), Delivery Date or Warrant Delivery Date could result in economic
loss to Buyer. As compensation to Buyer for such loss (and not as a penalty),
the Company agrees to pay to Buyer for late issuance of Common Stock issuable in
lieu of cash dividends on the Preferred Shares, upon conversion of the Preferred
Shares or exercise of the Warrants in accordance with the following schedule
(where "NO. BUSINESS DAYS" is defined as the number of business days beyond five
business days from the Dividend Payment Due Date, the Delivery Date or the
Warrant Delivery Date, as applicable):
<TABLE>
<CAPTION>
NO. BUSINESS DAYS COMPENSATION FOR EACH 10 SHARES
OF PREFERRED SHARES NOT CONVERTED
TIMELY OR 500 SHARES OF COMMON
STOCK ISSUABLE IN PAYMENT OF
DIVIDENDS OR UPON EXERCISE OF
WARRANTS NOT ISSUED TIMELY
<S> <C>
1 $ 25
2 50
3 75
4 100
5 125
6 150
7 175
8 200
9 225
10 250
more than 10 $250 + $100 for each Business Day
Late beyond 10 days
</TABLE>
15
<PAGE> 16
The Company shall pay to Buyer the compensation described above by the transfer
of immediately available funds upon Buyer's demand. Nothing herein shall limit
Buyer's right to pursue actual damages for the Company's failure to issue and
deliver Common Stock to Buyer, and in addition to any other remedies which may
be available to Buyer, in the event the Company fails for any reason to effect
delivery of such shares of Common Stock within five business days after the
relevant Dividend Payment Due Date, the Delivery Date or the Warrant Delivery
Date, as applicable, Buyer shall be entitled to rescind the relevant Notice of
Conversion or exercise of Warrants by delivering a notice to such effect to the
Company whereupon the Company and Buyer shall each be restored to their
respective original positions immediately prior to delivery of such Notice of
Conversion on delivery.
VI. DELIVERY INSTRUCTIONS
The Securities shall be delivered by the Company to the Escrow
Agent pursuant to Section I.B. hereof on a "delivery-against-payment basis" at
the Closing.
VII. CLOSING DATE
The date and time of the issuance and sale of the Preferred
Shares (the "CLOSING DATE") shall be the date hereof or such other as shall be
mutually agreed upon in writing. The issuance and sale of the Securities shall
occur on the Closing Date at the offices of the Escrow Agent. Notwithstanding
anything to the contrary contained herein, the Escrow Agent shall not be
authorized to release to the Company the Purchase Price and to Buyer the
certificate(s) (I/N/O Buyer or I/N/O Buyer's nominee) evidencing the Securities
being purchased by Buyer unless the conditions set forth in Section VIII.C. and
IX.G. hereof have been satisfied.
VIII. CONDITIONS TO THE COMPANY'S OBLIGATIONS
The Buyer understands that the Company's obligation to sell
the Securities on the Closing Date to Buyer pursuant to this Agreement is
conditioned upon:
A. Delivery by Buyer to the Escrow Agent of the Purchase
Price;
B. The accuracy in all material respects on the Closing Date
of the representations and warranties of Buyer contained in this Agreement as if
made on the Closing Date (except for representations and warranties which, by
their express terms, speak as of and relate to a specified date, in which case
such accuracy shall be measured as of such specified date) and the performance
by Buyer in all material respects on or before the Closing Date of all covenants
and agreements of Buyer required to be performed by it pursuant to this
Agreement on or before the Closing Date;
16
<PAGE> 17
C. There shall not be in effect any Law or order, ruling,
judgment or writ of any court or public or governmental authority restraining,
enjoining or otherwise prohibiting any of the transactions contemplated by this
Agreement.
IX. CONDITIONS TO BUYER'S OBLIGATIONS
The Company understands that Buyer's obligation to purchase
the Securities on the Closing Date pursuant to this Agreement is conditioned
upon:
A. Delivery by the Company to Buyer of evidence that the
Certificate of Designation has been filed and is effective.
B. Delivery by the Company to the Escrow Agent of one or more
certificates (I/N/O Buyer or I/N/O Buyer's nominee) evidencing the Securities to
be purchased by Buyer pursuant to this Agreement;
C. The accuracy in all respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement as if
made on the Closing Date (except for representations and warranties which, by
their express terms, speak as of and relate to a specified date, in which case
such accuracy shall be measured as of such specified date) and the performance
by the Company in all respects on or before the Closing Date of all covenants
and agreements of the Company required to be performed by it pursuant to this
Agreement on or before the Closing Date;
D. Buyer having received an opinion of counsel for the
Company, dated the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer as to the matters set forth in Annex A;
E. There not having occurred (i) any general suspension of
trading in, or limitation on prices listed for, the Common Stock on Nasdaq, (ii)
the declaration of a banking moratorium or any suspension of payments in respect
of banks in the United States, (iii) the commencement of a war, armed
hostilities or other international or national calamity directly or indirectly
involving the United States or any of its territories, protectorates or
possessions, or (iv) in the case of the foregoing existing at the date of this
Agreement, a material acceleration or worsening thereof;
F. There not having occurred any event or development, and
there being in existence no condition, having or which reasonably and
foreseeably could have a Material Adverse Effect;
G. The Company shall have delivered to Buyer (as provided in
the Escrow Instructions) reimbursement of Buyer's out-of-pocket costs and
expenses whether or not accounted for or incurred in connection with the
transactions contemplated by this Agreement (including the fees and
disbursements of Buyer's legal counsel) of $30,000;
17
<PAGE> 18
H. There shall not be in effect any Law or order, ruling,
judgment or writ of any court or public or governmental authority restraining,
enjoining or otherwise prohibiting any of the transactions contemplated by this
Agreement; and
I. Delivery of irrevocable instructions to the Company's
transfer agent to reserve such number of shares of Common Stock equal to at
least 19.9% of the total outstanding shares of Common Stock on the Closing Date
for issuance of the Conversion Shares and the Warrant Shares.
X. TERMINATION
A. TERMINATION BY MUTUAL WRITTEN CONSENT. This Agreement may
be terminated and the transactions contemplated hereby may be abandoned, for any
reason and at any time prior to the Closing Date, by the mutual written consent
of the Company and Buyer.
B. TERMINATION BY THE COMPANY OR BUYER. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned by action
of the Company or Buyer if (i) the Closing shall not have occurred at or prior
to 5:00 p.m., New York City time, on September 21, 1999 (the "LATEST CLOSING
DATE"); provided, however, that the right to terminate this Agreement pursuant
to this Section X.B.(i) shall not be available to any party whose failure to
fulfill any of its obligations under this Agreement has been the cause of or
resulted in the failure of the Closing to occur at or before such time and date
or (ii) any court or public or governmental authority shall have issued an
order, ruling, judgment or writ, or there shall be in effect any Law,
restraining, enjoining or otherwise prohibiting the consummation of any of the
transactions contemplated by this Agreement; provided, further, however, that if
the Closing shall not have occurred on or prior to the Latest Closing Date, the
Closing may only occur after the Latest Closing Date with the written acceptance
of Buyer.
C. TERMINATION BY BUYER. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned by Buyer at any time prior
to the Closing Date, if (i) the Company shall have failed to comply with any of
its covenants or agreements contained in this Agreement, (ii) there shall have
been a breach by the Company with respect to any representation or warranty made
by it in this Agreement, (iii) there shall have occurred any event or
development, or there shall be in existence any condition, having or reasonably
and forseeably likely to have a Material Adverse Effect or (iv) the Company
shall have failed to satisfy the conditions provided in Section IX hereof.
D. TERMINATION BY THE COMPANY. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned by the
Company at any time prior to the Closing Date, if (i) Buyer shall have failed to
comply with any of its covenants or agreements contained in this Agreement or
(ii) there shall have been a breach by Buyer with respect to any representation
or warranty made by it in this Agreement.
E. FEES AND EXPENSES OF TERMINATION. If this Agreement is
terminated for any reason, the Company shall reimburse Buyer for all of Buyer's
out-of-pocket costs and
18
<PAGE> 19
expenses incurred in connection with the transactions contemplated by this
Agreement and the other Documents (including, without limitation, the fees and
disbursements of Buyer's legal counsel).
XI. SURVIVAL; INDEMNIFICATION
A. The representations, warranties and covenants made by each
of the Company and Buyer in this Agreement, the annexes, schedules and exhibits
hereto and in each instrument, agreement and certificate entered into and
delivered by them pursuant to this Agreement, shall survive the Closing and the
consummation of the transactions contemplated hereby. In the event of a breach
or violation of any of such representations, warranties or covenants, the party
to whom such representations, warranties or covenants have been made shall have
all rights and remedies for such breach or violation available to it under the
provisions of this Agreement or otherwise, whether at law or in equity,
irrespective of any investigation made by or on behalf of such party on or prior
to the Closing Date.
B. The Company hereby agrees to indemnify and hold harmless
the Buyer, its Affiliates and their respective officers, directors, partners and
members (collectively, the "BUYER INDEMNITEES"), from and against any and all
losses, claims, damages, judgments, penalties, liabilities and deficiencies
(collectively, "LOSSES"), and agrees to reimburse the Buyer Indemnitees for all
reasonable out-of-pocket expenses (including the fees and expenses of legal
counsel), in each case promptly as incurred by the Buyer Indemnitees and to the
extent arising out of or in connection with:
1. any misrepresentation, omission of fact or breach of any
of the Company's representations or warranties contained in this
Agreement or the other Documents, or the annexes, schedules or exhibits
hereto or thereto or any instrument, agreement or certificate entered
into or delivered by the Company pursuant to this Agreement or the
other Documents; or
2. any failure by the Company to perform any of its
covenants, agreements. undertakings or obligations set forth in this
Agreement or the other Documents, or the annexes, schedules or exhibits
hereto or thereto or any instrument, agreement or certificate entered
into or delivered by the Company pursuant to this Agreement or the
other Documents; or
3. resales of the Common Shares by Buyer in the manner and
as contemplated by this Agreement and the Registration Rights
Agreement.
C. Buyer hereby agrees to indemnify and hold harmless the
Company, its Affiliates and their respective officers, directors, partners and
members (collectively, the "COMPANY INDEMNITEES"), from and against any and all
Losses, and agrees to reimburse the Company Indemnitees for all out-of-pocket
expenses (including the fees and expenses of legal counsel), in each case
promptly as incurred by the Company Indemnitees and to the extent arising out of
or in connection with:
19
<PAGE> 20
1. any misrepresentation, omission of fact, or breach of
any of Buyer's representations or warranties contained in this
Agreement or the other Documents, or the annexes, schedules or exhibits
hereto or thereto or any instrument, agreement or certificate entered
into or delivered by Buyer pursuant to this Agreement or the other
Documents; or
2. any failure by Buyer to perform in any material respect
any of its covenants, agreements, undertakings or obligations set forth
in this Agreement or the other Documents or any instrument, certificate
or agreement entered into or delivered by Buyer pursuant to this
Agreement or the other Documents.
D. Promptly after receipt by either party hereto seeking
indemnification pursuant to this Section XI (an "INDEMNIFIED PARTY") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "CLAIM"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section XI is being sought (the "INDEMNIFYING PARTY") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party except
to the extent that the Indemnifying Party is materially prejudiced and forfeits
substantive rights and defenses by reason of such failure. In connection with
any Claim as to which both the Indemnifying Party and the Indemnified Party are
parties, the Indemnifying Party shall be entitled to assume the defense thereof.
Notwithstanding the assumption of the defense of any Claim by the Indemnifying
Party, the Indemnified Party shall have the right to employ separate legal
counsel and to participate in the defense of such Claim, and the Indemnifying
Party shall bear the reasonable fees, out-of-pocket costs and expenses of such
separate legal counsel to the Indemnified Party if (and only if): (x) the
Indemnifying Party shall have agreed to pay such fees, out-of-pocket costs and
expenses, (y) the Indemnified Party and the Indemnifying Party reasonably shall
have concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party,
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than as described in
clauses (x), (y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party. Except as provided
above, the Indemnifying Party shall not, in connection with any Claim in the
same jurisdiction, be liable for the fees and expenses of more than one firm of
legal counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior written consent of
the Indemnified Party (which consent shall not unreasonably be withheld), settle
or compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
20
<PAGE> 21
E. In the event one party hereunder should have a claim for
indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly shall deliver notice of such claim
to the Indemnifying Party. If the Indemnified Party disputes the claim, such
dispute shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association. Judgment upon any
award rendered by any arbitrators may be entered in any court having competent
jurisdiction thereof.
XII. GOVERNING LAW; MISCELLANEOUS
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York, without regard to the
conflicts of law principles of such state. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions. A facsimile transmission of this signed
Agreement shall be legal and binding on all parties hereto. This Agreement may
be signed in one or more counterparts, each of which shall be deemed an
original. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement. If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
XIII. NOTICES
Except as may be otherwise provided herein, any notice or
other communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally or sent by certified mail, postage
prepaid, or by a nationally recognized overnight courier service, and shall be
deemed given when so delivered personally or by overnight courier service, or,
if mailed, three (3) days after the date of deposit in the United States mails,
as follows:
A. if to the Company, to:
Cafe Odyssey, Inc.
4801 West 81st Street, Suite 112
Bloomington, MN 55437
Attention: Stephen D. King
(612) 837-9917
(612) 837-9916 (Fax)
21
<PAGE> 22
with a copy to:
Maslon Edelman Borman & Brand, LLP
3300 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Attention: William M. Mower, Esq.
(612) 672-8358
(612) 672-8397 (Fax)
B. if to the Buyer, to:
The Shaar Fund Ltd.,
c/o Levinson Capital Management
2 World Trade Center, Suite 1820
New York, NY 10048
Attention: Samuel Levinson
(212) 432-7711
(212) 432-7771 (Fax)
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: Dennis J. Block, Esq.
(212) 504-5555
(212) 504-5557 (Fax)
C. if to the Escrow Agent, to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: Dennis J. Block, Esq.
(212) 504-5555
(212) 504-5557 (Fax)
The Company, the Buyer or the Escrow Agent may change the foregoing address by
notice given pursuant to this Section XIII.
XIV. CONFIDENTIALITY
Each of the Company and Buyer agrees to keep confidential and
not to disclose to or use for the benefit of any third party the terms of this
Agreement or any other information
22
<PAGE> 23
which at any time is communicated by the other party as being confidential
without the prior written approval of the other party; provided, however, that
this provision shall not apply to information which, at the time of disclosure,
is already part of the public domain (except by breach of this Agreement) and
information which is required to be disclosed by law (including, without
limitation, pursuant to Item 601(b)(10) of Regulation S-K under the Securities
Act and the Exchange Act).
XV. ASSIGNMENT
This Agreement shall not be assignable by either of the
parties hereto prior to the Closing without the prior written consent of the
other party, and any attempted assignment contrary to the provisions hereby
shall be null and void; provided, however, that Buyer may assign its rights and
obligations hereunder, in whole or in part, to any affiliate of Buyer who
furnishes to the Company the representations and warranties set forth in Section
II hereof and otherwise agrees to be bound by the terms of this Agreement.
23
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement on the date first above written.
CAFE ODYSSEY, INC.
By: /s/ Stephen D. King
-----------------------------
Name: Stephen D. King
Title: CEO
THE SHAAR FUND LTD.
By: /s/ Samuel Levinson
-----------------------------
Name: Samuel Levinson
Title: Managing Director
24
<PAGE> 25
EXHIBIT A
COMMON STOCK PURCHASE WARRANTS
25
<PAGE> 26
EXHIBIT B
CERTIFICATE OF DESIGNATION
26
<PAGE> 27
EXHIBIT C
ESCROW INSTRUCTIONS
27
<PAGE> 28
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
28
<PAGE> 29
SCHEDULE III.A.2.
SUBSIDIARIES
29
<PAGE> 30
SCHEDULE III.C.
ISSUANCES AND SALES OF SECURITIES
30
<PAGE> 31
SCHEDULE III.O.
RELATED PARTY TRANSACTIONS
31
<PAGE> 32
SCHEDULE III.R.6.
ENVIRONMENTAL MATTERS
32
<PAGE> 33
SCHEDULE III.V.
PROPERTY
33
<PAGE> 34
SCHEDULE III.W.
INTELLECTUAL PROPERTY
34
<PAGE> 35
ANNEX A
FORM OF OPINION
1. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Minnesota, is duly qualified to do business as a foreign corporation and is in
good standing in all jurisdictions where the Company owns or leases properties
or conducts business, except for jurisdictions in which the failure to so
qualify would not have a Material Adverse Effect, and has all requisite
corporate power and authority to own its properties and conduct its business as
described in the Commission Filings.
2. The authorized capital stock of the Company consists of
100,000,000 shares, having a par value $0.01 per share in the case of Common
Stock (the "COMMON STOCK"), and having a par value as determined by the
Company's Board of Directors in the case of preferred stock.
3. When delivered to you or upon your order against payment of
the agreed consideration therefor in accordance with the provisions of the
Documents, the Securities will be duly authorized and validly issued, fully paid
and nonassessable.
4. The Company has the requisite corporate power and authority
to enter into the Documents and to sell and deliver the Securities as described
in the Documents; each of the Documents has been duly and validly authorized by
all necessary corporate action by the Company; each of the Documents has been
duly and validly executed and delivered by and on behalf of the Company, and is
valid and binding agreement of the Company, enforceable in accordance with its
terms, except as enforceability may be limited by general equitable principles,
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other laws affecting creditors rights generally.
5. The executive, delivery and performance of the Documents by
the Company and the performance of its obligations thereunder do not and will
not constitute a breach or violation of any of the terms and provisions of, or
constitute a default (or with notice, lapse of time or both would constitute a
default) under or conflict with or violate any provision of (i) the Company's
certificate of incorporation or bylaws, (ii) any indenture, mortgage, deed of
trust, agreement or other instrument known to us to which the Company is a party
or by which it or any of its property is bound, (iii) or, to the best of our
knowledge, any judgment, decree or order of any court or governmental body
having jurisdiction over the Company or any of its property. To the best of our
knowledge, no consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any court or any public,
governmental or regulatory agency or body having jurisdiction over the Company
or any of its properties or assets is required for the execution, delivery and
performance by the Company of the Documents or the consummation by the Company
of the transactions contemplated thereby.
6. When issued, the Preferred Shares and the Warrants shall be
duly authorized, validly issued, fully paid and nonassessable, and free and
clear of all encumbrances and restrictions, except for restrictions on transfer
imposed by applicable securities laws. The
<PAGE> 36
Conversion Shares and Warrant Shares issuable upon conversion or exercise,
respectively, of the Preferred Shares and the Warrants, respectively, will be
duly authorized, validly issued, fully paid and nonassessable, and free and
clear of all encumbrances and restrictions, except for restrictions on transfer
imposed by applicable securities laws.
7. Based on Buyer's representations contained in this
Agreement, the offer and sale of the Preferred Shares and the Warrants are
exempt from the registration requirements of the Securities Act.
8. To the best of our knowledge, other than as described in
the Commission Filings, there are no outstanding options, warrants or other
securities exercisable or convertible into Common Stock of the Company.
9. There is no action, suit, claim, inquiry or investigation
pending or, to the best of our knowledge, threatened by or before any court or
public or governmental authority which, if determined adversely to the Company,
would have a Material Adverse Effect.
10. Neither the Company nor any of its subsidiaries is, or
will be after the consummation of the transactions contemplated by this
Agreement and the other Documents and the use of the proceeds from the sale of
the Securities, an "investment company" or an entity "controlled" by an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended.
A
36
<PAGE> 1
THIS COMMON STOCK PURCHASE WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR
THE PROVISIONS OF THIS COMMON STOCK PURCHASE WARRANT.
Number of Shares of Common Stock: 300,000
Warrant No. D-1
COMMON STOCK PURCHASE WARRANT
To Purchase Common Stock of
Cafe Odyssey, Inc.
This Is To Certify That The Shaar Fund Ltd., or registered
assigns, is entitled, at any time from the Closing Date (as hereinafter defined)
to the Expiration Date (as hereinafter defined), to purchase from Cafe Odyssey,
Inc., a Minnesota corporation (the "COMPANY"), 300,000 shares of Common Stock
(as hereinafter defined and subject to adjustment as provided herein), in whole
or in part, including fractional parts, at a purchase price equal to $3.00 per
share, all on the terms and conditions and pursuant to the provisions
hereinafter set forth.
1. DEFINITIONS
As used in this Common Stock Purchase Warrant (this
"WARRANT"), the following terms have the respective meanings set forth below:
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of
Common Stock issued by the Company after the Closing Date, other than Warrant
Stock.
"BOOK VALUE" shall mean, in respect of any share of Common
Stock on any date herein specified, the consolidated book value of the Company
as of the last day of any month immediately preceding such date, divided by the
number of Fully Diluted Outstanding shares of Common Stock as determined in
accordance with GAAP (assuming the payment of the exercise prices for such
shares) by Arthur Andersen LLP or any other firm of independent certified public
accountants of recognized national standing selected by the Company and
reasonably acceptable to the Holder.
"BUSINESS DAY" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
1
<PAGE> 2
"CLOSING DATE" shall have the meaning set forth in the
Securities Purchase Agreement.
"COMMISSION" shall mean the Securities and Exchange Commission
or any other federal agency then administering the Securities Act and other
federal securities laws.
"COMMON STOCK" shall mean (except where the context otherwise
indicates) the Common Stock, par value $0.01 per share, of the Company as
constituted on the Closing Date, and any capital stock into which such Common
Stock may thereafter be changed, and shall also include (i) capital stock of the
Company of any other class (regardless of how denominated) issued to the holders
of shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.4.
"CONVERTIBLE SECURITIES" shall mean evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable,
with or without payment of additional consideration in cash or property, for
shares of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.
"CURRENT WARRANT PRICE" shall mean, in respect of a share of
Common Stock at any date herein specified, the price at which a share of Common
Stock may be purchased pursuant to this Warrant on such date.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, or any successor federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from time to time.
"EXERCISE PERIOD" shall mean the period during which this
Warrant is exercisable pursuant to Section 2.1.
"EXPIRATION DATE" shall mean August 31, 2004.
"FULLY DILUTED OUTSTANDING" shall mean, when used with
reference to Common Stock, at any date as of which the number of shares thereof
is to be determined, all shares of Common Stock Outstanding at such date and all
shares of Common Stock issuable in respect of this Warrant, outstanding on such
date, and other options or warrants to purchase, or securities convertible into,
shares of Common Stock outstanding on such date which would be deemed
outstanding in accordance with GAAP for purposes of determining Book Value or
net income per share.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as from time to time in effect.
2
<PAGE> 3
"HOLDER" shall mean the Person in whose name the Warrant or
Warrant Stock set forth herein is registered on the books of the Company
maintained for such purpose.
"MARKET PRICE" per Common Share means the average of the
closing bid prices of the Common Shares as reported on the Nasdaq SmallCap
Market ("NASDAQ") for the five trading days immediately preceding the Closing
Date.
"OTHER PROPERTY" shall have the meaning set forth in Section
4.4.
"OUTSTANDING" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by or for
the account of the Company or any subsidiary thereof, and shall include all
shares issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock.
"PERSON" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, incorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration
Rights Agreement dated a date even herewith between the Company and The Shaar
Fund Ltd., as it may be amended from time to time.
"RESTRICTED COMMON STOCK" shall mean shares of Common Stock
which are, or which upon their issuance on their exercise of this Warrant would
be, evidenced by a certificate bearing the restrictive legend set forth in
Section 9.1(a).
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"SECURITIES PURCHASE AGREEMENT" shall mean the Securities
Purchase Agreement dated as of a date even herewith between the Company and The
Shaar Fund Ltd. as it may be amended from time to time.
"TRANSFER" shall mean any disposition of any Warrant or
Warrant Stock or of any interest in either thereof, which would constitute a
sale thereof within the meaning of the Securities Act.
"TRANSFER NOTICE" shall have the meaning set forth in Section
9.2.
"WARRANT PRICE" shall mean an amount equal to (i) the number
of shares of Common Stock being purchased upon exercise of this Warrant pursuant
to Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of
such exercise.
3
<PAGE> 4
"WARRANT STOCK" shall mean the shares of Common Stock
purchased by the holders of the Warrants upon the exercise thereof.
"WARRANTS" shall mean this Warrant and all warrants issued
upon transfer, division or combination of, or in substitution for, any thereof.
All Warrants shall at all times be identical as to terms and conditions and
date, except as to the number of shares of Common Stock for which they may be
exercised.
2. EXERCISE OF WARRANT
2.1 MANNER OF EXERCISE
From and after the Closing Date and until 5:00 p.m., New York
time, on the Expiration Date, Holder may exercise this Warrant, on any Business
Day, for all or any part of the number of shares of Common Stock purchasable
hereunder.
In order to exercise this Warrant, in whole or in part, Holder
shall deliver to the Company at its principal office at 4801 West 81st Street,
Suite 112, Bloomington, Minnesota 55437, or at the office or agency designated
by the Company pursuant to Section 12, (i) a written notice of Holder's election
to exercise this Warrant, which notice shall specify the number of shares of
Common Stock to be purchased, (ii) payment of the Warrant Price in cash or wire
transfer or cashier's check drawn on a United States bank and (iii) this
Warrant. Such notice shall be substantially in the form of the subscription form
appearing at the end of this Warrant as Exhibit A, duly executed by Holder or
its agent or attorney. Upon receipt of the items referred to in clauses (i),
(ii) and (iii) above, the Company shall, as promptly as practicable, and in any
event within five Business Days thereafter, execute or cause to be executed and
deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided. The stock certificate or certificates so delivered shall
be, to the extent possible, in such denomination or denominations as Holder
shall request in the notice and shall be registered in the name of Holder or,
subject to Section 9, such other name as shall be designated in the notice. This
Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and Holder or any other Person
so designated to be named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the notice, together with
the cash or check or checks and this Warrant, is received by the Company as
described above and all taxes required to be paid by Holder, if any, pursuant to
Section 2.2 prior to the issuance of such shares have been paid. If this Warrant
shall have been exercised in part, the Company shall, at the time of delivery of
the certificate or certificates representing Warrant Stock, deliver to Holder a
new Warrant evidencing the rights of Holder to purchase the unpurchased shares
of Common Stock called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant, or, at the request of Holder,
appropriate notation may be made on this Warrant and the same returned to
Holder. Notwithstanding any provision herein to the contrary, the Company shall
not be required to register shares in the name of any Person who acquired this
Warrant (or part hereof)
4
<PAGE> 5
or any Warrant Stock otherwise than in accordance with this Warrant.
2.2 PAYMENT OF TAXES AND CHARGES
All shares of Common Stock issuable upon the exercise of this
Warrant pursuant to the terms hereof shall be validly issued, fully paid and
nonassessable, freely tradable and without any preemptive rights. The Company
shall pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issue or delivery thereof,
unless such tax or charge is imposed by law upon Holder, in which case such
taxes or charges shall be paid by Holder. The Company shall not be required,
however, to pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for shares of Common Stock issuable
upon exercise of this Warrant in any name other than that of Holder, and in such
case the Company shall not be required to issue or deliver any stock certificate
until such tax or other charge has been paid or it has been established to the
satisfaction of the Company that no such tax or other charge is due.
2.3 FRACTIONAL SHARES
The Company shall not be required to issue a fractional share
of Common Stock upon exercise of any Warrant. As to any fraction of a share
which Holder would otherwise be entitled to purchase upon such exercise, the
Company shall pay a cash adjustment in respect of such final fraction in an
amount equal to the same fraction of the Market Price per share of Common Stock
as of the Closing Date.
2.4 CONTINUED VALIDITY
A holder of shares of Common Stock issued upon the exercise of
this Warrant, in whole or in part (other than a holder who acquires such shares
after the same have been publicly sold pursuant to a Registration Statement
under the Securities Act or sold pursuant to Rule 144 thereunder), shall
continue to be entitled with respect to such shares to all rights to which it
would have been entitled as Holder under Sections 9, 10 and 14 of this Warrant.
The Company will, at the time of exercise of this Warrant, in whole or in part,
upon the request of Holder, acknowledge in writing, in form reasonably
satisfactory to Holder, its continuing obligation to afford Holder all such
rights; provided, however, that if Holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to Holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1 TRANSFER
Subject to compliance with Section 9, transfer of this Warrant
and all rights hereunder, in whole or in part, shall be registered on the books
of the Company to be maintained for such purpose, upon surrender of this Warrant
at the principal office of the Company referred to in Section 2.1 or the office
or agency designated by the Company pursuant to Section 12, together with a
written assignment of this Warrant substantially in the form of Exhibit B hereto
5
<PAGE> 6
duly executed by Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall, subject to Section 9, execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denomination specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this Warrant not
so assigned, and this Warrant shall promptly be canceled. A Warrant, if properly
assigned in compliance with Section 9, may be exercised by a new Holder for the
purchase of shares of Common Stock without having a new warrant issued.
3.2 DIVISION AND COMBINATION
Subject to Section 9, this Warrant may be divided or combined
with other Warrants upon presentation hereof at the aforesaid office or agency
of the Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by Holder or its
agent or attorney. Subject to compliance with Section 3.1 and with Section 9, as
to any transfer which may be involved in such division or combination, the
Company shall execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with such notice.
3.3 EXPENSES
The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrants or Warrants under this
Section 3.
3.4 MAINTENANCE OF BOOKS
The Company agrees to maintain, at its aforesaid office or
agency, books for the registration and the registration of transfer of the
Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise of
this Warrant, shall be subject to adjustment from time to time as set forth in
this Section 4. The Company shall give Holder notice of any event described
below which requires an adjustment pursuant to this Section 4 at the time of
such event.
4.1 STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS
If at any time the Company shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock;
(b) subdivide its outstanding shares of Stock into a larger
number of shares of Common Stock; or
6
<PAGE> 7
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock;
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
shall be adjusted to equal (A) the Current Warrant Price multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
4.2 CERTAIN OTHER DISTRIBUTIONS
If at any time the Company shall take a record of the holders
of its Common Stock for the purpose of entitling them to receive any dividend or
other distribution of:
(a) cash;
(b) any evidences of its indebtedness, any shares of its
stock or any other securities or property of any nature whatsoever (other than
cash, Convertible Securities or Additional Shares of Common Stock); or
(c) any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash, Convertible
Securities or Additional Shares of Common Stock);
then Holder shall be entitled to receive such dividend or distribution as if
Holder had exercised the Warrant. A reclassification of the Common Stock (other
than a change in par value, or from par value to no par value or from no par
value to par value) into shares of Common Stock and shares of any other class of
stock shall be deemed a distribution by the Company to the holders of its Common
Stock of such shares of such other class of stock within the meaning of this
Section 4.2 and, if the outstanding shares of Common Stock shall be changed into
a larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or combination, as
the case may be, of the outstanding shares of Common Stock within the meaning of
Section 4.1.
4.3 OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION
The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price provided for in this Section 4:
(a) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by
this Section 4
7
<PAGE> 8
shall be made whenever and as often as any specified event requiring an
adjustment shall occur. For the purpose of any adjustment, any specified event
shall be deemed to have occurred at the close of business on the date of its
occurrence.
(b) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account to
the nearest 1/10th of a share.
(c) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(d) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board
of Directors of the Company shall be required to make a determination in good
faith of the fair value of any item under this Section 4, such determination may
be challenged in good faith by the Holder, and any dispute shall be resolved by
an investment banking firm of recognized national standing selected by the
Company and acceptable to Holder.
4.4 REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS
In case the Company shall reorganize its capital, reclassify
its capital stock, consolidate or merge with or into another corporation (where
the Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("OTHER
PROPERTY"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of the Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, consolidation or disposition of assets by a holder of the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined by resolution of the Board of Directors of
the Company) in order to provide for adjustments of
8
<PAGE> 9
shares of Common Stock for which this Warrant is exercisable which shall be as
nearly equivalent as practicable to the adjustments provided for in this Section
4. For purposes of this Section 4.4, "COMMON STOCK OF THE SUCCESSOR OR ACQUIRING
CORPORATION" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 4.4 still similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
4.5 OTHER ACTION AFFECTING COMMON STOCK
In case at any time or from time to time the Company shall
take any action in respect of its Common Stock, other than any action described
in this Section 4, which would have a materially adverse effect upon the rights
of Holder, the number of shares of Common Stock and/or the purchase price
thereof shall be adjusted in such manner as may be equitable in the
circumstances, as determined in good faith by the Board of Directors of the
Company.
4.6 CERTAIN LIMITATIONS
Notwithstanding anything herein to the contrary, the Company
agrees not to enter into any transaction which, by reason of any adjustment
hereunder, would cause the Current Warrant Price to be less than the par value
per share of Common Stock.
5. NOTICES TO HOLDER
5.1 NOTICE OF ADJUSTMENTS
Whenever the number of shares of Common Stock for which this
Warrant is exercisable, or whenever the price at which a share of such Common
Stock may be purchased upon exercise of the Warrants, shall be adjusted pursuant
to Section 4, the Company shall forthwith prepare a certificate to be executed
by the chief financial officer of the Company setting forth, in reasonable
detail, the event requiring the adjustment and the method by which such
adjustment was calculated (including a description of the basis on which the
Board of Directors of the Company determined the fair value of any evidences of
indebtedness, shares of stock, other securities or property or warrants or other
subscription or purchase rights referred to in Section 4.2), specifying the
number of shares of Common Stock for which this Warrant is exercisable and (if
such adjustment was made pursuant to Section 4.4 or 4.5) describing the number
and kind of any other shares of stock or Other Property for which this Warrant
is exercisable, and any change in the purchase price or prices thereof, after
giving effect to such adjustment or change. The Company shall promptly cause a
signed copy of such certificate to be delivered to the Holder in accordance with
Section 14.2. The Company shall keep at its office or agency designated pursuant
to Section 12 copies of all such certificates and cause the same to be available
for inspection at said office during normal business hours by the Holder or any
9
<PAGE> 10
prospective purchaser of a Warrant designated by Holder.
5.2 NOTICE OF CORPORATE ACTION
If at any time:
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right; or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation; or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 30 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 30 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Stock
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 14.2.
6. NO IMPAIRMENT
The Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be
10
<PAGE> 11
necessary or appropriate to protect the rights of Holder against impairment.
Without limiting the generality of the foregoing, the Company will (a) not
increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (b) take all such action as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock upon the exercise of
this Warrant, and (c) use its best efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its obligations
under this Warrant.
Upon the request of Holder, the Company will at any time
during the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Closing Date, the Company shall at all
times reserve and keep available for issue upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon exercise of
any Warrant and payment therefor in accordance with the terms of such Warrant,
shall be duly and validly issued and fully paid and nonassessable and not
subject to preemptive rights.
Before taking any action which would cause an adjustment
reducing the Current Warrant Price below the then par value, if any, of the
shares of Common Stock issuable upon exercise of the Warrants, the Company shall
take any corporate action which may be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of such Common
Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment
in the number of shares of Common Stock for which this Warrant is exercisable or
in the Current Warrant Price, the Company shall obtain all such authorizations
or exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of its Common Stock with respect to which any provision
of Section 4 refers to the taking of record of such holders, the Company will in
each case take such a record and will take such record as of the close of
business on a Business Day. The Company will not at any time, except upon
dissolution, liquidation or winding up of the Company, close its stock transfer
books or Warrant transfer books so as to result in preventing or delaying the
exercise or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
11
<PAGE> 12
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Stock. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this Section 9.
9.1 RESTRICTIVE LEGEND
(a) Holder, by accepting this Warrant and any Warrant Stock
agrees that this Warrant and the Warrant Stock issuable upon exercise hereof may
not be assigned or otherwise transferred unless and until (i) the Company has
received an opinion of counsel for Holder that such securities may be sold
pursuant to an exemption from registration under the Securities Act or (ii) a
registration statement relating to such securities has been filed by the Company
and declared effective by the Commission.
Each certificate for Warrant Stock issuable hereunder shall
bear a legend as follows until such securities have been sold pursuant to an
effective registration statement under the Securities Act:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
THE SECURITIES LAWS OF ANY STATE, AND ARE BEING OFFERED AND
SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS."
(b) Except as otherwise provided in this Section 9, the
Warrant shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES
AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT."
9.2 NOTICE OF PROPOSED TRANSFERS
Prior to any Transfer or attempted Transfer of any Warrants or
any shares of
12
<PAGE> 13
Restricted Common Stock, the Holder shall give ten days' prior written notice (a
"TRANSFER NOTICE") to the Company of Holder's intention to effect such Transfer,
describing the manner and circumstances of the proposed Transfer, and obtain
from counsel to Holder who shall be reasonably satisfactory to the Company, an
opinion that the proposed Transfer of such Warrants or such Restricted Common
Stock may be effected without registration under the Securities Act. After
receipt of the Transfer Notice and opinion, the Company shall, within five days
thereof, notify the Holder as to whether such opinion is reasonably satisfactory
and, if so, such holder shall thereupon be entitled to Transfer such Warrants or
such Restricted Common Stock, in accordance with the terms of the Transfer
Notice. Each certificate, if any, evidencing such shares of Restricted Common
Stock issued upon such Transfer shall bear the restrictive legend set forth in
Section 9.1(a), and the Warrant issued upon such Transfer shall bear the
restrictive legend set forth in Section 9.1(b), unless in the opinion of such
counsel such legend is not required in order to ensure compliance with the
Securities Act. Holder shall not be entitled to Transfer such Warrants or such
Restricted Common Stock until receipt of notice from the Company under this
Section 9.2(a) that such opinion is reasonably satisfactory.
9.3 REQUIRED REGISTRATION
Pursuant to the terms and conditions set forth in Registration
Rights Agreement, the Company shall prepare and file with the Commission not
later than the 30th day after the Closing Date, a Registration Statement
relating to the offer and sale of the Common Stock issuable upon exercise of the
Warrants and shall use its best efforts to cause the Commission to declare such
Registration Statement effective under the Securities Act as promptly as
practicable but no later than 150 days after the Closing Date.
9.4 TERMINATION OF RESTRICTIONS
Notwithstanding the foregoing provisions of Section 9, the
restrictions imposed by this Section upon the transferability of the Warrants,
the Warrant Stock and the Restricted Common Stock (or Common Stock issuable upon
the exercise of the Warrants) and the legend requirements of Section 9.1 shall
terminate as to any particular Warrant or share of Warrant Stock or Restricted
Common Stock (or Common Stock issuable upon the exercise of the Warrants) (i)
when and so long as such security shall have been effectively registered under
the Securities Act and disposed of pursuant thereto or (ii) when the Company
shall have received an opinion of counsel reasonably satisfactory to it that
such shares may be transferred without registration thereof under the Securities
Act. Whenever the restrictions imposed by Section 9 shall terminate as to this
Warrant, as hereinabove provided, the Holder hereof shall be entitled to receive
from the Company upon written request of the Holder, at the expense of the
Company, a new Warrant bearing the following legend in place of the restrictive
legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT
CONTAINED IN SECTION 9 HEREOF TERMINATED ON __________, _____,
AND ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution
13
<PAGE> 14
for, any Warrant or Warrants entitled to bear such legend shall have a similar
legend endorsed thereon. Whenever the restrictions imposed by this Section shall
terminate as to any share of Restricted Common Stock, as hereinabove provided,
the holder thereof shall be entitled to receive from the Company, at the
Company's expense, a new certificate representing such Common Stock not bearing
the restrictive legend set forth in Section 9.1(a).
9.5 LISTING ON SECURITIES EXCHANGE
If the Company shall list any shares of Common Stock on any
securities exchange or quotation system, it will, at its expense, list thereon,
maintain and, when necessary, increase such listing of, all shares of Common
Stock issued or, to the extent permissible under the applicable securities
exchange rules, issuable upon the exercise of this Warrant so long as any shares
of Common Stock shall be so listed during any such Exercise Period.
10. SUPPLYING INFORMATION
The Company shall cooperate with Holder in supplying such
information as may be reasonably necessary for Holder to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of an exemption from the Securities Act for the
sale of any Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it being
understood that the written agreement of the Holder shall be sufficient
indemnity), and in case of mutilation upon surrender and cancellation hereof,
the Company will execute and deliver in lieu hereof a new Warrant of like tenor
to Holder; provided, in the case of mutilation no indemnity shall be required if
this Warrant in identifiable form is surrendered to the Company for
cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the
Company shall maintain an office or agency (which may be the principal executive
offices of the Company) where the Warrants may be presented for exercise,
registration of transfer, division or combination as provided in this Warrant.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by
Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of Holder hereof, shall give rise to any liability of
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
14
<PAGE> 15
14. MISCELLANEOUS
14.1 NONWAIVER AND EXPENSES
No course of dealing or any delay or failure to exercise any
right hereunder on the part of Holder shall operate as a waiver of such right or
otherwise prejudice Holder's rights, powers or remedies. If the Company fails to
make, when due, any payments provided for hereunder, or fails to comply with any
other provision of this Warrant, the Company shall pay to Holder such amounts as
shall be sufficient to cover any costs and expenses including, without
limitation, reasonable attorneys' fees, including those of appellate
proceedings, incurred by Holder in collecting any amounts due pursuant hereto or
in otherwise enforcing any of its rights, powers or remedies hereunder.
14.2 NOTICE GENERALLY
Except as may be otherwise provided herein, any notice or
other communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally or sent by certified mail, postage
prepaid, or by a nationally recognized overnight courier service, and shall be
deemed given when so delivered personally or by overnight courier service, or,
if mailed, three (3) days after the date of deposit in the United States mails,
as follows:
(a) if to the Company, to:
Cafe Odyssey, Inc.
4801 West 81st Street, Suite 112
Bloomington, MN 55437
Attention: Stephen D. King
(612) 837-9917
(612) 837-9916 (Fax)
with a copy to:
Maslon Edelman Borman & Brand, LLP
3300 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Attention: William M. Mower, Esq.
(612) 672-8358
(612) 672-8397 (Fax)
(b) if to the Holder, to:
The Shaar Fund Ltd.
c/o Levinson Capital Management
2 World Trade Center, Suite 1820
15
<PAGE> 16
New York, NY 10048
Attention: Samuel Levinson
(212) 432-7771
(212) 432-7771 (Fax)
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: Dennis J. Block, Esq.
(212) 504-5555
(212) 504-5557 (Fax)
The Company or the Holder may change the foregoing address by notice given
pursuant to this Section 14.2.
14.3 INDEMNIFICATION
The Company agrees to indemnify and hold harmless Holder from
and against any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of
any kind which may be imposed upon, incurred by or asserted against Holder in
any manner relating to or arising out of any failure by the Company to perform
or observe in any material respect any of its covenants, agreements,
undertakings or obligations set forth in this Warrant; provided, however, that
the Company will not be liable hereunder to the extent that any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, attorneys' fees, expenses or disbursements are found in a final
nonappealable judgment by a court to have resulted from Holder's gross
negligence, bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
14.4 REMEDIES
Holder in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under Section 9 of this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any loss incurred
by reason of a breach by it of the provisions of Section 9 of this Warrant and
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.
14.5 SUCCESSORS AND ASSIGNS
Subject to the provisions of Sections 3.1 and 9, this Warrant
and the rights evidenced hereby shall inure to the benefit of and be binding
upon the successors of the Company and the successors and assigns of Holder. The
provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant and, with respect to Section 9 hereof, holders
of Warrant Stock, and shall be enforceable by any such Holder or holder of
16
<PAGE> 17
Warrant Stock.
14.6 AMENDMENT
This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of the Company
and Holder.
14.7 SEVERABILITY
Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall only be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Warrant.
14.8 HEADINGS
The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.
14.9 GOVERNING LAW
This Warrant shall be governed by the laws of the State of New
York, without regard to the provisions thereof relating to conflicts of law.
17
<PAGE> 18
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated: August 31, 1999
CAFE ODYSSEY, INC.
By:
Name:
Title:
Attest:
By:
Name:
Title:
18
<PAGE> 19
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of __________ shares of Common Stock of
Cafe Odyssey, Inc. and herewith makes payment therefor, all at the price and on
the terms and conditions specified in this Warrant and requests that
certificates for the shares of Common Stock hereby purchased (and any securities
or other property issuable upon such exercise) be issued in the name of and
delivered to
whose address is
and, if such shares of Common Stock shall not include all of the shares of
Common Stock issuable as provided in this Warrant, that a new Warrant of like
tenor and date for the balance of the shares of Common Stock issuable hereunder
be delivered to the undersigned.
(Name of Registered Owner)
(Signature of Registered Owner)
(Street Address)
(City) (State) (Zip Code)
NOTICE: The signature on this
subscription must correspond with
the name as written upon the face of
the within Warrant in every
particular, without alteration or
enlargement or any change whatsoever.
<PAGE> 20
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
and does hereby irrevocably constitute and appoint
attorney-in-fact to register such transfer on the books of Cafe Odyssey, Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated:
(Print Name)
(Signature)
(Print Name of Witness)
(Witness's Signature)
NOTICE: The signature
on this assignment
must correspond with
the name as written
upon the face of the
within Warrant in
every particular,
without alteration or
enlargement or any
change whatsoever.
<PAGE> 1
EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of August 31, 1999 (this
"AGREEMENT"), between Cafe Odyssey, Inc., a Minnesota corporation, with
principal executive offices located at 4801 West 81st Street, Suite 112,
Bloomington, Minnesota 55437 (the "COMPANY"), and The Shaar Fund Ltd. (the
"INITIAL INVESTOR").
WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement dated as of August 31, 1999, between the Initial Investor and
the Company (the "SECURITIES PURCHASE AGREEMENT"), the Company has agreed to
issue and sell to the Initial Investor (i) 2,200 shares of Series D 8%
Convertible Preferred Stock, par value $0.01 per share (the "PREFERRED SHARES")
which, upon the terms of and subject to the conditions of the Company's
Certificate of Designation of Series D 8% Convertible Preferred Stock (the
"CERTIFICATE OF DESIGNATION"), are convertible into shares of the Company's
common stock, par value $0.01 per share (the "COMMON STOCK") and (ii) Common
Stock Purchase Warrants (the "WARRANTS") to purchase shares of Common Stock; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide with respect to
the Common Stock issued or issuable in lieu of cash dividend payments on the
Preferred Shares, upon conversion of the Preferred Shares and exercise of the
Warrants certain registration rights under the Securities Act;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. DEFINITIONS
(a) As used in this Agreement, the following terms shall have the
meanings:
(i) "AFFILIATE," of any specified Person means any other
Person who directly, or indirectly through one or more intermediaries, is in
control of, is controlled by, or is under common control with, such specified
Person. For purposes of this definition, control of a Person means the power,
directly or indirectly, to direct or cause the direction of the management
and policies of such Person whether by contract, securities, ownership or
otherwise; and the terms "CONTROLLING" and "CONTROLLED" have the respective
meanings correlative to the foregoing.
(ii) "CLOSING DATE" means the date and time of the issuance
and sale of the Preferred Shares.
(iii) "COMMISSION" means the Securities and Exchange
Commission.
(iv) "CURRENT MARKET PRICE" on any date of determination means
the
1
<PAGE> 2
closing bid price of a share of the Common Stock on such day as reported on
the Nasdaq SmallCap Market ("NASDAQ"); provided, if such security bid is not
listed or admitted to trading on the Nasdaq, as reported on the principal
national security exchange or quotation system on which such security is
quoted or listed or admitted to trading, or, if not quoted or listed or
admitted to trading on any national securities exchange or quotation system,
the closing bid price of such security on the over-the-counter market on the
day in question as reported by Bloomberg LP, or a similar generally accepted
reporting service, as the case may be.
(v) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission thereunder,
or any similar successor statute.
(vi) "INVESTORS" means the Initial Investor and any
transferee or assignee of Registrable Securities who agrees to become bound
by all of the terms and provisions of this Agreement in accordance with
Section 8 hereof.
(vii) "PERSON" means any individual, partnership,
corporation, limited liability company, joint stock company, association,
trust, unincorporated organization, or a government or agency or political
subdivision thereof.
(viii) "PROSPECTUS" means the prospectus (including, without
limitation, any preliminary prospectus and any final prospectus filed
pursuant to Rule 424(b) under the Securities Act, including any prospectus
that discloses information previously omitted from a prospectus filed as part
of an effective registration statement in reliance on Rule 430A under the
Securities Act) included in the Registration Statement, as amended or
supplemented by any prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Securities covered by the
Registration Statement and by all other amendments and supplements to such
prospectus, including all material incorporated by reference in such
prospectus and all documents filed after the date of such prospectus by the
Company under the Exchange Act and incorporated by reference therein.
(ix) "PUBLIC OFFERING" means an offer registered with the
Commission and the appropriate state securities commissions by the Company of
its Common Stock and made pursuant to the Securities Act.
(x) "REGISTRABLE SECURITIES" means the Common Stock issued
or issuable (i) in lieu of cash dividend payments on the Preferred Shares,
(ii) upon conversion of the Preferred Shares or (iii) upon exercise of the
Warrants; provided, however, a share of Common Stock shall cease to be a
Registrable Security for purposes of this Agreement when it no longer is a
Restricted Security.
(xi) "REGISTRATION STATEMENT" means a registration statement
of the Company filed on an appropriate form under the Securities Act
providing for the registration of, and the sale on a continuous or delayed
basis by the holders of, all of the
2
<PAGE> 3
Registrable Securities pursuant to Rule 415 under the Securities Act,
including the Prospectus contained therein and forming a part thereof, any
amendments to such registration statement and supplements to such Prospectus,
and all exhibits and other material incorporated by reference in such
registration statement and Prospectus.
(xii) "RESTRICTED SECURITY" means any share of Common
Stock issued or issuable in lieu of cash dividend payments on the Preferred
Shares, upon conversion of the Preferred Shares or exercise of the Warrants
except any such share that (i) has been registered pursuant to an effective
registration statement under the Securities Act and sold in a manner
contemplated by the prospectus included in such registration statement, (ii)
has been transferred in compliance with the resale provisions of Rule 144
under the Securities Act (or any successor provision thereto) or is
transferable pursuant to paragraph (k) of Rule 144 under the Securities Act
(or any successor provision thereto), or (iii) otherwise has been transferred
and a new share of Common Stock not subject to transfer restrictions under
the Securities Act has been delivered by or on behalf of the Company.
(xiii) "SECURITIES ACT" means the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder, or
any similar successor statute.
(b) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Securities Purchase Agreement.
2. REGISTRATION
(a) FILING AND EFFECTIVENESS OF REGISTRATION STATEMENT. The
Company shall prepare and file with the Commission not later than 30 days
after the Closing Date, a Registration Statement relating to the offer and
resale of the Registrable Securities by the holders thereof and shall use its
best efforts to cause the Commission to declare such Registration Statement
effective under the Securities Act as promptly as practicable but not later
than 150 days after the Closing Date, assuming for purposes hereof a number
of shares of Registrable Securities equal to at least 19.9% of the total
outstanding shares of Common Stock on the Closing Date. The Company shall
notify the Initial Investor by written notice that such Registration
Statement has been declared effective by the Commission within 24 hours of
such declaration by the Commission.
(b) REGISTRATION DEFAULT. If the Registration Statement
covering the Registrable Securities or the Additional Registrable Securities
(as defined in Section 2(d) hereof) required to be filed by the Company
pursuant to Section 2(a) or 2(d) hereof, as the case may be, is not (i) filed
with the Commission within 30 days after the Closing Date or (ii) declared
effective by the Commission within 150 days after the Closing Date (either of
which, without duplication, an "INITIAL DATE"), then the Company shall make
the payments to the Initial Investor as provided in the next sentence as
liquidated damages and not as a penalty. The amount to be paid by the Company
to the Initial Investor shall be determined as of each Computation Date (as
defined below), and such amount shall be equal to 2% (the "LIQUIDATED DAMAGE
RATE") of the
3
<PAGE> 4
Purchase Price (as defined in the Securities Purchase Agreement) from the
Initial Date to the first Computation Date and for each Computation Date
thereafter, calculated on a pro rata basis to the date on which the
Registration Statement is filed with (in the event of an Initial Date
pursuant to clause (i) above) or declared effective by (in the event of an
Initial Date pursuant to clause (ii) above) the Commission (the "PERIODIC
AMOUNT") provided, however, that in no event shall the liquidated damages be
less than $25,000. The full Periodic Amount shall be paid by the Company to
the Initial Investor by wire transfer of immediately available funds within
three days after each Computation Date.
As used in this Section 2(b), "COMPUTATION DATE" means the
date which is 30 days after the Initial Date and, if the Registration
Statement required to be filed by the Company pursuant to Section 2(a) has
not theretofore been declared effective by the Commission, each date which is
30 days after the previous Computation Date until such Registration Statement
is so declared effective.
Notwithstanding the above, if the Registration Statement
covering the Registrable Securities or the Additional Registrable Securities
required to be filed by the Company pursuant to Section 2(a) or 2(d) hereof,
as the case may be, is not filed with the Commission by the 30th day after
the Closing Date, the Company shall be in default of this Registration Rights
Agreement.
(c) ELIGIBILITY FOR USE OF FORM S-3. The Company agrees that
at such time as it meets all the requirements for the use of Securities Act
Registration Statement on Form S-3 it shall file all reports and information
required to be filed by it with the Commission in a timely manner and take
all such other action so as to maintain such eligibility for the use of such
form.
(d) [Reserved]
(e) (i) If the Company proposes to register any of its
warrants, Common Stock or any other shares of common stock of the Company
under the Securities Act (other than a registration (A) on Form S-8 or S-4 or
any successor or similar forms, (B) relating to Common Stock or any other
shares of common stock of the Company issuable upon exercise of employee
share options or in connection with any employee benefit or similar plan of
the Company or (C) in connection with a direct or indirect acquisition by the
Company of another Person or any transaction with respect to which Rule 145
(or any successor provision) under the Securities Act applies), whether or
not for sale for its own account, it will each such time, give prompt written
notice at least 20 days prior to the anticipated filing date of the
registration statement relating to such registration to the Initial Investor,
which notice shall set forth such Initial Investor's rights under this
Section 3(e) and shall offer the Initial Investor the opportunity to include
in such registration statement such number of Registrable Securities as the
Initial Investor may request. Upon the written request of an Initial Investor
made within 10 days after the receipt of notice from the Company (which
request shall specify the number of Registrable Securities intended to be
disposed of by such Initial Investor), the Company will use its best efforts
to effect the registration under the Securities Act of all Registrable
4
<PAGE> 5
Securities that the Company has been so requested to register by the Initial
Investor, to the extent requisite to permit the disposition of the
Registrable Securities so to be registered; provided, however, that (A) if
such registration involves a Public Offering, the Initial Investor must sell
their Registrable Securities to the underwriters selected as provided in
Section 3(b) hereof on the same terms and conditions as apply to the Company
and (B) if, at any time after giving written notice of its intention to
register any Registrable Securities pursuant to this Section 3 and prior to
the effective date of the registration statement filed in connection with
such registration, the Company shall determine for any reason not to register
such Registrable Securities, the Company shall give written notice to the
Initial Investor and, thereupon, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration. The
Company's obligations under this Section 2(e) shall terminate on the date
that the registration statement to be filed in accordance with Section 2(a)
is declared effective by the Commission.
(ii) If a registration pursuant to this Section 2(e) involves
a Public Offering and the managing underwriter thereof advises the Company
that, in its view, the number of shares of Common Stock, Warrants or other
shares of Common Stock that the Company and the Initial Investor intend to
include in such registration exceeds the largest number of shares of Common
Stock or Warrants (including any other shares of Common Stock or Warrants of
the Company) that can be sold without having an adverse effect on such Public
Offering (the "MAXIMUM OFFERING SIZE"), the Company will include in such
registration, only that number of shares of Common Stock or Warrants, as
applicable, such that the number of shares of Registrable Securities
registered does not exceed the Maximum Offering Size, with the difference
between the number of shares in the Maximum Offering Size and the number of
shares to be issued by the Company to be allocated (after including all
shares to be issued and sold by the Company) among the Company and the
Initial Investor pro rata on the basis of the relative number of shares of
Common Stock or Warrants offered for sale under such registration by each of
the Company and the Initial Investor.
If as a result of the proration provisions of this Section
2(e)(ii), any Initial Investor is not entitled to include all such
Registrable Securities in such registration, such Initial Investor may elect
to withdraw its request to include any Registrable Securities in such
registration. With respect to registrations pursuant to this Section 2(e),
the number of securities required to satisfy any underwriters' over-allotment
option shall be allocated pro rata among the Company and the Initial Investor
on the basis of the relative number of shares of Common Stock or Warrants
otherwise to be included by each of them in the registration with respect to
which such over-allotment option relates.
3. OBLIGATIONS OF THE COMPANY
In connection with the registration of the Registrable
Securities, the Company shall:
5
<PAGE> 6
(a) Promptly (i) prepare and file with the Commission such
amendments (including post-effective amendments) to the Registration
Statement and supplements to the Prospectus as may be necessary to keep the
Registration Statement continuously effective and in compliance with the
provisions of the Securities Act applicable thereto so as to permit the
Prospectus forming part thereof to be current and useable by Investors for
resales of the Registrable Securities for a period of two years from the date
on which the Registration Statement is first declared effective by the
Commission (the "EFFECTIVE TIME") or such shorter period that will terminate
when all the Registrable Securities covered by the Registration Statement
have been sold pursuant thereto in accordance with the plan of distribution
provided in the Prospectus, transferred pursuant to Rule 144 under the
Securities Act or otherwise transferred in a manner that results in the
delivery of new securities not subject to transfer restrictions under the
Securities Act (the "REGISTRATION PERIOD") and (ii) take all lawful action
such that each of (A) the Registration Statement and any amendment thereto
does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, not misleading and (B) the
Prospectus forming part of the Registration Statement, and any amendment or
supplement thereto, does not at any time during the Registration Period
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing provisions of this Section 3(a),
the Company may, during the Registration Period, suspend the use of the
Prospectus for a period not to exceed 60 days (whether or not consecutive) in
any 12-month period if the Board of Directors of the Company determines in
good faith that because of valid business reasons, including pending mergers
or other business combination transactions, the planned acquisition or
divestiture of assets, pending material corporate developments and similar
events, it is in the best interests of the Company to suspend such use, and
prior to or contemporaneously with suspending such use the Company provides
the Investors with written notice of such suspension, which notice need not
specify the nature of the event giving rise to such suspension. At the end of
any such suspension period, the Company shall provide the Investors with
written notice of the termination of such suspension;
(b) During the Registration Period, comply with the provisions
of the Securities Act with respect to the Registrable Securities of the
Company covered by the Registration Statement until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the Investors as set forth in the Prospectus
forming part of the Registration Statement;
(c) (i) Prior to the filing with the Commission of any
Registration Statement (including any amendments thereto) and the
distribution or delivery of any Prospectus (including any supplements
thereto), provide (A) draft copies thereof to the Investors and reflect in
such documents all such comments as the Investors (and their counsel)
reasonably may propose and (B) to the Investors a copy of the accountant's
consent letter to be included in the filing and (ii) furnish to each Investor
whose Registrable Securities are included in the Registration Statement and
its legal counsel identified to the Company, (A) promptly after the same is
prepared and publicly distributed, filed with the Commission, or received by
the Company, one copy of the
6
<PAGE> 7
Registration Statement, each Prospectus, and each amendment or supplement
thereto, and (B) such number of copies of the Prospectus and all amendments
and supplements thereto and such other documents, as such Investor may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor;
(d) (i) Register or qualify the Registrable Securities covered
by the Registration Statement under such securities or "blue sky" laws of
such jurisdictions as the Investors who hold a majority-in-interest of the
Registrable Securities being offered reasonably request, (ii) prepare and
file in such jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may
be necessary to maintain the effectiveness thereof at all times during the
Registration Period, (iii) take all such other lawful actions as may be
necessary to maintain such registrations and qualifications in effect at all
times during the Registration Period, and (iv) take all such other lawful
actions reasonably necessary or advisable to qualify the Registrable
Securities for sale in such jurisdictions; provided, however, that the
Company shall not be required in connection therewith or as a condition
thereto to (A) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (B) subject
itself to general taxation in any such jurisdiction or (C) file a general
consent to service of process in any such jurisdiction;
(e) As promptly as practicable after becoming aware of such
event, notify each Investor of the occurrence of any event, as a result of
which the Prospectus included in the Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and promptly prepare an amendment to the Registration
Statement and supplement to the Prospectus to correct such untrue statement
or omission, and deliver a number of copies of such supplement and amendment
to each Investor as such Investor may reasonably request;
(f) As promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or,
in the event of an underwritten offering, the managing underwriters) of the
issuance by the Commission of any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time and
take all lawful action to effect the withdrawal, recession or removal of such
stop order or other suspension;
(g) Cause all the Registrable Securities covered by the
Registration Statement to be listed on the principal national securities
exchange, and included in an inter-dealer quotation system of a registered
national securities association, on or in which securities of the same class
or series issued by the Company are then listed or included;
(h) Maintain a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective
date of the Registration Statement;
(i) Cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates for the
7
<PAGE> 8
Registrable Securities to be offered pursuant to the registration statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts, as the case may be, as the Investors reasonably may
request and registered in such names as the Investor may request; and, within
three business days after a registration statement which includes Registrable
Securities is declared effective by the Commission, deliver and cause legal
counsel selected by the Company to deliver to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such registration statement) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;
(j) Take all such other lawful actions reasonably necessary to
expedite and facilitate the disposition by the Investors of their Registrable
Securities in accordance with the intended methods therefor provided in the
Prospectus which are customary under the circumstances;
(k) Make generally available to its security holders as soon
as practicable, but in any event not later than three (3) months after (i)
the effective date (as defined in Rule 158(c) under the Securities Act) of
the Registration Statement, and (ii) the effective date of each
post-effective amendment to the Registration Statement, as the case may be,
an earnings statement of the Company and its subsidiaries complying with
Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder (including, at the option of the Company, Rule 158);
(1) In the event of an underwritten offering, promptly include
or incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree
should be included therein and to which the Company does not reasonably
object and make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after it is notified of the
matters to be included or incorporated in such Prospectus supplement or
post-effective amendment;
(m) (i) Make reasonably available for inspection by Investors,
any underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by such
Investors or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and (ii) cause the Company's officers, directors and employees
to supply all information reasonably requested by such Investors or any such
underwriter, attorney, accountant or agent in connection with the
Registration Statement, in each case, as is customary for similar due
diligence examinations; provided, however, that all records, information and
documents that are designated in writing by the Company, in good faith, as
confidential, proprietary or containing any material nonpublic information
shall be kept confidential by such Investors and any such underwriter,
attorney, accountant or agent (pursuant to an appropriate confidentiality
agreement in the case of any such holder or agent), unless such disclosure is
made pursuant to judicial process in a court proceeding (after first giving
the Company an opportunity promptly to seek a protective order or otherwise
limit the scope of the information sought to be disclosed) or is required by
law, or such records, information or documents become available to the public
generally or through a third party not in violation of an accompanying
obligation of confidentiality; and provided, further, that, if the foregoing
inspection and information gathering
8
<PAGE> 9
would otherwise disrupt the Company's conduct of its business, such
inspection and information gathering shall, to the maximum extent possible,
be coordinated on behalf of the Investors and the other parties entitled
thereto by one firm of counsel designed by and on behalf of the majority in
interest of Investors and other parties;
(n) In connection with any underwritten offering, make such
representations and warranties to the Investors participating in such
underwritten offering and to the managers, in form, substance and scope as
are customarily made by the Company to underwriters in secondary underwritten
offerings;
(o) In connection with any underwritten offering, obtain
opinions of counsel to the Company (which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory to the managers)
addressed to the underwriters, covering such matters as are customarily
covered in opinions requested in secondary underwritten offerings (it being
agreed that the matters to be covered by such opinions shall include, without
limitation, as of the date of the opinion and as of the Effective Time of the
Registration Statement or most recent post-effective amendment thereto, as
the case may be, the absence from the Registration Statement and the
Prospectus, including any documents incorporated by reference therein, of an
untrue statement of a material fact or the omission of a material fact
required to be stated therein or necessary to make the statements therein (in
the case of the Prospectus, in light of the circumstances under which they
were made) not misleading, subject to customary limitations);
(p) In connection with any underwritten offering, obtain "cold
comfort" letters and updates thereof from the independent public accountants
of the Company (and, if necessary, from the independent public accountants of
any subsidiary of the Company or of any business acquired by the Company, in
each case for which financial statements and financial data are, or are
required to be, included in the Registration Statement), addressed to each
underwriter participating in such underwritten offering (if such underwriter
has provided such letter, representations or documentation, if any, required
for such cold comfort letter to be so addressed), in customary form and
covering matters of the type customarily covered in "cold comfort" letters in
connection with secondary underwritten offerings;
(q) In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by the managers, if
any; and
(r) In the event that any broker-dealer registered under the
Exchange Act shall be an "AFFILIATE" (as defined in Rule 2729(b)(1) of the
rules and regulations of the National Association of Securities Dealers, Inc.
(the "NASD RULES") (or any successor provision thereto)) of the Company or
has a "CONFLICT OF INTEREST" (as defined in Rule 2720(b)(7) of the NASD Rules
(or any successor provision thereto)) and such broker-dealer shall
underwrite, participate as a member of an underwriting syndicate or selling
group or assist in the distribution of any Registrable Securities covered by
the Registration Statement, whether as a holder of such Registrable
Securities or as an underwriter, a placement or sales agent or a broker or
dealer in respect thereof, or otherwise, the Company shall assist such
broker-dealer in complying with the requirements of the NASD Rules,
including, without limitation, by (A) engaging a "QUALIFIED
9
<PAGE> 10
INDEPENDENT UNDERWRITER" (as defined in Rule 2720(b)(15) of the NASD Rules
(or any successor provision thereto)) to participate in the preparation of
the Registration Statement relating to such Registrable Securities, to
exercise usual standards of due diligence in respect thereof and to recommend
the public offering price of such Registrable Securities, (B) indemnifying
such qualified independent underwriter to the extent of the indemnification
of underwriters provided in Section 5 hereof, and (C) providing such
information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the NASD Rules.
4. OBLIGATIONS OF THE INVESTORS
In connection with the registration of the Registrable
Securities, the Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with
respect to the Registrable Securities of a particular Investor that such
Investor shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of
the Registrable Securities held by it as shall be reasonably required to
effect the registration of such Registrable Securities and shall execute such
documents in connection with such registration as the Company may reasonably
request. As least seven days prior to the first anticipated filing date of
the Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "REQUESTED
INFORMATION") if such Investor elects to have any of its Registrable
Securities included in the Registration Statement. If at least two business
days prior to the anticipated filing date the Company has not received the
Requested Information from in Investor (a "NON-RESPONSIVE INVESTOR"), then
the Company may file the Registration Statement without including Registrable
Securities of such Non-Responsive Investor and have no further obligations to
the Non-Responsive Investor;
(b) Each Investor by its acceptance of the Registrable
Securities agrees to cooperate with the Company in connection with the
preparation and filing of the Registration Statement hereunder, unless such
Investor has notified the Company in writing of its election to exclude all
of its Registrable Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from
the Company of the occurrence of any event of the kind described in Section
3(e) or 3(f), it shall immediately discontinue its disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(e) and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
5. EXPENSES OF REGISTRATION
10
<PAGE> 11
All expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Section 3, but including, without limitation, all
registration, listing, and qualifications fees, printing and engraving fees,
accounting fees, and the fees and disbursements of counsel for the Company.
6. INDEMNIFICATION AND CONTRIBUTION
(a) The Company shall indemnify and hold harmless each
Investor and each underwriter, if any, which facilitates the disposition of
Registrable Securities, and each of their respective officers and directors
and each person who controls such Investor or underwriter within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act (each
such person being sometimes hereinafter referred to as an "INDEMNIFIED
PERSON") from and against any losses, claims, damages or liabilities, joint
or several, to which such Indemnified Person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement or an omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein, not misleading, or arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
any Prospectus or an omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and the Company hereby agrees to reimburse such Indemnified
Person for all reasonable legal and other expenses incurred by them in
connection with investigating or defending any such action or claim as and
when such expenses are incurred; provided, however, that the Company shall
not be liable to any such Indemnified Person in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon
(i) an untrue statement or alleged untrue statement made in, or an omission
or alleged omission from, such Registration Statement or Prospectus in
reliance upon and in conformity with written information furnished to the
Company by such Indemnified Person expressly for use therein or (ii) in the
case of the occurrence of an event of the type specified in Section 3(e), the
use by the Indemnified Person of an outdated or defective Prospectus after
the Company has provided to such Indemnified Person an updated Prospectus
correcting the untrue statement or alleged untrue statement or omission or
alleged omission giving rise to such loss, claim, damage or liability.
(b) INDEMNIFICATION BY THE INVESTORS AND UNDERWRITERS. Each
Investor agrees, as a consequence of the inclusion of any of its Registrable
Securities in a Registration Statement, and each underwriter, if any, which
facilitates the disposition of Registrable Securities shall agree, as a
consequence of facilitating such disposition of Registrable Securities,
severally and not jointly, to (i) indemnify and hold harmless the Company,
its directors (including any person who, with his or her consent, is named in
the Registration Statement as a director nominee of the Company), its
officers who sign any Registration Statement and each person, if any, who
controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any losses, claims,
damages or liabilities to which the Company or such other persons may become
subject, under the Securities Act or otherwise,
11
<PAGE> 12
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in such Registration Statement or
Prospectus or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein (in light of the circumstances under which
they were made, in the case of the Prospectus), not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to the Company by such
holder or underwriter expressly for use therein; provided, however, that no
Investor or underwriter shall be liable under this Section 6(b) for any
amount in excess of the net proceeds paid to such Investor or underwriter in
respect of shares sold by it, and (ii) reimburse the Company for any legal or
other expenses incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred.
(c) NOTICE OF CLAIMS, ETC. Promptly after receipt by a party
seeking indemnification pursuant to this Section 6 (an "INDEMNIFIED PARTY")
of written notice of any investigation, claim, proceeding or other action in
respect of which indemnification is being sought (each, a "CLAIM"), the
Indemnified Party promptly shall notify the party against whom
indemnification pursuant to this Section 6 is being sought (the "INDEMNIFYING
PARTY") of the commencement thereof; but the omission to so notify the
Indemnifying Party shall not relieve it from any liability that it otherwise
may have to the Indemnified Party, except to the extent that the Indemnifying
Party is materially prejudiced and forfeits substantive rights and defenses
by reason of such failure. In connection with any Claim as to which both the
Indemnifying Party and the Indemnified Party are parties, the Indemnifying
Party shall be entitled to assume the defense thereof. Notwithstanding the
assumption of the defense of any Claim by the Indemnifying Party, the
Indemnified Party shall have the right to employ separate legal counsel and
to participate in the defense of such Claim, and the Indemnifying Party shall
bear the reasonable fees, out-of-pocket costs and expenses of such separate
legal counsel to the Indemnified Party if (and only if): (x) the Indemnifying
Party shall have agreed to pay such fees, costs and expenses, (y) the
Indemnified Party and the Indemnifying Party shall reasonably have concluded
that representation of the Indemnified Party by the Indemnifying Party by the
same legal counsel would not be appropriate due to actual or, as reasonably
determined by legal counsel to the Indemnified Party, potentially differing
interests between such parties in the conduct of the defense of such Claim,
or if there may be legal defenses available to the Indemnified Party that are
in addition to or disparate from those available to the Indemnifying Party,
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period
of time after notice of the commencement of such Claim. If the Indemnified
Party employs separate legal counsel in circumstances other than as described
in clauses (x), (y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any
Claim in the same jurisdiction, be liable for the fees and expenses of more
than one firm of counsel for the Indemnified Party (together with appropriate
local counsel). The Indemnified Party shall not, without the prior written
consent of the Indemnifying Party (which consent shall not unreasonably be
withheld), settle or compromise any Claim or consent to the entry of any
judgment that does not include an
12
<PAGE> 13
unconditional release of the Indemnifying Party from all liabilities with
respect to such Claim or judgment.
(d) CONTRIBUTION. If the indemnification provided for in this
Section 6 is unavailable to or insufficient to hold harmless an Indemnified
Person under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein,
then each Indemnifying Party shall contribute to the amount paid or payable
by such Indemnified Party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and the
Indemnified Party in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state
a material fact relates to information supplied by such Indemnifying Party or
by such Indemnified Party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation (even if the Investors or any underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section
6(d). The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof)
referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The obligations of the Investors
and any underwriters in this Section 6(d) to contribute shall be several in
proportion to the percentage of Registrable Securities registered or
underwritten, as the case may be, by them and not joint.
(e) Notwithstanding any other provision of this Section 6, in
no event shall any (i) Investor be required to undertake liability to any person
under this Section 6 for any amounts in excess of the dollar amount of the
proceeds to be received by such Investor from the sale of such Investor's
Registrable Securities (after deducting any fees, discounts and commissions
applicable thereto) pursuant to any Registration Statement under which such
Registrable Securities are to be registered under the Securities Act and (ii)
underwriter be required to undertake liability to any Person hereunder for any
amounts in excess of the aggregate discount, commission or other compensation
payable to such underwriter with respect to the Registrable Securities
underwritten by it and distributed pursuant to the Registration Statement.
(f) The obligations of the Company under this Section 6 shall
be in addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 6 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in
13
<PAGE> 14
this Section 6 are not exclusive and shall not limit any rights or remedies
which may otherwise be available to an indemnified party at law or in equity.
7. RULE 144
With a view to making available to the Investors the benefits
of Rule 144 under the Securities Act or any other similar rule or regulation
of the Commission that may at any time permit the Investors to sell
securities of the Company to the public without registration ("RULE 144"),
the Company agrees to use its best efforts to:
(a) comply with the provisions of paragraph (c) (1) of Rule
144; and
(b) file with the Commission in a timely manner all reports
and other documents required to be filed by the Company pursuant to Section
13 or 15(d) under the Exchange Act; and, if at any time it is not required to
file such reports but in the past had been required to or did file such
reports, it will, upon the request of any Investor, make available other
information as required by, and so long as necessary to permit sales of, its
Registrable Securities pursuant to Rule 144.
8. ASSIGNMENT
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assigned by the Investors
to any permitted transferee of all or any portion of such securities (or all
or any portion of any Preferred Shares or Warrant of the Company which is
convertible into such securities) of Registrable Securities only if: (a) the
Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a
reasonable time after such transfer or assignment, furnished with written
notice of (i) the name and address of such transferee or assignee and (ii)
the securities with respect to which such registration rights are being
transferred or assigned, (c) immediately following such transfer or
assignment, the securities so transferred or assigned to the transferee or
assignee constitute Restricted Securities, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this
sentence the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions contained herein.
9. AMENDMENT AND WAIVER
Any provision of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and Investors who hold a majority-in-interest of the
Registrable Securities. Any amendment or waiver effected in accordance with
this Section 9 shall be binding upon each Investor and the Company.
10. MISCELLANEOUS
(a) A person or entity shall be deemed to be a holder of
Registrable Securities
14
<PAGE> 15
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two
or more persons or entities with respect to the same Registrable Securities,
the Company shall act upon the basis of instructions, notice or election
received from the registered owner of such Registrable Securities.
(b) If, after the date hereof and prior to the Commission
declaring the Registration Statement to be filed pursuant to Section 2(a)
effective under the Securities Act, the Company grants to any Person any
registration rights with respect to any Company securities which are more
favorable to such other Person than those provided in this Agreement, then
the Company forthwith shall grant (by means of an amendment to this Agreement
or otherwise) identical registration rights to all Investors hereunder.
(c) Except as may be otherwise provided herein, any notice or
other communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally or sent by certified mail, postage
prepaid, or by a nationally recognized overnight courier service, and shall
be deemed given when so delivered personally or by overnight courier service,
or, if mailed, three days after the date of deposit in the United States
mails, as follows:
(i) to the Company, to:
Cafe Odyssey, Inc.
4801 West 81st Street, Suite 112
Bloomington, MN 55437
Attention: Stephen D. King
(612) 837-9917
(612) 837-9916 (Fax)
with a copy to:
Maslon Edelman Borman & Brand, LLP
3300 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Attention: William M. Mower, Esq.
(612) 672-8358
(612) 672-8397 (Fax)
(ii) if to the Initial Investor, to:
The Shaar Fund Ltd.,
c/o Levinson Capital Management
2 World Trade Center, Suite 1820
New York, NY 10048
Attention: Samuel Levinson
(212) 432-7711
15
<PAGE> 16
(212) 432-7771 (Fax)
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: Dennis J. Block, Esq.
(212) 504-5555
(212) 504-5557 (Fax)
(iii) if to any other Investor, at such address as such
Investor shall have provided in writing to the Company.
The Company, the Initial Investor or any Investor may change the foregoing
address by notice given pursuant to this Section 10(c).
(d) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(e) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York. Each of the parties
consents to the jurisdiction of the federal courts whose districts encompass
any part of the City of New York or the state courts of the State of New York
sitting in the City of New York in connection with any dispute arising under
this Agreement and hereby waives, to the maximum extent permitted by law, any
objection including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions.
(f) The remedies provided in this Agreement are cumulative and
not exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their best efforts to find and
employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or restriction.
It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(g) The Company shall not enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
holders of Registrable Securities in this Agreement or otherwise conflicts
with the provisions hereof. The Company is not currently a party to any
agreement granting any registration rights with respect to any of its
securities to any person which conflicts with the Company's obligations
hereunder or gives any other party the right to include any securities in any
Registration Statement filed pursuant hereto, except for
16
<PAGE> 17
such rights and conflicts as have been irrevocably waived. Without limiting
the generality of the foregoing, without the written consent of the holders
of a majority in interest of the Registrable Securities, the Company shall
not grant to any person the right to request it to register any of its
securities under the Securities Act unless the rights so granted are subject
in all respect to the prior rights of the holders of Registrable Securities
set forth herein, and are not otherwise in conflict or inconsistent with the
provisions of this Agreement. The restrictions on the Company's rights to
grant registration rights under this paragraph shall terminate on the date
the Registration Statement to be filed pursuant to Section 2(a) is declared
effective by the Commission.
(h) This Agreement, the Securities Purchase Agreement, the
Escrow Instructions, dated as of a date even herewith (the "ESCROW
INSTRUCTIONS"), between the Company, the Initial Investor and Cadwalader,
Wickersham & Taft, the Preferred Shares and the Warrants constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof. There are no restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein. This Agreement, the
Securities Purchase Agreement, the Escrow Instructions, the Certificate of
Designation and the Warrants supersede all prior agreements and undertakings
among the parties hereto with respect to the subject matter hereof.
(i) Subject to the requirements of Section 8 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors
and assigns of each of the parties hereto.
(j) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may
require.
(k) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
(1) The Company acknowledges that any failure by the Company
to perform its obligations under Section 3, or any delay in such performance
could result in direct damages to the Investors and the Company agrees that,
in addition to any other liability the Company may have by reason of any such
failure or delay, the Company shall be liable for all direct damages caused
by such failure or delay.
(m) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same agreement. A facsimile transmission of this
signed Agreement shall be legal and binding on all parties hereto.
17
<PAGE> 18
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered as of the date first above written.
CAFE ODYSSEY, INC.
By: /s/ Stephen D. King
----------------------------
Name: Stephen D. King
Title: CEO
THE SHAAR FUND LTD.
By: /s/ Samuel Levinson
---------------------------
Name: Samuel Levinson
Title: Managing Director
18
<PAGE> 1
EXHIBIT 10.4
LOAN AGREEMENT
This Loan Agreement (the "AGREEMENT") is made and entered into by
and between the undersigned borrower (the "BORROWER") and the undersigned Lender
(the "LENDER") as of the date set forth on the last page of this Agreement.
ARTICLE I.
LOANS
1.1 SINGLE ADVANCE TERM LOAN. As of the date hereof, the Borrower has
obtained a term loan from the Lender in the original principal amount of Two
Million and no/100 Dollars ($2,000,000.00) (the "LOAN AMOUNT"). The term loan is
evidenced by a single Senior Convertible Note of the Borrower payable to the
order of the Lender in the Loan Amount and dated as of the date hereof (the
"NOTE"), and is being extended to finance the Borrower's acquisition of
popmail.com, inc., a Delaware corporation.
1.2 ADVANCE PROCEDURE. Subject to Section 1.4 hereof, the Lender shall
advance the proceeds of the Note to the Borrower pursuant to written wire
instructions provided by the Borrower to the Lender.
1.3 EXPENSES AND ATTORNEYS' FEES. The Borrower will reimburse the Lender
for all reasonable attorneys' fees and all other costs, fees and out-of-pocket
disbursements incurred by the Lender in connection with the preparation,
execution, delivery, administration, defense and enforcement of this Agreement
or any of the other Loan Documents (defined below), including fees and costs
related to any waivers or amendments with respect thereto. The Borrower will
also reimburse the Lender for all reasonable costs of collection before and
after judgment, and the costs of preservation and/or liquidation of any
collateral (including fees and disbursements of both inside and outside
counsel).
1.4 CONDITIONS TO BORROWING. The Lender shall not be obligated to make an
advance hereunder unless (i) the Lender has received executed copies of the Note
and all other documents or agreements applicable to the loan described herein,
including, but not limited to, the documents specified in Article III
(collectively with this Agreement the "LOAN DOCUMENTS"), in form and content
satisfactory to the Lender; (ii) the Lender has received copies of the
Borrower's Articles of Incorporation and By-Laws; and (iii) the Lender has
received a certified copy of a resolution or authorization in form and content
satisfactory to the Lender authorizing the loan and all acts contemplated by
this Agreement and all related documents.
<PAGE> 2
ARTICLE II.
WARRANTIES AND COVENANTS
During the term of this Agreement, and while any part of the credit
granted the Borrower under this Agreement or the other Loan Documents is
available or any obligations under any of the Loan Documents are unpaid or
outstanding, the Borrower warrants and continuously agrees as follows:
2.1 ACCURACY OF INFORMATION. All information, certificates or statements
given to the Lender pursuant to this Agreement and the other Loan Documents will
be true and complete in all material respects when given.
2.2 ORGANIZATION AND AUTHORITY; LITIGATION. If the Borrower is a
corporation or partnership, the Borrower is a validly existing corporation or
partnership (as applicable) in good standing under the laws of its state of
organization, and has all requisite power and authority, corporate or otherwise,
and possesses all licenses necessary, to conduct its business and own its
properties. The execution, delivery and performance of this Agreement and the
other Loan Documents (i) are within the Borrower's power; (ii) have been duly
authorized by proper corporate or partnership action (as applicable); (iii) do
not require the approval of any governmental agency; and (iv) will not violate
any law, agreement or restriction by which the Borrower is bound. This Agreement
and the other Loan Documents are the legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with their terms. As of
the date hereof, there is no litigation or administrative proceeding threatened
or pending against the Borrower which would, if adversely determined, have a
material adverse effect on the Borrower's financial condition or its property.
2.3 EXISTENCE; BUSINESS ACTIVITIES; ASSETS. The Borrower will (i)
preserve its corporate or partnership (as applicable) existence, rights and
franchises; (ii) not liquidate, dissolve, merge or consolidate with or into
another entity; and (iii) not sell, lease, transfer or otherwise dispose of all
or substantially all of its assets.
2.4 USE OF PROCEEDS. Advances by the Lender hereunder shall be used
exclusively by the Borrower for the purposes represented to the Lender in
Section 1.1 hereof.
2.5 COMPLIANCE WITH LAWS. The Borrower has materially complied with all
laws applicable to its business and its properties, and has all permits,
licenses and approvals required by such laws, copies of which have been provided
to the Lender.
2.6 FINANCIAL STATEMENTS AND REPORTING. Upon request of the Lender, the
Borrower shall provide to the Lender copies of any reports and financial
information reasonably requested by Lender and Lender agrees to keep all such
information confidential to the extent the Borrower has not publicly disclosed
such information by its reporting with the Securities and Exchange Commission or
otherwise.
2
<PAGE> 3
2.7 LIABILITIES. All taxes and other liabilities which are due from
Borrower have been paid in full and in a timely manner.
2.8 YEAR 2000.
(a) Borrower represents and warrants that all date-sensitive
hardware, software, processes, procedures, interfaces and operating systems and
core business functions (jointly referred to as the "Systems") used within the
Borrower's business operations contain or will contain acceptable design and
performance specifications so that such systems will not abruptly end or provide
invalid or incorrect results during the operation of Borrower's business on or
after January 1, 2000. All such Systems have been or will be designed to ensure
year 2000 compatibility on or before January 1, 2000, including, but not limited
to: date data century recognition, calculations that accommodate same century
and multi-century formulas and date values, date data interface values that
reflect the century, and which include year 2000 leap year calculations.
(b) Borrower represents and warrants that it will contact its
material suppliers to confirm that all date time and sensitive hardware,
software, processes, procedures, interfaces and operating systems used within
the suppliers' operations contain or that they intend that the same will contain
acceptable design and performance specification so that such Systems will not
abruptly and/or provide invalid or incorrect results during the operation of
their respective businesses on or after January 1, 2000 and that all such
Systems have been designed or that they intend them to be designed to ensure
Year 2000 compatibility including, but not limited to: date data century
recognition, calculations that accommodate same century and multi-century
formulas and date values, date data interface values that reflect the century
and which include Year 2000 leap year calculations.
2.9 WARRANTS. In consideration for the extension of the loan evidenced
by the Note, the Borrower agrees to issue a Warrant to Lender for the issuance
of 500,000 shares of common stock of the Borrower in the form of the Warrant
attached hereto as Exhibit A (the "WARRANTS").
2.10 ADDITIONAL INDEBTEDNESS. Borrower acknowledges and agrees that if it
shall incur any indebtedness for borrowed money on or after the date of this
Agreement, such indebtedness shall not mature on or before ninety (90) days
after the Maturity Date as such term is defined in the Note.
ARTICLE III.
COLLATERAL AND SUPPORT AGREEMENT
3.1 COLLATERAL. This Agreement and the Note are secured by that certain
Deed of Trust, Security Agreement and Fixture Financing Statement of even date
herewith executed by the Borrower, as grantor, in favor of the Lender, as
beneficiary (the "DEED OF TRUST"), in the form attached hereto as Exhibit B. At
such time that all obligations of the Borrower under the Note, this Loan
Agreement and any related Loan Documents have been irrevocably paid in full, the
Lender
3
<PAGE> 4
agrees to terminate the Deed of Trust and release the liens and security
interests granted to the Lender thereunder.
3.2 SUPPORT AGREEMENT. Borrower agrees to cause the execution and
delivery of the Support Agreement, in the form attached hereto as Exhibit C, by
the Borrower and Stephen D. King in favor of the Lender.
ARTICLE IV.
DEFAULTS
4.1 DEFAULTS. The occurrence of any of the following events and the
expiration of any applicable cure or grace periods, if any, shall constitute an
"EVENT OF DEFAULT":
(a) NONPAYMENT. The Borrower shall fail to pay when due any payment of
principal or interest on the Note within five (5) days after the
date on which such payment is due.
(b) NONPERFORMANCE. The Borrower shall fail to perform or observe any
other agreement, term, provision, condition, or covenant required
to be performed or observed by the Borrower hereunder, the Deed of
Trust or under any other Loan Document or other agreement with or
in favor of the Lender and such failure continues for thirty (30)
days after the Lender notifies the Borrower thereof in writing, or
if such default isn't reasonably susceptible to being cured within
such time period, then for such longer period of time as is
reasonably necessary so long as the Borrower is diligently
proceeding to cure the same, provided that such additional curing
period does not, in Lender's sole opinion, jeopardize Lender's
position.
(c) CHANGE OF MANAGEMENT. Stephen D. King shall at any time fail to be
the Chief Executive Officer or President of the Borrower or fail
to hold a management position of similar or greater responsibility
with the Borrower.
(d) OTHER INDEBTEDNESS. Borrower fails to repay when due, and after
expiration of any applicable cure or grace periods, any other
borrowed money obligation in excess of $50,000, or the holder of
any such obligation declares, or may declare, such obligation due
prior to its stated maturity of such Borrower's default hereunder;
(e) REPRESENTATIONS. Any representation or warranty made by Borrower
herein or in any of the other Loan Documents, any writings
furnished to Lender in connection with this Loan Agreement or in
any other agreement or instrument is untrue in any material
respect;
(f) ADVERSE CHANGE. There shall have been an adverse change in the
financial affairs of Borrower, in the operating condition of
Borrower, or in the value of the Collateral which,
4
<PAGE> 5
in the reasonable judgment of Lender, materially imperils
Borrower's ability to repay its obligations to Lender or Lender's
ability to realize adequately on the security therefor;
(g) LEASE DEFAULTS. The Borrower shall fail to perform or observe any
term, provision, condition or covenant required to be performed or
observed by the Borrower under the Lease (as such term is defined
in the Deed of Trust) as and when required therein and such
failure remains uncured beyond any applicable cure or grace period
as set forth in the Lease;
(h) NOTE EVENT OF DEFAULT. The occurrence of any "Event of Default" as
such term is defined in the Note.
4.2 ACCELERATION OF OBLIGATIONS. Upon the occurrence of any Event of
Default identified in Section 4.1 and the passage of any applicable cure or
grace period, the Lender may at any time thereafter declare the unpaid principal
balance of any obligations, together with the interest accrued thereon and other
amounts accrued hereunder and under the other Loan Documents (collectively, the
"OBLIGATIONS"), to be immediately due and payable; and the unpaid balance shall
thereupon be due and payable, all without presentation, demand, protest or
further notice of any kind, all of which are hereby waived, and notwithstanding
anything to the contrary contained herein or in any of the other Loan Documents.
4.3 OTHER REMEDIES. Nothing in this Article IV is intended to restrict
the Lender's rights under any of the Loan Documents or at law, and the Lender
may exercise all such rights and remedies as and when they are available.
ARTICLE V.
MISCELLANEOUS
5.1 DELAY; CUMULATIVE REMEDIES. No delay on the part of the Lender in
exercising any right, power or privilege hereunder or under any of the other
Loan Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege hereunder preclude other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein specified are cumulative and are not exclusive of
any rights or remedies which the Lender would otherwise have.
5.2 RELATIONSHIP TO OTHER DOCUMENTS. The warranties, covenants and other
obligations of the Borrower (and the rights and remedies of the Lender) that are
outlined in this Agreement and the other Loan Documents are intended to
supplement each other. In the event of any inconsistencies in any of the terms
in the Loan Documents, all terms shall be cumulative so as to give the Lender
the most favorable rights set forth in the conflicting documents, except that if
there is a direct conflict between any preprinted terms and specifically
negotiated terms (whether included in an addendum or otherwise), the
specifically negotiated terms will control.
5
<PAGE> 6
5.3 SUCCESSORS. The rights, options, powers and remedies granted in this
Agreement and the other Loan Documents shall extend to the Lender and to its
successors and assigns, shall be binding upon the Borrower and its successors
and assigns and shall be applicable hereto and to all renewals and/or extensions
hereof; provided, however, that notwithstanding the foregoing, the Borrower
shall not be entitled to assign any of its rights or obligations under this
Agreement or any other document or instrument related hereto without the prior
written consent of the Lender.
5.4 NOTICES. Although any notice required to be given hereunder or under
any of the other Loan Documents might be accomplished by other means, notice
will always be deemed given when placed in the United States Mail, with postage
prepaid, or sent by overnight delivery service, or sent by telex or facsimile,
in each case to the address and/or facsimile number set forth below or as
amended.
5.5 APPLICABLE LAW AND JURISDICTION; INTERPRETATION. This Agreement and
all other Loan Documents shall be governed by and interpreted in accordance with
the laws of the State of Ohio except to the extent superseded by Federal law.
Invalidity of any provision of this Agreement shall not affect the validity of
any other provision. THE BORROWER HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION
OF ANY STATE OR FEDERAL COURT SITUATED IN HAMILTON COUNTY, OHIO AND WAIVES ANY
OBJECTION BASED ON FORUM NON CONVENIENS, WITH REGARD TO ANY ACTIONS, CLAIMS,
DISPUTES OR PROCEEDINGS RELATING TO THIS AGREEMENT, THE NOTE, THE COLLATERAL,
ANY OTHER LOAN DOCUMENT, OR ANY TRANSACTIONS ARISING THEREFROM, OR ENFORCEMENT
AND/OR INTERPRETATION OF ANY OF THE FOREGOING. Nothing herein shall affect the
Lender's rights to serve process in any manner permitted by law, or limit the
Lender's right to bring proceedings against the Borrower in the competent courts
of any other jurisdiction or jurisdictions.
5.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original but together shall
constitute one and the same instrument.
(The remainder of this page has been intentionally left blank.)
6
<PAGE> 7
IN WITNESS WHEREOF, the undersigned have executed this LOAN AGREEMENT as
of August 24, 1999.
BORROWER:
CAFE ODYSSEY, INC.,
a Minnesota corporation
By: s/ Stephen D. King
----------------------------------------
Name and Title: C.E.O.
----------------------------
LENDER:
FAIRVIEW PARTNERS,
an Ohio General Partnership
By: s/ Timothy E. Johnson
----------------------------------------
Name and Title: Timothy E. Johnson, Agent
----------------------------
Borrower Address: 4801 West 81st Street
Suite 112
Bloomington, MN 55437
Borrower Telephone No.: (612) 837-9917
Borrower Facsimile No.: (612) 837-9916
Lender Address: 5807 McCray Court
Cincinnati, OH 45224
Lender Telephone No.: 513 661 3100
------------
Lender Facsimile No.: 513 661 3160
------------
<PAGE> 8
EXHIBIT A
(FORM OF WARRANT)
8
<PAGE> 9
EXHIBIT B
(ATTACH FORM OF DEED OF TRUST)
9
<PAGE> 10
EXHIBIT C
(FORM OF SUPPORT AGREEMENT)
10
<PAGE> 1
EXHIBIT 10.5
NEITHER THIS SENIOR CONVERTIBLE NOTE NOR THE SHARES OF COMMON STOCK ISSUABLE
UPON CONVERSION HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION (TOGETHER, THE
"SECURITIES LAWS") AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE
TRANSFERRED OR ENCUMBERED IN THE ABSENCE OF COMPLIANCE WITH SUCH SECURITIES LAWS
AND UNTIL THE ISSUER THEREOF SHALL HAVE RECEIVED AN OPINION FROM COUNSEL
ACCEPTABLE TO IT THAT THE PROPOSED DISPOSITION WILL NOT VIOLATE ANY APPLICABLE
SECURITIES LAWS.
SENIOR CONVERTIBLE NOTE
$2,000,000 August 24, 1999
FOR VALUE RECEIVED, Cafe Odyssey, Inc., a Minnesota corporation (the "Company"),
promises to pay to the order of Fairview Partners, an Ohio general partnership
("Holder"), in lawful money of the United States of America, the principal sum
of TWO MILLION DOLLARS ($2,000,000), together with interest in arrears on the
unpaid principal balance at a per annum floating rate equal to the Floating Rate
of Interest (as hereinafter defined), as the same may be adjusted from time to
time.
This Note has been executed and delivered pursuant to and in accordance with the
terms and conditions of the Loan Agreement of even date herewith by and between
the Company and the Holder (the "Agreement"), and is subject to the terms and
conditions of the Agreement, which is, by this reference, incorporated herein
and made a part hereof. Capitalized terms used in this Note without definition
shall have the respective meanings set forth in the Agreement.
1. INTEREST. The principal balance of this Note shall initially accrue interest
at the "Prime Rate" (as such term is hereinafter defined), plus two percent (2%)
(the "Floating Rate of Interest") and shall be adjusted on the same day that the
Prime Rate of Interest shall change. As used herein, the term "Prime Rate" shall
mean at any time any determination thereof is to be made, the fluctuating per
annum rate of interest then most recently reported in the Wall Street Journal as
the Prime Rate (the base rate on corporate loans at the thirty (30) largest U.S.
money center commercial banks) and if reported as a range, the interest rate
shall be the mid-point of the range. In the event that the Wall Street Journal
ceases to report the Prime Rate, then "Prime Rate" shall mean the fluctuating
interest rate per annum announced from time to time by U.S. Bank National
Association, Minneapolis, Minnesota, as its prime or base rate (or, if otherwise
denominated, such Bank's reference rate for interest rate calculations on
general commercial loans for short-term borrowings). Notwithstanding the
foregoing, the Company, at its option, may reduce the Floating Rate of Interest
by issuing additional Warrants for the issuance of common stock of the Company
in a form similar to the Warrants issued pursuant to Section 2.9 of the
Agreement. For every twenty thousand (20,000) additional Warrants issued by the
Company to the Holder, the Company shall be entitled to a one percent (1.0%)
reduction in the Floating Rate of Interest, provided, further, however, that in
no event
<PAGE> 2
will the Floating Rate of Interest be reduced below the lowest Applicable
Federal Rate published by the United States Internal Revenue Service. If at any
time the Company issues warrants in less than twenty thousand (20,000)
increments, it shall be entitled to a pro rata reduction in the Floating Rate of
Interest for such partial increment. Upon the occurrence and during the
continuance of an Event of Default, the Floating Rate of Interest shall be
increased to be equal to eighteen percent (18%) per annum and upon curing any
existing Event of Default, the Floating Rate of Interest shall automatically be
reduced to the rate otherwise required under this Note.
2. PAYMENTS.
2.1 PRINCIPAL AND INTEREST. The principal amount of this Note shall be
due and payable on August 24, 2000 (the "Maturity Date"). Interest on the unpaid
principal balance of this Note shall be due and payable quarterly on the
fifteenth (15th) day of November, February, May and August of each year,
commencing November 15, 1999 until said principal amount of the Note is paid in
full or upon conversion of the Note in accordance with Section 5 hereof.
2.2 MANNER OF PAYMENT. All payments of principal and interest on this
Note shall be made by check at 5807 McCrary Court, Cincinnati, Ohio, or at such
other place in the United States of America as Holder shall designate to the
Company in writing. If any payment of principal or interest on this Note is due
on a day which is not a Business Day, such payment shall be due on the next
succeeding Business Day, and such extension of time shall not be taken into
account in calculating the amount of interest payable under this Note. "Business
Day" means any day other than a Saturday, Sunday or legal holiday in the State
of Ohio.
2.3 PREPAYMENT. The Company may, without premium or penalty, at any
time and from time to time, prepay all or any portion of the outstanding
principal balance due under this Note, provided that each such prepayment is
accompanied by the accrued interest on the amount of principal prepaid
calculated to the date of such prepayment.
3. DEFAULT.
3.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events with respect to Company shall constitute an event of default
hereunder ("Event of Default"):
(a) If Company shall fail to pay when due any payment of
principal or interest on this Note within five (5) days after the date
on which such payment is due.
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to
insolvency or relief of debtors (a "Bankruptcy Law"), the Company shall
(i) commence a voluntary case or proceeding; (ii) consent to the entry
of an order for relief against it in an involuntary case; (iii) consent
to the appointment of a trustee, receiver, assignee, liquidator or
similar official; (iv) make an assignment for the
2
<PAGE> 3
benefit of its creditors; or (v) admit in writing its inability to pay
its debts as they become due.
(c) If a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (i) is for relief against the
Company in an involuntary case, (ii) appoints a trustee, receiver,
assignee, liquidator or similar official for the Company or
substantially all of the Company's properties, or (iii) orders the
liquidation of the Company, and in each case the order or decree is not
dismissed within 90 days.
(d) The occurrence of an "Event of Default" as such term is
defined in the Agreement.
3.2 NOTICE BY THE COMPANY. The Company shall notify Holder in writing
immediately after the occurrence of any Event of Default of which the Company
acquires knowledge.
3.3 REMEDIES. Upon the occurrence of an Event of Default hereunder
(unless all Events of Defaults have been cured or waived by Holder), Holder may
(i) by written notice to the Company, declare the entire unpaid principal
balance of this Note, together with all accrued interest thereon, immediately
due and payable regardless of any prior forbearance, and (ii) exercise any and
all rights and remedies available to it under applicable law or by agreement,
including, without limitation, the right to collect from the Company all sums
due under this Note and to exercise any rights or remedies available under the
Agreement and/or the Deed of Trust. The Company shall pay all reasonable costs
and expenses incurred by or on behalf of Holder in connection with Holder's
exercise of any or all of its rights and remedies under this Note, including,
without limitation, reasonable attorneys' fees.
4. CONVERSION.
4.1 VOLUNTARY CONVERSION. At any time on or after the Maturity Date,
but not later than sixty (60) days thereafter, the Holder shall have the right,
at the Holder's option, at any time prior to payment in full of the principal
balance of this Note, to convert this Note, in accordance with the provisions of
Section 4.2 hereof, in whole or in part, into fully paid and nonassessable
shares of Common Stock of the Company (the "Common Stock"). The number of shares
of Common Stock into which this Note may be converted ("Conversion Shares")
shall be determined by dividing the outstanding principal amount of the Note to
be converted together with all accrued interest thereon to the date of
conversion by $2.50 (the "Conversion Price").
4.2 CONVERSION PROCEDURE.
(a) NOTICE OF CONVERSION PURSUANT TO SECTION 4.1. Before the
Holder shall be entitled to convert this Note into shares of Common
Stock, it shall surrender this Note at the office of the Company and
shall give written notice by mail, postage prepaid, to the Company at
its principal corporate office, of the election to convert all or a
portion of this
3
<PAGE> 4
Note pursuant to Section 4.1, and shall state therein the name or names
in which the certificate or certificates for shares of Common Stock are
to be issued. If this Note is converted in part only, the Company shall
execute and deliver a new note to the Holder thereof in the principal
amount equal to the portion of this Note not so converted.
(b) MECHANICS AND EFFECT OF CONVERSION. No fractional shares
of Common Stock shall be issued upon conversion of this Note. Upon the
conversion of this Note pursuant to Section 4.1 above, the Holder shall
surrender this Note, duly endorsed, at the principal office of the
Company. At its expense, the Company shall, as soon as practicable
thereafter, issue and deliver to such Holder at such principal office a
certificate or certificates for the number of shares of Common Stock to
which the Holder shall be entitled upon such conversion (bearing such
legends as are required by applicable state and federal securities laws
in the opinion of counsel to the Company), together with a new note for
the principal amount of the Note that was not converted. In the event
of any conversion of this Note pursuant to Section 4.1 above, such
conversion shall be deemed to have been made immediately prior to the
close of business on the date of such surrender of this Note, and the
person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such
date. Upon conversion of all or a portion of this Note, the Company
shall be forever released from all its obligations and liabilities
under this Note, to the extent of the principal amount so converted.
4.3 ADDITIONAL CONDITIONS TO CONVERSION. As a condition of the issuance
of shares of Common Stock to the Holder of this Note upon conversion, the
Company may require that the Holder make standard and customary investment
representations with respect to the Common Stock in form and substance
reasonably acceptable to the Company and further may require that any
certificate for shares of Common Stock bear a legend similar in form and content
to the legend specified in the Warrants.
5. CONVERSION PRICE ADJUSTMENTS.
5.1 ADJUSTMENTS FOR STOCK SPLITS AND SUBDIVISIONS. In the event the
Company should at any time or from time to time after the date of issuance
hereof fix a record date for the effectuation of: (i) any dividends on any class
of stock of the Company payable in Common Stock or securities convertible into
or exercisable for Common Stock ("Common Stock Equivalents") shall be paid by
the Company, (ii) the Company shall subdivide its then outstanding shares of
Common Stock into a greater number of shares, (iii) the Company shall combine
its outstanding shares of Common Stock, by reclassification or otherwise, (iv)
any capital reorganization of the Common Stock of the Company (other than the
issuance of any shares of Common Stock in subdivision of outstanding shares of
Common Stock by reclassification or otherwise and other than a combination of
shares provided for in subparagraph (i) above; (v) any consolidation or mergers
of the Company with another corporation, or any sale, conveyance, lease or other
transfer by the Company of all or substantially all of its property to any other
corporation, which is effected in such a manner that the
4
<PAGE> 5
holders of Common Stock shall be entitled to receive cash, stock, securities or
assets with respect to or in exchange for Common Stock, or (vi) any dividend or
other distribution upon any class of stock of the Company payable in stock of
the Company of a different class, other securities of the Company or other
property of the Company (other than cash), then, as of such record date (or the
date of such distribution, split or subdivision if no record date is fixed), the
Conversion Price in effect immediately prior to such event shall (until adjusted
again pursuant hereto) be adjusted immediately after such event to a price
(calculated to the nearest full cent) determined by dividing (a) the number of
shares of Common Stock outstanding immediately prior to such event, multiplied
by the then existing Conversion Price, by (b) the total number of shares of
Common Stock outstanding immediately after such event, and the resulting
quotient shall be the adjusted Conversion Price per share. No adjustment of the
Conversion Price shall be made if the amount of such adjustment shall be less
than $.05 per share, but in such case any adjustment that would otherwise be
required then to be made shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustment or adjustments so carried forward, shall amount to not less than $.05
per share.
5.2 ADJUSTMENTS FOR REVERSE STOCK SPLITS. If the number of shares of
Common Stock outstanding at any time after the date hereof is decreased by a
combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Price in effect immediately
prior to such event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full cent)
determined by dividing (a) the number of shares of Common Stock outstanding
immediately prior to such event, multiplied by the then existing Conversion
Price, by (b) the total number of shares of Common Stock outstanding immediately
after such event, and the resulting quotient shall be the adjusted Conversion
Price per share. No adjustment of the Conversion Price shall be made if the
amount of such adjustment shall be less than $.05 per share, but in such case
any adjustment that would otherwise be required then to be made shall be carried
forward and shall be made at the time and together with the next subsequent
adjustment which, together with any adjustment or adjustments so carried
forward, shall amount to not less than $.05 per share.
5.3 NOTICES OF RECORD DATE. ETC. In the event of:
(a) Any taking by the Company of a record of the holders of
any class of securities of the Company for the purpose of determining
the holders thereof who are entitled to receive any dividend (other
than a cash dividend payable out of earned surplus at the same rate as
that or of the last such cash dividend theretofore paid) or other
distribution or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or
property, or to receive any other right; or
(b) Any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any transfer of all or substantially all of the assets of
the Company to any other person or any consolidation or merger
involving the Company; or
5
<PAGE> 6
(c) Any voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company will mail to the Holder at least twenty (20) days prior to the
earliest date specified therein, a notice specifying:
(i) The date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right; and
(ii) The date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up is expected to become effective and the
record date for determining stockholders entitled to vote thereon
and a description thereof.
5.4 RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common solely for the purpose of effecting the conversion of this Note such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of this Note; and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of the entire outstanding principal amount of this Note, in addition
to such other remedies as shall be available to the holder of this Note, the
Company will use its best efforts to take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares to such number of shares as shall be sufficient for such purposes.
6. MISCELLANEOUS.
6.1 WAIVER. Company hereby waives presentment, demand, protest and
notice of dishonor and protest.
6.2 NOTICES. Any notice required or permitted to be given hereunder
shall be given by the Company to the Holder or the Holder to the Company in
accordance with the Agreement.
6.3 SEVERABILITY. If any provision in this Note is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Note will remain in full force and effect. Any provision of this Note held
invalid or unenforceable only in part or degree will remain in full force and
effect to the extent not held invalid or unenforceable.
6.4 GOVERNING LAW. This Note will be governed by the laws of the State
of Ohio without regard to conflicts of laws principles.
6
<PAGE> 7
6.5 PARTIES IN INTEREST. This Note shall bind the Company and its
successors and assigns.
6.6 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Note are provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Note unless otherwise specified.
All words used in this Note will be construed to be of such gender or number as
the circumstances require. Unless otherwise expressly provided, the words
"hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific section or subsection hereof.
[The remainder of this page has been intentionally left blank]
7
<PAGE> 8
IN WITNESS WHEREOF, the Company has executed and delivered this Note as of the
date first stated above.
CAFE ODYSSEY, INC.
By:
---------------------------------------
Name and Title:
-----------------------------
8
<PAGE> 9
NOTICE OF CONVERSION
(To Be Signed Only Upon Conversion of Note)
TO CAFE ODYSSEY, INC.
The undersigned, the holder of the $2,000,000 Senior Convertible Note
of Cafe Odyssey, Inc. dated August 24, 1999, hereby surrenders such Note for
conversion into shares of Common Stock of CAFE ODYSSEY, INC., to the extent of
$ of the unpaid principal amount of such Note, and requests that the
certificates for such shares be issued in the name of, and delivered to,
whose address is .
Dated:
----------------------------------
FAIRVIEW PARTNERS, an Ohio
General Partnership
By:
--------------------------------------
Name and Title:
-------------------------
---------------------------------------
(Address)
9
<PAGE> 1
EXHIBIT 10.6
The Warrant and the securities issuable upon exercise of this Warrant (the
"Securities") have not been registered under the Securities Act of 1933 (the
"Securities Act") or under any state securities or Blue Sky laws ("Blue Sky
Laws"). No transfer, sale, assignment, pledge, hypothecation or other
disposition of this Warrant or the Securities or any interest therein may be
made except (a) pursuant to an effective registration statement under the
Securities Act and any applicable Blue Sky Laws or (b) if the Company has been
furnished with both an opinion of counsel for the holder, which opinion and
counsel shall be reasonably satisfactory to the Company, to the effect that no
registration is required because of the availability of an exemption from
registration under the Securities Act and applicable Blue Sky Laws, and
assurances that the transfer, sale, assignment, pledge, hypothecation or other
disposition will be made only in compliance with the conditions of any such
registration or exemption.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF CAFE ODYSSEY, INC.
WARRANT NO. FP-1 Bloomington, Minnesota
August 24, 1999
This certifies that, for value received, FAIRVIEW PARTNERS, or its
successors or assigns (the "Holder") is entitled to purchase from Cafe Odyssey,
Inc. (the "Company") Five Hundred Thousand (500,000) fully paid and
nonassessable shares (the "Shares") of the Company's Common Stock, $.01 par
value (the "Common Stock") at an exercise price of $2.50 per share (the
"Exercise Price"), subject to adjustment as herein provided. This Warrant may be
exercised by Holder at any time after the date hereof; provided that, Holder
shall in no event have the right to exercise this Warrant or any portion thereof
later than August 24, 2004.
This Warrant is subject to the following provisions, terms and
conditions:
1. Exercise of Warrant. The rights represented by this Warrant may be
exercised by the Holder, in whole or in part (but not as to a fractional share
of Common Stock), by the surrender of this Warrant (properly endorsed, if
required, at the Company's principal office in Bloomington, Minnesota, or such
other office or agency of the Company as the Company may designate by notice in
writing to the Holder at the address of such Holder appearing on the books of
the Company at any time within the period above named), and upon payment to it
by certified check, bank draft or cash of the purchase price for such Shares.
The Company agrees that the Shares so purchased shall have and are deemed to bez
issued to the Holder as the record owner of such Shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for such Shares as aforesaid. Certificates for the Shares of Common
Stock so purchased shall be delivered to the Holder within a reasonable time,
not exceeding ten (10) days, after the rights represented by this Warrant shall
have been so exercised, and, unless this Warrant has expired, a new Warrant
representing the number of Shares, if any, with respect to which this Warrant
shall not then have been exercised shall also be delivered to the Holder within
such time. The Company may require that any such new Warrant or any certificate
for Shares purchased upon the exercise hereof bear a legend substantially
similar to that which is contained on the face of this Warrant.
2. Transferability of this Warrant. This Warrant is issued upon the
following terms, to which Holder consents and agrees:
<PAGE> 2
a. Until this Warrant is transferred on the books of the Company,
the Company will treat the Holder of this Warrant registered as such on
the books of the Company as the absolute owner hereof for all purposes
without being affected by any notice to the contrary.
b. This Warrant may not be exercised, and this Warrant and the
Shares underlying this Warrant shall not be transferable, except in
compliance with all applicable state and federal securities laws,
regulations and orders, and with all other applicable laws, regulations
and orders.
c. The Warrant may not be transferred, and the Shares underlying
this Warrant may not be transferred, without the Holder obtaining an
opinion of counsel satisfactory in form and substance to the Company's
counsel stating that the proposed transaction will not result in a
prohibited transaction under the Securities Act of 1933, as amended
("Securities Act"), and applicable Blue Sky laws. By accepting this
Warrant, the Holder agrees to act in accordance with any conditions
reasonably imposed on such transfer by such opinion of counsel.
d. Neither this issuance of this Warrant nor the issuance of the
Shares underlying this Warrant have been registered under the
Securities Act.
3. Certain Covenants of the Company. The Company covenants and agrees
that all Shares which may be issued upon the exercise of the rights represented
by this Warrant, upon issuance and full payment for the Shares so purchased,
will be duly authorized and issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issue hereof, except those that
may be created by or imposed upon the Holder or its property, and without
limiting the generality of the foregoing, the Company covenants and agrees that
it will from time to time take all such actions as may be requisite to assure
that the par value per share of the Common Stock is at all times equal to or
less than the effective purchase price per share of the Common Stock issuable
pursuant to this Warrant. The Company further covenants and agrees that during
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized and reserved free of preemptive or
other rights for the exclusive purpose of issue upon exercise of the purchase
rights evidenced by this Warrant, a sufficient number of shares of its Common
Stock to provide for the exercise of the rights represented by this Warrant.
4. Adjustment of Exercise Price and Number of Shares. The Exercise
Price and number of Shares are subject to the following adjustments:
a. Adjustment of Exercise Price for Stock Dividend, Stock Split or
Stock Combination. In the event that (i) any dividends on any class of
stock of the Company payable in Common Stock or securities convertible
into or exercisable for Common Stock ("Common Stock Equivalents") shall
be paid by the Company, (ii) the Company shall subdivide its then
outstanding shares of Common Stock into a greater number of shares, or
(iii) the Company shall combine its outstanding shares of Common Stock,
by reclassification or otherwise, then, in any such event, the Exercise
Price in effect immediately prior to such event shall (until adjusted
again pursuant hereto) be adjusted immediately after such event to a
price (calculated to the nearest full cent) determined by dividing (a)
the number of shares of Common Stock outstanding immediately prior to
such event, multiplied by the then existing Exercise Price, by (b) the
total number of shares of Common Stock outstanding immediately after
such event, and the resulting quotient shall be the adjusted Exercise
Price per share. No adjustment of the Exercise Price
2
<PAGE> 3
shall be made if the amount of such adjustment shall be less than $.05
per share, but in such case any adjustment that would otherwise be
required then to be made shall be carried forward and shall be made at
the time and together with the next subsequent adjustment which,
together with any adjustment or adjustments so carried forward, shall
amount to not less than $.05 per share.
b. Adjustment of Number of Shares Purchasable on Exercise of
Warrants. Upon each adjustment of the Exercise Price pursuant to this
Section, the Holder shall thereafter (until another such adjustment) be
entitled to purchase at the adjusted Exercise Price the number of
shares, calculated to the nearest full share, obtained by multiplying
the number of shares specified in such Warrant (as adjusted as a result
of all adjustments in the Exercise Price in effect prior to such
adjustment) by the Exercise Price in effect prior to such adjustment
and dividing the product so obtained by the adjusted Exercise Price.
c. Notice as to Adjustment. Upon any adjustment of the Exercise
Price and any increase or decrease in the number of shares of Common
Stock purchasable upon the exercise of the Warrant, then, and in each
such case, the Company within thirty (30) days thereafter shall give
written notice thereof, by first class mail, postage prepaid, addressed
to each Holder as shown on the books of the Company, which notice shall
state the adjusted Exercise Price and the increased or decreased number
of shares purchasable upon the exercise of the Warrants, and shall set
forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
d. Effect of Reorganization, Reclassification, Merger, etc. If
at any time while this Warrant is outstanding there should be (i) any
capital reorganization of the capital stock of the Company (other than
the issuance of any shares of Common Stock in subdivision of
outstanding shares of Common Stock by reclassification or otherwise and
other than a combination of shares provided for in Section 4(a)
hereof), (ii) any consolidation or merger of the Company with another
corporation, or any sale, conveyance, lease or other transfer by the
Company of all or substantially all of its property to any other
corporation, which is effected in such a manner that the holders of
Common Stock shall be entitled to receive cash, stock, securities, or
assets with respect to or in exchange for Common Stock, or (iii) any
dividend or any other distribution upon any class of stock of the
Company payable in stock of the Company of a different class, other
securities of the Company, or other property of the Company (other than
cash), then, as a part of such transaction, lawful provision shall be
made so that Holder shall have the right thereafter to receive, upon
the exercise hereof, the number of shares of stock or other securities
or property of the Company, or of the successor corporation resulting
from such consolidation or merger, or of the corporation to which the
property of the Company has been sold, conveyed, leased or otherwise
transferred, as the case may be, which the Holder would have been
entitled to receive upon such capital reorganization, reclassification
of capital stock, consolidation, merger, sale, conveyance, lease or
other transfer, if this Warrant had been exercised immediately
prior to such capital reorganization, reclassification of capital
stock, consolidation, merger, sale, conveyance, lease or other
transfer. In any such case, appropriate adjustments (as determined by
the Board of Directors of the Company) shall be made in the application
of the provisions set forth in this Warrant (including the adjustment
of the Exercise Price and the number of Shares issuable upon the
exercise of the Warrant) to the end that the provisions set forth
herein shall thereafter be applicable, as near as reasonably may be, in
relation to any shares or other property thereafter deliverable upon
the exercise of the Warrant as if the Warrant had been exercised
immediately
3
<PAGE> 4
prior to such capital reorganization, reclassification of capital
stock, such consolidation, merger, sale, conveyance, lease or other
transfer and the Holder had carried out the terms of the exchange as
provided for by such capital reorganization, consolidation or merger.
The Company shall not effect any such capital reorganization,
consolidation, merger or transfer unless, upon or prior to the
consummation thereof, the successor corporation or the corporation to
which the property of the Company has been sold, conveyed, leased or
otherwise transferred shall assume by written instrument the obligation
to deliver to the Holder such shares of stock, securities, cash or
property as in accordance with the foregoing provisions such Holder
shall be entitled to purchase.
5. No Rights as Stockholders. This Warrant shall not entitle the
Holder as such to any voting rights or other rights as a stockholder of the
Company.
6. Registration Rights.
a. Piggyback Registration Rights. Provided that the Shares are not
then included in a current registration statement of the Company, if
the Company, at any time before the fifth anniversary of the issuance
of this Warrant, shall file a registration statement with the
Securities and Exchange Commission ("SEC") under the Securities Act of
1933, as amended, for the purpose of registering shares of Common Stock
for sale to the public, the Company shall give to the Holder at least
twenty (20) days advance written notice of its intention to file such
registration statement and Holder shall have the right to have included
in such registration statement such number of the Shares as it shall
designate to the Company within ten (10) days after the date of such
notice, provided that the number of Shares to be included in such
registration statement, when added to all the other shares to be
included therein, does not exceed the number of shares which the
Company and its underwriters, if any, reasonably fix for inclusion. If
the number of Shares to be included in such registration statement is
less than the total number of Shares which the Holder has requested to
be included, then the Holder and other holders of shares of Common
Stock or other securities of the Company entitled to include shares of
Common Stock in such registration shall participate in the underwriting
pro rata based upon the total number of shares of Common Stock
requested to be registered by all of such holders. The Holder shall
furnish the Company with such information as may be required in
connection with such registration statement and will cooperate to cause
such registration to become effective at the earliest practicable time.
If the shares to which such registration relates are to be sold in an
underwritten offering, the Holder, as a condition to the inclusion of
the shares in the registration statement, shall agree that its Shares
will be sold only as a part of such underwritten offering and at the
price and upon the terms fixed by the Company and its underwriters,
subject to the right of the Holder to withdraw the Shares therefrom.
b. Demand Registration Rights. On a one-time basis only, during
the three year period commencing two years after the date of this
Warrant, upon request by the Holder or Holders of a majority in
interest of this Warrant, and of any Shares, the Company will promptly
take all necessary steps to register or qualify, under the 1933 Act and
the securities laws of such states as the holders may reasonably
request, such number of Shares issued and to be issued upon conversion
of the Warrants and shares of common stock of the Company
4
<PAGE> 5
owned at such time by such holders pursuant to the conversion of that
certain $2,000,000 Senior Convertible Note issued as of the date of
this Warrant requested by such holders in their request to the Company.
The Company shall keep effective and maintain any registration,
qualification, notification, or approval specified in this section for
such period as may be reasonably necessary for such Holder or Holders
of this Warrant and/or such Shares to dispose thereof and from time to
time shall amend or supplement the prospectus used in connection
therewith to the extent necessary in order to comply with applicable
law.
7. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Minnesota.
8. Amendments and Waivers. The provisions of this Warrant may not be
amended, modified or supplemented, and waiver or consents to departures from the
provisions hereof may not be given, unless the Company agrees in writing and has
obtained the written consent of the Holder.
9. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to the Holder
shall be mailed, delivered, or telefaxed and confirmed to the Holder at his or
her address set forth on the records of the Company; or if sent to the Company
shall be mailed, delivered, or telefaxed and confirmed to Cafe Odyssey, Inc.,
4801 West 81st Street, Suite 112, Bloomington, MN 55437 or to such other address
as the Company or the Holder shall notify the other as provided in this Section.
[The remainder of this page has been intentionally left blank.]
5
<PAGE> 6
IN WITNESS WHEREOF, Cafe Odyssey, Inc. has caused this Warrant to be
signed by its duly authorized officer in the date set forth above.
CAFE ODYSSEY, INC.
By
----------------------------------
Its
---------------------------------
6
<PAGE> 7
SUBSCRIPTION FORM
To be signed only upon exercise of Warrant.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, of the shares of Common Stock of Cafe
Odyssey, Inc. (the "Shares") to which such Warrant relates and herewith makes
payment of $ therefor in cash, certified check or bank draft and
requests that a certificate evidencing the Shares be delivered to,
, the address for whom is set forth below the
signature of the undersigned:
Dated:
----------------------
---------------------------------------
(Signature)
---------------------------------------
---------------------------------------
(Address)
X X X
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrant.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the right to purchase
shares of Common Stock of Cafe Odyssey, Inc. to which the within Warrant relates
and appoints attorney, to transfer said right on the books
of with full power of substitution in the premises.
Dated:
----------------------
---------------------------------------
(Signature)
---------------------------------------
---------------------------------------
(Address)
7
<PAGE> 1
EXHIBIT 10.7
SUPPORT AGREEMENT
This SUPPORT AGREEMENT ("Agreement") is made as of the 24th day of
August, 1999, among Stephen D. King (hereinafter referred to as the
"undersigned"), Cafe Odyssey, Inc., a Minnesota corporation, ("Borrower"), and
Fairview Partners, an Ohio general partnership ("Fairview").
WITNESSETH:
WHEREAS, Fairview and Borrower have entered into that certain Loan
Agreement ("Loan Agreement") of even date herewith, pursuant to which
Fairview has extended a $2,000,000 loan (the "Loan") to or for the benefit of
Borrower; capitalized terms used but not otherwise defined herein shall have the
meanings set forth in the Loan Agreement; and
WHEREAS, the undersigned is a material shareholder of the Borrower and
is the duly elected, qualified and acting Chief Executive Officer of Borrower
and is fully familiar with all of the Borrower's business and financial affairs;
NOW, THEREFORE, to induce Fairview to make the Loan to or for the
account of Borrower under the Loan Agreement or any other Loan Document and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the undersigned, the Borrower and Fairview agree as
follows:
1. The undersigned agrees that in the event (i) of the occurrence of
an Event of Default under the Loan Agreement or any other Loan Document, and
(ii) Fairview has given notice of an acceleration of all of the Obligations
under and as defined in the Loan Agreement, the undersigned will, at Fairview's
option and upon Fairview's written request, and until this Agreement shall have
terminated as provided herein, for a period not to exceed twelve (12) months
after receiving such written request, use the undersigned's best efforts
(excluding the payment of money) to assist Fairview in obtaining possession,
ownership, management and control of the FF&E and the Leased Premises (as such
terms are defined in the Deed of Trust). Notwithstanding the foregoing, the
undersigned shall not be required to take any action or engage in any activity
that would breach or violate the undersigned's fiduciary obligations to the
Borrower or that would otherwise be in violation of any applicable laws.
2. Fairview shall have the right to terminate the undersigned's
engagement or other assistance described in Paragraph 1 above at any time on
three (3) business days' notice, for any cause or without cause. The
undersigned's obligations under Paragraph 1 of this Agreement shall further
terminate upon (i) the Borrower's payment of all then outstanding Obligations;
(ii) the death of the undersigned; or (iii) the mental or physical incapacity of
the undersigned as reasonably substantiated by a doctor acceptable to Fairview.
3. Fairview agrees to reimburse all reasonable costs and expenses
incurred by the undersigned in the performance of his obligations under this
Agreement.
4. In connection with such engagement, the undersigned shall not have
any authority to bind Fairview, except such specific authority as Fairview may
grant in writing.
5. In the event of the death, mental or physical incapacity of the
undersigned, Borrower shall be responsible for immediately obtaining a
replacement for such person and Borrower shall use its best efforts to cause
such replacement to execute a support agreement substantially in the form of
this Agreement.
6. This agreement shall be governed by and construed in accordance
with Minnesota substantive and procedural law and shall remain in full force and
effect so long as the obligations under the Loan Agreement are outstanding or
until otherwise agreed by an amendment hereto signed by Fairview and the
undersigned.
-1-
<PAGE> 2
7. The provisions of this Agreement are declared to be severable. If
any provision of this Agreement shall be held to be invalid, illegal or
unenforceable, such invalidity, illegality or unenforceability shall not affect
any other provisions of this Agreement.
[The remainder of this page has been intentionally left blank.]
-2-
<PAGE> 3
STEPHEN D. KING
---------------------------
Print Name of Undersigned
s/ Stephen D. King
---------------------------
Signature
Borrower:
CAFE ODYSSEY, INC.
BY: s/ Stephen D. King
------------------------
Its: C.E.O.
--------------------
Accepted:
FAIRVIEW PARTNERS
By s/ T.E. Johnson
---------------------------
Its Agent
------------------------
-3-
<PAGE> 1
EXHIBIT 10.8
FIRST DEED OF TRUST, SECURITY AGREEMENT AND
FIXTURE FINANCING STATEMENT
THIS INDENTURE is made and entered into this 24th day of August, 1999,
between CAFE ODYSSEY, INC., a Minnesota corporation ("Grantor"), whose address
is 4801 West 81st Street, Suite 112, Bloomington, Minnesota 55437, and the
PUBLIC TRUSTEE OF DENVER COUNTY, COLORADO ("Trustee").
WITNESSETH:
WHEREAS, FAIRVIEW PARTNERS, an Ohio general partnership ("Beneficiary")
whose address is 5807 McCray Court, Cincinnati, OH 45224, has agreed to make a
loan to the Grantor in the amount of $2,000,000.00 pursuant to the terms and
subject to the conditions set forth in that certain loan agreement of even date
herewith by and between the Beneficiary and the Grantor (the "Loan Agreement");
and
WHEREAS, Grantor has executed that certain Senior Convertible Note
("Note") of even date herewith for the principal sum of Two Million Dollars
($2,000,000.00), payable to the order of the Beneficiary with interest thereon
from the date hereof as provided in the Note and with the balance of principal
and interest due and payable in full on August 24, 2000; and
WHEREAS, Grantor is desirous of securing to Beneficiary, their
successors and assigns, the payment of the principal and interest becoming due
under the Note, together with any and all advances made, expenditures
authorized, costs and attorneys' fees incurred, or any other additional sums as
provided for herein or in the Note secured hereby or the Loan Agreement which
are expended or incurred by Beneficiary (all of which shall collectively
hereinafter sometimes be referred to as the "Secured Indebtedness"); and
WHEREAS, Grantor owns and operates a Cafe Odyssey theme restaurant
business at its leased premises (the "Leased Premises") situated in the retail
center commonly known as Denver Entertainment & Fashion Pavilions located at 500
16th Street, Denver, Colorado, as more particularly described in that certain
Shopping Center Lease executed by Denver Pavilions, L.P., as Landlord, and
Grantor (f/k/a Hotel Discovery, Inc.) dated May 12, 1998 (the "Lease"), which
Leased Premises constitutes a portion of the real property legally described on
Exhibit A attached hereto (the "Shopping Center Property");
NOW, THEREFORE, Grantor, in consideration of the premises and for the
purpose of securing payment of the Note and the other Secured Indebtedness, does
hereby grant, bargain, sell, and convey unto Trustee, in trust forever, that
property (collectively, the "Mortgaged Property"), whether now owned or
hereafter acquired by Grantor, situated in the County of Denver, State of
Colorado and more particularly described as follows:
All furniture, fixtures, equipment, inventory and other
articles of tangible personal property and intangible personal property
(including, but not limited to all permits and the non-exclusive right
to use the name "Cafe Odyssey," trademarks and service marks of
Grantor, but expressly excluding any rights with respect to the Lease)
of every kind and nature whatsoever, now or hereafter located in or
upon or arising from the Leased Premises (or the Grantor's business
operated thereon) or any part thereof and used or usable in
1
<PAGE> 2
connection with any present or future operation of the Leased Premises
and now owned or hereafter acquired by Grantor (collectively, the
"FF&E"); and
TOGETHER with all accounts receivable, income, profits and
cash flow (collectively, the "Cash Flow"), of each and every kind, now
or hereafter relating to or arising from the ownership and operation of
the FF&E and the improvement situated thereon; and
TOGETHER with all products and proceeds of the foregoing
(including, without limitation, insurance proceeds) and all other or
greater rights and interests of every nature in the foregoing property
and Grantor's rights to the possession or use thereof and income
therefrom, whether now owned or subsequently acquired by Grantor.
ALL OF THE FOREGOING property is sometimes hereinafter
collectively referred to as the "Mortgaged Property."
Notwithstanding the foregoing, if the granting of the foregoing liens
or any other interests to the Beneficiary under this Deed of Trust in and to any
Cash Flow of the Grantor shall be prohibited by or otherwise constitute a
violation of the Lease, then to the extent thereof, such Cash Flow which creates
a violation of the Lease by inclusion in this Deed of Trust shall be deemed
excluded therefrom and from the definition of "Mortgaged Property;" provided,
however, that no third party other than the landlord under the Lease shall have
the right to assert, enforce or benefit from this provision.
The filing of this Indenture shall constitute a fixture filing in the
office where it is filed and a carbon, photographic or other reproduction of
this document may also be filed as a financing statement:
Name and Address of Cafe Odyssey, Inc
Debtor and Record 4801 West 81st Street
Owner of Real Estate Suite 112
Bloomington, Minnesota 55437
Name and Address of Fairview Partners
Secured Party: 5807 McCray Court
Cincinnati, OH 45224
Description of the Types See above
(or items) of property
covered by this
financing statement:
Description of real estate See Exhibit A attached hereto
to which all or a part
of the collateral is
attached or upon which
it is located:
2
<PAGE> 3
Name and Address of record owner Denver Pavilions L.P.
of the above-referenced real estate: 511-16th Street
Suite 210
Denver, CO 80202
Some of the above described collateral is or is to become fixtures upon
or minerals and mineral rights located upon the real estate described above, and
this financing statement is to be filed for record in the public real estate
records.
IN TRUST NEVERTHELESS, and time being of the essence hereof, that upon
the occurrence of an Event of Default by Grantor as defined in the Loan
Agreement, Beneficiary or the legal holder of the Note may file notice with
Trustee declaring such default and their election and demand that the Mortgaged
Property be advertised for sale and sold in accordance with the statutes of the
State of Colorado; and thereupon, Trustee shall sell and dispose of the
Mortgaged Property (en masse or in separate parcels, as Trustee deems best), and
all the right, title, and interest of Grantor, its successors and assigns, in
and to the Mortgaged Property, at public auction at the front door of the
courthouse in the county of Colorado wherein the Mortgaged Property is situated,
or on said premises as may be specified in the notice of such sale, for the
highest and best price the same will bring in cash, after public notice having
been previously given of the time and place of such sale in accordance with the
statutes of the State of Colorado by advertisement weekly in some newspaper of
general circulation at that time published in said county in Colorado wherein
the Mortgaged Property is situated; copies of said notice shall be mailed in
accordance with the statutes of the State of Colorado governing sales of real
estate by Trustee, and Trustee shall make and give to the purchaser of the
Mortgaged Property at said sale a Certificate of Purchase, describing such
Mortgaged Property sold, the sum paid therefor, and the time when the purchaser
or other persons entitled thereto) shall be entitled to a deed therefor, unless
the same shall be redeemed as provided by law; and Trustee shall, upon demand by
the party holding the said Certificate of Purchase, the time for redemption
having expired, make, execute, and deliver to such party a deed to the Mortgaged
Property purchased in accordance with the statutes of the State of Colorado; and
Trustee shall, out of the proceeds of said sale, after first paying and
retaining all fees, charges, and costs incident to such foreclosure sale,
including, without limiting the generality of the foregoing, all attorneys' fees
and court costs and charges of every character, pay to Beneficiary or the legal
holder of the Note the principal, interest, and additional sums due on the Note,
including, without limiting the generality of the foregoing, late charges,
default interest charges, and fees due under the Note, according to the tenor
and effect thereof, and all monies advanced by Beneficiary or the legal holder
of the Note for insurance, taxes, assessments, repairs, maintenance, utilities,
maintenance fees, mechanics' liens or any other liens on the Mortgaged Property
of whatever nature, or for the payment of Grantor's debts, and any other Secured
Indebtedness with interest thereof from the date of the default at an interest
rate per annum equal to the default interest rate set forth in the Note,
rendering the overplus, if any, first unto any subsequent lienors in accordance
with the statutes of the State of Colorado, and then unto Grantor, which sale
and deed so made shall be a perpetual bar, both in law and equity, against
Grantor and all other persons claiming the Mortgaged Property, or any part
thereof, by, from, through, or under Grantor, or any of them.
It shall be specifically authorized herein that Beneficiary or the
legal holder of the Note or their representatives may bid at the foreclosure
sale held by Trustee or by Order of Court and any bid by Beneficiary or the
legal holder of the Note may take into consideration anticipated taxes,
assessments, insurance premiums, utilities, maintenance expense, management
costs, repairs title expense, and the then going real estate agent's commission,
all or any of which may be incurred during the period of redemption or in order
to subsequently sell or otherwise dispose of the Mortgaged Property after the
issuance of the
3
<PAGE> 4
Public Trustee's deed, and such amounts shall not be deemed an overplus
distributable to junior lienors or Grantor.
This Deed of Trust shall secure, as a part of the Secured Indebtedness,
without limiting the generality of the foregoing, any additional advances and
any expenditures made by Beneficiary or the legal holder of the Note (as
determined in their sole discretion) for all sums due under any lien prior to
this Deed of Trust, which sums Beneficiary and/or the legal holder of the Note
elect to pay in order to protect their security interest in the Mortgaged
Property, together with any taxes, special assessments, insurance premiums,
costs of completing the construction of any unfinished improvements, cost of
storage of materials for incorporation into the improvements and purchased with
funds disbursed under the Note, utility charges, delinquent payments fees,
attorneys' fees, and any other expenditures made or charges incurred by
Beneficiary and/or the legal holder of the Note, with interest thereon from the
date of such expenditure at an interest rate per annum equal to the default
interest rate set forth in the Note, all of which sums may be added to
Beneficiary's or the legal holder of the Note's bid at any foreclosure sale held
pursuant hereto. Grantor hereby assigns to Beneficiary and the legal holder of
the note any right Grantor may have by reason of any prior encumbrance on the
mortgaged property or by law or otherwise to cure any default under said prior
encumbrance, provided, however, neither Beneficiary nor the legal holder shall
have any obligation to do so, and further assigns to Beneficiary and the legal
holder of the Note any right Grantor may have by reason of contract or by law or
otherwise to make any or all of the payments described in this paragraph or
which Beneficiary or the legal holder of the Note is permitted to make on behalf
of Grantor by the terms of this Deed of Trust, provided, however, neither
Beneficiary nor the legal holder shall have any obligation to do so. Further, it
shall be lawful for the holder of the Certificate of Purchase covering the
Mortgaged Property to make any of the foregoing expenditures, and upon filing
receipts evidencing payment of the same with Trustee or the Sheriff or other
person lawfully conducting said sale and issuing said Certificate of Purchase,
such payments or expenditures shall thereupon become an additional claim or
indebtedness in favor of the holder of such Certificate of Purchase and against
the Mortgaged Property so sold. Before redemption can be made from such
foreclosure sale, the party redeeming shall be required to pay, in addition to
the amounts specified in said Certificate of Purchase, with interest thereon as
provided herein, the further and additional amounts represented by the foregoing
expenditures, together with interest thereon from the date of such expenditure
at an interest rate per annum equal to the default interest rate set forth in
the Note. In the event of default or foreclosure and if, in the opinion of
Beneficiary or the legal holder of the Note, it is necessary to complete
construction of any incomplete improvements or make repairs, alterations, or
renovations to the Mortgaged Property in order to preserve, protect, or prevent
waste, or change the manner of utilization or nature of occupancy, Beneficiary
shall have the right, but not the obligation, to proceed as it deems advisable
and Grantor does hereby appoint Beneficiary as its attorney-in-fact to do such
things as are hereby provided, and this power of attorney is coupled with an
interest in the Mortgaged Property and is irrevocable.
AND, Grantor represents, warrants, and covenants to Beneficiary, their
successors and assigns, that Grantor is now in a solvent condition; and no
bankruptcy or insolvency proceedings are pending or contemplated by Grantor, or
to Grantor's knowledge, threatened against Grantor. Grantor, for itself and for
its heirs, successors, and assigns, covenants and agrees to and with the Trustee
and Beneficiary that at the time of the ensealing and delivery of these
presents, it is well seized in fee simple title to the Mortgaged Property and
has good right, full power and lawful authority to grant, bargain, sell, convey,
transfer, assign and mortgage the Mortgaged Property. Grantor further warrants
that the Mortgaged Property is free and clear of all liens, security interest,
encumbrances and other title matters, including, without limitation, mechanic'
liens, materialmen's liens and liens for special assessments for work completed
or under construction on the date hereof except for those matters set forth in
Exhibit "B" attached hereto and incorporated herein by this
4
<PAGE> 5
reference ("Permitted Exceptions"); and that Grantor will warrant and forever
defend the title to the Mortgaged Property against the claims of all persons
whomsoever claiming or to claim the same or any part thereof, subject to the
Permitted Exceptions, and the Mortgaged Property in the quiet and peaceable
possession of said Trustee, its successors and assigns, against all and every
person or persons lawfully claiming or to claim the whole or any part thereof,
the Grantor shall and will warrant and forever will defend. The foregoing
warranty of title shall survive the foreclosure of this Deed of Trust and shall
inure to the benefit of and be enforceable by any person who may acquire title
to the Mortgaged Property pursuant to foreclosure.
GRANTOR further represents, warrants and covenants to Trustee and
Beneficiary, their successors and assigns, that Grantor is duly organized and
validly existing and in good standing under the laws of the State of Minnesota
with the power to own the Mortgaged Property and carry on its business as is now
being conducted; that the Note, this Deed of Trust and all other documents or
instruments securing payment of the Note constitute the legal, valid, and
binding obligations of Grantor, and any other party thereto and are enforceable
in accordance with their terms; that Grantor's execution and delivery of and
performance under, the Note, this Deed of Trust, and all other documents or
instruments securing payment of the Note have been duly authorized by all
requisite action under Grantor's governing documents and are not in
contravention of such documents, the law or any indenture agreement, or
undertaking to which Grantor or any general partner of Grantor is a party or by
which Grantor or any general partner of Grantor is bound.
AND upon payment in full of the Secured Indebtedness, the Beneficiary
shall cause the release of this Deed of Trust and all liens and security
interests created hereunder.
GENERAL COVENANTS
THE GRANTOR FURTHER COVENANTS AND AGREES AS FOLLOWS:
1. Existence. Grantor will continuously maintain its existence as a
Minnesota corporation as currently constituted.
2. Payment. Grantor will make prompt payment, as the same become due,
of all installments of principal, interest, and other charges becoming due under
the Note or this Deed of Trust.
3. Maintenance; Repairs. The Grantor shall keep and maintain the
Mortgaged Property in materially good condition, repair and operating condition
free from any waste or misuse, and will comply with all requirements of law,
municipal ordinances and regulations, restrictions and covenants affecting the
Mortgaged Property and its use, and will promptly repair or restore any
building, improvements or structures now or hereafter located on the Premises
which may become damaged or destroyed to their condition prior to any such
damage or destruction.
4. Payment of Taxes and Prior Encumbrances. During the continuance of
the Secured Indebtedness or any part thereof, the Grantor will pay or cause to
be paid all taxes and assessments levied on the Mortgaged Property when due
(including water and or water company stock assessments and periodic condominium
or owner association dues or assessments, if any) and all amounts due or to
become due on account of principal and interest on prior encumbrances, if any,
and upon demand will furnish Beneficiary receipted bills evidencing such
payment.
5
<PAGE> 6
Nothing in this Section 4 shall require the payment or discharge of any
obligations imposed upon the Grantor by this Section so long as the Grantor
shall diligently and in good faith and at its own expense contest the same or
the validity thereof by appropriate legal proceedings which shall operate to
prevent the collection thereof or other realization thereon and the sale or
forfeiture of the Mortgaged Property or any part thereof to satisfy the same;
provided, however, that during such contest the Grantor shall, at the reasonable
request of the Beneficiary, provide security satisfactory to the Beneficiary,
assuring the discharge of the Grantor's obligation under this Section and of any
additional charge, penalty or expense arising from or incurred as a result of
such contest; and provided further, however, that if at any time payment of any
obligation imposed upon the Grantor by this Section shall become necessary to
prevent the delivery of a tax deed conveying the Land or any portion thereof
because of nonpayment, then the Grantor shall pay the same in sufficient time to
prevent the delivery of such tax deed.
5. Insurance. Grantor shall keep the Mortgaged Property insured, in
such amounts and with such companies as Beneficiary shall approve in writing,
against loss by fire, lightning, windstorm, tornado, flood, boiler explosion or
malfunction, any other casualty, and public liability with loss of rents and
such other causes as may be required by Beneficiary with loss payable to the
Beneficiary hereunder as its interest may appear. Grantor will deliver to the
Beneficiary the policy or policies of insurance, with a standard mortgage clause
in favor of Beneficiary, as further security for the Secured Indebtedness. In
the event of loss or damage, the proceeds of all such insurance may be applied
to the payment of the Secured Indebtedness if an Event of Default has then
occurred and is continuing or otherwise shall be applied to the repair,
rebuilding, or replacement of the improvements damaged or destroyed. The said
proceeds of such insurance, if to be applied to repair, rebuilding or
replacement of improvements, shall be retained in the possession of the
Beneficiary until the said repair, rebuilding or replacement, in the sole
judgment of the Beneficiary, is complete.
6. Advances by Beneficiary for Taxes, Insurance or Prior Encumbrances.
In the case of the refusal or neglect of the Grantor to thus insure and deliver
the policies of insurance or to pay such taxes or assessments or amounts due or
to become due on prior encumbrances, if any, the Beneficiary may procure said
insurance or pay such taxes, assessments or amount due upon prior encumbrances,
if any, and all monies thus paid, with interest thereon at 18% per annum, shall
become so much additional indebtedness secured by this Deed of Trust, and shall
be paid out of the proceeds of sale of the Property aforesaid if not otherwise
paid by the Grantor. Such failure to so insure or to pay such amounts shall be a
violation or breach of the covenants of this Deed of Trust.
7. Possession of the Property-Appointment of Receiver. In the case of
any default or breach under the terms and covenants of the Secured Indebtedness
or this Deed of Trust, the Beneficiary shall at once become entitled to the
possession, use and enjoyment of the Mortgaged Property and to the issues and
profits therefrom, from the date of the accruing of such right and continuing
during the pendency of foreclosure proceedings including any period of
redemption. Such possession shall at once be delivered to the Beneficiary or the
holder of the Certificate of Purchase upon demand. Upon refusal, the delivery of
such possession may be enforced by the Beneficiary or the holder of the
Certificate of Purchase by an appropriate civil suit or proceeding. The
Beneficiary or the holder of the Certificate of Purchase shall be entitled to
appointment of a receiver for the Mortgaged Property to receive the rents,
issues and profits therefrom from and after any such default, including the time
covered by foreclosure proceedings and the period of redemption, as a matter of
right without regard to the solvency or insolvency of the Grantor or of the then
owner of said Property and without regard to the value of the Mortgaged
Property. Such receiver may be appointed by any court of competent jurisdiction
upon ex-parte application and without notice, notice being
6
<PAGE> 7
hereby expressly waived. All profits, income and revenue from said Mortgaged
Property shall be applied by such receiver to the payment first of the fees and
costs of such receivership proceeding and then to the Secured Indebtedness. The
balance remaining, if any, shall be disposed of in accordance with the orders
and directions of the court. The fees of any such receiver, attorneys' fees
incurred in appointment of the receiver and administration of the receivership
estate and all costs, including court costs, shall be the liability of the
Grantor, its successors and assigns, shall be due and payable upon demand and
shall become so much additional indebtedness secured hereby. Failure to pay said
fees and costs upon demand shall be in breach of the terms of this Deed of
Trust.
8. Alienation or Encumbrance of the Mortgaged Property. In the event
the Grantor shall sell, convey, alienate, encumber or dispose of the Mortgaged
Property described in this Deed of Trust, any part thereof or any interest
therein (including, but not limited to, outright conveyance; conveyance or
alienation of any interest in the Mortgaged Property or any part thereof; and
alienation of any interest in the Mortgaged Property by lease or rental
agreement with option to purchase) the entire Secured Indebtedness, irrespective
of the maturity dates expressed therein, shall, at the option of the Beneficiary
and without delay or notice, immediately become due and payable; provided,
however, that notwithstanding the foregoing, the Grantor may purchase additional
FF&E for use with respect to the Leased Premises and grant purchase money liens
thereon and may also sell and replace worn out and obsolete equipment in the
ordinary course of business. If the Beneficiary does not accelerate the
obligation, the Beneficiary, as a condition precedent to its waiver of its right
to accelerate the obligation, (a) may require the party to whom the Mortgaged
Property or any part thereof is alienated to assume this Deed of Trust and the
Secured Indebtedness; (b) may charge a transfer fee (which shall be in addition
to title insurance, abstracting, credit reports, surveys, attorneys' fees and
other charges pertaining to the transfer or sale); and/or (c) may increase the
interest rate on the Secured Indebtedness to a rate in excess of the rate set
forth in the Note secured by this Deed of Trust.
In the event the Grantor shall further encumber the Mortgaged Property
described in this Deed of Trust by creation of a lien or encumbrance junior to
the lien of this Deed of Trust without the prior written consent of the
Beneficiary hereunder or otherwise then as permitted herein, the entire Secured
Indebtedness secured by this Deed of Trust, irrespective of the maturity dates
expressed therein, shall at the option of the Beneficiary and without delay or
notice become immediately due and payable. Nothing in this paragraph shall,
however, limit the ability of the Beneficiary hereunder to withhold consent to
alienation of the Mortgaged Property as set forth in the paragraph immediately
above.
9. Security Agreement; Financing Statement; Personalty. Grantor and
Beneficiary agree that this deed of trust shall constitute a Security Agreement
within the meaning of the Colorado Uniform Commercial Code (hereinafter in this
paragraph referred to as the "Code") with respect to any Mortgaged Property
constituting personal property affixed to, located upon, arising from or used in
conjunction with the Leased Premises, which property may or may not be deemed to
form a part of the above-described real property or may or may not constitute a
"fixture" together with all replacements of such property, substitutions for
such property, additions to such property, and the proceeds thereof, any claims
resulting from damage to or destruction of any or all of such property,
including without limitation, claims under policies of insurance relating
thereto, and the proceeds of such claims (said property and the replacements,
substitutions and additions thereto and the proceeds thereof being hereinafter
collectively referred to as the "Collateral"). A security interest in and to the
Collateral is hereby granted to the Beneficiary and all of Grantor's right,
title and interest therein are hereby assigned to the Beneficiary, all to secure
payment of the Secured Indebtedness and to secure performance of the terms,
covenants and provisions hereof. In the event of a default under this deed of
trust, Beneficiary, pursuant to Section 4-9-501(4), C.R.S., shall have the
option
7
<PAGE> 8
of proceeding with respect to the Mortgaged Property as to both real and
personal property in accordance with its rights and remedies with respect to the
Mortgaged Property, in which event the default provisions of the Code shall not
apply. In such event, Beneficiary's bid at public trustee's or sheriff's sale
shall be deemed to be a bid for both the real and personal property. The
certificate of purchase, deed or certificate of redemption (whichever is or are
appropriate) issued in such sale shall also constitute a bill of sale for the
said personal property. Grantor shall not be entitled to redeem either the real
or personal property separate one from the other. The parties agree that, in the
event the Beneficiary shall elect to proceed with respect to the Collateral
separately from the real property described herein, five (5) days' notice of the
sale of the Collateral shall be reasonable notice. The reasonable expenses of
retaking, holding, preparing for sale, selling and the like incurred by the
Beneficiary shall include, but not be limited to, reasonable attorneys, fees and
legal expenses incurred by Beneficiary.
10. Time of the Essence. Time is of the essence of this Deed of Trust
and in the event the Grantor or the Grantor's successors or assigns fail to pay
Beneficiary any and all sums due according to the terms of the Note and this
Deed of Trust and fail to observe and perform any of the covenants and
agreements contained in said Note or this Deed of Trust, Beneficiary may, at its
option, declare said Note and the remaining indebtedness owing thereunder due
and payable, and any tax assessments, insurance premiums, or other advances made
or paid by said Beneficiary and not repaid by the Grantor shall become an
additional indebtedness hereunder and secured by this Deed of Trust.
11. Condemnation. If the Mortgaged Property or any part thereof shall
be condemned and taken under the power of eminent domain, all damages and awards
for the portion of the Mortgaged Property so taken shall be applied to the
repayment of the Secured Indebtedness if an Event of Default has occurred and is
continuing or otherwise shall be applied to the rebuilding, repair and
restoration of the lands and/or improvements damaged by said taking. Any balance
of such damages or awards remaining after application as above set forth shall
be paid over to the Grantor.
12. Inspection. Beneficiary shall have the right, at all reasonable
times, to inspect the Mortgaged Property.
13. Hazardous Substances. The Grantor warrants, covenants and
represents that to the best of its knowledge, after reasonable inquiry and
investigation, there does not exist in or under the Leased Premises any
pollutant, toxic or hazardous waste or substance, or any other material the
release or disposal of which is regulated by any law, regulation, ordinance or
code related to pollution or environmental contamination, other than those used
in the normal course of Grantor's business and disposed of properly and except
as disclosed on Schedule 1 attached hereto, and, that no part of the Leased
Premises was ever used for any industrial or manufacturing purpose or as a dump,
sanitary landfill, or gasoline service station, and that there exists on the
Leased Premises no storage tanks, electrical transformers or other equipment
containing PCBs or material amounts of asbestos. The Grantor represents that it
has received no summons, citations, directives, letters or other communications,
written or oral, from any federal, state or local agency or department
concerning the storing, releasing, pumping, pouring, emitting, emptying or
dumping or the presence of any pollutant, toxic or hazardous waste or substance
on the Leased Premises.
The Grantor covenants and agrees that it shall not, nor shall it permit
others to, use the Leased Premises for the business of generating, transporting,
storing, treating or disposing of any pollutant, toxic or hazardous waste or
substance, other than those used in the normal course of Grantor's business and
disposed of properly, nor shall it either take or fail to take any action which
may result in a release of any hazardous
8
<PAGE> 9
substance from or onto the Leased Premises. The Grantor further covenants and
agrees that it shall comply, and maintain the Leased Premises in compliance,
with any and all federal, state and local hazardous waste and other
environmental laws, rules, regulations and orders. In addition to all rights of
access granted the Beneficiary pursuant to this Indenture, during the term of
the loan contemplated hereby, the Beneficiary, or any authorized agent,
contractor or representative of the Beneficiary, is hereby irrevocably
authorized to enter upon the Leased Premises at any time and from time to time
for the purpose of performing inspections, taking soil borings or other borings,
or conducting any other tests or procedures on, in or about the Leased Premises
as the Beneficiary deems necessary or appropriate to determine whether any
hazardous or toxic substances, including without limitation asbestos or PBS, are
present on, under or about the Leased Premises.
The Grantor agrees to indemnify and to hold the Beneficiary harmless
from any and all claims, causes of action, damages, penalties, and costs
(including, but not limited to, attorneys' fees, consultants' fees and related
expenses) which may be asserted against, or incurred by, the Beneficiary
resulting from or due to release of any hazardous substance or waste on the
Leased Premises or arising out of any injury to human health or the environment
by reason of the condition of or past activity upon the Leased Premises. The
Grantor's duty to indemnify and hold harmless includes, but is not limited to,
proceedings or actions commenced by any person (including, but not limited to,
any federal, state, or local governmental agency or entity) before any court or
administrative agency. The Grantor further agrees that pursuant to its duty to
indemnify under this section, the Grantor shall indemnify the Beneficiary
against all expenses incurred by the Beneficiary as they become due and not
waiting for the ultimate outcome of the litigation or administrative proceeding.
The Grantor's obligations to indemnify and hold the Beneficiary harmless
hereunder shall survive repayment of the Secured Indebtedness and satisfaction
or foreclosure of this Deed of Trust.
14. Forbearance; Substitution of Collateral; Partial Releases. It is
understood and agreed that the Beneficiary may, at any time, without notice to
any person, grant to the Grantor any indulgences of forbearance, grant any
extension of time for payment of any indebtedness secured hereby, or allow any
change or changes, substitution or substitutions, of or for any of the Property
described in this Deed of Trust or any other collateral which may be held by
Beneficiary. Beneficiary's action in so doing shall in no way affect the
liability of the Grantor, any endorsers of the indebtedness secured hereby, or
any other person liable for the payment of said indebtedness, nor shall it in
any way affect or impair the lien of this Deed of Trust upon the remainder of
the Leased Premises and upon other collateral which is not changed or
substituted. It is also understood and agreed that the Beneficiary and the
Trustee may, at any time, without notice to any person, release any portion of
the Leased Premises described in this Deed of Trust or any other collateral
which may be held as security for the payment of the Secured Indebtedness either
with or without consideration for such release or releases. Such releases shall
not in any manner affect the liability of the Grantor, all endorsers and all
other persons who are or shall be liable for the payment of said indebtedness,
nor shall said releases in any manner affect, disturb or impair the validity and
priority of this Deed of Trust, for the full amount of the indebtedness
remaining unpaid together with all interest and advances which shall become
payable, upon the remainder of the Leased Premises and other collateral which is
unreleased. It is distinctly understood and agreed by the Grantor and the
Beneficiary that any release or releases may be made by the Beneficiary and the
Trustee without the consent or approval of any person or persons whomsoever.
15. Prosecution or Defense of Actions Affecting Obligation or Lien. If
Grantor fails to perform the covenants and agreements contained in this Deed of
Trust or if any action or proceeding is commenced which affects Beneficiary's
interest in the Mortgaged Property or the validity of the Note secured hereby
including, but not limited to, actions in eminent domain, code enforcement,
insolvency or arrangements or
9
<PAGE> 10
proceedings involving a bankrupt or a decedent's estate, or actions by parties
claiming an interest senior and paramount to the lien of this Deed of Trust, or
if it becomes necessary for Beneficiary to file an action to uphold or defend
the lien of this Deed of Trust, then Beneficiary shall have the right to employ
its own legal counsel to defend, pursue, compromise, negotiate, or prevent any
such litigation and all sums expended by Beneficiary including reasonable
attorneys' fees and other costs in connection with any such legal action shall
become so much additional indebtedness secured by this Deed of Trust. The
failure of the Grantor to pay to Beneficiary all such sums expended immediately
upon demand shall entitle the Beneficiary, at its option, to declare the entire
indebtedness to be at once due and payable.
16. Foreclosure and Attorneys' Fees. In the case of default in any of
the payments of principal or interest, according to the tenor and effect of the
Note secured hereby, or of a breach or violation of any of the covenants or
agreements contained herein, or incorporated herein, then the whole of said
principal sum secured hereby, all interest thereon, and the equity participation
amount, if any, set forth in the Note secured hereby, may at once or at any time
thereafter, at the option of the Beneficiary, become due and payable. If
foreclosure is performed by the Public Trustee, attorneys' fees of a reasonable
amount for services in the supervision of said foreclosure proceedings together
with all other costs of said foreclosure proceedings and as provided herein
shall be added by the Public Trustee to the indebtedness secured hereby to be
satisfied from the proceeds of the sale of said Mortgaged Property. If
foreclosure is made through the courts, reasonable attorneys' fees shall be
taxed by the court as a part of the costs of such foreclosure proceedings and
such fees and costs shall be treated as a part of the indebtedness secured
hereby to be satisfied from the proceeds of the sale of said Mortgaged Property.
17. Severability. In the event that any provision or clause of this
Deed of Trust conflicts with applicable law, such conflicts shall not affect or
invalidate other provisions of this Deed of Trust which can be given effect
without the conflicting provision. To this end, the provisions of this Deed of
Trust are declared to be severable.
18. Successors Bound; Terms; Captions. The covenants herein contained
shall bind, and the benefits and advantages hereof shall inure to the respective
heirs, executors, administrators, successors and assigns of the parties hereto.
Whenever used herein, the singular number shall include the plural and
conversely, and the use of any gender shall be applicable to all genders.
Whenever the term "Beneficiary" is used herein, it shall include the legal
holder or holders of the Note or of the indebtedness secured hereby or, where
applicable, the holder of a Certificate of Purchase. Assignment or negotiation
of the Note secured hereby shall also be an assignment of the Beneficiary's
interest under this Deed of Trust. In particular, without limitations, the word
"Note" or the words "Promissory Note" shall be singular or plural as the case
may be. The captions and headings of this Deed of Trust are for convenience only
and are not to be used to interpret or define the terms of this document.
19. Governing Law. Except for matters relating to the validity and/or
enforcement of the lien and security interest of the Beneficiary in the
Mortgaged Property, which shall be determined in accordance with the applicable
laws of the State in which the affected portion of the Mortgaged Property is
situated, with the laws of each such State applying to the Mortgaged Property in
such State, the internal laws (other than conflict laws) of the State of Ohio
shall govern the validity, interpretation, construction and performance of this
Deed of Trust and all other documents relating to the transactions contemplated
hereby.
[The remainder of this page has been intentionally left blank.]
10
<PAGE> 11
IN WITNESS WHEREOF, this Deed of Trust has been executed by the Grantor
as of the day and year first above written.
GRANTOR:
CAFE ODYSSEY, INC.
By: s/Stephen D. King
-----------------------------------------
Name and Title: C.E.O.
-----------------------------
STATE OF )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this 24th day of
August, 1999, by Stephen D. King the Chief Executive Officer of Cafe Odyssey,
Inc., a Minnesota corporation, for and on behalf of said corporation.
s/ Gail T. King
--------------------------------
Notary Public
<PAGE> 12
EXHIBIT A
(LEGAL DESCRIPTION OF SHOPPING CENTER PROPERTY)
<PAGE> 13
EXHIBIT B
TO
FIRST DEED OF TRUST, SECURITY AGREEMENT AND
FIXTURE FINANCING STATEMENT
PERMITTED EXCEPTIONS
1. Financing Statement filed with the Colorado Secretary of Sate
on February 2, 1999 as document number 19992006190 from Cafe
Odyssey as Debtor to Ecolab, Inc. as Secured Party.
2. Financing Statement filed with the Colorado Secretary of State
on March 19, 1999 as document number 19992015504 from Hotel
Discovery Inc. and D.B.A. Cafe Odyssey to Icelease Partners,
Ltd. as Secured Party and Bank One Kentucky, North America as
Assigned Party.
<PAGE> 1
EXHIBIT 10.9
AGREEMENT BETWEEN LANDLORD AND LENDER
THIS AGREEMENT BETWEEN LANDLORD AND LENDER (this "Agreement") is
executed as of this 24th day of August, 1999, by Denver Pavilions, L.P., having
its principal place of business at 500 16th Street, Denver, CO 80202, being the
fee owner and landlord (the "Landlord") of certain premises described on Exhibit
A (the "Premises"), which are now occupied, in whole or in part by Cafe Odyssey,
Inc., a Minnesota corporation, having its principal place of business at 4801
West 81st Street, Suite 112, Bloomington, Minnesota 55437 (the "Lessee"), with
regard to the following:
RECITALS:
First, the Lessee has requested FAIRVIEW PARTNERS, an Ohio general
partnership ("Lender") having an address at 5807 McCray Court, Cincinnati, Ohio
45224, to make a loan or loans to the Lessee (the "Loan") pursuant to the terms
of the Loan Agreement dated August 24, 1999, (the "Loan Agreement") in the
maximum aggregate principal amount not to exceed Two Million Dollars
($2,000,000) and other security or supporting documentation executed in
conjunction therewith (all such documents, as the same may be hereafter amended,
modified, supplemented or restated, are collectively referred to herein as the
"Loan Documents");
Second, the Lender is willing to extend the Loan only upon the security
of the various Loan Documents and as further security, this Agreement for the
purpose of specifying the Lender's rights with regard to the Premises; and
Third, the Lessee has entered into that certain Lease of the Premises
with the Landlord dated May 12, 1998, for a fifteen (15) year term which will
terminate on March 15, 2014 (the "Lease");
NOW THEREFORE, in consideration of the foregoing, the reliance of the
Lender in extending the Loan, the mutual covenants and agreements hereinafter
contained and for other valuable consideration as evidenced by the Loan
Agreement and other Loan Documents, the sufficiency of which is hereby
acknowledged, the undersigned parties, intending to be legally bound, first
incorporate the foregoing Recitals and the definitions contained within them and
the heading of this Agreement into the body hereof and otherwise agree as
follows:
1. The Lease is in full force and effect and constitutes the entire
agreement between the Landlord and Lessee regarding the Premises.
2. All rents reserved in the Lease have been paid to the extent they
are payable on or before the date hereof.
3. To the best of Landlord's knowledge, there is no existing default
under the provisions of the Lease or in the performance of any of the terms,
covenants, conditions or warranties thereof on the part of the Landlord or the
Lessee thereunder to be observed or performed.
<PAGE> 2
4. Landlord waives each and every right which Landlord now has, or may
hereafter have, under the laws of the State of Minnesota, or by virtue of the
Lease, any substitute lease or rental agreement with Lessee now or hereafter in
effect, to levy or distrain upon for payment in arrears, in advance or both, or
to claim or assert title to or a lien upon, all equipment, trade fixtures,
furniture and moveable personal property owned by the Lessee including, without
limitation, counters, restaurant kitchen equipment, shelving, showcases, mirrors
and other movable personal property (excluding however, mechanical, plumbing and
electrical systems, light fixtures, floor and wall coverings and immovable
partitions) and all additions, attachments and replacements thereof (the
"Equipment") which Equipment is now on the Premises, or may hereafter be
delivered or installed thereon, and is or may hereafter become subject to any
lien, mortgage, or security interest in favor of Lender pursuant to the Loan
Documents.
5. Landlord agrees that the Equipment shall remain personal property
notwithstanding the manner or mode of its attachment to the Premises, if any,
and shall not become fixtures.
6. Landlord recognizes and acknowledges that any claim or claims that
Lender has or may hereafter have against the Equipment by virtue of any Loan
Document is superior to any lien or claim of any nature which Landlord now has
or may hereafter have to the Equipment pursuant to the Lease, by statute,
agreement or otherwise.
7. In the event of default by Lessee in the payment of any indebtedness
to the Lender, or in the performance of any of the terms and conditions of any
Loan Document or any extension or renewals thereof, Lender may remove the
Equipment, or any part thereof, from the Premises in accordance with the terms
and conditions of the Loan Documents. Landlord consents to the entry upon the
Premises for the purpose of taking possession or removal of the Equipment upon
three (3) business days prior written notice. Landlord waives opportunity for
hearing in conjunction with any taking of possession or removal of the Equipment
by Lender. Any damage caused by removal shall be repaired by Lender at its sole
cost and expense. Landlord will make no claim whatsoever to the Equipment. In
the event of any such default by Lessee, Landlord agrees that, at Lender's
option, the Equipment may remain upon the Premises for a period of one (1) month
after the receipt by Lender of written notice from Landlord directing removal,
without incurring storage charges therefor.
8. Landlord will give to Lender simultaneously with service on Lessee a
duplicate of any and all notices or demands which are required by the L&we to be
given by Landlord to Lessee All such notices and demands shall be in writing,
either delivered in hand or sent by first class mail, postage prepaid or sent by
facsimile transmission addressed as follows:
Fairview Partners
5807 McCray Court
Cincinnati, Ohio 45224
2
<PAGE> 3
With a required copy to:
Keating, Muething & Klekamp, P.L.L.
1400 Provident Tower
One East Fourth Street
Cincinnati, Ohio 45202
Attention: Paul V. Muething
9. Upon a default under the Lease, Lender shall have the right and
privilege of performing on behalf of Lessee any of Lessee's covenants or of
curing any defaults by Lessee or of exercising any election, option or privilege
conferred upon Lessee by the terms of the Lease and Lessee shall be bound
thereby.
10. Landlord shall not terminate the Lease or Lessee's right of
possession for any default of Lessee if, (i) with respect to a monetary default,
within a period of ten (10) days after the expiration of the period of time (if
any) within which Lessee is expressly allowed in the Lease to cure such default,
and (ii) with respect to a nonmentary default within a period of thirty (30)
days after the expiration of the period of time (if any) within which Lessee is
expressly allowed in the Lease to cure such default, Landlord has provided
notice of such default to Lender and such default is cured or caused to be cured
by Lender or, (iii) if such nonrnonetary default is not reasonably susceptible
to being cured within such thirty (30) day period within a period of sixty (60)
days after the expiration of the period of time (if any) within which Lessee is
expressly allowed in the Lease to commence to eliminate the cause of such
default, Landlord has provided notice of such default to Lender and Lender
diligently commences to cure such default within the initial thirty (30) day
period, and continues to eliminate the cause of such default within the sixty
(60) day period on behalf of Lessee; provided, however, that there shall be no
obligation on the part of Lender to cure any default. Notwithstanding the
foregoing, nothing contained in this Agreement shall prevent or otherwise delay
the exercise of any rights of the Landlord under the Lease to ameliorate or
otherwise cure the existence of any safety, health, hazardous or other emergency
related situation or condition on the Premises in accordance with the terms
currently set forth in the Lease.
11. The Lender may, at any time, and from time to time, without the
consent of Landlord, without giving notice thereof to Landlord and without
affecting or impairing the validity or effectiveness of this instrument, (i)
extend additional credit or lend additional funds to the Lessee or any of them,
(ii) modify or amend the terms of payment of any indebtedness of Tenant (or any
of them) to the Lender, or (iii) amend or modify any of the terms, conditions,
covenants and agreements set forth in the Loan Agreement or in any security
agreement, mortgage or other loan document executed in connection therewith;
provided, however, that nothing contained in the Loan Documents or in this
Agreement shall be construed to create a security interest in favor of the
Lender in and to the Lease and the leasehold rights of the Lessee thereunder or
be deemed to constitute a consent of the Landlord to any such security interest.
3
<PAGE> 4
12. Landlord shall have no obligation or duty to determine whether or
not the Lessee has defaulted in its obligations to the Lender, and Landlord
shall be entitled to rely, fully and without recourse by Lessee, on receipt of
written notice from Lender that the Lessee has defaulted.
13. This Agreement shall be binding upon the Landlord, the heirs,
executors, personal representatives, successors and assigns of the Landlord, and
all transferees of the Premises and shall inure to the benefit of Agent and the
Lenders, and their respective successors and assigns.
14. This Agreement may be executed in any number of counterparts and by
different parties thereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which
counterparts taken together shall constitute but one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
4
<PAGE> 5
IN WITNESS WHEREOF, the undersigned parties have executed this
Agreement as of the date first set forth above.
Landlord: DENVER PAVILIONS, L.P.
By: s/ William E. Denton
----------------------------------------
Print Name: William E. Denton, Man.
--------------------------------
Title: for Denhill Denaw, General Partner
-------------------------------------
Signed and acknowledged in
the presence of:
Print name: Rebecca A. Struckhoff
-------------------------
Print name: Robert J. Murray
-------------------------
Lessee: Cafe Odyssey, Inc., a Minnesota corporation
By: s/ Stephen D. King
----------------------------------------
Print Name: Stephen D. King
--------------------------------
Title: C.E.O.
-------------------------------------
Signed and acknowledged in
the presence of:
Print name: Gail T. King
-------------------------
Print name: Roberta J. Hines
-------------------------
5
<PAGE> 6
AGREED AND ACCEPTED:
Lender: FAIRVIEW PARTNERS, an Ohio general
partnership
By: s/ T.E. Johnson
-------------------------------------
Print Name: Timothy E. Johnson
-----------------------------
Title: Agent
----------------------------------
Signed and acknowledged in
the presence of:
Print name: Noel A. Thesing
--------------------------
Print name: Carol J. Stemler
--------------------------
6
<PAGE> 7
State of Ohio )
)ss.
County of Hamilton )
On this 25th day of August, 1999, before me, a Notary Public in and for
said State, personally appeared Timothy E. Johnson, to me personally known, who,
being by me duly sworn, did say that he is an agent of Fairview Partners, an
Ohio general partnership, and that said instrument was signed on behalf of said
partnership by authority of its partners, and he acknowledged said partnership
by authority of its partners, and he acknowledged said instrument to be the free
act and deed of said partnership.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal on the day and year first above written, in the County and State aforesaid.
s/ Noel Ann Thesing
-----------------------------------
My Commission Expires:
NOTARIAL SEAL NOEL ANN THESING
STATE OF OHIO Notary Public, State of Ohio
My Commission Expires April 15, 2001
7
<PAGE> 8
State of Ohio )
)ss.
County of Hamilton )
BEFORE ME, the Subscriber, a Notary Public in and for said County and
State, personally appeared Stephen D. King, Chief Executive Officer of Cafe
Odyssey, Inc., a Minnesota corporation, the corporation which executed the
foregoing instrument, who acknowledged he did sign said instrument as such
officer on behalf of said corporation, and by authority of its Board of
Directors, and that the execution of said instrument is his free and voluntary
act and deed individually and as such officer, and the free and voluntary act
and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my name and affixed my
Notarial Seal this 24th day of August, 1999.
s/ Gail King
-------------------------------------------
Notary Public
NOTARIAL SEAL GAIL TONYA KING, Attorney at Law
STATE OF OHIO Notary Public, State of Ohio
My Commission Has No Expiration Date
Section 147.03
8
<PAGE> 9
State of California )
)ss.
County of Ventura )
On this 24th day of August, 1999, before me, a Notary Public in and for
said State, personally appeared William E. Denton, proved by satisfactory
evidence, who, being by me duly sworn, did say that he is the General Partner of
Denver Pavilions, a Colorado limited partnership, and that said instrument was
signed on behalf of said partnership, and he acknowledged said instrument to be
the free act and deed of said partnership.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal on the day and year first above written, in the County and State aforesaid.
s/ Rex J. Masterson
--------------------------------------
My Commission Expires: 6-16-01
NOTARIAL SEAL REX J. MASTERSON
COMM. #1140352
Notary Public - California
VENTURA COUNTY
My Comm. Exp. June 16, 2001
Prepared by and
Upon recordation return to:
Gail T. King, Esq.
Keating, Muething & Klekamp, P.L.L.
1400 Provident Tower
One East Fourth Street
Cincinnati, Ohio 45202
(513) 579-6584
9
<PAGE> 1
EXHIBIT 10.10
ESCROW AGREEMENT
This Escrow Agreement is made this 25th day of August, 1999, by and
between Fairview Partners, an Ohio general partnership, whose address is 5807
McCray Court, Cincinnati, Ohio 45224 ("Lender"), Cafe Odyssey, Inc., whose
address is 4801 West 81st Street, Suite 112, Bloomington, Minnesota 55437,
("Borrower") and Johnson Trust Company, an Ohio banking corporation, 3777 West
Fork Road, Cincinnati, Ohio 45247 ("Escrow Agent"), under the following
circumstances:
A. Borrower has entered into a Merger Agreement to acquire all of th
stock of popmail.com (the "Merger Agreement").
B. Lender has agreed to loan to Borrower Two Million and 00/100
Dollars ($2,000,000.00) (the "Loan") to acquire the stock of popmail.com
pursuant to the terms of the Loan Agreement (the "Loan Agreement").
C. Lender and Borrower desire to place in escrow the Loan proceeds on
the following terms and conditions.
NOW, THEREFORE, the parties agree as follows:
1. On the date hereof, Lender shall deposit with the Escrow Agent the
proceeds of the Loan ("Escrow Funds").
2. Escrow Agent hereby accepts the Escrow Funds and its obligations
set forth herein. Escrow Agent shall subsequently disburse the Escrow Funds and
any interest earned thereon to or for the benefit of Borrower upon receipt of a
joint instruction letter from Lender and Borrower that the following conditions
have been satisfied:
a) Borrower has notified Lender in writing that the transaction
contemplated by the Merger Agreement, shall be consummated as set forth in such
Agreement (the "Closing");
b) Contemporaneously with the disbursement of the Escrow
Funds, Borrower shall deliver an executed copy of the Merger Agreement and
evidence of the ownership of such stock;
c) Borrower has paid to Lender a One Percent (1%) fee on the
principal amount of the Loan and Lender's reasonable legal expenses in
connection with the Loan;
d) All of the liens (excluding true leases) encumbering the
collateral described in the Deed of Trust have been terminated or delivery of a
payoff letter from the applicable creditor in form and substance acceptable to
Lender providing for the satisfaction and termination of the conflicting lien in
question and the Loan proceeds are used to satisfy such conflicting lien and
upon the filing of financing statements and the Deed of Trust, Lender shall
obtain a first and best lien on the collateral described in the Deed of Trust;
<PAGE> 2
e) Lender has received an executed original of an Agreement
between Denver Pavilions, L.P. and Lender in form and substance, reasonably
satisfactory to Lender; and
f) Borrower has delivered a borrowing resolution, goodstanding
certificate and certified articles of incorporation as required by the Loan
Agreement.
3. If there is a failure to close under the Merger Agreement by
Purchaser on or before November 30, 1999 or the conditions set forth in Section
2 have not been satisfied at the time of the Closing, Lender shall give notice
to Escrow Agent that the Closing shall not occur at which time Escrow Agent
shall disburse the Escrow Funds to Lender to repay the Loan. In the event the
Escrow Funds are not sufficient to repay the Loan, Borrower shall forward any
additional amount to Lender to repay the Loan in full.
4. Except as otherwise set forth herein, Escrow Agent shall only
follow a written instruction concerning the Escrow Funds from Lender or any
instruction from a court of competent jurisdiction.
5. The Escrow Agent shall invest the Escrow Funds in an interest
bearing escrow account or in one (1) or more investments of the type and quality
agreed to in writing by Lender and Borrower. The Escrow Agent shall cause all
interest earned on or with respect to the Escrow Funds to be deposited with the
Escrow Funds. Such deposited interest shall be distributed to Borrower.
6. All notices and communications herein required to be given or made
to Lender or Borrower shall be deemed to be served three (3) days after deposit
in the United States mail, registered or certified mail, postage prepaid, return
receipt requested, addressed or by overnight courier, telegram or facsimile (to
the facsimile numbers set forth below their signature hereon) to Lender and
Borrower at their respective addresses as stated above or at such address or
facsimile number as each shall notify the other in writing. All notices and
communications to Escrow Agent shall be in writing and shall be deemed served
when received by Escrow Agent by mail, courier, telegram or facsimile (to the
facsimile number set below its signature hereon) at its address as stated above.
7. The duties and obligations of Escrow Agent shall be determined
solely by the express provisions of this Escrow Agreement, and Escrow Agent
shall not be liable except for the performance of the duties and obligations
specifically set forth herein. Escrow Agent's sole responsibility shall be to
the safekeeping, investment and disbursement of the Escrow Funds.
8. Notwithstanding the foregoing, the Escrow Agent shall not be
liable except for willful misconduct or gross negligence in the performance of
its duties and obligations as set forth herein. The Lender and Borrower each
agree to indemnify and hold the Escrow Agent harmless against any and all loss,
damage, liability or expense incurred arising out of or in connection with the
acceptance of its position as Escrow Agent and the administration of this Escrow
Agreement, including without limitation its reasonable out-of-pocket expenses
incurred in the performance of its duties hereunder
2
<PAGE> 3
and the costs and expenses of defending against any claim in connection with the
performance of its duties hereunder; provided, however, that the Escrow Agent
shall not be indemnified for any loss, damage, liability or expense caused by or
arising out of such Escrow Agent's gross negligence or willful misconduct.
9. Except as otherwise specified herein, the Escrow Agent agrees to
serve without compensation.
10. If any disagreement should arise among Lender and Borrower with
respect to this Escrow Agreement, or the Escrow Funds or if the Escrow Agent is
not in agreement as to the amount of any disbursement Lender or Borrower are
entitled to or any other matter that may arise hereunder, or if the Escrow Agent
cannot determine the proper action to be taken, the Escrow Agent shall have the
absolute right at its election to do either or both of the following: (i)
withhold or stop all performance under this Escrow Agreement until the Escrow
Agent is satisfied that such disagree ment has been resolved; or (ii) file a
suit in interpleader and obtain an order from a court of appropriate
jurisdiction requiring all persons involved to litigate in such court their
respective claims arising out of or in connection with the Escrow Agreement.
11. If Escrow Agent shall in good faith determine that it requires the
services of legal counsel to properly perform its duties hereunder, Lender and
Borrower shall be responsible for such fees.
12. This Escrow Agreement shall terminate upon the disbursement by
Escrow Agent of the Escrow Funds.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have hereto executed this Agreement as
of the day and year first above written.
WITNESS: FAIRVIEW PARTNERS
s/ Noel A. Thesing By: s/ T.E. Johnson
- ---------------------------- ----------------------
s/ Carol J. Stemler Its: Agent
- ---------------------------- ----------------------
Facsimile No.:513-661-3100
------------
Phone No.: 513-661-3160
---------------
CAFE ODYSSEY, INC.
s/ Gail T. King By: s/ Stephen D. King
- ---------------------------- -----------------------
s/ Roberta J. Hines Its: CEO
- ---------------------------- -----------------------
Facsimile No.:612-837-9916
------------
Phone No.: 612-837-9917
---------------
ESCROW AGENT
JOHNSON TRUST COMPANY
s/ Noel A. Thesing By: s/ Michael Barnes
--------------------------- -----------------------
Name:Michael Barnes
---------------------
s/ Carol J. Stemler Its: Vice President
- ---------------------------- ----------------------
Facsimile No.:513-661-3100
------------
Phone No.: 513-661-3160
----------------
4
<PAGE> 1
EXHIBIT 99.1
Contact:
Cafe Odyssey, Inc.
Stephen D. King, CEO
(612) 837-9917
For Immediate Release
CAFE ODYSSEY SECURES ADDITIONAL FINANCING AND COMPLETES MERGER WITH
POPMAIL.COM
Minneapolis, September 1, 1999. Cafe Odyssey, Inc. (Nasdaq: CODY) today
announced it has satisfied all the financing and other conditions contained in
the merger agreement and has completed the merger with PopMail.com, inc. The
shareholders of Cafe Odyssey previously approved the merger, along with a name
change to PopMail.com, inc., at a meeting held August 19, 1999. Required
financing for the merger was obtained through the private sale of $2.0 million
of long-term convertible debt, $2.2 million of convertible preferred shares,
exercise of warrants in the amount of $750,000, and a promissory note in the
amount of $550,000.
Stephen D. King, Chief Executive Officer, stated, "We now have a
presence as an Internet-based business. We plan to diligently build the
Company's Internet division with the objective of becoming a leading provider of
email services, permission-based marketing email, and branded web-based email in
the fields of radio, television, newspaper, and sports/entertainment. Our
immediate attention will now be focused on completing the acquisition of ROI
Interactive and furthering our negotiations with Internet Community Concepts and
other acquisition targets."
PopMail.com inc. is a leading provider of email service to radio
stations and their listeners. PopMail combines the power of the Internet with
the most successful affinity-building, mass-medium ever created: radio. By
providing radio stations with an attractive email service offered to listeners
free of charge, PopMail leverages radio's proven ability to engage audiences and
attract advertisers. PopMail holds exclusive relationships with more than 500
radio stations reaching 100 million listeners each week. The consumer web site
can be found at http://www.PopMail.com.
Dallas-based ROI Interactive offers a suite of permission marketing
email and ecommerce services to companies in the broadcast, media, sports, and
entertainment industries. The company was founded in June 1998 and has been
profitable since inception. With long-term agreements with over 75 television
stations and 25 professional sports teams, including TV stations in all of the
top 10 markets in the U.S., ENN is a leading permission marketing service in
television and professional sports. The contracts provide for fee-based income
and permission-based marketing through the exclusive use of ROI's
"ENEWSNOTIFIER(TM)" program. Stations and sports teams use this service to
notify their viewers and customers in advance of special events, shows, and
ticket availability. Many other services and functions are available through
this marketing technology.
The Cafe Odyssey restaurant division develops, owns, and operates
upscale, casual-themed restaurants. The concept is food-driven with a menu that
offers a broad selection of cuisine from around the world, including popular
"cultural fusion" items. The Company's web site can be found at
http://www.cafeodyssey.com.
The Private Securities Litigation Reform Act of 1995 provides a
"safe-harbor" for forward-looking statements. Certain information included in
this press release (as well as information included in oral statements or other
written statements made by or to be made by the Company) contains statements
that are forward-looking, such as statements relating to plans for future
expansion. Such forward-looking information involves important risks and
uncertainties that could significantly affect anticipated results in the future;
and accordingly, such results may differ from those expressed in any
forward-looking statement made by or on behalf of the Company. These risks and
uncertainties include, but are not limited to, completion of definitive purchase
agreements, shareholder approval, those relating to development and construction
activities, dependence on existing management, leverage and debt service,
domestic or global economic conditions, and changes in customer preferences and
attitudes. For more information, review the Company's filings with the
Securities and Exchange Commission.
