<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 26, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
RUBIO'S RESTAURANTS, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 5812 33-0100303
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
Incorporation or Organization) Number)
</TABLE>
1902 WRIGHT PLACE, SUITE 300
CARLSBAD, CALIFORNIA 92008
(760) 929-8226
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
MR. RALPH RUBIO
PRESIDENT AND CHIEF EXECUTIVE OFFICER
RUBIO'S RESTAURANTS, INC.
1902 WRIGHT PLACE, SUITE 300
CARLSBAD, CALIFORNIA 92008
(760) 929-8226
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
--------------------------
COPIES TO:
CRAIG S. ANDREWS, ESQ. JEFFREY D. SAPER, ESQ.
FAYE H. RUSSELL, ESQ. J. ROBERT SUFFOLETTA, ESQ.
BROBECK, PHLEGER & HARRISON LLP WILSON, SONSINI, GOODRICH & ROSATI,
550 WEST C STREET, SUITE 1300 P.C.
SAN DIEGO, CALIFORNIA 92101 650 PAGE MILL ROAD
(619) 234-1966 PALO ALTO, CALIFORNIA 94304
(650) 493-9300
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / __________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $0.001 per share 3,622,500 shares $10.00 $36,225,000 $10,071.00
</TABLE>
(1) Includes 472,500 shares of common stock that the underwriters have the
option to purchase to cover over-allotments, if any.
(2) Estimated pursuant to Rule 457(o) solely for the purpose of calculating the
amount of the registration fee.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(A), MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 26, 1999
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY CHANGE
WITHOUT NOTICE. WE AND THE SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES
UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION IS EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
3,150,000 Shares
[LOGO]
Rubio's Restaurants, Inc.
Common Stock
------------------
This is an initial public offering of shares of common stock of Rubio's
Restaurants, Inc. We are offering 2,250,000 shares in this offering and the
selling stockholders are selling an additional 900,000 shares. No public market
currently exists for our common stock. We anticipate that the initial public
offering price for our shares will be between $ and $ per share. After
the offering, the market price for our shares may be above or below this range.
We have applied to have our common stock listed on the Nasdaq National Market
under the symbol "RUBO."
Investing in our common stock involves a high degree of risk. Please see "Risk
Factors" starting on page 7 to read about certain risks that you should consider
carefully before buying shares of our common stock.
<TABLE>
<CAPTION>
Per Share Total
---------- ----------
<S> <C> <C>
Public offering price..................................................................... $ $
Underwriting discounts and commissions.................................................... $ $
Proceeds to us............................................................................ $ $
Proceeds to selling stockholders.......................................................... $ $
</TABLE>
The underwriters have an option to purchase 472,500 additional shares of common
stock from us and from the selling stockholders named under the caption
"Principal and Selling Stockholders" at the initial public offering price to
cover any over-allotments of shares. We will not receive any of the proceeds
from the sale of shares by the selling stockholders in the offering or to cover
over-allotments.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Thomas Weisel Partners LLC
Dain Rauscher Wessels
a division of Dain Rauscher Incorporated
U.S. Bancorp Piper Jaffray
Prospectus dated , 1999
<PAGE>
INSIDE FRONT COVER
Photograph of the exterior of one of our restaurants, along with a map of
the southwestern United States, showing markets in which we do business, as well
as the number of restaurants in each market. Restaurants that have signed leases
but are not yet open are highlighted in a different color.
FRONT GATEFOLD:
Photograph of a scene from the Baja peninsula, overlaid with pictures of our
restaurant interiors and exteriors, as well as pictures of a fish taco, shrimp
quesadilla and Baja Combo from our menu, with captions identifying the name of
each product.
2
<PAGE>
NOTES TO READERS OF THIS PROSPECTUS
- We were incorporated in California in May 1985, and reincorporated in
Delaware in September 1997. We have a wholly owned subsidiary, Rubio's
Restaurants of Nevada, Inc., which was incorporated in Nevada in 1997. Our
principal executive offices are located at 1902 Wright Place, Suite 300,
Carlsbad, California 92008. Our telephone number at that location is (760)
929-8226. INFORMATION CONTAINED ON OUR WEB SITE, WWW.RUBIOS.COM, DOES NOT
CONSTITUTE PART OF THIS PROSPECTUS.
- This offering is for 3,150,000 shares; however, the underwriters have a
30-day option to purchase up to 472,500 additional shares from us and from
the selling stockholders to cover over- allotments. Some of the
disclosures in this prospectus would be different if the underwriters
exercise the option. Unless we tell you otherwise, the information in this
prospectus assumes that the underwriters will not exercise the option.
- Unless we tell you otherwise, all information in this prospectus relating
to our capitalization reflects (1) the automatic conversion of each share
of our preferred stock into one share of our common stock upon the closing
of this offering, (2) an increase in our authorized common stock to
75,000,000 shares and an increase in our undesignated preferred stock to
5,000,000 shares effective immediately prior to the closing of this
offering and (3) the issuance of 37,677 shares of common stock upon the
exercise of warrants which terminate immediately upon this offering.
- Our registered trademarks and service marks include
Rubio's-Registered Trademark-, Baja Grill-Registered Trademark-, Home of
the Fish Taco-Registered Trademark-, HealthMex-Registered Trademark- and
Pesky-Registered Trademark-. Each other trademark, trade name or service
mark appearing in this prospectus belongs to its holder.
------------------------
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus may contain forward-looking statements based on our current
expectations, assumptions, estimates and projections about us and our industry.
These forward-looking statements involve risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, as more fully described in the "Risk
Factors" section and elsewhere in this prospectus. We are not obligated to
update or revise these forward-looking statements to reflect new events or
circumstances.
3
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SOME OF THE INFORMATION FOUND IN GREATER DETAIL
ELSEWHERE IN THIS PROSPECTUS. THIS SUMMARY IS NOT COMPLETE AND DOES NOT CONTAIN
ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER BEFORE INVESTING IN OUR COMMON
STOCK. WE URGE YOU TO READ THE ENTIRE PROSPECTUS CAREFULLY, ESPECIALLY THE RISKS
OF INVESTING IN OUR COMMON STOCK DISCUSSED UNDER "RISK FACTORS" AND THE
CONSOLIDATED FINANCIAL STATEMENTS BEFORE YOU DECIDE TO BUY OUR COMMON STOCK.
THE COMPANY
Rubio's Restaurants, Inc. owns and operates 64 high-quality, quick-service
Mexican restaurants under the name "Rubio's Baja Grill" located principally in
the southwest region of the United States. Our restaurants offer a distinctive
blend of high-quality, traditional Mexican cuisine combined with fresh seafood
fare indicative of the Baja region of Mexico. Our menu contains appealing
Mexican offerings with distinctive taste profiles prepared from fresh
ingredients. Our traditional menu items such as tacos and burritos feature
marinated, chargrilled meats and other high-quality ingredients which
distinguish them from typical Mexican fast food offerings. Adhering to an
overall emphasis on freshness, we prepare our menu items on-site and
made-to-order, with each location preparing its own chips, salsa and guacamole
fresh every day. Our menu also features our signature Baja-style fish taco, and
is accentuated by seasonal offerings including our lobster burrito and tequila
shrimp burrito. Most of our restaurants also offer a selection of Mexican and
domestic beers. Prices range from $1.79 for a Baja-style fish taco to $5.69 for
a Cabo Combo, which includes a shrimp burrito, fish taco, chips and beans. We
strive to provide superior service in a setting designed to promote a casual,
relaxed and fun experience for our guests. We design our Rubio's restaurant
decor to be reminiscent of an authentic Baja beach setting. Most of our
restaurants feature saltwater aquariums, surfboards and outdoor patio seating
beneath traditional palm-thatched umbrellas, or palapas.
We seek to differentiate our restaurants by providing high-quality Mexican
food in a quick-service environment. In this respect, we believe the "Rubio's
Baja Grill" concept is uniquely positioned between the quick-service and casual
dining segments of the restaurant industry. The critical components of our
concept include:
- providing distinctive, flavorful Mexican cuisine;
- creating a fun and relaxed atmosphere with authentic personality; and
- offering our guests excellent dining value.
We believe that our restaurant concept has broad national appeal and that,
as a result, we have significant opportunities to expand our operations and
generate attractive returns. Our business objective is to become the leading
high-quality, quick-service Mexican restaurant brand nationwide. Key to our
expansion plans and success at the restaurant-level is our business strategy to:
- create a distinctive concept and brand;
- achieve attractive restaurant-level economics;
- execute disciplined expansion; and
- ensure a high-quality guest experience.
We believe that our restaurants provide attractive restaurant-level
economics. In 1998, the 43 units open the entire year generated average sales of
$901,000, average operating income of $148,000, or 16.4% of sales, and average
cash flow of $183,000, or 20.3% of sales. Comparable restaurant sales increased
10.4% in 1998, following an 18.0% increase in 1997. We currently have 11 units
located outside California. Of these, three units have over 12 months of
operating results. These units generated average sales of $979,000 in 1998,
average operating income of $142,000, or 14.5% of sales, and average cash flow
of $193,000, or 19.7% of sales. We opened eight stores in 1996, 12 in 1997 and
16 in 1998. Our current expansion plan calls for us to open 28 restaurants in
1999, of which five have
4
<PAGE>
opened to date, and 36 restaurants in 2000. Five of the 23 units we plan to open
in the balance of 1999 are currently under construction, and an additional 16
have signed leases. We intend to continue to develop restaurants that will
require, on average, a total cash investment of approximately $380,000,
including pre-opening expenses of $20,000.
The Rubio's Baja Grill concept successfully evolved from the original
"Rubio's, Home of the Fish Taco" concept, which our co-founder Ralph Rubio first
developed following his college spring break trips to the Baja peninsula of
Mexico in the mid-1970s. Ralph opened the first Rubio's restaurant with his
father, Rafael, over 16 years ago in the Mission Bay area of San Diego.
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by us.............................. 2,250,000 shares
Common stock offered by selling stockholders............ 900,000 shares
Common stock outstanding after this offering............ 8,599,162 shares
Use of proceeds......................................... For development of new
restaurants, repayment of term
loan debt and working capital and
other general corporate purposes.
Please see "Use of Proceeds."
Risk Factors............................................ You should carefully consider the
risk factors immediately following
this summary.
Proposed Nasdaq National Market symbol.................. RUBO
</TABLE>
The information in the table above is as of December 27, 1998. In addition
to the 8,599,162 shares of common stock to be outstanding after this offering,
there are:
- 280,540 shares issuable upon the exercise of options outstanding at a
weighted average exercise price of $1.96 per share;
- 45,000 shares issuable upon the exercise of an outstanding warrant at an
exercise price of $7.20 per share; and
- 145,860 shares available for issuance under our stock option plans. Our
board authorized an additional 200,000 shares for issuance under our stock
option plans in March 1999. For a description of our stock option plans,
please see "Management--Benefit Plans."
5
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND SELECTED OPERATING DATA)
<TABLE>
<CAPTION>
FISCAL
-----------------------------------------------------
1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales..................................................... $ 11,837 $ 14,811 $ 19,523 $ 29,704 $ 44,699
Income from restaurant operations......................... 2,314 3,083 4,014 5,406 9,009
Operating income (loss)................................... (108) 9 85 (764) 596
Total other income (expense).............................. (146) 55 16 (137) 253
Income (loss) before income taxes......................... (254) 64 101 (901) 849
Net income (loss)......................................... (155) 16 72 (1,000) 915
Net income (loss) per share
Basic................................................... $ (0.15) $ (0.04) $ -- $ (1.08) $ 0.55
Diluted................................................. (0.15) (0.04) -- (1.08) 0.14
Shares used in computing net income (loss) per share
Basic................................................... 1,000 1,000 1,008 1,010 1,033
Diluted................................................. 1,000 1,000 1,026 1,010 6,418
Pro forma net income (loss) per share
Basic................................................... $ 0.14
Diluted................................................. 0.14
Shares used in computing pro forma net income (loss) per
share
Basic................................................... 6,334
Diluted................................................. 6,455
SELECTED OPERATING DATA:
Number of restaurants at end of period.................... 17 23 31 43 59
Comparable restaurant sales increase (decrease)........... 11.0% 5.3% (3.6)% 18.0% 10.4%
Average restaurant volume of units open for entire
period.................................................. $ 767,695 $ 786,489 $ 728,234 $ 825,741 $ 900,870
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 27, 1998
------------------------
ACTUAL AS ADJUSTED
--------- -------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................................................. $ 786 $ 19,155
Total assets........................................................................... 25,752 44,120
Long-term debt, including current portion.............................................. 1,856 --
Redeemable convertible preferred stock................................................. 17,695 --
Total stockholders' equity............................................................. 196 38,116
</TABLE>
- ------------------------------
Please see note 1 to the consolidated financial statements for an
explanation of the determination of the number of shares used in computing pro
forma net income (loss) per share.
Comparable restaurant sales are determined based on sales for stores which
were in operation for the previous 15 months.
The as adjusted balance sheet data listed above reflects the sale of
2,250,000 shares of common stock offered at an assumed initial public offering
price of $10.00 per share after deducting the estimated underwriting discount
and estimated offering expenses payable by us. Please see "Use of Proceeds" and
"Capitalization."
Fiscal years 1994 and 1995 ended on December 31. In 1996, we began using a
52- or 53-week fiscal year ending on the Sunday nearest December 31. Fiscal
years 1996, 1997 and 1998 each consisted of 52 weeks.
Net income (loss) for fiscal years 1994 through 1998 does not include the
effect of the accretion on the redeemable convertible preferred stock which
reduces net income (loss) attributable to common stockholders for those years.
6
<PAGE>
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CONSIDER CAREFULLY THE FOLLOWING INFORMATION ABOUT THESE RISKS, TOGETHER WITH
THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, BEFORE YOU DECIDE WHETHER TO
BUY OUR COMMON STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR
BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION WOULD LIKELY SUFFER. IN
ANY SUCH CASE, THE MARKET PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU MAY
LOSE ALL OR PART OF THE MONEY YOU PAID TO BUY OUR COMMON STOCK. ADDITIONAL RISKS
AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US OR THAT WE CURRENTLY DEEM IMMATERIAL
MAY ALSO IMPAIR OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
RISKS RELATED TO OUR BUSINESS
OUR PLANNED EXPANSION INTO NEW GEOGRAPHIC AREAS INVOLVES A NUMBER OF RISKS,
MANY OF WHICH ARE BEYOND OUR CONTROL.
Almost all of our current restaurants are located in the southwest region of
the United States. Our planned expansion into geographic areas outside the
Southwest involves a number of risks, including:
- uncertainties related to demographics, regional tastes and preferences;
- legal requirements, local custom, wages, costs and other economic
conditions;
- the need to develop relationships with local distributors and suppliers
for fresh produce, fresh tortillas and other ingredients;
- potential difficulties related to management of operations located in a
number of broadly dispersed locations; and
- lack of market awareness or acceptance of our restaurant concept.
We may not be successful in addressing these risks. We also may not be able
to open our planned new operations on a timely basis, or at all. Once the new
restaurants are opened, they may not be operated profitably. Delays in opening
or failure to open planned new restaurants could have a material adverse effect
on our business and results of operations. We currently anticipate that our new
restaurants will take several months to reach planned operating levels due to
inefficiencies typically associated with new restaurants, such as lack of market
awareness, acceptance of our restaurant concept and inability to hire sufficient
staff.
We may also use a franchise strategy in certain selected markets. We have
not used franchising in the past and may not be successful in identifying
franchisees that have the business abilities or access to financial resources
necessary to open our restaurants or to successfully develop or operate our
restaurants in their franchise areas in a manner consistent with our standards.
THE SUCCESS OF OUR RAPID EXPANSION STRATEGY WILL DEPEND ON A VARIETY OF
FACTORS, MANY OF WHICH ARE BEYOND OUR CONTROL.
We intend to continue to pursue a rapid expansion strategy. Since 1996, we
have opened 33 restaurants, 11 of which were opened outside of Southern
California. We intend to open an additional 28 restaurants in 1999, five of
which have been opened to date. Approximately 14 of those additional restaurants
are outside Southern California. We intend to open an additional 36 restaurants
in 2000. Our ability to successfully achieve our expansion strategy will depend
on a variety of factors, many of which are beyond our control. These factors
include:
- our ability to locate suitable restaurant sites or negotiate acceptable
lease terms;
- our ability to obtain required local, state and federal governmental
approvals and permits related to construction of the sites, food and
alcoholic beverages;
- our dependence on contractors to construct new restaurants in a timely
manner;
- our ability to attract, train and retain qualified and experienced
restaurant personnel and management;
7
<PAGE>
- our ability to operate our restaurants profitably;
- our need for additional capital and our ability to obtain such capital on
favorable terms or at all;
- our ability to respond effectively to the intense competition in the
quick-service restaurant industry; and
- general economic conditions.
OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY, WHICH COULD HAVE A
NEGATIVE EFFECT ON THE PRICE OF OUR COMMON STOCK.
Our quarterly and annual operating results and comparable unit sales may
fluctuate significantly as a result of a variety of factors, including:
- labor costs for our hourly and management personnel, including increases
in federal or state minimum wage requirements;
- fluctuations in food costs, particularly the cost of chicken, beef, fish,
cheese and produce;
- the timing of new restaurant openings and related expenses;
- the amount of sales contributed by new and existing restaurants;
- our ability to achieve and sustain profitability on a quarterly or annual
basis;
- consumer confidence;
- changes in consumer preferences;
- the level of competition from existing or new competitors in the
quick-service restaurant industry;
- factors associated with closing a unit, including payment of the base rent
for the balance of the lease term;
- impact of weather on revenues and costs of food; and
- general economic conditions.
Accordingly, results for any one quarter are not necessarily indicative of
results to be expected for any other quarter or for any year. We cannot assure
that comparable unit sales for any particular future period will not decrease.
Please see "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of factors which have historically
affected our operating results.
THE RESTAURANT INDUSTRY IS INTENSELY COMPETITIVE AND WE MAY NOT HAVE THE
RESOURCES TO COMPETE ADEQUATELY.
The restaurant industry is intensely competitive. There are many different
segments within the restaurant industry that are distinguished by types of
service, food types and price/value relationships. We position our restaurants
in the high-quality, quick-service Mexican food segment of the industry. In this
segment, our direct competitors include Baja Fresh, La Salsa and Chipotle. We
also compete indirectly with full-service Mexican restaurants including Chevy's,
Chi Chi's and El Torito, and fast food restaurants, particularly those focused
on Mexican food such as Taco Bell and Del Taco. Competition in our industry
segment is based primarily upon food quality, price, restaurant ambiance,
service and location. Although we believe we compete favorably with respect to
each of these factors, many of our direct and indirect competitors are
well-established national, regional or local chains and have substantially
greater financial, marketing, personnel and other resources than we do. We also
compete with many other retail establishments for site locations.
The performance of individual units may also be affected by factors such as
traffic patterns, demographic considerations and the type, number and proximity
of competing restaurants. In addition, factors such as inflation, increased
food, labor and employee benefit costs and the availability of experienced
management and hourly employees may also adversely affect the restaurant
industry in general and our units in particular.
8
<PAGE>
THE ABILITY TO ATTRACT AND RETAIN HIGHLY QUALIFIED PERSONNEL TO OPERATE AND
MANAGE OUR RESTAURANTS IS EXTREMELY IMPORTANT AND OUR FAILURE TO DO SO COULD
ADVERSELY AFFECT OUR BUSINESS.
Our success and the success of our individual restaurants depend upon our
ability to attract and retain highly motivated, well-qualified restaurant
operators and other management personnel, as well as a sufficient number of
qualified employees, including guest service and kitchen staff, to keep pace
with our expansion schedule. Qualified individuals needed to fill these
positions are in short supply in certain areas, and our inability to recruit and
retain such individuals may delay the planned openings of new restaurants or
result in higher employee turnover in existing restaurants, which could have a
material adverse effect on our business or results of operations. We also face
significant competition in the recruitment of qualified employees. In addition,
we are heavily dependent upon the services of our officers and key management
involved in restaurant operations, marketing, finance, purchasing, expansion,
human resources and administration. The loss of any of these individuals could
have a material adverse effect on our business and results of operations. We
currently do not have employment agreements with any of our employees.
WE MAY NOT BE ABLE TO MANAGE THE GROWTH WE EXPECT IN OUR OPERATIONS.
Our growth strategy will place a strain on our management, financial and
other resources. To manage our growth effectively, we must maintain the level of
quality and service at our existing and future restaurants. We must also
continue to enhance our operational, financial and management systems and
locate, hire, train and retain experienced and dedicated operating personnel,
particularly managers. We may not be able to effectively manage any one or more
of these or other aspects of our expansion. Failure to do so could have a
material adverse effect on our business and results of operations.
OUR FAILURE TO OBTAIN ADDITIONAL FINANCING WHEN NEEDED WOULD ADVERSELY
AFFECT OUR BUSINESS.
We believe that the proceeds from this offering, together with anticipated
cash flow from operations and funds anticipated to be available from a credit
facility, will be sufficient to satisfy our working capital requirements for at
least the next 12 months. We plan to incur substantial costs over the near-term
in connection with our expansion plans. We may need to seek additional financing
sooner than we anticipate as a result of the following factors:
- changes in our operating plans;
- acceleration of our expansion plans;
- lower than anticipated sales of our menu offerings;
- increased food and/or labor costs; and
- potential acquisitions.
Additional financing may not be available on acceptable terms, or at all. If
we fail to get additional financing as needed, our business and results of
operations would likely suffer. Please see "Management's Discussion and Analysis
of Financial Condition and Results of Operations" for a discussion of our
capital needs and current resources available.
9
<PAGE>
OUR GROWTH STRATEGY MAY BE HINDERED BY DEVELOPMENT COSTS AND DELAYS BEYOND
OUR CONTROL.
We depend on contractors and real estate developers to construct our
restaurants. Many factors may adversely affect the cost and time associated with
the development and construction of our restaurants, including:
- labor disputes;
- shortages of materials and skilled labor;
- adverse weather;
- unforeseen engineering problems;
- environmental problems;
- construction or zoning problems;
- local government regulations;
- modifications in design; and
- other unanticipated increases in costs.
Any of these factors could give rise to delays or cost overruns which may
prevent us from developing additional restaurants within our anticipated budgets
or time periods. Any such failure could have a material adverse effect on our
business and results of operations.
OUR RESTAURANTS ARE CONCENTRATED IN A CERTAIN GEOGRAPHIC REGION AND ARE
THEREFORE SUBJECT TO FLUCTUATIONS IN BUSINESS IN THAT REGION.
All but one of our existing restaurants are located in the southwest region
of the United States. Accordingly, we are susceptible to fluctuations in our
business caused by adverse economic or other conditions in this region,
including natural or other disasters. Our significant investment in, and
long-term commitment to, each of our units limits our ability to respond quickly
or effectively to changes in local competitive conditions or other changes that
could affect our operations. In addition, some of our competitors have many more
units than we do. Consequently, adverse economic or other conditions in a
region, a decline in the profitability of several existing units or the
introduction of several unsuccessful new units in a geographic area could have a
more significant effect on our results of operations than would be the case for
a company with a larger number of restaurants or with more geographically
dispersed restaurants.
OUR FAILURE OR INABILITY TO ENFORCE OUR TRADEMARKS AND TRADE NAMES COULD
ADVERSELY AFFECT OUR EFFORTS TO ESTABLISH BRAND EQUITY.
Our ability to successfully expand our concept will depend on our ability to
establish and maintain "brand equity" through the use of our trademarks, service
marks, trade dress and other proprietary intellectual property, including our
name and logos. We currently hold three trademarks and have seven service marks
relating to our brand. Some or all of the rights in our intellectual property
may not be enforceable, even if registered, against any prior users of similar
intellectual property or our competitors who seek to utilize similar
intellectual property in areas where we operate or intend to conduct operations.
If we fail to enforce any of our intellectual property rights, we may be unable
to capitalize on our efforts to establish brand equity. It is also possible that
we will encounter claims from prior users of similar intellectual property in
areas where we operate or intend to conduct operations. Claims from prior users
could limit our operations and possibly cause us to pay damages or licensing
fees to a prior user or registrant of similar intellectual property.
10
<PAGE>
OUR PROFITABILITY IS DEPENDENT ON OUR FOOD AND LABOR COSTS, OVER WHICH WE
HAVE NO CONTROL.
Our restaurant operating costs principally consist of food and labor costs.
Our profitability is dependent on our ability to anticipate and react to changes
in food and labor costs. Various factors beyond our control, including adverse
weather conditions and governmental regulation, may affect our food costs. We
may not be able to anticipate and react to changing food costs, whether through
our purchasing practices, menu composition or menu price adjustments in the
future. In the event that food or labor price increases cause us to increase our
menu prices, we face the risk that our guests will choose to patronize
lower-cost restaurants. Failure to react to changing food costs or to retain
guests if we are forced to raise menu prices could have a material adverse
effect on our business and results of operations.
A substantial number of our employees are subject to various minimum wage
requirements. Many of our employees work in restaurants located in California
and receive salaries equal to or slightly greater than the California minimum
wage. Effective March 1, 1998, the minimum wage in California increased to $5.75
per hour from $5.15. Similar proposals may come before legislators or voters in
other jurisdictions in which we operate or seek to operate. Such minimum wage
increases could have a material adverse effect on our business and results of
operations. Please see "Business--Operations" and "Business--Purchasing."
AS A RESTAURANT SERVICE PROVIDER, WE COULD BE SUBJECT TO ADVERSE PUBLICITY
OR CLAIMS FROM OUR GUESTS.
We may be the subject of complaints or litigation from guests alleging
food-related illness, injuries suffered on the premises or other food quality,
health or operational concerns. Adverse publicity resulting from such
allegations may materially adversely affect us and our restaurants, regardless
of whether such allegations are true or whether we are ultimately held liable.
We may also be the subject of complaints or allegations from current, former or
prospective employees from time to time. A lawsuit or claim could result in an
adverse decision against us that could materially adversely affect us or our
business.
WE MAY NOT BE ABLE TO OBTAIN AND MAINTAIN STATE AND LOCAL PERMITS NECESSARY
TO OPERATE OUR UNITS, WHICH WOULD ADVERSELY AFFECT OUR BUSINESS.
The failure to maintain necessary licenses, permits or approvals, including
food and alcoholic beverage licenses, or to comply with other government
regulations could have a material adverse effect on our business and results of
operations. In addition, difficulties or failures in obtaining required licenses
and approvals will result in delays in, or cancellation of, the opening of new
units. Restaurants are subject to licensing and regulation by state and local
health, environmental, labor relations, sanitation, building, zoning, safety,
fire and other departments. Our activities are also subject to the Federal
Americans With Disabilities Act and related regulations, which prohibit
discrimination on the basis of disability in public accommodations and
employment. We are also subject to state "dram-shop" laws and regulations, which
generally provide that a person injured by an intoxicated person may seek to
recover damages from an establishment that wrongfully served alcoholic beverages
to such person. Given the location of many of our restaurants, even if our
operation of those restaurants is in strict compliance with the requirements of
the Immigration and Naturalization Service, our employees may not all meet
federal citizenship or residency requirements, which could lead to disruptions
in our work force. The development and construction of additional units will
also be subject to compliance with applicable zoning, land use and environmental
regulations. There can be no assurance that we will be able to obtain necessary
variances or other approvals on a cost-effective and timely basis in order to
construct and develop units in the future. Changes in any or all of these laws
or regulations, such as government-imposed paid leaves of absence or mandated
health benefits, could have a material adverse effect on our business and
results of operations. For a more complete description of the governmental
regulations to which our business is subject, please see "Business--Government
Regulation."
11
<PAGE>
OUR CURRENT INSURANCE MAY NOT PROVIDE ADEQUATE LEVELS OF COVERAGE AGAINST
CLAIMS WHICH COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS.
There are certain types of losses we may incur that may be uninsurable or
that we believe are not economically insurable, such as losses due to
earthquakes and other natural disasters. In view of the location of many of our
existing and planned units, our operations are particularly susceptible to
damage and disruption caused by earthquakes. In the event of an earthquake or
other natural disaster affecting the geographic area of our operations, we could
suffer a loss of the capital invested in, as well as anticipated earnings from,
the damaged or destroyed properties. Further, we do not currently maintain any
insurance coverage for employee-related litigation or the effects of adverse
publicity. In addition, punitive damage awards are generally not covered by
insurance. We may also be subject to litigation which, regardless of the
outcome, could result in adverse publicity and damages. Such litigation, adverse
publicity or damages could have a material adverse effect on our business and
results of operations.
IF WE FAIL TO BE YEAR 2000 COMPLIANT, IT COULD HARM OUR BUSINESS.
We have not fully completed tests to assure that our systems will function
properly in the year 2000. Our restaurant information systems may need to be
upgraded in order to prevent system failure or miscalculation resulting from the
year 2000 that could disrupt our normal business activities.
We estimate that we have incurred costs of less than $25,000 to date in
connection with our year 2000 plan. We currently estimate the total costs of
completing our year 2000 plan, including costs incurred to date, to be less than
$50,000. Until our testing is complete and our vendors and providers are
contacted, we will not be able to completely evaluate whether our information
technology systems or non-information technology systems will need to be revised
or replaced. If our efforts to address year 2000 risks are not successful, or if
suppliers or other third parties with whom we conduct business do not
successfully address such risks, it could have a material adverse effect on our
business and results of operations. Please see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Year 2000 Readiness
Disclosure" for detailed information on our state of readiness, potential risks
and contingency plans regarding the year 2000 issue.
RISKS RELATED TO THIS OFFERING
THE LARGE NUMBER OF SHARES ELIGIBLE FOR PUBLIC SALE AFTER THIS OFFERING
COULD CAUSE OUR STOCK PRICE TO DECLINE.
The market price of our common stock could decline as a result of sales by
our existing stockholders of a large number of shares of our common stock in the
market after this offering or the perception that such sales could occur. These
sales also might make it more difficult for us to sell equity securities in the
future at a time and at a price that we deem appropriate. Please see "Shares
Eligible for Future Sale" for a description of sales that may occur in the
future.
THE LIQUIDITY OF OUR STOCK IS UNCERTAIN, SINCE IT HAS NEVER BEEN PUBLICLY
TRADED.
Prior to this offering, there has been no public market for our common
stock. We cannot predict the extent to which investor interest in us will lead
to the development of an active trading market or how liquid that market might
become. The market price of the common stock may decline below the initial
public offering price. The initial public offering price for the shares will be
determined by negotiations among us, the selling stockholders and the
representatives of the underwriters. This initial price may not be indicative of
prices that will prevail in the trading market. Please see "Underwriting."
12
<PAGE>
THE MARKET PRICE OF OUR STOCK MAY BE ADVERSELY AFFECTED BY MARKET
VOLATILITY.
The stock market has experienced extreme price and volume fluctuations. The
trading price of our common stock could be subject to wide fluctuations in
response to a number of factors, including:
- fluctuations in our quarterly or annual results of operations;
- changes in published earnings estimates by analysts and whether our
earnings meet or exceed such estimates;
- additions or departures of key personnel; and
- changes in overall stock market conditions, including the stock prices of
other restaurant companies.
In the past, companies that have experienced volatility in the market price
of their stock have been the object of securities class action litigation. If we
were subject to securities class action litigation, it could result in
substantial costs and a diversion of our management's attention and resources.
THE INTERESTS OF OUR CONTROLLING STOCKHOLDERS MAY CONFLICT WITH YOUR
INTERESTS.
We anticipate that the executive officers, directors and entities affiliated
with them will, in the aggregate, beneficially own approximately 53.8% of our
outstanding common stock following the completion of this offering. These
stockholders will be able to exercise control over all matters requiring
approval by our stockholders, including the election of directors and approval
of significant corporate transactions. This concentration of ownership may also
have the effect of delaying or preventing a change in control of our company.
Please see "Management" and "Principal and Selling Stockholders" for detailed
information on the beneficial ownership of the executive officers, directors and
affiliates.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD
MAKE A THIRD-PARTY ACQUISITION OF US DIFFICULT.
Certain provisions of our certificate of incorporation, our bylaws and
Delaware law could make it more difficult for a third party to acquire us, even
if doing so might be beneficial to our stockholders. Please see "Description of
Securities" for detailed information on these provisions.
YOU WILL SUFFER DILUTION IN THE VALUE OF YOUR SHARES.
Investors purchasing shares in this offering will incur immediate and
substantial dilution in net tangible book value per share. To the extent
outstanding options to purchase common stock are exercised, there will be
further dilution. Please see "Dilution" for detailed information on dilution
resulting from this offering.
13
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the 2,250,000 shares
offered by us will be approximately $20.2 million, assuming an initial public
offering price of $10.00 per share and after deducting the estimated
underwriting discounts and commissions and estimated offering expenses payable
by us. If our portion of the underwriters' over-allotment option is exercised in
full, we estimate that such net proceeds will be approximately $22.0 million.
We intend to use approximately $18.0 million of the net proceeds of this
offering for development of new restaurants, approximately $1.7 million for
repayment of term loan debt and the remainder for working capital and other
general corporate purposes. As of December 27, 1998, the balance outstanding
under our term loan agreement with BankBoston, N.A. was $1.9 million, which
bears interest at the lesser of (1) the London InterBank Offered Rate (LIBOR)
adjusted by the statutory reserve rate plus 4.0%, or (2) the greater of the
bank's base rate plus 1.5% or the Federal Funds Effective Rate plus 2.0%. Within
90 days after this offering, the term loan must be repaid in full, without
prepayment penalty. Pending any such use, as described above, we intend to
invest the net proceeds in interest-bearing instruments. We will not receive any
proceeds from the sale of shares by the selling stockholders. Please see
"Principal and Selling Stockholders."
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. Our
term loan agreement with BankBoston requires us to obtain the bank's consent
prior to making any distribution or declaring any dividends. We do not expect to
pay any cash dividends for the foreseeable future. We currently intend to retain
future earnings, if any, to finance the expansion of our business. Any future
determination to pay cash dividends will be at the discretion of our board of
directors and will be dependent on financial condition, operating results,
capital requirements and other factors that our board deems relevant.
14
<PAGE>
DILUTION
Our net tangible book value as of December 27, 1998, after giving effect to
the automatic conversion of all outstanding shares of preferred stock into
common stock, was $17,891,381, or $2.82 per share of common stock. Net tangible
book value per share is equal to the amount of our total tangible assets less
total liabilities, divided by the number of shares of common stock outstanding
as of December 27, 1998. Assuming the sale by us of the 2,250,000 shares offered
at an assumed initial public offering price of $10.00 per share and after
deducting underwriting discounts and estimated offering expenses, and the
application of the estimated net proceeds therefrom, our pro forma net tangible
book value as of December 27, 1998 would have been $38,116,381, or $4.43 per
share of common stock. This represents an immediate increase in net tangible
book value of $1.61 per share to existing stockholders and an immediate dilution
in pro forma net tangible book value of $5.57 per share to new investors. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share..................... $ 10.00
---------
Net tangible book value per share before this offering............ $ 2.82
---------
Increase attributable to new investors............................ 1.61
---------
Pro forma net tangible book value per share after this offering..... 4.43
---------
Pro forma dilution per share to new investors....................... $ 5.57
---------
---------
</TABLE>
The following table summarizes, on a pro forma basis as of December 27,
1998, after giving effect to the automatic conversion of all outstanding shares
of preferred stock into common stock and the issuance of shares of common stock
upon the exercise of certain warrants , the total number of shares of common
stock purchased from us, the total consideration paid to us and the average
price per share paid by existing stockholders and by new investors:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------------- -------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ----------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Existing stockholders........................... 6,349,162 73.8% $ 18,301,120 44.9% $ 2.88
New investors................................... 2,250,000 26.2 22,500,000 55.1 10.00
---------- ----- ------------- -----
Total......................................... 8,599,162 100.0% $ 40,801,120 100.0%
---------- ----- ------------- -----
---------- ----- ------------- -----
</TABLE>
The tables and calculations above assume no exercise of outstanding options
or warrants unless otherwise set forth in this prospectus. At December 27, 1998,
there were (1) 280,540 shares issuable upon the exercise of options outstanding
at a weighted average exercise price of $1.96 per share, (2) 45,000 shares
issuable upon the exercise of an outstanding warrant at an exercise price of
$7.20 per share and (3) 145,860 shares available for issuance under our stock
option plans. Our board authorized an additional 200,000 shares for issuance
under our stock option plans in March 1999. To the extent that these options or
warrants are exercised, there will be further dilution to new investors. Please
see "Management--Benefit Plans."
15
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 27, 1998 on
an actual basis and as adjusted to give effect to the receipt by us of the
estimated net proceeds from the sale of 2,250,000 shares offered at an assumed
initial public offering price of $10.00 per share. This information should be
read in conjunction with our consolidated financial statements and the notes
relating to such statements appearing elsewhere in this prospectus. This
information is based on the number of shares of common stock outstanding on
December 27, 1998. It excludes (1) 280,540 shares of common stock issuable upon
the exercise of options outstanding at a weighted average exercise price of
$1.96 per share (2) 45,000 shares of common stock issuable upon the exercise of
an outstanding warrant at an exercise price of $7.20 per share and (3) 145,860
shares available for issuance under our stock option plans. Our board authorized
an additional 200,000 shares for issuance under our stock plans in March 1999.
Please see "Management--Benefit Plans," "Description of Securities" and the more
detailed consolidated financial statements and notes appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
DECEMBER 27, 1998
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt, less current portion.................................... $ 1,114 $ --
--------- -----------
Redeemable convertible preferred stock:
$0.001 par value, 3,410,242 shares authorized on an actual basis;
3,338,138 shares issued and outstanding on an actual basis; and no
shares authorized, issued and outstanding on an as adjusted basis... 17,695 --
Stockholders' equity:
Convertible preferred stock, $0.001 par value, 1,973,395 shares
authorized on an actual basis; 1,924,747 shares issued and
outstanding on an actual basis; no shares authorized, issued and
outstanding on an as adjusted basis................................. 2 --
Preferred stock, $0.001 par value, no shares authorized, issued and
outstanding on an actual basis; 5,000,000 shares authorized on an as
adjusted basis; no shares issued and outstanding on an as adjusted
basis............................................................... -- --
Common stock, $0.001 par value, 7,298,725 shares authorized on an
actual basis; 1,048,600 shares issued and outstanding on an actual
basis; 75,000,000 shares authorized on as adjusted basis; 8,599,162
shares issued and outstanding on an as adjusted basis............... 1 9
Additional paid-in capital............................................ -- 37,914
Deferred compensation................................................. 23 23
Accumulated other comprehensive income................................ 44 44
Retained earnings..................................................... 126 126
--------- -----------
Total stockholders' equity.......................................... 196 38,116
--------- -----------
--------- -----------
Total capitalization................................................ $ 19,005 $ 38,116
--------- -----------
--------- -----------
</TABLE>
16
<PAGE>
SELECTED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the consolidated financial statements and the notes to such
statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this prospectus. The statement of
operations data for the years ended December 29, 1996, December 28, 1997 and
December 27, 1998, and the consolidated balance sheet data at December 28, 1997
and December 27, 1998 are derived from our consolidated financial statements
which have been audited by Deloitte & Touche LLP, independent auditors, and are
included elsewhere in this prospectus. The statement of operations data for the
two years ended December 31, 1994 and 1995, and the consolidated balance sheet
data at December 31, 1994 and 1995 and December 29, 1996 are derived from
audited consolidated financial statements not included in this prospectus.
Historical results are not necessarily indicative of the results to be expected
in the future.
<TABLE>
<CAPTION>
FISCAL
--------------------------------------------------------
1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE AND SELECTED OPERATING DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales....................................................... $ 11,837 $ 14,811 $ 19,523 $ 29,704 $ 44,699
Costs and expenses:
Cost of sales............................................. 2,988 3,587 5,068 8,659 13,074
Restaurant labor, occupancy and other..................... 6,535 8,141 10,441 15,639 22,616
--------- --------- --------- --------- ---------
Income from restaurant operations....................... 2,314 3,083 4,014 5,406 9,009
General and administrative expenses....................... 2,073 2,596 3,176 4,253 6,148
Depreciation and amortization............................. 349 478 735 1,259 1,946
Pre-opening expenses...................................... -- -- 18 271 319
Loss on asset impairment.................................. -- -- -- 387 --
--------- --------- --------- --------- ---------
Operating income (loss)..................................... (108) 9 85 (764) 596
Other income (expense):
Interest income (expense), net............................ (109) (58) 17 (75) 268
Miscellaneous income (expense)............................ 63 111 1 (6) (10)
Gain (loss) on disposal/sale of property.................. (100) 2 (2) (56) (5)
--------- --------- --------- --------- ---------
Total other income (expense)............................ (146) 55 16 (137) 253
--------- --------- --------- --------- ---------
Income (loss) before income taxes........................... (254) 64 101 (901) 849
Income tax benefit (expense)................................ 99 (48) (29) (99) 66
--------- --------- --------- --------- ---------
Net income (loss)........................................... $ (155) $ 16 $ 72 $ (1,000) $ 915
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income (loss) per share
Basic....................................................... $ (0.15) $ (0.04) $ -- $ (1.08) $ 0.55
Diluted..................................................... (0.15) (0.04) -- (1.08) 0.14
Shares used in computing net income (loss) per share
Basic....................................................... 1,000 1,000 1,008 1,010 1,033
Diluted..................................................... 1,000 1,000 1,026 1,010 6,418
Pro forma net income (loss) per share
Basic....................................................... $ 0.14
Diluted..................................................... 0.14
Shares used in computing pro forma net income (loss) per share
Basic....................................................... 6,334
Diluted..................................................... 6,455
SELECTED OPERATING DATA:
Number of restaurants at end of period........................ 17 23 31 43 59
Comparable restaurant sales increase (decrease)............... 11.0% 5.3% (3.6)% 18.0% 10.4%
Average restaurant volume of units open for entire period..... $ 767,695 $ 786,489 $ 728,234 $ 825,741 $ 900,870
BALANCE SHEET DATA:
Cash and cash equivalents..................................... $ 53 $ 1,004 $ 633 $ 866 $ 786
Total assets.................................................. 3,799 7,813 13,375 23,054 25,752
Long-term debt, including current portion..................... 1,285 1,923 2,483 2,562 1,856
Redeemable convertible preferred stock........................ -- 3,171 7,550 17,003 17,695
Total stockholders' equity (deficit).......................... 1,130 4,317 8,474 (141) 196
</TABLE>
- ------------------------------
Please see the consolidated financial statements and related notes appearing
elsewhere in this prospectus for the determination of number of shares used in
computing basic and diluted net income (loss) per share.
Comparable restaurant sales are determined based on sales for stores which
were in operation for the previous 15 months.
Net income (loss) for fiscal years 1994 through 1998 does not include the
effect of the accretion on the redeemable convertible preferred stock which
reduces net income (loss) attributable to common stockholders for those years.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SHOULD BE READ IN CONJUNCTION WITH OUR CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES APPEARING ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
We own and operate 64 high-quality, quick-service Mexican restaurants under
the name "Rubio's Baja Grill" with 26 restaurants in San Diego, 27 restaurants
in greater Los Angeles, six restaurants in Phoenix, four restaurants in Las
Vegas and one in Denver. In addition, we license our concept to other restaurant
operators in three non-traditional locations at Qualcomm Stadium, the San Diego
International Airport food court and the Del Mar Thoroughbred Club. We opened
our first restaurant in 1983, in the Mission Bay area of San Diego, and grew
steadily through 1994, at which time we operated 17 units. We increased the
number of restaurant openings in recent years, opening six in 1995, eight in
1996, 12 in 1997 and 16 in 1998. We intend to open 28 units in 1999, of which
five have opened to date, five are currently under construction and 16 have
signed leases. We intend to open 36 units in 2000.
As a result of our rapid expansion, period to period comparisons of our
financial results may not be meaningful. When a new unit opens, it will
typically incur higher than normal levels of food and labor costs until new
personnel gain experience. Hourly labor schedules are gradually adjusted
downward during the first three months of a restaurant opening, in order to
reach operating efficiencies similar to those at established units. In
calculating comparable restaurant sales, we introduce a restaurant into our
comparable restaurant base once it has been in operation for 15 calendar months.
Throughout our history, we have sought to evolve our concept and menu in
order to meet the changing needs and taste preferences of our guests. From
January through April 1997, we modified our restaurant concept to include a
broader menu selection and updated our restaurant decor. To reflect these
additions and improvements in our concept, we changed our name to "Rubio's Baja
Grill, Home of the Fish Taco" from "Rubio's, Home of the Fish Taco." During this
time we added 13 new items, deleted certain items, upgraded nine other menu
items and increased prices on selected items. We believe that this concept
modification was a critical factor influencing the comparable restaurant sales
increases of 18.0% reported in 1997 and 10.4% reported in 1998. Since the spring
of 1997, our sales and costs reflect these higher quality, higher cost and
higher priced menu items and may not be comparable to historical comparable
period results.
In conjunction with the modification of our restaurant concept, we increased
our marketing expenditures from $515,000 in 1996 to $1,123,000 in 1997. In
particular, we increased media spending and, we believe, used this medium more
efficiently to augment growth in our sales base. We believe our restaurant sales
are favorably impacted by radio and television advertising and that this
advertising helped to contribute to the comparable restaurant sales increases in
both 1997 and 1998.
Sales represents gross sales less sales taxes, coupons and other discounts.
Cost of sales is composed of food, beverage and paper supply expenses.
Components of restaurant labor, occupancy and other expenses include direct
hourly and management wages, bonuses, fringe benefit costs, rent and other
occupancy costs, advertising and promotion, operating supplies, utilities,
maintenance and repairs and other operating expenses.
General and administrative expenses include all corporate and administrative
functions that support existing operations and provide infrastructure to
facilitate our future growth. Components of this category include management,
supervisory and staff salaries and employee benefits, travel, information
systems, training, corporate rent and professional and consulting fees.
18
<PAGE>
Pre-opening costs, which are expensed as incurred, consist of the costs of
hiring and training the initial workforce, travel, the cost of food used in
training, the cost of the initial stocking of certain operating supplies and
other direct costs related to the opening.
We have leased all of our facilities, except for one building, in order to
minimize the cash investment associated with each unit. The majority of our
leases are for 10-year terms and include options to extend the terms. The
majority of our leases also include both fixed rate and percentage-of-sales rent
provisions.
We use a 52- or 53-week fiscal year ending on the Sunday nearest December
31. Fiscal years 1996, 1997 and 1998 each consisted of 52 weeks.
RESULTS OF OPERATIONS
Our operating results, expressed as a percentage of sales, were as follows:
<TABLE>
<CAPTION>
FISCAL
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Sales................................................................................. 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales....................................................................... 26.0 29.2 29.2
Restaurant labor, occupancy and other............................................... 53.5 52.6 50.6
--------- --------- ---------
Income from restaurant operations................................................. 20.5 18.2 20.2
General and administrative expenses................................................. 16.3 14.3 13.8
Depreciation and amortization....................................................... 3.8 4.2 4.4
Pre-opening expenses................................................................ 0.1 0.9 0.7
Loss on asset impairment............................................................ -- 1.3 --
--------- --------- ---------
Operating income (loss)............................................................... 0.3 (2.5) 1.3
Other income (expense):
Interest income (expense), net...................................................... 0.1 (0.3) 0.6
Miscellaneous income (expense)...................................................... -- -- --
Loss on disposal/sale of property................................................... -- (0.2) --
--------- --------- ---------
Total other income (expense)...................................................... 0.1 (0.5) 0.6
--------- --------- ---------
Income (loss) before income taxes..................................................... 0.4 (3.0) 1.9
Income tax (expense) benefit.......................................................... -- (0.3) 0.1
--------- --------- ---------
Net income (loss)..................................................................... 0.4% (3.3)% 2.0%
--------- --------- ---------
--------- --------- ---------
</TABLE>
YEAR ENDED DECEMBER 27, 1998 COMPARED TO YEAR ENDED DECEMBER 28, 1997
Results of operations reflect a full year of operations of 43 restaurants
and 31 restaurants for the years ended December 27, 1998 and December 28, 1997,
respectively. Results of operations also reflect partial year of operations of
16 restaurants and 12 restaurants for the years ended December 27, 1998 and
December 28, 1997, respectively.
SALES. Sales increased $15.0 million, or 50.5%, to $44.7 million in 1998
from $29.7 million in 1997. This increase was primarily due to the opening of 16
units in 1998 and the realization of a full year of operations for the 12 units
opened in 1997, along with a comparable unit sales increase of $2.8 million, or
10.4%. The comparable unit sales increase was driven both by the momentum
generated by the Baja Grill concept, as well as the success of the lobster
burrito promotion, which took place from June through September 1998. We also
introduced a price increase of approximately 1.5% at the beginning of 1998.
19
<PAGE>
COST OF SALES. Cost of sales as a percentage of sales remained constant at
29.2% in 1998 and 1997.
RESTAURANT LABOR, OCCUPANCY AND OTHER. Restaurant labor, occupancy and
other decreased as a percentage of sales to 50.6% in 1998 from 52.6% in 1997.
This reduction was due primarily to lower labor, minimum rent and other fixed
unit operating expenses as a percentage of sales as a result of the efficiencies
associated with increased unit sales. In addition, there were certain
non-recurring expenses incurred in 1997, related to the modification of our
restaurant concept. These one-time expenses included higher levels of hourly
employee training and operating supplies, resulting in higher 1997 total
expenses in this category.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased to $6.1 million in 1998 from $4.3 million in 1997. This increase was
primarily due to the hiring of additional corporate employees and field
management required to support and manage unit expansion and a senior management
bonus expense incurred in 1998 which was not incurred in 1997. General and
administrative expenses decreased as a percentage of sales to 13.8% in 1998 from
14.3% in 1997 primarily due to our expanding revenue base.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased to
$1.9 million in 1998 from $1.3 million in 1997. The $0.6 million increase was
primarily due to the additional depreciation on the 16 new units opened during
1998.
PRE-OPENING EXPENSES. Pre-opening expenses increased to $319,000 in 1998
from $271,000 in 1997 primarily due to the increase in unit openings in 1998 to
16 from 12 in the prior period.
LOSS ON ASSET IMPAIRMENT. There was no loss on asset impairment in 1998.
Loss on asset impairment of $387,000 in 1997 reflects the difference between the
carrying value and the estimated fair value of the assets of one restaurant
location.
INTEREST INCOME (EXPENSE), NET. Net interest income increased to $268,000
in 1998 from $75,000 in net interest expense in 1997. This increase was
primarily due to an increase in interest income from $188,000 in 1997 to
$521,000 in 1998 resulting from interest and other investment income associated
with the investment of the net proceeds from our $10.1 million preferred stock
private placement in November 1997.
INCOME TAXES. The provision (benefit) for income taxes in 1998 and 1997 is
based on the approximate tax rate applied to the respective year's pre-tax book
income (loss). The 7.8% tax benefit applied in 1998 is primarily a result of the
recognition of prior year net deferred tax assets previously valued, due to the
current year net income and the future realizability of such net deferred tax
assets.
YEAR ENDED DECEMBER 28, 1997 COMPARED TO YEAR ENDED DECEMBER 29, 1996
Results of operations reflect a full year of operations of 31 restaurants
and 23 restaurants for the years ended December 28, 1997 and December 29, 1996,
respectively. Results of operations also reflect partial year of operations of
12 restaurants and eight restaurants for the years ended December 28, 1997 and
December 29, 1996, respectively.
SALES. Sales increased $10.2 million, or 52.1%, to $29.7 million in 1997
from $19.5 million in 1996. This increase was primarily due to the opening of 12
units in 1997 and the realization of a full year of operations for the eight
units opened in 1996, along with a comparable unit sales increase of $3.2
million, or 18.0%. The comparable unit sales increase was driven primarily by
the modification to the Baja Grill concept and related promotional campaigns.
20
<PAGE>
COST OF SALES. Cost of sales as a percentage of sales increased to 29.2% in
1997 from 26.0% in 1996, primarily due to the modification to the Baja Grill
concept. The new menu items offered with the Baja Grill menu, particularly those
containing chargrilled chicken and steak, reflect higher food cost percentages
than items replaced or retained from the previous menu.
RESTAURANT LABOR, OCCUPANCY AND OTHER. Restaurant labor, occupancy and
other decreased as a percentage of sales to 52.6% in 1997 from 53.5% in 1996.
This reduction was due primarily to a decrease in unit minimum rent as a
percentage of sales resulting from our expanding revenue base.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased to $4.3 million in 1997 from $3.2 million in 1996, primarily due to
additions in senior management personnel, corporate employees and operations
supervisors hired in 1997 to assist in executing our growth strategy. General
and administrative expenses decreased as a percentage of sales to 14.3% in 1997
from 16.3% in 1996 due primarily to our expanding revenue base.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased to
$1.3 million in 1997 from $0.7 million in 1996. This $0.6 million increase was
primarily due to the additional depreciation on the 12 new units opened during
1997 as well as the depreciation of the fixed assets purchased in conjunction
with the modification to the Baja Grill concept.
PRE-OPENING EXPENSES. Pre-opening expenses increased to $271,000 in 1997
from $18,000 in 1996 primarily due to the increase in unit openings in 1997 to
12 from eight in the prior period. Prior to the third quarter of 1996, we did
not report pre-opening expenses separately from recurring restaurant expense
categories on our income statement.
LOSS ON ASSET IMPAIRMENT. Loss on asset impairment of $387,000 in 1997
reflects the difference between the carrying value and the estimated fair value
of the assets of one restaurant location.
GAIN (LOSS) ON DISPOSAL/SALE OF PROPERTY. The $56,000 loss on the sale of
property in 1997 resulted primarily from the disposal of certain assets in
conjunction with the modification of units to the Baja Grill concept.
INTEREST INCOME (EXPENSE), NET. Net interest expense increased to $75,000
in 1997 from $17,000 in net interest income in 1996. This decrease was primarily
due to less cash invested in short-term instruments. This net reduction in
interest was offset by an increase in borrowing related to the new restaurant
financings.
INCOME TAXES. The provision for income taxes in 1997 and 1996 is based on
the approximate tax rate applied to each year's pretax book income. The 1997
provision for income tax was adjusted by a valuation allowance equal to the net
deferred tax asset due to uncertainty as to its realization.
21
<PAGE>
QUARTERLY RESULTS
The following tables set forth certain unaudited quarterly information for
each quarter of fiscal years 1997 and 1998. This quarterly information has been
prepared on a basis consistent with the audited consolidated financial
statements and, we believe, includes all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the information
shown. Our quarterly operating results may fluctuate significantly as a result
of a variety of factors and operating results for any quarter are not
necessarily indicative of results for a full fiscal year.
<TABLE>
<CAPTION>
FISCAL 1997
--------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT NUMBER OF RESTAURANTS)
<S> <C> <C> <C> <C>
Sales.......................................... $ 6,143 $ 7,449 $ 8,162 $ 7,950
Costs and expenses:
Cost of sales................................ 1,761 2,208 2,341 2,349
Restaurant labor, occupancy and other........ 3,361 3,906 4,032 4,340
----------- ----------- ----------- -----------
Income from restaurant operations.......... 1,021 1,335 1,789 1,261
General and administrative expenses.......... 1,003 1,149 1,036 1,065
Depreciation and amortization................ 235 312 332 380
Pre-opening expenses......................... 26 40 47 158
Loss on asset impairment..................... -- -- -- 387
----------- ----------- ----------- -----------
Operating income (loss).................... (243) (166) 374 (729)
Other income (expense):
Interest income (expense).................... (1) (31) (42) (1)
Miscellaneous income (expense)............... -- -- (3) (3)
Gain (loss) on disposal/sale of property..... (45) (11) 1 (1)
----------- ----------- ----------- -----------
Total other income (expense)................. (46) (42) (44) (5)
----------- ----------- ----------- -----------
Income (loss) before income taxes.............. (289) (208) 330 (734)
Income tax benefit (expense)................... (31) (23) 36 (81)
----------- ----------- ----------- -----------
Net income (loss)............................ $ (320) $ (231) $ 366 $ (815)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Number of restaurants at end of period......... 33 35 38 43
<CAPTION>
FISCAL 1998
-----------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales.......................................... $ 9,217 $ 10,907 $ 12,935 $ 11,640
Costs and expenses:
Cost of sales................................ 2,672 3,180 3,832 3,390
Restaurant labor, occupancy and other........ 4,895 5,433 6,217 6,071
------ ----------- ----------- -----------
Income from restaurant operations.......... 1,650 2,294 2,886 2,179
General and administrative expenses.......... 1,428 1,488 1,674 1,558
Depreciation and amortization................ 426 482 495 543
Pre-opening expenses......................... 51 42 80 146
Loss on asset impairment..................... -- -- -- --
------ ----------- ----------- -----------
Operating income (loss).................... (255) 282 637 (68)
Other income (expense):
Interest income (expense).................... 80 51 54 83
Miscellaneous income (expense)............... 2 (9) (1) (2)
Gain (loss) on disposal/sale of property..... 6 (2) (2) (7)
------ ----------- ----------- -----------
Total other income (expense)................. 88 40 51 74
------ ----------- ----------- -----------
Income (loss) before income taxes.............. (167) 322 688 6
Income tax benefit (expense)................... (13) 25 54 --
------ ----------- ----------- -----------
Net income (loss)............................ $ (180) $ 347 $ 742 $ 6
------ ----------- ----------- -----------
------ ----------- ----------- -----------
Number of restaurants at end of period......... 46 49 52 59
</TABLE>
Our operating results for the eight fiscal quarters expressed as a
percentage of sales were as follows:
<TABLE>
<CAPTION>
FISCAL 1997
--------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales.......................................... 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales................................ 28.7 29.6 28.7 29.5
Restaurant labor, occupancy and other........ 54.7 52.4 49.4 54.6
----- ----- ----- -----
Income from restaurant operations.......... 16.6 18.0 21.9 15.9
General and administrative expenses.......... 16.3 15.4 12.7 13.4
Depreciation and amortization................ 3.8 4.2 4.1 4.8
Pre-opening expenses......................... 0.4 0.5 0.6 2.0
Loss on asset impairment..................... -- -- -- 4.9
----- ----- ----- -----
Operating income (loss)...................... (3.9) (2.1) 4.5 (9.2)
Other income (expense):
Interest income (expense).................... -- (0.4) (0.5) --
Miscellaneous income (expense)............... -- -- -- --
Gain (loss) on disposal/sale of property..... (0.7) (0.1) -- --
----- ----- ----- -----
Total other income (expense)................. (0.7) (0.5) (0.5) --
----- ----- ----- -----
Income (loss) before income taxes.............. (4.6) (2.6) 4.0 (9.2)
Income tax benefit (expense)................... (0.5) (0.3) 0.4 (1.0)
----- ----- ----- -----
Net income (loss).............................. (5.1)% (2.9 )% 4.4% (10.2)%
----- ----- ----- -----
----- ----- ----- -----
<CAPTION>
FISCAL 1998
-----------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales.......................................... 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales................................ 29.0 29.2 29.6 29.1
Restaurant labor, occupancy and other........ 53.1 49.8 48.1 52.2
----- ----- ----- -----
Income from restaurant operations.......... 17.9 21.0 22.3 18.7
General and administrative expenses.......... 15.5 13.6 12.9 13.4
Depreciation and amortization................ 4.6 4.4 3.8 4.7
Pre-opening expenses......................... 0.6 0.4 0.6 1.3
Loss on asset impairment..................... -- -- -- --
----- ----- ----- -----
Operating income (loss)...................... (2.8) 2.6 5.0 (0.7)
Other income (expense):
Interest income (expense).................... 0.9 0.5 0.4 0.7
Miscellaneous income (expense)............... -- (0.1) -- --
Gain (loss) on disposal/sale of property..... 0.1 -- -- (0.1)
----- ----- ----- -----
Total other income (expense)................. 1.0 0.4 0.4 0.6
----- ----- ----- -----
Income (loss) before income taxes.............. (1.8) 3.0 5.4 0.1
Income tax benefit (expense)................... (0.1) 0.2 0.4 --
----- ----- ----- -----
Net income (loss).............................. (1.9 )% 3.2% 5.8% 0.1%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
22
<PAGE>
Historically, we have experienced seasonal variability in our quarterly
operating results with higher sales per restaurant in the second and third
quarters than in the first and fourth quarters. The higher sales in the second
and third quarters affect profitability by reducing the impact of our
restaurants' fixed and semi-fixed costs, as well as through increased revenues.
This seasonal impact on our operating results is expected to continue.
INFLATION
Components of our operations subject to inflation include food, beverage,
lease and labor costs. Our leases require us to pay taxes, maintenance, repairs,
insurance and utilities, all of which are subject to inflationary increases. We
believe inflation has not had a material impact on our results of operations in
recent years.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our capital requirements in recent years through cash flow
from operations, private placements of preferred stock and bank debt. We
generated $4.2 million in cash flow from operating activities in 1998, $2.0
million in 1997 and $1.4 million in 1996. From 1995 through 1997, we raised
approximately $16.8 million, net of financing costs, from the sale of preferred
stock. We have also financed our capital requirements through bank borrowings.
As of December 27, 1998, the balance outstanding under our term loan agreement
with BankBoston, N.A. was $1.9 million, which bears interest at the lesser of
(1) LIBOR adjusted by the statutory reserve rate plus 4.0%, or (2) the greater
of the bank's base rate plus 1.5% or the Federal Funds Effective Rate plus 2.0%.
Under the terms of the loan agreement, the term loan must be repaid in full
within 90 days following this offering without prepayment penalty. In addition,
we have a $7.5 million line of credit agreement with BankBoston, which bears
interest at the same rate as the term loan, but has not yet been drawn upon. We
are currently negotiating an amendment to the BankBoston revolving credit
agreement, which is expected to lower the borrowing rate of interest.
Our principal financial needs arise from the development and opening of new
units. We incurred capital expenditures of approximately $6.9 million during
1998, of which $6.6 million was for new unit openings. In 1997 we incurred
approximately $6.4 million in capital expenditures, of which $5.0 million was
for new unit openings and $1.0 million for the modification to the Baja Grill
concept. In 1996, we incurred $3.0 million in capital expenditures, of which
$2.6 million was for new unit openings.
Total capital expenditures in 1999 are expected to be approximately $11.7
million, of which approximately $10.0 million is expected to be invested in the
opening of new restaurants. We plan to open 28 units in 1999, and 36 units in
2000. We expect that future locations will generally cost approximately $360,000
per unit net of landlord allowances and excluding pre-opening expenses.
Pre-opening expenses are expected to average approximately $20,000 per
restaurant.
We lease restaurant and office facilities and certain real property under
operating leases expiring through 2013. As of the date of this prospectus, our
future minimum lease payments for our headquarters and restaurants are as
follows: $4.4 million in 1999, $5.0 million in 2000, $5.0 million in 2001, $4.9
million in 2002, and $4.9 million in 2003 and $19.4 million thereafter.
We believe that the proceeds from this offering, together with anticipated
cash flow from operations and funds anticipated to be available from a credit
facility, will be sufficient to satisfy our working capital and capital
expenditure requirements for at least the next 12 months. We plan to incur
substantial costs over the near term in connection with our expansion program.
Changes in our operating plans, acceleration of our expansion plans, lower than
anticipated sales, increased expenses, potential acquisitions or other events
may cause us to seek additional financing sooner than anticipated. Additional
financing may not be available on acceptable terms, or at all. Failure to obtain
additional financing as needed could have a material adverse effect on our
business and results of operations.
23
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our market risk exposures are related to our cash, cash equivalents and
investments. We invest our excess cash in highly liquid short-term investments
with maturities of less than one year and U.S. Treasury notes and
mortgage-backed securities with maturities in excess of one year. We do not feel
these are a significant market risk.
YEAR 2000 READINESS DISCLOSURE
Historically, most computer databases, as well as embedded microprocessors
in computer systems and industrial equipment, were designed with date data using
only two digits of the year. Most computer programs, computers and embedded
microprocessors controlling equipment were programmed to assume that all two
digit dates were preceded by "19," causing "00" to be interpreted as the year
1900. This formerly common practice now could result in a computer system or
embedded microprocessor which fails to recognize properly a year that begins
with "20," rather than "19." This in turn could result in computer system
miscalculations or failures, as well as failures of equipment controlled by date
sensitive microprocessors, and is generally referred to as the "year 2000"
issue.
OUR STATE OF YEAR 2000 READINESS
We have reviewed both our information technology and our non-information
technology systems to determine whether they are year 2000 compliant. We have
not identified any material systems which are not year 2000 compliant. We have
initiated formal communications with all significant supplier and service
providers to determine the extent to which we are vulnerable to those third
parties' failures to solve their year 2000 problem. We have received written
assurances of year 2000 compliance from a majority of the third parties with
whom we have relationships, including our point-of-sale, payroll, and credit
card service providers. Testing and replacement of all systems is scheduled to
be completed by July 1, 1999. We intend to continue to make efforts to ensure
that third parties with whom we have relationships are year 2000 compliant.
THE COSTS TO ADDRESS OUR YEAR 2000 ISSUES
We estimate that we have incurred costs of less than $25,000 to date in
connection with our year 2000 plan. We currently estimate the total costs of
completing our year 2000 plan, including costs incurred to date, to be less than
$50,000. This estimate is based on currently available information and will be
updated as we continue our assessment of third-party relationships, proceed with
our testing and implementation and design contingency plans.
THE RISKS OF OUR YEAR 2000 ISSUES
If any information technologies or embedded microprocessor technology
systems critical to our operations have been overlooked, there could be a
material adverse effect on our business or results of operations of a magnitude
which we have not yet fully analyzed. If the vendors of most important goods and
services or the suppliers of our necessary energy, telecommunications and
transportation needs, fail to provide us with (1) the materials and services
which are necessary to produce, distribute and sell our products, (2) the
electrical power and other utilities necessary to sustain our operations, or (3)
reliable means of transporting supplies to our restaurants, such failure could
affect our ability to sell product which could have a material adverse effect on
our business or results of operations.
OUR CONTINGENCY PLAN
We are in the initial stages of developing a business contingency plan to
address both unavoided and unavoidable year 2000 risks. This plan currently
includes developing and maintaining relationships with several suppliers of
services and products to mitigate the risks associated with suppliers who are
24
<PAGE>
not year 2000 compliant. Although we expect to have the plan well-developed by
July 31, 1999, enhancements and revisions will be continuously considered and
implemented as appropriate.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including derivative instruments
embedded in other contracts, and for hedging activities. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
We have not yet assessed the effect of this standard on our current reporting
and disclosures.
In April 1998, Statement of Position (SOP) 98-5, "Reporting on the Costs of
Start-Up Activities" was issued by the Accounting Standards Executive Committee.
SOP 98-5 provides guidance on the financial reporting of start-up costs and
organization costs. It requires costs of start-up activities and organization
costs to be expensed as incurred, and is effective for fiscal years beginning
after December 15, 1998. We have chosen to early adopt this SOP for the fiscal
year ended December 28, 1997. The adoption of this SOP did not have a material
effect on our operations.
25
<PAGE>
BUSINESS
THIS PROSPECTUS MAY CONTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. OUR ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS
DISCUSSED IN ANY FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH A
DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS."
We own and operate 64 high-quality, quick-service Mexican restaurants under
the name "Rubio's Baja Grill" located principally in the southwest region of the
United States. Our restaurants offer a distinctive blend of high-quality,
traditional Mexican cuisine combined with fresh seafood fare indicative of the
Baja region of Mexico. Our menu contains appealing Mexican offerings with
distinctive taste profiles prepared from fresh ingredients. Our traditional menu
items such as tacos and burritos feature marinated, chargrilled meats and other
high-quality ingredients which distinguish them from typical Mexican fast food
offerings. Adhering to an overall emphasis on freshness, we prepare our menu
items on-site and made-to-order, with each location preparing its own chips,
salsa and guacamole fresh every day. Our menu also features our signature
Baja-style fish taco and is accentuated by seasonal offerings including our
lobster burrito and tequila shrimp burrito. Most of our restaurants also offer a
selection of Mexican and domestic beers. Prices range from $1.79 for a
Baja-style fish taco to $5.69 for a Cabo Combo, which includes a shrimp burrito,
fish taco, chips and beans. We strive to provide superior service in a setting
designed to promote a casual, relaxed and fun experience for our guests. We
design our restaurant decor to be reminiscent of an authentic Baja beach
setting. Most of our restaurants feature saltwater aquariums, surfboards and
outdoor patio seating beneath traditional palm-thatched umbrellas, or palapas.
RUBIO'S BAJA GRILL CONCEPT
The Rubio's Baja Grill concept successfully evolved from the original
"Rubio's, Home of the Fish Taco" concept, which our co-founder Ralph Rubio first
developed following his college spring break trips to the Baja peninsula of
Mexico in the mid-1970s. Ralph opened the first Rubio's restaurant with his
father, Rafael, over 16 years ago in the Mission Bay area of San Diego. Building
on the success of our original "fish taco" concept, we later expanded our menu
offerings and upgraded our store layout to appeal to a broader customer base. We
seek to differentiate our restaurants by providing high-quality Mexican food in
a quick-service environment. We believe the "Rubio's Baja Grill" concept is
uniquely positioned between the quick-service and casual dining segments of the
restaurant industry. The critical elements of our market positioning are as
follows:
- DISTINCTIVE, FRESH, HIGH-QUALITY FOOD. We seek to differentiate ourselves
from other quick-service and fast food Mexican restaurants by offering
high-quality products made-to-order using authentic regional Baja Mexican
recipes. We have experienced a high degree of success to date developing
distinctive and flavorful offerings that generate strong customer loyalty
and are often described as "craveable." Our signature items include our
Baja-style fish tacos as well as limited time promotions such as our
lobster burrito and tequila shrimp burrito. Our menu is served at both
lunch and dinner. It features a variety of other freshly prepared items,
including tacos and burritos made with chargrilled chicken, steak, mahi
mahi and shrimp, as well as grilled quesadillas. Freshly prepared salsas
are offered at our complimentary salsa bar. Our menu also includes reduced
fat "Healthmex" offerings and "Kid Pesky" meals designed for children.
- CASUAL, FUN DINING EXPERIENCE. We strive to promote an enjoyable overall
customer experience by creating a fun and relaxed setting in each of our
restaurants. Unlike the generic decor of a typical fast food restaurant,
our restaurants are designed to create an authentic personality capturing
the relaxed, beach-like atmosphere of the Baja region of Mexico. Our
design elements include colorful Mexican tiles, saltwater aquariums with
tropical fish, Baja beach photos and tropical prints, surfboards on the
walls and authentic palm-thatched patio umbrellas, or palapas, in most
existing locations.
26
<PAGE>
- EXCELLENT DINING VALUE. Our restaurants offer guests high-quality food
typically associated with sit-down, casual dining restaurants at
quick-service prices. In addition to favorable prices, we offer the
convenience and rapid delivery of a traditional quick-service format. We
provide guests a clean and comfortable environment in which to enjoy their
meal on site. We also offer guests the convenience of take-out service. We
believe the strong value we deliver to our customers is critical to
building strong repeat business and customer loyalty.
OUR BUSINESS STRATEGIES
Our business objective is to become the leading high-quality, quick-service
Mexican restaurant brand nationwide. In order to achieve our business objective,
we have developed the following strategies:
- CREATE A DISTINCTIVE CONCEPT AND BRAND. Our restaurants provide guests
with a distinctive dining experience which, we believe, helps promote
frequent visiting patterns and strong customer loyalty. We continue to
focus on several key initiatives designed to enhance the performance of
our existing restaurants and strengthen our brand identity. These
initiatives include developing and expanding proprietary menu offerings
such as the Baja-style fish taco, lobster burrito and "Baja Bowl." In
addition, we focus on securing high-visibility, high-traffic store
locations and promoting the awareness of our brand through comprehensive
regional and local media campaigns. As a result of these initiatives, we
experienced comparable store sales increases of 10.4% in 1998 and 18.0% in
1997.
- ACHIEVE ATTRACTIVE RESTAURANT-LEVEL ECONOMICS. We believe that we have
been able to achieve attractive operating results due to the broad appeal
of our concept, careful site selection and cost-effective development,
consistent application of our management and training programs and
favorable product costs. We utilize centralized information and accounting
systems which allow our management to monitor and control labor, food and
other direct operating expenses, and provide them with timely access to
financial and operating data. We believe we achieve a lower-than-average
product cost compared to our competitors, due to the popularity of our
fish items versus higher-cost items such as chicken and steak. We also
believe that our culture and emphasis on training leads to a lower
employee turnover ratio, and therefore higher productivity, compared to
many of our competitors.
- EXECUTE DISCIPLINED EXPANSION STRATEGY. We believe that our restaurant
concept has broad national appeal and that, as a result, we have
significant opportunities to expand our operations and generate attractive
unit level economics. With the addition of selected senior management in
operations, development, marketing and finance in 1996, we implemented an
accelerated expansion strategy. We opened eight stores in 1996, 12 in 1997
and 16 in 1998. Our current expansion plan calls for us to open 28
restaurants in 1999, of which five have been opened to date, and 36
restaurants in 2000. Five of the 23 units we plan to open in the balance
of 1999 are currently under construction and an additional 16 have signed
leases. Through our rigorous site selection process and criteria developed
by our real estate committee, we principally target high-traffic,
high-visibility locations in urban and suburban markets with medium to
high family income levels.
- ENSURE HIGH-QUALITY GUEST EXPERIENCE. We strive to provide a consistent,
high-quality guest experience in order to generate frequent visiting
patterns and brand loyalty. To achieve this goal, we focus on creating a
fun, team-like culture for our restaurant employees, which we believe
fosters a friendly and inviting atmosphere for our guests. Through
extensive training, experienced restaurant-level management and rigorous
operational controls, we seek to ensure prompt, friendly and efficient
service to our guests. Our commitment to making each guest's experience a
consistently positive one is evidenced by Rubio's list of "House Rules",
which is prominently
27
<PAGE>
displayed in each restaurant and defines the high level of quality and
service our guests can expect from us. Overall, we design our concept to
appeal to a broad variety of guests, including families, and believe the
cleanliness of our facilities provides an additional advantage over many
of our competitors.
UNIT ECONOMICS
In 1998, the 43 units open the entire year generated on a per unit basis
average sales of $901,000, average operating income of $148,000, or 16.4% of
sales, and average cash flow of $183,000, or 20.3% of sales. Comparable
restaurant sales increased 10.4% in 1998, following an 18.0% increase in 1997.
We currently have 11 units open outside California. Of these, three units
have over 12 months of operating results. These units generated average sales of
$979,000 in 1998, average operating income of $142,000, or 14.5% of sales, and
average cash flow of $193,000 or 19.7% of sales. These results are not
necessarily indicative of the results we will obtain in connection with the
other units currently open, or those we may open in the future.
We currently lease all of our restaurant locations with the exception of one
owned building. We plan to continue to lease substantially all of our future
restaurant locations in order to minimize the cash investment associated with
each unit. Our site selection strategy is to locate our restaurants in
high-profile, high-traffic locations, preferably on an end-cap location in line
with other retail properties.
Historically, the size of our restaurants has generally ranged from 1,800 to
3,000 square feet, excluding our smaller, food court locations. We expect the
size of our future sites to range from 2,000 to 2,400 square feet. We intend to
continue to develop restaurants that will require, on average, a total cash
investment of approximately $380,000, including pre-opening expenses of $20,000.
28
<PAGE>
EXISTING AND PROPOSED LOCATIONS
The following table sets forth certain information about our existing and
proposed units. We currently operate 64 restaurant facilities under the name
"Rubio's Baja Grill," with 26 restaurants in San Diego county, 27 restaurants in
greater Los Angeles, which includes Los Angeles, Orange, San Bernardino and
Riverside counties, six restaurants in Phoenix, Arizona, four restaurants in Las
Vegas, Nevada and one restaurant in Denver, Colorado. In addition, we license
our concept to other restaurant operators for three non-traditional locations at
Qualcomm Stadium, the San Diego International Airport food court and the Del Mar
Thoroughbred Club. Five of the 23 units we plan to open in the balance of 1999
are under construction. We have signed leases for an additional 16 units. The
majority of our units are in high-traffic retail centers, and are not
stand-alone units.
<TABLE>
<CAPTION>
SQUARE
LOCATIONS DATE OPENED FOOTAGE
- ------------------------- ----------------- -----------
<S> <C> <C>
SAN DIEGO AREA
Mission Bay............ January 1983 1,800
San Diego State
University........... March 1986 1,300
Pacific Beach.......... August 1987 1,800
Point Loma............. March 1988 2,995
San Marcos............. July 1988 1,900
Chula Vista............ October 1988 2,262
Encinitas.............. October 1989 3,250
El Cajon............... July 1990 3,000
Kearny Mesa............ October 1990 2,900
University Towne
Centre............... April 1991 1,992
Solana Beach........... May 1992 2,207
Downtown San Diego..... August 1992 2,100
Carmel Mountain Ranch.. December 1993 2,262
Mission Valley......... August 1995 2,658
Grossmont.............. December 1995 2,914
La Jolla............... February 1996 2,350
San Diego Hall of
Justice (Food
Court)............... June 1996 619
Carlsbad............... October 1996 2,450
Hillcrest.............. December 1996 2,650
Vista.................. October 1997 2,000
Mission Gorge.......... December 1997 2,352
Rancho Bernardo........ March 1998 2,270
Fashion Valley Food
Court................ April 1998 870
Rancho Del Rey......... October 1998 2,000
Rancho San Diego....... January 1999 2,038
Parkway Plaza.......... February 1999 2,685
Under
Del Mar................ construction 2,000
Oceanside.............. Lease signed 2,480
Scripps Ranch.......... Lease signed 2,000
San Marcos (Restaurant
Row)................. Lease signed 1,700
LOS ANGELES AREA
Tustin................. June 1991 2,397
Irvine................. August 1991 2,448
Temecula............... November 1994 2,916
Costa Mesa............. December 1994 2,201
Laguna Niguel.......... May 1995 2,418
Anaheim................ July 1995 2,985
Encino................. September 1995 2,673
Irvine Spectrum (Food
Court)............... December 1995 1,350
Manhattan Beach........ January 1996 3,600
Santa Ana.............. February 1996 2,400
Marina del Rey......... October 1996 2,027
La Habra............... December 1996 2,000
Cypress................ March 1997 2,070
Belmont Shore.......... March 1997 2,114
<CAPTION>
SQUARE
LOCATIONS DATE OPENED FOOTAGE
- ------------------------- ----------------- -----------
<S> <C> <C>
LOS ANGELES AREA
(CONTINUED)
Mission Viejo.......... April 1997 2,322
Cerritos............... August 1997 1,752
Torrance............... September 1997 2,500
Ontario................ October 1997 2,160
Rancho Cucamonga....... November 1997 2,235
San Clemente........... February 1998 2,154
Northridge............. March 1998 2,180
Villa Park............. April 1998 2,120
University of
California Los
Angeles (Food
Court)............... September 1998 960
Yorba Linda............ November 1998 1,996
The Block, Orange...... November 1998 2,000
Riverside.............. December 1998 2,000
Chino Hills............ December 1998 2,045
Under
Monrovia............... construction 2,500
Under
Long Beach............. construction 1,372
Upland................. Lease signed 1,879
Brentwood.............. Lease signed 2,000
Placentia.............. Lease signed 2,100
West Covina............ Lease signed 2,000
Fountain Valley........ Lease signed 2,272
PHOENIX AREA
Ahwatukee.............. April 1997 2,000
North Scottsdale....... September 1997 2,400
Gilbert................ May 1998 2,400
North Phoenix.......... August 1998 2,435
Agua Fria.............. November 1998 2,150
Chandler............... March 1999 2,100
Tempe.................. Lease signed 2,000
Peoria................. Lease signed 2,000
Mesa................... Lease signed 2,200
Tucson (Campbell and
Glen)................ Lease signed 2,000
Tucson (Ina)........... Lease signed 2,400
LAS VEGAS AREA
Henderson.............. December 1997 2,400
Summerlin.............. August 1998 2,100
The Lakes.............. December 1998 2,100
Tenaya................. January 1999 2,278
Las Vegas (Flamingo)... Lease signed 2,200
DENVER AREA
Lone Tree.............. March 1999 2,200
Under
Belcaro................ construction 2,223
Northglenn............. Lease signed 2,300
SACRAMENTO, CALIFORNIA
Sacramento (Natomas)... Lease signed 2,000
SALT LAKE CITY, UTAH
Under
Sugarhouse............. construction 2,500
</TABLE>
29
<PAGE>
EXPANSION AND SITE SELECTION
We plan to open 28 units during 1999, five of which have opened to date, and
36 units in 2000. Five of the 23 units we plan to open in the balance of 1999
are under construction, and we have leased sites for an additional 16 units.
Leases for five of the 36 units to be opened in 2000 have been signed. We opened
our first unit outside of California in Phoenix, Arizona in April 1997. We
currently operate a total of 11 units outside of California, including six in
Arizona, four in Las Vegas and one in Denver. We are negotiating new leases in
all of our current markets, in addition to Salt Lake City, Sacramento and
Minneapolis.
Our expansion strategy targets major metropolitan areas that have attractive
demographic characteristics. Once a metropolitan area is selected, we identify
viable trade areas that have high-traffic patterns, strong demographics, such as
high density of white collar families, medium to high family incomes, high
education levels, and density of both daytime employment and residential
developments, limited competition within the trade area and strong retail and
entertainment developments. Within a desirable trade area, we select sites that
provide specific levels of visibility, accessibility, parking, co-tenancy and
exposure to a large number of potential customers.
We believe that the quality of our site selection criteria is critical to
our continuing success. Therefore, our senior management team is actively
involved in the selection of each new market and specific site, personally
visiting all new markets and most sites or conducting a video site tour of all
sites prior to granting final approval. Each new market and site must be
approved by our Real Estate Site Acquisition Committee, which consists of
members of senior management. This process allows us to analyze each potential
location taking into account its effect on all aspects of our business.
In connection with our strategy to rapidly expand into certain markets, we
expect to evaluate the merits of initiating a franchising program. We are not
sure when or if we will decide to franchise our concept or how extensively we
will pursue such a strategy. Adopting a franchising strategy would require us to
devote management and financial resources to build the operational
infrastructure needed to support the franchise of our restaurants. If we
implemented a franchising program, we would earn revenue through initial
franchise fees payable to us by franchisees and through royalty income based on
a percentage of restaurant sales. Franchising programs typically involve
substantially lower initial cash investments compared to unit expansion
strategies where company-owned units are developed and leased. Franchising
programs involve risks. Please see "Risk Factors--Our planned expansion into new
geographic areas involves a number of risks, many of which are beyond our
control."
MENU
Our menu features made-to-order burritos, soft-shell tacos, and quesadillas
made with marinated, chargrilled chicken breast and lean steak, as well as
seafood indicative of the Baja region of Mexico, such as chargrilled mahi mahi,
sauteed shrimp and our signature Baja-style fish taco. Side items including our
chips, beans and rice are all made fresh daily. Other ingredients, such as our
fresh, handmade guacamole, shredded natural cheeses and our zesty chipotle
sauce, also contribute to our quality image and distinctive flavor profiles. We
also offer a self-serve salsa bar where guests can choose from three different
salsas made fresh every day at each restaurant. Our prices range from $1.79 for
a Baja-style fish taco to $5.69 for a Cabo Combo, which includes a shrimp
burrito, fish taco, chips and beans. Most units also offer a selection of
imported Mexican and domestic beers.
To provide added variety, from time to time we introduce limited time
offerings such as our lobster burrito, tequila shrimp burrito, "killer" shark
tacos and Baja Bowls. Some of these items have been permanently added to the
menu, such as the Baja Bowl, a flavorful combination of chargrilled steak or
chicken served over rice and beans with fresh tomatoes, onions and cilantro.
Other items, such as the lobster burrito, are offered seasonally due to limited
availability.
30
<PAGE>
Substantially all of our units include a HealthMex section on their menu and
Kid Pesky meals designed for children. Our HealthMex items are designed to have
less than 22% of their calories from fat, and include a chargrilled mahi mahi
taco or a chargrilled chicken burrito served on a whole wheat tortilla. The Kid
Pesky meals consist of a choice of a fish taco, chicken taquitos, quesadilla or
a bean and cheese burrito, along with a side dish, drink, churro dessert and toy
surprise.
DECOR AND ATMOSPHERE
We believe that the decor and atmosphere of our restaurants is a critical
factor in our guests' overall dining experience. We strive to create the
relaxed, casual environment that is reminiscent of the Baja region of Mexico.
Our design elements include colorful Mexican tiles, saltwater aquariums with
tropical fish, Baja beach photos and tropical prints, surfboards on the walls
and authentic palm-thatched patio umbrellas, or palapas, in most existing
locations. We believe the decor and atmosphere of our restaurants appeal to a
broad variety of consumers, including families.
MARKETING
We utilize broadcast advertising as a marketing tool to increase our brand
awareness, attract new guests and build customer loyalty. Our advertising is
designed to portray ourselves as a high-quality, quick-service Mexican food
restaurant and to promote special offers to increase sales. Examples of these
offers include limited-time-only product introductions, such as our lobster
burrito or tequila shrimp burrito, as well as price promotions, such as our
99-cent fish taco special. Media used for these promotions include television,
radio, coupons and in-store merchandising materials. We believe word-of-mouth
advertising is also a key component in attracting new guests.
As part of our expansion strategy, we select target markets which we believe
will support multiple units and the efficient use of broadcast advertising. Upon
entry into each new market, we also hire local public relations firms to help
establish brand awareness for our restaurants as we build toward media
efficiency. In 1998, we spent approximately $1.4 million on marketing. We expect
our marketing expenditures to increase as we add new restaurants and expand into
new markets.
OPERATIONS
UNIT MANAGEMENT AND EMPLOYEES
Our typical restaurant employs one general manager, one to two assistant
managers and 22 to 25 hourly employees, approximately 60% of which are full-time
employees and approximately 40% of which are part-time employees. The general
manager is responsible for the day-to-day operations of the restaurant,
including food quality, service, staffing and purchasing. We seek to hire
experienced general managers and staff and to motivate and retain them by
providing opportunities for increased responsibilities and advancement, as well
as performance-based cash incentives. These performance incentives are tied to
sales, profitability and qualitative measures such as mystery shoppers, who
anonymously evaluate individual restaurants. We also grant general managers
options to purchase shares of our common stock when hired or promoted. All
employees working more than 20 hours per week are eligible for health benefits
and participation in our 401(k) plan. We believe that we have low managerial and
hourly employee turnover rates in comparison to the turnover rates within the
quick-service industry and that lower turnover results in decreased training
costs and higher productivity.
We currently employ 11 district managers, each of whom reports either to a
regional manager or to the director of operations. These district managers
direct unit management in all phases of restaurant operations, as well as assist
in opening new units. We also grant district managers options to purchase shares
of our common stock when hired or promoted.
31
<PAGE>
TRAINING
We strive to maintain quality and consistency in each of our units through
the careful training and supervision of personnel and the establishment of, and
adherence to, high standards relating to personnel performance, food and
beverage preparation and maintenance of facilities. We have implemented a
training program that is designed to teach new managers the technical and
supervisory skills necessary to direct the operations of our restaurants in a
professional and profitable manner. Each manager must successfully complete a
five-week training course, which includes hands-on experience in both the
kitchen and dining areas. We have also prepared operations manuals and
videotapes relating to food and beverage handling, preparation and service. In
addition, we maintain a continuing education program to provide our unit
managers with ongoing training and support. We strive to maintain a
team-oriented atmosphere and instill enthusiasm and dedication in our employees.
We regularly solicit employee suggestions concerning the improvement of our
operations in order to be responsive to both them and our guests.
QUALITY CONTROLS
Our emphasis on excellent customer service is enhanced by our quality
control programs. We welcome comments on the quality of service and food at our
restaurants by maintaining a toll-free customer hotline and distributing
customer surveys. District managers are directly responsible for ensuring that
these comments are addressed to achieve a high level of customer satisfaction.
Our Director of Food and Beverage is also responsible for ensuring product
consistency and quality among our restaurants. Furthermore, we engage a
third-party service whereby an anonymous customer or mystery shopper evaluates
and reports to management key elements of the Rubio's experience, including
product quality, cleanliness and customer service.
HOURS OF OPERATIONS
Our units are generally open Sunday through Thursday from 10:30 a.m. until
10:00 p.m., and on Friday and Saturday from 10:30 a.m. until 11:00 p.m.
MANAGEMENT INFORMATION SYSTEMS
All of our restaurants use computerized point-of-sale systems, which are
designed to improve operating efficiency, provide corporate management timely
access to financial and marketing data, and reduce restaurant and corporate
administrative time and expense. These systems record each order and print the
food requests in the kitchen for the cooks to prepare. The data captured for use
by operations and corporate management include gross and sales amounts, cash and
credit card receipts, and quantities of each menu item sold. Sales and receipts
information is generally transmitted to the corporate office daily, where it is
reviewed and reconciled by the accounting department before being recorded in
the accounting system. The daily sales information is polled nightly to the
corporate office and distributed to management via electronic mail each morning.
The point-of-sale system also calculates daily ideal usage and cost for the top
10 food items which make up approximately 85% of total food cost. A monthly
trend report of actual food cost compared to ideal food cost is also prepared.
We are currently installing a back office system, including personal computers
in each of our restaurants, which will allow managers to compare actual food
cost to ideal food costs on a daily basis. As of the date of this prospectus,
this system is currently operational in over half of our restaurants, and is
expected to be installed in all of our restaurants by the end of 1999.
Our corporate systems provide management with operating reports that show
restaurant performance comparisons with budget and prior year results both for
the accounting period and year-to-date, as well as trend formats by both dollars
and percents of sales. These systems allow us to closely monitor restaurant
sales, cost of sales, labor expense and other restaurant trends on a daily,
32
<PAGE>
weekly, and monthly basis. We believe these systems will enable both unit and
corporate management to adequately manage the operational and financial
performance of the restaurants in support of our planned expansion.
PURCHASING
We strive to obtain consistently high-quality ingredients at competitive
prices from reliable sources. To attain operating efficiencies and to provide
fresh ingredients for our food products while obtaining the lowest possible
prices for the required quality, purchasing employees at the corporate office
control the purchasing of food items through buying from a variety of national,
regional and local suppliers at negotiated prices. Most food and other products
are shipped from a central distributor directly to the units two to four times
per week. Produce and tortillas are delivered daily from local suppliers to
ensure product freshness. We do not maintain a central food product warehouse or
commissary. We generally purchase certain of our food products from one
supplier. We believe, however, that other sources of supply are readily
available at substantially similar prices. As is typical in our industry, we do
not have any long-term contracts with our food suppliers. We have not
experienced significant delays in receiving our food and beverage inventories,
restaurant supplies or equipment.
COMPETITION
The restaurant industry is intensely competitive. There are many different
segments within the restaurant industry that are distinguished by types of
service, food types and price/value relationships. We position our restaurants
in the high-quality, quick-service Mexican food segment of the industry. In this
segment, our direct competitors include Baja Fresh, La Salsa and Chipotle. We
also compete indirectly with full-service Mexican restaurants including Chevy's,
Chi Chi's and El Torito and fast food restaurants, particularly those focused on
Mexican food such as Taco Bell and Del Taco. Competition in our industry segment
is based primarily upon food quality, price, restaurant ambiance, service and
location. Although we believe we compete favorably with respect to each of these
factors, many of our direct and indirect competitors are well-established
national, regional or local chains and have substantially greater financial,
marketing, personnel and other resources than we do. We also compete with many
other retail establishments for site locations.
PROPERTIES
Our corporate headquarters are located in Carlsbad, California. We occupy
this facility under a lease which terminates in August 31, 2005, with options to
extend the lease for an additional 13 years. We lease each of our restaurant
facilities with the exception of the El Cajon unit, which is covered by a ground
lease. The majority of our leases are for 10-year terms and include options to
extend the terms. The majority of our leases also include both fixed rate and
percentage-of-sales rent provisions. The landlord of our San Diego State
University unit has the right to terminate the lease, with 60 days notice, in
the event a proposed redevelopment project commences work.
TRADEMARKS
Our registered trademarks and service marks include "Rubio's," "Baja Grill,"
"Home of the Fish Taco," "HealthMex" and "Pesky" with the United States Patents
and Trademark Office. We believe that our trademarks, service marks and other
proprietary rights have significant value and are important to the marketing of
our restaurant concept. We have in the past and expect to continue to vigorously
protect our proprietary rights. We cannot predict, however, whether steps taken
by us to protect our proprietary rights will be adequate to prevent
misappropriation of these rights or the use by others of restaurant features
based upon, or otherwise similar to, our concept. It may be difficult for us to
prevent others from copying elements of our concept and any litigation to
enforce our rights will
33
<PAGE>
likely be costly. In addition, other local restaurant operations with names
similar to those we use may try to prevent us from using our marks in those
locales.
EMPLOYEES
As of March 18, 1999, we had approximately 1,700 employees, including
approximately 40 employees located at our corporate headquarters.
GOVERNMENT REGULATION
Our restaurants are subject to licensing and regulation by state and local
health, sanitation, safety, fire and other authorities, including licensing and
regulation requirements for the sale of alcoholic beverages and food. To date,
we have not experienced an inability to obtain or maintain any necessary
licenses, permits or approvals, including restaurant, alcoholic beverage and
retail licensing. The development and construction of additional units will also
be subject to compliance with applicable zoning, land use and environmental
regulations. For a description of risks faced by us related to government
regulation, please see "Risk Factors--Risks Related to Our Business--We may not
be able to obtain and maintain state and local permits necessary to operate our
units, which would adversely affect our business."
LEGAL PROCEEDINGS
As of the date of this prospectus, we are not a party to any material
litigation.
34
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS
Our executive officers, key employees and directors, as of March 26, 1999,
are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH US
- ---------------------------- --- ------------------------------------------------------------------------------
<S> <C> <C>
Rafael Rubio................ 69 Chairman of the Board and Director
Ralph Rubio................. 43 President, Chief Executive Officer and Director
Stephen J. Sather........... 51 Chief Operating Officer, Vice President of Operations
Richard Rubio............... 35 Vice President of Real Estate Development
Bruce Frazer................ 39 Vice President of Marketing
Ted Frumkin................. 37 Director of Real Estate
Kyle Anderson(1)(2)......... 42 Director
Jason M. Fish(1)(2)......... 41 Director
Kim Lopdrup(1)(2)........... 40 Director
Robert Rubio................ 37 Director
Timothy J. Ryan............. 59 Director Nominee
</TABLE>
- ------------------------
(1) Audit committee member.
(2) Compensation committee member.
RAFAEL RUBIO, a co-founder, has served as a Director and as Chairman of the
Board since our inception in January 1983. Prior to his current position with
Rubio's, Mr. Rubio held the positions of Executive Vice President and Vice
President of Manufacturing of Ornyte Xerxes-Proform Co., a fiberglass and
plastics manufacturer. He continues to serve as an international consultant to
various fiberglass and plastics manufacturers.
RALPH RUBIO, a co-founder, has served as President, Chief Executive Officer
and Director since our inception in January 1983. Prior to founding Rubio's, Mr.
Rubio was employed in restaurant management and in various other positions at
the Old Spaghetti Factory, Hungry Hunter and Harbor House restaurant chains. Mr.
Rubio has more than 20 years of experience in the restaurant industry.
STEPHEN J. SATHER has served as Chief Operating Officer since July 1998. He
has served as Vice President of Operations since February 1996. Prior to joining
us, Mr. Sather served as Vice President of New Concepts for Rally's Hamburgers,
a publicly held company, from December 1993 to February 1996. Prior to that, Mr.
Sather served as Senior Vice President of Operations for La Salsa Holding
Company, a privately held company, from December 1992 until November 1993. From
April 1986 until November 1992, Mr. Sather was employed by Taco Bell
Corporation, a publicly held company, and served as Director of New Concepts
when he left. Mr. Sather has more than 25 years of experience in the restaurant
industry.
RICHARD RUBIO has served as Vice President of Real Estate Development since
November 1994. From October 1990 until November 1994, Mr. Rubio served as Vice
President of Construction, and has served in various other positions with us
since June 1983.
BRUCE FRAZER has served as Vice President of Marketing since June 1996.
Prior to joining us, Mr. Frazer served as Vice President of Food &
Beverage/Product Marketing at Family Restaurants, Inc. from May 1994 until May
1996. From December 1984 until April 1994, Mr. Frazer was employed at Foodmaker,
Inc., a publicly held company, serving as Vice President of Product Marketing
when he left. Mr. Frazer has more than 15 years of experience in the restaurant
industry.
35
<PAGE>
TED FRUMKIN has served as Director of Real Estate since May 1996. Prior to
joining us, Mr. Frumkin served as Real Estate Manager at Office Depot Inc., a
publicly held company, from December 1994 until May 1996. From July 1991 until
December 1994, Mr. Frumkin served as Real Estate Manager at Wal-Mart Stores
Inc., a publicly held company. Prior to that, Mr. Frumkin served as Real Estate
Manager at Taco Bell Corporation, a publicly held company, from December 1985
until July 1991.
KYLE ANDERSON has served as a Director since January 1995. Mr. Anderson is a
founding member of Rosewood Capital Associates, LLC, the general partner of
Rosewood Capital, L.P., a consumer oriented private equity investment fund.
Prior to joining Rosewood in 1988, Mr. Anderson was a Vice President in the
mergers and acquisitions department at The First Boston Corporation. Mr.
Anderson serves on the board of directors of a number of privately held
companies.
JASON M. FISH has served as a Director since December 1997. Mr. Fish has
been a managing member of Farallon Capital Management, L.L.C. and Farallon
Partners, L.L.C., since April 1996, when they were formed to serve as management
companies for funds affiliated with Farallon, and was a managing director of
their predecessor, FCMI, Inc., from January 1993 through April 1996. Mr. Fish
also served as a general partner of funds affiliated with Farallon during that
time period. Mr. Fish joined Farallon in 1990. Mr. Fish serves as a director of
Town Sports International, Inc., a health club management company.
KIM LOPDRUP has served as a Director since January 1997. Mr. Lopdrup has
served in various positions at Allied Domecq PLC, a publicly held company whose
subsidiaries include Baskin Robbins, Dunkin Donuts and TOGO'S, since May 1985,
and has served in his current position as Chief Executive Officer of Allied
Domecq Retailing International since October 1998.
ROBERT RUBIO has served as a Director since 1994. From August 1995 through
September 1998, Mr. Rubio served as Vice President of Market Development, and
from March 1993 until July 1995, he served as Vice President of Operations. Mr.
Rubio served in various other positions at Rubio's since February 1986.
TIMOTHY J. RYAN is a nominee to serve as a Director and is expected to be
elected to our board prior to the close of this offering. Mr. Ryan has served as
the President and Chief Executive Officer of Diedrich Coffee, Inc. since
November 1997. From December 1995 until his retirement in December 1996, Mr.
Ryan served as President of Sizzler U.S.A., a division of Sizzler International,
Inc., and a director of Sizzler International, Inc., of which he was also a
Senior Vice President. From November 1988 to December 1993, Mr. Ryan served as
Senior Vice President of Marketing at Taco Bell Worldwide, and from December
1993 to December 1995, he served as Senior Vice President of Taco Bell's Casual
Dining Division.
Our executive officers are appointed by the board and serve until their
successors are elected or appointed.
Ralph Rubio, Richard Rubio and Robert Rubio are the sons of Rafael Rubio.
CLASSIFIED BOARD
Our board currently has six members. Under our bylaws, beginning at our next
annual meeting of stockholders, our board will be divided into three classes of
directors serving staggered three-year terms, with one class of directors to be
elected at each annual meeting of stockholders. The first class of directors
whose term will expire in 2000 will include Jason Fish and Robert Rubio. The
second class of directors whose term will expire in 2001 will include Kim
Lopdrup and Rafael Rubio. The third class of directors whose term will expire in
2002 will include Ralph Rubio, Kyle Anderson and Timothy Ryan.
36
<PAGE>
BOARD COMMITTEES
AUDIT COMMITTEE. The audit committee of the board of directors reviews,
acts on and reports to the board of directors with respect to various auditing
and accounting matters, including the recommendation of our auditors, the scope
of the annual audits, fees to be paid to the auditors, the performance of our
independent auditors and our accounting practices. The members of the audit
committee are Messrs. Anderson, Fish and Lopdrup.
COMPENSATION COMMITTEE. The compensation committee of the board of
directors recommends, reviews and oversees the salaries, benefits and stock
option plans for our employees, consultants, directors and other individuals
compensated by us. The compensation committee also administers our compensation
plans. The members of the compensation committee are Messrs. Anderson, Fish and
Lopdrup.
DIRECTOR COMPENSATION
Directors do not receive cash compensation for their service on our board of
directors. Non-employee directors are reimbursed for reasonable expenses
incurred in connection with serving as a director. In January 1997, we granted a
non-qualified stock option to purchase 25,000 shares of common stock to Mr.
Lopdrup, a non-employee director. The option granted to Mr. Lopdrup was fully
exercised by Mr. Lopdrup and is subject to a right of repurchase in our favor
which lapses over a period of five years from the date of grant. Vesting of any
options previously granted to board members will automatically accelerate in the
event of a sale, acquisition or merger of Rubio's. Each individual who first
becomes a non-employee member of the board of directors at any time after the
offering will receive an option to purchase 15,000 shares of common stock on the
date such individual joins the board of directors, provided such individual has
not previously been employed by us or any parent or subsidiary corporation. In
addition, on the date of each annual stockholders' meeting beginning in 2000,
each non-employee member of the board of directors will automatically be granted
an option to purchase 5,000 shares of common stock, provided such individual has
served as a non-employee member of the board of directors for at least six
months. For a discussion of our automatic option grant program and accelerated
vesting of options under the 1999 Plan, please see "--Benefit Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our compensation committee currently consists of Messrs. Anderson, Fish and
Lopdrup. No member of the compensation committee has been an officer or employee
of us at any time. None of our executive officers serves as a member of the
board of directors or compensation committee of any other company that has one
or more executive officers serving as a member of our board of directors or
compensation committee.
EXECUTIVE COMPENSATION
The following table sets forth all compensation received during fiscal 1998
by our chief executive officer and four of our other executive officers whose
salary and bonus exceeded $100,000 in such fiscal year. Perquisites and other
personal benefits paid to officers in the table below are less than the minimum
reporting thresholds and are represented in the table below by "--." All other
compensation represents matching payments under our 401(k) plan.
37
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ---------------
SECURITIES
--------------------- OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- ---------------------------------------------------- ---------- --------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Ralph Rubio......................................... $ 199,836 $ 39,967 -- -- $ --
President and Chief Executive Officer
Rafael Rubio........................................ 199,836 39,967 -- -- --
Chairman of the Board
Stephen J. Sather................................... 169,800 32,760 -- 8,000 340
Vice President of Operations and Chief Operating
Officer
James W. Stryker.................................... 141,500 27,300 -- 6,000 775
Vice President of Finance and Chief Financial
Officer
Bruce Frazer........................................ 135,840 26,208 -- 6,000 815
Vice President of Marketing
</TABLE>
Mr. Stryker served as our Vice President of Finance and Chief Financial
Officer from February 1996 through March 19, 1999.
STOCK OPTION INFORMATION
The following table sets forth certain information regarding options granted
to the executive officers listed in the Summary Compensation Table during fiscal
1998. We have not granted any stock appreciation rights.
Each option represents the right to purchase one share of common stock. The
options shown in this table are all incentive stock options granted under our
stock option plans. The options vest on the following schedule: 20% of the
options vest after the completion of one year of service from the grant date and
the remainder of the options vest in equal monthly installments over the next 48
months of service. To the extent not already exercisable, certain of these
options may also accelerate and become exercisable in the event of a merger in
which we are not the surviving corporation or upon the sale of substantially all
of our assets. Please see "--Benefit Plans" for more details regarding these
options. In the year ended December 27, 1998, we granted options to purchase an
aggregate of 137,140 shares of common stock.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM
OPTIONS EMPLOYEES EXERCISE EXPIRATION --------------------
NAME GRANTED IN 1998 PRICE DATE 5% 10%
- --------------------------------------------- ------------- --------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Ralph Rubio.................................. -- -- -- -- -- --
Rafael Rubio................................. -- -- -- -- -- --
Stephen J. Sather............................ 8,000 5.8% $ 2.00 01/30/08 $ 10,062 $ 25,500
James W. Stryker............................. 6,000 4.4 2.00 01/30/08 7,547 19,125
Bruce Frazer................................. 6,000 4.4 2.00 01/30/08 7,547 19,125
</TABLE>
38
<PAGE>
The exercise price per share of each option was equal to the fair market
value of the common stock on the date of grant as determined by our board after
consideration of a number of factors, including, but not limited to, our
financial performance, market conditions and the price, preferred rights and
privileges of shares of equity securities sold to or purchased by outside
investors.
The potential realizable value at assumed annual rates of stock price
appreciation for the option term represents hypothetical gains that could be
achieved for the respective options if exercised at the end of the option term.
The 5% and 10% assumed annual rates of compounded stock price appreciation are
mandated by rules of the SEC and do not represent our estimate or projection of
our future common stock prices. These amounts represent certain assumed rates of
appreciation in the value of our common stock from the fair market value on the
date of grant. Actual gains, if any, on stock option exercises are dependent on
the future performance of the common stock and overall stock market conditions.
The amounts reflected in the table may not necessarily be achieved.
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED DECEMBER 27, 1998 AND YEAR-END
OPTION VALUES
The following table sets forth certain information concerning the number and
value of unexercised options held by each of the executive officers listed in
the Summary Compensation Table at December 27, 1998. None of these executive
officers exercised options to purchase common stock during fiscal 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL 1998 OPTIONS AT FISCAL 1998
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Ralph Rubio..................................................... -- -- -- --
Rafael Rubio.................................................... -- -- -- --
Stephen J. Sather............................................... 26,050 26,950 $ 220,692 $ 225,808
James W. Stryker................................................ 13,967 16,033 118,167 133,833
Bruce Frazer.................................................... 11,633 13,367 98,333 111,167
</TABLE>
There was no public trading market for the common stock as of December 27,
1998. Accordingly, the value of unexercised in-the-money options listed above
has been calculated on the basis of the assumed initial public offering price of
$10.00 per share, less the applicable exercise price per share, multiplied by
the number of shares underlying such options.
BENEFIT PLANS
1999 STOCK INCENTIVE PLAN
Our 1999 Stock Incentive Plan is intended to serve as the successor equity
incentive program to our 1998 Stock Option/Stock Issuance Plan, 1995 Stock
Option/Stock Issuance Plan and 1993 Stock Option/Stock Issuance Plan. Our 1999
plan was adopted by our board and stockholders in March 1999. Our 1999 plan will
become effective on the date the underwriting agreement is signed in connection
with this offering of our common stock. All outstanding options under the
predecessor plans will be incorporated into our 1999 plan on the date this plan
is effective, and no further option grants will be made under the predecessor
plans after such date. The incorporated options will continue to be governed by
their existing terms, unless the plan administrator elects to extend one or more
features of our 1999 plan to those options. Except as otherwise noted below, the
incorporated options will have substantially the same terms as in effect for
grants made under the discretionary option grant program of our 1999 plan.
An initial reserve of 1,126,400 shares of common stock has been authorized
for issuance under our 1999 plan. Such share reserve consists of (1)
approximately the number of shares which will remain
39
<PAGE>
available for issuance under the predecessor plans on the date our 1999 plan
becomes effective, including the shares subject to outstanding options
thereunder, plus (2) an additional increase of approximately 500,000 shares. The
number of shares of common stock reserved for issuance under our 1999 plan will
automatically increase on the first trading day in January each calendar year,
beginning in calendar year 2000, by an amount equal to 3% of the total number of
shares of common stock outstanding on the last trading day in December of the
preceding calendar year, but in no event will any such annual increase exceed
450,000 shares. In addition, no participant in our 1999 plan may be granted
stock options, separately exercisable stock appreciation rights and direct stock
issuances for more than 500,000 shares of common stock in the aggregate per
calendar year.
Our 1999 plan is divided into five separate components: (1) the
discretionary option grant program under which eligible individuals in our
employ or service (including officers, non-employee board members and
consultants) may, at the discretion of the plan administrator, be granted
options to purchase shares of common stock at an exercise price not less than
100% of the fair market value of those shares on the grant date, (2) the stock
issuance program under which such individuals may, in the plan administrator's
discretion, be issued shares of common stock directly, through the purchase of
such shares at a price not less than 100% of their fair market value at the time
of issuance or as a bonus tied to the performance of services, (3) the salary
investment option grant program which may, at the plan administrator's sole
discretion, be activated for one or more calendar years and, if so activated,
will allow executive officers and other highly compensated employees the
opportunity to apply a portion of their base salary to the acquisition of
special below-market stock option grants, (4) the automatic option grant program
under which option grants will automatically be made at periodic intervals to
eligible non-employee board members to purchase shares of common stock at an
exercise price equal to 100% of the fair market value of those shares on the
grant date and (5) the director fee option grant program which may, in the plan
administrator's sole discretion, be activated for one or more calendar years
and, if so activated, will allow non-employee board members the opportunity to
apply a portion of the annual retainer fee otherwise payable to them in cash
each year to the acquisition of special below-market option grants.
The discretionary option grant program and the stock issuance program will
be administered by the compensation committee. The compensation committee as
plan administrator will have complete discretion to determine which eligible
individuals are to receive option grants or stock issuances under those
programs, the time or times when such option grants or stock issuances are to be
made, the number of shares subject to each such grant or issuance, the status of
any granted option as either an incentive stock option or a non-statutory stock
option under the federal tax laws, the vesting schedule to be in effect for the
option grant or stock issuance and the maximum term for which any granted option
is to remain outstanding. However, the board acting by disinterested majority
will have the exclusive authority to make any discretionary option grants or
stock issuances to members of the compensation committee. The compensation
committee will also have the exclusive authority to select the executive
officers and other highly compensated employees who may participate in the
salary investment option grant program in the event that program is activated
for one or more calendar years. Neither the compensation committee nor the board
will exercise any administrative discretion with respect to option grants under
the salary investment option grant program or under the automatic option grant
or director fee option grant program for the non-employee board members. All
grants under those latter three programs will be made in strict compliance with
the express provisions of each such program.
The exercise price for the shares of common stock subject to option grants
made under our 1999 plan may be paid in cash or in shares of common stock valued
at fair market value on the exercise date. The option may also be exercised
through a same-day sale program without any cash outlay by the optionee. In
addition, the plan administrator may provide financial assistance to one or more
optionees in the exercise of their outstanding options or the purchase of their
unvested shares by
40
<PAGE>
allowing such individuals to deliver a full-recourse, interest-bearing
promissory note in payment of the exercise price and any associated withholding
taxes incurred in connection with such exercise or purchase.
The plan administrator will have the authority to effect the cancellation of
outstanding options under the discretionary option grant program (including
options incorporated from the predecessor plans) in return for the grant of new
options for the same or different number of option shares with an exercise price
per share based upon the fair market value of our common stock on the new grant
date.
Stock appreciation rights are authorized for issuance under the
discretionary option grant program. Such rights will provide the holders with
the election to surrender their outstanding options for an appreciation
distribution from us equal to the excess of (1) the fair market value of the
vested shares of common stock subject to the surrendered option over (2) the
aggregate exercise price payable for those shares. Such appreciation
distribution may be made in cash or in shares of common stock. None of the
incorporated options from the predecessor plans contain any stock appreciation
rights.
In the event that we are acquired by merger or asset sale, each outstanding
option under the discretionary option grant program which is not to be assumed
by the successor corporation will automatically accelerate in full, and all
unvested shares under the discretionary option grant and stock issuance programs
will immediately vest, except to the extent our repurchase rights with respect
to those shares are to be assigned to the successor corporation. The plan
administrator will have complete discretion to grant one or more options under
the discretionary option grant program which will become fully vested for all
the option shares in the event those options are assumed in the acquisition and
the optionee's service with us or the acquiring entity involuntarily terminates
within a designated period (not to exceed 18 months) following such acquisition.
The vesting of outstanding shares under the stock issuance program may be
accelerated upon similar terms and conditions. The plan administrator will also
have the authority to grant options which will immediately vest upon an
acquisition of us, whether or not those options are assumed by the successor
corporation.
The plan administrator is also authorized under the discretionary option
grant and stock issuance programs to grant options and to structure repurchase
rights so that the shares subject to those options or repurchase rights will
immediately vest in connection with a change in ownership or control of us
(whether by successful tender offer for more than 50% of the outstanding voting
stock or by a change in the majority of the board by reason of one or more
contested elections for board membership). Such accelerated vesting may occur
either at the time of such change or upon the subsequent involuntary termination
of the individual's service within a designated period (not to exceed 18 months)
following such change in control.
The options incorporated from the predecessor plans may, in the plan
administrator's discretion, immediately vest in the event of (1) our merger or
consolidation, or (2) the acquisition by another corporation or person of (a)
all or substantially all of our assets or (b) 50% or more of our then
outstanding voting stock, unless those options are assumed or substituted in the
acquisition of us. Certain of the options incorporated from the predecessor
plans are subject to provisions providing for accelerated vesting upon a change
in control. The plan administrator will have the discretion to extend the
acceleration provisions of our 1999 plan to any or all of the options
outstanding under the predecessor plans.
In the event the plan administrator elects to activate the salary investment
option grant program for one or more calendar years, each of our executive
officers and other highly compensated employees selected for participation may
elect, prior to the start of the calendar year, to reduce his or her base salary
for that calendar year by a specified dollar amount not less than $10,000 nor
more than $50,000. Each selected individual who files such a timely election
will automatically be granted, on the first trading day in January of the
calendar year for which that salary reduction is to be in effect, a
non-statutory option to purchase that number of shares of common stock
determined by dividing the
41
<PAGE>
salary reduction amount by two-thirds of the fair market value per share of
common stock on the grant date. The option will be exercisable at a price per
share equal to one-third of the fair market value of the option shares on the
grant date. As a result, the total spread on the option shares at the time of
grant (the fair market value of the option shares on the grant date less the
aggregate exercise price payable for those shares) will be equal to the amount
of salary invested in that option. The option will vest and become exercisable
in a series of 12 equal monthly installments over the calendar year for which
the salary reduction is to be in effect and will be subject to full and
immediate vesting upon certain changes in the ownership or control of us.
Under the automatic option grant program, each individual who first becomes
a non-employee board member at any time after the completion of this offering
will automatically receive an option grant for 15,000 shares on the date such
individual joins the board, provided such individual has not been in our prior
employ. In addition, on the date of each annual stockholders meeting held after
the completion of this offering, each non-employee board member who is to
continue to serve as a non-employee board member will automatically be granted
an option to purchase 5,000 shares of common stock, provided such individual has
served on our board for at least six months.
Each automatic grant will have a term of 10 years, subject to earlier
termination following the optionee's cessation of board service. The option will
be immediately exercisable for all of the option shares and will be immediately
vested.
Should the director fee option grant program be activated in the future,
each non-employee board member will have the opportunity to apply all or a
portion of any annual retainer fee otherwise payable in cash to the acquisition
of a below-market option grant. The option grant will automatically be made on
the first trading day in January in the year for which the retainer fee would
otherwise be payable in cash. The option will have an exercise price per share
equal to one-third of the fair market value of the option shares on the grant
date, and the number of shares subject to the option will be determined by
dividing the amount of the retainer fee applied to the program by two-thirds of
the fair market value per share of common stock on the grant date. As a result,
the total spread on the option (the fair market value of the option shares on
the grant date less the aggregate exercise price payable for those shares) will
be equal to the portion of the retainer fee invested in that option. The option
will vest and become exercisable for the option shares in a series of 12 equal
monthly installments over the calendar year for which the election is to be in
effect. However, the option will become immediately exercisable and vested for
all the option shares upon (1) certain changes in the ownership or control of us
or (2) the death or disability of the optionee while serving as a board member.
The shares subject to each option under the salary investment option grant
and director fee option grant programs will immediately vest upon (1) an
acquisition of us by merger or asset sale or (2) the successful completion of a
tender offer for more than 50% of our outstanding voting stock or a change in
the majority of the board effected through one or more contested elections for
board membership.
Limited stock appreciation rights will automatically be included as part of
each grant made under the automatic option grant, salary investment option grant
and director fee option grant programs and may be granted to one or more of our
officers as part of their option grants under the discretionary option grant
program. Options with such a limited stock appreciation right may be surrendered
to us upon the successful completion of a hostile tender offer for more than 50%
of our outstanding voting stock. In return for the surrendered option, the
optionee will be entitled to a cash distribution from us in an amount per
surrendered option share equal to the excess of (1) the highest price per share
of common stock paid in connection with the tender offer over (2) the exercise
price payable for such share.
The board may amend or modify our 1999 plan at any time, subject to any
required stockholder approval. Our 1999 plan will terminate on the earliest of
(1) March 17, 2009, (2) the date on which all
42
<PAGE>
shares available for issuance under our 1999 plan have been issued as
fully-vested shares or (3) the termination of all outstanding options in
connection with certain changes in control or ownership of us.
1999 EMPLOYEE STOCK PURCHASE PLAN
Our 1999 Employee Stock Purchase Plan was adopted by our board and
stockholders in March 1999 and will become effective immediately upon the
execution of the underwriting agreement for this offering. Our employee stock
purchase plan is designed to allow our eligible employees to purchase shares of
common stock, at semi-annual intervals, through their periodic payroll
deductions under our employee stock purchase plan.
An initial reserve of 200,000 shares of common stock has been authorized for
issuance under our employee stock purchase plan. Our employee stock purchase
plan will be implemented in a series of successive offering periods, each with a
maximum duration for 24 months. However, the initial offering period will begin
on the execution date of the underwriting agreement and will end on the last
business day in July 2001. The next offering period will commence on the first
business day in August 2001, and subsequent offering periods will commence as
designated by the plan administrator.
Individuals who are eligible employees (scheduled to work more than 20 hours
per week for more than five calendar months per year) on the start date of any
offering period may enter our employee stock purchase plan on that start date or
on any subsequent semi-annual entry date (the first business day of February or
August each year). Individuals who become eligible employees after the start
date of the offering period may join our employee stock purchase plan on any
subsequent semi-annual entry date within that offering period.
Payroll deductions may not exceed 10% of the participant's cash earnings,
and the accumulated payroll deductions of each participant will be applied to
the purchase of shares on his or her behalf on each semi-annual purchase date
(the last business day in January and July each year) at a purchase price per
share equal to 85% of the lower of (1) the fair market value of the common stock
on the participant's entry date into the offering period or (2) the fair market
value on the semi-annual purchase date. In no event, however, may any
participant purchase more than 1,500 shares on any semi-annual purchase date nor
may all participants in the aggregate purchase more than 50,000 shares on any
such semi-annual purchase date. The plan administrator may require shares of
common stock purchased under our employee stock purchase plan to be held for one
year before they may be sold or otherwise transferred.
Should the fair market value per share of common stock on any purchase date
be less than the fair market value per share on the start date of the two-year
offering period, then that offering period will automatically terminate, and a
new two-year offering period will begin on the next business day, with all
participants in the terminated offering to be automatically transferred to the
new offering period.
In the event we are acquired by merger or asset sale, all outstanding
purchase rights will automatically be exercised immediately prior to the
effective date of such acquisition. The purchase price will be equal to 85% of
the lower of (1) the fair market value per share of common stock on the
participant's entry date into the offering period in which such acquisition
occurs or (2) the fair market value per share of common stock immediately prior
to such acquisition.
Our employee stock purchase plan will terminate on the earlier of (1) the
last business day of July 2009, (2) the date on which all shares available for
issuance under our employee stock purchase plan shall have been sold pursuant to
purchase rights exercised thereunder or (3) the date on which all purchase
rights are exercised in connection with an acquisition of us by merger or asset
sale. The board may at any time alter, suspend or discontinue our employee stock
purchase plan. However, certain amendments to our employee stock purchase plan
may require stockholder approval.
43
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN SALES OF SECURITIES
Since February 1995, we have issued the following securities in private
placement transactions: (1) 1,092,007 shares of Series B preferred stock and
common stock warrants exercisable for 50,000 shares for an aggregate price of
$3,500,003 in February 1995; (2) 793,640 shares of Series C preferred stock for
an aggregate price of $4,270,783 in March and June 1996; (3) 1,403,843 shares of
Series D preferred stock for an aggregate price of $10,100,005 in November and
December 1997; and (4) an additional 48,648 shares of Series D preferred stock
for an aggregate price of $350,000 in May 1998. The purchasers of more than
$60,000 of such securities in the last four years include, among others, the
following executive officers, directors and holders of more than 5% of our
outstanding stock and their affiliates:
<TABLE>
<CAPTION>
PREFERRED STOCK
EXECUTIVE OFFICERS, DIRECTORS ------------------------------- TOTAL
AND 5% STOCKHOLDERS SERIES B SERIES C SERIES D CONSIDERATION
- -------------------------------------------------------- --------- --------- --------- -------------
<S> <C> <C> <C> <C>
Rosewood Capital, L.P................................... 936,005 743,321 347,486 $ 9,500,004
Funds affiliated with Farallon Partners, L.L.C.......... -- -- 952,111 $ 6,850,001
Bruce Frazer............................................ -- 9,291 6,950 $ 99,999
</TABLE>
For additional information regarding securities held by our executive
officers and directors and by stockholders of more than 5% of our outstanding
common stock and their affiliates, please see "Principal and Selling
Stockholders."
Certain holders of outstanding common stock and common stock issuable upon
the exercise of warrants are entitled to certain registration rights. Please see
"Description of Securities--Registration Rights."
SERIES A PREFERRED STOCK REPURCHASE
In June 1998, we repurchased from the Rafael R. Rubio and Gloria G. Rubio
Family Trust 48,648 shares of Series A preferred stock for an aggregate
repurchase price of $350,000. Rafael Rubio, our Chairman of the Board and
Director, and his wife are co-trustees and beneficiaries of this trust. We then
issued 48,648 shares of Series D preferred stock to funds affiliated with
Farallon Partners, L.L.C., including Farallon Capital Partners, L.P., Farallon
Capital Institutional Partners, L.P., Farallon Capital Institutional Partners
II, Farallon Capital Institutional Partners III, L.P. and RR Capital Partners,
L.P., a holder of more than 5% of our securities.
44
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of March 18, 1999, assuming the
exercise of all warrants that must be exercised prior to this offering and as
adjusted to reflect the sale of the shares of common stock offered hereby, by
(1) each person or group of affiliated persons who we know owns beneficially 5%
or more of our common stock, (2) each of our directors, (3) our executive
officers listed in the Summary Compensation Table and (4) all of our directors
and executive officers as a group. Percentage of ownership is calculated as
required by Commission Rule 13d-3(d)(1). Except as indicated in the footnotes to
this table, the persons named in the table have sole voting and investment power
with respect to all shares of common stock shown as beneficially owned by them,
subject to community property laws. The table below includes the number of
shares underlying options which are exercisable within 60 days from the date of
this offering. The address for those individuals for which an address is not
otherwise indicated is: 1902 Wright Place, Suite 300, Carlsbad, California
92008.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED PRIOR TO THIS
SHARES BENEFICIALLY OWNED
OFFERING NUMBER OF AFTER THIS OFFERING
--------------------------------------- SHARES --------------------------
NUMBER OF BEING NUMBER OF
NUMBER OF SHARES OFFERED IN NUMBER OF SHARES
SHARES UNDERLYING PERCENT THIS SHARES UNDERLYING
BENEFICIAL OWNER OUTSTANDING OPTIONS (%) OFFERING(1) OUTSTANDING OPTIONS
- ---------------------------------------- ----------- ------------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Rosewood Capital, L.P.
One Maritime Plaza, Suite 1330
San Francisco, California 94111....... 2,026,812 -- 31.9 300,000 1,726,812 --
Funds affiliated with Farallon Partners,
L.L.C.(2)
One Maritime Plaza, Suite 1325
San Francisco, California 94111....... 952,111 -- 15.0 300,000 652,111 --
Rafael Rubio(3)......................... 1,135,752 -- 17.9 300,000 835,752 --
Ralph Rubio(3).......................... 1,184,100 -- 18.6 -- 1,184,100 --
Kyle Anderson(4)........................ 2,026,812 -- 31.9 300,000 1,726,812 --
Jason M. Fish(5)........................ 952,111 -- 15.0 300,000 652,111 --
Kim Lopdrup............................. 35,000 -- * -- 35,000 --
Robert Rubio(3)......................... 150,133 -- 2.4 -- 150,133 --
Stephen J. Sather....................... -- 28,875 * -- -- 28,875
James W. Stryker........................ 2,500 18,319 * -- 2,500 18,319
Bruce Frazer............................ 16,241 13,231 * -- 16,241 13,231
All directors and executive officers as
a group (9 persons)................... 5,502,649 60,425 86.8 900,000 4,602,649 60,425
<CAPTION>
PERCENT
BENEFICIAL OWNER (%)
- ---------------------------------------- -----------
<S> <C>
Rosewood Capital, L.P.
One Maritime Plaza, Suite 1330
San Francisco, California 94111....... 20.1
Funds affiliated with Farallon Partners,
L.L.C.(2)
One Maritime Plaza, Suite 1325
San Francisco, California 94111....... 7.6
Rafael Rubio(3)......................... 9.7
Ralph Rubio(3).......................... 13.8
Kyle Anderson(4)........................ 20.1
Jason M. Fish(5)........................ 7.6
Kim Lopdrup............................. *
Robert Rubio(3)......................... 1.7
Stephen J. Sather....................... *
James W. Stryker........................ *
Bruce Frazer............................ *
All directors and executive officers as
a group (9 persons)................... 53.8
</TABLE>
- ------------------------------
* Less than 1% of total.
(1) In connection with the underwriters over-allotment option, Rosewood Capital,
L.P., Rafael Rubio and funds affiliated with Farallon Capital will sell up
to an additional 200,000, 35,752 and 50,000 shares, respectively.
(2) Includes 399,886 shares beneficially owned by Farallon Capital Partners,
L.P., 333,239 shares beneficially owned by Farallon Capital Institutional
Partners, L.P., 142,816 shares beneficially owned by Farallon Capital
Institutional Partners II, L.P., 38,085 shares beneficially owned by
Farallon Capital Institutional Partners III, L.P., and 38,085 shares
beneficially owned by RR Capital Partners, L.P. All of the foregoing
entities disclaim group attribution.
(3) All of the shares outstanding held by Rafael Rubio, Ralph Rubio and Robert
Rubio are held in trust for the benefit of these individuals and/or their
families.
(4) Includes 2,026,812 shares held by the Rosewood Capital, L.P. Mr. Anderson is
a founding member of Rosewood Capital Associates LLC, the general partner of
Rosewood Capital, L.P. Mr. Anderson disclaims beneficial ownership of such
shares except to the extent of his pecuniary interest therein.
(5) Includes 952,111 shares held by the funds affiliated with Farallon Partners,
L.L.C., as described in note (1) above. Mr. Fish is a managing member of
Farallon Partners, L.L.C. Mr. Fish disclaims beneficial ownership of such
shares.
45
<PAGE>
DESCRIPTION OF SECURITIES
The following information describes our common stock and preferred stock and
certain provisions of our certificate of incorporation and our bylaws as in
effect upon the closing of this offering. This description is only a summary.
You should also refer to the certificate and bylaws which have been filed with
the SEC as exhibits to our registration statement, of which this prospectus
forms a part. The descriptions of the common stock and preferred stock reflect
changes to our capital structure that will occur upon the receipt of the
requisite board of directors and stockholder approvals and upon the closing of
this offering in accordance with the terms of the certificate.
Upon the completion of the offering our authorized capital stock will
consist of 75,000,000 shares of common stock, par value $0.001 per share, and
5,000,000 shares of preferred stock, par value $0.001 per share.
COMMON STOCK
As of March 18, 1999, there were 1,082,574 shares of common stock
outstanding and held of record by 22 stockholders, assuming the exercise of all
common stock warrants that must be exercised prior to this offering. Based upon
the number of shares outstanding and giving effect to (1) the automatic
conversion of each share of our preferred stock into one share of our common
stock upon the closing of this offering and (2) the issuance of the 2,250,000
shares of common stock offered hereby, there will be 8,599,162 shares of common
stock outstanding upon the closing of this offering.
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of common stock are entitled to receive ratably
such dividends, if any, as may be declared by the board of directors out of
funds legally available for that purpose, subject to any preferential dividend
rights of any outstanding preferred stock. Holders of common stock have no
preemptive, subscription, redemption or conversion rights. The outstanding
shares of common stock are, and the shares offered by us in this offering will
be, when issued in consideration for payment thereof, fully paid and
nonassessable. The rights, preferences and privileges of holders of common stock
are subject to, and may be adversely affected by, the rights of the holders of
shares of any series of preferred stock which we may designate and issue in the
future. Upon the closing of this offering, there will be no shares of preferred
stock outstanding.
PREFERRED STOCK
As of March 18, 1999, there were 5,266,588 shares of convertible preferred
stock outstanding, assuming the exercise of all preferred stock warrants that
must be exercised prior to this offering. All outstanding shares of convertible
preferred stock will be converted into an aggregate of 5,266,588 shares of
common stock upon the closing of this offering and such shares of convertible
preferred stock will no longer be authorized, issued or outstanding.
Upon the closing of this offering, the board of directors will be
authorized, without further stockholder approval, to issue from time to time up
to an aggregate of 5,000,000 shares of preferred stock in one or more series and
to fix or alter the designations, powers, preferences, rights and any
qualifications, limitations or restrictions of the shares of each such series
thereof, including the dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption (including sinking fund provisions),
redemption price or prices, liquidation preferences and the number of shares
constituting any series or designations of such series. We have no present plans
to issue any shares of preferred stock. Please see "--Anti-Takeover Effects of
Certain Provisions of Delaware Law and our Certificate of Incorporation and
Bylaws."
46
<PAGE>
OPTIONS
As of March 24, 1999, options to purchase a total of 392,230 shares of
common stock were outstanding and, assuming the effectiveness of the 1999 Stock
Incentive Plan, options to purchase a total of 734,170 shares of common stock
will be available for future issuance under the 1999 Stock Incentive Plan.
Please see "Management--Benefit Plans" and "Shares Eligible for Future Sale."
COMMON STOCK WARRANT
We have an outstanding warrant to purchase 45,000 shares of common stock, at
an exercise price of $7.20. The warrant contains an anti-dilution provision
providing for adjustments of the exercise price and the number of shares
underlying the warrant upon the occurrence of certain events, including any
recapitalization, reclassification, stock dividend, stock split, stock
combination or similar transaction. This warrant expires on the earlier of the
business day preceding an acquisition or December 31, 2002.
REGISTRATION RIGHTS
As of March 18, 1999, pursuant to the terms of an investors' rights
agreement after the closing of this offering the holders of 3,341,841 shares of
common stock and up to 45,000 shares of common stock issuable upon exercise of a
warrant will be entitled to certain demand registration rights with respect to
the registration of their shares under the Securities Act of 1933. The holders
of 50% of shares issued on conversion of the Series B preferred stock and Series
C preferred stock or the holders of 50% of such shares issued on conversion of
the Series D preferred stock have the right to demand that we register their
shares under the Securities Act subject to certain limitations. We are not
required to effect more than two registrations pursuant to such demand
registration rights. In addition, after the closing of this offering these
holders will be entitled to certain piggyback registration rights with respect
to the registration of such shares of common stock under the Securities Act. In
the event that we propose to register any shares of common stock under the
Securities Act either for our account or for the account of other security
holders, the holders of shares having piggyback registration rights are entitled
to receive notice of such registration and to include their shares in any such
registration, subject to certain limitations. Further, at any time after we
become eligible to file a registration statement on Form S-3, the holders of
3,365,242 shares of common stock may require us to file registration statements
under the Securities Act on Form S-3 with respect to their shares of common
stock. These registration rights are subject to certain conditions and
limitations, among them the right of the underwriters of an offering to limit
the number of shares of common stock held by such security holders to be
included in such registration. We are generally required to bear all of the
expenses of all such registrations, including the reasonable fees of a single
counsel acting on behalf of all selling holders, except underwriting discounts
and selling commissions. Registration of any of the shares of common stock held
by security holders with registration rights would result in such shares
becoming freely tradable without restriction under the Securities Act
immediately upon effectiveness of such registration.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE
OF INCORPORATION AND BYLAWS
GENERAL
Certain provisions of Delaware law and our certificate of incorporation and
bylaws could have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from acquiring, control of us. Such
provisions could limit the price that certain investors might be willing to pay
in the future for shares of our common stock. These provisions of Delaware law
and the certificate of incorporation and bylaws may also have the effect of
discouraging or preventing certain types of transactions involving an actual or
threatened change of control of us, including unsolicited takeover
47
<PAGE>
attempts, even though such a transaction may offer our stockholders the
opportunity to sell their stock at a price above the prevailing market price.
DELAWARE TAKEOVER STATUTE
We are subject to the "business combination" provisions of Section 203 of
the Delaware General Corporation Law. Subject to certain exceptions, Section 203
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless:
- the transaction is approved by the board of directors prior to the date
the interested stockholder obtained interested stockholder status;
- upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, the stockholder owned at least 85% of
our voting stock outstanding at the time the transaction commenced,
excluding for purposes of determining the number of shares outstanding
those shares owned by (a) persons who are directors and also officers and
(b) employee stock plans in which employee participants do not have the
right to determine confidentially whether shares held subject to the plan
will be tendered in a tender or exchange offer; or
- on or subsequent to the date the business combination is approved by the
board and authorized at an annual or special meeting of stockholders by
the affirmative vote of at least 66 2/3% of the outstanding voting stock
that is not owned by the interested stockholder.
A "business combination" includes mergers, asset sales and other
transactions resulting in a financial benefit to the interested stockholder.
Subject to certain exceptions, an "interested stockholder" is a person who,
together with affiliates and associates, owns, or within three years did own,
15% or more of the corporation's voting stock. This statute could prohibit or
delay the accomplishment of mergers or other takeover or change in control
attempts with respect to us and, accordingly, may discourage attempts to acquire
us.
In addition, certain provisions of our certificate of incorporation and
bylaws summarized in the following paragraphs may be deemed to have an
anti-takeover effect and may delay, defer or prevent a tender offer or takeover
attempt that a stockholder might consider in its best interest, including those
attempts that might result in a premium over the market price for the shares
held by stockholders.
BOARD OF DIRECTORS VACANCIES
Our bylaws authorize the board of directors to fill vacant directorships or
increase the size of the board of directors. This may deter a stockholder from
removing incumbent directors and simultaneously gaining control of the board of
directors by filling the vacancies created by such removal with its own
nominees.
CLASSIFIED BOARD
Our bylaws provide that our board will be classified into three classes of
directors beginning at the next annual meeting of stockholders. Please see
"Management--Classes of the Board" for more information regarding the classified
board.
STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS
Our certificate of incorporation provides that stockholders may act only at
duly called annual or special meetings of stockholders, not by written consent.
Our bylaws further provide that special
48
<PAGE>
meetings of our stockholders may be called only by the President, Chief
Executive Officer or Chairman of the board of directors or a majority of the
board of directors.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS
Our bylaws provide that stockholders seeking to bring business before our
annual meeting of stockholders, or to nominate candidates for election as
directors at our annual meeting of stockholders, must provide timely notice
thereof in writing. To be timely, a stockholder's notice must be delivered to,
or mailed and received at, our principal executive offices not less than 120
days prior to the first anniversary of the date of notice of annual meeting
provided with respect to the previous year's annual meeting of stockholders;
provided, that if no annual meeting of stockholders was held in the previous
year or the date of the annual meeting of stockholders has been changed to be
more than 30 calendar days earlier than such anniversary, notice by the
stockholder, to be timely, must be received a reasonable time before the
solicitation is made. The bylaws also specify certain requirements as to the
form and content of a stockholder's notice. These provisions may preclude
stockholders from bringing matters before our annual meeting of stockholders or
from making nominations for directors at our annual meeting of stockholders.
AUTHORIZED BUT UNISSUED SHARES
Our authorized but unissued shares of common stock and preferred stock are
available for future issuance without stockholder approval, subject to certain
limitations imposed by the Nasdaq National Market. These additional shares may
be utilized for a variety of corporate purposes, including future public
offerings to raise additional capital, corporate acquisitions and employee
benefit plans. The existence of authorized but unissued and unreserved common
stock and preferred stock could render more difficult or discourage an attempt
to obtain control of us by means of a proxy contest, tender offer, merger or
otherwise.
Delaware law provides generally that the affirmative vote of a majority of
the shares entitled to vote on any matter is required to amend a corporation's
certificate of incorporation or bylaws, unless a corporation's certificate of
incorporation or bylaws, as the case may be, requires a greater percentage.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Our certificate of incorporation provides that, except to the extent
prohibited by Delaware law, our directors shall not be personally liable to us
or our stockholders for monetary damages for any breach of fiduciary duty as our
directors. Under Delaware law, the directors have a fiduciary duty to us which
is not eliminated by this provision of the certificate and, in appropriate
circumstances, equitable remedies such as injunctive or other forms of
nonmonetary relief will remain available. In addition, each director will
continue to be subject to liability under Delaware law for breach of the
director's duty of loyalty to us for acts or omissions which are found by a
court of competent jurisdiction to be not in good faith or which involve
intentional misconduct, or knowing violations of law, for actions leading to
improper personal benefit to the director, and for payment of dividends or
approval of stock repurchases or redemptions that are prohibited by Delaware
law. This provision does not affect the directors' responsibilities under any
other laws, such as the Federal securities laws or state or Federal
environmental laws.
Section 145 of the Delaware General Corporation Law empowers a corporation
to indemnify its directors and officers and to purchase insurance with respect
to liability arising out of their capacity or status as directors and officers,
provided that this provision shall not eliminate or limit the liability of a
director for the following:
- any breach of the director's duty of loyalty to us or our stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock purchases or redemptions;
- for any transaction from which the director derived an improper personal
benefit.
49
<PAGE>
Delaware law provides further that the indemnification permitted thereunder
shall not be deemed exclusive of any other rights to which the directors and
officers may be entitled under our bylaws, any agreement, a vote of stockholders
or otherwise. The certificate eliminates the personal liability of directors to
the fullest extent permitted by Delaware law. In addition, the certificate
provides that we may fully indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (whether civil, criminal, administrative or investigative) by
reason of the fact that such person is or was one of our directors or officers
or is or was serving at our request as a director of or officer of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding.
We have also entered into agreements to indemnify our directors and
executive officers, in addition to the indemnification provided for in our
bylaws. We believe that these provisions and agreements are necessary to attract
and retain qualified directors and executive officers. Our bylaws also permit us
to secure insurance on behalf of any officer, director, employee or other agent
for any liability arising out of his or her actions, regardless of whether
Delaware law would permit indemnification. We have applied for liability
insurance for our officers and directors.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the certificate of incorporation. We are not aware
of any threatened litigation or proceeding that may result in a claim for such
indemnification.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is U.S. Stock Transfer
Corporation.
50
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
The market price of our common stock could decline as a result of sales of a
large number of shares of our common stock in the market after this offering, or
the perception that such sales could occur. Such sales also might make it more
difficult for us to sell equity securities in the future at a time and price
that we deem appropriate. After this offering, 8,599,162 shares of common stock
will be outstanding. Of these shares, the 3,150,000 shares being offered hereby
are freely tradable. This leaves 5,449,162 shares eligible for sale in the
public market as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
- ----------------- -----------------------------------------------------------------------------------------------
<S> <C>
33,974 After the date of this prospectus
392,230 Upon the filing of a registration statement to register for resale shares of common stock
issuable upon the exercise of options granted under our stock option plans
-- At various times after 90 days from the date of this prospectus (Rules 701 and 144)
5,415,188 At various times after 180 days from the date of this prospectus (subject, in some cases, to
volume limitations) (lock-up and Rule 144)
</TABLE>
In general, under Rule 144, as currently in effect, an affiliate of Rubio's
or a person (or persons whose shares are required to be aggregated) who has
beneficially owned shares for at least one year is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of (1)
1% of the then outstanding shares of common stock (approximately 85,992 shares
immediately after this offering) or (2) the average weekly trading volume in the
common stock during the four calendar weeks preceding the date on which notice
of such sale is filed, subject to certain restrictions. In addition, a person
who is not deemed to have been our affiliate at any time during the 90 days
preceding a sale, and who has beneficially owned the shares proposed to be sold
for at least two years, would be entitled to sell such shares under Rule 144(k)
without regard to the requirements described above. To the extent that shares
were acquired from one of our affiliates, such person's holding period for the
purpose of effecting a sale under Rule 144 commences on the date of transfer
from the affiliate.
As of the date of this prospectus, options to purchase a total of 392,230
shares of common stock are outstanding, of which 113,757 shares are currently
vested and immediately exercisable. Upon the closing of this offering, we intend
to file a registration statement to register for resale the 1,126,400 shares of
common stock reserved for issuance under our stock option plans. We expect such
registration statement to become effective immediately upon filing. Shares
issued upon the exercise of stock options granted under our stock option plans
will be eligible for resale in the public market from time to time subject to
vesting and, in the case of certain options, the expiration of the lock-up
agreements referred to below.
Our directors and officers and certain of our stockholders who hold
4,962,718 shares in the aggregate have entered into lock-up agreements pursuant
to which they have agreed that they will not sell, directly or indirectly, any
shares of common stock without the prior written consent of Thomas Weisel
Partners LLC for a period of 180 days from the date of this prospectus. In
addition, certain of our stockholders who hold 452,470 shares in the aggregate
have entered into similar lock-up agreements with us.
Certain holders of approximately 3,341,841 shares of common stock and up to
45,000 shares of common stock issuable upon exercise of a warrant, have the
right, subject to certain conditions and limitations, to include their shares in
certain registration statements relating to our securities. By exercising their
registration rights and causing a large number of shares to be registered and
sold in the public market, these holders may cause the price of the common stock
to fall. In addition, any demand to include such shares in our registration
statements could have an adverse effect on our ability to raise needed capital.
Please see "Management--Benefit Plans," "Principal and Selling Stockholders,"
"Description of Securities--Registration Rights," "Shares Eligible for Future
Sale" and "Underwriting."
51
<PAGE>
UNDERWRITING
GENERAL
Subject to the terms and conditions set forth in an agreement among the
underwriters and us, each of the underwriters named below, through their
representatives, Thomas Weisel Partners LLC, Dain Rauscher Wessels, a division
of Dain Rauscher Incorporated ("Dain Rauscher Wessels"), and U.S. Bancorp Piper
Jaffray, has severally agreed to purchase from us the aggregate number of shares
of common stock set forth opposite its name below:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- --------------------------------------------------------------------------- -----------------
<S> <C>
Thomas Weisel Partners LLC.................................................
Dain Rauscher Wessels......................................................
U.S. Bancorp Piper Jaffray.................................................
-----------------
Total.................................................................... 3,150,000
-----------------
-----------------
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters are subject to various conditions, such as approval of certain
legal matters by counsel. The nature of the underwriters' obligations is such
that they are committed to purchase and pay for all of the above shares of
common stock if any are purchased.
The underwriting agreement provides that we and the selling stockholders
will indemnify the underwriters against certain liabilities under the Securities
Act or will contribute to payments that the underwriters may be required to make
relating to these liabilities.
OVER-ALLOTMENT OPTION
We and the selling stockholders named under the caption "Principal and
Selling Stockholders" have granted a 30-day over-allotment option to the
underwriters to purchase up to an aggregate of 472,500 additional shares of our
common stock exercisable at the "public offering price" less the "underwriting
discounts and commissions," each as set forth on the cover page of this
prospectus. If the underwriters exercise such option in whole or in part, then
each of the underwriters will be severally committed, subject to certain
conditions, to purchase the additional shares of our common stock in proportion
to their respective purchase commitments set forth in the table above.
COMMISSIONS AND DISCOUNTS
The underwriters propose to offer the shares of common stock directly to the
public at the "public offering price" set forth on the cover page of this
prospectus, and at such price less a concession not in excess of $ per share of
common stock to certain other dealers who are members of the National
Association of Securities Dealers, Inc. The underwriters may allow, and such
dealers may reallow, concessions not in excess of $ per share of common stock
to certain other dealers. After this offering, the offering price, concessions
and other selling terms may be changed by the underwriters. Our common stock is
offered subject to receipt and acceptance by the underwriters and to certain
other conditions, including the right to reject orders in whole or in part.
52
<PAGE>
The following table summarizes the compensation to be paid to the
underwriters by us and the expenses payable by us:
<TABLE>
<CAPTION>
TOTAL
------------------------------
WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
--------------- -------------- --------------
<S> <C> <C> <C>
Underwriting discounts and commissions paid by us...................... $ $ $
Expenses payable by us................................................. $ $ $
</TABLE>
RESERVED SHARES
The underwriters, at our request, have reserved for sale at the initial
public offering price up to 94,500 shares of common stock to be sold in this
offering for sale to our employees and other persons designated by us. The
number of shares available for sale to the general public will be reduced to the
extent that any reserved shares are purchased. Any reserved shares not purchased
in this manner will be offered by the underwriters on the same basis as the
other shares offered hereby.
NO SALES OF SIMILAR SECURITIES
Our directors and officers and certain stockholders who hold 4,962,718
shares in the aggregate, have agreed that they will not offer, sell, or agree to
sell, directly or indirectly, or otherwise dispose of any shares of common stock
without the prior written consent of Thomas Weisel Partners LLC for a period of
180 days from the date of this prospectus.
In addition, we have agreed that for a period of 180 days after the date of
this prospectus we will not, without the prior written consent of Thomas Weisel
Partners LLC, offer, sell or otherwise dispose of any shares of common stock
except for the shares of common stock offered hereby, the shares of common stock
issuable upon exercise of outstanding options and warrants.
INFORMATION REGARDING THOMAS WEISEL PARTNERS LLC
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998, Thomas Weisel Partners LLC has co-managed 12 public offerings of equity
securities and has acted as an underwriter in an additional four public
offerings of equity securities. Thomas Weisel Partners LLC does not have any
material relationship with us or any of our officers, directors or controlling
persons, except with respect to its contractual relationship with us under the
underwriting agreement entered into in connection with this offering.
NASDAQ NATIONAL MARKET LISTING
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial offering price for our common stock will be
determined by negotiations between us, the selling stockholders and
representatives of the underwriters. Some of the factors to be considered in
these negotiations will be our results of operations in recent periods,
estimates of our prospects and the industry in which we compete, an assessment
of our management, the general state of the securities markets at the time of
this offering and the prices of similar securities of generally comparable
companies. We have applied for approval for the quotation of our common stock on
the Nasdaq National Market, under the symbol "RUBO." We cannot assure you,
however, that an active or orderly trading market will develop for our common
stock or that our common stock will trade in the public markets subsequent to
this offering at or above the initial offering price. Please see "Risk
Factors--The liquidity of our stock is uncertain, since it has never been
publicly traded."
The underwriters do not expect to confirm sales of common stock to any
accounts over which they exercise discretionary authority to exceed 5% of the
number of shares being offered under this prospectus.
53
<PAGE>
MARKET STABILIZATION, SHORT POSITIONS AND PENALTY BIDS
In order to facilitate this offering, certain persons participating in this
offering may engage in transactions that stabilize, maintain or otherwise affect
the price of our common stock during and after this offering. Specifically, the
underwriters may over-allot or otherwise create a short position in our common
stock for their own account by selling more shares of common stock than we have
sold to them. The underwriters may elect to cover any short position by
purchasing shares of common stock in the open market or by exercising the
over-allotment option granted to the underwriters. In addition, the underwriters
may stabilize or maintain the price of the common stock by bidding for or
purchasing shares of common stock in the open market and may impose penalty
bids. Under these penalty bids, selling concessions that are allowed to
syndicate members or other broker-dealers participating in this offering are
reclaimed if shares of common stock previously distributed in this offering are
repurchased, usually in order to stabilize the market. The effect of these
transactions may be to stabilize or maintain the market price at a level above
that which might otherwise prevail in the open market. No representation is made
as to the magnitude or effect of any such stabilization or other transactions.
These transactions may be effected on the Nasdaq National Market or otherwise
and may be discontinued at any time after they are commenced.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Brobeck, Phleger & Harrison LLP, San Diego, California. Attorneys
associated with such firm own an aggregate of 76,288 shares of common stock.
Certain legal matters in connection with this offering will be passed upon for
the underwriters by Wilson Sonsini Goodrich & Rosati, P.C., Palo Alto,
California.
EXPERTS
The consolidated financial statements as of December 28, 1997 and December
27, 1998 and for each of the three years in the period ended December 27, 1998
included in this prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and are
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 (including
the exhibits, schedules and amendments to the registration statement) under the
Securities Act with respect to the shares of common stock to be sold in this
offering. This prospectus does not contain all the information set forth in the
registration statement. For further information with respect to our company and
the shares of common stock to be sold in this offering, reference is made to the
registration statement. Statements contained in this prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete, and in each instance reference is made to the copy of such
contract, agreement or other document filed as an exhibit to the registration
statement, each such statement being qualified in all respects by such
reference.
You may read and copy all or any portion of the registration statement or
any other information we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You can request copies of these documents,
upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. Our SEC filings, including the registration statement, are also available
to you on the Commission's Web site (http://www.sec.gov).
As a result of this offering, we will become subject to the information and
reporting requirements of the Exchange Act, and, in accordance therewith, will
file periodic reports, proxy statements and other information with the SEC. Upon
approval of the common stock for the quotation on the Nasdaq
54
<PAGE>
National Market, such reports, proxy and information statements and other
information may also be inspected at the offices of Nasdaq Operations, 1735 K
Street, N.W., Washington, D.C. 20006.
We intend to furnish our stockholders with annual reports containing audited
consolidated financial statements and with quarterly reports for the first three
quarters of each year containing unaudited interim consolidated financial
information.
55
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
RUBIO'S RESTAURANTS, INC. PAGE
-----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Consolidated Balance Sheets as of December 28, 1997 and December 27, 1998............. F-3
Consolidated Statements of Operations for the years ended December 29, 1996, December
28, 1997 and December 27, 1998...................................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December
29, 1996, December 28, 1997 and December 27, 1998................................... F-5
Consolidated Statements of Cash Flows for the years ended December 29, 1996, December
28, 1997 and December 27, 1998...................................................... F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Rubio's Restaurants, Inc.:
We have audited the accompanying consolidated balance sheets of Rubio's
Restaurants, Inc. and subsidiary (the "Company") as of December 28, 1997 and
December 27, 1998, and the related consolidated statements of operations,
stockholders' equity (deficit) and of cash flows for each of the three years in
the period ended December 27, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Rubio's Restaurants, Inc. and
subsidiary as of December 28, 1997 and December 27, 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
December 27, 1998 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
San Diego, California
March 25, 1999
F-2
<PAGE>
RUBIO'S RESTAURANTS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 28, 1997 AND DECEMBER 27, 1998
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY
(NOTE 1)
1997 1998 (UNAUDITED)
---------- ---------- ------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................................... $ 866,160 $ 786,493
Short-term investments.............................................................. 4,758,475 2,721,894
Other receivables................................................................... 12,592 169,688
Income taxes receivable............................................................. 3,315 99,478
Inventory........................................................................... 254,210 359,755
Prepaid expenses.................................................................... 174,108 295,143
Deferred income taxes............................................................... -- 53,485
---------- ----------
Total current assets.............................................................. 6,068,860 4,485,936
INVESTMENTS........................................................................... 4,617,000 3,391,490
PROPERTY--net......................................................................... 12,167,851 17,133,392
OTHER ASSETS.......................................................................... 200,294 346,765
DEFERRED INCOME TAXES................................................................. -- 393,914
---------- ----------
TOTAL................................................................................. $23,054,005 $25,751,497
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable.................................................................... $1,765,720 $2,942,970
Accrued expenses and other liabilities.............................................. 1,226,754 2,150,424
Current portion of long-term debt................................................... 808,232 742,573
Income taxes payable................................................................ -- 105,235
---------- ----------
Total current liabilities......................................................... 3,800,706 5,941,202
DEFERRED RENT......................................................................... 637,579 805,054
LONG-TERM DEBT........................................................................ 1,753,842 1,113,860
---------- ----------
Total liabilities................................................................. 6,192,127 7,860,116
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 4)
REDEEMABLE CONVERTIBLE PREFERRED STOCK:
Series B redeemable ($3.74 per share liquidation preference), actual--$.001 par
value, 1,092,007 shares authorized, issued and outstanding; pro forma--no shares
authorized, issued or outstanding................................................. 3,348,015 3,408,810
Series C redeemable ($5.81 per share liquidation preference), actual--$.001 par
value, 793,640 shares authorized, issued and outstanding; pro forma--no shares
authorized, issued or outstanding................................................. 4,243,570 4,254,450
Series D redeemable ($7.19 per share liquidation preference), actual--$.001 par
value, 1,524,595 shares authorized, 1,403,843 issued and outstanding in 1997 and
1,452,491 issued and outstanding in 1998; pro forma--no shares authorized, issued
or outstanding.................................................................... 9,411,116 10,032,065
---------- ----------
Total redeemable convertible preferred stock...................................... 17,002,701 17,695,325 $ --
---------- ---------- ------------
STOCKHOLDERS' EQUITY (DEFICIT):
Convertible preferred stock Series A ($2.00 per share liquidation preference),
actual--$.001 par value, 1,973,395 shares authorized, 1,973,395 issued and
outstanding in 1997 and 1,924,747 issued and outstanding in 1998; pro forma--no
shares authorized, issued or outstanding.......................................... 1,973 1,925
Common stock, actual--$.001 par value, 7,298,725 shares authorized, 1,010,577 issued
and outstanding in 1997 and 1,048,600 issued and outstanding in 1998; pro
forma--6,349,162 shares issued and outstanding.................................... 1,011 1,049 6,349
Paid-in capital..................................................................... 28,271 -- 17,691,951
Deferred compensation............................................................... -- 22,881 22,881
Accumulated other comprehensive income.............................................. -- 44,271 44,271
Retained earnings (accumulated deficit)............................................. (172,078) 125,930 125,930
---------- ---------- ------------
Total stockholders' equity (deficit).............................................. (140,823) 196,056 $17,891,382
---------- ---------- ------------
------------
TOTAL................................................................................. $23,054,005 $25,751,497
---------- ----------
---------- ----------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
RUBIO'S RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 29, 1996, DECEMBER 28, 1997 AND DECEMBER 27, 1998
<TABLE>
<CAPTION>
1996 1997 1998
------------- ------------- -------------
<S> <C> <C> <C>
SALES............................................................... $ 19,523,064 $ 29,703,726 $ 44,698,531
COSTS AND EXPENSES:
Cost of sales..................................................... 5,068,647 8,658,651 13,073,417
Restaurant labor, occupancy and other............................. 10,440,660 15,639,052 22,616,021
------------- ------------- -------------
Total restaurant operating costs................................ 15,509,307 24,297,703 35,689,438
------------- ------------- -------------
Income from restaurant operations............................... 4,013,757 5,406,023 9,009,093
General and administrative expenses............................... 3,175,603 4,253,704 6,148,137
Depreciation and amortization..................................... 735,241 1,259,283 1,945,932
Pre-opening expenses.............................................. 18,298 270,846 318,529
Loss on asset impairment.......................................... -- 386,928 --
------------- ------------- -------------
OPERATING INCOME (LOSS)............................................. 84,615 (764,738) 596,495
OTHER INCOME (EXPENSE):
Interest and investment income.................................... 236,469 188,132 521,110
Interest expense.................................................. (219,307) (262,622) (253,575)
Miscellaneous income (expense).................................... 1,235 (5,321) (9,945)
Loss on disposal/sale of property................................. (1,799) (56,395) (5,073)
------------- ------------- -------------
Total other income (expense).................................... 16,598 (136,206) 252,517
------------- ------------- -------------
INCOME (LOSS) BEFORE INCOME TAXES................................... 101,213 (900,944) 849,012
INCOME TAX (EXPENSE) BENEFIT........................................ (29,611) (99,522) 66,276
------------- ------------- -------------
NET INCOME (LOSS)................................................... $ 71,602 $ (1,000,466) $ 915,288
------------- ------------- -------------
------------- ------------- -------------
HISTORIC NET INCOME (LOSS) PER SHARE:
Basic............................................................. $ -- $ (1.08) $ .55
------------- ------------- -------------
------------- ------------- -------------
Diluted........................................................... $ -- $ (1.08) $ .14
------------- ------------- -------------
------------- ------------- -------------
HISTORIC SHARES USED IN CALCULATING HISTORIC NET INCOME (LOSS) PER
SHARE:
Basic............................................................. 1,007,639 1,010,483 1,033,469
------------- ------------- -------------
------------- ------------- -------------
Diluted........................................................... 1,025,588 1,010,483 6,417,654
------------- ------------- -------------
------------- ------------- -------------
PRO FORMA NET INCOME PER SHARE (UNAUDITED):
Basic............................................................. $ .14
-------------
-------------
Diluted........................................................... $ .14
-------------
-------------
PRO FORMA SHARES USED IN CALCULATING PRO FORMA NET INCOME PER SHARE
(UNAUDITED):
Basic............................................................. 6,334,031
-------------
-------------
Diluted........................................................... 6,455,331
-------------
-------------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
RUBIO'S RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 29, 1996, DECEMBER 28, 1997 AND DECEMBER 27, 1998
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK
SERIES A COMMON STOCK
---------------------- ---------------------- PAID-IN DEFERRED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION
--------- ----------- --------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996............................ 2,000,000 $ 2,000 1,000,000 $ 1,000 $ 24,387
Exercise of common stock options.................. 10,107 10 3,651
Repurchase shares of Series A preferred stock..... (26,605) (27) -- -- (216)
Net income........................................ -- -- -- -- --
Accretion of redemption--preferred stock.......... -- -- -- -- --
--------- ----------- --------- ----------- ---------
BALANCE, DECEMBER 29, 1996.......................... 1,973,395 1,973 1,010,107 1,010 27,822
Exercise of common stock options.................. 450 1 449
Net loss.......................................... -- -- -- -- --
Accretion of redemption--preferred stock.......... -- -- -- -- --
--------- ----------- --------- ----------- ---------
BALANCE, DECEMBER 28, 1997.......................... 1,973,395 1,973 1,010,557 1,011 28,271
Exercise of common stock options.................. 38,043 38 51,634
Repurchase shares of Series A preferred stock..... (48,648) (48) -- -- (79,905)
Deferred compensation--stock options.............. $ 22,881
Accretion of redemption--preferred stock.......... -- -- -- -- --
Net income........................................ -- -- -- -- --
Other comprehensive income:
Net unrealized gain on available-for-sale
investments, net of $30,765 tax............... -- -- -- -- --
Total comprehensive income.................... -- -- -- -- --
--------- ----------- --------- ----------- --------- -------------
BALANCE, DECEMBER 27, 1998.......................... 1,924,747 $ 1,925 1,048,600 $ 1,049 $ -- $ 22,881
--------- ----------- --------- ----------- --------- -------------
--------- ----------- --------- ----------- --------- -------------
<CAPTION>
ACCUMULATED
OTHER RETAINED TOTAL TOTAL
COMPRE- EARNINGS STOCKHOLDERS' COMPRE-
HENSIVE (ACCUMULATED EQUITY HENSIVE
INCOME DEFICIT) (DEFICIT) INCOME
------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996............................ $1,063,309 $1,090,696
Exercise of common stock options.................. 3,661
Repurchase shares of Series A preferred stock..... (142,926) (143,169)
Net income........................................ 71,602 71,602
Accretion of redemption--preferred stock.......... (68,958) (68,958)
------------- ------------
BALANCE, DECEMBER 29, 1996.......................... 923,027 953,832
Exercise of common stock options.................. 450
Net loss.......................................... (1,000,466) (1,000,466)
Accretion of redemption--preferred stock.......... (94,639) (94,639)
------------- ------------
BALANCE, DECEMBER 28, 1997.......................... (172,078) (140,823)
Exercise of common stock options.................. 51,672
Repurchase shares of Series A preferred stock..... (270,047) (350,000)
Deferred compensation--stock options.............. 22,881
Accretion of redemption--preferred stock.......... (347,233) (347,233)
Net income........................................ 915,288 915,288 $ 915,288
Other comprehensive income:
Net unrealized gain on available-for-sale
investments, net of $30,765 tax............... $ 44,271 -- 44,271 44,271
------------
Total comprehensive income.................... -- -- -- $ 959,559
------------- ------------ ------------ -----------
-----------
BALANCE, DECEMBER 27, 1998.......................... $ 44,271 $ 125,930 $ 196,056
------------- ------------ ------------
------------- ------------ ------------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
RUBIO'S RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 29, 1996, DECEMBER 28, 1997 AND DECEMBER 27, 1998
<TABLE>
<CAPTION>
1996 1997 1998
------------ -------------- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)..................................................... $ 71,602 $ (1,000,466) $ 915,288
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization....................................... 735,241 1,259,283 1,945,932
Loss on asset impairment............................................ -- 386,928 --
Deferred compensation............................................... -- -- 22,881
Loss on disposal/sale of property................................... 1,799 56,395 5,073
Changes in assets and liabilities:
Other receivables................................................. (24,178) 11,586 (157,096)
Income taxes receivable........................................... 51,060 8,849 (96,163)
Inventory......................................................... (40,880) (80,230) (105,545)
Prepaid expenses.................................................. (179,460) 52,522 (121,035)
Other assets...................................................... (26,122) 55,781 (146,471)
Deferred income taxes............................................. 12,525 33,611 (447,399)
Accounts payable.................................................. 522,001 540,584 1,177,250
Accrued expenses and other liabilities............................ 246,727 535,084 923,670
Income taxes payable.............................................. -- -- 105,235
Deferred rent..................................................... 77,489 135,775 167,475
------------ -------------- --------------
Cash provided by operating activities........................... 1,447,804 1,995,702 4,189,095
INVESTING ACTIVITIES:
Proceeds from sale of property........................................ 2,002 9,330 7,200
Purchase of property.................................................. (2,951,304) (6,423,481) (6,923,746)
Purchases of investments.............................................. (9,119,679) (17,264,580) (29,648,505)
Sales and maturities of investments................................... 5,508,529 12,291,384 32,954,867
------------ -------------- --------------
Cash used for investing activities.............................. (6,560,452) (11,387,347) (3,610,184)
FINANCING ACTIVITIES:
Proceeds from long-term debt.......................................... 1,168,678 836,869 2,227,720
Principal payments on long-term debt.................................. (609,162) (757,418) (2,933,361)
Proceeds from the sale of redeemable preferred stock.................. 4,224,527 9,388,152 350,000
Repurchase of Series A preferred stock................................ (143,169) -- (350,000)
Proceeds from exercise of stock options............................... 3,661 450 51,672
Deferred offering costs............................................... -- -- (4,609)
Transfer of cash from restricted deposit.............................. 97,002 156,624 --
------------ -------------- --------------
Cash provided by (used for) financing activities................ 4,741,537 9,624,677 (658,578)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........................ (371,111) 233,032 (79,667)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.......................... 1,004,239 633,128 866,160
------------ -------------- --------------
CASH AND CASH EQUIVALENTS AT END OF YEAR................................ $ 633,128 $ 866,160 $ 786,493
------------ -------------- --------------
------------ -------------- --------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest................................................ $ 203,716 $ 260,988 $ 219,740
Cash paid (received) related to income taxes--net..................... $ 68,250 $ (61,085) $ 402,818
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Holding gains on available-for-sale investments, before tax........... $ 75,036
--------------
--------------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 29, 1996, DECEMBER 28, 1997 AND DECEMBER 27, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS--Rubio's Restaurants, Inc. was incorporated in
California in 1985 and reincorporated in Delaware in 1997 (see Note 7). Rubio's
Restaurants, Inc. has a wholly-owned subsidiary which was incorporated in Nevada
in 1997. Rubio's Restaurants, Inc. and its subsidiary (collectively, the
"Company") own and operate a chain of 59 restaurants and three concessions in
Southern California, Nevada and Arizona.
BASIS OF FINANCIAL STATEMENT PRESENTATION--The Company operates and reports
on a 52-53 week fiscal year ending on the Sunday closest to December 31.
ACCOUNTING ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and contingencies at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results may differ from those estimates.
CASH EQUIVALENTS--Cash equivalents consist of money market instruments
purchased with an original maturity date of three months or less.
INVESTMENTS--The Company's investments are composed primarily of government
and mortgage-backed securities. While it is the Company's general intent to hold
such securities until maturity, management will occasionally sell particular
securities for cash flow purposes. Therefore, pursuant to Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," the Company's investments are classified as
available-for-sale based upon the Company's intent, and are accounted for at
fair market value (see Note 2). The fair market value of such investments is
determined based on quoted market prices for those investments, and approximated
cost at December 28, 1997. Holding gains on these investments were $75,036 at
December 27, 1998 and are included as other accumulated comprehensive income in
the statements of stockholders' equity. Short-term investments are investments
with original maturities of greater than three months and remaining maturities
of less than one year, or investments that are reasonably expected to be
realized in cash or consumed in operations over the next year (see Note 2).
INVENTORY--Inventory consists of food, beverage and restaurant supplies and
is stated at the lower of cost (first-in, first-out method) or market.
PROPERTY--Property is stated at cost. Depreciation and amortization are
computed using the straight-line method over the estimated useful lives of the
assets or the remaining lease term, whichever is less. The lives for equipment
are 3 - 7 years and for building and leasehold items, 5 - 20 years.
The Company periodically assesses its ability to recover the carrying value
of its long-lived assets. If management concludes that the carrying value will
not be recovered, an impairment write-down is recorded to reduce the asset to
its estimated fair value.
In 1997, in accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets to be Disposed Of," the Company recorded a loss of $386,928 on
long-lived assets where circumstances indicated that the assets were impaired
based on the expected future cash flows of one of the restaurant locations. The
impairment charge was the difference between the carrying value and the
estimated fair value of the assets. The Company estimated fair values based on
sales prices for
F-7
<PAGE>
RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 29, 1996, DECEMBER 28, 1997 AND DECEMBER 27, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
comparable assets. The Company will continue to operate this store to the end of
the lease term. The Company did not have any impairment losses in fiscal 1996 or
1998.
DEFERRED RENT--Rent expense on operating leases with scheduled or minimum
rent increases is expensed on the straight-line basis over the lease terms.
Deferred rent represents the excess of rent charged to expense over rent payable
under the lease agreement.
UNEARNED USAGE ALLOWANCE--The Company receives payments from the Company's
beverage suppliers under the suppliers' marketing allowance programs and records
such amounts as an unearned usage allowance. The Company recognizes the usage
allowance as a reduction to cost of sales based on the actual quantity purchased
on a monthly basis.
STORE PRE-OPENING EXPENSES--Costs incurred in connection with start-up and
promotion of new store openings are expensed as incurred.
INCOME TAXES--The Company accounts for income taxes in accordance with SFAS
No. 109 "Accounting for Income Taxes" (see Note 5).
STOCK-BASED COMPENSATION--Effective January 1, 1996, the Company adopted
SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123
encourages, but does not require, companies to record compensation cost for
stock-based employee compensation plans at fair value. The Company has chosen to
continue to account for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related Interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the fair market value of the Company's stock at the date of the grant
over the amount an employee must pay to acquire the stock (see Note 7).
CONCENTRATION OF CREDIT RISK--The Company invests its excess cash in money
market accounts and debt securities. The Company has not experienced any
material losses on its cash accounts or other investments.
EARNINGS PER SHARE--In February 1997, the Financial Accounting Standards
Board ("FASB") issued SFAS No. 128, "Earnings Per Share" (EPS), effective for
all financial statements issued after December 15, 1997. SFAS No. 128 requires
dual presentation of "Basic" and "Diluted" EPS by entities with complex capital
structures, replacing "Primary" and "Fully Diluted" EPS under APB Opinion No.
15. Basic EPS excludes dilution and is computed by dividing net income or loss
attributable to common stockholders by the weighted average of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock (convertible
preferred stock, warrants to purchase common stock and common stock options
using the treasury stock method) were exercised or converted into common stock.
Potential common shares in the diluted EPS computation are excluded where their
effect would be antidilutive. EPS for all periods have been computed in
accordance with SFAS No. 128 (see Note 8).
PRO FORMA NET INCOME PER SHARE--In accordance with SFAS No. 128, pro forma
basic net income per share is computed based on the weighted average of common
shares outstanding during the year, which includes the conversion of all
convertible preferred stock and the issuance of shares of common stock upon the
exercise of certain outstanding warrants (see "Unaudited Pro Forma Stockholders'
F-8
<PAGE>
RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 29, 1996, DECEMBER 28, 1997 AND DECEMBER 27, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Equity") upon the consummation of the Company's planned initial public offering.
Pro forma diluted earnings per share is computed assuming the potential dilution
upon exercise of potential common shares using the treasury stock method, except
for the years where potential dilution is not assumed as the effect would be
antidilutive (see "Earnings Per Share" and Note 8).
UNAUDITED PRO FORMA STOCKHOLDERS' EQUITY--On March 18, 1999, the Company's
Board of Directors approved an increase in the authorized shares of common stock
to 75,000,000 and authorized 5,000,000 shares of undesignated preferred stock.
The change in authorized shares will be effective upon the closing of the
Company's planned initial public offering. Consolidated stockholders' equity as
of December 27, 1998 has been shown on a pro forma basis, assuming conversion of
5,262,885 shares of convertible preferred stock then outstanding into 5,262,885
shares of common stock, and the issuance of 37,677 shares of common stock upon
the exercise of certain outstanding warrants. The unaudited pro forma
consolidated balance sheet as of December 27, 1998 and pro forma net income per
share (see "Pro Forma Net Income Per Share"), reflect this conversion.
RECENT ACCOUNTING PRONOUNCEMENTS--In June 1997, the FASB issued SFAS No.
130, "Reporting Comprehensive Income," effective for fiscal years beginning
after December 15, 1997. SFAS No. 130 establishes standards for the reporting
and display of comprehensive income and its components in a full set of general
purpose financial statements. Comprehensive income is defined as the change in
equity of a business enterprise during a period, resulting from transactions and
other events and circumstances from nonowner sources. The Company implemented
SFAS No. 130 for fiscal 1998.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information." SFAS No. 131 requires publicly held
companies to report financial and other information about key revenue-producing
segments of the entity for which such information is available and is utilized
by the chief operating decision maker. Specific information to be reported for
individual segments includes profit or loss, certain revenue and expense items
and total assets. A reconciliation of segment financial information to amounts
reported in the financial statements would be provided. SFAS No. 131 is
effective for the Company in 1998. The Company currently operates as one segment
(see Note 9).
In April 1998, Statement of Position ("SOP") 98-5, "Reporting on the Costs
of Start-Up Activities" was issued by the Accounting Standards Executive
Committee. SOP 98-5 provides guidance on the financial reporting of start-up
costs and organization costs. It requires costs of start-up activities and
organization costs to be expensed as incurred, and is effective for fiscal years
beginning after December 15, 1998. The Company early adopted this SOP for the
fiscal year ended December 28, 1997. The adoption of this SOP did not have a
material effect on the results of operations.
RECLASSIFICATIONS--Certain prior year amounts have been reclassified to
conform with current year presentation.
F-9
<PAGE>
RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 29, 1996, DECEMBER 28, 1997 AND DECEMBER 27, 1998
2. BALANCE SHEET DETAILS as of December 28, 1997 and December 27, 1998,
respectively:
<TABLE>
<CAPTION>
1997 1998
------------- -------------
<S> <C> <C>
PROPERTY--at cost:
Building and leasehold improvements.......................... $ 7,884,212 $ 11,209,218
Equipment and furniture...................................... 7,411,138 10,319,498
Construction in process and related costs.................... 468,580 1,059,514
------------- -------------
15,763,930 22,588,230
Less: accumulated depreciation and amortization................ (3,596,079) (5,454,838)
------------- -------------
Total.......................................................... $ 12,167,851 $ 17,133,392
------------- -------------
------------- -------------
OTHER ASSETS:
Long-term deposits........................................... $ 193,836 $ 268,680
Other........................................................ 6,458 78,085
------------- -------------
Total.......................................................... $ 200,294 $ 346,765
------------- -------------
------------- -------------
ACCRUED EXPENSES AND OTHER LIABILITIES:
Compensation................................................. $ 531,997 $ 1,069,227
Sales taxes.................................................. 223,129 334,157
Vacation pay................................................. 165,347 248,136
Unearned usage allowance..................................... 114,442 206,316
Other........................................................ 191,839 292,588
------------- -------------
Total.......................................................... $ 1,226,754 $ 2,150,424
------------- -------------
------------- -------------
INVESTMENTS:
U.S. Treasury notes.......................................... $ 9,324,976 $ 4,911,791
Mortgage-backed securities................................... 50,499 1,201,593
------------- -------------
9,375,475 6,113,384
Less current portion......................................... (4,758,475) (2,721,894)
------------- -------------
Non-current.................................................. $ 4,617,000 $ 3,391,490
------------- -------------
------------- -------------
</TABLE>
3. LONG-TERM DEBT AND CREDIT FACILITIES
CAPITAL EXPANSION LINE--In 1997, the Company had a $3,000,000 capital
expansion line (the "Capital line") with a bank which provided for interest at
1.0% over the bank's referenced rate (8.50% at December 28, 1997). The purpose
of the Capital line was to assist the Company in financing leasehold
improvements and equipment in new restaurant locations. Under the Capital line,
the bank would advance 75% of the invoice amounts, not to exceed $200,000 per
location. Once each restaurant was completed the advances were converted to an
individual term loan. Each individual loan had specific monthly payments of both
principal and interest, commencing one month after conversion. The Capital line
was secured by the Company's assets, including a specific collateral assignment
of Rubio's trademarks and Waiver and Consent Agreement on all new locations
financed. Interest expense for the borrowings under the Capital line was
$219,307, $262,622 and $82,081 for the years ended
F-10
<PAGE>
RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 29, 1996, DECEMBER 28, 1997 AND DECEMBER 27, 1998
3. LONG-TERM DEBT AND CREDIT FACILITIES (CONTINUED)
December 29, 1996, December 28, 1997 and December 27, 1998, respectively. The
Capital line contained various covenants including the maintenance of a minimum
amount of tangible net worth and a debt coverage ratio, and placed certain
restrictions on fixed asset purchases. There was $2,562,074 in total borrowings
against the Capital line as of December 28, 1997, and the Company was in
compliance with all related covenants. There were no additional amounts
available upon the expiration of the Capital line on April 30, 1997. The Company
refinanced the remaining borrowings under the Capital line with the Term Loan in
May 1998.
TERM LOAN--In May 1998, the Company entered into a term loan (the "Term
Loan") with another bank to refinance the remaining borrowings under the Capital
line. The Term Loan provides for interest, at the election of the Company at:
(i) adjusted LIBOR plus 4% per annum (9.25% at December 27, 1998) or (ii) the
greater of the bank reference rate plus 1.5% or the Federal Funds Effective Rate
plus 2%. There was $1,856,433 outstanding under the Term Loan as of December 27,
1998. Interest expense was $171,494 under the Term Loan for the year ended
December 27, 1998. There are no additional amounts available to the Company
under the Term Loan. Principal and interest payments are due in quarterly
installments through April 1, 2001 or no later than 90 days after the completion
of an initial public offering, whichever is earlier.
REVOLVING LINE OF CREDIT--In May 1998, the Company entered into a revolving
line of credit (the "Credit line") in conjunction with the Term Loan, which
provides for interest at the election of the Company, at: (i) adjusted LIBOR
plus 4% per annum (9.25% at December 27, 1998) or (ii) the greater of the bank
reference rate plus 1.5% or the Federal Funds Effective Rate plus 2%. Principal
and interest payments due under the Credit line are payable upon or before
maturity at May 12, 2001. There were no borrowings outstanding against the
Credit line at December 27, 1998.
The Term Loan and Credit line contain various covenants including a fixed
charge coverage ratio, minimum interest coverage ratio, and maximum total
leverage ratio, and place certain restrictions on fixed asset purchases. The
Term Loan and Credit line restrict the payment of cash dividends and other stock
redemptions or repurchases, as defined in the agreement, without prior consent
of the lender. Borrowings under the Credit line and the Term Loan are secured by
the Company's assets. The Company was in compliance with all such covenants as
of December 27, 1998.
F-11
<PAGE>
RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 29, 1996, DECEMBER 28, 1997 AND DECEMBER 27, 1998
3. LONG-TERM DEBT AND CREDIT FACILITIES (CONTINUED)
The following summarizes the balances outstanding as long-term debt as of
December 28, 1997 and December 27, 1998:
<TABLE>
<CAPTION>
1997 1998
------------ ------------
<S> <C> <C>
Term Loan, total quarterly installment payments of $185,643,
interest payable in arrears ranging from 9.14% to 9.25%......... $ -- $ 1,856,433
Capital line, total monthly installment payments approximating
$89,193 including interest ranging from 8.38% to 10.75%......... 2,562,074 --
Less current portion.............................................. (808,232) (742,573)
------------ ------------
Long-term debt.................................................... $ 1,753,842 $ 1,113,860
------------ ------------
------------ ------------
</TABLE>
Principal payments on total long-term debt at December 27, 1998 are as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR
- --------------------------------------------------------------------------------
<S> <C>
1999............................................................................ $ 742,573
2000............................................................................ 742,573
2001............................................................................ 371,287
------------
$ 1,856,433
------------
------------
</TABLE>
4. COMMITMENTS AND CONTINGENCIES
The Company leases restaurant and office facilities, four vehicles, and
office equipment under various operating leases expiring through 2013. The
leases generally provide renewal options from three to ten years. Certain leases
are subject to minimum annual increases based upon the consumer price index not
to exceed specific maximum amounts, certain leases have built-in contingent
percentage rents based upon sales, and other leases pass through common area
charges to the Company. Rental expense under these operating leases was
approximately $1,879,954, $2,495,415 and $3,545,546 for fiscal years 1996, 1997
and 1998, respectively.
Future minimum annual lease commitments, as of December 27, 1998, are as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR
- -------------------------------------------------------------------------------
<S> <C>
1999........................................................................... $ 3,808,816
2000........................................................................... 3,761,455
2001........................................................................... 3,782,455
2002........................................................................... 3,683,500
2003........................................................................... 3,687,735
Thereafter..................................................................... 11,873,765
-------------
Total.......................................................................... $ 30,597,726
-------------
-------------
</TABLE>
F-12
<PAGE>
RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 29, 1996, DECEMBER 28, 1997 AND DECEMBER 27, 1998
4. COMMITMENTS AND CONTINGENCIES (CONTINUED)
EMPLOYEE SAVINGS PLAN--On January 31, 1997, the Company adopted a defined
contribution benefit 401(k) plan. This plan allows eligible employees to
contribute a percentage of their salary, subject to annual limits. The Company
matches 25% of each eligible employee's contributions up to 6% of their gross
salary. The contributions vest over a five-year period. The Company contributed
$43,573 to the plan for the year ended December 27, 1998.
5. INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Under SFAS No. 109, the deferred tax (provision)
benefit is determined under the liability method. Under this method, deferred
tax assets and liabilities are recognized based on differences between the
financial statement and tax basis of assets and liabilities using presently
enacted tax rates.
The components of the income taxes expense for the years ended December 29,
1996, December 28, 1997 and December 27, 1998 are as follows:
<TABLE>
<CAPTION>
1996 1997 1998
---------- ----------- -----------
<S> <C> <C> <C>
Federal (expense) benefit:
Current............................................... $ (30,609) $ 42,483 $ (306,652)
Deferred.............................................. 10,120 (127,496) 368,361
State (expense) benefit:
Current............................................... (800) 9,753 (105,236)
Deferred.............................................. (8,322) (24,262) 109,803
---------- ----------- -----------
Total income tax (expense) benefit...................... $ (29,611) $ (99,522) $ 66,276
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
The income tax expense differs from the Federal statutory rate because of
the effect of the following items for the years ended December 29, 1996,
December 28, 1997 and December 27, 1998:
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Statutory rate..................................................... (34.0)% 34.0% (35.0)%
State income taxes, net of Federal benefit......................... (6.0) (1.1) (5.9)
Non-deductible items............................................... (4.4) (.1) (.9)
Valuation allowance................................................ -- (49.2) 53.2
Other.............................................................. 15.1 5.3 (3.6)
--------- --------- ---------
Effective tax (expense) benefit rate............................... (29.3)% (11.1)% 7.8%
--------- --------- ---------
--------- --------- ---------
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for reporting and the
amounts used for income tax purposes.
F-13
<PAGE>
RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 29, 1996, DECEMBER 28, 1997 AND DECEMBER 27, 1998
5. INCOME TAXES (CONTINUED)
The tax effects of items comprising the Company's net deferred tax assets as
of December 28, 1997 and December 27, 1998 are as follows:
<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
Deferred rent....................................................... $ 273,139 $ 352,936
Differences between book and tax basis of property.................. (351,147) (326,163)
Reserves currently not deductible................................... 227,770 262,464
Net operating losses................................................ 234,737 --
Credits............................................................. 66,089 245,301
Other............................................................... 921 (17,943)
Unrealized gain on investments...................................... -- (30,765)
State taxes......................................................... -- (38,431)
----------- -----------
Net deferred tax assets before valuation allowance.................. 451,509 447,399
Valuation allowance................................................. (451,509) --
----------- -----------
Total............................................................... $ -- $ 447,399
----------- -----------
----------- -----------
</TABLE>
The Company has Federal credit carryforwards available to offset future tax
liabilities of $245,301.
The Company has provided a valuation allowance equal to the net deferred tax
asset as of December 28, 1997. The Company eliminated the valuation allowance in
1998 due to management's belief that current year activity made realization of
such benefit more likely than not.
6. REDEEMABLE CONVERTIBLE PREFERRED STOCK
REDEEMABLE CONVERTIBLE PREFERRED STOCK--The Company has three classes of
redeemable convertible preferred stock outstanding, each with voting rights and
each subject to the Stock Restriction Agreement dated February 1, 1995, as
amended and the Amended and Restated Certificate of Incorporation dated November
18, 1997 (the "Certificate of Incorporation").
SERIES B REDEEMABLE--In conjunction with the Certificate of
Incorporation, the Series B Stock Purchase Agreement and Investors'
Rights Agreement as amended and restated on November 19, 1997 provide,
among other things, that the Series B stockholders: (i) are entitled to a
$.26 per share annual dividend (non-cumulative) prior to any declaration
or payment of dividends to any holders of Series A Preferred Stock or
common stock, (ii) have a liquidation preference of $3.20511 per share
plus declared but unpaid dividends plus an amount equal to 8% compounded
per annum, (iii) may request redemption of their shares, subject to
legally available funds, any time on or after July 1, 2000 at a price
equal to the greater of $3.20511 per share or the fair market value of
such shares, but the Company may elect to defer a portion of the
redemption for up to four years from the date of the redemption request,
with such deferral bearing interest at prime plus 1%, (iv) have the right
at any time to convert their shares into common stock on a 1 for 1 basis
(subject to adjustment) as defined in the Certificate of Incorporation,
(v) shall automatically convert their shares to common stock on a 1 for 1
basis upon either (a) the consummation of a public
F-14
<PAGE>
RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 29, 1996, DECEMBER 28, 1997 AND DECEMBER 27, 1998
6. REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)
offering with aggregate net proceeds of $15 million, or (b) the date upon
which the Company obtains the consent of the holders of a majority of the
then outstanding shares of Series B Preferred Stock for such conversion,
(vi) have certain registration rights and (vii) have the right to approve
certain corporate transactions and the right of first refusal on certain
stock offerings.
SERIES C REDEEMABLE--In conjunction with the Certificate of
Incorporation, the Series C Preferred Stock Purchase Agreement and
Investors' Rights Agreement as amended and restated on November 19, 1997,
provide, among other things, that the Series C stockholders: (i) are
entitled to a $.43 per share annual dividend (non-cumulative) prior to
any declaration or payment of dividends to any holders of Series A
Preferred Stock or common stock, (ii) have a liquidation preference of
$5.38126 per share plus declared but unpaid dividends, plus an amount
equal to 8% compounded per annum, (iii) may request redemption of their
shares, subject to legally available funds, any time on or after July 1,
2000 at a price equal to the greater of $5.38126 per share or the fair
market value of such shares, but the Company may elect to defer a portion
of the redemption for up to four years from the date of the redemption
request, with such deferral bearing interest at prime plus 1%, (iv) have
the right to convert their shares into common stock on a 1 for 1 basis
(subject to adjustment) as defined in the Certificate of Incorporation,
(v) shall automatically convert their shares to common stock on a 1 for 1
basis (subject to adjustment) upon either (a) the consummation of a
public offering with aggregate net proceeds of $15 million, or (b) the
date upon which the Company obtains the consent of the holders of a
majority of the then outstanding shares of Series C Preferred Stock for
such conversion, (vi) have certain registration rights and (vii) have the
right to approve certain corporate transactions and the right of first
refusal on certain stock offerings.
SERIES D REDEEMABLE--In conjunction with the Certificate of
Incorporation, the Series D Preferred Stock Purchase Agreement and
Investors' Rights Agreement dated November 19, 1997, provide, among other
things, that the Series D stockholders: (i) are entitled to a $.5756 per
share annual dividend (non-cumulative) prior to any declaration or
payment of dividends to any holders of Series A Preferred Stock or common
stock, (ii) have a liquidation preference of $7.19454 per share plus
declared but unpaid dividends, plus an amount equal to 8% compounded per
annum, (iii) may request redemption of their shares, subject to legally
available funds, any time on or after July 1, 2000 at a price equal to
the greater of $7.19454 per share or the fair market value of such
shares, but the Company may elect to defer a portion of the redemption
for up to four years from the date of the redemption request, with such
deferral bearing interest at prime plus 1%, (iv) have the right to
convert their shares into common stock on a 1 for 1 basis (subject to
adjustment) as defined in the Certificate of Incorporation, (v) shall
automatically convert their shares to common stock on a 1 for 1 basis
(subject to adjustment) upon either (a) the consummation of a public
offering with aggregate net proceeds of $15 million, or (b) the date upon
which the Company obtains the consent of the holders of a majority of the
then outstanding shares of Series D Preferred Stock for such conversion,
(vi) have certain registration rights and (vii) have the right to approve
certain corporate transactions and the right of first refusal on certain
stock offerings.
F-15
<PAGE>
RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 29, 1996, DECEMBER 28, 1997 AND DECEMBER 27, 1998
6. REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)
PREFERRED STOCK PURCHASE WARRANTS
DEFERRED STOCK ISSUE COSTS--In connection with the Series D redeemable
convertible preferred stock ("Series D Preferred Stock") issuance, the
Company issued a warrant to purchase up to 27,104 shares (subject to
adjustment under a formula defined in the warrant) of the Company's
Series D Preferred Stock. The warrant is exercisable under certain
conditions specified in the warrant. The warrant term extends until the
earlier of December 31, 2002 or the effective date of an initial public
offering of equity securities. The exercise price is $8.63345 per share.
The fair value of the warrants upon date of issuance was not material.
DEBT ISSUE COSTS--In connection with the Term Loan (see Note 3), the
Company issued a warrant to purchase up to 45,000 shares (subject to
adjustment under a formula defined in the warrant) of the Company's
Series D Preferred Stock. The warrant is exercisable under certain
conditions specified in the warrant. The warrant term extends until the
earlier of December 31, 2002 or the business day preceding an
acquisition. The exercise price is $7.19454 per share. The fair value of
the warrant upon date of issuance was not material.
7. STOCKHOLDERS' EQUITY (DEFICIT)
REINCORPORATION--In 1997, the Company changed its state of incorporation
from California to Delaware. In connection with this change, the outstanding
shares of the Company's no par value common and convertible preferred stock were
converted into and exchanged for an equal number of shares of $.001 par value
common and convertible preferred stock of the Delaware entity. The financial
statements have been restated for all periods presented to reflect this change.
COMMON STOCK--Holders of common stock are entitled to one vote per share.
The rights of the common stock are subject to prior rights of the preferred
stock.
CONVERTIBLE PREFERRED STOCK--The Company has Series A convertible preferred
stock outstanding with voting rights. The Series A Preferred Stock is subject to
the Stock Restriction Agreement dated February 1, 1995, as amended and the
Amended and Restated Certificate of Incorporation dated November 18, 1997 (the
"Certificate of Incorporation"). The rights of the Series A stockholders are
junior to the Series B, Series C and Series D stockholders. The Series A
stockholders have the right, at any time, to convert their shares into common
stock on a 1 for 1 basis, subject to adjustment as defined in the Certificate of
Incorporation. Should a liquidation take place, preferred stockholders have
preferential rights to distributions equal to $2.00 per share. Conversion
becomes automatic in the event: (i) the Company initiates a public offering with
aggregate net proceeds of $15 million, or (ii) the majority of the holders of
the then outstanding preferred stock elect to convert their shares into common
stock. The holders have certain registration rights.
COMMON STOCK WARRANT--In connection with the Series B convertible redeemable
preferred stock issuance (see Note 6), the Company issued a warrant to purchase
up to 50,000 shares (subject to adjustment under a formula defined in the
warrant) of the Company's common stock. The warrant is exercisable under certain
conditions specified in the warrant. The warrant term extends until the earlier
of February 2, 2000 or the effective date of an initial public offering of
equity securities. The exercise price is $3.20511 per share. The total fair
value of the warrant upon date of issuance was not material.
F-16
<PAGE>
RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 29, 1996, DECEMBER 28, 1997 AND DECEMBER 27, 1998
7. STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
1995 STOCK OPTION/STOCK ISSUANCE PLAN--On May 30, 1996, the stockholders of
the Company approved the 1995 Stock Option/Stock Issuance Plan (the "Plan"). The
Plan supersedes and incorporates all options outstanding under the 1993 Stock
Option Plan. The Plan provides for the issuance of incentive and nonstatutory
options and for the purchase of common stock for eligible individuals. The Board
of Directors administers the Plan. The stock issuable under the Plan is shares
of authorized but unissued or reacquired common stock. The maximum number of
shares of common stock which may be issued over the term of the Plan may not
exceed 306,147 shares. The total number of shares authorized, as well as shares
subject to outstanding options, will be adjusted in the event of certain changes
to the Company's capital structure, such as stock splits or dividends or other
recapitalization. In no event will any adjustment be made in connection with the
conversion of one or more outstanding shares of the Company's preferred stock
into shares of common stock.
The Plan is divided into two separate programs: (i) the option grant program
and (ii) the stock issuance program. Participation in the Plan is limited to
employees, non-employee directors and consultants of the Company. The option
exercise price per share is fixed by the Plan administrator in accordance with
the following provisions: (i) the exercise price shall not be less than 85% of
the fair market value per share of the common stock on the date of grant, except
for incentive stock options, where the exercise price shall not be less than
100% of the fair market value of the common stock on the date of grant, and (ii)
if the person to whom the option is granted is a 10% stockholder, then the
exercise price per share shall not be less than 110% of the fair market value
per share of the common stock on the option grant date. The purchase price per
share for stock issuances is determined by the Plan administrator and must be at
least 85% of the fair market value of a share of common stock at the time of
issuance.
Each option granted under the Plan has a maximum term of either five or ten
years (depending on stock ownership) and will be subject to earlier termination
in the event of the optionee's termination of service.
1998 STOCK OPTION/STOCK ISSUANCE PLAN--On March 27, 1998, the stockholders
of the Company approved the 1998 Stock Option/Stock Issuance Plan (the "1998
Plan"). The 1998 Plan provides for the issuance of incentive and nonstatutory
options and for the purchase of common stock for eligible individuals. The Board
of Directors administers the 1998 Plan. The stock issuable under the 1998 Plan
is shares of authorized but unissued or reacquired common stock. The number of
shares of common stock which may be issued over the term of the 1998 Plan,
including the authorization of an additional 200,000 shares for issuance on
March 18, 1999, may not exceed 368,853 shares. The total number of shares
authorized, as well as shares subject to outstanding options, will be adjusted
in the event of certain changes to the Company's capital structure, such as
stock splits or dividends or other recapitalization. In no event will any
adjustment be made in connection with the conversion of one or more outstanding
shares of the Company's preferred stock into shares of common stock.
The 1998 Plan is divided into two separate programs: (i) the option grant
program and (ii) the stock issuance program. Participation in the 1998 Plan is
limited to employees, non-employee directors and consultants of the Company. The
option exercise price per share is fixed by the 1998 Plan administrator in
accordance with the following provisions: (i) the exercise price shall not be
less than 85% of the fair market value per share of the common stock on the date
of grant, except for incentive
F-17
<PAGE>
RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 29, 1996, DECEMBER 28, 1997 AND DECEMBER 27, 1998
7. STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
stock options, where the exercise price shall not be less than 100% of the fair
market value of the common stock on the date of grant, and (ii) if the person to
whom the option is granted is a 10% stockholder, then the exercise price per
share shall not be less than 110% of the fair market value per share of the
common stock on the option grant date. The purchase price per share for stock
issuances is determined by the 1998 Plan administrator and must be at least 85%
of the fair market value of a share of common stock at the time of issuance. The
purchase price per share for stock issuances to a 10% stockholder shall not be
less than 110% of the fair market at the time of issuance.
Each option granted under the 1998 Plan has a maximum term of either five or
ten years (depending on stock ownership) and will be subject to earlier
termination in the event of the optionee's termination of service.
1999 STOCK INCENTIVE PLAN--On March 18, 1999 and March 24, 1999, the Board
of Directors and the stockholders, respectively, of the Company approved the
1999 Stock Incentive Plan (the "1999 Plan"). The 1999 Plan will be effective
upon the execution of the underwriting agreement and pricing of the common stock
with respect to the Company's initial public offering. All outstanding options
under the 1993 Stock Option Plan, the 1995 Stock Option/Stock Issuance Plan and
the 1998 Stock Option/Stock Issuance Plan (collectively, the "predecessor
plans") will be incorporated into the 1999 Plan upon the effective date, and no
further grants will be made under the predecessor plans. Except as otherwise
noted below, the options previously granted under the predecessor plans will
have substantially the same terms as in effect for new grants made under the
1999 Plan.
The stock issuable under the 1999 Plan shall be shares of authorized but
unissued or reacquired common stock, including shares repurchased by the Company
on the open market. A total of 1,126,400 shares of common stock have been
authorized for issuance under the 1999 Plan, which includes the shares subject
to outstanding options under the predecessor plans. As of December 27, 1998,
145,860 options were available for grant under the predecessor plans. The number
of shares of common stock reserved for issuance under the 1999 Plan will
automatically increase on the first trading day in January each year, beginning
in calendar year 2000. The increase will be equal to 3% of the total number of
shares of common stock outstanding as of the last trading day in December of the
preceding year, not to exceed 450,000 shares in any given year. In addition, no
participant in the 1999 Plan may be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances for more than
500,000 shares of common stock in the aggregate per calendar year. Each option
shall have a maximum term of either five or ten years, depending on the related
program, and will be subject to earlier termination in the event of the
optionee's termination of service.
The 1999 Plan is divided into five separate components; (i) the
discretionary option grant program, (ii) the stock issuance program, (iii) the
salary investment option grant program, (iv) the automatic option grant program
and (v) the director fee option grant program.
The discretionary option grant and stock issuance programs provide for the
issuance of incentive and nonstatutory options for eligible employees. The
option exercise price per share is fixed by the 1999 Plan administrator in
accordance with the following provisions: (i) the exercise price shall not be
less than 100% of the fair market value per share of the common stock on the
date of grant, and (ii) if the person to whom the option is granted is a 10%
stockholder, then the exercise price per share shall not be less than 110% of
the fair market value per share of the common stock on the date of grant.
F-18
<PAGE>
RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 29, 1996, DECEMBER 28, 1997 AND DECEMBER 27, 1998
7. STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
The purchase price for stock issuances is determined by the 1999 Plan
administrator and shall not be less than 100% of the fair market value of a
share of common stock at the time of issuance. Each option shall be exercisable
at such time or times, during such period and for such number of shares as shall
be determined by the 1999 Plan administrator as set forth in the related
individual option agreements.
The salary investment option grant program, if activated, would be available
to executive officers and other highly compensated eligible employees. The
participants may elect, prior to the start of a calendar year, to reduce their
base salary by a specific dollar amount not less than $10,000 nor more than
$50,000. The options will be exercisable at a price equal to one-third of the
fair market value of the options at grant date. The options will vest monthly
for one year and are subject to full and immediate vesting upon certain changes
in ownership of the Company.
The automatic option grant program is available to non-employee board
members. When the 1999 Plan becomes effective, eligible individuals will
automatically receive an option grant for 15,000 shares on the date of joining
the board provided that they have not been previously employed by the Company.
In addition, at the date of each annual meeting of stockholders, each
non-employee board member will automatically be granted an option to purchase
5,000 shares of common stock, provided that the individual has served on the
board for at least six months. All grants under the automatic option grant
program vest immediately upon issuance. The exercise price per share shall be
equal to 100% of the fair market value of the common stock on the date of grant.
The director fee option grant program allows, if activated, for non-employee
board members to apply any of their annual retainer fees to the acquisition of a
special option grant. The options will be exercisable at a price equal to
one-third of the fair market value of the options at the grant date. The options
will vest monthly for one year and are subject to full and immediate vesting
upon certain changes in ownership of the Company.
The board may amend or modify the 1999 Plan at any time, subject to any
required stockholder approval. The 1999 Plan will terminate at the earliest of
(i) March 17, 2009, (ii) the date on which all shares available for issuance
under our 1999 Plan have been issued as fully-vested shares or (iii) the
termination of all outstanding options in connection with certain ownership
changes.
1999 EMPLOYEE STOCK PURCHASE PLAN--On March 18, 1999 and March 24, 1999, the
Board of Directors and stockholders, respectively, approved the 1999 Employee
Stock Purchase Plan ("ESPP"). The ESPP will be effective upon the execution of
the underwriting agreement and pricing of the common stock with respect to the
Company's initial public offering. The ESPP allows eligible employees, as
specified in the ESPP, to purchase shares of common stock in semi-annual
intervals through payroll deductions under this plan. The accumulated payroll
deductions will be applied to the purchase of shares on the employee's behalf at
a price per share equal to 85% of the lower of (i) the fair market value of the
Company's common stock at the date of entry into the current offering period or
(ii) the fair market value on the purchase date. An initial reserve of 200,000
shares of common stock has been authorized for issuance under the ESPP. The
Board of Directors may alter, suspend or discontinue the ESPP. However, certain
amendments to the ESPP may require stockholder approval.
F-19
<PAGE>
RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 29, 1996, DECEMBER 28, 1997 AND DECEMBER 27, 1998
7. STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
The following is a summary of stock option activity for fiscal 1996, 1997
and 1998:
<TABLE>
<CAPTION>
SHARES
----------------------- WEIGHTED
OPTIONS AVERAGE EXERCISE
AVAILABLE OPTIONS PRICE
FOR GRANT OUTSTANDING PER SHARE
---------- ----------- -----------------
<S> <C> <C> <C>
Balance at January 1, 1996......................... 161,720 63,280 $ 0.86
Authorized....................................... 100,000 -- --
Granted.......................................... (125,060) 125,060 1.46
Exercised........................................ (10,107) 0.36
Forfeited........................................ 23,863 (23,863) 1.07
---------- -----------
Balance at December 29, 1996....................... 160,523 154,370 1.40
Authorized.......................................
Granted.......................................... (87,930) 87,930 1.54
Exercised........................................ (450) 1.00
Forfeited........................................ 17,200 (17,200) 1.50
---------- -----------
Balance at December 28, 1997....................... 89,793 224,650 1.33
Authorized....................................... 150,000
Granted.......................................... (137,140) 137,140 2.63
Exercised........................................ (38,043) 1.39
Forfeited........................................ 43,207 (43,207) 1.75
---------- -----------
Balance at December 27, 1998....................... 145,860 280,540 1.96
---------- -----------
---------- -----------
Exercisable, December 29, 1996..................... 14,945 1.01
-----------
-----------
Exercisable, December 28, 1997..................... 66,010 1.33
-----------
-----------
Exercisable, December 27, 1998..................... 92,585 1.46
-----------
-----------
</TABLE>
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its employee stock option plans (see Note 1). Under APB Opinion
No. 25, the Company will record compensation expense resulting from the
difference between the respective grant price per share and the estimated fair
market value of the common stock at the dates of grant. Total deferred
compensation for fiscal 1998 grants was $300,540, and will be recorded ratably
over the vesting period of the respective options. For the year ended December
27, 1998 the Company recorded $22,881 of deferred compensation expense
associated with these option grants.
F-20
<PAGE>
RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 29, 1996, DECEMBER 28, 1997 AND DECEMBER 27, 1998
7. STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
The following table summarizes the impact on the Company's net income (loss)
had compensation cost been determined based upon the fair value at the grant
date for awards under the stock option plans consistent with the methodology
prescribed under SFAS No. 123:
<TABLE>
<CAPTION>
FISCAL YEARS
-------------------------------------
1996 1997 1998
---------- ------------- ----------
<S> <C> <C> <C>
Net income (loss) available to common stockholders:
Basic.............................................. $ 2,644 $ (1,095,105) $ 568,055
Diluted............................................ 2,644 (1,095,105) 915,288
As adjusted under SFAS No. 123:
Net income (loss):
Basic.............................................. $ (19,262) $ (1,127,202) $ 520,283
Diluted............................................ (19,262) (1,127,202) 867,516
Net income (loss) per share:
Basic.............................................. $ (0.02) $ (1.12) $ 0.50
Diluted............................................ (0.02) (1.12) 0.14
</TABLE>
The following table summarizes the weighted average fair value at grant date
for the options granted during fiscal 1996, 1997 and 1998 using the
Black-Scholes option-pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
FISCAL YEARS
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Expected dividend yield...................................... None None None
Expected stock price volatility.............................. None None None
Risk-free interest rate...................................... 6.00% 6.00% 5.60%
Assumed forfeiture rate...................................... 0% 20% 10%
Expected lives of options.................................... 10 years 8 years 5 years
Weighted average fair value per share........................ $0.64 $0.58 $0.57
</TABLE>
The estimated fair value of options granted is subject to the assumptions
made and if the assumptions changed, the estimated fair value amounts could be
significantly different.
F-21
<PAGE>
RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 29, 1996, DECEMBER 28, 1997 AND DECEMBER 27, 1998
7. STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
The following table summarizes information as of December 27, 1998
concerning currently outstanding and exercisable options:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------- ------------------------
WEIGHTED AVERAGE WEIGHTED
REMAINING WEIGHTED AVERAGE
RANGE OF EXERCISE NUMBER CONTRACTUAL LIFE AVERAGE NUMBER EXERCISE
PRICES OUTSTANDING (YEARS) EXERCISE PRICE EXERCISABLE PRICE
- ----------------------- ----------- ----------------------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$1.00--$2.00........... 249,320 3 $ 1.62 92,585 $ 1.46
$4.00--$5.00........... 31,220 5 $ 4.64 -- --
----------- -----------
280,540... $ 1.96 92,585 $ 1.46
----------- -----------
----------- -----------
</TABLE>
8. EARNINGS PER SHARE
Reconciliation of basic and diluted earnings per share in accordance with
SFAS No. 128 (see Note 1) is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR PRO FORMA
----------------------------------------- 1998
1996 1997 1998 (UNAUDITED)
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Numerator
Basic:
Net income (loss)........................................... $ 71,602 $ (1,000,466) $ 915,288 $ 915,288
Accretion on redeemable convertible preferred stock......... (68,958) (94,639) (347,233) --
------------ ------------- ------------ ------------
Net income (loss) attributable to common stockholders..... 2,644 (1,095,105) 568,055 915,288
Diluted:
Reversal of accretion on redeemable convertible preferred
stock..................................................... -- -- 347,233 --
------------ ------------- ------------ ------------
Net income (loss) attributable to common stockholders..... $ 2,644 $ (1,095,105) $ 915,288 $ 915,288
------------ ------------- ------------ ------------
------------ ------------- ------------ ------------
</TABLE>
F-22
<PAGE>
RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 29, 1996, DECEMBER 28, 1997 AND DECEMBER 27, 1998
8. EARNINGS PER SHARE (CONTINUED)
<TABLE>
<CAPTION>
FISCAL YEAR PRO FORMA
----------------------------------------- 1998
1996 1997 1998 (UNAUDITED)
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Denominator
Basic:
Weighted average common shares
outstanding............................................... 1,007,639 1,010,483 1,033,469 1,033,469
Conversion of convertible preferred stock................... -- -- -- 5,262,885
Conversion of warrants into common stock.................... -- -- -- 37,677
------------ ------------- ------------ ------------
Total weighted average common shares outstanding.......... 1,007,639 1,010,483 1,033,469 6,334,031
Diluted:
Effect of dilutive securities:
Common stock options........................................ 17,949 -- 121,300 121,300
Conversion of convertible preferred stock................... -- -- 5,262,885 --
------------ ------------- ------------ ------------
Total weighted average common and potential common shares
outstanding............................................. 1,025,588 1,010,483 6,417,654 6,455,331
------------ ------------- ------------ ------------
------------ ------------- ------------ ------------
Earnings (loss) per share:
Basic......................................................... $ -- $ (1.08) $ 0.55 $ 0.14
Diluted....................................................... $ -- $ (1.08) $ 0.14 $ 0.14
</TABLE>
9. SEGMENTED INFORMATION
The Company owns and operates high-quality, quick-service Mexican
restaurants under the name "Rubio's Baja Grill," with restaurants primarily in
California, Arizona and Nevada. In accordance with SFAS No. 131, the Company
currently considers its business to consist of one reportable operating segment.
* * * * * *
F-23
<PAGE>
REAR INSIDE COVER:
Photographs of a beach in Baja overlaid with photographs of a Baja Bowl,
lobster burrito and nachos grande from our menu, with captions identifying the
name of each product.
A copy of our menu will be attached to the inside back cover.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
You should rely only on the information contained in this prospectus or to which
we have referred you. Neither we nor any underwriter has authorized anyone to
provide you with information that is different. This prospectus is not an offer
to sell nor is it seeking an offer to buy these securities in any jurisdiction
where the offer or sale is not permitted. The information contained in this
prospectus is correct only as of the date of this prospectus, even if this
prospectus is delivered to you after the prospectus date, or you buy our common
stock after the prospectus date.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 7
Use of Proceeds........................................................... 14
Dividend Policy........................................................... 14
Dilution.................................................................. 15
Capitalization............................................................ 16
Selected Financial Data................................................... 17
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 18
Business.................................................................. 26
Management................................................................ 35
Certain Relationships and Related Transactions............................ 44
Principal and Selling Stockholders........................................ 45
Description of Securities................................................. 46
Shares Eligible for Future Sale........................................... 51
Underwriting.............................................................. 52
Legal Matters............................................................. 54
Experts................................................................... 54
Where You Can Find More Information....................................... 54
Index to Consolidated Financial Statements................................ F-1
</TABLE>
Until , 1999, all dealers selling shares of our common stock, whether
or not participating in this offering, may be required to deliver a prospectus.
This delivery requirement is in addition to the obligation of dealers to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
[LOGO]
Rubio's Restaurants, Inc.
3,150,000 Shares
Common Stock
---------------------
PROSPECTUS
---------------------
Thomas Weisel Partners LLC
Dain Rauscher Wessels
a division of Dain Rauscher Incorporated
U.S. Bancorp Piper Jaffray
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses to be paid by the Registrant are as follows. All amounts other
than the SEC registration fee, the NASD filing fees and the Nasdaq National
Market listing fee are estimates.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
----------
<S> <C>
SEC registration fee.............................................................. $ 10,071
NASD filing fee................................................................... 4,123
Nasdaq National Market listing fee................................................ 17,000
Legal fees and expenses........................................................... 250,000
Accounting fees and expenses...................................................... 200,000
Printing and engraving............................................................ 150,000
Blue sky fees and expenses (including legal fees)................................. 5,000
Transfer agent fees............................................................... 5,000
Miscellaneous..................................................................... 58,806
----------
Total........................................................................... $ 700,000
----------
----------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933.
As permitted by the Delaware General Corporation Law, the Registrant's
Second Restated Certificate of Incorporation includes a provision that
eliminates the personal liability of our directors for monetary damages for
breach of fiduciary duty as a director, except for liability (1) for any breach
of the director's duty of loyalty to the Registrant or our stockholders, (2) for
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (3) under section 174 of the Delaware General
Corporation Law (regarding unlawful dividends and stock purchases), or (4) for
any transaction from which the director derived an improper personal benefit.
As permitted by the Delaware General Corporation Law, the bylaws of the
Registrant provide that (1) the Registrant is required to indemnify its
directors and officers to the fullest extent permitted by the Delaware General
Corporation Law, subject to certain very limited exceptions, (2) the Registrant
may indemnify its other employees and agents as set forth in the Delaware
General Corporation Law, (3) the Registrant is required to advance expenses, as
incurred, to its directors and executive officers in connection with a legal
proceeding to the fullest extent permitted by the Delaware General Corporation
Law, subject to certain very limited exceptions and (4) the rights conferred in
the bylaws are not exclusive.
The Registrant has entered into indemnification agreements with each of its
directors and executive officers to give such directors and officers additional
contractual assurances regarding the scope of the indemnification set forth in
the Registrant's Amended and Restated Certificate of Incorporation and to
provide additional procedural protections. At present, there is no pending
litigation or proceeding involving a director, officer or employee of the
Registrant regarding which indemnification is sought, nor is the Registrant
aware of any threatened litigation that may result in claims for
indemnification.
II-1
<PAGE>
Reference is also made to Section 8 of the Underwriting Agreement, which
provides for the indemnification of officers, directors and controlling persons
of the Registrant against certain liabilities. The indemnification provision in
the Registrant's Certificate of Incorporation, bylaws and the indemnification
agreements entered into between the Registrant and each of its directors and
executive officers may be sufficiently broad to permit indemnification of the
Registrant's directors and executive officers for liabilities arising under the
Securities Act of 1933.
The Registrant has applied for liability insurance for its officers and
directors.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere in this prospectus:
<TABLE>
<CAPTION>
DOCUMENT EXHIBIT NUMBER
- ----------------------------------------------------------------------------- -----------------
<S> <C>
Underwriting Agreement....................................................... 1.1
Form of Second Restated Certificate of Incorporation of Registrant........... 3.2
Form of Restated Bylaws of Registrant........................................ 3.4
Form of Indemnification Agreement............................................ 10.26
Form of Indemnification Agreement............................................ 10.27
</TABLE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The Registrant has sold and issued the following securities since January 1,
1996:
(1) The Registrant from time to time has granted stock options to employees
and consultants in reliance upon exemption from registration pursuant to
either (1) Section 4(2) of the Securities Act of 1933 or (2) Rule 701
promulgated under the Securities Act of 1933. The following table sets
forth certain information regarding such grants:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SHARES PRICES
----------- -------------
<S> <C> <C>
Fiscal year ended December 29, 1996................................ 125,060 $ 1.00-$1.50
Fiscal year ended December 28, 1997................................ 87,930 $ 1.50-$2.00
Fiscal year ended December 27, 1998................................ 137,140 $ 2.00-$5.00
</TABLE>
For additional information concerning these transactions, please see
"Management--Benefit Plans" in the prospectus included in this
registration statement.
(2) On March 28, 1996 and June 30, 1996, the Registrant issued a total of
793,640 shares of Series C preferred stock to various venture
capitalists, accredited investors and insiders for an aggregate
consideration of $4,270,783.
(3) On November 19, 1997 and December 3, 1997, the Registrant issued a total
of 1,403,843 shares of Series D preferred stock to various venture
capitalists, accredited investors and insiders for an aggregate
consideration of $10,100,005.
(4) On December 31, 1997, the Registrant issued a warrant to purchase up to
27,104 shares of Series D preferred stock to NationsBanc Montgomery
Securities, LLC in consideration for services provided in the private
placement of the Registrant's Series D preferred stock.
(5) On May 7, 1998, the Registrant issued 25,000 shares of common stock to a
director upon exercise of options for a consideration of $37,500.
(6) On May 11, 1998, the Registrant issued a warrant to purchase up to
45,000 shares of Series D preferred stock to FSC Corp. in connection with
its credit facility with BankBoston, N.A.
II-2
<PAGE>
(7) On June 16, 1998, the Registrant issued 48,648 shares of Series D
preferred stock to accredited investors for an aggregate consideration of
$350,000.
The above securities were offered and sold by the Registrant in reliance
upon exemptions from registration pursuant to either (1) Section 4(2) of the
Securities Act of 1933 as transactions not involving any public offering, or (2)
Rule 701 promulgated under the Securities Act of 1933. No underwriters were
involved in connection with the sales of securities referred to in this Item 15.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation, as amended.
3.2 Form of Amended and Restated Certificate of Incorporation to be in effect upon the closing of this
offering.
3.3 Bylaws, as amended.
3.4 Form of Restated Bylaws to be in effect upon the closing of this offering.
4.1* Specimen common stock certificate.
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1 Series B Preferred Stock Purchase Agreement, dated February 1, 1995.
10.2 Common Stock Purchase Warrant granted to Flemming & Lessard, Inc., dated February 2, 1995.
10.3 Series C Preferred Stock Purchase Agreement, dated March 28, 1996.
10.4 Amendment Number One to Series C Preferred Stock Purchase Agreement, dated June 30, 1996.
10.5+ Series D Preferred Stock Purchase Agreement, dated November 19, 1997.
10.6 Amendment No. 1 to the Series D Preferred Stock Purchase Agreement, dated December 3, 1997.
10.7 Amended and Restated Investors' Rights Agreement, dated November 19, 1997.
10.8 Amendment No. 1 to the Amended and Restated Investors' Rights Agreement, dated December 31, 1997.
10.9 Amendment No. 2 to the Amended and Restated Investors' Rights Agreement, dated May , 1998.
10.10 Amended and Restated Stock Restriction Agreement, dated November 19, 1997.
10.11 Series D Preferred Stock Purchase Warrant granted to NationsBanc Montgomery Securities, LLC, dated
December 31, 1997.
10.12 Series D Preferred Stock Purchase Warrant granted to FSC Corp., dated May 11, 1998.
10.13 Stock Purchase Agreement, dated June 16, 1998.
10.14 Revolving Credit and Term Loan Agreement between us and BankBoston, N.A., dated May 1998.
10.15 Lease Agreement between us and Macro Plaza Enterprises, dated October 27, 1997.
10.16 First Amendment to Lease Agreement between us and Cornerstone Corporate Centre, LLC, dated October 16,
1998.
10.17+ Agreement between us and Service America Corporation dated April 9, 1992.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.18+ Test Agreement between us and Host International, Inc., dated August 4, 1995.
10.19+ General Purchasing Term Agreement between us and Pacific Basin Foods, Inc., dated October 21, 1996.
10.20+ Amendment to Agreement between us and Pacific Basin Foods, Inc., dated November 20, 1998.
10.21+ Agreement between us and Coca-Cola USA Fountain, dated March 10, 1998.
10.22+ Agreement between us and Dr. Pepper/Seven Up, Inc., dated June 23, 1998.
10.23+ Rental Agreement between us and Premier Food Services, Inc., dated July 10, 1998.
10.24* Form of Employee Confidentiality and Inventions Agreement.
10.25 Form of Indemnification Agreement between us and each of its directors.
10.26 Form of Indemnification Agreement between us and each of its officers.
10.27 1993 Stock Option/Stock Issuance Plan, as amended.
10.28 1993 Stock Option/Stock Issuance Plan Form of Notice of Grant of Stock Option.
10.29 1993 Stock Option/Stock Issuance Plan Form of Stock Option Agreement.
10.30 1993 Stock Option/Stock Issuance Plan Form of Stock Purchase Agreement.
10.31 1993 Stock Option/Stock Issuance Plan Form of Restricted Stock Issuance Agreement.
10.32 1995 Stock Option/Stock Issuance Plan.
10.33 1995 Stock Option/Stock Issuance Plan Form of Notice of Grant of Stock Option.
10.34 1995 Stock Option/Stock Issuance Plan Form of Stock Option Agreement.
10.35 1995 Stock Option/Stock Issuance Plan Form of Stock Purchase Agreement.
10.36* 1995 Stock Option/Stock Issuance Plan Form of Stock Issuance Agreement.
10.37 1998 Stock Option/Stock Issuance Plan.
10.38 1998 Stock Option/Stock Issuance Plan Form of Notice of Grant of Stock Option.
10.39 1998 Stock Option/Stock Issuance Plan Form of Stock Option Agreement.
10.40 1998 Stock Option/Stock Issuance Plan Form of Addendum to Stock Option Agreement.
10.41 1998 Stock Option/Stock Issuance Plan Form of Stock Purchase Agreement.
10.42 1998 Stock Option/Stock Issuance Plan Form of Addendum to Stock Purchase Agreement.
10.43 1998 Stock Option/Stock Issuance Plan Form of Stock Issuance Agreement.
10.44 1998 Stock Option/Stock Issuance Plan Form of Addendum to Stock Issuance Agreement.
10.45* Form of 1999 Stock Incentive Plan.
10.46* Form of 1999 Stock Incentive Plan Notice of Grant.
10.47* Form of 1999 Stock Incentive Plan Stock Option Agreement.
10.48* Form of Employee Stock Purchase Plan.
11.1* Statement re: Computation of Basic and Diluted Net Income (Loss) Per Share.
21.1 Subsidiary List.
23.1 Independent Auditors' Consent.
23.2* Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).
23.3 Consent of Timothy J. Ryan.
24.1* Powers of Attorney (See Signature Page on Page II-6).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
+ We have sought confidential treatment pursuant to Rule 406 of portions of the
referenced exhibits.
II-4
<PAGE>
(b) Financial Statement Schedules.
All financial statement schedules have been omitted because the required
information is not applicable or not present in amounts sufficient to require
submission of the schedule, or because the information required is included in
the consolidated financial statements or the notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriter
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities Exchange Commission such
indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424 (b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in San Diego, California, on this 26th
day of March, 1999.
<TABLE>
<S> <C> <C>
RUBIO'S RESTAURANTS, INC.
By: /s/ RALPH RUBIO
-----------------------------------------
Ralph Rubio
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933 this Registration
Statement has been signed by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
President, Chief Executive
/s/ RALPH RUBIO Officer and Director
- ------------------------------ (principal executive, March 26, 1999
Ralph Rubio financial and accounting
officer)
/s/ KYLE ANDERSON
- ------------------------------ Director March 26, 1999
Kyle Anderson
/s/ JASON FISH
- ------------------------------ Director March 26, 1999
Jason Fish
/s/ RAFAEL RUBIO
- ------------------------------ Director March 26, 1999
Rafael Rubio
/s/ ROBERT RUBIO
- ------------------------------ Director March 26, 1999
Robert Rubio
/s/ KIM LOPDRUP
- ------------------------------ Director March 26, 1999
Kim Lopdrup
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation, as amended.
3.2 Form of Amended and Restated Certificate of Incorporation to be in effect upon the closing of this
offering.
3.3 Bylaws, as amended.
3.4 Form of Restated Bylaws to be in effect upon the closing of this offering.
4.1* Specimen common stock certificate.
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1 Series B Preferred Stock Purchase Agreement, dated February 1, 1995.
10.2 Common Stock Purchase Warrant granted to Flemming & Lessard, Inc., dated February 2, 1995.
10.3 Series C Preferred Stock Purchase Agreement, dated March 28, 1996.
10.4 Amendment Number One to Series C Preferred Stock Purchase Agreement, dated June 30, 1996.
10.5+ Series D Preferred Stock Purchase Agreement, dated November 19, 1997.
10.6 Amendment No. 1 to the Series D Preferred Stock Purchase Agreement, dated December 3, 1997.
10.7 Amended and Restated Investors' Rights Agreement, dated November 19, 1997.
10.8 Amendment No. 1 to the Amended and Restated Investors' Rights Agreement, dated December 31, 1997.
10.9 Amendment No. 2 to the Amended and Restated Investors' Rights Agreement, dated May , 1998.
10.10 Amended and Restated Stock Restriction Agreement, dated November 19, 1997.
10.11 Series D Preferred Stock Purchase Warrant granted to NationsBanc Montgomery Securities, LLC, dated
December 31, 1997.
10.12 Series D Preferred Stock Purchase Warrant granted to FSC Corp., dated May 11, 1998.
10.13 Stock Purchase Agreement, dated June 16, 1998.
10.14 Revolving Credit and Term Loan Agreement between us and BankBoston, N.A., dated May 1998.
10.15 Lease Agreement between us and Macro Plaza Enterprises, dated October 27, 1997.
10.16 First Amendment to Lease Agreement between us and Cornerstone Corporate Centre, LLC, dated October 16,
1998.
10.17+ Agreement between us and Service America Corporation dated April 9, 1992.
10.18+ Test Agreement between us and Host International, Inc., dated August 4, 1995.
10.19+ General Purchasing Term Agreement between us and Pacific Basin Foods, Inc., dated October 21, 1996.
10.20+ Amendment to Agreement between us and Pacific Basin Foods, Inc., dated November 20, 1998.
10.21+ Agreement between us and Coca-Cola USA Fountain, dated March 10, 1998.
10.22+ Agreement between us and Dr. Pepper/Seven Up, Inc., dated June 23, 1998.
10.23+ Rental Agreement between us and Premier Food Services, Inc., dated July 10, 1998.
10.24* Form of Employee Confidentiality and Inventions Agreement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.25 Form of Indemnification Agreement between us and each of its directors.
10.26 Form of Indemnification Agreement between us and each of its officers.
10.27 1993 Stock Option/Stock Issuance Plan, as amended.
10.28 1993 Stock Option/Stock Issuance Plan Form of Notice of Grant of Stock Option.
10.29 1993 Stock Option/Stock Issuance Plan Form of Stock Option Agreement.
10.30 1993 Stock Option/Stock Issuance Plan Form of Stock Purchase Agreement.
10.31 1993 Stock Option/Stock Issuance Plan Form of Restricted Stock Issuance Agreement.
10.32 1995 Stock Option/Stock Issuance Plan.
10.33 1995 Stock Option/Stock Issuance Plan Form of Notice of Grant of Stock Option.
10.34 1995 Stock Option/Stock Issuance Plan Form of Stock Option Agreement.
10.35 1995 Stock Option/Stock Issuance Plan Form of Stock Purchase Agreement.
10.36* 1995 Stock Option/Stock Issuance Plan Form of Stock Issuance Agreement.
10.37 1998 Stock Option/Stock Issuance Plan.
10.38 1998 Stock Option/Stock Issuance Plan Form of Notice of Grant of Stock Option.
10.39 1998 Stock Option/Stock Issuance Plan Form of Stock Option Agreement.
10.40 1998 Stock Option/Stock Issuance Plan Form of Addendum to Stock Option Agreement.
10.41 1998 Stock Option/Stock Issuance Plan Form of Stock Purchase Agreement.
10.42 1998 Stock Option/Stock Issuance Plan Form of Addendum to Stock Purchase Agreement.
10.43 1998 Stock Option/Stock Issuance Plan Form of Stock Issuance Agreement.
10.44 1998 Stock Option/Stock Issuance Plan Form of Addendum to Stock Issuance Agreement.
10.45* Form of 1999 Stock Incentive Plan.
10.46* Form of 1999 Stock Incentive Plan Notice of Grant.
10.47* Form of 1999 Stock Incentive Plan Stock Option Agreement.
10.48* Form of Employee Stock Purchase Plan.
11.1* Statement re: Computation of Basic and Diluted Net Income (Loss) Per Share.
21.1 Subsidiary List.
23.1 Independent Auditors' Consent.
23.2* Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).
23.3 Consent of Timothy J. Ryan.
24.1* Powers of Attorney (See Signature Page on Page II-6).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
+ We have sought confidential treatment pursuant to Rule 406 of portions of the
referenced exhibits.
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF RUBIO'S RESTAURANTS, INC.,
a Delaware corporation
Rubio's Restaurants, Inc., a corporation organized and existing under the
laws of the State of Delaware, certifies as follows:
1. The name of the corporation is Rubio's Restaurants, Inc. The
original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on September 2, 1997.
2. Pursuant to Sections 242 and 245 of the General Corporation Law
of the State of Delaware, this Amended and Restated Certificate of Incorporation
was adopted by the Corporation's Board of Directors and stockholders, the
stockholders of the Corporation having approved the Amended and Restated
Certificate of Incorporation by the written consent of the holders of at least a
majority of the outstanding shares in accordance with Section 228 thereof, and
written notice having been given in accordance with the requirements of such
Section. The Amended and Restated Certificate of Incorporation restates,
integrates and amends the provisions of the Certificate of Incorporation of this
Corporation.
3. The text of the Corporation's Certificate of Incorporation as
heretofore amended or supplemented is hereby restated and further amended to
read in its entirety as follows:
ARTICLE I.
The name of this Corporation is Rubio's Restaurants, Inc.
ARTICLE II.
The address of the registered office of the Corporation in the State of
Delaware is 30 Old Rudnick Lane, City of Dover, County of Kent 19901, and the
name of the registered agent of the Corporation in the State of Delaware at such
address is CorpAmerica, Inc.
<PAGE>
ARTICLE III.
The purpose of this Corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the Delaware
General Corporation Law.
ARTICLE IV.
A. CLASSES OF STOCK. This Corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the Corporation is authorized to issue is
Twelve Million Five Hundred Thousand (12,500,000) shares. Seven Million Two
Hundred Fifty-One Thousand Fifteen (7,251,015) shares shall be Common Stock,
$0.001 par value per share, and Five Million Two Hundred Forty-Eight Thousand
Nine Hundred Eighty-Five (5,248,985) shares shall be Preferred Stock, $0.001 par
value per share, of which One Million Nine Hundred Seventy-Three Thousand Three
Hundred Ninety-Five (1,973,395) shares shall be Series A Preferred Stock, One
Million Ninety-Two Thousand Seven (1,092,007) shares shall be Series B Preferred
Stock, Seven Hundred Ninety-Three Thousand Six Hundred Forty (793,640) shares
shall be Series C Preferred Stock and One Million Three Hundred Eighty-Nine
Thousand Nine Hundred Forty-Three (1,389,943) shares shall be Series D Preferred
Stock.
B. RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The rights,
preferences, restrictions and other matters relating to the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock are as follows:
1. DIVIDEND PROVISIONS.
a. Holders of shares of Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock (collectively, the "Preferred
Stock") shall be entitled to receive dividends, out of any assets legally
available therefor, prior and in preference to any declaration or payment of any
dividend on the Series A Preferred Stock or the Common Stock of this
Corporation, at the rate of $0.26 per share of Series B Preferred Stock per
annum, $0.43 per share of Series C Preferred Stock per annum and $0.5756 per
share of Series D Preferred Stock per annum (subject to appropriate adjustments
for stock splits, stock dividends, combinations or other recapitalizations), in
each case calculated from the date of issuance to the relevant date the dividend
is paid, payable when, as and if declared by the Board of Directors. Such
dividends shall not be cumulative.
b. No distribution or dividend of cash or property shall be
paid on shares of Common Stock or Series A Preferred Stock unless (i) first,
paragraph 1(a) shall have been satisfied and (ii) then, as to the balance a
distribution or dividend of the same amount per share (on an as-converted basis)
is simultaneously paid on the shares of Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock.
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c. No distribution or dividend of cash or property shall be
paid on shares of Common Stock unless a distribution or dividend of the same
amount per share (on an as-converted basis) is simultaneously paid on the shares
of Series A Preferred Stock.
d. No distribution or dividend of cash or property shall be
paid on shares of Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock unless a distribution or dividend of a proportionate amount, as
determined in accordance with the respective dividend preferences stated in
paragraph 1(a) and 1(b) above of the Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock, is simultaneously paid on the
shares of Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock.
2. LIQUIDATION PREFERENCE.
a. In the event of any liquidation, dissolution or winding up
of this Corporation, either voluntary or involuntary, the holders of Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of any of the
assets of this Corporation to the holders of Series A Preferred Stock or Common
Stock by reason of their ownership thereof, an amount per share equal to the sum
of (i) with respect to the Series B Preferred Stock, $3.20511 for each
outstanding share of Series B Preferred Stock (subject to appropriate
adjustments for stock splits, stock dividends, combinations or other
recapitalizations and hereafter referred to as the "Original Series B Issue
Price") plus declared but unpaid dividends, (ii) with respect to the Series C
Preferred Stock $5.38126 for each outstanding share of Series C Preferred Stock
(subject to appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations and hereafter referred to as the
"Original Series C Issue Price") plus declared but unpaid dividends, and (iii)
with respect to the Series D Preferred Stock, $7.19454 for each outstanding
share of Series D Preferred Stock (subject to appropriate adjustments for stock
splits, stock dividends, combinations or other recapitalizations and hereafter
referred to as the "Original Series D Issue Price") plus declared but unpaid
dividends. If upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amount, then the
entire assets and funds of the Corporation legally available for distribution
shall be distributed in proportion to the aggregate liquidation preferences of
the respective series, and ratably among the holders of each series in
proportion to the amount of such stock owned by each such holder.
b. Upon the completion of the distribution required by
subparagraph (a) of this Section 2, if assets remain in this Corporation the
holders of Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets of this Corporation to the holders of
Series A Preferred Stock or Common Stock by reason of their ownership
thereof, an amount per share equal to the sum of (i) with respect to the
Series B Preferred Stock, an amount equal to eight percent (8%) compounded
per annum on the Original Series B Issue Price, calculated from the date of
the initial issuance and sale of shares of Series B
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Preferred Stock, and on declared but unpaid dividends from the date
of declaration through the effective date of the liquidation, dissolution or
winding up of this Corporation, (ii) with respect to the Series C Preferred
Stock, an amount equal to eight percent (8%) compounded per annum on the
Original Series C Issue Price, calculated from the date of the initial issuance
and sale of shares of Series C Preferred Stock, and on declared but unpaid
dividends from the date of declaration through the effective date of the
liquidation, dissolution or winding up of this Corporation and (iii) with
respect to the Series D Preferred Stock, an amount equal to eight percent (8%)
compounded per annum on the Original Series D Issue Price, calculated from the
date of the initial issuance and sale of shares of Series D Preferred Stock, and
on declared but unpaid dividends from the date of declaration through the
effective date of the liquidation, dissolution or winding up of this
Corporation. If upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amount, then the
entire assets and funds of the Corporation legally available for distribution
shall be distributed in proportion to the aggregate liquidation preferences of
the respective series, and ratably among the holders of each series in
proportion to the amount of such stock owned by each such holder, calculated as
if the Corporation had sufficient assets to make such payments in full.
c. Upon the completion of the distributions required by
subparagraphs (a) and (b) of this Section 2, if assets remain in this
Corporation the holders of Series A Preferred Stock and Common Stock shall
receive all of the remaining assets of this Corporation. The entire assets and
funds of the Corporation legally available for distribution (after giving effect
to the distributions referred to in Sections 2(a) and 2(b) hereof) shall be
distributed ratably among the holders of the Series A Preferred Stock and Common
Stock in proportion to the amount of such stock owned by each such holder
(determined on an as-converted basis).
d. Without limiting the rights of holders of Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock to vote against any
such transaction, a consolidation or merger of the Corporation with or into any
other corporation or corporations, or a sale, conveyance or disposition of all
or substantially all of the assets of the Corporation or 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 currently outstanding is
disposed of (excluding the issuance of up to 1,389,943 shares of Series D
Preferred Stock), shall be deemed to be a liquidation, dissolution or winding up
within the meaning of this Section 2 entitling the holders of shares of
Preferred Stock to the preferences stated above. No such transaction may occur
unless each holder of Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock is given advance written notice of such transaction and
has an opportunity to convert its shares into Common Shares prior thereto under
Section 4 hereof. The amount being distributed to the holders of capital stock
upon any such merger or consolidation shall be any cash plus the value of any
property, rights and securities distributed to such holders by the acquiring
person, firm or other entity. The value of such property, rights or other
securities shall be reasonably determined in good faith by the Board of
Directors of the Corporation.
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3. REDEMPTION.
a. The holders of a majority of the outstanding Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock, each
acting separately as a class ("Moving Investors") shall be entitled to demand
redemption of their shares at any time on or after July 1, 2000 at a price equal
to the greater (i) of $3.20511 per share with respect to the Series B Preferred
Stock, $5.38126 with respect to the Series C Preferred Stock and $7.19454 with
respect to the Series D Preferred Stock or (ii) the fair market value of each
such share to be determined by mutual agreement or by a single business
appraiser selected by the Corporation and the Moving Investors or as set forth
below in this Section 3(a) ("Redemption Price"). If a redemption demand has
been so made, the Corporation shall promptly notify all holders of Preferred
Stock thereof, and (i) each holder of shares of Preferred Stock of the series
for which a demand has been made shall have the right to elect to be redeemed
along with the Moving Investors and (ii) holders of shares of Preferred Stock of
any other series shall have an opportunity to make a redemption demand as
provided above. If such a redemption demand is made by the holders of a
majority of the outstanding Series B Preferred Stock, Series C Preferred Stock
or Series D Preferred Stock, the Corporation must redeem the shares of the
Preferred Stock demanded by the Moving Investors (and the other holders of
Preferred Stock so electing to be included) to be so redeemed at the Redemption
Price. In addition, the Corporation shall have the option to redeem all of the
outstanding shares of the series of Preferred Stock making such request. The
Corporation must pay the Redemption Price in cash but may pay the Redemption
Price in up to four equal installments commencing six months after receipt of
notice from the Moving Investors and on each of the next three (3) anniversary
dates thereafter; provided, however, that any balance due on all of the
Redemption Price shall be paid in full on or before January 1, 2004. If the
Moving Investors and the Corporation are unable to agree upon the Redemption
Price and are unable to agree upon the identity of a single business appraiser
to value the relevant Preferred Stock, then (unless the Corporation and the
Moving Investors agree on a different procedure), the Moving Investors shall
hire one business appraiser experienced in restaurant valuations and Rubio's
shall hire a second business appraiser experienced in restaurant valuations.
The two business appraisers that have been selected shall select a third
business appraiser experienced in restaurant valuations. All three business
appraisers shall independently determine the value of the relevant Preferred
Stock and render a written appraisal ("Appraisal"). The Redemption Price shall
be the average of the two closest Appraisals. The cost of all of the business
appraisers shall be borne 50% by the Corporation and 50% by the Moving Investors
whose shares are redeemed. Any deferred payments shall bear interest at the
annual rate of prime as determined by Bank of America (the most favorable rate
available to corporations for borrowing from time to time) plus 1%.
Notwithstanding the above, following the determination of the Redemption Price,
the holders of a majority of the outstanding shares of any series of Preferred
Stock that has requested redemption hereunder may determine on behalf of the
entire series, not to effect such redemption. If the holders of a majority of a
series of Preferred Stock decide not to sell their shares at the applicable
Redemption Price, then the cost of all of the business appraisers shall be borne
100% by the Moving Investors of the series of Preferred Stock declining to have
their shares redeemed.
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b. A holder electing to redeem shares hereunder may elect to
redeem all or any number of shares held by such holder.
c. With respect to any redemption to be conducted for any
series of Preferred Stock in installments pursuant to subsection 3(a), the
Corporation shall effect such redemption (i) PARI PASSU (based on the respective
number of shares to be redeemed) among the series of Preferred Stock to be
redeemed and (ii) PARI PASSU (based on the number of shares to be redeemed)
among the holders of each series of Preferred Stock to be redeemed.
d. At least 20 but no more than 60 days prior to the date fixed
for any redemption of Series B Preferred Stock, Series C Preferred Stock or
Series D Preferred Stock (the "Redemption Date"), written notice shall be
mailed, first class postage prepaid, to each holder of record (at the close of
business on the business day next preceding the day on which notice is given) of
the Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock to be redeemed, at the address last shown on the records of this
Corporation for such holder or given by the holder to this Corporation for the
purpose of notice or if no such address appears or is given at the place where
the principal executive office of this Corporation is located, notifying such
holder of the redemption to be effected, specifying the number of shares to be
redeemed from such holder, if any, the Redemption Date, the Series B Redemption
Price, Series C Redemption Price or Series D Redemption Price, as applicable,
the place at which payment may be obtained and the date on which such holder's
rights to elect to be included in such redemption terminate and the date on
which such holder's Conversion Rights (as hereinafter defined) as to any shares
to be redeemed terminate and calling upon any holder of the series of Preferred
Stock to be redeemed to surrender to this Corporation, in the manner and at the
place designated, his certificate or certificates representing the shares to be
redeemed, if any (the "Redemption Notice"). Except as provided in subsection
3(d) and except as prohibited by applicable Delaware corporate law, on or after
the Redemption Date, each holder of Series B Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock, as applicable, to be redeemed shall surrender
to this Corporation the certificate or certificates representing such shares, in
the manner and at the place designated in the Redemption Notice, and thereupon
the Series B Redemption Price, Series C Redemption Price or Series D Redemption
Price, as applicable, of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be cancelled. In the event less than all the
shares represented by any such certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares.
e. From and after the Redemption Date, unless there shall have
been a default in payment of the Series B Redemption Price, the Series C
Redemption Price or the Series D Redemption Price, as applicable, all rights of
the holders of such shares to be redeemed on the Redemption Date (except the
right to receive the Series B Redemption Price, the Series C Redemption Price or
the Series D Redemption Price, as applicable, including any interest due
pursuant to subsection 3(a) upon surrender of their certificate or certificates)
shall cease with respect to such shares, and such shares shall not thereafter be
transferred on the books of this Corporation or be deemed to be outstanding for
any purpose whatsoever. If the funds of the Corporation legally available for
redemption of shares of Series B Preferred
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Stock, Series C Preferred Stock or Series D Preferred Stock on any Redemption
Date are insufficient to redeem the total number of shares of Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock to be redeemed on
such date, those funds which are legally available will be used to redeem the
maximum possible number of such shares ratably among the holders of such shares
to be redeemed. Any shares of Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock not redeemed shall remain outstanding and
entitled to all the rights and preferences provided herein. At any time
thereafter (unless any holder shall have given written notice to the Company to
cancel the redemption of such holder's shares) when additional funds of the
Corporation are legally available for the redemption of the Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock, such funds will
immediately be used to redeem the balance of the shares which the Corporation
has become obligated to redeem on any Redemption Date but which it has not
redeemed.
4. CONVERSION. The holders of the Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall
have conversion rights as follows (the "Conversion Rights"):
a. RIGHT TO CONVERT.
(1) Subject to subsection 4(c), each share of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time after the date of issuance of such share and prior to the close of
business on any Redemption Date as may have been fixed in any Redemption Notice
with respect to such share, at the office of this Corporation or any transfer
agent for the particular series of Preferred Stock, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing, with
respect to Series A Preferred Stock, $2.00 per share (subject to appropriate
adjustments for stock splits, stock dividends, combinations or other
recapitalizations and hereafter referred to as the "Original Series A Issue
Price") by the applicable Conversion Price, with respect to Series B Preferred
Stock, the Original Series B Issue Price plus all declared but unpaid dividends
on such share of Series B Preferred Stock by the applicable Conversion Price at
the time in effect for such share, with respect to Series C Preferred Stock, the
Original Series C Issue Price plus all declared but unpaid dividends on such
share of Series C Preferred Stock by the applicable Conversion Price at the time
in effect for such share or with respect to Series D Preferred Stock, the
Original Series D Issue Price plus all declared but unpaid dividends on such
share of Series D Preferred Stock by the applicable Conversion Price at the time
in effect for such share. The initial "Conversion Price" per share for shares
of Series A Preferred Stock shall be the Original Series A Issue Price, the
initial Conversion Price per share for shares of Series B Preferred Stock shall
be the Original Series B Issue Price, the initial Conversion Price per share for
shares of Series C Preferred Stock shall be the Original Series C Issue Price
and the initial Conversion Price per share for shares of Series D Preferred
Stock shall be the Original Series D Issue Price; provided, however, that the
Conversion Price for the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock shall be subject to
adjustment as set forth in subsection 4(c).
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(2) In the event of a call for redemption of any shares of
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock
pursuant to Section 3 hereof, the Conversion Rights unless earlier exercised
shall terminate as to the shares designated for redemption at the close of
business on the Redemption Date, unless default is made in payment of the Series
B Redemption Price, the Series C Redemption Price or the Series D Redemption
Price, as applicable, in which case the Conversion Rights shall terminate on the
date such Redemption Price is paid in full for the Series B Preferred Stock,
Series C Preferred Stock or Series D Preferred Stock, as applicable.
(3) Each share of Series B Preferred Stock shall
automatically be converted into shares of Common Stock based on the Conversion
Price at the time in effect for such shares immediately upon the earlier of (A)
the closing of the Corporation's sale of its Common Stock in a bona fide, firm
commitment underwriting pursuant to a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), in which the
Corporation and any selling stockholders receive not less than $15,000,000
aggregate net proceeds, or (B) the date upon which the Corporation obtains the
consent of the holders of a majority of the then outstanding shares of Series B
Preferred Stock for conversion of the Series B Preferred Stock into Common
Stock.
(4) Each share of Series C Preferred Stock shall
automatically be converted into shares of Common Stock based on the Conversion
Price at the time in effect for such shares immediately upon the earlier of (A)
the closing of the Corporation's sale of its Common Stock in a bona fide, firm
commitment underwriting pursuant to a registration statement under the
Securities Act, in which the Corporation and any selling stockholders receive
not less than $15,000,000 aggregate net proceeds, or (B) the date upon which the
Corporation obtains the consent of the holders of a majority of the then
outstanding shares of Series C Preferred Stock for conversion of the Series C
Preferred Stock into Common Stock.
(5) Each share of Series D Preferred Stock shall
automatically be converted into shares of Common Stock based on the Conversion
Price at the time in effect for such shares immediately upon the earlier of (A)
the closing of the Corporation's sale of its Common Stock in a bona fide, firm
commitment underwriting pursuant to a registration statement under the
Securities Act, in which the Corporation and any selling stockholders receive
not less than $15,000,000 aggregate net proceeds, or (B) the date upon which the
Corporation obtains the consent of the holders of a majority of the then
outstanding shares of Series D Preferred Stock for conversion of the Series D
Preferred Stock into Common Stock.
b. MECHANICS OF CONVERSION. Before any holder of Preferred
Stock shall be entitled to convert the same into shares of Common Stock, he
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of this Corporation or of any transfer agent for the particular series of
Preferred Stock and shall give written notice by mail, postage prepaid, to this
Corporation at its principal corporate office, of the election to convert the
same and shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. This Corporation
shall, as soon as practicable
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thereafter, issue and deliver at such office to such holder of Preferred Stock
or to the nominee or nominees of such holder, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the shares of
Preferred Stock to be converted, 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. If the conversion is in connection with an underwritten offer of
securities registered pursuant to the Securities Act, the conversion may, at the
option of any holder tendering Preferred Stock for conversion, be conditioned
upon the effectiveness of a registration statement under the Securities Act and
the closing of the sale and purchase of shares pursuant to such offering, in
which event the person(s) entitled to receive the Common Stock issuable upon
such conversion of the Preferred Stock shall not be deemed to have converted
such Preferred Stock until immediately prior to the closing of such offering.
c. CONVERSION PRICE ADJUSTMENTS OF PREFERRED STOCK. The
Conversion Price of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock shall be subject to
adjustment from time to time as follows:
(1) (a) Upon each issuance or deemed issuance by the
Corporation of any Additional Stock (as defined below) after the date upon which
any shares of (a) Series B Preferred Stock were first issued (the "Series B
Purchase Date"), with respect to the Series B Preferred Stock, (b) Series C
Preferred Stock were first issued (the "Series C Purchase Date"), with respect
to Series C Preferred Stock, or (c) Series D Preferred Stock were first issued
(the "Series D Purchase Date"), with respect to the Series D Preferred Stock,
(the Series B Purchase Date, Series C Purchase Date and Series D Purchase Date
shall collectively be referred to herein as the "Purchase Date"), without
consideration or for a consideration per share less than the Conversion Price
for the Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock, as applicable, in effect immediately prior to the issuance of such
Additional Stock, the applicable Conversion Price for the Series B Preferred
Stock, Series C Preferred Stock and/or Series D Preferred Stock, as applicable,
in effect immediately prior to each such issuance shall forthwith (except as
otherwise provided in this clause (1)) be adjusted to a price determined by
multiplying such Conversion Price by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of Common Stock which the aggregate
consideration received by the Corporation for such issuance of Additional Stock
would purchase at such Conversion Price; and the denominator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of such Additional Stock.
(b) No adjustment of the Conversion Price for the
Series B Preferred Stock, Series C Preferred Stock or the Series D Preferred
Stock shall be made in an amount less than one cent per share, provided that any
adjustments which are not required to be made by reason of this sentence shall
be carried forward and shall be either taken into account in any subsequent
adjustment made prior to three (3) years from the date
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of the event giving rise to the adjustment being carried forward, or shall be
made at the end of three (3) years from the date of the event giving rise to the
adjustment being carried forward, whichever occurs first. Except to the limited
extent provided for in subsections (e)(iii) and (e)(iv), no adjustment of such
Conversion Price pursuant to this subsection 4(c)(1) shall have the effect of
increasing the Conversion Price above the Conversion Price in effect immediately
prior to such adjustment.
(c) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, or commissions allowed, paid or
incurred by this Corporation for any underwriting or brokerage commission or
otherwise in connection with the issuance and sale thereof.
(d) In the case of the issuance of the Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as reasonably determined
in good faith by the Board of Directors irrespective of any accounting
treatment.
(e) In the case of the issuance (whether before, on or
after the Purchase Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply for all
purposes of this subsection 4(c)(1) and subsection 4(c)(2):
i) The aggregate maximum number of shares of
Common Stock deliverable upon exercise (assuming the satisfaction of
any conditions to exercisability, including, without limitation, the
passage of time, but without taking into account potential
antidilution adjustments) of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal
to the consideration (determined in the manner provided in subsections
4(c)(1)(c) and (c)(1)(d), if any, received by the Corporation upon the
issuance of such options or rights plus the exercise price provided in
such options or rights (without taking into account potential
antidilution adjustments) for the Common Stock covered thereby.
ii) The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange (assuming
the satisfaction of any conditions to convertibility or
exchangeability, including, without limitation, the passage of time,
but without taking into account potential antidilution adjustments)
for any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent conversion or
exchange thereof shall be deemed to have been issued at the time such
securities were issued or such options or rights were issued and for a
consideration equal to the consideration, if any, received by the
Corporation for
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any such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus
the additional consideration, if any, to be received by the
Corporation (without taking into account potential antidilution
adjustments) upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in each
case to be determined in the manner provided in subsections 4(c)(1)(c)
and (c)(1)(d)).
iii) In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to
this Corporation upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or exchangeable
securities, including, without limitation, a change resulting from the
antidilution provisions thereof, the Conversion Price of the
applicable Preferred Stock to the extent in any way affected by or
computed using such options, rights or securities, shall be recomputed
to reflect such change, but no further adjustment shall be made for
the actual issuance of Common Stock or any payment of such
consideration upon the exercise of any such options or rights or the
conversion or exchange of such securities.
iv) Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the applicable Conversion Price of the
Preferred Stock to the extent in any way affected by or computed using
such options, rights or securities or options or rights related to
such securities, shall be recomputed to reflect the issuance of only
the number of shares of Common Stock (and convertible or exchangeable
securities which remain in effect) actually issued upon the exercise
of such options or rights, upon the conversion or exchange of such
securities or upon the exercise of the options or rights related to
such securities.
v) The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to
subsections 4(c)(1)(e)(i) and (ii) shall be appropriately adjusted to
reflect any change, termination or expiration of the type described in
either subsection 4(c)(1)(e)(iii) or (iv).
(2) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 4(c)(1)) by
this Corporation after the Purchase Date other than
(a) shares of Common Stock actually issued pursuant
to a transaction described in subsection 4(c)(3) hereof,
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(b) shares of Common Stock issued upon conversion of
the Series A Preferred Stock, Series B Preferred Stock or Series D
Preferred Stock,
(c) shares issued or issuable to employees,
consultants or directors of this Corporation pursuant to stock option
or stock issuance plans approved by the Corporation's Board of
Directors, or to vendors, suppliers, customers or other persons or
organizations with which the Corporation has a commercial
relationship, provided such issuances are first approved by the
Corporation's Board of Directors, or
(d) shares of Common Stock issued or issuable upon
exercise of warrants or rights granted to underwriters in connection
with such a public offering, or
(e) shares issued by way of dividend or other
distribution on shares excluded from the definition of Additional
Stock by virtue of clauses (a) through (d),
(3) In the event the Corporation should at any time or from
time to time after the Purchase Date fix a record date for the effectuation of a
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the applicable
Conversion Price of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock or Series D Preferred Stock shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of
each share of such series shall be increased in proportion to such increase of
the aggregate of shares of Common Stock outstanding and those issuable with
respect to such Common Stock Equivalents.
(4) If the number of shares of Common Stock outstanding at
any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the applicable Conversion Price for the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock
shall be appropriately increased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be decreased in
proportion to such decrease in outstanding shares.
d. OTHER DISTRIBUTIONS. In the event this Corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this Corporation or other persons, or assets (excluding
cash dividends) or options or rights not
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referred to in subsection 4(c)(3), then, in each such case for the purpose of
this subsection 4(d), the holders of the Preferred Stock shall be entitled to a
proportionate share of any such distribution as though they were the holders of
the number of shares of Common Stock of the Corporation into which their shares
of Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of the Corporation entitled to
receive such distribution.
e. RECAPITALIZATIONS. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4), provision shall be made so that the holders of the Preferred
Stock shall be entitled to receive the number of shares of stock or other
securities or property of the Company or otherwise, to which a holder of Common
Stock deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 4 with respect to the rights of
the holders of the Preferred Stock after the recapitalization to the end that
the provisions of this Section 4 (including adjustment of the Conversion Price
then in effect for each series and the number of shares purchasable upon
conversion of the Preferred Stock) shall be applicable after that event as
nearly equivalent as may be practicable.
f. RECLASSIFICATION OR REORGANIZATION. If the Common Stock
shall be changed into the same or different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision, combination, merger or sale of assets
transaction or recapitalization provided for elsewhere in this Section 4), then
and in each such event the holders of Preferred Stock shall be entitled to
receive the kind and amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification or other change, to which
a holder of Common Stock deliverable upon conversion would have been entitled
upon such reorganization, reclassification or other change.
g. NO IMPAIRMENT. This Corporation shall not, by amendment of
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this Corporation, but shall at all times in good faith assist in
the carrying out of all the provisions of this Section 4 and in the taking of
all such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Preferred Stock against impairment.
h. NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
(1) No fractional shares shall be issued upon conversion
of the Preferred Stock and the number of shares of Common Stock to be issued
shall be rounded to the nearest whole share. Whether or not fractional shares
are issuable upon such conversion shall be determined on the basis of the total
number of shares of Preferred Stock the holder is
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<PAGE>
at the time converting into Common Stock and the number of shares of Common
Stock issuable upon such aggregate conversion.
(2) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Preferred Stock pursuant to this Section 4, this
Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. This Corporation shall, upon the written request at any
time of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (A) such adjustment and readjustment,
(B) the applicable Conversion Price at the time in effect, and (C) the number of
shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of Preferred Stock.
i. NOTICES OF RECORD DATE. In the event of any taking by this
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, 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, this Corporation shall mail to each
holder of Preferred Stock, at least 20 days prior to the date specified therein,
a notice specifying 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.
j. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. This
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Preferred Stock, in addition to
such other remedies as shall be available to the holder of such Preferred Stock,
this Corporation shall take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.
k. NOTICES. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of this
Corporation.
5. VOTING RIGHTS.
a. GENERAL VOTING RIGHTS. The holder of each share of the
Preferred Stock shall have the right to one vote for each share of Common Stock
into which such Preferred Stock could then be converted (with any fractional
share determined on an
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<PAGE>
aggregate conversion basis being rounded to the nearest whole share), and with
respect to such vote, such holder shall have full voting rights and powers equal
to the voting rights and powers of the holders of Common Stock, and shall be
entitled, notwithstanding any provision hereof, to notice of any stockholders'
meeting in accordance with the Bylaws of this Corporation, and shall be entitled
to vote, together as a single class with holders of Common Stock, with respect
to any question upon which holders of Common Stock have the right to vote,
except for the election of directors as provided in Section 5(b) and the
provisions of Section 6 below.
b. ELECTION OF DIRECTORS. Notwithstanding 5(a) above, the
holders of Series C Preferred Stock and the holders of Series B Preferred Stock,
voting as a single class together, shall be entitled to elect one (1) director
of the Corporation, and, for so long as Farallon Capital Management, LLC or
persons or entities controlling or controlled by or under common control with
Farallon Capital Management, LLC continue to hold at least 750,000 shares of the
Corporation's Series D Preferred Stock, the holders of Series D Preferred Stock
shall be entitled (at their option) either to elect one (1) director of the
Corporation or designate a person with board representation rights. The holders
of Series A Preferred Stock and Common Stock, voting together as a class, shall
be entitled to elect the remaining directors of the Corporation or designate a
person with board observation rights. At any meeting held for the purpose of
electing or nominating directors, (i) the presence in person or by proxy of the
holders of a majority of the Series B Preferred Stock then outstanding and a
majority of the Series C Preferred Stock then outstanding shall constitute a
quorum of the Series B and Series C Preferred Stock for the election or
nomination of directors to be elected or nominated solely by the holders of
Series B and Series C Preferred Stock voting together as a single class and (ii)
the presence in person or by proxy of the holders of a majority of the Series D
Preferred Stock then outstanding shall constitute a quorum of the Series D
Preferred Stock for the election or nomination of directors to be elected or
nominated solely by the holders of Series D Preferred Stock. A vacancy in any
directorship elected by the holders of Series B Preferred Stock and Series C
Preferred Stock shall be filled only by vote of the holders of Series B
Preferred Stock and Series C Preferred Stock. A vacancy in any directorship
elected by the holders of Series D Preferred Stock shall be filled only by vote
of the holders of Series D Preferred Stock.
6. PROTECTIVE PROVISIONS.
a. So long as shares of Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock are outstanding, this Corporation
shall not without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of at least a majority of the then outstanding
shares of Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock, voting together as a single class:
(1) sell, convey, or otherwise dispose of or encumber (other
than pursuant to a credit arrangement in the ordinary course of business) all or
substantially all of its property or business or merge into or consolidate with
any other Corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than 50%
of the voting power of the Corporation is disposed of or transferred
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<PAGE>
or effect any voluntary liquidation, dissolution or winding up of the
Corporation or any reorganization or recapitalization of the Corporation (any
such event hereinafter referred to as a "Corporate Transaction"); or
(2) create any new class or series of stock or any other
securities convertible into equity securities of the Corporation having a
preference over, or being on a parity with, the Series B Preferred Stock, Series
C Preferred Stock or Series D Preferred Stock with respect to voting, dividends
or preferences upon liquidation or conversion rights; or
(3) amend the Corporation's Certificate of Incorporation; or
(4) amend the Corporation's Bylaws, including, without
limitation, any amendment to increase the authorized number of directors to more
than six.
b. So long as shares of Series B Preferred Stock are
outstanding, this Corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Series B Preferred Stock alter or
change the rights, preferences or privileges of the shares of Series B Preferred
Stock so as to adversely affect the shares.
c. So long as shares of Series C Preferred Stock are
outstanding, this Corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Series C Preferred Stock alter or
change the rights, preferences or privileges of the shares of Series C Preferred
Stock so as to adversely affect the shares.
d. So long as shares of Series D Preferred Stock are
outstanding, this Corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Series D Preferred Stock, voting
together as a single class, alter or change the rights, preferences or
privileges of the shares of Series D Preferred Stock so as to adversely affect
the shares.
7. STATUS OF CONVERTED OR REDEEMED STOCK. In the event any shares
of Preferred Stock shall be redeemed or converted pursuant to Section 3 or
Section 4 hereof, the shares so converted or redeemed shall be cancelled and
shall not be issuable by the Corporation. The Certificate of Incorporation of
this Corporation shall be appropriately amended to effect the corresponding
reduction in the Corporation's authorized capital stock.
8. NON-PARI PASSU AND NON-PRO RATA TREATMENT. Notwithstanding any
requirement in Sections 1, 2 or 3 of Article IV, Section B which requires a
payment or delivery of any amount or consideration to be made PARI PASSU or pro
rata, if any holder (a "Restricted Holder") of Preferred Stock has agreed to
limit, restrict or subordinate its right (each a "Restriction") to payment or
delivery of any amount or consideration which otherwise would be distributable
to it by the Company, the Company shall, even if the Company has agreed to such
Restriction, nevertheless distribute all amounts and consideration distributable
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<PAGE>
to each other holder of Preferred Stock without regard to any Restrictions and
shall hold for the benefit of the Restricted Holder or as otherwise required by
law or contract the amounts and consideration otherwise distributable to the
Restricted Holder until the applicable Restriction is complied with or
extinguished.
C. COMMON STOCK.
1. DIVIDEND RIGHTS. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the Corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or winding
up of the Corporation, the assets of the Corporation shall be distributed as
provided in Section 2 of Division (B) of this Article IV.
3. REDEMPTION. The Common Stock is not redeemable.
4. VOTING RIGHTS. The holder of each share of Common Stock shall
have the right to one vote, and shall be entitled to notice of any stockholders'
meeting in accordance with the Bylaws of this Corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law and
Section 5(b) of Division (B) of this Article IV.
ARTICLE V.
A. EXCULPATION. A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (1) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (2) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) under Section 174 of the Delaware General
Corporation Law or (4) for any transaction from which the director derived any
improper personal benefit. If the Delaware General Corporation Law is hereafter
amended to further reduce or to authorize, with the approval of the
Corporation's stockholders, further reductions in the liability of the
Corporation's directors for breach of fiduciary duty, then a director of the
Corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
B. INDEMNIFICATION. To the extent permitted by applicable law, this
Corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this Corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law,
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<PAGE>
subject only to limits created by applicable Delaware law (statutory or
non-statutory), with respect to actions for breach of duty to the Corporation,
its stockholders, and others.
C. EFFECT OF REPEAL OR MODIFICATION. Any repeal or modification of any
of the foregoing provisions of this Article V shall be prospective and shall not
adversely affect any right or protection of a director, officer, agent or other
person existing at the time of, or increase the liability of any director of the
Corporation with respect to any acts or omissions of such director occurring
prior to, such repeal or modification.
ARTICLE VI.
Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the Corporation.
ARTICLE VII.
The Corporation is to have a perpetual existence.
ARTICLE VIII.
Subject to IV(B)(6), the Corporation reserves the right to repeal, alter,
amend or rescind any provision contained in this Certificate of Incorporation
and/or any provision contained in any amendment to or restatement of this
Certificate of Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred on stockholders herein are granted subject to
this reservation.
ARTICLE IX.
Subject to IV(B)(6), the Board of Directors may from time to time make,
amend, supplement or repeal the Bylaws by the requisite affirmative vote of
Directors as set forth in the Bylaws.
ARTICLE X.
The Corporation shall not be subject to the provisions of Section 203 of
the Delaware General Corporation Law.
[Remainder of This Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation
has been executed as of this 18th day of November, 1997 by the undersigned who
affirms that the statements made herein are true and correct.
/s/ Ralph Rubio
------------------------------
Ralph Rubio, President
/s/ Rafael Rubio
------------------------------
Rafael Rubio, Secretary
[SIGNATURE PAGE TO AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION OF RUBIO'S RESTAURANTS, INC.]
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
RUBIO'S RESTAURANTS, INC.
RUBIO'S RESTAURANTS, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That resolutions were duly adopted by the Board of Directors of the
Corporation setting forth a proposed amendment to the Amended and Restated
Certificate of Incorporation of the Corporation, and declaring said amendment to
be advisable and recommended for approval by the stockholders of the
Corporation. The resolutions setting forth the proposed amendment are as
follows:
NOW, THEREFORE, BE IT RESOLVED, that the Amended and Restated Certificate
of Incorporation of the Corporation be amended by changing Article IV,
Section A thereof so that, as amended, said Section shall read in its
entirety as follows:
"A. CLASSES OF STOCK. This Corporation is authorized to issue
two classes of stock to be designated, respectively, "Common Stock"
and "Preferred Stock." The total number of shares which the
Corporation is authorized to issue is Twelve Million Six Hundred
Eighty-Two Thousand Three Hundred Sixty-Two (12,682,362) shares.
Seven Million Two Hundred Ninety-Eight Thousand Seven Hundred
Twenty-Five (7,298,725) shares shall be Common Stock, $0.001 par value
per share, and Five Million Three Hundred Eighty-Three Thousand Six
Hundred Thirty-Seven (5,383,637) shares shall be Preferred Stock,
$0.001 par value per share, of which One Million Nine Hundred
Seventy-Three Thousand Three Hundred Ninety-Five (1,973,395) shares
shall be Series A Preferred Stock, One Million Ninety-Two Thousand
Seven (1,092,007) shares shall be Series B Preferred Stock, Seven
Hundred Ninety-Three Thousand Six Hundred Forty (793,640) shares shall
be Series C Preferred Stock and One Million Five Hundred Twenty-Four
Thousand Five Hundred Ninety-Five (1,524,595) shares shall be Series D
Preferred Stock."
SECOND: That, thereafter, the stockholders approved the foregoing
amendment by written consent in accordance with Section 228 of the Delaware
General Corporation Law.
<PAGE>
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law.
FOURTH: That the capital of said Corporation shall not be reduced under or
by reason of said amendment.
[Remainder of This Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, said Rubio's Restaurants, Inc. has caused this
certificate to be signed by Ralph Rubio, its President and Rafael Rubio, its
Secretary, this 13th day of May, 1998.
By: /s/ Ralph Rubio
------------------------------
Ralph Rubio, President
By: /s/ Rafael Rubio
------------------------------
Rafael Rubio, Secretary
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<PAGE>
CERTIFICATE OF AMENDMENT TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
RUBIO'S RESTAURANTS, INC.
RUBIO'S RESTAURANTS, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That resolutions were duly adopted by the Board of Directors of the
Corporation setting forth a proposed amendment to the Amended and Restated
Certificate of Incorporation of the Corporation, and declaring said amendment to
be advisable and recommended for approval by the stockholders of the
Corporation. The resolutions setting forth the proposed amendment are as
follows:
NOW, THEREFORE, BE IT RESOLVED, that the Amended and Restated Certificate
of Incorporation of the Corporation be amended by adding paragraph 4.a.(6)
to ARTICLE IV., Section B. thereof so that, as amended, said paragraph
shall inserted and read in its entirety as follows:
"(6) Each share of Series A Preferred Stock shall
automatically be converted in shares of Common Stock based on the
Conversion Price at the time in effect for such shares immediately upon the
earlier of (A) the closing of the Corporation's sale of its Common Stock in
a bona fide, firm commitment underwriting pursuant to a registration
statement under the Securities Act, in which the Corporation and any
selling stockholders receive not less than $15,000,000 aggregate net
proceeds, or (B) the date upon which the Corporation obtains the consent to
the holders of a majority of the then outstanding shares of Series A
Preferred Stock for conversion of the Series A Preferred Stock in Common
Stock."
SECOND: That, thereafter, the stockholders approved the foregoing
amendment by written consent in accordance with Section 228 of the Delaware
General Corporation Law.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law.
FOURTH: That the capital of said Corporation shall not be reduced under or
by reason of said amendment.
[Remainder of This Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, said Rubio's Restaurants, Inc. has caused this
certificate to be signed by Ralph Rubio, its President and Chief Executive
Officer, this 26th day of March, 1999.
By: /s/ Ralph Rubio
-------------------------------------
Ralph Rubio, President and Chief
Executive Officer
2
<PAGE>
FORM OF SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF RUBIO'S RESTAURANTS, INC.,
A DELAWARE CORPORATION
RUBIO'S RESTAURANTS, INC., a corporation organized and existing under
the laws of the state of delaware, hereby certifies as follows:
1. The name of the corporation is RUBIO'S RESTAURANTS, INC. The
original Certificate of incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on September 2, 1997 and was
amended pursuant to an Amended and Restated Certificate of Incorporation
filed with the Secretary of State of the State of Delaware on November 18,
1997.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of
the State of Delaware, this Second Restated Certificate of Incorporation was
adopted by the corporation's Board of Directors and stockholders.
3. The text of the Certificate of Incorporation as heretofore amended
or supplemented is hereby restated and further amended to read in its
entirety as follows:
ARTICLE I
The name of this corporation is RUBIO'S RESTAURANTS, INC.
ARTICLE II
The address of this corporation's registered office in the State of
Delaware is 1050 S. State Street, City of Dover, County of Kent. The name of
its registered agent at such address is CorpAmerica, Inc.
ARTICLE III
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may now or hereafter be organized under the
Delaware General Corporation Law.
ARTICLE IV
(A) CLASSES OF STOCK. This corporation is authorized to issue two
classes of stock, denominated Common Stock and Preferred Stock. The Common
Stock shall have a par value of $0.001 per share and the Preferred Stock
shall have a par value of $0.001 per share. The total number of shares of
Common Stock which the Corporation is authorized to issue is seventy-five
million (75,000,000), and the total number of shares of Preferred Stock which
the Corporation is authorized to issue is five million (5,000,000), which
shares of Preferred Stock shall be undesignated as to series.
<PAGE>
(B) ISSUANCE OF PREFERRED STOCK. The Preferred Stock may be issued
from time to time in one or more series. The Board of Directors is hereby
authorized, by filing one or more certificates pursuant to the Delaware
General Corporation Law (each, a "Preferred Stock Designation"), to fix or
alter from time to time the designations, powers, preferences and rights of
each such series of Preferred Stock and the qualifications, limitations or
restrictions thereof, including without limitation the dividend rights,
dividend rate, conversion rights, voting rights, rights and terms of
redemption (including sinking fund provisions), redemption price or prices,
and the liquidation preferences of any wholly-unissued series of Preferred
Stock, and to establish from time to time the number of shares constituting
any such series and the designation thereof, or any of them; and to increase
or decrease the number of shares of any series subsequent to the issuance of
shares of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be decreased
in accordance with the foregoing sentence, the shares constituting such
decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
(C) RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS OF COMMON STOCK.
1. DIVIDEND RIGHTS. Subject to the prior or equal rights of
holders of all classes of stock at the time outstanding having prior or equal
rights as to dividends, the holders of the Common Stock shall be entitled to
receive, when and as declared by the Board of Directors, out of any assets of
the corporation legally available therefor, such dividends as may be declared
from time to time by the Board of Directors.
2. REDEMPTION. The Common Stock is not redeemable upon demand of
any holder thereof or upon demand of this corporation.
3. VOTING RIGHTS. The holder of each share of Common Stock shall
have the right to one vote, and shall be entitled to notice of any
stockholders' meeting in accordance with the Bylaws of this corporation, and
shall be entitled to vote upon such matters and in such manner as may be
provided by law.
ARTICLE V
(A) EXCULPATION. A director of the corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law or (iv) for any transaction from which the
director derived any improper personal benefit. If the Delaware General
Corporation Law is hereafter amended to further reduce or to authorize, with
the approval of the corporation's stockholders, further reductions in the
liability of the corporation's directors for breach of fiduciary duty, then a
director of the corporation shall not be liable for any such breach to the
fullest extent permitted by the Delaware General Corporation Law as so
amended.
(B) INDEMNIFICATION. To the extent permitted by applicable law, this
corporation is also authorized to provide indemnification of (and advancement
of expenses to) such agents (and
2
<PAGE>
any other persons to which Delaware law permits this corporation to provide
indemnification) through bylaw provisions, agreements with such agents or
other persons, vote of stockholders or disinterested directors or otherwise,
in excess of the indemnification and advancement otherwise permitted by
Section 145 of the Delaware General Corporation Law, subject only to limits
created by applicable Delaware law (statutory or non-statutory), with respect
to actions for breach of duty to the corporation, its stockholders and others.
(C) EFFECT OF REPEAL OR MODIFICATION. Any repeal or modification of
any of the foregoing provisions of this Article V shall be prospective and
shall not adversely affect any right or protection of a director, officer,
agent or other person existing at the time of, or increase the liability of
any director of the corporation with respect to any acts or omissions of such
director occurring prior to, such repeal or modification.
ARTICLE VI
Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the corporation. At the next Annual Meeting
of Stockholders, the Directors shall be classified into three classes, as
nearly equal in number as possible as determined by the Board of Directors,
with the term of office of the first class to expire at the second Annual
Meeting of Stockholders, the term of office of the second class to expire at
the third Annual Meeting of Stockholders and the term of the third class to
expire at the fourth Annual Meeting of Stockholders. At each Annual Meeting
of Stockholders following such initial classification and election, Directors
elected to succeed those Directors whose terms expire shall be elected for a
term of office to expire at the third succeeding Annual Meeting of
Stockholders after their election. Additional directorships resulting from
an increase in the number of Directors shall be apportioned among the classes
as equally as possible as determined by the Board of Directors.
ARTICLE VII
No holder of shares of stock of the corporation shall have any
preemptive or other right, except as such rights are expressly provided by
contract, to purchase or subscribe for or receive any shares of any class, or
series thereof, of stock of the corporation, whether now or hereafter
authorized, or any warrants, options, bonds, debentures or other securities
convertible into, exchangeable for or carrying any right to purchase any
share of any class, or series thereof, of stock; but such additional shares
of stock and such warrants, options, bonds, debentures or other securities
convertible into, exchangeable for or carrying any right to purchase any
shares of any class, or series thereof, of stock may be issued or disposed of
by the Board of Directors to such persons, and on such terms and for such
lawful consideration as in its discretion it shall deem advisable or as the
corporation shall have by contract agreed.
ARTICLE VIII
The corporation is to have a perpetual existence.
ARTICLE IX
The corporation reserves the right to repeal, alter, amend or rescind
any provision contained in this Second Amended and Restated Certificate of
Incorporation and/or any
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provision contained in any amendment to or restatement of this Second Amended
and Restated Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred on stockholders herein are
granted subject to this reservation.
ARTICLE X
The Board of Directors may from time to time make, amend, supplement or
repeal the Bylaws by the requisite affirmative vote of Directors as set forth
in the Bylaws; provided, however, that the stockholders may change or repeal
any bylaw adopted by the Board of Directors by the requisite affirmative vote
of stockholders as set forth in the Bylaws; and, provided further, that no
amendment or supplement to the Bylaws adopted by the Board of Directors shall
vary or conflict with any amendment or supplement thus adopted by the
stockholders.
ARTICLE XI
No action shall be taken by the stockholders of the corporation except
at an annual or special meeting of stockholders called in accordance with the
Bylaws, and no action shall be taken by the stockholders by written consent.
ARTICLE XII
Advance notice of stockholder nominations for the election of directors and
of business to be brought by stockholders before any meeting of the stockholders
of the corporation shall be given in the manner provided in the Bylaws of the
corporation.
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IN WITNESS WHEREOF, this Second Amended and Restated Certificate of
Incorporation has been signed under the seal of the corporation as of this
___ day of __________, 1999.
RUBIO'S RESTAURANTS, INC.,
A Delaware Corporation
By:
--------------------------------------------
Ralph Rubio,
President and Chief Executive Officer
[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION OF RUBIOS RESTAURANTS, INC.]
<PAGE>
Exhibit 3.3
BYLAWS
OF
RUBIO'S RESTAURANTS, INC.
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Dover, County of
Kent, State of Delaware.
Section 2. The corporation may also have offices at such other places both
within and without the State of Delaware as the Board of Directors may from time
to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of directors
shall be held in the City of San Diego, State of California, at such place as
may be fixed from time to time by the Board of Directors, or at such other place
either within or without the State of Delaware as shall be designated from time
to time by the Board of Directors and stated in the notice of the meeting.
Meetings of stockholders for any other purpose may be held at such time and
place, within or without the State of Delaware, as shall be stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year 1998,
shall be held on such date and at such time as shall be designated from time to
time by the Board of
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Directors and stated in the notice of the meeting, at which they shall elect by
a plurality vote a board of directors, and transact such other business as may
properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
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Section 6. Written notice of a special meeting stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is called,
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such
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question.
Section 10. Unless otherwise provided in the certificate of incorporation
each stockholder shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for each share of the capital stock having voting
power held by such stockholder, but no proxy shall be voted on after three years
from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of incorporation,
any action required to be taken at any annual or special meeting of stockholders
of the corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole board
shall be five (5) until changed by the vote or written consent of the
Shareholders or by a majority vote of the Board of Directors, in each case,
together with the vote or written consent of the holders of a majority of the
outstanding shares of Series B Preferred Stock or the Series B directors as
prescribed by the Certificate of Incorporation. Directors shall hold office
until the next Annual Meeting of Shareholders and until their respective
successors are elected. If
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any such annual meeting is not held, or the directors are not elected thereat,
the directors may be elected at any special meeting of shareholders held for
that purpose. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. The business of the corporation shall be managed by or under
the direction of its board of directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or by these bylaws directed or required to
be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected Board of Directors
shall be held at
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such time and place as shall be fixed by the vote of the stockholders at the
annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected Board of Directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver signed by all
of the directors.
Section 6. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the board.
Section 7. Special meetings of the board may be called by the President on
four (4) days' notice to each director by mail or 48 hours' notice to each
director either personally or by telegram; special meetings shall be called by
the President or Secretary in like manner and on like notice on the written
request of two directors unless the board consists of only one director, in
which case special meetings shall be called by the President or Secretary in
like manner and on like notice on the written request of the sole director.
Section 8. At all meetings of the board a majority of the directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors, except as may be otherwise specifically provided by
statute or by the certificate of incorporation. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
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Section 9. Unless otherwise restricted by the certificate of incorporation
or these bylaws, any action required or permitted to be taken at any meeting of
the Board of Directors or of any committee thereof may be taken without a
meeting, if all members of the board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a majority
of the whole board, designate one or more committees, each committee to consist
of one or more of the directors of the corporation. The board may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee.
In the absence of disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member.
Any such committee, to the extent provided in the resolution of the Board
of Directors, shall have and may exercise all the powers and authority of the
Board of Directors
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in the management of the business and affairs of the corporation, and may
authorize the seal of the corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the certificate of incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, recommending
to the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the bylaws of the corporation; and, unless the
resolution or the certificate of incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
Section 12. Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
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REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or bylaw, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be elected by the Board
of Directors and shall include a President and a Secretary. The Board of
Directors may elect from among its members a Chairman of the Board and a Vice
Chairman of the Board. The Board of Directors may also elect a Chief Financial
Officer and/or one or more Vice Presidents,
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Assistant Secretaries and Assistant Chief Financial Officers. Any number of
offices may be held by the same person, unless the certificate of incorporation
or these bylaws otherwise provide.
Section 2. The Board of Directors at its first meeting after each annual
meeting of stockholders shall elect a President and a Secretary and may also
elect Vice Presidents and a Chief Financial Officer.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualified. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which he shall be
present. He shall have and may exercise such powers as are, from time to time,
assigned to him by the Board and as may be provided by law.
Section 7. In the absence of the Chairman of the Board, the Vice Chairman
of the Board, if any, shall preside at all meetings of the Board of Directors
and of the stockholders at which he shall be present. He shall have and may
exercise such powers as are, from time
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to time, assigned to him by the Board and as may be provided by law.
THE PRESIDENT AND VICE PRESIDENT
Section 8. The President shall be the chief executive officer of the
corporation; and in the absence of the Chairman and Vice Chairman of the Board
he shall preside at all meetings of the stockholders and the Board of Directors.
He shall have general and active management of the business of the corporation
and shall see that all orders and resolutions of the Board of Directors are
carried into effect.
Section 9. He shall execute bonds, mortgages and other contracts requiring
a seal, under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board of Directors to some
other officer or agent of the corporation.
Section 10. In the absence of the President or in the event of his
inability or refusal to act, the Vice President, if any, (or in the event there
be more than one Vice President, the Vice Presidents in the order designated by
the directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 11. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like
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duties for the standing committees when required. He shall give, or cause to be
given, notice of all meetings of the stockholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors or President, under whose supervision he shall be. He
shall have custody of the corporate seal of the corporation and he, or an
Assistant Secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by his signature or by the
signature of such Assistant Secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the corporation and to
attest the affixing by his signature.
Section 12. The Assistant Secretary, or, if there be more than one, the
Assistant Secretaries in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the Secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
THE CHIEF FINANCIAL OFFICER AND ASSISTANT CHIEF FINANCIAL OFFICER
Section 13. The Chief Financial Officer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors.
Section 14. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors
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so requires, an account of all his transactions as Chief Financial Officer and
of the financial condition of the corporation.
Section 15. If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 16. The Assistant Chief Financial Officer, or if there shall be
more than one, the Assistant Chief Financial Officers in the order determined by
the Board of Directors (or if there be no such determination, then in the order
of their election) shall, in the absence of the Chief Financial Officer or in
the event of his inability or refusal to act, perform the duties and exercise
the powers of the Chief Financial Officer and shall perform such other duties
and have such other powers as the Board of Directors may from time to time
prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by, the
Chairman or Vice Chairman of the Board of Directors, or the President or a Vice
President and the Chief Financial Officer or an Assistant Chief Financial
Officer, or the Secretary or an Assistant Secretary of the corporation,
certifying the number of shares owned by him in the corporation.
Certificates may be issued for partly paid shares and in such case upon the
face or back of the certificates issued to represent any such partly paid
shares, the total amount of the
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consideration to be paid therefor, and the amount paid thereon shall be
specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing
such issue
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of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
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REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the certificate of incorporation, if any, may be declared by
the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
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CHECKS
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by resolution
of the Board of Directors.
SEAL
Section 5. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 6. The corporation shall indemnify its officers, directors,
employees and agents to the full extent permitted by the General Corporation Law
of Delaware.
ARTICLE VIII
AMENDMENT
Section 1. These bylaws may be altered, amended or repealed or new bylaws
may be adopted by the stockholders or by the Board of Directors, when such power
is conferred upon the Board of Directors by the certificate of incorporation at
any regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors if notice of
such alteration, amendment, repeal or adoption of new bylaws be contained in the
notice of such special meeting. If the power to adopt, amend or
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repeal bylaws is conferred upon the Board of Directors by the certificate of
incorporation it shall not divest or limit the power of the stockholders to
adopt, amend or repeal bylaws.
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CERTIFICATE OF SECRETARY
The undersigned, being the Secretary of Rubio's Restaurants, a Delaware
corporation, does hereby certify the foregoing to be the Bylaws of said
Corporation, as adopted by the directors of the Corporation and which remain in
full force and effect as of the date hereof.
Executed at San Diego, California, effective as of September 2, 1997.
/s/ Rafael Rubio
------------------------------
Rafael Rubio, Secretary
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AMENDMENT TO BYLAWS
OF
RUBIO'S RESTAURANTS, INC.
Certificate of Secretary
The undersigned does hereby certify that:
I am the duly qualified and acting Secretary of Rubio's Restaurants, Inc.,
a duly organized and existing California corporation (the "Corporation").
The following is a true copy of a resolution duly adopted by unanimous
written consent of the directors of the Corporation effective March 22, 1996,
which appears in the minute book of the Corporation:
RESOLVED, that Article II, Section 11 of the Bylaws of the Corporation be
amended to read in its entirety as set forth below:
"Section 11. CUMULATIVE VOTING FOR ELECTION OF DIRECTORS. Provided
the candidate's name has been placed in nomination prior to the voting
and one or more shareholders has given notice at the meeting prior to
the voting of the shareholder's intent to cumulate the shareholder's
votes, every Common shareholder, Series A Preferred Stock shareholder,
Series B Preferred Stock shareholder and Series C Preferred Stock
shareholder entitled to vote at any election for directors shall have
the right to cumulate such Common shareholder's votes, Series A
Preferred Stock shareholder's votes, Series B Preferred Stock
shareholder's votes, or Series C Preferred Stock shareholder's votes,
as applicable, and give one candidate of the applicable class the
number of votes equal to the number of directors to be elected
multiplied by the number of votes to which the shareholder's shares
are normally entitled, or distribute the shareholder's votes on the
same principle among as many candidates as the shareholder shall think
fit. The candidates receiving the highest number of votes of the
shares entitled to be voted for that particular candidate to the
number of directors to be elected by such shares are elected.
Notwithstanding the foregoing, the Series B and C Preferred Stock
shareholders, voting together as a single class, shall only have the
right to elect one director and the Series A Preferred Stock
shareholders and the Common shareholders shall have the right to elect
the balance of the directors."
RESOLVED, that Article III, Section 2 of the Bylaws of the Corporation be
amended in its entirety as set forth below:
"Section 2. NUMBER, TENURE AND QUALIFICATIONS. The authorized number
of directors of this Corporation shall be exactly five (5), until
changed to five (5) by the vote or written consent of the Shareholders
or by a majority vote of the Board of Directors, in each case together
with the vote or written consent of the holders of a majority of the
outstanding shares of both Series B Preferred
<PAGE>
Stock and Series C Preferred Stock or the Series B director/Series C
director, as prescribed by the Articles of Incorporation.
Directors shall hold office until the next annual meeting of
shareholders and until their respective successors are elected. If
any such annual meeting is not held, or the directors are not elected
thereat, the directors may be elected at any special meeting of
shareholders held for that purpose. Directors need not be
shareholders."
RESOLVED, that Article III, Section 13 of the Bylaws of the Corporation be
amended in its entirety as set forth below:
"Section 13. VACANCIES. Except for a vacancy created by the removal
of a director, all vacancies in the Board of Directors except as
described below, whether caused by resignation, death or otherwise,
may be filled by a majority of the remaining directors, though less
than a quorum, or by a sole remaining director, and each director so
elected shall hold office until his successor is elected at an annual,
regular or special meeting of the shareholders. A vacancy in any
directorship elected by the holders of Series B Preferred Stock and
the holders of the Series C Preferred Stock, voting together as a
single class. shall be filled only by vote of the holders of the
Series B Preferred Stock and Series C Preferred Stock. The voting to
fill other vacancies in the board of directors shall be filled by the
vote of the Series A Preferred shareholders and the Common
shareholders. Vacancies created by the removal of a director may be
filled only by approval of the shareholders entitled to vote for such
directors. Those shareholders entitled to vote may elect a director
at any time to fill any vacancy not filled by the directors. Any such
election by written consent requires the consent of a majority of the
outstanding shares entitled to vote."
The foregoing amendment to the Bylaws is in conformity with the Amended and
Restated Articles of Incorporation and Bylaws of the Corporation, has never been
modified or repealed, and is now in full force and effect.
IN WITNESS WHEREOF, I have executed this Amendment to Bylaws and affixed
the seal of the Corporation on the 22nd day of March, 1996.
/s/ Rafael Rubio
------------------------------
Rafael Rubio, Secretary
2
<PAGE>
CERTIFICATE OF AMENDMENT TO BYLAWS OF
RUBIO'S RESTAURANTS, INC.
The undersigned does hereby certify that:
I am the duly qualified and acting Secretary of Rubio's Restaurants, Inc.,
a duly organized and existing Delaware corporation (the "Corporation").
The following amendment was duly adopted by written consent of the Board of
Directors and stockholders of the Corporation effective as of November 19, 1997,
which contents appear in the minute book of the Corporation:
A. Section 2 of Article II of the Bylaws of the Corporation is amended in
its entirety to read as follows:
"Section 2. Annual meetings of stockholders, commencing with the
year 1998, shall be held on such date and at such time as shall be
designated from time to time by the Board of Directors and stated in
the notice of the meeting, at which they shall elect the board of
directors, and transact such other business as may properly be brought
before the meeting. Directors shall be elected as set forth in the
Company's Certificate of Incorporation."
B. Section 1 of Article III of the Bylaws of the Corporation is
amended in its entirety to read as follows:
"Section 1. The number of directors which shall constitute the
whole board shall be six (6) until changed by the vote or written
consent of the stockholders or by a majority vote of the Board of
Directors, in each case, together with the vote or written consent of
the holders of a majority of the outstanding shares of Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock, voting together as a single class, as prescribed by the Amended
and Restated Certificate of Incorporation of the Corporation.
Directors shall hold office until the next Annual Meeting of
Stockholders and until their respective successors are elected. If
any such annual meeting is not
<PAGE>
held, or the directors are not elected thereat, the directors may be
elected at any special meeting of stockholders held for that purpose.
Directors need not be stockholders."
B. The first sentence of Section 2 of Article III of the Bylaws of the
Corporation is amended in its entirety to read as follows:
"Except as provided in the Company's Certificate of Incorporation,
vacancies and newly created directorships resulting from any increase in
the authorized number of directors may be filled by a majority of the
directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next
annual election and until their successors are duly elected and shall
qualify, unless sooner displaced. If there are no directors in office,
then an election of directors may be held in the manner provided by
statute."
The foregoing amendment of the Bylaws is in conformity with the Amended and
Restated Certificate of Incorporation and the Bylaws of the Corporation, has
never been modified or repealed, and is now in full force and effect.
IN WITNESS WHEREOF, I have executed this Amendment to Bylaws and affixed
the seal of the Corporation on the day of November, 1997.
/s/ Rafael Rubio
------------------------------
Rafael Rubio, Secretary
2
<PAGE>
EXHIBIT 3.4
FORM OF RESTATED BYLAWS
OF
RUBIO'S RESTAURANTS, INC.
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office shall be in the
City of Dover, County of Kent, State of Delaware.
Section 2. OTHER OFFICES. The corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. All meetings of the stockholders for the
election of Directors shall be held in the City of San Diego, State of
California, at such place as may be fixed from time to time by the Board of
Directors, or at such other place either within or without the State of
California as shall be designated from time to time by the Board of Directors
and stated in the notice of the meeting. Meetings of stockholders for any
other purpose may be held at such time and place, within or without the State
of California, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2. ANNUAL MEETING.
(a) The annual meeting of the stockholders of the corporation,
for the purpose of election of Directors and for such other business as may
lawfully come before it, shall be held on such date and at such time as may
be designated from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting.
To be properly brought before an annual meeting, business must be: (A)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (B) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or (C)
otherwise properly brought before the meeting by a stockholder. For business
to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary
of the corporation. To be timely, a stockholder's notice must be delivered to
or mailed and received at the principal executive offices of the corporation
no later than the date specified in the corporation's proxy statement
released to stockholders in connection with the previous year's annual
meeting of stockholders, which date shall be not less
<PAGE>
than one hundred twenty (120) calendar days in advance of the date of such
proxy statement; provided, however, that in the event that no annual meeting
was held in the previous year or the date of the annual meeting has been
changed by more than thirty (30) days from the date contemplated at the time
of the previous year's proxy statement, notice by the stockholder to be
timely must be so received a reasonable time before the solicitation is made.
A stockholder's notice to the Secretary shall set forth as to each matter
the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting
and the reasons for conducting such business at the annual meeting, (ii) the
name and address, as they appear on the corporation's books, of the
stockholder proposing such business, (iii) the class and number of shares of
the corporation which are beneficially owned by the stockholder, (iv) any
material interest of the stockholder in such business and (v) ay other
information that is required to be provided by the stockholder pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), in such stockholder's capacity as a proponent to a stockholder
proposal. In addition to the foregoing, in order to include information with
respect to a stockholder proposal in the proxy statement and form of proxy
for a stockholder's meeting, stockholders must provide notice as required by
the regulations promulgated under the 1934 Act to the extent such regulations
require notice that is different from the notice required above.
Notwithstanding anything in these Bylaws to the contrary, no business shall
be conducted at any annual meeting except in accordance with the procedures
set forth in this paragraph (b) of this Section 2. The chairman of the
annual meeting shall, if the facts warrant, determine and declare at the
meeting that business was not properly brought before the meeting and in
accordance with the provisions of this paragraph (b), and, if he or she
should so determine, the chairman shall so declare at the meeting that any
such business not properly brought before the meeting shall not be transacted.
(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
Directors. Nominations of persons for election to the Board of Directors of
the corporation may be made at a meeting of stockholders by or at the
direction of the Board of Directors or by any stockholder of the corporation
entitled to vote in the election of Directors at the meeting who complies
with the notice procedures set forth in this paragraph (c). Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the
Secretary of the corporation in accordance with the provisions of paragraph
(b) of this Section 2. Timely notice shall also be given of any
stockholder's intention to cumulate votes in the election of Directors at a
meeting if cumulative voting is available. Such stockholder's notice shall
set forth (i) as to each person, if any, whom the stockholder proposes to
nominate for election or re-election as a Director: (A) the name, age,
business address and residence address of such person, (B) the principal
occupation or employment of such person, (C) the class and number of shares
of the corporation that are beneficially owned by such person, (D) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nominations are to be made by the stockholder, and (E)
any other information relating to such person that is required to be
disclosed in solicitations of proxies for election of Directors, or is
otherwise required, in each case pursuant to Regulation 14A under the 1934
Act (including without limitation such person's written consent to being
named in the proxy statement, if any, as a nominee and to serving as a
Director if elected); and (ii) as to such stockholder giving notice, the
information required to be provided pursuant to subitems (ii), (iii) and (iv)
of paragraph (b) of this Section 2 and, if
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<PAGE>
cumulative voting is available to such stockholder, whether such stockholder
intends to request cumulative voting in the election of Directors at the
meeting. At the request of the Board of Directors, any person nominated by a
stockholder for election as a Director shall furnish to the Secretary of the
corporation that information required to be set forth in the stockholder's
notice of nomination which pertains to the nominee. No person shall be
eligible for election as a Director of the corporation unless nominated in
accordance with the procedures set forth in this paragraph (c). The chairman
of the meeting shall, if the facts warrant, determine and declare at the
meeting that a nomination was not made in accordance with the procedures
prescribed by these Bylaws, and if the chairman should so determine, he or
she shall so declare at the meeting, and the defective nomination shall be
disregarded.
Section 3. NOTICE OF ANNUAL MEETING. Written notice of the annual
meeting stating the place, date and hour of the meeting shall be given to
each stockholder entitled to vote at such meeting not less than ten (10) nor
more than sixty (60) days before the date of the meeting.
Section 4. VOTING LIST. The officer who has charge of the stock ledger
of the corporation shall prepare and make, or have prepared and made, at
least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior
to the meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
Section 5. SPECIAL MEETINGS. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, as amended from time to time, may only be
called as provided in this Section 5 by the President, Chief Executive
Officer or Chairman of the Board and shall be called by the President or
Secretary at the request in writing of a majority of the Board of Directors.
Such request shall state the purpose or purposes of the proposed meeting.
The place, date and time of any special meeting shall be determined by the
Board of Directors. Such determination shall include the record date for
determining the stockholders having the right of and to vote at such meeting.
Section 6. NOTICE OF SPECIAL MEETING. Written notice of a special
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called shall be given not less than ten
(10) nor more than sixty (60) days before the date of the meeting, to each
stockholder entitled to vote at such meeting.
Section 7. ACTION AT SPECIAL MEETING. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in
the notice.
Section 8. QUORUM AND ADJOURNMENTS.
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<PAGE>
(a) The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy,
shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation, as amended. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
(b) When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of statute or of
the Certificate of Incorporation, as amended, a different vote is required,
in which case such express provision shall govern and control the decision of
such question.
Section 9. VOTING RIGHTS. Unless otherwise provided in the Certificate
of Incorporation, as amended, each stockholder shall at every meeting of the
stockholders be entitled to one (1) vote in person or by proxy for each share
of the capital stock having voting power held by such stockholder, but no
proxy shall be voted on after three (3) years from its date, unless the proxy
provides for a longer period.
Section 10. ACTION WITHOUT MEETING. No action shall be taken by the
stockholders of the corporation except at an annual or special meeting of
stockholders called in accordance with these Bylaws, and no action shall be
taken by the stockholders by written consent.
ARTICLE III
DIRECTORS
Section 1. CLASSES, NUMBER, TERM OF OFFICE AND QUALIFICATION. At the
next annual meeting of stockholders following the adoption of these Bylaws,
the Directors shall be classified into two classes, as nearly equal in number
as possible as determined by the Board of Directors, with the term of office
of the first class to expire at the second annual meeting of stockholders
following the adoption of these Bylaws and the term of office of the second
class to expire at the third annual meeting of stockholders following the
adoption of these Bylaws. At each annual meeting of stockholders following
such initial classification and election, Directors elected to succeed those
Directors whose terms expire shall be elected for a term of office to expire
at the second succeeding annual meeting of stockholders after their election.
Additional directorships resulting from an increase in the number of
Directors shall be apportioned among the classes as equally as possible as
determined by the Board of Directors. The number of directors that shall
constitute the whole board shall not be less than six (6) nor more than ten
(10). The number of Directors which shall constitute the whole Board shall
be fixed by resolution of the Board of Directors, with the number initially
fixed at eight (8). The number of Directors shall be
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<PAGE>
determined by resolution of sixty-six and two-thirds percent (66-2/3%) of the
Directors then in office or by sixty-six and two-thirds percent (66-2/3%) of
the stockholders at the annual meeting of the stockholders, and each Director
elected shall hold office until his or her successor is elected and
qualified. Directors need not be stockholders.
Section 2. VACANCIES. Vacancies may be filled only by a two-thirds
majority of the Directors then in office or by a sole remaining Director.
Each Director so chosen shall hold office until a successor is duly elected
and shall qualify or until his or her earlier death, resignation or removal.
If there are no Directors in office, then an election of Directors may be
held in the manner provided by statute; provided, however, that each Director
shall be elected by an affirmative vote of at least two-thirds of the
stockholders. If, at the time of filling any vacancy, the Directors then in
office shall constitute less than a majority of the whole Board (as
constituted immediately prior to any such increase), the Court of Chancery
may, upon application of any stockholder or stockholders holding at least ten
percent of the total number of the shares at the time outstanding having the
right to vote for such Directors, summarily order an election to be held to
fill any such vacancies, or to replace the Directors chosen by the Directors
then in office.
Section 3. POWERS. The business of the corporation shall be managed by
or under the direction of its Board of Directors which may exercise all such
powers of the corporation and do all such lawful acts and things as are not
by statute or by the Certificate of Incorporation, as amended, from time to
time, or by these Bylaws directed or required to be exercised or done by the
stockholders.
Section 4. REGULAR AND SPECIAL MEETINGS. The Board of Directors of the
corporation may hold meetings, both regular and special, either within or
without the State of California.
Section 5. ANNUAL MEETING. The annual meeting of the Board of Directors
shall be held without notice other than this Bylaw immediately after, and at
the same place as, the annual meeting of stockholders. In the event the
annual meeting of the Board of Directors shall not be held immediately after,
and at the same place as, the annual meeting of stockholders, the meeting may
be held at such time and place as shall be specified in a notice given as
hereinafter provided for special meetings of the Board of Directors.
Section 6. NOTICE OF REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board.
Section 7. NOTICE OF SPECIAL MEETINGS. Special meetings of the Board
may be called by the Chief Executive Officer or President on no less than
forty-eight (48) hours notice to each Director either personally, or by
telephone, mail, telegram or facsimile; special meetings shall be called by
the Chief Executive Officer, President or Secretary in like manner and on
like notice on the written request of two Directors unless the Board consists
of only one Director, in which case special meetings shall be called by the
Chief Executive Officer, President or Secretary in like manner and on like
notice on the written request of the sole Director. A written waiver of
notice, signed by the person entitled thereto, whether before or after the
time of the meeting stated therein, shall be deemed equivalent to notice.
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<PAGE>
Section 8. QUORUM. At all meetings of the Board a majority of the
Directors shall constitute a quorum for the transaction of business and the
act of a majority of the Directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by these Bylaws, by statute or by the Certificate of
Incorporation, as amended. If a quorum shall not be present at any meeting
of the Board of Directors, the Directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 9. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation, as amended from time to time, or these Bylaws,
any action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting, if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
Section 10. MEETINGS BY TELEPHONE CONFERENCE CALLS. Unless otherwise
restricted by the Certificate of Incorporation, as amended from time to time,
or these Bylaws, members of the Board of Directors, or any committee
designated by the Board of Directors, may participate in a meeting of the
Board of Directors, or any committee, by means of conference telephone, video
conference or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
Section 11. COMMITTEES. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the Directors of the corporation. The
Board may designate one or more Directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting
of the committee.
In the absence of disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he, she or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the Board
of Directors, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to
all papers which may require it; but no such committee shall have the power
or authority in reference to amending the Certificate of Incorporation, as
amended from time to time, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the Bylaws of the corporation; and, unless the
resolution or the Certificate of Incorporation, as amended from time to time,
expressly so provide, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock. Such committee or
committees shall have such name or names as may be determined from time to
time by resolution adopted by the Board of Directors.
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<PAGE>
Each committee shall keep regular minutes of its meetings and report the
same to the Board of Directors when required.
Section 12. FEES AND COMPENSATION. Unless otherwise restricted by the
Certificate of Incorporation, as amended, or these Bylaws, the Board of
Directors shall have the authority to fix the compensation of Directors. The
Directors may be paid their expenses, if any, of attendance at each meeting
of the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as Director. No such
payment shall preclude any Director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
Section 13. REMOVAL. Subject to any limitations imposed by law or the
Certificate of Incorporation, as amended from time to time, the Board of
Directors, or any individual Director, may be removed from office at any time
only with cause by the affirmative vote of the holders of at least a majority
of shares entitled to vote at an election of Directors.
ARTICLE IV
NOTICES
Section 1. NOTICE. Whenever, under the provisions of statute or of the
Certificate of Incorporation, as amended, or of these Bylaws, notice is
required to be given to any Director or stockholder, it shall not be
construed to mean personal notice, but such notice may be given in writing,
by mail, addressed to such Director or stockholder, at his, her or its
address as it appears on the records of the corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the
same shall be deposited in the United States mail. Notice to Directors may
also be given personally, by telephone, including a voice messaging system or
other system or technology designed to record and communicate messages,
telegram, facsimile electronic mail or other electronic means.
Section 2. WAIVER OF NOTICE. Whenever any notice is required to be
given under the provisions of statute or of the Certificate of Incorporation,
as amended from time to time, or of these Bylaws, a waiver thereof in
writing, signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. ENUMERATION. The officers of the corporation shall be chosen
by the Board of Directors and shall include a Chief Executive Officer, a
Chief Financial Officer and a Secretary. The Board of Directors may elect
from among its members a Chairman of the Board and a Vice Chairman of the
Board. The Board of Directors may also choose a President, one or more Vice
Presidents and one or more Assistant Secretaries. Any number of offices may
be held by the same person, unless the Certificate of Incorporation, as
amended, or these Bylaws otherwise provide.
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The compensation of all officers and agents of the corporation shall be
fixed by the Board of Directors, and no officer shall be prevented from
receiving such compensation by virtue of such officer also being a Director of
the corporation.
Section 2. ELECTION OR APPOINTMENT. The Board of Directors at its first
meeting after each annual meeting of stockholders shall choose a Chief
Executive Officer, a Chief Financial Officer and a Secretary and may choose a
President, one or more Vice Presidents and one or more Assistant Secretaries.
The Board of Directors may appoint such other officers and agents as it
shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time
to time by the Board.
Section 3. TENURE, REMOVAL AND VACANCIES. The officers of the
corporation shall hold office until their successors are chosen and
qualified. Any officer elected or appointed by the Board of Directors may be
removed at any time by the affirmative vote of a majority of the Board of
Directors. Any vacancy occurring in any office of the corporation shall be
filled by the Board of Directors.
Section 4. CHAIRMAN OF THE BOARD. The Chairman of the Board, if any,
shall preside at all meetings of the Board of Directors and of the
stockholders at which he or she shall be present. The Chairman of the Board
shall have and may exercise such powers as are, from time to time, assigned
to him or her by the Board and as may be provided by law.
Section 5. VICE CHAIRMAN OF THE BOARD. In the absence of the Chairman
of the Board, the Vice Chairman of the Board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which he or she
shall be present. The Vice Chairman of the Board shall have and may exercise
such powers as are, from time to time, assigned to him or her by the Board
and as may be provided by law.
Section 6. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
corporation shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and the officers
of the corporation. In the absence or nonexistence of a Chairman of the
Board and a Vice Chairman of the Board, the Chief Executive Officer shall
preside at all meetings of the Board of Directors and of the stockholders.
The Chief Executive Officer shall have the general powers and duties of
management usually vested in the Chief Executive Officer of a corporation,
including general supervision, direction and control of the business and
supervision of other officers of the corporation, and shall have such other
powers and duties as may be prescribed by the Board of Directors or these
Bylaws.
The Chief Executive Officer shall, without limitation, have the authority
to execute bonds, mortgages and other contracts requiring a seal, under the
seal of the corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the corporation.
Section 7. PRESIDENT. Subject to such supervisory powers as may be
given by these Bylaws or the Board of Directors to the Chairman of the Board
or the Chief Executive Officer, if
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there be such officers, the President shall have general supervision,
direction and control of the business and supervision of other officers of
the corporation, and shall have such other powers and duties as may be
prescribed by the Board of Directors or these Bylaws. In the event a Chief
Executive Officer shall not be appointed, the President shall have the duties
of such office.
Section 8. VICE PRESIDENTS. The Vice President, or if there shall be
more than one, the Vice Presidents in the order determined by the Board of
Directors, shall, in the absence or disability of the President, act with all
of the powers and be subject to all the restrictions of the President. The
Vice Presidents shall also perform such other duties and have such other
powers as the Board of Directors, the Chief Executive Officer, the President
or these Bylaws may, from time to time, prescribe.
Section 9. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors, all meetings of the committees thereof and all meetings
of the stockholders and record all the proceedings of the meetings in a book
or books to be kept for that purpose. Under the Chief Executive Officer's or
President's supervision, the Secretary shall give, or cause to be given, all
notices required to be given by these Bylaws or by law; shall have such
powers and perform such duties as the Board of Directors, the Chief Executive
Officer, the President or these Bylaws may, from time to time, prescribe; and
shall have custody of the seal of the corporation. The Secretary, or an
Assistant Secretary, shall have authority to affix the seal of the
corporation to any instrument requiring it and when so affixed, it may be
attested by his or her signature or by the signature of such Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by
his or her signature.
Section 10. ASSISTANT SECRETARY. The Assistant Secretary, if any, or if
there be more than one, the Assistant Secretaries in the order determined by
the Board of Directors, shall, in the absence, disability or refusal to act
of the Secretary, perform the duties and exercise the powers of the Secretary
and shall perform such other duties and have such other powers as the Board
of Directors, the Chief Executive Officer, the President, the Secretary or
these Bylaws may, from time to time, prescribe.
Section 11. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
act as Treasurer and shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the Board of
Directors. The Chief Financial Officer may alternatively be designated by
the title "Treasurer."
The Chief Financial Officer shall disburse the funds of the corporation
as may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer or, if there
be no Chief Executive Officer, the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account
of all his or her transactions as Chief Financial Officer and of the
financial condition of the corporation.
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If required by the Board of Directors, the Chief Financial Officer shall
give the corporation a bond (which shall be renewed every six years) in such
sum and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his or her office and
for the restoration to the corporation, in case of his or her death,
resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in the Chief Financial
Officer's possession or under his or her control belonging to the corporation.
Section 12. OTHER OFFICERS, ASSISTANT OFFICERS AND AGENTS. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these Bylaws, shall have such authority and perform such
duties as may from time to time be prescribed by the Board of Directors, the
Chief Executive Officer or the President.
Section 13. ABSENCE OR DISABILITY OF OFFICERS. In the case of the
absence or disability of any officer of the corporation and of any person
hereby authorized to act in such officer's place during such officer's
absence or disability, the Board of Directors may delegate the powers and
duties of such officer to any officer or to any Director, or to any other
person who it may select.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. CERTIFICATES OF STOCK. Every holder of stock in the
corporation shall be entitled to have a certificate, signed by, or in the
name of the corporation by, the Chairman or Vice Chairman of the Board of
Directors, or the Chief Executive Officer or the President or a Vice
President and the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the corporation, certifying the number of shares owned
by him in the corporation.
Certificates may be issued for partly paid shares and in such case upon
the face or back of the certificates issued to represent any such partly paid
shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware,
in lieu of the foregoing requirements, there may be set forth on the face or
back of the certificate which the corporation shall issue to represent such
class or series of stock, a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
Section 2. EXECUTION OF CERTIFICATES. Any or all of the signatures on
the certificate may be facsimile. In case any officer, transfer agent or
registrar who has signed or whose
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facsimile signature has been placed upon a certificate shall have ceased to
be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he or
she were such officer, transfer agent or registrar at the date of issue.
Section 3. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen or destroyed.
When authorizing such issue of a new certificate or certificates, the Board
of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or the owner's legal representative, to
advertise the same in such manner as it shall require and/or to give the
corporation a bond in such sum as it may direct as indemnity against any
claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
Section 4. TRANSFER OF STOCK. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate
to the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 5. FIXING RECORD DATE. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholder or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may
fix, in advance, a record date, which shall not be more than sixty (60) nor
less than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 6. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the
owner of shares and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
ARTICLE VII
INDEMNIFICATION
Section 1. INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS. The
corporation shall indemnify its Directors and executive officers to the
fullest extent not prohibited by the Delaware General Corporation Law;
provided, however, that the corporation may limit the extent
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of such indemnification by individual contracts with its Directors and
executive officers; and, provided, further, that the corporation shall not be
required to indemnify any Director or executive officer in connection with
any proceeding (or part thereof) initiated by such person or any proceeding
by such person against the corporation or its Directors, officers, employees
or other agents unless (i) such indemnification is expressly required to be
made by law, (ii) the proceeding was authorized by the Board of Directors of
the corporation and (iii) such indemnification is provided by the
corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the Delaware General Corporation Law.
Section 2. INDEMNIFICATION OF OTHER OFFICERS, EMPLOYEES AND OTHER
AGENTS. The corporation shall have power to indemnify its other officers,
employees and other agents as set forth in the Delaware General Corporation
Law.
Section 3. GOOD FAITH.
(a) For purposes of any determination under this Bylaw, a
Director or executive officer shall be deemed to have acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe that his or her
conduct was unlawful, if his or her action is based on information, opinions,
reports and statements, including financial statements and other financial
data, in each case prepared or presented by:
(1) one or more officers or employees of the corporation
whom the Director or executive officer believed to be reliable and competent
in the matters presented;
(2) counsel, independent accountants or other persons as to
matters which the Director or executive officer believed to be within such
person's professional competence; and
(3) with respect to a Director, a committee of the Board
upon which such Director does not serve, as to matters within such
committee's designated authority, which committee the Director believes to
merit confidence; so long as, in each case, the Director or executive officer
acts without knowledge that would cause such reliance to be unwarranted.
(b) The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that the person did not act in
good faith and in a manner which such person reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to
any criminal proceeding, that such person had reasonable cause to believe
that his or her consent was unlawful.
(c) The provisions of this Section 3 shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth by the
Delaware General Corporation Law.
Section 4. EXPENSES. The corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all
expenses incurred by any Director or
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executive officer in connection with such proceeding upon receipt of an
undertaking by or on behalf of such person to repay said amounts if it should
be determined ultimately that such person is not entitled to be indemnified
under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
Section 4 of this Bylaw, no advance shall be made by the corporation if a
determination is reasonably and promptly made (i) by the Board of Directors
by a majority vote of a quorum consisting of Directors who were not parties
to the proceeding or (ii) if such quorum is not obtainable, or, even if
obtainable, a quorum of disinterested Directors so directs, by independent
legal counsel in a written opinion, that the facts known to the
decision-making party at the time such determination is made demonstrate
clearly and convincingly that such person acted in bad faith or in a manner
that such person did not believe to be in or not opposed to the best
interests of the corporation.
Section 5. ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to Directors and
executive officers under this Bylaw shall be deemed to be contractual rights
and be effective to the same extent and as if provided for in a contract
between the corporation and the Director or executive officer. Any right to
indemnification or advances granted by this Bylaw to a Director or executive
officer shall be enforceable by or on behalf of the person holding such right
in any court of competent jurisdiction if (i) the claim for indemnification
or advances is denied, in whole or in part or (ii) no disposition of such
claim is made within ninety (90) days of request therefor. The claimant in
such enforcement action, if successful in whole or in part, shall be entitled
to be paid also the expense of prosecuting such claim. The corporation shall
be entitled to raise as a defense to any such action that the claimant has
not met the standards of conduct that make it permissible under the Delaware
General Corporation Law for the corporation to indemnify the claimant for the
amount claimed. Neither the failure of the corporation (including its Board
of Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such action that indemnification
of the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the corporation (including its Board of
Directors, independent legal counsel or its stockholders) that the claimant
has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the claimant has not met the applicable
standard of conduct.
Section 6. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by this Bylaw shall not be exclusive of any other right which such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, as amended from time to time, Bylaws,
agreement, vote of stockholders or disinterested Directors or otherwise, both
as to action in such person's official capacity and as to action in another
capacity while holding office. The corporation is specifically authorized to
enter into individual contracts with any or all of its Directors, officers,
employees or agents respecting indemnification and advances, to the fullest
extent not prohibited by the Delaware General Corporation Law.
Section 7. SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a Director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
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Section 8. INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or
permitted to be indemnified pursuant to this Bylaw.
Section 9. AMENDMENTS. Any repeal or modification of this Bylaw shall
only be prospective and shall not affect the rights under this Bylaw in
effect at the time of the alleged occurrence of any action or omission to act
that is the cause of any proceeding against any agent of the corporation.
Section 10. SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each Director and executive officer
to the full extent not prohibited by any applicable portion of this Bylaw
that shall not have been invalidated or by any other applicable law.
Section 11. CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(a) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of the
testimony in, any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative.
(b) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees,
fines, amounts paid in settlement or judgment and any other costs and
expenses of any nature or kind incurred in connection with any proceeding.
(c) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent
of a constituent) absorbed in a consolidation or merger which, if its
separate existence had continued, would have had power and authority to
indemnify its Directors, officers, and employees or agents, so that any
person who is or was a Director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a Director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall
stand in the same position under the provisions of this Bylaw with respect to
the resulting or surviving corporation as such person would have with respect
to such constituent corporation if its separate existence had continued.
(d) References to a "Director," "officer," "employee," or "agent" of
the corporation shall include, without limitation, situations where such person
is serving at the request of the corporation as a Director, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
(e) References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on a person
with respect to an employee benefit plan; and references to "serving at the
request of the corporation" shall include any service as a Director, officer,
employee or agent of the corporation which imposes duties on,
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or involves services by, such Director, officer, employee, or agent with
respect to an employee benefit plan, its participants, or beneficiaries; and
a person who acted in good faith and in a manner such person reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner "not opposed
to the best interests of the corporation" as referred to in this Bylaw.
ARTICLE VIII
LOANS TO OFFICERS
Section 1. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other
employee of the corporation or of its subsidiaries, including any officer or
employee who is a Director of the Corporation or its subsidiaries, whenever,
in the judgment of the Board of Directors, such loan, guarantee or assistance
may reasonably be expected to benefit the corporation. The loan, guarantee
or other assistance may be with or without interest and may be unsecured, or
secured in such manner as the Board of Directors shall approve, including,
without limitation, a pledge of shares of stock of the corporation. Nothing
in this Bylaw shall be deemed to deny, limit or restrict the powers of
guaranty or warranty of the corporation at common law or under any statute.
ARTICLE IX
GENERAL PROVISIONS
Section 1. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation, as amended from time to time, if any, may be declared by the
Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the Certificate of Incorporation, as
amended from time to time.
Section 2. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Directors from time to time, in their absolute discretion,
think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purposes as the Directors shall think
conducive to the interest of the corporation, and the Directors may modify or
abolish any such reserve in the manner in which it was created.
Section 3. EXECUTION OF CORPORATE INSTRUMENTS. All checks or demands
for money and notes of the corporation shall be signed by such officer or
officers or such other person or persons as the Board of Directors may from
time to time designate.
Section 4. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
Section 5. CORPORATE SEAL. The Board of Directors may adopt a corporate
seal having inscribed thereon the name of the corporation, the year of its
organization and the words "Corporate Seal, Delaware." The seal may be used
by causing it or a facsimile thereof to be impressed or affixed or reproduced
or otherwise.
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ARTICLE X
AMENDMENTS
Section 1. AMENDMENTS.
(a) Except as otherwise set forth in Section 9 of Article VII of
these Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by
the affirmative vote of a majority of the voting power of all of the
then-outstanding shares of capital stock of the corporation entitled to vote
generally in the election of Directors (the "Voting Stock"). The Board of
Directors shall also have the power, if such power is conferred upon the
Board of Directors by the Certificate of Incorporation, as amended from time
to time, to adopt, amend or repeal Bylaws by a vote of the majority of the
Board of Directors unless a greater or different vote is required pursuant to
the provisions of the Bylaws, the Certificate of Incorporation or any
applicable provision of law.
(b) Notwithstanding any other provisions of these Bylaws or any
provision of law which might otherwise permit a lesser vote or no vote, but
in addition to any affirmative vote of the holders of any particular class or
series of the Voting Stock required by law, the Certificate of Incorporation,
as amended from time to time, or any Preferred Stock Designation (as the term
is defined in the Certificate of Incorporation, as amended), the affirmative
vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of
the voting power of all of the then-outstanding shares of the Voting Stock,
voting together as a single class, shall be required to alter, amend or
repeal this paragraph (b) or Section 2, Section 5 or Section 10 of Article II
or Section 1, Section 2 or Section 13 of Article III of these Bylaws.
(c) Notwithstanding any other provisions of these Bylaws or any
provision of law which might otherwise permit a lesser vote or no vote, but
in addition to any affirmative vote of the holders of any particular class or
series of the Voting Stock required by law, the Certificate of Incorporation,
as amended from time to time, or any Preferred Stock Designation (as the term
is defined in the Certificate of Incorporation, as amended), the affirmative
vote of at least sixty-six and two-thirds percent (66-2/3%) of the Directors
shall be required to alter, amend or repeal this paragraph (c) or Section 2,
Section 5 or Section 10 of Article II or Section 1, Section 2 or Section 13
of Article III of these Bylaws.
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CERTIFICATE OF SECRETARY
The undersigned, being the Secretary of RUBIO'S RESTAURANTS, INC., a
Delaware corporation, does hereby certify the foregoing to be the Bylaws of
said corporation, as adopted by a majority of the stockholders and Directors
of the corporation and which remain in full force and effect as of the date
hereof.
Executed at San Diego, California effective as of March ___, 1999.
-------------------------------------
Craig S. Andrews, Secretary
<PAGE>
EXHIBIT 10.1
RUBIO'S RESTAURANTS, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
--------------------------------------
February 1, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Purchase and Sale of Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Sale and Issuance of Series B Preferred Stock. . . . . . . . . . . . . . 1
1.2 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Subsequent Sale of Series B Preferred Stock. . . . . . . . . . . . . . . 1
2. Representations and Warranties of the Company . . . . . . . . . . . . . . . . 2
2.1 Organization, Good Standing and Qualification. . . . . . . . . . . . . . 2
2.2 Capitalization and Voting Rights . . . . . . . . . . . . . . . . . . . . 2
2.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Valid Issuance of Preferred and Common Stock . . . . . . . . . . . . . . 4
2.6 Governmental Consents. . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.8 Proprietary Information. . . . . . . . . . . . . . . . . . . . . . . . . 5
2.9 Patents and Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.10 Compliance with Other Instruments. . . . . . . . . . . . . . . . . . . . 6
2.11 Agreements; Action . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.12 Related-Party Transactions . . . . . . . . . . . . . . . . . . . . . . . 7
2.13 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.14 Environmental and Safety Laws. . . . . . . . . . . . . . . . . . . . . . 8
2.15 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.16 Business Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.17 Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.18 Title to Property and Assets . . . . . . . . . . . . . . . . . . . . . . 8
2.19 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.20 Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.21 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.22 Tax Returns, Payments and Elections. . . . . . . . . . . . . . . . . . . 10
2.23 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.24 Minute Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.25 Labor Agreements and Actions . . . . . . . . . . . . . . . . . . . . . . 10
2.26 Manufacturing and Marketing Rights . . . . . . . . . . . . . . . . . . . 11
2.27 Real Property Holding Company. . . . . . . . . . . . . . . . . . . . . . 11
3. Representations and Warranties of the Investors . . . . . . . . . . . . . . . 11
3.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Purchase Entirely for Own Account. . . . . . . . . . . . . . . . . . . . 11
3.3 Disclosure of Information. . . . . . . . . . . . . . . . . . . . . . . . 11
3.4 Investment Experience. . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.5 Accredited Investor. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.6 Restricted Securities. . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.7 Further Limitations on Disposition . . . . . . . . . . . . . . . . . . . 12
3.8 Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4. California Commissioner of Corporations . . . . . . . . . . . . . . . . . . . 13
4.1 Corporate Securities Law . . . . . . . . . . . . . . . . . . . . . . . . 13
(i)
<PAGE>
5. Conditions of Investors' Obligations at Closing . . . . . . . . . . . . . . . 13
5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 13
5.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.3 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.4 California Qualification . . . . . . . . . . . . . . . . . . . . . . . . 14
5.5 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.6 Opinion of Company Counsel . . . . . . . . . . . . . . . . . . . . . . . 14
5.7 Investors' Rights Agreement. . . . . . . . . . . . . . . . . . . . . . . 14
6. Conditions of the Company's Obligations at Closing. . . . . . . . . . . . . . 14
6.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 14
6.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.3 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . 14
6.4 California Qualification . . . . . . . . . . . . . . . . . . . . . . . . 15
6.5 Investors Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . 15
7. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.1 Survival of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.3 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.5 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.7 Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.9 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.11 Aggregation of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.12 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
SCHEDULE A - Schedule of Investors
EXHIBIT A - Restated Articles of Incorporation
EXHIBIT B - Schedule of Series A Preferred and Common
Holders
SCHEDULE OF EXCEPTIONS
(ii)
<PAGE>
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT is made as of the 1st day
of February, 1995, by and between Rubio's Restaurants, Inc., a California
corporation (the "Company"), and the investors listed on SCHEDULE A hereto, each
of which is herein referred to as an "Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF SERIES B PREFERRED STOCK.
(a) The Company shall adopt and file with the Secretary of State
of California on or before the Closing (as defined below) Amended and Restated
Articles of Incorporation ("Restated Articles") in the form attached hereto as
EXHIBIT A.
(b) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally and not jointly, to purchase at the Closing and the
Company agrees to sell and issue to each Investor at the Closing, that number of
shares of the Company's Series B Preferred Stock set forth opposite each
Investor's name on SCHEDULE A hereto for the purchase price set forth thereon.
Such purchase shall be payable by Investor either by (i) delivery to Company by
Investor of a check in the amount of the purchase price payable to the Company's
order (or by wire transfer of funds in such amount to the Company's designated
bank account), (ii) cancellation of indebtedness of the Company to Investor in
an amount equal to the purchase price through the delivery of an original
Promissory Note of the Company marked cancelled for the amount of indebtedness
converted or (iii) by some combination of payment and cancellation of
indebtedness which in the aggregate shall be equal to such purchase price. Each
Investor holding a Promissory Note from the Company will cancel such Note at the
Closing in exchange for shares of Series B Preferred Stock as set forth after
their names on Schedule A, and the Company will pay any accrued interest at the
Closing.
1.2 CLOSING. The purchase and sale of the Series B Preferred Stock
shall take place at the offices of Brobeck, Phleger & Harrison, 550 West "C"
Street, Suite 1300, San Diego, California, at 9:00 A.M., on February 1, 1995, or
at such other time and place as the Company and Investors acquiring in the
aggregate more than half the shares of Series B Preferred Stock sold pursuant
hereto mutually agree upon orally or in writing (which time and place are
designated as the "Closing"). At the Closing the Company shall deliver to each
Investor a certificate representing the Series B Preferred Stock which such
Investor is purchasing against delivery to the Company by such Investor of a
check in the amount of the purchase price therefor payable to the Company's
order or by wire transfer of funds in such amount to the Company's designated
bank account.
<PAGE>
1.3 SUBSEQUENT SALE OF SERIES B PREFERRED STOCK. To the extent that
less than 1,092,026 shares of Series B Preferred Stock are sold at the Closing,
the Company may sell any remaining shares of Series B Preferred Stock at a price
not less than $3.20511 per share to such other purchaser(s) as the Company's
Board of Directors shall select. Any purchaser in a subsequent closing
occurring within sixty days following the Closing shall execute a counterpart
signature page to this Agreement and the Investors' Rights Agreement, the Stock
Restriction Agreement and any additional sales of Series B Preferred Stock to
Investors shall be deemed to be made hereunder. The sale of any additional
shares of Series B Preferred Stock under this Section 1.3 occurring within sixty
days following the Closing shall not be subject to the Investor's right of first
offer contained in Section 2.4 of the Investors' Rights Agreement to be executed
contemporaneously with this Agreement (the "Investors' Rights Agreement");
otherwise, such shares shall be subject to the Investors' right of first offer
under the Investors' Rights Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Investor that, except as set forth on a Schedule
of Exceptions furnished to each Investor and special counsel for the Investors,
specifically identifying the relevant subparagraph hereof, which exceptions
shall be deemed to be representations and warranties as if made hereunder:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California and has all requisite corporate power and authority
to carry on its business as now conducted and as proposed to be conducted in its
Business Plan dated September 1994, as amended through the date hereof,
heretofore furnished to the Investors ("Business Plan"). The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure so to qualify would have a material adverse effect on its
business, prospects, properties or financial condition.
2.2 CAPITALIZATION AND VOTING RIGHTS. The authorized capital of the
Company consists, or will consist prior to the Closing, of:
(i) PREFERRED STOCK. 3,092,026 shares of Preferred Stock (the
"Preferred Stock"), of which (a) 2,000,000 shares have been designated Series A
Preferred Stock and all of which are issued and outstanding and are owned by the
persons, and in the numbers specified in EXHIBIT B hereto) and (b) 1,092,026
shares of which have been designated Series B Preferred Stock, none of which are
currently issued or outstanding. The rights, privileges and preferences of the
Preferred Stock will be as stated in the Restated Articles attached hereto as
EXHIBIT A
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<PAGE>
(ii) COMMON STOCK. 5,000,000 shares of common stock ("Common
Stock"), of which 1,000,000 shares are issued and outstanding and are owned by
the persons, and in the numbers specified in EXHIBIT B hereto.
(iii) The outstanding shares of Common Stock have been issued in
accordance with the registration or qualification provisions of the Act (as
defined below) and any applicable state securities laws or pursuant to a valid
exemption therefrom.
(iv) Except for (A) the conversion privileges of the Series A
Preferred Stock and the Series B Preferred Stock to be issued under this
Agreement, (B) the rights provided in paragraph 2.4 of the Investors' Rights
Agreement to be executed contemporaneously with this Agreement, which is
attached hereto as EXHIBIT B, (C) the rights provided in that certain
Shareholders' Agreement among the current shareholders of the Company and the
Stock Restriction Agreement of even date herewith, by and among the Company, the
Investors and current shareholders of the Company, (D) currently outstanding
options to purchase 11,500 shares of Common Stock granted to employees owned by
the persons and in the numbers specified in EXHIBIT B, and (E) warrants to
purchase 50,000 shares of Common Stock to be issued to Flemming & Lessard, Inc.
subsequent to the Closing in connection with this Agreement, there are not
outstanding any options, warrants, rights (including conversion or preemptive
rights and rights of first refusal) or agreements for the purchase or
acquisition from the Company of any shares of its capital stock. The Company is
not a party or subject to any agreement or understanding, and, to the Company's
knowledge, there is no agreement or understanding between any persons and/or
entities, which affects or relates to the voting or giving of written consents
with respect to any security or by a director of the Company.
2.3 SUBSIDIARIES. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association or
other business entity. The Company is not a participant in any joint venture,
partnership or similar arrangement.
2.4 AUTHORIZATION. All corporate action on the part of the Company,
its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, the Investors' Rights Agreement, and
any other agreement to which the Company is a party, the execution and delivery
of which is contemplated hereby (collectively, the "Ancillary Agreements"), the
performance of all obligations of the Company hereunder and thereunder and the
authorization, issuance (or reservation for issuance) and delivery of the Series
B Preferred Stock being sold hereunder and the Common Stock issuable upon
conversion of the Series B Preferred Stock has been taken or will be taken prior
to the Closing, and this Agreement, the Investors' Rights Agreement, and any
Ancillary Agreements
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constitute valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies, and (iii) to the extent the indemnification
provisions contained in the Investors' Rights Agreement may be limited by
applicable federal or state securities laws.
2.5 VALID ISSUANCE OF PREFERRED AND COMMON STOCK.
(a) The Series B Preferred Stock which is being purchased by the
Investors hereunder, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable and, based in part upon the representations
of the Investors in this Agreement, will be issued in compliance with all
applicable federal and state securities laws. The shares of Series B Preferred
Stock are being issued free of restrictions on transfer other than restrictions
on transfer set forth in this Agreement, the Investors' Rights Agreement or any
Ancillary Agreement and other than pursuant to federal or state securities laws.
The Common Stock issuable upon conversion of the Series B Preferred Stock
purchased under this Agreement has been duly and validly reserved for issuance
and, upon issuance in accordance with the terms of the Restated Articles of
Incorporation, shall be duly and validly issued, fully paid and nonassessable,
and issued in compliance with all applicable securities laws, as then in effect,
of the United States and each of the states whose securities laws govern the
issuance of any of the Series B Preferred Stock hereunder.
(b) The outstanding shares of Series A Preferred Stock and
Common Stock are all duly and validly authorized and issued, fully paid and
nonassessable, and were issued in compliance with all applicable federal and
state securities laws. The Common Stock issuable upon conversion of the Series
A Preferred Stock will be issued free of restrictions on transfer other than
restrictions on transfer set forth in this Agreement, the Investors' Rights
Agreement, or any Ancillary Agreement and other than pursuant to federal or
state securities laws.
2.6 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority on
the part of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement, except for (a) the filing of the
Restated Articles with the Secretary of State of the State of California, and
(b) the filing pursuant to Section 25102(f) of the California Corporate
Securities Law of 1968, as amended, and the rules thereunder, which filing will
be effected
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<PAGE>
within 15 days of the sale of the Series B Preferred Stock hereunder.
2.7 LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company which
questions the validity of this Agreement, the Investors' Rights Agreement or any
Ancillary Agreements, or the right of the Company to enter into any of them, or
to consummate the transactions contemplated hereby or thereby, or which might
result, either individually or in the aggregate, in any material adverse changes
in the assets, financial condition, business affairs or prospects of the
Company, financially or otherwise, taken as a whole or any change in the current
equity ownership of the Company. The foregoing includes, without limitation,
any action, suit, proceeding or investigation pending or threatened involving
the prior employment of any of the Company's employees, their use in connection
with the Company's business of any information or techniques allegedly
proprietary to any of their former employers, or their obligations under any
agreements with prior employers or negotiations by the Company with potential
investors in the Company or its proposed business. The Company is not a party
or subject to the provisions of any order, writ, injunction, judgment or decree
of any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
2.8 PROPRIETARY INFORMATION. Each key employee, officer and
consultant of the Company has executed an Employment Relationship and
Confidentiality Agreement in the form provided to special counsel to the
Investors. The Company, after reasonable investigation, is not aware that any
of its employees, officers or consultants are in violation thereof, and the
Company will use its best efforts to prevent any such violation.
2.9 PATENTS AND TRADEMARKS. The Company has sufficient title and
ownership of all patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, proprietary rights and processes necessary
for its business as now conducted and as proposed to be conducted as described
in the Business Plan without any conflict with or infringement of the rights of
others. There are no outstanding options, licenses or agreements of any kind
relating to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity.
The Company has not received any communications alleging that the Company has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights or trade secrets or
other proprietary rights of any other person or entity. The Company is not
aware that any of its employees is obligated under any contract (including
licenses, covenants or
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<PAGE>
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
the use of his best efforts to promote the interests of the Company or that
would conflict with the Company's business as proposed to be conducted. Neither
the execution nor delivery of this Agreement, the Investors' Rights Agreement
and any Ancillary Agreements nor the carrying on of the Company's business by
the employees of the Company, nor the conduct of the Company's business as
proposed, will conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees is now obligated. The Company does
not believe it is or will be necessary to utilize any inventions of any of its
employees (or people it currently intends to hire) made prior to their
employment by the Company.
2.10 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any provisions of its Articles of Incorporation (as
amended) or Bylaws or of any material provision of any instrument, judgment,
order, writ, decree, mortgage, indenture, agreement, lease or contract to which
it is a party or by which it is bound or, to its knowledge, of any provision of
federal or state statute, rule or regulation applicable to the Company. To the
Company's best knowledge, the other party or parties to such instruments,
mortgages, indentures, agreements, leases or contracts are not in default in any
material respect of any provisions contained therein. The execution, delivery
and performance of this Agreement, the Investors' Rights Agreement and any
Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby will not result in any such violation or be in conflict with
or constitute, with or without the passage of time and giving of notice, either
a default under any such provision, instrument, judgment, order, writ, decree,
mortgage, indenture, agreement, lease or contract or an event which results in
the creation of any lien, charge or encumbrance upon any assets of the Company,
or the suspension, revocation, impairment, forfeiture or nonrenewal of any
material permit, license, authorization, or approval applicable to the Company,
its business or operations or any of its assets or properties.
2.11 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby
and by the Investors' Rights Agreement or any Ancillary Agreement, there are no
commitments, agreements, understandings or proposed transactions between the
Company and any of its officers, directors, affiliates or any affiliate thereof.
(b) There are no commitments, agreements, understandings,
instruments, contracts, proposed transactions, judgments, orders, writs or
decrees to which the Company is a party or by which it is bound which may
involve (i) obligations
-6-
<PAGE>
(contingent or otherwise) of, or payments to, the Company in excess of $50,000,
or (ii) the license of any patent, copyright, trade secret or other proprietary
right to or from the Company or (iii) provisions restricting or affecting the
development, manufacture or distribution of the Company's products or services.
(c) The Company has not (i) declared or paid any dividends,
or authorized or made any distribution upon or with respect to any class or
series of its capital stock, (ii) incurred any indebtedness for money borrowed
or any other liabilities individually in excess of $50,000 or, in the case of
indebtedness and/or liabilities individually less than $50,000, in excess of
$200,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under its
Articles of Incorporation (as amended) or Bylaws, which adversely affects its
business as now conducted or as proposed to be conducted in the Business Plan,
its properties or its financial condition.
(f) The Company is not a party to any employment or
consulting agreements that are not terminable at will by the Company on no more
than thirty (30) days' notice without cost or liability to the Company.
2.12 RELATED-PARTY TRANSACTIONS. No employee, officer, or director
of the Company or member of his or her immediate family is indebted to the
Company, nor is the Company indebted (or committed to make loans or extend or
guarantee credit) to any of them. To the best of the Company's knowledge, none
of such persons has any direct or indirect ownership interest or act as an
officer or director in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation that competes with the Company, except that employees, officers or
directors of the Company and members of their immediate families may own stock
in publicly-traded companies that may compete with the Company. Other than as a
participant in Company benefit plans, no form of compensation, remuneration or
financial interest is due or promised to any officer or director, or member of
the immediate
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family of any officer or director of the Company, for 1994 and 1995, except as
set forth on the Schedule of Exceptions. No officer or director, or member of
the immediate family of any officer or director, of the Company has a direct or
indirect financial interest in any material contract of the Company.
2.13 PERMITS. The Company has all franchises, permits, licenses and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects or financial condition of the Company, taken as
a whole, and believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be conducted.
The Company is not in default in any material respect under any of such
franchises, permits, licenses or other similar authority.
2.14 ENVIRONMENTAL AND SAFETY LAWS. To the best of its knowledge,
the Company is not in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety and, to the best
of its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation.
2.15 DISCLOSURE. The Company has fully provided each Investor with
all the information which such Investor has requested for deciding whether to
purchase the Series B Preferred Stock and all information which the Company
believes is reasonably necessary to enable such Investor to make such decision.
Neither this Agreement, the Investors' Rights Agreement and any Ancillary
Agreements nor any other statements or certificates made or delivered in
connection herewith or therewith contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
or therein not misleading.
2.16 BUSINESS PLAN. The Business Plan has been prepared in good
faith by the Company, and as of the date of the Business Plan, it did not: (i)
contain any untrue statement of a material fact; or (ii) omit to state a
material fact necessary to make the statements made therein not misleading,
except that with respect to projections contained in the Business Plan, the
Company represents only that such projections were prepared in good faith and
that the Company reasonably believes there was a reasonable basis for such
projections. As of the date of the Business Plan and as of the date of the
Closing, the Business Plan does not: (i) contain any untrue statement of a
material fact; or (ii) omit to state a material fact necessary to make the
statements made therein not misleading, as to current or past business or
business practices of the Company.
2.17 REGISTRATION RIGHTS. Except as provided in the Investors'
Rights Agreement, the Company has not granted or
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agreed to grant any registration rights, including piggyback rights, to any
person or entity.
2.18 TITLE TO PROPERTY AND ASSETS. The Company owns its property
and assets free and clear of all mortgages, liens, loans and encumbrances,
except such encumbrances and liens which arise in the ordinary course of
business and do not materially impair the Company's ownership or use of such
property or assets. With respect to the property and assets it leases, the
Company is in compliance with such leases and, to the best of its knowledge,
holds a valid leasehold interest free of any liens, claims or encumbrances,
except such encumbrances and liens which arise in the ordinary course of
business and do not materially impair the Company's use of such property or
assets.
2.19 FINANCIAL STATEMENTS. The Company has delivered to each
Investor its audited financial statements (balance sheet, statements of
operations, retained earnings and of cash flows) at December 31, 1994 and for
the fiscal year then ended (the "Financial Statements"). The Financial
Statements are complete and correct in all material respects and accurately set
out and describe the financial condition and operating results of the Company as
of the date, and for the period, indicated therein. The Financial Statements
have been prepared in accordance with generally accepted accounting principles
("GAAP"). Except as set forth in the Financial Statements, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business subsequent to December 31, 1994, which in the
aggregate do not exceed Fifty Thousand Dollars ($50,000) and (ii) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under generally accepted accounting principles to be reflected in
the Financial Statements, which, in both cases, individually or in the
aggregate, are not material to the financial condition or operating results of
the Company. Except as disclosed in the Financial Statements, the Company is
not a guarantor or indemnitor of any indebtedness of any other person, firm or
corporation. The Company maintains and will continue to maintain a standard
system of accounting established and administered in accordance with generally
accepted accounting principles.
2.20 CHANGES. Since December 31, 1994, there has not been:
(a) any change in the assets, liabilities, financial
condition or operating results of the Company, except changes in the ordinary
course of business which have not been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the assets, properties,
financial condition, operating results,
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prospects or business of the Company (as such business is presently conducted
and as it is proposed to be conducted);
(c) any waiver or compromise by the Company of a valuable
right or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and which is not material to the assets, properties,
financial condition, operating results or business of the Company (as such
business is presently conducted and as it is proposed to be conducted);
(e) any change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
subject;
(f) any material change in any compensation arrangement or
agreement with any employee; or
(g) to the Company's knowledge, any other event or
condition of any character which might materially and adversely affect the
assets, properties, financial condition, operating results or business of the
Company (as such business is presently conducted and as it is proposed to be
conducted).
2.21 EMPLOYEE BENEFIT PLANS. The Company does not have any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974,
as amended.
2.22 TAX RETURNS, PAYMENTS AND ELECTIONS. The Company has filed all
tax returns and reports as required by law. These returns and reports are true
and correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith which are listed in
the Schedule of Exceptions. The provision for taxes of the Company is adequate
for taxes due or accrued as of the date thereof. The Company has not elected
pursuant to the Internal Revenue Code of 1986, as amended ("Code"), to be
treated as a Subchapter S corporation or a collapsible corporation pursuant to
Section 341(f) or Section 1362(a) of the Code, nor has it made any other
elections pursuant to the Code (other than elections which relate solely to
methods of accounting, depreciation or amortization) which would have a material
effect on the Company, its financial condition, its business as presently
conducted or proposed to be conducted or any of its properties or material
assets. The Company has never had a tax deficiency or tax audit and the Company
has made all withholdings for all income tax of its employees.
2.23 INSURANCE. The Company has in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that
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might be damaged or destroyed. The Company has in full force and effect
products liability and errors and omissions insurance in amounts customary for
companies similarly situated.
2.24 MINUTE BOOKS. The minute books of the Company, access to which
has been provided to the Investors, contain a complete summary of all meetings
of directors and shareholders and all actions by written consent without a
meeting of directors and shareholders since the time of incorporation and
reflect all transactions referred to in such minutes accurately in all material
respects.
2.25 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees. The Company is not
aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, nor does the Company
have a present intention to terminate the employment of any of the foregoing.
Subject to general principles related to wrongful termination of employees, the
employment of each officer and employee of the Company is terminable at the will
of the Company.
2.26 MANUFACTURING AND MARKETING RIGHTS. The Company has not
granted rights to manufacture, produce, assemble, license, market or sell its
products to any other person and is not bound by any agreement that affects the
Company's exclusive rights to develop, manufacture, assemble, distribute and
sell its products.
2.27 REAL PROPERTY HOLDING COMPANY. The Company is not a real
property holding company within the meaning of the Internal Revenue Code Section
897.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor hereby
represents and warrants that:
3.1 AUTHORIZATION. This Agreement constitutes its valid and
legally binding obligation, enforceable in accordance with its terms.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
each Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution
-11-
<PAGE>
of this Agreement such Investor hereby confirms, that the Series B Preferred
Stock to be received by such Investor and the Common Stock issuable upon
conversion thereof (collectively, the "Securities") will be acquired for
investment for such Investor's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that such
Investor has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, each Investor
further represents that such Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities. Each Investor represents that it has full power and authority to
enter into this Agreement.
3.3 DISCLOSURE OF INFORMATION. Each Investor believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Securities. Each Investor further represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Securities. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 2 of this Agreement or the right of the Investors to
rely thereon.
3.4 INVESTMENT EXPERIENCE. Each Investor is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Securities.
If other than an individual, Investor also represents it has not been organized
for the purpose of acquiring the Securities.
3.5 ACCREDITED INVESTOR. Each Investor is an "accredited investor"
within the meaning of SEC Rule 501 of Regulation D, as presently in effect.
3.6 RESTRICTED SECURITIES. Each Investor understands that the
Securities it is purchasing are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act of 1933, as amended (the "Act"), only in certain limited
circumstances. In this connection, each Investor represents that it is familiar
with SEC Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
3.7 FURTHER LIMITATIONS ON DISPOSITION. Without in any way
limiting the representations set forth above, each Investor further agrees not
to make any disposition of all or any
-12-
<PAGE>
portion of the Securities unless and until the transferee has agreed in writing
for the benefit of the Company to be bound by this Section 3 and Section 7,
provided and to the extent such sections are then applicable, and the Investors'
Rights Agreement and any applicable Ancillary Agreement and:
(a) There is then in effect a Registration Statement under
the Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and
(b) above, or any legend on certificates representing the Securities pursuant to
Section 3.8 below, no such registration statement or opinion of counsel shall be
necessary for a transfer by an Investor which is a partnership to a partner of
such partnership or a retired partner of such partnership who retires after the
date hereof, or to the estate of any such partner or retired partner or the
transfer by gift, will or intestate succession of any partner to his spouse or
to the siblings, lineal descendants or ancestors of such partner or his spouse,
if the transferee agrees in writing to be subject to the terms hereof to the
same extent as if he were an original Investor hereunder.
3.8 LEGENDS. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR
ANY STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE ACT, OR
PURSUANT TO RULE 144 UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT."
(b) Any legend required by the laws of the State of
California, including any legend required by the California Department of
Corporations and Sections 417 and 418 of the Code.
-13-
<PAGE>
4. CALIFORNIA COMMISSIONER OF CORPORATIONS.
4.1 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
5. CONDITIONS OF INVESTORS' OBLIGATIONS AT CLOSING. The obligations of
each Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor which does not
consent thereto:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
5.2 PERFORMANCE. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing.
5.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to each Investor at the Closing a certificate certifying that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled and stating
that there shall have been no adverse change in the business, affairs,
operations, properties, assets or condition of the Company since the date of the
Business Plan.
5.4 CALIFORNIA QUALIFICATION. The Commissioner of Corporations of
the State of California shall have issued a permit qualifying the offer and sale
of the Securities to the Investors pursuant to this Agreement, or such offer and
sale shall be exempt from such qualification under the California Corporate
Securities Law of 1968, as amended.
5.5 BOARD OF DIRECTORS. Immediately upon Closing, the board of
directors of the Company shall be comprised of Ralph Rubio, Rafael Rubio, Robert
Rubio and Kyle Anderson as the designee of the Series B investors.
5.6 OPINION OF COMPANY COUNSEL. Each Investor shall have received
from Brobeck, Phleger & Harrison, counsel for the
-14-
<PAGE>
Company, an opinion, dated as of the Closing, in form and substance satisfactory
to the special counsel to the Investors.
5.7 INVESTORS' RIGHTS AND STOCK RESTRICTION AGREEMENTS. The
Company and each Investor shall have entered into the Investors' Rights
Agreement, and the Company, each Investor and the holders of outstanding shares
of the Company's Common Stock and Series A Preferred Stock shall have entered
into a Stock Restriction Agreement.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Investor:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investor contained in Section 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.
6.2 PERFORMANCE. The Investors shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by them on or before the Closing.
6.3 PAYMENT OF PURCHASE PRICE. The Investors shall have delivered
the purchase price specified in Section 1.2.
6.4 CALIFORNIA QUALIFICATION. The Commissioner of Corporations of
the State of California shall have issued a permit qualifying the offer and sale
to the Investors of the Series B Preferred Stock and the Common Stock issuable
upon the conversion thereof or such offer and sale shall be exempt from such
qualification under the California Corporate Securities Law of 1968, as amended.
6.5 INVESTORS RIGHTS AGREEMENT. The Company and each Investor
shall have entered into the Investors' Rights Agreement.
7. MISCELLANEOUS.
7.1 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.
-15-
<PAGE>
7.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Securities. Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.3 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
7.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.
7.7 FINDER'S FEE. Each party represents that it neither is nor
will be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, partners,
employees or representatives is responsible. The Company agrees to indemnify
and hold harmless each Investor from any liability for any commission or
compensation in the nature of a finders' fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.
7.8 EXPENSES. Irrespective of whether the Closing is effected, the
Company shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If the
Closing is effected, the Company shall, at the Closing, reimburse the reasonable
fees of a
-16-
<PAGE>
single special counsel for the Investors hereunder (not to exceed $12,500) and
shall, upon receipt of a bill therefor, reimburse the out-of-pocket expenses of
such counsel. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement or the Restated Articles of Incorporation,
the prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
7.9 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Series B Preferred Stock (or, upon conversion of any shares of
Series B Preferred Stock, by the holders of a majority of the Common Stock
issued or issuable upon conversion of the Series B Preferred Stock). Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any securities purchased under this Agreement at the time
outstanding (including securities into which such securities are convertible),
each future holder of all such securities and the Company.
7.10 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
7.11 AGGREGATION OF STOCK. All shares of Series B Preferred Stock
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
7.12 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
RUBIO'S RESTAURANTS, INC.
By: /s/ Ralph Rubio
------------------------------
Ralph Rubio, President
Address: 5151 Shoreham Place, Suite 260
San Diego, CA 92122
INVESTORS:
ROSEWOOD CAPITAL, L.P.
By: Rosewood Associates L.P.
------------------------------
By: /s/ Kyle Anderson
------------------------------
General Partner
Address: One Maritime Plaza, Suite 1330
San Francisco, CA 94111
DOOLING FAMILY TRUST DATED DECEMBER 8,
1988
By: /s/ Michael Dooling
------------------------------
/s/ Kathleen Kelley Dooling,
------------------------------
Trustee
Address: 427 South Marengo Avenue #3
Pasadena, CA 91101
BROPHAR INVESTOR PARTNERS
By: /s/ Craig Andrews
------------------------------
General Partner
Address: c/o Craig Andrews,
Brobeck, Phleger & Harrison
550 West "C" Street, Suite 1200
San Diego, CA 92101
[SIGNATURE PAGE TO SERIES B PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
PRUDENTIAL SECURITIES, CUSTODIAN FOR
KEVIN L. SHIBUYA IRA
By: /s/ Kevin Shibuya
------------------------------
Address: 9255 Towne Centre Drive, Suite 800
San Diego, CA 92121
/s/ R. Alex Kaseberg
-----------------------------------
R. ALEX KASEBERG
Address: 8521 Via Mallorca
La Jolla, CA 92037
/s/ Tod Thoele
-----------------------------------
TOD THOELE
Address: 63 San Bernardino Avenue
Ventura, CA 93004
T. LARRY AND MARGARET EDDINGTON
/s/ T. Larry Eddington
-----------------------------------
T. Larry Eddington
/s/ Margaret Eddington
-----------------------------------
Margaret Eddington
Address: 3330 Dove Hollow Road
Olivenhain, CA 92024
/s/ George H. Adams, Jr.
-----------------------------------
GEORGE H. ADAMS, JR.
Address: 6045 Beaumont Avenue
La Jolla, CA 92037
[SIGNATURE PAGE TO SERIES B PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
/s/ John Brice
-----------------------------------
JOHN BRICE
Address: 1331 Park Row
La Jolla, CA 92037
PRUDENTIAL SECURITIES, CUSTODIAN
FOR FRANK O. HOLLOWAY IRA
By: /s/ Frank O. Holloway
------------------------------
Address: 9255 Towne Centre Drive, Suite 800
San Diego, CA 92121
UMB BANK, N.A., TRUSTEE OF THE BROBECK,
PHLEGER & HARRISON SAVINGS PLAN f/b/o
WILLIAM F. SULLIVAN
By: /s/ [ILLEGIBLE]
------------------------------
Vice President
Address: 1010 Grand Avenue
P. O. Box 419692
Kansas City, MO 64141-0692
UMB BANK, N.A., TRUSTEE OF THE BROBECK,
PHLEGER & HARRISON SAVINGS PLAN f/b/o
TODD J. ANSON
By: /s/ [ILLEGIBLE]
------------------------------
Vice President
Address: 1010 Grand Avenue
P. O. Box 419692
Kansas City, MO 64141-0692
[SIGNATURE PAGE TO SERIES B PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
UMB BANK, N.A., TRUSTEE OF THE BROBECK,
PHLEGER & HARRISON SAVINGS PLAN f/b/o
CRAIG S. ANDREWS
By: /s/ [ILLEGIBLE]
------------------------------
Vice President
Address: 1010 Grand Avenue
P. O. Box 419692
Kansas City, MO 64141-0692
UMB BANK, N.A., TRUSTEE OF THE BROBECK,
PHLEGER & HARRISON SAVINGS PLAN f/b/o
JOHN A. DENNISTON
By: /s/ [ILLEGIBLE]
------------------------------
Vice President
Address: 1010 Grand Avenue
P. O. Box 419692
Kansas City, MO 64141-0692
UMB BANK, N.A., TRUSTEE OF THE BROBECK,
PHLEGER & HARRISON SAVINGS PLAN f/b/o
JAY DE GROOT
By: /s/ [ILLEGIBLE]
------------------------------
Vice President
Address: 1010 Grand Avenue
P. O. Box 419692
Kansas City, MO 64141-0692
[SIGNATURE PAGE TO SERIES B PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
/s/ Frank Holloway
-----------------------------------
FRANK O. HOLLOWAY
Address: 81 South Peak Drive
Laguna Niguel, CA 92677
[SIGNATURE PAGE TO SERIES B PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
SCHEDULE A
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
Purchase Number
Name and Address Price of Shares
- --------------------------------------------- --------------- ---------
<S> <C> <C>
Rosewood Capital, L.P. $3,000,000.00 936,005
Dooling Family Trust dated December 8,
1988 $150,000.00 46,800
Brophar Investor Partners $95,002.67 29,641
Prudential Securities, Custodian for
Kevin L. Shibuya IRA $25,000.00 7,800
R. Alex Kaseberg $25,000.00 7,800
Tod Thoele $25,000.00 7,800
T. Larry Eddington and Margaret Eddington $25,000.00 7,800
George H. Adams, Jr. $25,000.00 7,800
John Brice $25,000.00 7,800
Prudential Securities, Custodian for
Frank O. Holloway IRA $10,000.00 3,120
Frank O. Holloway $15,000.00 4,680
UMB Bank, n.a., Trustee of the Brobeck,
Phleger & Harrison Retirement Savings
Plan f/b/o William F. Sullivan $25,000.00 7,800
UMB Bank, n.a., Trustee of the Brobeck,
Phleger & Harrison Retirement Savings
Plan f/b/o Todd J. Anson $25,000.00 7,800
UMB Bank, n.a., Trustee of the Brobeck,
Phleger & Harrison Retirement Savings
Plan f/b/o Craig S. Andrews $20,003.09 6,241
UMB Bank, n.a., Trustee of the Brobeck,
Phleger & Harrison Retirement Savings Plan
f/b/o John A. Denniston $5,000.00 1,560
UMB Bank, n.a., Trustee of the Brobeck,
Phleger & Harrison Retirement Savings
Plan f/b/o Jay De Groot $5,000.00 1,560
-------------------------------
Total: $3,500,005.761,092,007
</TABLE>
<PAGE>
EXHIBIT A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
A-1
<PAGE>
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF RUBIO'S RESTAURANTS, INC.
a California Corporation
The undersigned RALPH RUBIO and RAFAEL RUBIO hereby certify that:
ONE: They are the duly elected and acting President and Secretary,
respectively, of said Corporation.
TWO: The Articles of Incorporation of said Corporation shall be amended and
restated to read in full as follows:
ARTICLE I
The name of this Corporation is RUBIO'S RESTAURANTS, INC.
ARTICLE II
The purpose of this Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
A. CLASSES OF STOCK. This Corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the Corporation is authorized to issue is Eight
Million Ninety-Two Thousand Twenty-Six (8,092,026) shares. Five Million
(5,000,000) shares shall be Common Stock and Three Million Ninety-Two Thousand
Twenty-Six (3,092,026) shares shall be Preferred Stock, of which Two Million
(2,000,000) shares shall be Series A Preferred Stock and One Million Ninety-Two
Thousand Twenty-Six (1,092,026) shares shall be Series B Preferred Stock.
B. RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The rights,
preferences, restrictions and other matters relating to the Series A Preferred
Stock and Series B Preferred Stock are as follows:
1. DIVIDEND PROVISIONS.
(a) Subject to the rights of series of Preferred Stock which may
from time to time come into existence, holders of shares of Series B Preferred
Stock shall be entitled to receive dividends, out of any assets legally
available therefor, prior and in preference to any declaration or payment of any
dividend (payable other than in Common Stock or other securities and
<PAGE>
rights convertible into or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock of this Corporation) on the Series
A Preferred Stock or the Common Stock of this Corporation, at the rate of $0.26
per share of Series B Preferred Stock per annum (subject to appropriate
adjustments for stock splits, stock dividends, combinations or other
recapitalizations) payable when, as and if declared by the Board of Directors.
Such dividends shall not be cumulative.
(b) No distribution or dividend of cash or property shall be
paid on shares of Common Stock or Series A Preferred Stock unless a distribution
or dividend of the same amount per share (on an as-converted basis) is
simultaneously paid on the shares of Series B Preferred Stock.
(c) No distribution or dividend of cash or property shall be
paid on shares of Common Stock unless a distribution or dividend of the same
amount per share (on an as-converted basis) is simultaneously paid on the shares
of Series A Preferred Stock.
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up
of this Corporation, either voluntary or involuntary, subject to the rights of
series of Preferred Stock which may from time to time come into existence, the
holders of Series B Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets of this Corporation to the
holders of Series A Preferred Stock or Common Stock by reason of their ownership
thereof, an amount per share equal to the sum of (i) $3.20511 for each
outstanding share of Series B Preferred Stock (subject to appropriate
adjustments for stock splits, stock dividends, combinations or other
recapitalizations and hereafter referred to as the "Original Series B Issue
Price") and (ii) an amount equal to eight percent (8%) compounded per annum
calculated from the date of the initial issuance and sale of shares of Series B
Preferred Stock through the effective date of the liquidation, dissolution or
winding up of this Corporation. If upon the occurrence of such event, the
assets and funds thus distributed among the holders of the Series B Preferred
Stock shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amount, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among the holders of the Series B Preferred Stock in proportion to the amount of
such stock owned by each such holder.
(b) Upon the completion of the distribution required by
subparagraph (a) of this Section 2, if assets remain in this Corporation the
holders of Series A Preferred Stock and Common Stock shall receive all of the
remaining assets of this Corporation. The entire assets and funds of the
Corporation legally available for distribution (after giving effect to the
distribution referred to in Section 2(a) hereof) shall be
-2-
<PAGE>
distributed ratably among the holders of the Series A Preferred Stock and Common
Stock in proportion to the amount of such stock owned by each such holder
(determined on an as-converted basis).
(c) A consolidation or merger of this Corporation with or into
any other corporation or corporations, or a sale, conveyance or disposition of
all or substantially all of the assets of this Corporation or 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 (excluding
the issuance of up to 1,092,026 shares of Series B Preferred Stock), shall be
deemed to be a liquidation, dissolution or winding up within the meaning of this
Section 2. The amount being distributed to the holders of capital stock upon
any such merger or consolidation shall be the cash or the value of the property,
rights or securities distributed to such holders by the acquiring person, firm
or other entity. The value of such property, rights or other securities shall
be determined in good faith by the Board of Directors of the Corporation.
3. REDEMPTION.
(a) On or at any time after January 1, 1998, upon the receipt by
this Corporation of the written request of the holders of a majority of the then
outstanding Series B Preferred Stock ("Redemption Request"), this Corporation
shall, to the extent it may lawfully do so, redeem all of the shares of Series B
Preferred Stock then outstanding by paying in cash therefor $3.20511 per share
(such total amount is hereinafter referred to as the "Series B Redemption
Price"). Upon the receipt of a Redemption Request, the Corporation shall redeem
all of the then outstanding shares of Series B Preferred Stock within ninety
(90) days of the Corporation's receipt of such Redemption Request; PROVIDED,
HOWEVER, that the Corporation, in its sole discretion, may instead redeem
one-third of the then outstanding shares of Series B Preferred Stock within
ninety (90) days of the Corporation's receipt of such Redemption Request and
defer the redemption by this Corporation for up to one (1) year from the date of
the Redemption Request of an additional one-third of the outstanding Series B
Preferred Stock (as of the date of the Redemption Request) and may defer the
redemption by this Corporation for up to two (2) years from the date of the
Redemption Request of the final one-third of the outstanding Series B Preferred
Stock (as of the date of the Redemption Request). Payment for such deferred
redemption shall bear interest from the date of the initial redemption pursuant
to the Redemption Request hereunder through the date of redemption at the annual
rate of prime (the most favorable rate available to the Corporation for its
borrowing from time to time) plus two percent (2%).
(b) With respect to any redemption to be conducted in
installments pursuant to subsection 3(a), the Corporation shall effect such
redemption pro rata according to
-3-
<PAGE>
the number of shares of Series B Preferred Stock held by each holder.
(c) At least 20 but no more than 60 days prior to the date fixed
for any redemption of Series B Preferred Stock (the "Redemption Date"), written
notice shall be mailed, first class postage prepaid, to each holder of record
(at the close of business on the business day next preceding the day on which
notice is given) of the Series B Preferred Stock to be redeemed, at the address
last shown on the records of this Corporation for such holder or given by the
holder to this Corporation for the purpose of notice or if no such address
appears or is given at the place where the principal executive office of this
Corporation is located, notifying such holder of the redemption to be effected,
specifying the number of shares to be redeemed from such holder, the Redemption
Date, the Series B Redemption Price, the place at which payment may be obtained
and the date on which such holder's Conversion Rights (as hereinafter defined)
as to such shares terminate and calling upon such holder to surrender to this
Corporation, in the manner and at the place designated, his certificate or
certificates representing the shares to be redeemed (the "Redemption Notice").
Except as provided in subsection 3(d) and except as prohibited by applicable
California corporate law, on or after the Redemption Date, each holder of Series
B Preferred Stock to be redeemed shall surrender to this Corporation the
certificate or certificates representing such shares, in the manner and at the
place designated in the Redemption Notice, and thereupon the Series B Redemption
Price of such shares shall be payable to the order of the person whose name
appears on such certificate or certificates as the owner thereof and each
surrendered certificate shall be cancelled. In the event less than all the
shares represented by any such certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares.
(d) From and after the Redemption Date, unless there shall have
been a default in payment of the Series B Redemption Price, all rights of the
holders of such shares as holders of Series B Preferred Stock to be redeemed on
the Redemption Date (except the right to receive the Series B Redemption Price
including any interest due pursuant to subsection 3(a) upon surrender of their
certificate or certificates) shall cease with respect to such shares, and such
shares shall not thereafter be transferred on the books of this Corporation or
be deemed to be outstanding for any purpose whatsoever. If the funds of the
Corporation legally available for redemption of shares of Series B Preferred
Stock on any Redemption Date are insufficient to redeem the total number of
shares of Series B Preferred Stock to be redeemed on such date, those funds
which are legally available will be used to redeem the maximum possible number
of such shares ratably among the holders of such shares to be redeemed. Any
shares of Series B Preferred Stock not redeemed shall remain outstanding and
entitled to all the rights and preferences provided herein. At any time
thereafter when additional funds of the Corporation are
-4-
<PAGE>
legally available for the redemption of shares of Series B Preferred Stock, such
funds will immediately be used to redeem the balance of the shares which the
Corporation has become obligated to redeem on any Redemption Date but which it
has not redeemed.
4. CONVERSION. The holders of the Series A Preferred Stock and
Series B Preferred Stock have conversion rights as follows (the "Conversion
Rights"):
(a) RIGHT TO CONVERT.
i) Subject to subsection 4(c), each share of Series A
Preferred Stock and Series B Preferred Stock shall be convertible, at the option
of the holder thereof, at any time after the date of issuance of such share and
prior to the close of business on any Redemption Date as may have been fixed in
any Redemption Notice with respect to such share, at the office of this
Corporation or any transfer agent for the particular series of Preferred Stock,
into such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing, with respect to Series A Preferred Stock, $2.00 per
share (subject to appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations and hereafter referred to as the
"Original Series A Issue Price") or, with respect to Series B Preferred Stock,
the Original Series B Issue Price plus all declared but unpaid dividends on such
share of Series B Preferred Stock by the applicable Conversion Price at the time
in effect for such share. The initial Conversion Price per share for shares of
Series A Preferred Stock shall be the Original Series A Issue Price and the
initial Conversion Price per share for shares of Series B Preferred Stock shall
be the Original Series B Issue Price; provided, however, that the Conversion
Price for the Series A Preferred Stock and Series B Preferred Stock shall be
subject to adjustment as set forth in subsection 4(c).
ii) In the event of a call for redemption of any shares of
Series B Preferred Stock pursuant to Section 3 hereof, the Conversion Rights
shall terminate as to the shares designated for redemption at the close of
business on the Redemption Date, unless default is made in payment of the Series
B Redemption Price, in which case the Conversion Rights shall terminate on the
date such Redemption Price is paid in full.
iii) Each share of Series B Preferred Stock and Series A
Preferred Stock shall automatically be converted into shares of Common Stock at
the Conversion Price at the time in effect for such shares immediately upon the
earlier of (A) the closing of the Corporation's sale of its Common Stock in a
bona fide, firm commitment underwriting pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the public
offering price of which was not less than $8.00 per share (without adjustment to
reflect subsequent stock dividends, stock splits or recapitalization) and
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<PAGE>
$10,000,000 aggregate net proceeds or (B) the date upon which the Corporation
obtains the consent of the holders of 66-2/3% of the then outstanding shares of
Series B Preferred Stock for conversion of the Series A Preferred Stock and
Series B Preferred Stock into Common Stock.
(b) MECHANICS OF CONVERSION. Before any holder of Preferred
Stock shall be entitled to convert the same into shares of Common Stock, he
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of this Corporation or of any transfer agent for the particular series of
Preferred Stock and shall give written notice by mail, postage prepaid, to this
Corporation at its principal corporate office, of the election to convert the
same and shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. This Corporation
shall, as soon as practicable thereafter, issue and deliver at such office to
such holder of Preferred Stock or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares of Preferred Stock to be converted, 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. If the conversion is in connection
with an underwritten offer of securities registered pursuant to the Securities
Act, the conversion may, at the option of any holder tendering Preferred Stock
for conversion, be conditioned upon the effectiveness of a registration
statement under the Securities Act and the closing of the sale and purchase of
shares pursuant to such offering, in which event the person(s) entitled to
receive the Common Stock issuable upon such conversion of the Preferred Stock
shall not be deemed to have converted such Preferred Stock until immediately
prior to the closing of such registration statement.
(c) CONVERSION PRICE ADJUSTMENTS OF PREFERRED STOCK. The
Conversion Price of the Series A Preferred Stock and Series B Preferred Stock
shall be subject to adjustment from time to time as follows:
i) A. Upon each issuance by the Corporation of any
Additional Stock (as defined below) after the date upon which any shares of
Series B Preferred Stock were first issued (the "Purchase Date"), without
consideration or for a consideration per share less than the applicable
Conversion Price for the Series B Preferred Stock in effect immediately prior
to the issuance of such Additional Stock, the applicable Conversion Price for
the Series B Preferred Stock in effect immediately prior to each such
issuance shall forthwith (except as otherwise provided in this clause (i)) be
adjusted to a price determined by multiplying such Conversion Price by a
fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issuance (including, without
limitation, the number of shares of Common Stock issuable upon
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<PAGE>
the conversion of the Preferred Stock) plus the number of shares of Common Stock
which the aggregate consideration received by the Corporation for such issuance
would purchase at such Conversion Price; and the denominator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance (including, without limitation, the number of shares of Common Stock
issuable upon the conversion of the Preferred Stock in the number of shares of
Common Stock outstanding) plus the number of shares of such Additional Stock.
B. No adjustment of the Conversion Price for the
Series B Preferred Stock shall be made in an amount less than one cent per
share, provided that any adjustments which are not required to be made by reason
of this sentence shall be carried forward and shall be either taken into account
in any subsequent adjustment made prior to three (3) years from the date of the
event giving rise to the adjustment being carried forward, or shall be made at
the end of three (3) years from the date of the event giving rise to the
adjustment being carried forward, whichever occurs first. Except to the limited
extent provided for in subsections (E)(3) and (E)(4), no adjustment of such
Conversion Price pursuant to this subsection 4(c)(i) shall have the effect of
increasing the Conversion Price above the Conversion Price in effect immediately
prior to such adjustment.
C. In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by this Corporation for any underwriting or otherwise
in connection with the issuance and sale thereof.
D. In the case of the issuance of the Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined by the
Board of Directors irrespective of any accounting treatment.
E. In the case of the issuance (whether before, on or
after the Purchase Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply for all
purposes of this subsection 4(c)(i) and subsection 4(c)(ii):
1. The aggregate maximum number of shares of
Common Stock deliverable upon exercise (assuming the satisfaction of
any conditions to exercisability, including, without limitation, the
passage of time, but without taking into account potential
antidilution adjustments) of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the
time such options
-7-
<PAGE>
or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in subsections
4(c)(i)(C) and (c)(i)(D)), if any, received by the Corporation upon
the issuance of such options or rights plus the exercise price
provided in such options or rights (without taking into account
potential antidilution adjustments) for the Common Stock covered
thereby.
2. The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange (assuming
the satisfaction of any conditions to convertibility or
exchangeability, including, without limitation, the passage of time,
but without taking into account potential antidilution adjustments)
for any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent conversion or
exchange thereof shall be deemed to have been issued at the time such
securities were issued or such options or rights were issued and for a
consideration equal to the consideration, if any, received by the
Corporation for any such securities and related options or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the additional consideration, if any, to be received
by the Corporation (without taking into account potential antidilution
adjustments) upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in each
case to be determined in the manner provided in subsections 4(c)(i)(C)
and (c)(i)(D)).
3. In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to
this Corporation upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or exchangeable
securities, including, without limitation, a change resulting from the
antidilution provisions thereof, the Conversion Price of the
applicable Preferred Stock to the extent in any way affected by or
computed using such options, rights or securities, shall be recomputed
to reflect such change, but no further adjustment shall be made for
the actual issuance of Common Stock or any payment of such
consideration upon the exercise of any such options or rights or the
conversion or exchange of such securities.
4. Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the applicable Conversion
-8-
<PAGE>
Price of the Preferred Stock to the extent in any way affected by or
computed using such options, rights or securities or options or rights
related to such securities, shall be recomputed to reflect the
issuance of only the number of shares of Common Stock (and convertible
or exchangeable securities which remain in effect) actually issued
upon the exercise of such options or rights, upon the conversion or
exchange of such securities or upon the exercise of the options or
rights related to such securities.
5. The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to
subsections 4(c)(i)(E)(1) and (2) shall be appropriately adjusted to
reflect any change, termination or expiration of the type described in
either subsection 4(c)(i)(E)(3) or (4).
ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 4(c)(i)(E))
by this Corporation after the Purchase Date other than
A. shares of Common Stock issued pursuant to a
transaction described in subsection 4(c)(iii) hereof,
B. shares of Common Stock issued upon conversion of
the applicable Preferred Stock,
C. to employees, consultants or directors of this
Corporation, or to vendors, suppliers, customers or other persons or
organizations with which the Corporation has a commercial
relationship, at any time when the total number of shares of Common
Stock so issuable or issued (and not repurchased at cost by the
Corporation in connection with the termination of employment or the
commercial relationship) does not exceed 225,000 (subject to
appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations) subsequent to the Purchase
Date, or
D. shares of Common Stock issued or issuable (I) in a
public offering before or in connection with which all outstanding
shares of Preferred Stock will be converted to Common Stock or (II)
upon exercise of warrants or rights granted to underwriters in
connection with such a public offering.
E. by way of dividend or other distribution on shares
excluded from the definition of Additional Stock by virtue of clauses
(A) through (D).
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<PAGE>
iii) In the event the Corporation should at any time or from
time to time after the Purchase Date fix a record date for the effectuation of a
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the applicable
Conversion Price of the Series A or Series B Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be increased in proportion to such
increase of the aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents.
iv) If the number of shares of Common Stock outstanding at
any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the applicable Conversion Price for the Series A or Series B
Preferred Stock shall be appropriately increased so that the number of shares of
Common Stock issuable on conversion of each share of such series shall be
decreased in proportion to such decrease in outstanding shares.
(d) OTHER DISTRIBUTIONS. In the event this Corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this Corporation or other persons, or assets (excluding
cash dividends) or options or rights not referred to in subsection 4(c)(iii),
then, in each such case for the purpose of this subsection 4(d), the holders of
the Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the Corporation into which their shares of Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
(e) RECAPITALIZATIONS. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4), provision shall be made so that the holders of the Preferred
Stock shall thereafter be entitled to receive upon conversion of the Preferred
Stock, the number of shares of stock or other securities or property of the
Company or otherwise, to which a holder of Common Stock deliverable upon
conversion would have
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<PAGE>
been entitled on such recapitalization. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 4
with respect to the rights of the holders of the Preferred Stock after the
recapitalization to the end that the provisions of this Section 4 (including
adjustment of the Conversion Price then in effect for each series and the number
of shares purchasable upon conversion of the Preferred Stock) shall be
applicable after that event as nearly equivalent as may be practicable.
(f) NO IMPAIRMENT. This Corporation shall not, by amendment of
its Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by this
Corporation, but shall at all times in good faith assist in the carrying out of
all the provisions of this Section 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Preferred Stock against impairment.
(g) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
i) No fractional shares shall be issued upon conversion of
the Preferred Stock and the number of shares of Common Stock to be issued shall
be rounded to the nearest whole share. Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis of the total
number of shares of Preferred Stock the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Preferred Stock pursuant to this Section 4, this
Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. This Corporation shall, upon the written request at any
time of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (A) such adjustment and readjustment,
(B) the applicable Conversion Price at the time in effect, and (C) the number of
shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of Preferred Stock.
(h) NOTICES OF RECORD DATE. In the event of any taking by this
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for,
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<PAGE>
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, this Corporation shall
mail to each holder of Preferred Stock, at least 20 days prior to the date
specified therein, a notice specifying 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.
(i) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. This
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Preferred Stock, in addition to
such other remedies as shall be available to the holder of such Preferred Stock,
this Corporation shall take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.
(j) NOTICES. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of this
Corporation.
5. VOTING RIGHTS.
(a) GENERAL VOTING RIGHTS. The holder of each share of the
Preferred Stock shall have the right to one vote for each share of Common Stock
into which such Preferred Stock could then be converted (with any fractional
share determined on an aggregate conversion basis being rounded to the nearest
whole share), and with respect to such vote, such holder shall have full voting
rights and powers equal to the voting rights and powers of the holders of Common
Stock, and shall be entitled, notwithstanding any provision hereof, to notice of
any shareholders' meeting in accordance with the Bylaws of this Corporation, and
shall be entitled to vote, together as a single class with holders of Common
Stock, with respect to any question upon which holders of Common Stock have the
right to vote, except for the election of directors as provided in Section 5(b)
below.
(b) ELECTION OF DIRECTORS. Notwithstanding 5(a) above, the
holders of Series B Preferred Stock, voting as a separate class, shall be
entitled to elect one (1) director of the Corporation. The holders of Series A
Preferred Stock and Common Stock, voting together as a class, shall be entitled
to elect the remaining directors of the Corporation. At any meeting held for
the purpose of electing or nominating directors, the
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presence in person or by proxy of the holders of a majority of the Series B
Preferred Stock then outstanding shall constitute a quorum of the Series B
Preferred Stock for the election or nomination of directors to be elected or
nominated solely by the holders of Series B Preferred Stock. A vacancy in any
directorship elected by the holders of Series B Preferred Stock shall be filled
only by vote of the holders of Series B Preferred Stock.
6. PROTECTIVE PROVISIONS. Subject to the rights of series of
Preferred Stock which may from time to time come into existence, so long as
shares of Preferred Stock are outstanding, this Corporation shall not without
first obtaining the approval (by vote or written consent, as provided by law) of
the holders of at least a majority of the then outstanding shares of Series B
Preferred Stock, voting as a separate class:
(a) sell, convey, or otherwise dispose of or encumber (other
than pursuant to a credit arrangement in the ordinary course of business) all or
substantially all of its property or business or merge into or consolidate with
any other Corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than 50%
of the voting power of the Corporation is disposed of or effect any voluntary
liquidation, dissolution or winding up of the Corporation or any reorganization
or recapitalization of the Corporation (any such event hereinafter referred to
as a "Corporate Transaction"); or
(b) alter or change the rights, preferences or privileges of the
shares of Series B Preferred Stock so as to adversely affect the shares; or
(c) create any new class or series of stock or any other
securities convertible into equity securities of the corporation having a
preference over, or being on a parity with, the Series B Preferred Stock with
respect to voting, dividends or upon liquidation; or
(d) amend the Corporation's Articles of Incorporation; or
(e) amend the Corporation's Bylaws, including, without
limitation, any amendment to increase the authorized number of directors to more
than five; or
(f) repurchase shares of the Corporation's Common Stock or
Preferred Stock; or
(g) permit any subsidiary to issue stock to any entity other
than the Corporation.
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<PAGE>
7. STATUS OF CONVERTED OR REDEEMED STOCK. In the event any shares
of Preferred Stock shall be redeemed or converted pursuant to Section 3 or
Section 4 hereof, the shares so converted or redeemed shall be cancelled and
shall not be issuable by the Corporation. The Articles of Incorporation of this
Corporation shall be appropriately amended to effect the corresponding reduction
in the Corporation's authorized capital stock.
8. REPURCHASE OF SHARES. In connection with repurchases by this
Corporation of its Common Stock pursuant to its agreements with certain of the
holders thereof, Sections 502 and 503 of the California General Corporation Law
shall not apply in whole or in part with respect to such repurchases.
C. COMMON STOCK.
1. DIVIDEND RIGHTS. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the Corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or winding
up of the Corporation, the assets of the Corporation shall be distributed as
provided in Section 2 of Division (B) of this Article III.
3. REDEMPTION. The Common Stock is not redeemable.
4. VOTING RIGHTS. The holder of each share of Common Stock shall
have the right to one vote, and shall be entitled to notice of any shareholders'
meeting in accordance with the Bylaws of this Corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law and
Section 5(b) of Division (B) of this Article III.
ARTICLE IV
A. The liability of the directors of this Corporation for monetary damages
for breach of fiduciary duties shall be eliminated to the fullest extent
permissible under California law.
B. This Corporation is authorized to indemnify the directors and officers
of this Corporation to the fullest extent permissible under California law.
C. This Corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the
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California Corporations Code) through bylaw provisions, agreements with the
agents, vote of shareholders or disinterested directors, or otherwise in excess
of the indemnification otherwise permitted by Section 317 of the California
Corporations Code, subject only to applicable limits set forth in Section 204 of
the California Corporations Code with respect to actions for breach of duty to
the Corporation and its shareholders.
D. Any amendment or repeal of this Article IV shall not reduce or
eliminate the effect of this Article IV with respect to actions taken prior to
such amendment or repeal.
* * *
THREE The foregoing amendment and restatement has been approved by the
Board of Directors of said Corporation.
FOUR The foregoing amendment and restatement of the articles of
incorporation was approved by the holders of the requisite number of shares of
said Corporation in accordance with Sections 902 and 903 of the California
Corporations Code; the total number of outstanding shares of each class entitled
to vote with respect to the foregoing amendment was 1,000,000 shares of Common
Stock and 2,000,000 shares of Series A Preferred Stock. The number of shares
voting in favor of the foregoing amendment equaled or exceeded the vote
required, such required vote being (i) more than fifty percent (50%) of the
Common Stock and Series A Preferred Stock voting together, (ii) more than 50% of
the Common Stock voting as a separate class and (iii) more than fifty percent
(50%) of the Series A Preferred Stock voting as a separate class.
[Remainder of This Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this certificate on
January 24, 1995.
------------------------------------
Ralph Rubio, President
------------------------------------
Rafael Rubio, Secretary
The undersigned certify under penalty of perjury that they have read the
foregoing Restated Articles of Incorporation and know the contents thereof, and
that the statements therein are true.
Executed at San Diego, California, on January 24, 1995.
------------------------------------
Ralph Rubio, President
------------------------------------
Rafael Rubio, Secretary
[SIGNATURE PAGE TO AMENDED AND RESTATED
ARTICLES OF INCORPORATION]
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EXHIBIT B
SCHEDULE OF COMMON AND SERIES A PREFERRED STOCK HOLDERS
<TABLE>
<CAPTION>
NAME SHARES
----- ------
<S> <C>
COMMON SHAREHOLDERS
- -------------------
Ralph Rubio and Dione Rubio as Trustees of
the Ralph Rubio and Dione Rubio Family Trust 400,000
Rafael Rubio 400,000
Robert L. Garcia and Gloria R. Garcia, as
Trustees of the Robert and Gloria Garcia Trust 50,000
Richard M. Rubio and Victoria E. Rubio as
Trustees or Successors of the Richard and
Victoria Rubio Trust 50,000
Robert Rubio as Trustee of the Robert Rubio Trust 50,000
Gloria Garcia as Trustee of the Trust FBO
Roman Rubio 50,000
----------
Total 1,000,000
SERIES A PREFERRED SHAREHOLDERS
- -------------------------------
Ralph Rubio and Dione Rubio as Trustees of
the Ralph Rubio and Dione Rubio Family Trust 800,000*
Rafael Rubio 800,000*
Robert L. Garcia and Gloria R. Garcia, as
Trustees of the Robert and Gloria Garcia Trust 100,000
Richard M. Rubio and Victoria E. Rubio as
Trustees or Successors of the Richard and
Victoria Rubio Trust 100,000
Robert Rubio as Trustee of the Robert Rubio Trust 100,000
Gloria Garcia as Trustee of the Trust FBO
Roman Rubio 100,000
----------
Total 2,000,000
OPTION HOLDERS
- --------------
Tom Huppert 5,500
Jeff Barker 6,000
----------
Total 11,500
</TABLE>
* Prior to sale by each of 15,600 shares to the Dooling Trust concurrently with
the Closing of this Agreement.
B-1
<PAGE>
EXHIBIT 10.2
THE TRANSFER OF THIS WARRANT IS SUBJECT TO
RESTRICTIONS CONTAINED HEREIN. THIS WARRANT
HAS BEEN ISSUED IN RELIANCE UPON THE
REPRESENTATION OF THE HOLDER THAT IT HAS BEEN
ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH
A VIEW TOWARD THE RESALE OR OTHER DISTRIBUTION
THEREOF. NEITHER THIS WARRANT NOR THE SHARES
ISSUABLE UPON THE EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES LAWS.
RUBIO'S RESTAURANTS, INC.
Common Stock Purchase Warrant
To Subscribe for and Purchase February 2, 1995
50,000 Shares of Common Stock of
Rubio's Restaurants, Inc.
THIS CERTIFIES that, for $500 paid in cash and other value received,
Flemming & Lessard, Inc. or its registered assigns (the "Holder"), is entitled
to subscribe for and purchase from Rubio's Restaurants, Inc., a California
corporation (hereinafter called the "Corporation"), up to 50,000 shares (subject
to adjustment as hereinafter provided) of fully paid and non-assessable Common
Stock of the Corporation (the "Common Stock"), subject to the provisions and
upon the terms and conditions hereinafter set forth at the price of $3.20511 per
share (such price as from time to time to be adjusted as provided herein is
called the "Warrant Price"), at or prior to the earlier of (i) 5:00 p.m. Pacific
time on February 2, 2000 or (ii) the effective date of the registration
statement for the Corporation's initial public offering of equity securities
(the "Exercise Period"). However, this Warrant shall not be exercisable until
the earlier of (i) the date when the then-current fair market value per share of
the Common Stock of the Company as determined by the Company's Board of
Directors equals or exceeds the exercise price per share of the Warrant, (ii)
the closing of the Company's underwritten initial public offering, (iii)
immediately prior to the closing of an acquisition of all or substantially all
of the Company's outstanding stock or assets by an unrelated entity, by merger
or otherwise, or (iv) the date which is two years from the date of issuance of
this Warrant.
This Warrant and any Warrant subsequently issued upon exchange or transfer
hereof are hereinafter collectively called the "Warrant."
Section 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 fractional
shares) at any time or from time to time during the Exercise Period by the
completion of the purchase form attached hereto and by the surrender of this
Warrant (properly endorsed) at the office of the
<PAGE>
Corporation as it may designate by notice in writing to the Holder hereof at the
address of the Holder appearing on the books of the Corporation, and by payment
to the Corporation of the Warrant Price in cash or by certified or official bank
check, for each share being purchased. (In addition, see Section 2 below for
net issuance provisions.) In the event of any exercise of the rights
represented by this Warrant, a certificate or certificates for the shares of
Common Stock so purchased, registered in the name of the Holder, or its nominee
or other party designated in the purchase form by the Holder hereof, shall be
delivered to the Holder within thirty (30) business days after the date in which
the rights represented by this Warrant shall have been so exercised; and, unless
this Warrant has expired or has been exercised in full, a new Warrant
representing the number of shares (except a remaining fractional share), if any,
with respect to which this Warrant shall not then have been exercised shall also
be issued to the Holder within such time. The person in whose name any
certificate for shares of Common Stock is issued upon exercise of this Warrant
shall for all purposes be deemed to have become the holder of record of such
shares on the date on which this Warrant was surrendered and payment of the
Warrant Price, except that, if the date of such surrender and payment is a date
on which the stock transfer books of the Corporation are closed, such person
shall be deemed to have become the holder of such shares at the close of
business on the next succeeding date on which the stock transfer books are open.
No fractional shares shall be issued upon exercise of this Warrant and no
payment or adjustment shall be made upon any exercise on account of any cash
dividends on the Common Stock issued upon such exercise. If any fractional
interest in a share of Common Stock would, except for the provision of this
Section 1, be delivered upon such exercise, the Corporation, in lieu of delivery
of a fractional share thereof, shall pay to the Holder an amount in cash equal
to the current market price of such fractional share as determined in good faith
by the Board of Directors of the Corporation (the "Board").
Section 2. NET ISSUANCE.
(a) RIGHT TO CONVERT. In addition to and without limiting the rights
of the Holder under the terms of this Warrant, the Holder shall have the right
to convert this Warrant or any portion thereof (the "Conversion Right") into
shares of Common Stock as provided in this Section 2 at any time or from time to
time during the Exercise Period. Upon exercise of the Conversion Right with
respect to a particular number of shares subject to the Warrant (the "Converted
Warrant Shares"), the Corporation shall deliver to the Holder (without payment
by the Holder of any exercise price or any cash or other consideration) that
number of shares of fully paid and nonassessable Common Stock computed using the
following formula:
X = Y (A - B)
---------
A
Where X = the number of shares of Common Stock to be delivered to the
holder
Y = the number of Converted Warrant Shares
-2-
<PAGE>
A = the fair market value of one share of the Corporation's
Common Stock on the Conversion Date (as defined below)
B = the per share exercise price of the Warrant (as adjusted to
the Conversion Date)
The Conversion Right may only be exercised with respect to a whole number of
shares subject to the Warrant. No fractional shares shall be issuable upon
exercise of the Conversion Right, and if the number of shares to be issued
determined in accordance with the foregoing formula is other than a whole
number, the Corporation shall pay to the Holder an amount in cash equal to the
fair market value of the resulting fractional share on the Conversion Date (as
defined below). Shares issued pursuant to the Conversion Right shall be treated
as if they were issued upon the exercise of the Warrant.
(b) METHOD OF EXERCISE. The Conversion Right may be exercised by the
Holder by the surrender of the Warrant at the principal office of the
Corporation together with a written statement specifying that the Holder thereby
intends to exercise the Conversion Right and indicating the total number of
shares under the Warrant that the Holder is exercising through the Conversion
Right. Such conversion shall be effective upon receipt by the Corporation of
the Warrant together with the aforesaid written statement, or on such later date
as is specified therein (the "Conversion Date"). Certificates for the shares
issuable upon exercise of the Conversion Right and, if applicable, a new warrant
evidencing the balance of the shares remaining subject to the Warrant, shall be
issued as of the Conversion Date and shall be delivered to the Holder promptly
following the Conversion Date.
(c) DETERMINATION OF FAIR MARKET VALUE. For purposes of this Section
2, fair market value of a share of Common Stock on the Conversion Date shall
mean:
(i) If traded on a stock exchange, the fair market value of the
Common Stock shall be deemed to be the average of the closing selling prices of
the Common Stock on the stock exchange determined by the Board to be the primary
market for the Common Stock over the ten (10) trading day period (or such
shorter period immediately following the closing of an initial public offering)
ending on the date prior to the Conversion Date, as such prices are officially
quoted in the composite tape of transactions on such exchange;
(ii) If traded over-the-counter, the fair market value of the
Common Stock shall be deemed to be the average of the closing bid prices (or, if
such information is available, the closing selling prices) of the Common Stock
over the ten (10) trading day period (or such shorter period immediately
following the closing of an initial public offering) ending on the date prior to
the Conversion Date, as such prices are reported by the National Association of
Securities Dealers through its NASDAQ system or any successor system; and
(iii) If there is no public market for the Common Stock, then the
fair market value shall be determined by mutual agreement of the holder of the
Warrant and the Corporation, and if the holder and the Corporation are unable to
so agree, by an [INVESTMENT
-3-
<PAGE>
BANKER] of national reputation selected by the Corporation and reasonably
acceptable to the holder of the Warrant.
Section 3. STOCK SPLITS, CONSOLIDATION, MERGER AND SALE. In the event
that before the issuance of the shares of Common Stock into which this Warrant
may be exercised the outstanding shares of Common Stock shall be split, combined
or consolidated, by dividend, reclassification or otherwise, into a greater or
lesser number of shares of Common Stock, the Warrant Price in effect immediately
prior to such combination or consolidation and the number of shares purchasable
under this Warrant shall, concurrently with the effectiveness of such
combination or consolidation, be proportionately adjusted. If there shall be
effected any consolidation or merger of the Corporation with another
corporation, or a sale of all or substantially all of the Corporation's assets
to another corporation, and if the holders of Common Stock shall be entitled
pursuant to the terms of any such transaction to receive stock, securities or
assets with respect to or in exchange for Common Stock, then, as a condition of
such consolidation, merger or sale, lawful and adequate provisions shall be made
whereby the Holder of this Warrant shall thereafter have the right to receive,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock immediately theretofore receivable upon the exercise
of such Warrant, such shares of stock, securities or assets as may be issuable
or payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such Common Stock immediately
theretofore so receivable had such consolidation, merger or sale not taken
place, and in any such case appropriate provisions shall be made with respect to
the rights and interests of the Holder to the end that the provisions hereof
shall thereafter be applicable, as nearly as may be, in relation to any shares
of stock, securities or assets thereafter deliverable upon the exercise of this
Warrant.
(a) STOCK TO BE RESERVED. The Corporation will at all times reserve
and keep available out of its authorized Common Stock, solely for the purpose of
issue upon the exercise of this Warrant as herein provided, such number of
shares of Common Stock as shall then be issuable upon the exercise of this
Warrant. The Corporation shall from time to time in accordance with applicable
law increase the authorized amount of its Common Stock if at any time the number
of shares of Common Stock remaining unissued and available for issuance shall
not be sufficient to permit exercise of this Warrant. The Corporation covenants
that all shares of Common Stock which shall be so issued shall be duly and
validly issued and fully paid and nonassessable and free from all taxes, liens
and charges with respect to the issue thereof, and, without limiting the
generality of the foregoing, the Corporation will take all such action as may be
necessary to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any requirements of
any national securities exchange upon which shares of capital stock of the
Corporation may be listed.
(b) ISSUE TAX. The issuance of certificates for shares of Common
Stock upon exercise of this Warrant shall be made without charge to the Holders
of this Warrant for any issuance tax in respect thereof provided that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the Holder of this Warrant.
-4-
<PAGE>
(c) CLOSING OF BOOKS. The Corporation will at no time close its
transfer books against the transfer of the shares of Common Stock issued or
issuable upon the exercise of this Warrant in any manner which interferes with
the timely exercise of this Warrant.
Section 4. NOTICES OF RECORD DATES. In the event of:
(a) any taking by the Corporation of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution (other than cash
dividends out of earned surplus), 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 Corporation, any
reclassification or recapitalization of the capital stock of the Corporation or
any transfer of all or substantially all the assets of the Corporation to or
consolidation or merger of the Corporation with or into any other corporation,
or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Corporation,
then and in each such event the Corporation will give notice to the Holder of
this Warrant specifying (i) the date on which any such record is to be taken for
the purpose of such dividend, distribution or right and stating the amount and
character of such dividend, distribution or right, and (ii) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock will be entitled to exchange their shares of Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be given at least ten (10) days and not more than
ninety (90) days prior to the date therein specified, and such notice shall
state that the action in question or the record date is subject to the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") or to a favorable vote of shareholders, if either
is required.
Section 5. NO SHAREHOLDER RIGHTS OR LIABILITIES. This Warrant shall not
entitle the Holder hereof to any voting rights or other rights as a shareholder
of the Corporation. No provision hereof, in the absence of affirmative action
by the Holder hereof to purchase shares of Common Stock, and no mere enumeration
hereon of the rights or privileges of the Holder hereof, shall give rise to any
liability of such Holder for the Warrant Price or as a shareholder of the
Corporation, whether such liability is asserted by the Corporation or by
creditors of the Corporation.
Section 6. REPRESENTATIONS OF HOLDER.
The Holder hereby represents and acknowledges to the Corporation that:
-5-
<PAGE>
(a) this Warrant, the Common Stock issuable upon exercise of this
Warrant and any securities issued with respect to any of them by way of a stock
dividend or stock split or in connection with a recapitalization, merger,
consolidation or other reorganization will be "restricted securities" as such
term is used in the rules and regulations under the Securities Act and that such
securities have not been and will not be registered under the Securities Act or
any state securities law, and that such securities must be held indefinitely
unless registration is effected or transfer can be made pursuant to appropriate
exemptions;
(b) the Holder has read, and fully understands, the terms of this
Warrant set forth on its face and the attachments hereto, including the
restrictions on transfer contained herein;
(c) the Holder has either a pre-existing personal or business
relationship with the Corporation or one of its officers, directors or
controlling persons;
(d) the Holder is purchasing for investment for its own account and
not with a view to or for sale in connection with any distribution of this
Warrant or the Common Stock of the Corporation issuable upon exercise of this
Warrant and it has no intention of selling such securities in a public
distribution in violation of the federal securities laws or any applicable state
securities laws; provided that nothing contained herein will prevent Holder from
transferring such securities in compliance with the terms of this Warrant and
the applicable federal and state securities laws;
(e) the Holder is an "accredited investor" within the meaning of
paragraph (a) of Rule 501 of Regulation D promulgated by the Securities and
Exchange Commission and an "excluded purchaser" within the meaning of Section
25102(f) of the California Corporate Securities Law of 1968; and
(f) the Corporation may affix the following legend (in addition to any
other legend(s), if any, required by applicable state corporate and/or
securities laws) to certificates for shares of Common Stock (or other
securities) issued upon exercise of this Warrant ("Warrant Shares"):
"These securities have not been registered under the Securities Act of
1933, as amended. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with
respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or
unless sold pursuant to Rule 144 of such Act."
Section 7. NOTICE OF PROPOSED TRANSFERS. The Holder of this Warrant, by
acceptance hereof, agrees to comply in all respects with the provisions of this
Section 7. Prior to any proposed transfer of this Warrant or any Warrant
Shares, unless there is in effect a registration statement under the Securities
Act covering the proposed transfer, the Holder of such securities shall give
written notice to the Corporation of such Holder's intention to effect such
-6-
<PAGE>
transfer. Each such notice shall describe the manner and circumstances of the
proposed transfer in sufficient detail, and shall be accompanied (except in
transactions in compliance with Rule 144) by either (i) a written opinion of
legal counsel who shall be reasonably satisfactory to the Corporation addressed
to the Corporation and reasonably satisfactory in form and substance to the
Corporation's counsel, to the effect that the proposed transfer of the Warrant
and/or Warrant Shares may be effected without registration under the Securities
Act, or (ii) a "no action" letter from the U.S. Securities and Exchange
Commission (the "Commission") to the effect that the transfer of such securities
without registration will not result in a recommendation by the staff of the
Commission that enforcement action be taken with respect thereto, whereupon the
Holder of such securities shall be entitled to transfer such securities in
accordance with the terms of the notice delivered by the Holder to the
Corporation. Each new certificate evidencing the Warrant and/or Warrant Shares
so transferred shall bear the appropriate restrictive legends set forth in
Section 6(f) above, except that such certificate shall not bear such restrictive
legend if, in the opinion of counsel for the Corporation, such legend is not
required in order to establish or assist in compliance with any provisions of
the Securities Act or any applicable state securities laws.
Section 8. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant
is lost, stolen, mutilated or destroyed, the Corporation may, on such terms as
to indemnity or otherwise as it may in its discretion reasonably impose (which
shall, in the case of a mutilated Warrant, include the surrender thereof), issue
a new Warrant of like denomination and tenor as the Warrant so lost, stolen,
mutilated or destroyed. Any such new Warrant shall constitute an original
contractual obligation of the Corporation, whether or not the allegedly lost,
stolen, mutilated or destroyed Warrant shall be at any time enforceable by
anyone.
Section 9. PRESENTMENT. Prior to due presentment of this Warrant together
with a completed assignment form attached hereto for registration of transfer,
the Corporation may deem and treat the Holder as the absolute owner of the
Warrant, notwithstanding any notation of ownership or other writing thereon, for
the purpose of any exercise thereof and for all other purposes, and the
Corporation shall not be affected by any notice to the contrary.
Section 10. NOTICE. Notice or demand pursuant to this Warrant shall be
sufficiently given or made, if sent by first-class mail, postage prepaid,
addressed, if to the Holder of this Warrant, to the Holder at its last known
address as it shall appear in the records of the Corporation, and if to the
Corporation, at 5151 Shoreham Place, Suite 260, San Diego, California 92122,
Attention: Secretary. The Corporation may alter the address to which
communications are to be sent by giving notice of such change of address in
conformity with the provisions of this Section 10 for the giving of notice.
Section 11. GOVERNING LAW. The validity, interpretation and performance
of this Warrant shall be governed by the laws of the State of California without
regard to principles of conflicts of laws.
Section 12. SUCCESSORS, ASSIGNS. Subject to the restrictions on transfer
by Holder set forth in Section 7 hereof, all the terms and provisions of the
Warrant shall be binding upon
-7-
<PAGE>
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto.
Section 13. AMENDMENT. This Warrant may be modified, amended or
terminated by a writing signed by the Corporation and the Holder.
Section 14. SEVERABILITY. Should any part but not the whole of this
Warrant for any reason be declared invalid, such decision shall not affect the
validity of any remaining portion, which remaining portion shall remain in force
and effect as if this Warrant had been executed with the invalid portion thereof
eliminated, and it is hereby declared the intention of the parties hereto that
they would have executed the remaining portion of this Warrant without including
therein any such part which may, for any reason, be hereafter declared invalid.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-8-
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be duly
executed and delivered on and as of the day and year first above written by one
of its officers thereunto duly authorized.
RUBIO'S RESTAURANTS, INC., a
California corporation
Dated: February 2, 1995 By: /s/ Ralph Rubio
-----------------------------------------
Ralph Rubio, President
The undersigned Holder agrees and accepts this Warrant and
acknowledges that it has read and confirms each of the representations
contained in Section 6.
FLEMMING & LESSARD, INC.
By: /s/ Ray Lessard
-----------------------------------------
Its:
-------------------------------------
Address: 601 California Street
Suite 610
San Francisco, CA 94108
[SIGNATURE PAGE TO COMMON STOCK PURCHASE WARRANT]
-9-
<PAGE>
PURCHASE FORM
(To be executed by the Warrant Holder if he desires to exercise the Warrant in
whole or in part)
To: RUBIO'S RESTAURANTS, INC.
The undersigned, whose Social Security or other identifying number is
, hereby irrevocably elects the right of purchase represented
by the within Warrant for, and to purchase thereunder,
shares of Common Stock provided for
therein and tenders payment herewith to the order of
RUBIO'S RESTAURANTS, INC.
in the amount of
$...............
The undersigned requests that certificates for such shares be issued as follows:
Name: ......................................
Address: ...................................
Deliver to: ................................
Address: ...................................
and, if said number of shares shall not be all the shares purchasable hereunder,
that a new Warrant for the balance remaining of the shares purchasable under the
within Warrant be registered in the name of, and delivered to, the undersigned
at the address stated below
Address: .............................
Dated: , 199__
Signature................... (Signature
must conform in all respects to the name
of the Warrant Holder as specified on
the face of the Warrant, without
alteration, enlargement or any change
whatsoever)
-10-
<PAGE>
ASSIGNMENT
(To be executed by the Warrant Holder if he desires to effect a transfer of the
Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
whose Social Security or other identification number
is............................ [residing/located] at ...................... the
attached Warrant, and appoints............................. residing at
.......................................
....................................... the undersigned's attorney-in-fact to
transfer said Warrant on the books of the Corporation, with full power of
substitution in the premises.
Dated: , 199 .
In the presence of:
____________________________ ...................................
(Signature must conform in all respects to
the name of the Warrant Holder as specified
on the face of the Warrant, without
alteration, enlargement or any change
whatsoever).
-11-
<PAGE>
EXHIBIT 10.3
RUBIO'S RESTAURANTS, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
--------------------------------------
March 28, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. Purchase and Sale of Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Sale and Issuance of Series C Preferred Stock. . . . . . . . . . . . . . 1
1.2 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Subsequent Sale of Series C Preferred Stock. . . . . . . . . . . . . . . 1
2. Representations and Warranties of the Company . . . . . . . . . . . . . . . . 2
2.1 Organization, Good Standing and Qualification. . . . . . . . . . . . . . 2
2.2 Capitalization and Voting Rights . . . . . . . . . . . . . . . . . . . . 2
2.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Valid Issuance of Preferred and Common Stock . . . . . . . . . . . . . . 4
2.6 Governmental Consents. . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.8 Proprietary Information. . . . . . . . . . . . . . . . . . . . . . . . . 5
2.9 Patents and Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.10 Compliance with Other Instruments. . . . . . . . . . . . . . . . . . . . 6
2.11 Agreements; Action . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.12 Related-Party Transactions . . . . . . . . . . . . . . . . . . . . . . . 7
2.13 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.14 Environmental and Safety Laws. . . . . . . . . . . . . . . . . . . . . . 8
2.15 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.16 Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.17 Title to Property and Assets . . . . . . . . . . . . . . . . . . . . . . 8
2.18 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.19 Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.20 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.21 Tax Returns, Payments and Elections. . . . . . . . . . . . . . . . . . . 10
2.22 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.23 Minute Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.24 Labor Agreements and Actions . . . . . . . . . . . . . . . . . . . . . . 11
2.25 Manufacturing and Marketing Rights . . . . . . . . . . . . . . . . . . . 11
2.26 Real Property Holding Company. . . . . . . . . . . . . . . . . . . . . . 11
3. Representations and Warranties of the Investors . . . . . . . . . . . . . . . 11
3.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Purchase Entirely for Own Account. . . . . . . . . . . . . . . . . . . . 11
3.3 Disclosure of Information. . . . . . . . . . . . . . . . . . . . . . . . 12
3.4 Investment Experience. . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.5 Accredited Investor. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.6 Restricted Securities. . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.7 Further Limitations on Disposition . . . . . . . . . . . . . . . . . . . 12
3.8 Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4. California Commissioner of Corporations . . . . . . . . . . . . . . . . . . . 13
4.1 Corporate Securities Law . . . . . . . . . . . . . . . . . . . . . . . . 13
5. Conditions of Investors' Obligations at Closing . . . . . . . . . . . . . . . 14
5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 14
5.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.3 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . 14
(i)
<PAGE>
5.4 California Qualification . . . . . . . . . . . . . . . . . . . . . . . . 14
5.5 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.6 Opinion of Company Counsel . . . . . . . . . . . . . . . . . . . . . . . 14
5.7 Investors' Rights and Stock Restriction Agreements . . . . . . . . . . . 14
5.8 Restated Articles. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6. Conditions of the Company's Obligations at Closing. . . . . . . . . . . . . . 15
6.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 15
6.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.3 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . 15
6.4 California Qualification . . . . . . . . . . . . . . . . . . . . . . . . 15
6.5 Investors' Rights and Stock Restriction Agreement. . . . . . . . . . . . 15
6.6 Restated Articles. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.1 Survival of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.3 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.5 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.7 Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.9 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.11 Aggregation of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.12 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
SCHEDULE A - Schedule of Investors
EXHIBIT A - Restated Articles of Incorporation
EXHIBIT B - Schedule of Series A Preferred and Common
Shareholders
EXHIBIT C - Schedule of Series B Preferred
Shareholders
SCHEDULE OF EXCEPTIONS
(ii)
<PAGE>
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES C PREFERRED STOCK PURCHASE AGREEMENT is made as of the 28th day
of March, 1996, by and between Rubio's Restaurants, Inc., a California
corporation (the "Company"), and the investors listed on Schedule A hereto, each
of which is herein referred to as an "Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF SERIES C PREFERRED STOCK.
(a) The Company shall adopt and file with the Secretary of State
of California on or before the Closing (as defined below) Amended and Restated
Articles of Incorporation ("Restated Articles") in the form attached hereto as
EXHIBIT A.
(b) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally and not jointly, to purchase at the Closing and the
Company agrees to sell and issue to each Investor at the Closing, that number of
shares of the Company's Series C Preferred Stock set forth opposite each
Investor's name on SCHEDULE A hereto for the purchase price set forth thereon.
Such purchase shall be payable by Investor either by delivery to Company by
Investor of a check in the amount of the purchase price payable to the Company's
order (or by wire transfer of funds in such amount to the Company's designated
bank account).
1.2 CLOSING. The purchase and sale of the Series C Preferred Stock
shall take place at the offices of Brobeck, Phleger & Harrison, 550 West "C"
Street, Suite 1300, San Diego, California, at 10:00 A.M., on March 28, 1996, or
at such other time and place as the Company and Investors acquiring in the
aggregate more than half the shares of Series C Preferred Stock sold pursuant
hereto mutually agree upon orally or in writing (which time and place are
designated as the "Closing"). At the Closing the Company shall deliver to each
Investor a certificate representing the Series C Preferred Stock which such
Investor is purchasing against delivery to the Company by such Investor of a
check in the amount of the purchase price therefor payable to the Company's
order or by wire transfer of funds in such amount to the Company's designated
bank account.
1.3 SUBSEQUENT SALE OF SERIES C PREFERRED STOCK. To the extent that
less than 775,058 shares of Series C Preferred Stock are sold at the Closing,
the Company may sell any remaining shares of Series C Preferred Stock at a price
not less than $5.38126 per share to such other purchaser(s) as the Company's
Board of Directors shall select. Any purchaser in a subsequent closing
occurring within sixty days following the Closing shall execute a counterpart
signature page to this Agreement and Amendment Number Two to the Investors'
Rights Agreement, the Stock Restriction Agreement and any additional sales of
Series C
<PAGE>
Preferred Stock to Investors shall be deemed to be made hereunder. The sale of
any additional shares of Series C Preferred Stock under this Section 1.3
occurring within sixty days following the Closing shall not be subject to the
Investor's right of first offer contained in Section 2.4 of the Investors'
Rights Agreement dated February 1, 1995, as amended, or the Amendment Number Two
to the Investors' Rights Agreement to be executed contemporaneously with this
Agreement (collectively, the "Investors' Rights Agreement"); otherwise, such
shares shall be subject to the Investors' right of first offer under the
Investors' Rights Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Investor that, except as set forth on a Schedule
of Exceptions furnished to each Investor and special counsel for the Investors,
specifically identifying the relevant subparagraph hereof, which exceptions
shall be deemed to be representations and warranties as if made hereunder:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California and has all requisite corporate power and authority
to carry on its business as now conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on its business,
prospects, properties or financial condition.
2.2 CAPITALIZATION AND VOTING RIGHTS. The authorized capital of the
Company consists, or will consist prior to the Closing, of:
(i) PREFERRED STOCK. 3,917,026 shares of Preferred Stock (the
"Preferred Stock"), of which (a) 2,000,000 shares have been designated Series A
Preferred Stock of which 26,605 are to be redeemed concurrently with the
issuance of the Series C Preferred Shares with the result that 1,973,395 will be
issued and outstanding and are owned by the persons, and in the numbers
specified in EXHIBIT B hereto), (b) 1,092,026 shares of which have been
designated Series B Preferred Stock, of which 1,092,007 are currently issued and
outstanding; and (c) 825,000 shares of which have been designated Series C
Preferred Stock, none of which are currently issued or outstanding and up to
775,058 of which may be sold pursuant to this Agreement. The rights, privileges
and preferences of the Series C Preferred Stock will be as stated in the
Restated Articles attached hereto as EXHIBIT A.
(ii) COMMON STOCK. 6,082,974 shares of common stock ("Common
Stock"), of which 1,004,500 shares are issued and outstanding and are owned by
the persons, and in the numbers specified in EXHIBIT B hereto.
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<PAGE>
(iii) The outstanding shares of Common Stock have been issued in
accordance with the registration or qualification provisions of the Act (as
defined below) and any applicable state securities laws or pursuant to a valid
exemption therefrom.
(iv) Except for (A) the conversion privileges of the Series A
Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock
to be issued under this Agreement, (B) the rights provided in paragraph 2.4 of
the Investors' Rights Agreement dated February 1, 1995, which is attached hereto
as EXHIBIT B, (C) the rights provided in Amendment Number One to the Investors'
Rights Agreement dated of even date herewith, (D) the rights provided in that
certain Shareholders' Agreement among the current shareholders of the Company
and the Stock Restriction Agreement dated February 1, 1995 by and among the
Company, the Investors and current shareholders of the Company, (E) currently
authorized options to purchase 220,500 shares of Common Stock of which 121,460
have been granted to employees, and (F) warrants to purchase 50,000 shares of
Common Stock issued to Flemming & Lessard, Inc., there are not outstanding any
options, warrants, rights (including conversion or preemptive rights and rights
of first refusal) or agreements for the purchase or acquisition from the Company
of any shares of its capital stock. The Company is not a party or subject to
any agreement or understanding, and, to the Company's knowledge, there is no
agreement or understanding between any persons and/or entities, which affects or
relates to the voting or giving of written consents with respect to any security
or by a director of the Company.
2.3 SUBSIDIARIES. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association or
other business entity. The Company is not a participant in any joint venture,
partnership or similar arrangement.
2.4 AUTHORIZATION. All corporate action on the part of the Company,
its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, the Investors' Rights Agreement, and
any other agreement to which the Company is a party, the execution and delivery
of which is contemplated hereby (collectively, the "Ancillary Agreements"), the
performance of all obligations of the Company hereunder and thereunder and the
authorization, issuance (or reservation for issuance) and delivery of the Series
C Preferred Stock being sold hereunder and the Common Stock issuable upon
conversion of the Series C Preferred Stock has been taken or will be taken prior
to the Closing, and this Agreement, the Investors' Rights Agreement, and any
Ancillary Agreements constitute valid and legally binding obligations of the
Company, enforceable in accordance with their respective terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
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<PAGE>
performance, injunctive relief or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Investors' Rights
Agreement may be limited by applicable federal or state securities laws.
2.5 VALID ISSUANCE OF PREFERRED AND COMMON STOCK.
(a) The Series C Preferred Stock which is being purchased by the
Investors hereunder, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable and, based in part upon the representations
of the Investors in this Agreement, will be issued in compliance with all
applicable federal and state securities laws. The shares of Series C Preferred
Stock are being issued free of restrictions on transfer other than restrictions
on transfer set forth in this Agreement, the Investors' Rights Agreement or any
Ancillary Agreement and other than pursuant to federal or state securities laws.
The Common Stock issuable upon conversion of the Series C Preferred Stock
purchased under this Agreement has been duly and validly reserved for issuance
and, upon issuance in accordance with the terms of the Restated Articles of
Incorporation, shall be duly and validly issued, fully paid and nonassessable,
and issued in compliance with all applicable securities laws, as then in effect,
of the United States and each of the states whose securities laws govern the
issuance of any of the Series C Preferred Stock hereunder.
(b) The outstanding shares of Series A Preferred Stock, Series B
Preferred Stock, and Common Stock are all duly and validly authorized and
issued, fully paid and nonassessable, and were issued in compliance with all
applicable federal and state securities laws. The Common Stock issuable upon
conversion of the Series A Preferred Stock and Series B Preferred Stock will be
issued free of restrictions on transfer other than restrictions on transfer set
forth in this Agreement, the Investors' Rights Agreement, the Stock Restriction
Agreement or any Ancillary Agreement and other than pursuant to federal or state
securities laws.
2.6 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority on
the part of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement, except for (a) the filing of the
Restated Articles with the Secretary of State of the State of California, and
(b) the filing pursuant to Section 25102(f) of the California Corporate
Securities Law of 1968, as amended, and the rules thereunder, which filing will
be effected within 15 days of the sale of the Series C Preferred Stock
hereunder.
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<PAGE>
2.7 LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company which
questions the validity of this Agreement, the Investors' Rights Agreement or any
Ancillary Agreements, or the right of the Company to enter into any of them, or
to consummate the transactions contemplated hereby or thereby, or which might
result, either individually or in the aggregate, in any material adverse changes
in the assets, financial condition, business affairs or prospects of the
Company, financially or otherwise, taken as a whole or any change in the current
equity ownership of the Company. The foregoing includes, without limitation,
any action, suit, proceeding or investigation pending or threatened involving
the prior employment of any of the Company's employees, their use in connection
with the Company's business of any information or techniques allegedly
proprietary to any of their former employers, or their obligations under any
agreements with prior employers or negotiations by the Company with potential
investors in the Company or its proposed business. The Company is not a party
or subject to the provisions of any order, writ, injunction, judgment or decree
of any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
2.8 PROPRIETARY INFORMATION. Each key employee, officer and
consultant of the Company has executed an Employment Relationship and
Confidentiality Agreement in the form provided to special counsel to the
Investors. The Company, after reasonable investigation, is not aware that any
of its employees, officers or consultants are in violation thereof, and the
Company will use its best efforts to prevent any such violation.
2.9 PATENTS AND TRADEMARKS. The Company has sufficient title and
ownership of all patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, proprietary rights and processes necessary
for its business as now conducted and as proposed to be conducted without any
conflict with or infringement of the rights of others. There are no outstanding
options, licenses or agreements of any kind relating to the foregoing, nor is
the Company bound by or a party to any options, licenses or agreements of any
kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, proprietary rights and
processes of any other person or entity. The Company has not received any
communications alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary rights of
any other person or entity. The Company is not aware that any of its employees
is obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his
best efforts to promote the interests of the Company or
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<PAGE>
that would conflict with the Company's business as proposed to be conducted.
Neither the execution nor delivery of this Agreement, the Investors' Rights
Agreement and any Ancillary Agreements nor the carrying on of the Company's
business by the employees of the Company, nor the conduct of the Company's
business as proposed, will conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated. The
Company does not believe it is or will be necessary to utilize any inventions of
any of its employees (or people it currently intends to hire) made prior to
their employment by the Company.
2.10 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any provisions of its Articles of Incorporation (as
amended) or Bylaws or of any material provision of any instrument, judgment,
order, writ, decree, mortgage, indenture, agreement, lease or contract to which
it is a party or by which it is bound or, to its knowledge, of any provision of
federal or state statute, rule or regulation applicable to the Company. To the
Company's best knowledge, the other party or parties to such instruments,
mortgages, indentures, agreements, leases or contracts are not in default in any
material respect of any provisions contained therein. The execution, delivery
and performance of this Agreement, the Investors' Rights Agreement and any
Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby does not require the consent of any third party to, and will
not result in any such violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a default under any
such provision, instrument, judgment, order, writ, decree, mortgage, indenture,
agreement, lease or contract or an event which results in the creation of any
lien, charge or encumbrance upon any assets of the Company, or the suspension,
revocation, impairment, forfeiture or nonrenewal of any material permit,
license, authorization, or approval applicable to the Company, its business or
operations or any of its assets or properties.
2.11 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby and by
the Investors' Rights Agreement or any Ancillary Agreement, there are no
commitments, agreements, understandings or proposed transactions between the
Company and any of its officers, directors, affiliates or any affiliate thereof.
(b) There are no commitments, agreements, understandings,
instruments, contracts, proposed transactions, judgments, orders, writs or
decrees to which the Company is a party or by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $50,000, or (ii) the license of any patent, copyright,
trade secret or other proprietary right to or from the Company or
(iii) provisions restricting or affecting the development,
-6-
<PAGE>
manufacture or distribution of the Company's products or services.
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities individually in excess of $50,000 or, in the case of
indebtedness and/or liabilities individually less than $50,000, in excess of
$200,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under its
Articles of Incorporation (as amended) or Bylaws, which adversely affects its
business as now conducted or as proposed to be conducted, its properties or its
financial condition.
(f) The Company is not a party to any employment or consulting
agreements that are not terminable at will by the Company on no more than thirty
(30) days' notice without cost or liability to the Company.
2.12 RELATED-PARTY TRANSACTIONS. No employee, officer, or director
of the Company or member of his or her immediate family is indebted to the
Company, nor is the Company indebted (or committed to make loans or extend or
guarantee credit) to any of them. To the best of the Company's knowledge, none
of such persons has any direct or indirect ownership interest or act as an
officer or director in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation that competes with the Company, except that employees, officers or
directors of the Company and members of their immediate families may own not
more than 5% of the outstanding stock in publicly-traded companies that may
compete with the Company. Other than as a participant in Company benefit plans,
no form of compensation, remuneration or financial interest is due or promised
to any officer or director, or member of the immediate family of any officer or
director of the Company, for 1994, 1995 and 1996, except as set forth on the
Schedule of Exceptions. No officer or director, or member of the immediate
family of any officer or director, of the
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<PAGE>
Company has a direct or indirect financial interest in any material contract of
the Company.
2.13 PERMITS. The Company has all franchises, permits, licenses and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects or financial condition of the Company, taken as
a whole, and believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be conducted.
The Company is not in default in any material respect under any of such
franchises, permits, licenses or other similar authority.
2.14 ENVIRONMENTAL AND SAFETY LAWS. To the best of its knowledge,
the Company is not in violation of, and the Company has not received any
communications alleging that the Company has violated, or by conducting its
business as proposed, would violate any applicable statute, law or regulation
relating to the environment or occupational health and safety and, to the best
of its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation.
2.15 DISCLOSURE. The Company has fully provided each Investor with
all the information which such Investor has requested for deciding whether to
purchase the Series C Preferred Stock and all information which the Company
believes is reasonably necessary to enable such Investor to make such decision.
Neither this Agreement, the Investors' Rights Agreement and any Ancillary
Agreements nor any other statements or certificates made or delivered in
connection herewith or therewith contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
or therein not misleading.
2.16 REGISTRATION RIGHTS. Except as provided in the Investors'
Rights Agreement, the Company has not granted or agreed to grant any
registration rights, including piggyback rights, to any person or entity.
2.17 TITLE TO PROPERTY AND ASSETS. The Company owns its property and
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens which arise in the ordinary course of business and
do not materially impair the Company's ownership or use of such property or
assets. With respect to the property and assets it leases, the Company is in
compliance with such leases and, to the best of its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances, except such
encumbrances and liens which arise in the ordinary course of business and do not
materially impair the Company's use of such property or assets.
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<PAGE>
2.18 FINANCIAL STATEMENTS. The Company has delivered to each
Investor its audited financial statements (balance sheet, statements of
operations, retained earnings and of cash flows) at December 31, 1995 and for
the fiscal year then ended (the "Financial Statements"). The Financial
Statements are complete and correct in all material respects and accurately set
out and describe the financial condition and operating results of the Company as
of the date, and for the period, indicated therein. The Financial Statements
have been prepared in accordance with generally accepted accounting principles
("GAAP"). Except as set forth in the Financial Statements, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business subsequent to December 31, 1995, which in the
aggregate do not exceed Fifty Thousand Dollars ($50,000) and (ii) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under generally accepted accounting principles to be reflected in
the Financial Statements, which, in both cases, individually or in the
aggregate, are not material to the financial condition or operating results of
the Company. Except as disclosed in the Financial Statements, the Company is
not a guarantor or indemnitor of any indebtedness of any other person, firm or
corporation. The Company maintains and will continue to maintain a standard
system of accounting established and administered in accordance with generally
accepted accounting principles.
2.19 CHANGES. Since December 31, 1995, there has not been:
(a) any change in the assets, liabilities, financial condition
or operating results of the Company, except changes in the ordinary course of
business which have not been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results, prospects or business of the Company (as such
business is presently conducted and as it is proposed to be conducted);
(c) any waiver or compromise by the Company of a valuable right
or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and which is not material to the assets, properties,
financial condition, operating results or business of the Company (as such
business is presently conducted and as it is proposed to be conducted);
(e) any change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
subject;
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<PAGE>
(f) any material change in any compensation arrangement or
agreement with any employee; or
(g) to the Company's knowledge, any other event or condition of
any character which might materially and adversely affect the assets,
properties, financial condition, operating results or business of the Company
(as such business is presently conducted and as it is proposed to be conducted).
2.20 EMPLOYEE BENEFIT PLANS. The Company does not have any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974,
as amended.
2.21 TAX RETURNS, PAYMENTS AND ELECTIONS. The Company has filed all
tax returns and reports as required by law. These returns and reports are true
and correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith which are listed in
the Schedule of Exceptions. The provision for taxes of the Company is adequate
for taxes due or accrued as of the date thereof. The Company has not elected
pursuant to the Internal Revenue Code of 1986, as amended ("Code"), to be
treated as a Subchapter S corporation or a collapsible corporation pursuant to
Section 341(f) or Section 1362(a) of the Code, nor has it made any other
elections pursuant to the Code (other than elections which relate solely to
methods of accounting, depreciation or amortization) which would have a material
effect on the Company, its financial condition, its business as presently
conducted or proposed to be conducted or any of its properties or material
assets. The Company has never had a tax deficiency or tax audit and the Company
has made all withholdings for all income tax of its employees.
2.22 INSURANCE. The Company has in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed. The Company has in full force and effect
products liability and errors and omissions insurance in amounts customary for
companies similarly situated.
2.23 MINUTE BOOKS. The minute books of the Company, access to which
has been provided to the Investors, contain a complete summary of all meetings
of directors and shareholders and all actions by written consent without a
meeting of directors and shareholders since the time of incorporation and
reflect all transactions referred to in such minutes accurately in all material
respects.
2.24 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company,
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has sought to represent any of the employees, representatives or agents of the
Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees. The Company is not
aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, nor does the Company
have a present intention to terminate the employment of any of the foregoing.
Subject to general principles related to wrongful termination of employees, the
employment of each officer and employee of the Company is terminable at the will
of the Company.
2.25 MANUFACTURING AND MARKETING RIGHTS. The Company has not granted
rights to manufacture, produce, assemble, license, market or sell its products
to any other person and is not bound by any agreement that affects the Company's
exclusive rights to develop, manufacture, assemble, distribute and sell its
products.
2.26 REAL PROPERTY HOLDING COMPANY. The Company is not a real
property holding company within the meaning of the Internal Revenue Code Section
897.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor hereby
represents and warrants that:
3.1 AUTHORIZATION. This Agreement constitutes its valid and legally
binding obligation, enforceable in accordance with its terms.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
each Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Series C Preferred Stock to be received by such Investor and
the Common Stock issuable upon conversion thereof (collectively, the
"Securities") will be acquired for investment for such Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, each Investor (other than Rosewood Capital, L.P.) further
represents that such Investor does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Securities. Each
Investor represents that it has full power and authority to enter into this
Agreement.
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3.3 DISCLOSURE OF INFORMATION. Each Investor believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Securities. Each Investor further represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Securities. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 2 of this Agreement or the right of the Investors to
rely thereon.
3.4 INVESTMENT EXPERIENCE. Each Investor is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Securities.
If other than an individual, Investor also represents it has not been organized
for the purpose of acquiring the Securities.
3.5 ACCREDITED INVESTOR. Each Investor is an "accredited investor"
within the meaning of SEC Rule 501 of Regulation D, as presently in effect.
3.6 RESTRICTED SECURITIES. Each Investor understands that the
Securities it is purchasing are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act of 1933, as amended (the "Act"), only in certain limited
circumstances. In this connection, each Investor represents that it is familiar
with SEC Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
3.7 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, each Investor further agrees not to make
any disposition of all or any portion of the Securities unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3, provided and to the extent such sections are then applicable,
and the Investors' Rights Agreement and any applicable Ancillary Agreement and:
(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement or an exemption from such
Registration is available; or
(b)(i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably
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<PAGE>
requested by the Company, such Investor shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Act. It is
agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, or any legend on certificates representing the Securities pursuant to
Section 3.8 below, no such registration statement or opinion of counsel shall be
necessary for a transfer by an Investor which is a partnership to a partner of
such partnership or a retired partner of such partnership who retires after the
date hereof, or to the estate of any such partner or retired partner or the
transfer by gift, will or intestate succession of any partner to his spouse or
to the siblings, lineal descendants or ancestors of such partner or his spouse,
if the transferee agrees in writing to be subject to the terms hereof to the
same extent as if he were an original Investor hereunder.
3.8 LEGENDS. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY
STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE ACT, OR PURSUANT TO
RULE 144 UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT."
(b) Any legend required by the laws of the State of California,
including any legend required by the California Department of Corporations and
Sections 417 and 418 of the Code.
4. CALIFORNIA COMMISSIONER OF CORPORATIONS.
4.1 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
5. CONDITIONS OF INVESTORS' OBLIGATIONS AT CLOSING. The obligations of
each Investor under subsection 1.1(b) of this
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<PAGE>
Agreement are subject to the fulfillment on or before the Closing of each of the
following conditions, the waiver of which shall not be effective against any
Investor which does not consent thereto:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
5.2 PERFORMANCE. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to each Investor at the Closing a certificate certifying that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled and stating
that there shall have been no adverse change in the business, affairs,
operations, properties, assets or condition of the Company since December 31,
1995.
5.4 CALIFORNIA QUALIFICATION. The Commissioner of Corporations of
the State of California shall have issued a permit qualifying the offer and sale
of the Securities to the Investors pursuant to this Agreement, or such offer and
sale shall be exempt from such qualification under the California Corporate
Securities Law of 1968, as amended.
5.5 BOARD OF DIRECTORS. Immediately upon Closing, the board of
directors of the Company shall be comprised of Ralph Rubio, Rafael Rubio, Robert
Rubio and Kyle Anderson.
5.6 OPINION OF COMPANY COUNSEL. Each Investor shall have received
from Brobeck, Phleger & Harrison, counsel for the Company, an opinion, dated as
of the Closing, in form and substance satisfactory to the special counsel to the
Investors.
5.7 INVESTORS' RIGHTS AND STOCK RESTRICTION AGREEMENTS. The
Company, each Investor and the parties to the Investors' Rights Agreement shall
have entered into the Amendment Number Two to the Investors' Rights Agreement,
and the Company, each Investor and the holders of outstanding shares of the
Company's Common Stock and Series A Preferred Stock shall have entered into
Amendment Number One to the Stock Restriction Agreement.
5.8 RESTATED ARTICLES. The Restated Articles shall have been filed
with the Secretary of State of the State of California and shall be in full
force and effect on the Closing Date.
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<PAGE>
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Investor:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investor contained in Section 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.
6.2 PERFORMANCE. The Investors shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by them on or before the Closing.
6.3 PAYMENT OF PURCHASE PRICE. The Investors shall have delivered
the purchase price specified in Section 1.2.
6.4 CALIFORNIA QUALIFICATION. The Commissioner of Corporations of
the State of California shall have issued a permit qualifying the offer and sale
to the Investors of the Series C Preferred Stock and the Common Stock issuable
upon the conversion thereof or such offer and sale shall be exempt from such
qualification under the California Corporate Securities Law of 1968, as amended.
6.5 INVESTORS' RIGHTS AND STOCK RESTRICTION AGREEMENT. The Company,
each Investor and the parties to the Investor Rights Agreement shall have
entered into Amendment Number Two to the Investors' Rights Agreement and the
Company, each Investor and the holders of outstanding shares of the Company's
Common Stock and Series A Preferred Stock shall have entered into Amendment
Number One to the Stock Restriction Agreement.
6.6 RESTATED ARTICLES. The Restated Articles shall have been filed
with the Secretary of State of the State of California and shall be in full
force and effect on the Closing Date.
7. MISCELLANEOUS.
7.1 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.
-15-
<PAGE>
7.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Securities. Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.3 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
7.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.
7.7 FINDER'S FEE. Each party represents that it neither is nor will
be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, partners,
employees or representatives is responsible. The Company agrees to indemnify
and hold harmless each Investor from any liability for any commission or
compensation in the nature of a finders' fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.
7.8 EXPENSES. Irrespective of whether the Closing is effected, the
Company shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If the
Closing is effected, the Company shall, at the Closing, reimburse the reasonable
fees of a
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<PAGE>
single special counsel for the Investors hereunder (not to exceed $10,000 and
shall, upon receipt of a bill therefor, reimburse the out-of-pocket expenses of
such counsel. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement or the Restated Articles, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
7.9 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Series C Preferred Stock and the Common Stock issued or
issuable upon conversion of the Series C Preferred Stock. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any securities purchased under this Agreement at the time outstanding
(including securities into which such securities are convertible), each future
holder of all such securities and the Company.
7.10 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
7.11 AGGREGATION OF STOCK. All shares of Series C Preferred Stock
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
7.12 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
RUBIO'S RESTAURANTS, INC.
By: /s/ Ralph Rubio
------------------------------
Ralph Rubio, President
Address: 5151 Shoreham Place, Suite 260
San Diego, CA 92122
INVESTORS:
ROSEWOOD CAPITAL, L.P.
By: Rosewood Capital Associates, L.P.,
General Partner
By: /s/ [ILLEGIBLE]
-------------------------------
Address: One Maritime Plaza, Suite 1330
San Francisco, CA 94111
BROPHAR INVESTOR PARTNERS
By: /s/ Craig Andrews
------------------------------
General Partner
Address: c/o Craig Andrews,
Brobeck, Phleger & Harrison
550 West "C" Street, Suite 1200
San Diego, CA 92101
/s/ R. Alex Kaseberg
-----------------------------------
R. ALEX KASEBERG
Address:
[SIGNATURE PAGE TO
SERIES C PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
/s/ Tod Thoele
-----------------------------------
TOD THOELE
Address: 63 San Bernardino Avenue
Ventura, CA 93004
T. LARRY AND MARGARET EDDINGTON
/s/ T. Larry Eddington
-----------------------------------
T. Larry Eddington
/s/ Margaret Eddington
-----------------------------------
Margaret Eddington
Address: 3330 Dove Hollow Road
Olivenhain, CA 92024
/s/ George H. Adams, Jr.
-----------------------------------
GEORGE H. ADAMS, JR.
Address: 6045 Beaumont Avenue
La Jolla, CA 92037
/s/ John Brice
-----------------------------------
JOHN BRICE
Address: 1331 Park Row
La Jolla, CA 92037
UMB BANK, N.A., TRUSTEE OF THE BROBECK,
PHLEGER & HARRISON SAVINGS PLAN f/b/o
WILLIAM F. SULLIVAN
By: /s/ [ILLEGIBLE]
-------------------------------
Vice President
Address: 1010 Grand Avenue
P. O. Box 419692
Kansas City, MO 64141-0692
[SIGNATURE PAGE TO
SERIES C PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
UNITED MISSOURI BANK, N.A., TRUSTEE OF
THE BROBECK, PHLEGER & HARRISON SAVINGS
PLAN f/b/o TODD J. ANSON
By: /s/ [ILLEGIBLE]
-------------------------------
Vice President
Address: 1010 Grand Avenue
P. O. Box 419692
Kansas City, MO 64141-0692
/s/ Frank Holloway
-----------------------------------
FRANK O. HOLLOWAY
Address: 81 South Peak Drive
Laguna Niguel, CA 92677
/s/ James Stryker
-----------------------------------
JAMES STRYKER
Address: c/o Rubio's Restaurants, Inc.
5151 Shoreham Place, Suite 260
San Diego, CA 92122
/s/ Kim Lopdrup
-----------------------------------
KIM LOPDRUP
Address: One Tamarack Way
Sharon, MA 02067
PRUDENTIAL SECURITIES, CUSTODIAN FOR
FRANK O. HOLLOWAY, IRA
By:
--------------------------------
Address: 9255 Towne Centre Drive, Suite 800
San Diego, CA 92121
/s/ Kevin Shibuya
-----------------------------------
KEVIN SHIBUYA
Address: c/o Prudential Securities
9255 Towne Centre Drive, Suite 800
San Diego, CA 92121
[SIGNATURE PAGE TO
SERIES C PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
SCHEDULE A
SCHEDULE OF INVESTORS
Rosewood Capital, L.P.
George H. Adams, Jr.
John Brice
Todd Thoele
T. Larry Eddington &
Margaret Eddington
Frank O. Holloway
R. Alex Kaseberg
UMB Bank, n.a., Trustee of
the Brobeck, Phleger &
Harrison Savings Plan f/b/o
William F. Sullivan IRA
UMB Bank, n.a., Trustee of
the Brobeck, Phleger &
Harrison Savings Plan f/b/o
Todd J. Anson IRA
Brophar Investor Partners
James Stryker
Kin Lopdrup
Kevin Shibuya
<PAGE>
EXHIBIT A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
A-1
<PAGE>
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF RUBIO'S RESTAURANTS, INC.
a California Corporation
The undersigned RALPH RUBIO and RAFAEL RUBIO hereby certify that:
ONE: They are the duly elected and acting President and Secretary,
respectively, of said Corporation.
TWO: The Articles of Incorporation of said Corporation shall be amended and
restated to read in full as follows:
ARTICLE I
The name of this Corporation is RUBIO'S RESTAURANTS, INC.
ARTICLE II
The purpose of this Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
A. CLASSES OF STOCK. This Corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the Corporation is authorized to issue is Ten
Million (10,000,000) shares. Six Million Eighty Two Thousand Nine Hundred and
Seventy-Four (6,082,974) shares shall be Common Stock and Three Million Nine
Hundred Seventeen Thousand and Twenty-Six (3,917,026) shares shall be Preferred
Stock, of which Two Million (2,000,000) shares shall be Series A Preferred
Stock, One Million Ninety-Two Thousand and Twenty-Six (1,092,026) shares shall
be Series B Preferred Stock, and Eight Hundred Twenty Five Thousand (825,000)
shares shall be Series C Preferred Stock.
B. RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The rights,
preferences, restrictions and other matters relating to the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock are as follows:
1. DIVIDEND PROVISIONS.
(a) Subject to the rights of series of Preferred Stock which may
from time to time come into existence, holders of shares of Series B Preferred
Stock and Series C Preferred Stock shall be entitled to receive dividends, out
of any assets legally
<PAGE>
available therefor, prior and in preference to any declaration or payment of any
dividend (payable other than in Common Stock or other securities and rights
convertible into or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock of this Corporation) on the Series
A Preferred Stock or the Common Stock of this Corporation, at the rate of $0.26
per share of Series B Preferred Stock per annum and $0.43 per share on the
Series C Preferred Stock per annum (subject to appropriate adjustments for stock
splits, stock dividends, combinations or other recapitalizations) payable when,
as and if declared by the Board of Directors. Such dividends shall not be
cumulative.
(b) No distribution or dividend of cash or property shall be
paid on shares of Common Stock or Series A Preferred Stock unless a distribution
or dividend of the same amount per share (on an as-converted basis) is
simultaneously paid on both the shares of Series B Preferred Stock and the
shares of Series C Preferred Stock.
(c) No distribution or dividend of cash or property shall be
paid on shares of Common Stock unless a distribution or dividend of the same
amount per share (on an as-converted basis) is simultaneously paid on the shares
of Series A Preferred Stock.
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up
of this Corporation, either voluntary or involuntary, subject to the rights of
series of Preferred Stock which may from time to time come into existence, the
holders of Series B Preferred Stock and Series C Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of any of the
assets of this Corporation to the holders of Series A Preferred Stock or Common
Stock by reason of their ownership thereof, an amount per share equal to the sum
of (i) $3.20511 for each outstanding share of Series B Preferred Stock (subject
to appropriate adjustments for stock splits, stock dividends, combinations or
other recapitalizations and hereafter referred to as the "Original Series B
Issue Price"), plus declared but unpaid dividends and (ii) $5.38126 for each
outstanding share of Series C Preferred Stock (subject to appropriate
adjustments for stock splits, stock dividends, combinations or other
recapitalizations and hereafter referred to as the "Original Series C Issue
Price") plus declared but unpaid dividends and (iii) an amount equal to eight
percent (8%) compounded per annum on the Original Series B Issue Price and on
the Original Series C Issue Price calculated from the date of the initial
issuance and sale of shares of Series B Preferred Stock and Series C Preferred
Stock, respectively, and on declared but unpaid dividends from the date of
declaration through the effective date of the liquidation, dissolution or
winding up of this Corporation. If upon the occurrence of such event, the
assets and funds thus distributed among the holders of the Series B Preferred
Stock and Series C
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<PAGE>
Preferred Stock shall be insufficient to permit the payment to such holders of
the full aforesaid preferential amount, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among the holders of the Series B Preferred Stock and Series C Preferred Stock
in proportion to the amount of such stock owned by each such holder.
(b) Upon the completion of the distribution required by
subparagraph (a) of this Section 2, if assets remain in this Corporation the
holders of Series A Preferred Stock and Common Stock shall receive all of the
remaining assets of this Corporation. The entire assets and funds of the
Corporation legally available for distribution (after giving effect to the
distribution referred to in Section 2(a) hereof) shall be distributed ratably
among the holders of the Series A Preferred Stock and Common Stock in proportion
to the amount of such stock owned by each such holder (determined on an
as-converted basis).
(c) A consolidation or merger of this Corporation with or into
any other corporation or corporations, or a sale, conveyance or disposition of
all or substantially all of the assets of this Corporation or 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 (excluding
the issuance of up to 1,092,026 shares of Series B Preferred Stock and the
issuance of up to 825,000 shares of Series C Preferred Stock), shall be deemed
to be a liquidation, dissolution or winding up within the meaning of this
Section 2. The amount being distributed to the holders of capital stock upon
any such merger or consolidation shall be the cash or the value of the property,
rights or securities distributed to such holders by the acquiring person, firm
or other entity. The value of such property, rights or other securities shall
be determined in good faith by the Board of Directors of the Corporation.
3. REDEMPTION.
(a) The holders of a majority of the outstanding Series B and
Series C Preferred Stock ("Moving Investors") may request redemption of their
shares at any time on or after July 1, 2000 at a price equal to the greater (i)
of $3.20511 per share with respect to the Series B Preferred Stock and at a
price of $5.38126 with respect to the Series C Preferred Stock or (ii) the fair
market value of such shares ("Redemption Price"). If such request is made,
Corporation shall have the option to redeem all of the outstanding shares of
Series B and Series C Preferred Stock. The Corporation may pay the Redemption
Price in up to four equal annual installments commencing six months after
receipt of notice from the Moving Investors and on each anniversary date
thereafter; provided, however, that any balance due on all of the Redemption
Price shall be paid in full on or before January 1, 2004. If the Moving
Investors and the Corporation are unable to agree upon the Redemption Price and
are unable to agree upon the identity of a single business appraiser to value of
the Corporation, then the Moving Investors shall hire
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<PAGE>
one business appraiser experienced in restaurant valuations and Rubio's shall
hire a second business appraiser experienced in restaurant valuations. The two
business appraisers that have been selected shall select a third business
appraiser experienced in restaurant valuations. All three business appraisers
shall independently determine the value of the Corporation and render a written
appraisal ("Appraisal"). The Redemption Price shall be the average of the two
closest Appraisals. The cost of all of the business appraisers shall be borne
50% by the Corporation and 50% by the Moving Investors whose shares are
redeemed. Any deferred payments shall bear interest at the annual rate of prime
(the most favorable rate available to the Corporation for its borrowing from
time to time) plus 1%.
(b) With respect to any redemption to be conducted in
installments pursuant to subsection 3(a), the Corporation shall effect such
redemption pro rata according to the number of shares of Series B Preferred
Stock and Series C Preferred Stock held by each holder.
(c) At least 20 but no more than 60 days prior to the date fixed
for any redemption of Series B Preferred Stock and Series C Preferred Stock (the
"Redemption Date"), written notice shall be mailed, first class postage prepaid,
to each holder of record (at the close of business on the business day next
preceding the day on which notice is given) of the Series B and Series C
Preferred Stock as applicable to be redeemed, at the address last shown on the
records of this Corporation for such holder or given by the holder to this
Corporation for the purpose of notice or if no such address appears or is given
at the place where the principal executive office of this Corporation is
located, notifying such holder of the redemption to be effected, specifying the
number of shares to be redeemed from such holder, the Redemption Date, the
Series B Redemption Price and Series C Redemption Price as applicable, the place
at which payment may be obtained and the date on which such holder's Conversion
Rights (as hereinafter defined) as to such shares terminate and calling upon
such holder to surrender to this Corporation, in the manner and at the place
designated, his certificate or certificates representing the shares to be
redeemed (the "Redemption Notice"). Except as provided in subsection 3(d) and
except as prohibited by applicable California corporate law, on or after the
Redemption Date, each holder of Series B and Series C Preferred Stock as
applicable to be redeemed shall surrender to this Corporation the certificate or
certificates representing such shares, in the manner and at the place designated
in the Redemption Notice, and thereupon the Series B Redemption Price and the
Series C Redemption Price as applicable of such shares shall be payable to the
order of the person whose name appears on such certificate or certificates as
the owner thereof and each surrendered certificate shall be cancelled. In the
event less than all the shares represented by any such certificate are redeemed,
a new certificate shall be issued representing the unredeemed shares.
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<PAGE>
(d) From and after the Redemption Date, unless there shall have
been a default in payment of the Series B Redemption Price or the Series C
Redemption Price as applicable, all rights of the holders of such shares as
holders of Series B Preferred Stock to be redeemed on the Redemption Date
(except the right to receive the Series B Redemption Price and the Series C
Redemption Price as applicable including any interest due pursuant to subsection
3(a) upon surrender of their certificate or certificates) shall cease with
respect to such shares, and such shares shall not thereafter be transferred on
the books of this Corporation or be deemed to be outstanding for any purpose
whatsoever. If the funds of the Corporation legally available for redemption of
shares of Series B or Series C Preferred Stock on any Redemption Date are
insufficient to redeem the total number of shares of Series B or Series C
Preferred Stock to be redeemed on such date, those funds which are legally
available will be used to redeem the maximum possible number of such shares
ratably among the holders of such shares to be redeemed. Any shares of Series B
and Series C Preferred Stock not redeemed shall remain outstanding and entitled
to all the rights and preferences provided herein. At any time thereafter when
additional funds of the Corporation are legally available for the redemption of
the Series B and Series C Preferred Stock, such funds will immediately be used
to redeem the balance of the shares which the Corporation has become obligated
to redeem on any Redemption Date but which it has not redeemed.
4. CONVERSION. The holders of the Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock and shall have conversion rights
as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT.
i) Subject to subsection 4(c), each share of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share and prior to the close of business on any Redemption Date
as may have been fixed in any Redemption Notice with respect to such share, at
the office of this Corporation or any transfer agent for the particular series
of Preferred Stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing, with respect to Series A Preferred
Stock, $2.00 per share (subject to appropriate adjustments for stock splits,
stock dividends, combinations or other recapitalizations and hereafter referred
to as the "Original Series A Issue Price") or, with respect to Series B
Preferred Stock, the Original Series B Issue Price plus all declared but unpaid
dividends on such share of Series B Preferred Stock by the applicable Conversion
Price at the time in effect for such share or with respect to Series C Preferred
Stock, the Original Series C Issue Price plus all declared but unpaid dividends
on such share of Series C Preferred Stock by the applicable Conversion Price at
the time in effect for such share. The initial
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<PAGE>
Conversion Price per share for shares of Series A Preferred Stock shall be the
Original Series A Issue Price, the initial Conversion Price per share for shares
of Series B Preferred Stock shall be the Original Series B Issue Price and the
initial Conversion Price per share for share of Series C Preferred Stock shall
be the Original Series C Issue Price; provided, however, that the Conversion
Price for the Series A Preferred Stock, Series B Preferred Stock and the Series
C Preferred Stock shall be subject to adjustment as set forth in subsection
4(c).
ii) In the event of a call for redemption of any shares of
Series B or Series C Preferred Stock pursuant to Section 3 hereof, the
Conversion Rights shall terminate as to the shares designated for redemption at
the close of business on the Redemption Date, unless default is made in payment
of the Series B Redemption Price or the Series C Redemption Price as applicable,
in which case the Conversion Rights shall terminate on the date such Redemption
Price is paid in full for the Series B Preferred Stock and for the Series C
Preferred Stock, as applicable.
iii) Each share of Preferred Stock shall automatically be
converted into shares of Common Stock based on the Conversion Price at the time
in effect for such shares immediately upon the earlier of (A) the closing of the
Corporation's sale of its Common Stock in a bona fide, firm commitment
underwriting pursuant to a registration statement under the Securities Act of
1933, as amended (the "Securities Act"), in which the Corporation and any
selling shareholders receive not less than $15,000,000 aggregate net proceeds,
or (B) the date upon which the Corporation obtains the consent of the holders of
66 2/3% of the then outstanding shares of Series B Preferred Stock and Series C
Preferred Stock for conversion of the Preferred Stock into Common Stock.
(b) MECHANICS OF CONVERSION. Before any holder of Preferred
Stock shall be entitled to convert the same into shares of Common Stock, he
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of this Corporation or of any transfer agent for the particular series of
Preferred Stock and shall give written notice by mail, postage prepaid, to this
Corporation at its principal corporate office, of the election to convert the
same and shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. This Corporation
shall, as soon as practicable thereafter, issue and deliver at such office to
such holder of Preferred Stock or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares of Preferred Stock to be converted, 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
-6-
<PAGE>
Stock as of such date. If the conversion is in connection with an underwritten
offer of securities registered pursuant to the Securities Act, the conversion
may, at the option of any holder tendering Preferred Stock for conversion, be
conditioned upon the effectiveness of a registration statement under the
Securities Act and the closing of the sale and purchase of shares pursuant to
such offering, in which event the person(s) entitled to receive the Common Stock
issuable upon such conversion of the Preferred Stock shall not be deemed to have
converted such Preferred Stock until immediately prior to the closing of such
offering.
(c) CONVERSION PRICE ADJUSTMENTS OF PREFERRED STOCK. The
Conversion Price of the Series A Preferred Stock, the Series B Preferred Stock
and the Series C Preferred Stock shall be subject to adjustment from time to
time as follows:
i) A. Upon each issuance by the Corporation of any
Additional Stock (as defined below) after the date upon which any shares of
Series B Preferred Stock or the Series C Preferred Stock were first issued (the
"Purchase Date"), without consideration or for a consideration per share less
than the applicable Conversion Price for the Series B Preferred Stock in effect
immediately prior to the issuance of such Additional Stock, the applicable
Conversion Price for the Series B Preferred Stock and the Series C Preferred
Stock in effect immediately prior to each such issuance shall forthwith (except
as otherwise provided in this clause (i)) be adjusted to a price determined by
multiplying such Conversion Price by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of Common Stock which the aggregate
consideration received by the Corporation for such issuance would purchase at
such Conversion Price; and the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issuance plus the
number of shares of such Additional Stock.
B. No adjustment of the Conversion Price for the
Series B Preferred Stock or the Series C Preferred Stock shall be made in an
amount less than one cent per share, provided that any adjustments which are not
required to be made by reason of this sentence shall be carried forward and
shall be either taken into account in any subsequent adjustment made prior to
three (3) years from the date of the event giving rise to the adjustment being
carried forward, or shall be made at the end of three (3) years from the date of
the event giving rise to the adjustment being carried forward, whichever occurs
first. Except to the limited extent provided for in subsections (E)(3) and
(E)(4), no adjustment of such Conversion Price pursuant to this subsection
4(c)(i) shall have the effect of increasing the Conversion Price above the
Conversion Price in effect immediately prior to such adjustment.
C. In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or
-7-
<PAGE>
incurred by this Corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
D. In the case of the issuance of the Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined by the
Board of Directors irrespective of any accounting treatment.
E. In the case of the issuance (whether before, on or
after the Purchase Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply for all
purposes of this subsection 4(c)(i) and subsection 4(c)(ii):
1. The aggregate maximum number of shares of
Common Stock deliverable upon exercise (assuming the satisfaction of
any conditions to exercisability, including, without limitation, the
passage of time, but without taking into account potential
antidilution adjustments) of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal
to the consideration (determined in the manner provided in subsections
4(c)(i)(C) and (c)(i)(D)), if any, received by the Corporation upon
the issuance of such options or rights plus the exercise price
provided in such options or rights (without taking into account
potential antidilution adjustments) for the Common Stock covered
thereby.
2. The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange (assuming
the satisfaction of any conditions to convertibility or
exchangeability, including, without limitation, the passage of time,
but without taking into account potential antidilution adjustments)
for any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent conversion or
exchange thereof shall be deemed to have been issued at the time such
securities were issued or such options or rights were issued and for a
consideration equal to the consideration, if any, received by the
Corporation for any such securities and related options or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the additional consideration, if any, to be received
by the Corporation (without taking into account potential antidilution
adjustments) upon the conversion or
-8-
<PAGE>
exchange of such securities or the exercise of any related options or
rights (the consideration in each case to be determined in the manner
provided in subsections 4(c)(i)(C) and (c)(i)(D)).
3. In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to
this Corporation upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or exchangeable
securities, including, without limitation, a change resulting from the
antidilution provisions thereof, the Conversion Price of the
applicable Preferred Stock to the extent in any way affected by or
computed using such options, rights or securities, shall be recomputed
to reflect such change, but no further adjustment shall be made for
the actual issuance of Common Stock or any payment of such
consideration upon the exercise of any such options or rights or the
conversion or exchange of such securities.
4. Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the applicable Conversion Price of the
Preferred Stock to the extent in any way affected by or computed using
such options, rights or securities or options or rights related to
such securities, shall be recomputed to reflect the issuance of only
the number of shares of Common Stock (and convertible or exchangeable
securities which remain in effect) actually issued upon the exercise
of such options or rights, upon the conversion or exchange of such
securities or upon the exercise of the options or rights related to
such securities.
5. The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to
subsections 4(c)(i)(E)(1) and (2) shall be appropriately adjusted to
reflect any change, termination or expiration of the type described in
either subsection 4(c)(i)(E)(3) or (4).
ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 4(c)(i)(E))
by this Corporation after the Purchase Date other than
A. shares of Common Stock issued pursuant to a
transaction described in subsection 4(c)(iii) hereof,
B. shares of Common Stock issued upon conversion of
the applicable Preferred Stock,
-9-
<PAGE>
C. to employees, consultants or directors of this
Corporation, or to vendors, suppliers, customers or other persons or
organizations with which the Corporation has a commercial
relationship, at any time when the total number of shares of Common
Stock so issuable or issued (and not repurchased at cost by the
Corporation in connection with the termination of employment or the
commercial relationship) does not exceed 220,500 (subject to
appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations) subsequent to the Purchase
Date, or
D. shares of Common Stock issued or issuable (I) in a
public offering before or in connection with which all outstanding
shares of Preferred Stock will be converted to Common Stock or (II)
upon exercise of warrants or rights granted to underwriters in
connection with such a public offering, or
E. by way of dividend or other distribution on shares
excluded from the definition of Additional Stock by virtue of clauses
(A) through (D),
iii) In the event the Corporation should at any time or from
time to time after the Purchase Date fix a record date for the effectuation of a
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the applicable
Conversion Price of the Series A, Series B Preferred Stock or Series C Preferred
Stock shall be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of each share of such series shall be increased in
proportion to such increase of the aggregate of shares of Common Stock
outstanding and those issuable with respect to such Common Stock Equivalents.
iv) If the number of shares of Common Stock outstanding at
any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the applicable Conversion Price for the Series A, Series B
Preferred Stock or Series C Preferred Stock shall be appropriately increased so
that the number of shares of Common Stock issuable on conversion of
-10-
<PAGE>
each share of such series shall be decreased in proportion to such decrease in
outstanding shares.
(d) OTHER DISTRIBUTIONS. In the event this Corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this Corporation or other persons, or assets (excluding
cash dividends) or options or rights not referred to in subsection 4(c)(iii),
then, in each such case for the purpose of this subsection 4(d), the holders of
the Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the Corporation into which their shares of Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
(e) RECAPITALIZATIONS. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4), provision shall be made so that the holders of the Preferred
Stock shall thereafter be entitled to receive upon conversion of the Preferred
Stock, the number of shares of stock or other securities or property of the
Company or otherwise, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 4 with respect to the rights of the holders of the Preferred Stock
after the recapitalization to the end that the provisions of this Section 4
(including adjustment of the Conversion Price then in effect for each series and
the number of shares purchasable upon conversion of the Preferred Stock) shall
be applicable after that event as nearly equivalent as may be practicable.
(f) NO IMPAIRMENT. This Corporation shall not, by amendment of
its Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by this
Corporation, but shall at all times in good faith assist in the carrying out of
all the provisions of this Section 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Preferred Stock against impairment.
(g) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
i) No fractional shares shall be issued upon conversion of
the Preferred Stock and the number of shares of Common Stock to be issued shall
be rounded to the nearest whole share. Whether or not fractional shares are
issuable upon
-11-
<PAGE>
such conversion shall be determined on the basis of the total number of shares
of Preferred Stock the holder is at the time converting into Common Stock and
the number of shares of Common Stock issuable upon such aggregate conversion.
ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Preferred Stock pursuant to this Section 4, this
Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. This Corporation shall, upon the written request at any
time of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (A) such adjustment and readjustment,
(B) the applicable Conversion Price at the time in effect, and (C) the number of
shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of Preferred Stock.
(h) NOTICES OF RECORD DATE. In the event of any taking by this
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, 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, this
Corporation shall mail to each holder of Preferred Stock, at least 20 days prior
to the date specified therein, a notice specifying 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.
(i) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. This
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Preferred Stock, in addition to
such other remedies as shall be available to the holder of such Preferred Stock,
this Corporation shall take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.
(j) NOTICES. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder
-12-
<PAGE>
of record at his address appearing on the books of this Corporation.
5. VOTING RIGHTS.
(a) GENERAL VOTING RIGHTS. The holder of each share of the
Preferred Stock shall have the right to one vote for each share of Common Stock
into which such Preferred Stock could then be converted (with any fractional
share determined on an aggregate conversion basis being rounded to the nearest
whole share), and with respect to such vote, such holder shall have full voting
rights and powers equal to the voting rights and powers of the holders of Common
Stock, and shall be entitled, notwithstanding any provision hereof, to notice of
any shareholders' meeting in accordance with the Bylaws of this Corporation, and
shall be entitled to vote, together as a single class with holders of Common
Stock, with respect to any question upon which holders of Common Stock have the
right to vote, except for the election of directors as provided in Section 5(b)
below.
(b) ELECTION OF DIRECTORS. Notwithstanding 5(a) above, the
holders of Series C Preferred Stock and the holders of Series B Preferred Stock,
voting as a single class together, shall be entitled to elect one (1) director
of the Corporation. The holders of Series A Preferred Stock and Common Stock,
voting together as a class, shall be entitled to elect the remaining directors
of the Corporation. At any meeting held for the purpose of electing or
nominating directors, the presence in person or by proxy of the holders of a
majority of the Series B Preferred Stock then outstanding and a majority of the
Series C Preferred Stock then outstanding shall constitute a quorum of the
Series B and Series C Preferred Stock for the election or nomination of
directors to be elected or nominated solely by the holders of Series B and
Series C Preferred Stock voting together as a single class. A vacancy in any
directorship elected by the holders of Series B and Series C Preferred Stock
shall be filled only by vote of the holders of Series B and Series C Preferred
Stock.
6. PROTECTIVE PROVISIONS. Subject to the rights of series of
Preferred Stock which may from time to time come into existence, so long as
shares of Preferred Stock are outstanding, this Corporation shall not without
first obtaining the approval (by vote or written consent, as provided by law) of
the holders of at least a majority of the then outstanding shares of Series B
Preferred Stock and holders of at least a majority of the then outstanding
shares of Series C Preferred Stock, voting together as a single class:
(a) sell, convey, or otherwise dispose of or encumber (other
than pursuant to a credit arrangement in the ordinary course of business) all or
substantially all of its property or business or merge into or consolidate with
any other Corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which
-13-
<PAGE>
more than 50% of the voting power of the Corporation is disposed of or effect
any voluntary liquidation, dissolution or winding up of the Corporation or any
reorganization or recapitalization of the Corporation (any such event
hereinafter referred to as a "Corporate Transaction"); or
(b) alter or change the rights, preferences or privileges of the
shares of Series B Preferred Stock or Series C Preferred Shares so as to
adversely affect the shares; or
(c) create any new class or series of stock or any other
securities convertible into equity securities of the corporation having a
preference over, or being on a parity with, the Series B Preferred Stock or
Series C Preferred Stock with respect to voting, dividends or preferences upon
liquidation; or
(d) amend the Corporation's Articles of Incorporation; or
(e) amend the Corporation's Bylaws, including, without
limitation, any amendment to increase the authorized number of directors to more
than five; or
(f) repurchase shares of the Corporation's Common Stock or
Preferred Stock; or
(g) permit any subsidiary to issue stock to any entity other
than the Corporation.
7. STATUS OF CONVERTED OR REDEEMED STOCK. In the event any shares
of Preferred Stock shall be redeemed or converted pursuant to Section 3 or
Section 4 hereof, the shares so converted or redeemed shall be cancelled and
shall not be issuable by the Corporation. The Articles of Incorporation of this
Corporation shall be appropriately amended to effect the corresponding reduction
in the Corporation's authorized capital stock.
8. REPURCHASE OF SHARES. In connection with repurchases by this
Corporation of its Common Stock pursuant to its agreements with certain of the
holders thereof, Sections 502 and 503 of the California General Corporation Law
shall not apply in whole or in part with respect to such repurchases.
C. COMMON STOCK.
1. DIVIDEND RIGHTS. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the Corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
-14-
<PAGE>
2. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation shall be
distributed as provided in Section 2 of Division (B) of this Article III.
3. REDEMPTION. The Common Stock is not redeemable.
4. VOTING RIGHTS. The holder of each share of Common Stock shall
have the right to one vote, and shall be entitled to notice of any shareholders'
meeting in accordance with the Bylaws of this Corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law and
Section 5(b) of Division (B) of this Article III.
ARTICLE IV
A. The liability of the directors of this Corporation for monetary damages
for breach of fiduciary duties shall be eliminated to the fullest extent
permissible under California law.
B. This Corporation is authorized to indemnify the directors and officers
of this Corporation to the fullest extent permissible under California law.
C. This Corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) through bylaw
provisions, agreements with the agents, vote of shareholders or disinterested
directors, or otherwise in excess of the indemnification otherwise permitted by
Section 317 of the California Corporations Code, subject only to applicable
limits set forth in Section 204 of the California Corporations Code with respect
to actions for breach of duty to the Corporation and its shareholders.
D. Any amendment or repeal of this Article IV shall not reduce or
eliminate the effect of this Article IV with respect to actions taken prior to
such amendment or repeal.
* * *
THREE The foregoing amendment and restatement has been approved by the
Board of Directors of said Corporation.
FOUR The foregoing amendment and restatement of the articles of
incorporation was approved by the holders of the requisite number of shares of
said Corporation in accordance with Sections 902 and 903 of the California
Corporations Code; the total number of outstanding shares of each class entitled
to vote with respect to the foregoing amendment was 1,004,500 shares of Common
Stock, 2,000,000 shares of Series A Preferred Stock and 1,092,007 shares of
Series B Preferred Stock. The number of
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<PAGE>
shares voting in favor of the foregoing amendment equaled or exceeded the vote
required, such required vote being (i) more than fifty percent (50%) of the
Common Stock and Series A Preferred Stock voting together, (ii) more than 50% of
the Common Stock voting as a separate class, (iii) more than fifty percent (50%)
of the Series A Preferred Stock voting as a separate class, and (iv) more than
fifty percent (50%) of the Series B Preferred Stock voting as a separate class.
-16-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this certificate on March
22, 1996.
------------------------------------
Ralph Rubio, President
------------------------------------
Rafael Rubio, Secretary
The undersigned certify under penalty of perjury that they have read the
foregoing Restated Articles of Incorporation and know the contents thereof, and
that the statements therein are true.
Executed at San Diego, California, on March 22, 1996.
------------------------------------
Ralph Rubio, President
------------------------------------
Rafael Rubio, Secretary
[SIGNATURE PAGE TO AMENDED AND RESTATED
ARTICLES OF INCORPORATION]
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<PAGE>
EXHIBIT B
SCHEDULE OF COMMON AND SERIES A PREFERRED SHAREHOLDERS
<TABLE>
<CAPTION>
NAME SHARES
----- ------
<S> <C>
COMMON SHAREHOLDERS
- -------------------
Ralph Rubio and Dione Rubio as Trustees of
the Ralph Rubio and Dione Rubio Family Trust 400,000
Rafael Rubio 400,000
Robert L. Garcia and Gloria R. Garcia, as
Trustees of the Robert and Gloria Garcia Trust 50,000
Richard M. Rubio and Victoria E. Rubio as
Trustees or Successors of the Richard and
Victoria Rubio Trust 50,000
Robert Rubio as Trustee of the Robert Rubio Trust 50,000
Gloria Garcia as Trustee of the Trust FBO
Roman Rubio 50,000
Thomas Huppert 4,100
Kevin Kelly 300
Lisa Conder 100
----------
Total 1,004,500(1)
SERIES A PREFERRED SHAREHOLDERS
- -------------------------------
Ralph Rubio and Dione Rubio as Trustees of
the Ralph Rubio and Dione Rubio Family Trust 784,400
Rafael Rubio 784,400
Robert L. Garcia and Gloria R. Garcia, as
Trustees of the Robert and Gloria Garcia Trust 100,000
Richard M. Rubio and Victoria E. Rubio as
Trustees or Successors of the Richard and
Victoria Rubio Trust 100,000
Robert Rubio as Trustee of the Robert Rubio Trust 100,000
Gloria Garcia as Trustee of the Trust FBO
Roman Rubio 100,000
Dooling Family Trust dated December 8, 1988 31,200
----------
Total 2,000,000(2)
</TABLE>
- --------------------
(1) There are 50,000 warrants outstanding in favor of Flemming & Lessard, Inc.;
there is an authorized option pool remaining of 220,500 shares, of which
121,460 have been granted.
(2) Simultaneously with this Series C Preferred Stock issuance, the Company
will be repurchasing 26,605 Series A shares from Gloria Garcia, Trustee
<PAGE>
EXHIBIT C
SCHEDULE OF SERIES B PREFERRED SHAREHOLDERS
<TABLE>
<CAPTION>
Purchase Number
Name and Address Price of Shares
- ----------------------------------------- ------------------- ----------
<S> <C> <C>
Rosewood Capital, L.P. 936,005
Dooling Family Trust dated December 8,
1988 46,800
Brophar Investor Partners 29,641
Prudential Securities, Custodian for
Kevin L. Shibuya IRA 7,800
R. Alex Kaseberg 7,800
Tod Thoele 7,800
T. Larry Eddington and Margaret Eddington 7,800
George H. Adams, Jr. 7,800
John Brice 7,800
Prudential Securities, Custodian for
Frank O. Holloway IRA 3,120
Frank O. Holloway 4,680
UMB Bank, n.a., Trustee of the Brobeck,
Phleger & Harrison Retirement Savings
Plan f/b/o William F. Sullivan 7,800
UMB Bank, n.a., Trustee of the Brobeck,
Phleger & Harrison Retirement Savings
Plan f/b/o Todd J. Anson 7,800
UMB Bank, n.a., Trustee of the Brobeck,
Phleger & Harrison Retirement Savings
Plan f/b/o Craig S. Andrews 6,241
UMB Bank, n.a., Trustee of the Brobeck,
Phleger & Harrison Retirement Savings
Plan f/b/o John A. Denniston 1,560
UMB Bank, n.a., Trustee of the Brobeck,
Phleger & Harrison Retirement Savings
Plan f/b/o Jay De Groot 1,560
Total: 1,092,007
</TABLE>
C-1
<PAGE>
EXHIBIT 10.4
RUBIO'S RESTAURANTS, INC.
AMENDMENT NUMBER ONE TO THE
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
This Amendment No. 1 ("Amendment") to the Series C Preferred Purchase
Agreement dated as of March 28, 1996 (together, the "Agreement"), is made as of
this 30th day of June, 1996 by and among Rubio's Restaurants, Inc. a California
corporation (the "Company"), the investors listed on SCHEDULE A to the
Agreement, (the "Existing Series C Investors"), and the investors listed on
SCHEDULE A hereto (the "New Investors"). Capitalized terms used herein which
are not defined herein shall have the definitions ascribed to them in the
Agreement.
RECITALS
A. The Company desires to sell and issue to the New Investors, and the
New Investors desire to purchase from the Company, up to 18,582 shares of the
Company's Series C Preferred Stock pursuant to the Agreement.
B. The Existing Investors desire for the New Investors to invest in the
Company and, as a condition thereof and to induce such investment, the Existing
Investors are willing to enter into this Amendment to permit the New Investors
to become parties to the Agreement.
In consideration of the foregoing and the promises and covenants contained
herein and other good and valuable consideration the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. AMENDMENTS TO AGREEMENT.
Section 1.3 is hereby amended and shall read in its entirety as
follows:
1.3 SUBSEQUENT SALE OF SERIES C PREFERRED STOCK. To the
extent that less than 825,000 shares of Series C Preferred Stock
are sold at the Closing, the Company may sell any remaining
shares of Series C Preferred Stock at a price not less than
$5.38126 per share to such other purchaser(s) as the Company's
Board of Directors shall select, provided such sale is completed
on or before June 30, 1996 (the "Second Closing"). Any such
purchaser shall execute a counterpart signature page to this
Agreement, Amendment Number Two to the Investors' Rights
Agreement, and the Stock Restriction Agreement; and any
additional sales of Series C Preferred Stock to Investors shall
be deemed to be made hereunder. The sale of any additional
shares of Series C Preferred Stock under this Section 1.3
occurring on or before June 30, 1996 shall not be subject to the
Investor's right of
<PAGE>
first offer contained in Section 2.4 of the Investors' Rights
Agreement dated February 1, 1995, as amended, or the Amendment
Number Two to the Investors' Rights Agreement to be executed
contemporaneously with this Agreement (collectively, the
"Investors' Rights Agreement"); otherwise, such shares shall be
subject to the Investors' right of first offer under the
Investors' Rights Agreement.
2. EFFECT OF AMENDMENT. Except as amended and set forth above, the
Agreement shall continue in full force and effect.
3. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each which will be deemed an original, and all of which together
shall constitute one and the same instrument.
4. SEVERABILITY. If one or more provisions of this Amendment are held to
be unenforceable under applicable law, such provision shall be excluded from
this Amendment and the balance of the Amendment shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
5. ENTIRE AGREEMENT. This Amendment, together with the Agreement,
constitutes the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.
6. GOVERNING LAW. This Amendment shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-2-
<PAGE>
IN WITNESS WHEREOF, this Amendment is hereby executed as of the date first
above written.
COMPANY: RUBIO'S RESTAURANTS, INC.
a California corporation
By: /s/ Ralph Rubio
-------------------------------
Ralph Rubio, President
Address: 5151 Shoreham Place, Suite 260
San Diego, CA 92122
INVESTORS: ROSEWOOD CAPITAL, L.P.
By: Rosewood Capital Associates, L.P.,
General Partner
By: /s/ Kyle Anderson
-------------------------
General Partner
Address: One Maritime Plaza, Suite 1330
San Francisco, CA 94111
/s/ J. Richard Fredericks
-----------------------------------
J. Richard Fredericks
Address: 2395 Vallejo Street
San Francisco, CA 94123
/s/ Bruce Frazer
-----------------------------------
Bruce Frazer
Address: c/o Rubio's Restaurants, Inc.
5151 Shoreham Place, Suite 260
San Diego, CA 92122
[SIGNATURE PAGE TO AMENDMENT NUMBER ONE TO
SERIES C PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
SCHEDULE A
SCHEDULE OF SECOND CLOSING INVESTORS
<TABLE>
<CAPTION>
Number
Name Investment of Shares
- --------------------------- ------------------- ---------------
<S> <C> <C>
J. Richard Fredericks $49,997.29 9,291
Bruce Frazer $49,997.29 9,291
---------- ------
TOTAL: $99,994.58 18,582
</TABLE>
<PAGE>
EXHIBIT 10.5
RUBIO'S RESTAURANTS, INC.
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
--------------------------------------
November 19, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. Purchase and Sale of Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Sale and Issuance of Series D Preferred Stock. . . . . . . . . . . . . . 1
1.2 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Subsequent Sale of Series D Preferred Stock. . . . . . . . . . . . . . . 1
2. Representations and Warranties of the Company . . . . . . . . . . . . . . . . 2
2.1 Organization, Good Standing and Qualification. . . . . . . . . . . . . . 2
2.2 Capitalization and Voting Rights . . . . . . . . . . . . . . . . . . . . 2
2.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Valid Issuance of Preferred and Common Stock . . . . . . . . . . . . . . 3
2.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.8 Proprietary Information. . . . . . . . . . . . . . . . . . . . . . . . . 5
2.9 Patents and Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.10 Compliance with Other Instruments. . . . . . . . . . . . . . . . . . . . 5
2.11 Agreements; Action . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.12 Related-Party Transactions . . . . . . . . . . . . . . . . . . . . . . . 6
2.13 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.14 Environmental and Safety Laws. . . . . . . . . . . . . . . . . . . . . . 7
2.15 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.16 Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.17 Title to Property and Assets . . . . . . . . . . . . . . . . . . . . . . 7
2.18 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.19 Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.20 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.21 Tax Returns, Payments and Elections. . . . . . . . . . . . . . . . . . . 9
2.22 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.23 Minute Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.24 Labor Agreements and Actions . . . . . . . . . . . . . . . . . . . . . . 9
2.25 Manufacturing and Marketing Rights . . . . . . . . . . . . . . . . . . . 10
2.26 Real Property Holding Company. . . . . . . . . . . . . . . . . . . . . . 10
2.27 Reincorporation in Delaware. . . . . . . . . . . . . . . . . . . . . . . 10
3. Representations and Warranties of the Investors . . . . . . . . . . . . . . . 10
3.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2 Purchase Entirely for Own Account. . . . . . . . . . . . . . . . . . . . 10
3.3 Disclosure of Information. . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 Investment Experience. . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.5 Accredited Investor. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.6 Restricted Securities. . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.7 Further Limitations on Disposition . . . . . . . . . . . . . . . . . . . 11
3.8 Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE>
PAGE
4. California Commissioner of Corporations . . . . . . . . . . . . . . . . . . . 12
4.1 Corporate Securities Law . . . . . . . . . . . . . . . . . . . . . . . . 12
5. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.1 Board Observation Rights . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 Series D Director. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6. Conditions of Investors' Obligations at Closing.. . . . . . . . . . . . . . . 13
6.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 13
6.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.3 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.4 California Qualification . . . . . . . . . . . . . . . . . . . . . . . . 13
6.5 Opinion of Company Counsel . . . . . . . . . . . . . . . . . . . . . . . 13
6.6 Investors' Rights and Stock Restriction Agreements . . . . . . . . . . . 13
6.7 Restated Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7. Conditions of the Company's Obligations at Closing. . . . . . . . . . . . . . 14
7.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 14
7.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.3 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . 14
7.4 California Qualification . . . . . . . . . . . . . . . . . . . . . . . . 14
7.5 Investors' Rights and Stock Restriction Agreement. . . . . . . . . . . . 14
7.6 Restated Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.1 Survival of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.3 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.5 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.7 Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.9 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.11 Aggregation of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.12 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
SCHEDULE A - Schedule of Investors
SCHEDULE B - Schedule of Stockholders
EXHIBIT A - Amended and Restated Certificate of Incorporation
EXHIBIT B - Amended and Restated Investors' Rights Agreement
EXHIBIT C - Amended and Restated Stock Restriction Agreement
EXHIBIT D - Schedule of Exceptions
<PAGE>
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES D PREFERRED STOCK PURCHASE AGREEMENT is made as of the 19th day
of November, 1997, by and between Rubio's Restaurants, Inc., a Delaware
corporation (the "Company"), and the investors listed on Schedule A hereto, each
of which is herein referred to as an "Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF SERIES D PREFERRED STOCK.
(a) The Company shall adopt and file with the Secretary of State
of Delaware on or before the Closing (as defined below) an Amended and Restated
Certificate of Incorporation ("Restated Certificate") in the form attached
hereto as EXHIBIT A.
(b) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally and not jointly, to purchase at the Closing and the
Company agrees to sell and issue to each Investor at the Closing, that number of
shares of the Company's Series D Preferred Stock set forth opposite each
Investor's name on SCHEDULE A hereto for the purchase price set forth thereon.
Such purchase price shall be payable by Investor either by delivery to Company
by Investor of a check in the amount of the purchase price payable to the
Company's order (or by wire transfer of funds in such amount to the Company's
designated bank account).
1.2 CLOSING. The purchase and sale of at least 1,250,949 shares of
the Series D Preferred Stock shall take place at the offices of Brobeck, Phleger
& Harrison LLP, 550 West "C" Street, Suite 1300, San Diego, California, at 11:00
A.M., on November 19, 1997, or at such other time and place as the Company and
Investors acquiring in the aggregate more than half the shares of Series D
Preferred Stock sold pursuant hereto mutually agree upon orally or in writing
(which time and place are designated as the "Closing"). At the Closing the
Company shall deliver to each Investor a certificate representing the Series D
Preferred Stock which such Investor is purchasing against delivery to the
Company by such Investor of a check in the amount of the purchase price therefor
payable to the Company's order or by wire transfer of funds in such amount to
the Company's designated bank account.
1.3 SUBSEQUENT SALE OF SERIES D PREFERRED STOCK. To the extent that
at least 1,250,949 but less than 1,389,943 shares of Series D Preferred Stock
are sold at the Closing, the Company may sell within sixty days following the
Closing any remaining shares of Series D Preferred Stock at a price not less
than $7.19454 per share to such other purchaser(s) as the Company's Board of
Directors shall select. Any purchaser in a subsequent closing shall execute a
counterpart signature page to this Agreement, the Amended and Restated
Investors' Rights Agreement and the Amended and Restated Stock Restriction
Agreement, and any additional sales of Series D Preferred Stock to Investors
shall be deemed to be made hereunder. The sale of any additional shares of
Series D Preferred Stock under this Section
-1-
<PAGE>
1.3 occurring within sixty days following the Closing shall not be subject to
the right of first offer contained in Section 2.4 of the Amended and Restated
Investors' Rights Agreement to be executed contemporaneously with this
Agreement, which is attached hereto as EXHIBIT B (the "Investors' Rights
Agreement").
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Investor on the date of the Closing that, except
as set forth on a Schedule of Exceptions attached hereto as EXHIBIT D furnished
to each Investor and to special counsel for the Investors, specifically
identifying the relevant subparagraph hereof, which exceptions shall be deemed
to be representations and warranties as if made hereunder:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on its business,
prospects, properties or financial condition. The Company is the successor to
all of the business, assets, properties, rights, permits, licenses, approvals,
liabilities, and obligations of Rubio's Restaurants, Inc., a California
corporation.
2.2 CAPITALIZATION AND VOTING RIGHTS.
(a) The authorized capital of the Company consists, or will
consist prior to the Closing, of:
(i) PREFERRED STOCK. 5,248,985 shares of Preferred Stock,
$0.001 par value per share (the "Preferred Stock"), of which (a) 1,973,395
shares have been designated Series A Preferred Stock, all of which are currently
issued and outstanding; (b) 1,092,007 shares of which have been designated
Series B Preferred Stock, all of which are currently issued and outstanding; (c)
793,640 shares of which have been designated Series C Preferred Stock, all of
which are currently issued or outstanding; and (d) 1,389,943 shares of which
have been designated Series D Preferred Stock, none of which are currently
issued or outstanding and up to all of which may be sold pursuant to this
Agreement. The rights, privileges and preferences of the Series D Preferred
Stock will be as stated in the Restated Certificate attached hereto as
EXHIBIT A.
(ii) COMMON STOCK. 7,251,015 shares of common stock, $0.001
par value per share ("Common Stock"), of which 1,010,557 shares are issued and
outstanding.
(b) The outstanding shares of Common Stock have been issued in
accordance with the registration or qualification provisions of the Act (as
defined below) and any applicable state securities laws or pursuant to a valid
exemption therefrom.
(c) Except for (A) the conversion privileges of the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and
the Series D Preferred Stock to be issued under this Agreement, (B) the rights
provided in paragraph 2.4 of the
-2-
<PAGE>
Investors' Rights Agreement, (C) currently authorized options to purchase
325,000 shares of Common Stock of which 233,747 (10,557 of which have been
exercised) have been granted to employees, and (D) warrants to purchase 50,000
shares of Common Stock issued to Flemming & Lessard, Inc., there are not
outstanding any options, warrants, rights (including conversion or preemptive
rights and rights of first refusal) or agreements for the purchase or
acquisition from the Company of any shares of its capital stock. The Company is
not a party or subject to any agreement or understanding, and, to the Company's
knowledge, there is no agreement or understanding between any persons and/or
entities, which affects or relates to the voting or giving of written consents
with respect to any security or by a director of the Company.
(d) All of the shares of capital stock of the Company are owned
of record by the persons and in the amounts set forth on SCHEDULE B and were
purchased for the purchase price set forth thereon.
2.3 SUBSIDIARIES. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association or
other business entity. The Company is not a participant in any joint venture,
partnership or similar arrangement.
2.4 AUTHORIZATION. All corporate action on the part of the Company,
its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement, the Investors' Rights Agreement, the
Amended and Restated Stock Restriction Agreement dated of even date herewith and
attached hereto as EXHIBIT C (the "Stock Restriction Agreement") and any other
agreement to which the Company is a party, the execution and delivery of which
is contemplated hereby (collectively, the "Ancillary Agreements"), the
performance of all obligations of the Company hereunder and thereunder and the
authorization, issuance (or reservation for issuance) and delivery of the Series
D Preferred Stock being sold hereunder and the Common Stock issuable upon
conversion of the Series D Preferred Stock has been taken or will be taken prior
to the Closing, and this Agreement, the Investors' Rights Agreement, the Stock
Restriction Agreement and any Ancillary Agreements constitute valid and legally
binding obligations of the Company, enforceable in accordance with their
respective terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Investors' Rights Agreement may be limited by applicable federal or state
securities laws.
2.5 VALID ISSUANCE OF PREFERRED AND COMMON STOCK.
(a) The Series D Preferred Stock which is being purchased by the
Investors hereunder, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable and, based in part upon the representations
of the Investors in this Agreement, will be issued in compliance with all
applicable federal and state securities laws. The shares of Series D Preferred
Stock are being issued free of restrictions on transfer other than restrictions
on transfer set forth in this Agreement, the Investors' Rights Agreement, the
Stock
-3-
<PAGE>
Restriction Agreement or any Ancillary Agreement and other than pursuant to
federal or state securities laws. The Common Stock issuable upon conversion of
the Series D Preferred Stock purchased under this Agreement has been duly and
validly reserved for issuance and, upon issuance in accordance with the terms of
the Restated Certificate, shall be duly and validly issued, fully paid and
nonassessable, and issued in compliance with all applicable securities laws, as
then in effect, of the United States and each of the states whose securities
laws govern the issuance of any of the Series D Preferred Stock hereunder.
(b) The outstanding shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Common Stock are all duly and
validly authorized and issued, fully paid and nonassessable, and were issued in
compliance with all applicable federal and state securities laws. The Common
Stock issuable upon conversion of the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock will be issued free of restrictions
on transfer other than restrictions on transfer set forth in this Agreement, the
Investors' Rights Agreement, the Stock Restriction Agreement or any Ancillary
Agreement and other than pursuant to federal or state securities laws.
2.6 CONSENTS. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state, local or provincial governmental authority or any other person
or entity on the part of the Company is required in connection with the
consummation of the transactions contemplated by this Agreement, except for (a)
the filing of a Restated Certificate with the Secretary of State of the State of
Delaware, and (b) the filing pursuant to Section 25102(f) of the California
Corporate Securities Law of 1968, as amended, and the rules thereunder, which
filing will be effected within 15 days of the sale of the Series D Preferred
Stock hereunder.
2.7 LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company which
questions the validity of this Agreement, the Investors' Rights Agreement, the
Stock Restriction Agreement or any Ancillary Agreements, or the right of the
Company to enter into any of them, or to consummate the transactions
contemplated hereby or thereby, or which might result, either individually or in
the aggregate, in any material adverse changes in the assets, financial
condition, business affairs or prospects of the Company, financially or
otherwise, taken as a whole or any change in the current equity ownership of the
Company. The foregoing includes, without limitation, any action, suit,
proceeding or investigation pending or threatened involving the prior employment
of any of the Company's employees, their use in connection with the Company's
business of any information or techniques allegedly proprietary to any of their
former employers, or their obligations under any agreements with prior employers
or negotiations by the Company with potential investors in the Company or its
proposed business. The Company is not a party or subject to the provisions of
any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality. There is no action, suit, proceeding or
investigation by the Company currently pending or which the Company intends to
initiate.
2.8 PROPRIETARY INFORMATION. Each key employee, officer and
consultant of the Company has executed an Employment Relationship and
Confidentiality Agreement in the form provided to special counsel to the
Investors. The Company, after reasonable
-4-
<PAGE>
investigation, is not aware that any of its employees, officers or consultants
are in violation thereof, and the Company will use its best efforts to prevent
any such violation.
2.9 PATENTS AND TRADEMARKS. The Company has sufficient title and
ownership of all patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, proprietary rights and processes necessary
for its business as now conducted and as proposed to be conducted without any
conflict with or infringement of the rights of others. There are no outstanding
options, licenses or agreements of any kind relating to the foregoing, nor is
the Company bound by or a party to any options, licenses or agreements of any
kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, proprietary rights and
processes of any other person or entity. The Company has not received any
communications alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary rights of
any other person or entity. The Company is not aware that any of its employees
is obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his or
her best efforts to promote the interests of the Company or that would conflict
with the Company's business as proposed to be conducted. Neither the execution
nor delivery of this Agreement, the Investors' Rights Agreement, the Stock
Restriction Agreement and any Ancillary Agreements nor the carrying on of the
Company's business by the employees of the Company, nor the conduct of the
Company's business as proposed, will conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated. The
Company does not believe it is or will be necessary to utilize any inventions of
any of its employees (or people it currently intends to hire) made prior to
their employment by the Company.
2.10 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any provisions of its Restated Certificate or Bylaws or
of any material provision of any instrument, judgment, order, writ, decree,
mortgage, indenture, agreement, lease or contract to which it is a party or by
which it is bound or, to its knowledge, of any provision of federal or state
statute, rule or regulation applicable to the Company. To the Company's best
knowledge, the other party or parties to such instruments, mortgages,
indentures, agreements, leases or contracts are not in default in any material
respect of any provisions contained therein. The execution, delivery and
performance of this Agreement, the Investors' Rights Agreement, the Stock
Restriction Agreement and any Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby does not require the consent of any
third party to, and will not result in any such violation or be in conflict with
or constitute, with or without the passage of time and giving of notice, either
a default under any provision, instrument, judgment, order, writ, decree,
mortgage, indenture, agreement, lease or contract, or an event which results in
the creation of any lien, charge or encumbrance upon any assets of the Company,
or the suspension, revocation, impairment, forfeiture or nonrenewal of any
material permit, license, authorization, or approval applicable to the Company,
its business or operations or any of its assets or properties.
-5-
<PAGE>
2.11 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby and by
the Investors' Rights Agreement, Stock Restriction Agreement or any Ancillary
Agreement, there are no commitments, agreements, understandings or proposed
transactions between the Company and any of its officers, directors, affiliates
or any affiliate thereof.
(b) There are no commitments, agreements, understandings,
instruments, contracts, proposed transactions, judgments, orders, writs or
decrees to which the Company is a party or by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $50,000, or (ii) the license of any patent, copyright,
trade secret or other proprietary right to or from the Company or
(iii) provisions restricting or affecting the development, manufacture or
distribution of the Company's products or services.
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities individually in excess of $50,000 or, in the case of
indebtedness and/or liabilities individually less than $50,000, in excess of
$200,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under its
Restated Certificate or Bylaws, which adversely affects its business as now
conducted or as proposed to be conducted, its properties or its financial
condition.
(f) The Company is not a party to any employment or consulting
agreements that are not terminable at will by the Company on no more than thirty
(30) days' notice without cost or liability to the Company.
2.12 RELATED-PARTY TRANSACTIONS. No employee, officer, or director or
stockholder of the Company or member of his or her immediate family is indebted
to the Company, nor is the Company indebted (or committed to make loans or
extend or guarantee credit) to any of them. To the best of the Company's
knowledge, none of such persons has any direct or indirect ownership interest or
serves as an officer or director in any firm or corporation with which the
Company is affiliated or with which the Company has a business relationship, or
any firm or corporation that competes with the Company, except that employees,
officers or directors of the Company and members of their immediate families
-6-
<PAGE>
may own not more than 5% of the outstanding stock in publicly-traded companies
that may compete with the Company. Other than as a participant in Company
benefit plans, no form of compensation, remuneration or financial interest is
due or promised to any officer or director, or member of the immediate family of
any officer or director of the Company, for 1995, 1996 and 1997, except as set
forth on the Schedule of Exceptions. No officer or director, or member of the
immediate family of any officer or director, of the Company has a direct or
indirect financial interest in any material contract of the Company.
2.13 PERMITS. The Company has all franchises, permits, licenses and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects or financial condition of the Company, taken as
a whole, and believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be conducted.
The Company is not in default in any material respect under any of such
franchises, permits, licenses or other similar authority.
2.14 ENVIRONMENTAL AND SAFETY LAWS. To the best of its knowledge, the
Company is not in violation of, and the Company has not received any
communications alleging that the Company has violated, or by conducting its
business as proposed, would violate any applicable statute, law or regulation
relating to the environment or occupational health and safety and, to the best
of its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation.
2.15 DISCLOSURE. The Company has fully provided each Investor with
all the information which such Investor has requested for deciding whether to
purchase the Series D Preferred Stock and all information which the Company
believes is reasonably necessary to enable such Investor to make such decision.
Neither this Agreement, the Investors' Rights Agreement, the Stock Restriction
Agreement and any Ancillary Agreements nor any other statements or certificates
made or delivered in connection herewith or therewith contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements herein or therein not misleading.
2.16 REGISTRATION RIGHTS. Except as provided in the Investors' Rights
Agreement, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
2.17 TITLE TO PROPERTY AND ASSETS. The Company owns its property and
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens which arise in the ordinary course of business and
do not materially impair the Company's ownership or use of such property or
assets. With respect to the property and assets it leases, the Company is in
compliance with such leases and, to the best of its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances, except such
encumbrances and liens which arise in the ordinary course of business and do not
materially impair the Company's use of such property or assets.
2.18 FINANCIAL STATEMENTS. The Company has made available to each
Investor its audited financial statements (balance sheet and statements of
operations, retained
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earnings and cash flows) at December 31, 1996 and for the fiscal year then ended
and its unaudited financial statements (balance sheet and statements of
operations, retained earnings and cashflows) as at and for the nine-month period
ended September 30, 1997 (the "Financial Statements"). The Financial Statements
are complete and correct in all material respects and accurately set out and
describe the financial condition and operating results of the Company as of the
date, and for the period, indicated therein. The Financial Statements have been
prepared in accordance with generally accepted accounting principles ("GAAP").
Except as set forth in the Financial Statements, the Company has no liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to September 30, 1997, which in the aggregate do
not exceed $50,000 and (ii) obligations under contracts and commitments incurred
in the ordinary course of business and not required under generally accepted
accounting principles to be reflected in the Financial Statements, which, in
both cases, individually or in the aggregate, are not material to the financial
condition or operating results of the Company. Except as disclosed in the
Financial Statements, the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation. The Company maintains
and will continue to maintain a standard system of accounting established and
administered in accordance with generally accepted accounting principles.
2.19 CHANGES. Since September 30, 1997, there has not been:
(a) any change in the assets, liabilities, financial condition
or operating results of the Company, except changes in the ordinary course of
business which have not been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results, prospects or business of the Company (as such
business is presently conducted and as it is proposed to be conducted);
(c) any waiver or compromise by the Company of a valuable right
or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and which is not material to the assets, properties,
financial condition, operating results or business of the Company (as such
business is presently conducted and as it is proposed to be conducted);
(e) any change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
subject;
(f) any material change in any compensation arrangement or
agreement with any employee; or
(g) to the Company's knowledge, any other event or condition of
any character which might materially and adversely affect the assets,
properties, financial
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<PAGE>
condition, operating results or business of the Company (as such business is
presently conducted and as it is proposed to be conducted).
2.20 EMPLOYEE BENEFIT PLANS. The Company does not have any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974,
as amended.
2.21 TAX RETURNS, PAYMENTS AND ELECTIONS. The Company has filed all
tax returns and reports as required by law. These returns and reports are true
and correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith which are listed in
the Schedule of Exceptions. The provision for taxes of the Company is adequate
for taxes due or accrued as of the date thereof. The Company has not elected
pursuant to the Internal Revenue Code of 1986, as amended ("Code"), to be
treated as a Subchapter S corporation or a collapsible corporation pursuant to
Section 341(f) or Section 1362(a) of the Code, nor has it made any other
elections pursuant to the Code (other than elections which relate solely to
methods of accounting, depreciation or amortization) which would have a material
effect on the Company, its financial condition, its business as presently
conducted or proposed to be conducted or any of its properties or material
assets. The Company has never had a tax deficiency or tax audit and the Company
has made all withholdings for all income taxes of its employees.
2.22 INSURANCE. The Company has in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed. The Company has in full force and effect
products liability and errors and omissions insurance in amounts customary for
companies similarly situated.
2.23 MINUTE BOOKS. The minute books of the Company, access to which
has been provided to the Investors, contain a complete summary of all meetings
of directors and stockholders and all actions by written consent without a
meeting of directors and stockholders since the time of inception and reflect
all transactions referred to in such minutes accurately in all material
respects.
2.24 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees. The Company is not
aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, nor does the Company
have a present intention to terminate the employment of any of the foregoing.
Subject to general principles related to wrongful termination of employees, the
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<PAGE>
employment of each officer and employee of the Company is terminable at the will
of the Company.
2.25 MANUFACTURING AND MARKETING RIGHTS. The Company has not granted
rights to manufacture, produce, assemble, license, market or sell its products
to any other person and is not bound by any agreement that affects the Company's
exclusive rights to develop, manufacture, assemble, distribute and sell its
products.
2.26 REAL PROPERTY HOLDING COMPANY. The Company is not a real
property holding company within the meaning of the Internal Revenue Code Section
897.
2.27 REINCORPORATION IN DELAWARE. The merger of Rubio's Restaurants,
Inc., a California corporation, into the Company did not have a material adverse
effect on the business prospects and financial condition of the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor hereby
represents and warrants that:
3.1 AUTHORIZATION. This Agreement constitutes its valid and legally
binding obligation, enforceable in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally, and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
each Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Series D Preferred Stock to be received by such Investor and
the Common Stock issuable upon conversion thereof (collectively, the
"Securities") will be acquired for investment for such Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, each Investor further represents that such Investor does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Securities. Each Investor represents that it has
full power and authority to enter into this Agreement.
3.3 DISCLOSURE OF INFORMATION. Each Investor believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Securities. Each Investor further represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Securities. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 2 of this Agreement or the right of the Investors to
rely thereon.
3.4 INVESTMENT EXPERIENCE. Each Investor is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can
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<PAGE>
bear the economic risk of its investment and has such knowledge and experience
in financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Securities. If other than an individual,
Investor also represents it has not been organized for the purpose of acquiring
the Securities.
3.5 ACCREDITED INVESTOR. Each Investor is an "accredited investor"
within the meaning of SEC Rule 501 of Regulation D, as presently in effect.
3.6 RESTRICTED SECURITIES. Each Investor understands that the
Securities it is purchasing are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act of 1933, as amended (the "Act"), only in certain limited
circumstances. In this connection, each Investor represents that it is familiar
with SEC Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
3.7 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, each Investor further agrees not to make
any disposition of all or any portion of the Securities unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3, provided and to the extent such sections are then applicable,
and the Investors' Rights Agreement, the Stock Restriction Agreement and any
applicable Ancillary Agreement and:
(a) There is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement or an exemption from such
registration is available; or
(b)(i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, or any legend on certificates representing the Securities pursuant to
Section 3.8 below, no such registration statement or opinion of counsel shall be
necessary for a transfer (i) by an Investor to any person or entity that,
directly or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such Investor or (ii) by an
Investor which is a partnership to a partner of such partnership or a retired
partner of such partnership who retires after the date hereof, or to the estate
of any such partner or retired partner or the transfer by gift, will or
intestate succession of any partner to his spouse or to the siblings, lineal
descendants or ancestors of such partner or his spouse, if the transferee agrees
in writing to be subject to the terms hereof to the same extent as if he were an
original Investor hereunder.
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<PAGE>
3.8 LEGENDS. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY
STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE ACT, OR PURSUANT TO
RULE 144 UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT."
(b) Any legend required by the laws of any state.
4. CALIFORNIA COMMISSIONER OF CORPORATIONS.
4.1 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
5. COVENANTS.
5.1 BOARD OBSERVATION RIGHTS. For so long as Farallon Capital
Management LLC ("Farallon") and any parties controlling, controlled by or under
common control with Farallon hold at least 750,000 shares of the Company's
Series D Preferred Stock, and in the event that a director elected by a majority
of the holders of the Series D Preferred Stock is not serving on the Company's
Board of Directors, the Company shall permit a representative of Farallon
reasonably acceptable to the Company's Board of Directors to attend as an
observer all meetings of the Company's Board of Directors and to receive all
written materials and other information given to directors in connection with
such meetings; provided, however, that such representative shall have entered
into the Company's standard confidentiality agreement prior to attending any
meetings of the Board of Directors or receiving any written materials in
connection with such meetings.
5.2 SERIES D DIRECTOR. The Investors agree that any nominee of the
holders of Series D Preferred Stock to serve as the director to be elected by
the holders of Series D Preferred Stock as contemplated in Section 5(b) of
Article VI of the Restated Certificate shall be approved by the majority of the
Company's Board of Directors, which approval will not be unreasonably withheld,
prior to election.
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<PAGE>
6. CONDITIONS OF INVESTORS' OBLIGATIONS AT CLOSING. The obligations of
each Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor which does not
consent thereto:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
6.2 PERFORMANCE. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
6.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to each Investor at the Closing a certificate certifying that the
conditions specified in Sections 6.1 and 6.2 have been fulfilled and stating
that there shall have been no material adverse change in the business, affairs,
operations, properties, assets or condition of the Company since September 30,
1997.
6.4 CALIFORNIA QUALIFICATION. The Commissioner of Corporations of
the State of California shall have issued a permit qualifying the offer and sale
of the Securities to the Investors pursuant to this Agreement, or such offer and
sale shall be exempt from such qualification under the California Corporate
Securities Law of 1968, as amended.
6.5 OPINION OF COMPANY COUNSEL. Each Investor shall have received
from Brobeck, Phleger & Harrison LLP, counsel for the Company, an opinion, dated
as of the Closing, in form and substance satisfactory to the special counsel to
the Investors.
6.6 INVESTORS' RIGHTS AND STOCK RESTRICTION AGREEMENTS. The Company
and each Investor shall have entered into the Investors' Rights Agreement, and
the Company, each Investor and a majority of the holders of outstanding shares
of the Company's Common Stock, Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock shall have entered into the Stock Restriction
Agreement.
6.7 RESTATED CERTIFICATE. The Restated Certificate shall have been
filed with the Secretary of State of the State of Delaware and shall be in full
force and effect on the Closing Date.
7. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Investor:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investor contained in Section 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.
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<PAGE>
7.2 PERFORMANCE. The Investors shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by them on or before the Closing.
7.3 PAYMENT OF PURCHASE PRICE. The Investors shall have delivered
the purchase price specified in Section 1.2.
7.4 CALIFORNIA QUALIFICATION. The Commissioner of Corporations of
the State of California shall have issued a permit qualifying the offer and sale
to the Investors of the Series D Preferred Stock and the Common Stock issuable
upon the conversion thereof or such offer and sale shall be exempt from such
qualification under the California Corporate Securities Law of 1968, as amended.
7.5 INVESTORS' RIGHTS AND STOCK RESTRICTION AGREEMENT. The Company
and each Investor shall have entered into the Investors' Rights Agreement and
the Company, each Investor and a majority of the holders of outstanding shares
of the Company's Common Stock, Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock shall have entered into the Stock Restriction
Agreement.
7.6 RESTATED CERTIFICATE. The Restated Certificate shall have been
filed with the Secretary of State of the State of Delaware and shall be in full
force and effect on the Closing Date.
8. MISCELLANEOUS.
8.1 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.
8.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Securities). Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
8.3 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
8.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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<PAGE>
8.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.6 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be sent to
the address/fax number indicated for such party on the signature page hereof
(provided that any party may at any time change its address/fax number for
notice by ten (10) days' advance written notice to the other parties), and shall
be deemed effectively given upon (i) personal delivery to the party to be
notified, (ii) the time of successful facsimile transmission to the party to be
notified, (iii) sending by reputable overnight delivery service or (iv) three
(3) days after deposit with the United States Post Office, by registered or
certified mail.
8.7 FINDER'S FEE. Except for fees owed to Montgomery Securities for
its services acting as the placement agent in connection with the sale of
securities contemplated by this Agreement, for which the Company shall be
responsible, each party represents that it neither is nor will be obligated for
any finders' fee or commission in connection with this transaction. Each
Investor agrees to indemnify and to hold harmless the Company from any liability
for any commission or compensation in the nature of a finders' fee (and the
costs and expenses of defending against such liability or asserted liability)
for which the Investor or any of its officers, partners, employees or
representatives is responsible. The Company agrees to indemnify and hold
harmless each Investor from any liability for any commission or compensation in
the nature of a finders' fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
8.8 EXPENSES. Irrespective of whether the Closing is effected, the
Company shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If the
Closing is effected, the Company shall, at the Closing, reimburse the reasonable
fees of special counsel for Rosewood Capital, L.P. (not to exceed $10,000) and
for Farallon (not to exceed $10,000), and shall, upon receipt of a bill
therefor, reimburse the out-of-pocket expenses of such counsel for an amount not
to exceed $10,000 to each of Rosewood and Farallon. If any action at law or in
equity is necessary to enforce or interpret the terms of this Agreement or the
Restated Certificate, the prevailing party shall be entitled to reasonable
attorney's fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
8.9 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
seventy-five percent (75%) of the Common Stock issued or issuable upon
conversion of the Series D Preferred Stock. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
securities subject to this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities and the Company.
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<PAGE>
8.10 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
8.11 AGGREGATION OF STOCK. All shares of Series D Preferred Stock
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
8.12 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
RUBIO'S RESTAURANTS, INC.
By: /s/ Ralph Rubio
------------------------------
Ralph Rubio, President
Address: 5151 Shoreham Place, Suite 260
San Diego, CA 92122
Fax No: (619) 452-0181
INVESTORS:
ROSEWOOD CAPITAL, L.P.
By: Rosewood Capital Associates, L.P.,
General Partner
By: /s/ Kyle Anderson
---------------------------
Kyle A. Anderson, Principal
Address: One Maritime Plaza, Suite 1330
San Francisco, CA 94111
Fax No: (415) 362-1192
FARALLON CAPITAL PARTNERS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark Wehrly
[COUNTERPART SIGNATURE PAGE TO
SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
FARALLON CAPITAL INSTITUTIONAL
PARTNERS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark Wehrly
FARRALON CAPITAL INSTITUTIONAL
PARTNERS II, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark Wehrly
FARALLON CAPITAL INSTITUTIONAL
PARTNERS III, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark Wehrly
[COUNTERPART SIGNATURE PAGE TO
SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
RR CAPITAL PARTNERS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark Wehrly
W.A. & H. INVESTMENT, L.L.C.
By: /s/ illegible
------------------------------
Title:
-----------------------------
Address: Wessels, Arnold & Henderson, L.L.C.
c/o Kim-Hue Phan
601 Second Avenue South
Minneapolis, MN 55402-4314
Fax No: ____________________
/s/ Arthur Yelsey
-----------------------------------
Arthur R. Yelsey
Address: 1550 Bayside Drive
Corona Del Mar, CA 92625
Fax No: 714-721-0555
[COUNTERPART SIGNATURE PAGE TO
SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
BRUCE AND JOANNE FRAZER
/s/ Bruce Frazer
-----------------------------------
Bruce Frazer
/s/ Joanne Frazer
-----------------------------------
Joanne Frazer
Address: 5151 Shoreham Place, Suite 260
San Diego, CA 92122
Fax No: ____________________
JOHN AND ELLEN BRICE
/s/ John Brice
-----------------------------------
John Brice
/s/ Ellen Brice
-----------------------------------
Ellen Brice
Address: 1331 Park Row
La Jolla, CA 92037
Fax No: 619/454-7092
H.A. LAVEZZI CO., INC. PROFIT SHARING
TRUST FOR THE BENEFIT OF JOHN
RICHARD CUCHNA & JOHN RANDALL CUCHNA
By: /s/ illegible
------------------------------
Trustee
Address: 2515 Industry Street
Oceanside, CA 92054
Fax No: 760 757-0523
[COUNTERPART SIGNATURE PAGE TO
SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
BRIAN AND ANN ROBERTS
/s/ Brian Roberts
-----------------------------------
Brian Roberts
/s/ Ann Roberts
-----------------------------------
Ann Roberts
Address: 16 Leroy Street
San Francisco, CA 94109
Fax No: 415-292-9892
/s/ Frank Holloway
-----------------------------------
Frank O. Holloway
Address: 81 South Peak Drive
Laguna Niguel, CA 92677
Fax No: 714-595-5901
/s/ R. Alex Kaseberg
-----------------------------------
R. Alex Kaseberg
Address: 12801 Corbett Court
San Diego, CA 92130
Fax No: 259-7389
T. LARRY AND MARGARET EDDINGTON
/s/ T. Larry Eddington
-----------------------------------
T. Larry Eddington
/s/ Margaret Eddington
-----------------------------------
Margaret Eddington
Address: 3330 Dove Hollow Road
Olivenhain, CA 92024
Fax No: 759-0483
[COUNTERPART SIGNATURE PAGE TO
SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
RICHARD AND MARTHA PARKER
/s/ Richard Parker
-----------------------------------
Richard Parker
/s/ Martha Parker
-----------------------------------
Martha Parker
Address: 430 Silvergate
San Diego, CA 92106
Fax No: 582-1497
BROBECK, PHLEGER & HARRISON LLP
By: /s/ Craig S. Andrews
------------------------------
Its: Partner
------------------------------
Address: Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
Fax No: ____________________
EVEREN CLEARING CORP. CUST.
FBO: KEVIN L. SHIBUYA IRA
By: /s/ Kevin Shibuya
------------------------------
Title:
------------------------------
Address: 2141 Palomar Airport Road, Suite 100
Carlsbad, CA 92009
Fax No.: (760) 804-0399
/s/ Lic. Eugenio Clariond
-----------------------------------
Lic. Eugenio Clariond R.R.
Address: Ave. Batallon De San Patricio No. 111
Torre Comercial America Piso 26
Fracc. Valle Oriente
Garza Garcia, N.L. CP66269 Mexico
Fax No: (52-8) 153-8385
[COUNTERPART SIGNATURE PAGE TO
SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
DANIEL K. AND KUMIKO SHIBUYA JTWROS
/s/ Daniel Shibuya
-----------------------------------
Daniel K. Shibuya
/s/ Kumiko Shibuya
-----------------------------------
Kumiko Shibuya
Address: 8451 Cranford Avenue
Sun Valley, CA 91352
Fax No: (818) 982-2423
EVEREN CLEARING CORP. CUST.
FBO: GAIL L. ROSS IRA
By: /s/ Gail Ross
------------------------------
Title:
-----------------------------
Address: 2141 Palomar Airport Road, Suite 100
Carlsbad, CA 92009
Fax No: (760) 804-0399
/s/ Ronald B. Sellers
-----------------------------------
Ronald B. Sellers
Address: 11381 Eastview Pt.
San Diego, CA 92131
Fax N.: 619-546-9501
EVEREN CLEARING CORP. CUST.
FBO: RONALD B. SELLERS IRA
By: /s/ Ronald B. Sellers
------------------------------
Title:
-----------------------------
Address: 2141 Palomar Airport Road, Suite 100
Carlsbad, CA 92009
Fax No: (760) 804-0399
[COUNTERPART SIGNATURE PAGE TO
SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
EVEREN CLEARING CORP. CUST.
FBO: SHAWN O. ROWE IRA
By: /s/ Shawn Rowe
------------------------------
Title:
-----------------------------
Address: 2141 Palomar Airport Road, Suite 100
Carlsbad, CA 92009
Fax No: (760) 804-0399
EVEREN CLEARING CORP. CUST.
FBO: SHARON ROWE IRA
By: /s/ Sharon Rowe
------------------------------
Title:
-----------------------------
Address: 2141 Palomar Airport Road, Suite 100
Carlsbad, CA 92009
Fax No: (760) 804-0399
SHAWN O. ROWE AND SHARON ROWE
JTWROS
/s/ Shawn Rowe
-----------------------------------
Shawn O. Rowe
/s/ Sharon Rowe
-----------------------------------
Sharon Rowe
Address: 823 Pocahontas Court
Paso Robles, CA 93446
/s/ Mike Blackman
-----------------------------------
Mike Blackman
Address: Nations Bank Montgomery Securities
9 West 57th Street, 47th Floor
New York, NY 10019
Fax No: 212-583-8450
[COUNTERPART SIGNATURE PAGE TO
SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
/s/ J. Richards Fredericks
-----------------------------------
J. Richards Fredericks
Address: Nations Bank Montgomery Securities
600 Montgomery Street
San Francisco, CA 94111
Fax No: 627-2230
/s/ Murray Huneke
-----------------------------------
Murray Huneke, Trustee for Huneke
Family Trust
Address: Nations Bank Montgomery Securities
600 Montgomery Street
San Francisco, CA 94111
Fax No: 415-913-5513
[COUNTERPART SIGNATURE PAGE TO
SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
SCHEDULE A
SCHEDULE OF INVESTORS
(as amended)
<TABLE>
<CAPTION>
NAME PURCHASE PRICE NUMBER OF SHARES
- ---------------------------------- ----------------- ------------------
<S> <C> <C>
FIRST CLOSING
- -------------
Rosewood Capital, L.P. $2,500,001.93 347,486
Farallon Capital Partners, L.P. $2,729,996.98 379,454
Farallon Capital Institutional
Partners, L.P. $2,274,999.88 316,212
Farallon Capital Institutional
Partners II, L.P. $ 974,996.87 135,519
Farallon Capital Institutional
Partners III, L.P. $ 260,003.48 36,139
RR Capital Partners, L.P. $ 260,003.48 36,139
W.A. & H. Investment, L.L.C. $ 249,995.88 34,748
Arthur R. Yelsey $ 50,002.05 6,950
Bruce and Joanne Frazer $ 50,002.05 6,950
John and Ellen Brice $ 50,002.05 6,950
H.A. Lavezzi Co., Inc. Profit
Sharing Trust for the benefit of
John Richard Cuchna & John
Randall Cuchna $ 74,995.88 10,424
Brian and Ann Roberts $ 50,002.05 6,950
Frank O. Holloway $ 25,001.03 3,475
R. Alex Kaseberg $ 9,993.22 1,389
T. Larry and Margaret Eddington $ 25,001.03 3,475
Richard and Martha Parker $ 25,001.03 3,475
Brobeck, Phleger & Harrison LLP $ 15,000.62 2,085
<PAGE>
Subtotal: $9,624,999.51 1,337,820
SUBSEQUENT CLOSING
- ------------------
EVEREN Clearing Corp. Cust.
FBO: Kevin L. Shibuya IRA $ 25,001.03 3,475
Lic. Eugenio Clariond R.R. $ 249,995.88 34,748
Daniel K. & Kumiko Shibuya JTWROS $ 25,001.03 3,475
EVEREN Clearing Corp. Cust.
FBO: Gail L. Ross IRA $ 30,001.23 4,170
Ronald B. Sellers $ 12,504.11 1,738
EVEREN Clearing Corp. Cust.
FBO: Ronald B. Sellers IRA $ 12,496.92 1,737
EVEREN Clearing Corp. Cust.
FBO: Shawn O. Rowe IRA $ 9,000.37 1,251
EVEREN Clearing Corp. Cust.
FBO: Sharon Rowe IRA $ 4,496.59 625
Shawn O. Rowe & Sharon Rowe JTWROS $ 6,503.87 904
Mike Blackman $ 25,001.03 3,475
J. Richards Frederick $ 50,002.06 6,950
Huneke Family Trust $ 25,001.03 3,475
Subtotal: $ 475,005.15 66,023
Total: $10,100,004.66 1,403,843
</TABLE>
<PAGE>
SCHEDULE B
SCHEDULE OF STOCKHOLDERS
<PAGE>
Rubio's Restaurants, Inc.
Shareholder Listing
<TABLE>
<CAPTION>
NO. OF SHARES % OF TOTAL
SHAREHOLDER COMMON PREFERRED A PREFERRED B PREFERRED C TOTAL OUTSTANDING
<S> <C> <C> <C> <C> <C> <C>
Ralph & Dione Family Trust 400,000 784,400 1,184,400 24.32%
Rafael R. Rubio and Gloria G. Rubio Family Trust 400,000 784,400 1,184,400 24.32%
Gloria Garcia as Trustee of the Trust 50,000 100,000 150,000 3.08%
f/b/o Roman Rubio
Richard M. Rubio & Victoria E. Rubio Trust 50,000 100,000 150,000 3.08%
Robert Rubio Trust 50,000 100,000 150,000 3.08%
Robert L. Garcia & Gloria R. Garcia, Trust 50,000 73,395 123,395 2.53%
Total Rubio Family 1,000,000 1,942,195 2,942,195 60.42%
Rosewood Capital 936,005 743,321 1,679,326 34.49%
Dooling Family Trust 31,200 46,800 78,000 1.60%
Brophar Investor Partners 29,641 4,772 34,413 0.71%
UMB Bank, Trustee of the Brobeck, Phleger & 7,800 3,121 10,921 0.22%
Harrison Retirement Savings Plan f/b/o
T. Anson
Kim Lopdrup 10,000 10,000 0.21%
J. Richard Fredericks 9,291 9,291 0.19%
Bruce Frazer 9,291 9,291 0.19%
UMB Bank, Trustee of the Brobeck, Phleger & 7,800 1,418 9,218 0.19%
Harrison Retirement Savings Plan f/b/o
W. Sullivan
George H. Adams Jr. 7,800 1,418 9,218 0.19%
John Brice 7,800 1,418 9,218 0.19%
Tod Thoele 7,800 1,418 9,218 0.19%
T. Larry Eddington and Margaret Eddington 7,800 1,418 9,218 0.19%
Prudential Securities, Custodian for Kevin 7,800 1,418 9,218 0.19%
L. Shibuya & Kevin Shibuya (ind.)
Prudential Securities, Custodian for Frank 7,800 1,418 9,218 0.19%
O. Holloway & Frank Holloway (ind.)
R. Alex Kaseberg 7,800 1,418 9,218 0.19%
UMB Bank, Trustee of the Brobeck, Phleger 6,241 6,241 0.13%
& Harrison Retirement Savings Plan f/b/o
C. Andrews
Tom Huppert 4,700 4,700 0.10%
C. Jeff Barker 3,812 3,812 0.08%
James Stryker 2,500 2,500 0.05%
UMB Bank, Trustee of the Brobeck, Phleger 1,560 1,560 0.03%
& Harrison Retirement Savings Plan f/b/o
J. Denniston
UMB Bank, Trustee of the Brobeck, Phleger 1,560 1,560 0.03%
& Harrison Retirement Savings Plan f/b/o
J. De Groot
Julie Blair 715 715 0.01%
Robert Paul Nunez 480 480 0.01%
Kevin Kelly 300 300 0.01%
Lisa Conder 100 100 0.01%
John Canning 450 450 0.01%
Total Outstanding stock 1,010,557 1,973,395 1,092,007 793,640 4,869,599 100.00%
</TABLE>
Series B Preferred at $3.21 per share
Series C Preferred at $5.38126 per share
<PAGE>
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
See Exhibit 3.1 to the Registration Statement on Form S-1
A-1
<PAGE>
EXHIBIT B
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
See Exhibit 10.7 to the Registration Statement on Form S-1
B-1
<PAGE>
EXHIBIT C
AMENDED AND RESTATED STOCK RESTRICTION AGREEMENT
See Exhibit 10.10 to the Registration Statement on Form S-1
C-1
<PAGE>
EXHIBIT D
SCHEDULE OF EXCEPTIONS
D-1
<PAGE>
SCHEDULE OF EXCEPTIONS TO
SERIES D STOCK PURCHASE AGREEMENT
This Schedule of Exceptions is made and given pursuant to Section 2 of the
Series D Preferred Stock Purchase Agreement (the "Agreement"). The section
numbers in this Schedule of Exceptions correspond to the section numbers in the
Agreement; however, any information disclosed herein under any section number
shall be deemed to be disclosed and incorporated into any other section number
under the Agreement where such disclosure would otherwise be appropriate. Any
terms defined in the Agreement shall have the same meaning when used in this
Schedule of Exceptions as when used in the Agreement unless the context
otherwise requires.
SECTION 2.2 CAPITALIZATION AND VOTING RIGHTS
(c) The Company has agreed to issue a warrant to purchase 27,104 shares of
Series D Preferred Stock at an exercise price of $8.633448 per share to
Montgomery Securities, Inc. In connection with the issuance of such warrant,
the Company intends to amend the Restated Certificate to increase the number of
authorized shares of Series D Preferred Stock to 1,417,047.
SECTION 2.3 SUBSIDIARIES
Rubio's Restaurants of Nevada, Inc., a Nevada corporation, is a
wholly-owned subsidiary of the Company, which was incorporated on October 23,
1997 for the sole purpose of holding liquor licenses in Nevada.
SECTION 2.7 LITIGATION
Personal injury (foreign object in food) complaint filed by Rubio's
customer alleging wage loss, hospital and medical expenses, general damage, loss
of earning capacity, and incidental damages including travel expense. The
complaint states that plaintiff's damages exceed $25,000. A court date (jury
trial) has been set for February 1998. The Company believes that any damages
resulting from this action would be covered by the Company's liability
insurance.
Four worker's compensation claims have been made by three employees,
claiming various back injuries and other injuries. The Company believes that
any damages resulting from these actions would be covered by the Company's
worker's compensation insurance.
D-1
<PAGE>
SECTION 2.8 PROPRIETARY INFORMATION
The Company enters into an Employment Relationship and Confidentiality
Agreement with all employees. The form of such agreement has been provided to
Investor's counsel.
SECTION 2.9 PATENTS AND TRADEMARKS
On April 9, 1992, the Company entered into an agreement with Service
America Corporation (SAC) to operate a concession stand at San Diego's Qualcomm
Stadium in conjunction with the Company. The agreement was for a term of four
years, but includes an annual one-year renewal provision effective if neither
party gives timely notice of intent not to renew. Pursuant to such agreement,
SAC was granted the right and license to use the name "Rubio's" and any and all
other trademarks, tradenames, logos and/or copyrights utilized by Rubio's in the
sale of its products. SAC is obligated to pay to the Company 10% of all net
sales on Rubio's products sold in the stand.
The Company entered into a test agreement on August 4, 1995 with Host
International, Inc. (Host) whereby the Company granted to Host a non-exclusive
license to use the name Rubio's and other trademarks, service marks, and
logotypes at a San Diego Airport location. The term of this agreement was a
"test period" 180 days. The agreement calls for the parties to consider
extending the term at the end of the test period, on mutually agreeable terms.
Rubio's and Host are currently in the process of finalizing that agreement
extension. A license fee of 6% of gross revenues from the sale of Rubio's
proprietary items was charged during the test period.
SECTION 2.10 COMPLIANCE WITH OTHER INSTRUMENTS
Pursuant to that certain Business Loan Agreement, dated July 18, 1995, the
Company must obtain the consent of Union Bank of California, N.A. ("Union Bank")
prior to the sale and issuance of shares of Series D Preferred Stock. The
Company has obtained a conditional consent from Union Bank, containing certain
conditions which the Company intends to fulfill in due course.
Certain stockholders have a right of first refusal with respect to the
issuance of Series D Preferred Stock pursuant to that certain Investors' Rights
Agreement, dated February 1, 1995, as amended.
SECTION 2.11 AGREEMENTS; ACTION
(b)(i) The Company is a party to a certain Fountain Agreement Amendment,
executed on August 15, 1997, pursuant to which Pepsi-Cola Company has advanced
the Company marketing support funds in an amount in excess of $50,000.
Pursuant to an engagement letter entered into by the Company with
Montgomery Securities, Inc. in approximately May 1997, the Company is obligated
to issue a
D-2
<PAGE>
warrant to Montgomery Securities, Inc. (see Section 2.2 above) and to pay them a
selling commission in the amount of $480,000.
Certain of the Company's store locations have notes payable
outstanding to Union Bank of California (with the exception of the loan on the
El Cajon restaurant which is outstanding to Bank of Commerce) in connection with
the acquisition and buildout of the facilities as follows:
<TABLE>
<CAPTION>
OUTSTANDING
BALANCE AT TERM OF
RESTAURANT 9/28/97 NOTE
- -------------------------------- --------------------- ------------------
<S> <C> <C>
El Cajon $241,952 20 years
Carmel Mountain Ranch 57,990 5 years
Point Loma expansion 38,000 5 years
Upgrades to 13 restaurants 18,147 5 years
Temecula 80,000 5 years
Costa Mesa 83,333 5 years
Laguna Niguel 94,252 5 years
Anaheim 115,760 5 years
Mission Valley 115,760 5 years
Encino 122,807 5 years
Irvine Spectrum 133,333 5 years
Grossmont 133,327 5 years
Manhattan Beach 113,310 5 years
La Jolla Village 137,363 5 years
Santa Ana 135,026 5 years
Hall of Justice 78,947 5 years
Marina del Rey 183,333 5 years
Carlsbad 163,333 5 years
La Habra 166,667 5 years
Hillcrest 183,333 5 years
Cypress 183,333 5 years
Mission Viejo 186,667 5 years
</TABLE>
These loans are each secured by the assets, inventory and accounts of the
respective loan's restaurant to which the money was applied. UCC-1 Financing
Statements have been filed in connection with certain of these loans. The Bank
of Commerce loan is an SBA loan and is secured by the assets of the El Cajon
restaurant and further backed by personal guarantees from both Ralph and Rafael
Rubio.
D-3
<PAGE>
In addition, in October 1997 the Company negotiated a $500,000 credit line
with Union Bank of California. The line is due and payable in full on December
31, 1997, with interest paid monthly at the Reference Rate plus 1.00%.
Both the Union Bank of California notes payable and the credit line are
governed by a Business Loan Agreement dated July 18, 1995 as amended. This
Agreement contains certain negative covenants concerning the operation and
financial status of the Company. In addition, it provides that the restaurant
notes payable are to be perfected by a purchase money security agreement and UCC
Financing Statement. The credit line is secured pursuant to a General Security
Agreement covering all accounts receivable, inventory, equipment, chattel paper
and instruments.
See Section 2.9 above.
(b)(ii) See Section 2.9 above.
(c)(ii) See Section 2.11(b)(i) above.
SECTION 2.17 TITLE TO PROPERTY AND ASSETS
The Company owns the building in which the El Cajon store is located;
however, the land on which it is sited is leased on a long-term ground lease,
the material terms of which are described in SCHEDULE A attached hereto. All
other store sites are leased pursuant to individual leases, the material terms
of which are also described in SCHEDULE A.
SECTION 2.20 EMPLOYEE BENEFIT PLANS
The Company has medical and dental plans that are offered to each employee
generally after six months employment. The Company pays for a majority of the
costs of the plans with an amount deducted from each participating employee's
pay check. The Company is partially self-funded with respect to payment of
medical and dental expenses, with stop loss insurance in place for both
individual and aggregate losses.
Full-time employees, 21 years of age or older who have been employed by the
Company for one year or more, are eligible to participate in the Company's
401(k) Plan. There is a partial Company match, vesting over five years.
The Company has a Profit Sharing Plan in place that is subject to ERISA.
The Plan was frozen in November of 1995, and distribution of the assets
commenced upon receipt of an IRS determination letter in 1997. At September 28,
1997, the Plan had approximately $36,000 in plan assets (investments and cash).
There are no unfunded liabilities.
In addition, the Company has a Salary Continuation Plan that is available
to full-time executive employees. The Company pays 100% of the employee's base
monthly salary as of the date of the employee's disability, for the first ninety
days of disability. The Company has
D-4
<PAGE>
disability income insurance which provides monthly benefits equal to 60% of the
employee's base salary after ninety days from the date of disability.
SECTION 2.25 MANUFACTURING AND MARKETING RIGHTS
See Section 2.9 above.
D-5
<PAGE>
SCHEDULE A
RUBIO'S LEASE PROVISIONS
1. PACIFIC BEACH, CA
Term: ***
Payment per month: ***
2. CARMEL MOUNTAIN, CA
Term: ***
Payment per month: ***
3. CHULA VISTA, CA
Term: ***
Payment per month: ***
4. COSTA MESA, CA
Term: ***
Payment per month: ***
5. DOWNTOWN, CA
Term: ***
Payment per month: ***
6. EL CAJON, CA
Term: ***
Payment per month: ***
7. ENCINITAS, CA
Term: ***
Payment per month: ***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
A-1
<PAGE>
8. IRVINE, CA
Term: ***
Payment per month: ***
9. KEARNY MESA, CA
Term: ***
Payment per month: ***
10. LAGUNA NIGUEL, CA
Term: ***
Payment per month: ***
11. MISSION BAY, CA
Term: ***
Payment per month: ***
12. CORPORATE OFFICE
Term: ***
Payment per month: ***
13. POINT LOMA, CA
Term: ***
Payment per month: ***
14. SDSU, CA
Term: ***
Payment per month: ***
Termination: ***
15. SAN MARCOS, CA
Term: ***
Payment per month: ***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
A-2
<PAGE>
16. SOLANA BEACH, CA
Term: ***
Payment per month: ***
17. TEMECULA, CA
Term: ***
Payment per month: ***
18. TUSTIN, CA
Term: ***
Payment per month: ***
19. UTC, CA
Term: ***
Payment per month: ***
20. MISSION VALLEY, CA
Term: ***
Payment per month: ***
21. ENCINO, CA
Term: ***
Payment per month: ***
22. IRVINE SPECTRUM, CA
Term: ***
Payment per month: ***
23. GROSSMONT CENTER, CA
Term: ***
Payment per month: ***
24. MANHATTAN BEACH, CA
Term: ***
Payment per month: ***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
A-3
<PAGE>
25. LA JOLLA, CA
Term: ***
Payment per month: ***
26. SANTA ANA, CA
Term: ***
Payment per month: ***
27. HALL OF JUSTICE, CA
Term: ***
Payment per month: ***
28. MARINA DEL REY, CA
Term: ***
Payment per month: ***
29. CARLSBAD, CA
Term: ***
Payment per month: ***
30. LA HABRA, CA
Term: ***
Payment per month: ***
31. HILLCREST, CA
Term: ***
Payment per month: ***
32. CYPRESS/STANTON, CA
Term: ***
Payment per month: ***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
A-4
<PAGE>
33. BELMONT, CA
Term: ***
Payments per month: ***
34. MISSION VIEJO, CA
Term: ***
Payments per month: ***
35. AHWATUKEE, AZ
Term: ***
Payments per month: ***
36. CERRITOS, CA
Term: ***
Payment per month: ***
37. TORRANCE, CA
Term: ***
Payments per month: ***
38. NORTH SCOTTSDALE, AZ
Term: ***
Payment per month: ***
39. VISTA, CA
Term: ***
Payment per month: ***
40. ONTARIO, CA
Term: ***
Payment per month: ***
41. RANCHO CUCAMONGA, CA
Term: ***
Payment per month: ***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
A-5
<PAGE>
42. HENDERSON, NV
Term: ***
Payment per month: ***
43. MISSION GORGE, CA
Term: ***
Payment per month: ***
44. SAN CLEMENTE, CA
Term: ***
Payment per month: ***
45. YORBA LINDA, CA
Term: ***
Payment per month: ***
46. GILBERT, AZ
Term: ***
Payment per month: ***
47. VILLA PARK, CA
Term: ***
Payment per month: ***
48. SUMMERLIN, NV
Term: ***
Payment per month: ***
49. CHANDLER, AZ
Term: ***
Payment per month: ***
50. RANCHO SAN DIEGO, CA
Term: ***
Payment per month: ***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
A-6
<PAGE>
51. GLENDALE, CA
Term: ***
Payment per month: ***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
A-7
<PAGE>
EXHIBIT 10.6
RUBIO'S RESTAURANTS, INC.
AMENDMENT NO. 1 TO THE
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
This Amendment No. 1 ("Amendment") to the Series D Preferred Stock Purchase
Agreement (the "Agreement"), dated November 19, 1997, is made as of this 3rd day
of December, 1997 by and among RUBIO'S RESTAURANTS, INC., a Delaware corporation
(the "Company"), the investors listed on SCHEDULE A of the Agreement (the
"Existing Investors") and the investors listed on EXHIBIT A attached hereto,
(the "New Investors"). Capitalized terms used herein which are not defined
herein shall have the definition ascribed to them in the Agreement.
RECITALS
The Company desires to sell and issue to the New Investors and the New
Investors desire to purchase from the Company, shares of the Company's Series D
Preferred Stock pursuant to the Agreement.
The Existing Investors desire for the New Investors to invest in the
Company and, as a condition thereof and to induce such investment, the Existing
Investors and the Company are willing to enter into this Amendment to permit
each of the New Investors to become a party to the Agreement, as amended.
In consideration of the foregoing and the promises and covenants contained
herein and other good and valuable consideration the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. ADDITIONAL PARTIES TO THE AGREEMENT.
The New Investors hereby enter into and become parties to the
Agreement. SCHEDULE A to the Agreement is amended to include the New Investors.
2. AMENDMENTS TO AGREEMENT.
2.1 Section 1.3 of the Agreement is amended in its entirety to read
as follows:
"1.3 SUBSEQUENT SALE SERIES D PREFERRED STOCK. To the extent
that at least 1,250,949 but less than 1,403,843 shares of Series D Preferred
Stock are sold at the Closing, the Company may sell within sixty days following
the Closing any remaining shares of Series D Preferred Stock at a price not less
than $7.19454 per share to such other purchaser(s) as the Company's Board of
Directors shall select. Any purchaser in a subsequent closing shall execute a
counterpart signature page to this Agreement, the Amended and Restated
Investors' Rights Agreement and the Amended and Restated Stock Restriction
<PAGE>
Agreement, and any additional sales of Series D Preferred Stock to Investors
shall be deemed to be made hereunder. The sale of any additional shares of
Series D Preferred Stock under this Section 1.3 occurring within sixty days
following the Closing shall not be subject to the right of first offer contained
in Section 2.4 of the Amended and Restated Investors' Rights Agreement to be
executed contemporaneously with this Agreement, which is attached hereto as
EXHIBIT B (the "Investors' Rights Agreement").
3. EFFECT OF AMENDMENT.
Except as amended and set forth above, the Agreement shall continue in full
force and effect.
4. COUNTERPARTS.
This Amendment may be executed in any number of counterparts, each which
will be deemed an original, and all of which together shall constitute one
instrument.
5. SEVERABILITY.
If one or more provisions of this Amendment are held to be
unenforceable under applicable law, such provision(s) shall be excluded from
this Amendment and the balance of the Amendment shall be interpreted as if such
provision(s) were so excluded and shall be enforceable in accordance with its
terms.
6. ENTIRE AGREEMENT.
This Amendment, together with the Agreement, constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.
7. GOVERNING LAW.
This Amendment shall be governed by and construed under the laws of
the State of California as applied to agreements among California residents
entered into and to be performed entirely within California.
[Remainder of This Page Intentionally Left Blank]
-2-
<PAGE>
This Amendment is hereby executed as of the date first above written.
RUBIO'S RESTAURANTS, INC.,
a Delaware corporation
By: /s/ Ralph Rubio
-------------------------------
Ralph Rubio, President
Address: 5151 Shoreham Place, Suite 260
San Diego, CA 92122
EXISTING INVESTORS:
ROSEWOOD CAPITAL, L.P.
By: Rosewood Capital Associates, L.P.,
General Partner
By: /s/ Kyle Anderson
-------------------------------
Kyle A. Anderson, Principal
Address: One Maritime Plaza, Suite 1330
San Francisco, CA 94111
Fax No: (415) 362-1192
FARALLON CAPITAL PARTNERS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
-------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and
Mark Wehrly
[COUNTERPART SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE
SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
FARALLON CAPITAL INSTITUTIONAL
PARTNERS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
-------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and
Mark Wehrly
FARRALON CAPITAL INSTITUTIONAL
PARTNERS II, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
-------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and
Mark Wehrly
[COUNTERPART SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE
SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
FARALLON CAPITAL INSTITUTIONAL
PARTNERS III, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
-------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and
Mark Wehrly
RR CAPITAL PARTNERS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
-------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and
Mark Wehrly
[COUNTERPART SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE
SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
RAFAEL R. RUBIO AND GLORIA G. RUBIO,
CO-TRUSTEES OF THE RAFAEL R. RUBIO AND
GLORIA G. RUBIO FAMILY TRUST
By: /s/ Rafael R. Rubio
-------------------------------
Rafael R. Rubio
By: /s/ Gloria G. Rubio
-------------------------------
Gloria G. Rubio
Address: 5134 Pendelton Street
San Diego, CA 92109
Fax No.:
RALPH RUBIO AND DIONE RUBIO AS TRUSTEES
OF THE RALPH RUBIO AND DIONE RUBIO
FAMILY TRUST
By: /s/ Ralph Rubio, Trustee
-------------------------------
Ralph Rubio, Trustee
By: /s/ Dione Rubio, Trustee
-------------------------------
Dione Rubio, Trustee
Address: 1115 Los Caballitos
Del Mar, CA 92014
Fax No.:
[COUNTERPART SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE
SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
NEW INVESTORS:
/s/ Michael Blackman
------------------------------------
Michael Blackman
Address: Nations Bank Montgomery
Securities
9 West 57th Street, 47th Fl.
New York, NY 10019
Fax No: ___________________
/s/ Richards Fredericks
------------------------------------
J. Richards Fredericks
Address: Nations Bank Montgomery
Securities
600 Montgomery Street
San Francisco, CA 94111
Fax No: ___________________
/s/ Murray Henke
------------------------------------
Murray Huneke, Trustee of the Huneke
Family Trust
Address: Nations Bank Montgomery
Securities
600 Montgomery Street
San Francisco, CA 94111
Fax No: 415 913-5513
[COUNTERPART SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE
SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
Exhibit A
NEW INVESTORS
Mike Blackman
J. Richards Fredericks
Murray Huneke
<PAGE>
EXHIBIT 10.7
RUBIO'S RESTAURANTS, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
---------------------
November 19, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Request for Registration . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Company Registration . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.4 Obligations of the Company . . . . . . . . . . . . . . . . . . . . . . . 4
1.5 Furnish Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.6 Expenses of Demand Registration. . . . . . . . . . . . . . . . . . . . . 5
1.7 Expenses of Company Registration . . . . . . . . . . . . . . . . . . . . 6
1.8 Underwriting Requirements. . . . . . . . . . . . . . . . . . . . . . . . 6
1.9 Delay of Registration. . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.10 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.11 Reports Under Securities Exchange Act of 1934. . . . . . . . . . . . . . 9
1.12 Form S-3 Registration. . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.13 Assignment of Registration Rights. . . . . . . . . . . . . . . . . . . . 11
1.14 Limitations on Subsequent Registration Rights. . . . . . . . . . . . . . 11
1.15 "Market Stand-Off" Agreement . . . . . . . . . . . . . . . . . . . . . . 11
1.16 Termination of Registration Rights . . . . . . . . . . . . . . . . . . . 12
2. Covenants of the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1 Delivery of Financial Statements . . . . . . . . . . . . . . . . . . . . 12
2.2 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.3 Termination of Covenants . . . . . . . . . . . . . . . . . . . . . . . . 13
2.4 Right of First Offer . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.5 Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.2 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.4 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.7 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.9 Aggregation of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.11 Representation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.12 Amendment of Prior Agreement . . . . . . . . . . . . . . . . . . . . . . 17
Schedule A - Schedule of Investors
</TABLE>
<PAGE>
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT is made as of
November 19, 1997, by and between Rubio's Restaurants, Inc., a Delaware
corporation (the "Company"), and the investors listed on Schedule A hereto, each
of which is herein referred to as an "Investor."
RECITALS
WHEREAS, the Company and certain of the investors (the "Existing
Investors") are parties to that certain Investors' Rights Agreement, dated
February 1, 1995, as amended on June 10, 1995 and March 28, 1996 (the "Prior
Agreement").
WHEREAS, the Company desires to sell and issue to certain of the Investors
(the "Series D Investors"), and the Series D Investors desire to purchase from
the Company, up to 1,389,943 shares of Series D Preferred Stock pursuant to the
Series D Preferred Stock Purchase Agreement dated of even date herewith (the
"Series D Agreement").
WHEREAS, the Existing Investors desire for the Series D Investors to invest
in the Company, and, as a condition thereof and to induce such investment, the
Existing Investors are willing to enter into this Agreement to amend and restate
the Prior Agreement subject to Section 3.10 and 3.12 hereof.
WHEREAS, certain of the Company's and the Series D Investors obligations
under the Series D Agreement are conditioned upon the execution and delivery of
this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties agree as follows:
1. REGISTRATION RIGHTS. The Company covenants and agrees as
follows:
1.1 DEFINITIONS. For purposes of this Agreement:
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Affiliates" means any persons or entities that,
directly or indirectly through one or more intermediaries, are in control of,
are controlled by, or are under common control with a specified party.
(c) The term "register", "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
<PAGE>
(d) The term "Registrable Securities" means (1) the Common Stock
issuable or issued upon conversion of the Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock and (2) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Common
Stock, excluding in all cases, however, any Registrable Securities sold by a
person in a transaction in which his rights under this Section 1 are not
assigned.
(e) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
(f) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.13 hereof.
(g) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the Securities and Exchange Commission ("SEC") which permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
(h) The term "Series B Registrable Securities" means (1) the
Common Stock issuable or issued upon conversion of the Series B Preferred Stock
and (2) any Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of, such Series B Preferred Stock or Common Stock, excluding in all
cases, however, any Series B Registrable Securities sold by a person in a
transaction in which his rights under this Section 1 are not assigned.
(i) The term "Series C Registrable Securities" means (1) the
Common Stock issuable or issued upon conversion of the Series C Preferred Stock
and (2) any Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of, such Series C Preferred Stock or Common Stock, excluding in all
cases, however, any Series C Registrable Securities sold by a person in a
transaction in which his rights under this Section 1 are not assigned.
(j) The term "Series D Registrable Securities" means (1) the
Common Stock issuable or issued upon conversion of the Series D Preferred Stock
and (2) any Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of, such Series D Preferred Stock or Common Stock, excluding in all
cases, however, any Series D Registrable Securities sold by a person in a
transaction in which his rights under this Section 1 are not assigned.
-2-
<PAGE>
1.2 REQUEST FOR REGISTRATION.
(a) If the Company shall receive at any time after six (6)
months from the effective date of the first registration statement for a public
offering of securities of the Company (other than a registration statement
relating either to the sale of securities to employees of the Company pursuant
to a stock option, stock purchase or similar plan or a SEC Rule 145
transaction), a written request from the Holders of at least a majority of the
Series B Registrable Securities and Series C Registrable Securities or a
majority of the Series D Registrable Securities that the Company file a
registration statement under the Act covering the registration of Registrable
Securities with an anticipated aggregate offering price, net of underwriters'
discounts and commissions, of not less than $5,000,000, then the Company shall,
within ten (10) days of the receipt thereof, give written notice of such request
to all Holders (who shall have the right to participate in such registration)
and shall, subject to the limitations of subsection 1.2(b), effect as soon as
practicable, and in any event shall use its best efforts to effect within sixty
(60) days of the receipt of such request, the registration under the Act of all
Registrable Securities which the Holders request to be registered within twenty
(20) days of the mailing of such notice by the Company in accordance with
Section 3.5.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to this Section 1.2 and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by the Company and shall be reasonably
acceptable to a majority in interest of the Initiating Holders. In such event,
the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
approved for such underwriting by a majority in interest of the Initiating
Holders. Notwithstanding any other provision of this Section 1.2, if the
underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Company shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company requested to be included by each Holder; provided, however, that the
number of shares of Registrable Securities to be included in such underwriting
shall not be reduced unless all securities other than Registrable Securities are
first entirely excluded from the underwriting.
(c) The Company is obligated to effect only two (2) such
registrations pursuant to this Section 1.2 (one (1) initiated by holders of a
majority of the Series B Registrable Securities and Series C Registrable
Securities and one (1) initiated by
-3-
<PAGE>
holders of a majority of the outstanding Series D Registrable Securities) and is
not obligated to effect a demand registration pursuant to this Section 1.2 until
at least six (6) months have elapsed from a prior registration whether pursuant
to this Section 1.2 or otherwise.
(d) Notwithstanding the foregoing, if the Company shall furnish
to Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement and stating the reasons therefor, the Company shall have
the right to defer taking action with respect to such filing for a period of not
more than one-hundred twenty (120) days after receipt of the request of the
Initiating Holders.
1.3 COMPANY REGISTRATION. If at any time the Company proposes to
register (whether for its own account or for the account of any stockholder
other than registrations effected pursuant to Sections 1.2 and 1.12 of this
Agreement) any of its stock or other securities under the Act in connection with
the public offering of such securities solely for cash (other than a
registration relating solely to the sale of securities to participants in a
Company stock plan, or a registration on any form which does not include
substantially the same information about the Company as would be required to be
included in a registration statement covering the sale of the Registrable
Securities), the Company shall, at such time, promptly give each Holder written
notice of such registration. Upon the written request of each Holder given
within twenty (20) days after mailing of such notice by the Company in
accordance with Section 3.5, the Company shall, subject to the provisions of
Section 1.8, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.
1.4 OBLIGATIONS OF THE COMPANY. Whenever required under this Section
1 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to one hundred twenty (120) days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
-4-
<PAGE>
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
1.5 FURNISH INFORMATION.
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself and the Registrable Securities
held by it, and upon request by the Company the intended method of disposition
of such securities as shall be required to effect the registration of such
Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.12 if, due to the
operation of subsection 1.5(a), the anticipated aggregate offering price of the
Registrable Securities to be included in the registration does not equal or
exceed the anticipated aggregate offering price required to originally trigger
the Company's obligation to initiate such registration as specified in
subsection 1.2(a) or subsection 1.12(b)(2), whichever is applicable.
1.6 EXPENSES OF DEMAND REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Initiating Holders (in which case all participating Holders shall
bear such expenses), unless the Initiating Holders agree to forfeit their right
to one demand registration pursuant to Section 1.2; provided further, however,
that the Holders shall not be required to forfeit such demand right if at the
time of such withdrawal, the Holders have learned of a material adverse change
in the condition, business
-5-
<PAGE>
or prospects of the Company from that known to the Holders at the time of their
request and have withdrawn the request with reasonable promptness following the
disclosure by the Company of such material adverse change.
1.7 EXPENSES OF COMPANY REGISTRATION. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder, including (without limitation) all
registration, filing and qualification fees, printers, legal and accounting fees
relating or apportionable thereto and the reasonable fees and disbursements of
one counsel for the selling Holders but excluding underwriting discounts and
commissions relating to the Registrable Securities.
1.8 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned among the selling stockholders in proportion (as
nearly as practicable) to the amount of Registrable Securities of the Company
owned by each holder), provided, however, that the number of shares of
Registrable Securities to be included in such underwriting shall not be reduced
unless all other shares of securities (except the securities proposed to be sold
by the Company in such underwriting) are first entirely excluded from the
underwriting and in no event shall (i) the amount of securities of the selling
Holders included in the offering be reduced below twenty percent (20%) of the
total amount of securities included in such offering, unless such offering is
the initial public offering of the Company's securities or (ii) notwithstanding
(i) above, any shares being sold by a stockholder exercising a demand
registration right similar to that granted in Section 1.2 be excluded from such
offering. For purposes of the preceding parenthetical concerning apportionment,
for any selling stockholder which is a holder of Registrable Securities and
which is a partnership or corporation, the partners, retired partners and
stockholders of such holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefit of any of the
foregoing persons shall be deemed to be a single "selling stockholder," and any
pro-rata reduction with respect to such "selling stockholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling stockholder," as defined in
this sentence.
1.9 DELAY OF REGISTRATION. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any
-6-
<PAGE>
controversy that might arise with respect to the interpretation or
implementation of this Section 1.
1.10 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the Securities Exchange Act of 1934, as amended (the
"1934 Act") and their partners, members, directors and officers, against any
losses, claims, damages or liabilities (joint or several) to which they may
become subject under the Act, or the 1934 Act, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the 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 (iii) any violation or alleged violation by the
Company of the Act, the 1934 Act or any blue sky laws, or any rule or regulation
promulgated under the Act or the 1934 Act; and the Company will pay to each such
Holder, underwriter or controlling person any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this subsection 1.10(a) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person,
and the Company's executive officers were not actually aware at the time of the
use of such information, without any duty of investigation, that such
information would result in a Violation.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder against any losses, claims,
damages or liabilities (joint or several) to which any of the foregoing persons
may become subject under the Act or the 1934 Act insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are based
upon any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with such
registration and the Company's executive officers were not actually aware, at
the time of the use of such information, without any duty of investigation, that
such information
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would result in a Violation; and each such Holder will pay any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this subsection 1.10(b), in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 1.10(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder (which consent
shall not be unreasonably withheld); provided further, that in no event shall
any indemnity under this subsection 1.10(b) exceed the gross proceeds from the
offering received by such Holder. With respect to any Registrable Securities
held by United Missouri Bank, n.a. as Trustee, the Holder's liability for
indemnification under this Agreement shall be limited to the assets held in the
participant's individually directed account who directed the purchase of this
investment and shall not extend to other assets of the Brobeck, Phleger &
Harrison Retirement Savings Plan or to UMB Bank, n.a. in its individual or any
other capacity.
(c) Promptly after receipt by an indemnified party under this
Section 1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
indemnified party under this Section 1.10 except to the extent it actually
prejudices the ability to defend such action, but the omission to so deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
1.10.
(d) If the indemnification provided for in this Section 1.10 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and
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<PAGE>
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns at least
five percent (5%) of the Registrable Securities, forthwith upon request (i) a
written statement by the Company that it has complied with the reporting
requirements of SEC Rule 144 (at any time after ninety (90) days after the
effective date of the first registration statement filed by the Company), the
Act and the 1934 Act (at any time after it has become subject to such reporting
requirements), or that it qualifies as a registrant whose securities may be
resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (iii) such other information as may
be reasonably requested in availing any Holder of any rule or regulation of the
SEC which permits the selling of any such securities without registration or
pursuant to such form.
1.12 FORM S-3 REGISTRATION. In case the Company shall receive from
any Holder at any time after the first anniversary of the Company's first
underwritten public
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offering a written request or requests that the Company effect a registration on
Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
Registrable Securities as are specified in such request, together with any other
securities to be offered by the Company or other Holders (so long as inclusion
of such securities to be offered by the Company does not interfere with the
marketing of the requesting Holders' Registrable Securities specified in such
request) and together with all or such portion of the Registrable Securities of
any other Holder joining in such request as are specified in a written request
given within fifteen (15) days after receipt of such written notice from the
Company; provided, however, that the Company shall not be obligated to effect
any such registration, qualification or compliance, pursuant to this section
1.12: (1) if Form S-3 is not available for such offering by the Holders; (2) if
the Holders, together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public (net of any underwriters' discounts or commissions) of less than
$500,000; (3) if the Company shall furnish to the Holders a certificate signed
by the President of the Company stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its stockholders for such Form S-3 Registration to be effected at
such time and stating the reasons therefor, in which event the Company shall
have the right to defer the filing of the Form S-3 registration statement for a
period of not more than 120 days after receipt of the request of the Holder
under this Section 1.12; (4) if the Company has, within the six (6)-month period
preceding the date of such request, already effected a registration on Form S-3
for the Holders pursuant to this Section 1.12; (5) if the Company has already
effected four (4) registrations on Form S-3 pursuant to this Section 1.12; or
(6) in any particular jurisdiction in which the Company would be required to
qualify to do business.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection with a
registration requested pursuant to Section 1.12, including (without limitation)
all registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for the selling Holders and counsel
for the Company, but excluding underwriters' commissions and discounts relating
to the Registrable Securities, shall be borne by the Company. Registrations
effected pursuant to this Section 1.12 shall not be counted as demands for
registration or registrations effected pursuant to Sections 1.2 or 1.3,
respectively.
1.13 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all
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related obligations) by a Holder to any of its general partners, limited
partners or Affiliates or to a transferee and its Affiliates or assignee and its
Affiliates of such securities who, after such assignment or transfer, holds at
least 250,000 shares of Registrable Securities (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other
recapitalizations), provided the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned. For the purposes of determining the
number of shares of Registrable Securities held by a transferee or assignee, the
holdings of transferees and assignees (i) who are Affiliates shall be aggregated
and (ii), of a partnership who are partners or retired partners of such
partnership (including spouses and ancestors, lineal descendants and siblings of
such partners or spouses who acquire Registrable Securities by gift, will or
intestate succession) shall be aggregated together and with the partnership;
provided that all assignees and transferees who would not qualify individually
for assignment of registration rights shall have a single attorney-in-fact for
the purpose of exercising any rights, receiving notices or taking any action
under this Section 1.
1.14 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed under Section 1.2, 1.3 and
1.12 hereof, unless under the terms of such agreement, such holder or
prospective holder may include such securities in any such registration only to
the extent that the inclusion of his securities will not reduce the amount of
the Registrable Securities of the Holders which is included or (b) to make a
demand registration which could result in such registration statement being
declared effective prior to the date set forth in subsection 1.2(a) or within
one hundred twenty (120) days of the effective date of any registration effected
pursuant to Section 1.2.
1.15 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that,
during the period of duration specified by the Company and an underwriter of
Common Stock or other securities of the Company, following the effective date of
a registration statement for an underwritten public offering by the Company
filed under the Act, it shall not, to the extent requested by the Company and
such underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any securities of the Company held by it at any time during such period
except common stock included in such registration; provided, however, that:
(a) such agreement shall not exceed one-hundred eighty (180)
days for the first such registration statement of the Company which covers
Common Stock (or other securities) to be sold on its behalf to the public in an
underwritten offering; and
(b) such agreement shall not exceed ninety (90) days for any
subsequent registration statement of the Company which covers Common Stock (or
other securities) to be sold on its behalf to the public in an underwritten
offering.
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In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.16 TERMINATION OF REGISTRATION RIGHTS.
(a) No Holder shall be entitled to exercise any right provided
for in Section 1.2 after such time as (i) the Holder can sell all of such stock
under Rule 144(k) (or successor rule) promulgated by the SEC and (ii) the Holder
holds less than two percent (2%) of the outstanding capital stock of the Company
(iii) and the Company is eligible to use Form S-3 (or a successor form)
promulgated by the SEC.
(b) No Holder shall be entitled to exercise any right provided
for in Sections 1.2, 1.3 or 1.12 after five (5) years following the consummation
of the sale of securities pursuant to a registration statement filed by the
Company under the Act in connection with the initial firm commitment
underwritten offering of its securities to the general public.
2. COVENANTS OF THE COMPANY.
2.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall deliver to
each Investor or group of Investors who are Affiliates which holds 40% of the
outstanding shares of Series B Preferred Stock, Series C Preferred Stock or
Series D Preferred Stock of the Company (each such Investor or group of
Investors who are Affiliates being a "Major Investor"), subject to appropriate
adjustment for stock splits, stock dividends, combinations and other
recapitalizations:
(a) as soon as practicable, but in any event within ninety (90)
days after the end of each fiscal year of the Company, audited consolidated
financial statements for the Company and its consolidated subsidiaries, such
year-end financial reports to be prepared in accordance with generally accepted
accounting principles ("gaap"), and audited and certified by independent public
accountants of nationally recognized standing selected by the Company;
(b) as soon as practicable, but in any event within ninety (90)
days after the end of each fiscal year, a business plan and monthly financial
statement projections for the new fiscal year;
(c) within thirty (30) days of the end of each month,
consolidated financial statements for the Company and its consolidated
subsidiaries; and
(d) as soon as practicable, but in any event within thirty (30)
days after the end of each fiscal quarter, a quarterly budget and a narrative
report prepared by the president of the Company, explaining any material
developments and deviations from budget.
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<PAGE>
2.2 INSPECTION. The Company shall permit each Major Investor, at
such Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by the Investor; provided, however, that the Company shall not be
obligated pursuant to this Section 2.2 to provide access to any information
which it reasonably considers to be a trade secret or similar confidential
information absent an appropriate signed confidentiality agreement.
2.3 TERMINATION OF COVENANTS. Subject to their earlier termination
pursuant to the specific terms of each Section, the covenants set forth in
Sections 2.1, 2.2, 2.4, and 2.5 shall terminate and be of no further force or
effect when the sale of securities pursuant to a registration statement filed by
the Company under the Act in connection with the firm commitment underwritten
offering of its securities to the general public is consummated or when the
Company first becomes obligated to file reports under Section 13 of the 1934
Act, whichever event shall first occur.
2.4 RIGHT OF FIRST OFFER. Subject to the terms and conditions
specified in this paragraph 2.4, the Company hereby grants to each Investor or
group of Investors which are Affiliates holding more than 300,000 shares of
Registrable Securities, and to each of the stockholders listed on attached
SCHEDULE 2.4 (the Investors, group of Investors and such stockholders shall be
referred to herein as the "Offeree(s)") a right of first offer with respect to
future sales by the Company of its Shares (as hereinafter defined). An Offeree
shall be entitled to apportion the right of first offer hereby granted it among
itself and its partners, Affiliates and relatives in such proportions as it
deems appropriate.
Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any class of its
capital stock ("Shares"), the Company shall first make an offering of such
Shares to each Offeree in accordance with the following provisions:
(a) The Company shall deliver a notice pursuant to Section 3.5
("Notice") to the Offeree stating (i) its bona fide intention to offer such
Shares, (ii) the number of such Shares to be offered, and (iii) the price and
terms, if any, upon which it proposes to offer such Shares.
(b) Within twenty (20) calendar days after receipt of the
Notice, the Offeree may elect to purchase or obtain, at the price and on the
terms specified in the Notice, up to that portion of such Shares which equals
the proportion that the number of shares of common stock issued and held, or
issuable upon conversion of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock (collectively, the
"Preferred Stock") then held, by such Offeree bears to the total number of
shares of common stock of the Company then outstanding (assuming full conversion
of all convertible securities), issued and held, or issuable upon conversion of
the Preferred Stock then held, by all the Offerees. The Company shall promptly,
in writing, inform each Offeree which purchases all the Shares available to it
("Fully-Exercising Offeree") of any other Offeree's failure to do likewise.
During the ten (10)-day period commencing after receipt of such
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information each Fully-Exercising Offeree shall be entitled to subscribe to that
portion of the Shares for which Offerees were entitled to subscribe but which
were not subscribed for by the Offerees which is equal to the proportion that
the number of shares of common stock issued and held, or issuable upon
conversion of Preferred Stock then held, by such Fully-Exercising Offeree bears
to the total number of shares of common stock issued and held, or issuable upon
conversion of the Preferred Stock then held, by all Fully-Exercising Offerees
who wish to purchase some of the unsubscribed Shares.
(c) If all Shares which Offerees are entitled to obtain pursuant
to subsection 2.4(b) are not elected to be obtained as provided in subsection
2.4(b) hereof, the Company may, during the thirty (30)-day period following the
expiration of the period provided in subsection 2.4(b) hereof, offer the
remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable to the Offeree than, those
specified in the Notice. If the Company does not enter into an agreement for
the sale of the Shares within such period, or if such agreement is not
consummated within thirty (30) days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered
unless first reoffered to the Offerees in accordance herewith.
(d) The right of first offer in this Section 2.4 shall not be
applicable (i) to the issuance or sale of shares of common stock (or options
therefor) to employees, consultants or directors of this Company (and not
repurchased at cost by the Company in connection with the termination of
employment or service relationship) subsequent to the date of this Agreement,
(ii) to or after consummation of a firm commitment underwritten offering of its
securities to the general public in which the aggregate gross cash proceeds to
the Company (prior to underwriters' discounts and expenses) are equal to or
exceed $15,000,000, (iii) the issuance of securities pursuant to the conversion
or exercise of convertible or exercisable securities, (iv) the issuance of
securities in connection with a bona fide business acquisition of or by the
Company, whether by merger, consolidation, sale of assets, sale or exchange of
stock or otherwise or (v) the issuance of shares of stock, warrants or other
securities or rights to persons or entities (such as equipment lessors) with
which the Company has business relationships provided such issuances are for
other than primarily equity financing purposes.
2.5 NEGATIVE COVENANTS. The Company shall not take any of the
following actions without first obtaining the approval of a majority of the
Company's Board of Directors, including (i) the director elected by the holders
of the Series B Preferred Stock and Series C Preferred Stock, voting together as
a single class as set forth in subsection 5(b) of Article VI of the Amended and
Restated Certificate of Incorporation of the Company (the "Restated
Certificate") and (ii) the director, if any, elected by the holders of Series D
Preferred Stock, as set forth in subsection 5(b) of Article VI of the Restated
Certificate and Section 5 of the Series D Preferred Stock Purchase Agreement:
(a) approve the annual business plan of the Company; or
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(b) create, incur, assume or suffer to exist debt obligations in
excess of $3,000,000 in the aggregate; or
(c) authorize management compensation, including granting stock
options to officers and management; or
(d) approve any stock option or stock issuance plans or any increase
in the number of shares of Common Stock reserved for issuance pursuant to the
Company's stock option or stock issuance plans, including any increase in the
325,000 shares reserved for issuance under the Company's 1995 Stock Option/Stock
Issuance Plan;
(e) enter into any agreements to license or franchise the Company's
concept or restaurants; or
(f) directly or indirectly redeem, purchase or otherwise acquire any
of the Company's equity securities from a member of the Rubio family (or any
trust or entity for such person), except for redemption of equity securities
from members of the Rubio family who are employees of the Company on standard
terms upon the termination of employment; or
(g) approve, or permit approval, of any change in the Company's
business concept; or
(h) merge or consolidate with any other party or acquire any interest
in any business; or
(i) sell, convey, liquidate, dissolve or otherwise dispose of the
assets of the Company in any transaction or series of transactions other than in
the ordinary course of business; or
(j) liquidate, dissolve or effect a recapitalization or
reorganization in any form or transaction; or
(k) enter into any transaction with any Affiliates of the Company,
except for normal employment arrangements and benefit programs on reasonable
terms; or
(l) directly or indirectly declare or pay any dividends or make any
distributions upon or repurchase or redeem any of its equity securities other
than the redemption rights pursuant to the Restated Certificate, or except for
redemptions of equity securities from employees and advisors of the Company on
standard terms upon termination of service.
3. MISCELLANEOUS.
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3.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
3.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be sent to
the address/fax number indicated for such party on the signature page hereof
(provided that any party may at any time change its address/fax number for
notice by ten (10) days' advance written notice to the other parties), and shall
be deemed effectively given upon (i) personal delivery to the party to be
notified, (ii) the time of successful facsimile transmission to the party to be
notified, (iii) sending by reputable overnight delivery service or (iv) three
(3) days after deposit with the United States Post Office, by registered or
certified mail.
3.6 EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.7 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
eighty percent (80%) of the Registrable Securities then outstanding; provided,
however, that such consent may not be unreasonably withheld in connection with
any amendments to this Agreement which add additional parties to this Agreement
with rights pari passu to those granted to the Investors hereunder. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any Registrable Securities then outstanding, each future
holder of all such shares and the Company.
3.8 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement
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and the balance of the Agreement shall be interpreted as if such provision were
so excluded and shall be enforceable in accordance with its terms.
3.9 AGGREGATION OF STOCK. All shares of Registrable Securities held
or acquired by Affiliates or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
3.10 ENTIRE AGREEMENT. Section 2.6 of the Prior Agreement, with
respect to the holders of Series B Preferred Stock and Series C Preferred Stock
only, and this Agreement (including the Exhibits hereto, if any) constitute the
full and entire understanding and agreement between the parties with regard to
the subjects hereof and thereof.
3.11 REPRESENTATION. By executing this Agreement, each Investor and
each other person or entity executing this Agreement acknowledges and agrees
that Brobeck, Phleger & Harrison LLP represents the Company solely and that
Investor has been advised to, and has had an opportunity to, consult with its
own attorney in connection with this Agreement.
3.12 AMENDMENT OF PRIOR AGREEMENT. This Agreement constitutes an
amendment of the Prior Agreement (except for Section 2.6 of the Prior Agreement
which remains in effect for the holders of Series B Preferred Stock and Series C
Preferred Stock only), and is cast in the form of an amendment and restatement
solely for the ease of the parties hereto.
[Remainder of This Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
RUBIO'S RESTAURANTS, INC.
By: /s/ Ralph Rubio
------------------------------
Ralph Rubio, President
Address: 5151 Shoreham Place, Suite 260
San Diego, CA 92122
Fax No: (619) 452-0181
INVESTORS:
ROSEWOOD CAPITAL, L.P.
By: Rosewood Associates L.P., General
Partner
By: /s/ Kyle Anderson
------------------------------
Kyle A. Anderson, Principal
Address: One Maritime Plaza, Suite 1330
San Francisco, CA 94111
Fax No: (415) 362-1192
DOOLING FAMILY TRUST DATED
DECEMBER 8, 1988
By:
------------------------------
, Trustee
--------------------------
Address: 427 South Marengo Avenue #3
Pasadena, CA 91101
Fax No: ____________________
[COUNTERPART SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
BROPHAR INVESTOR PARTNERS
By: /s/ Craig S. Andrews
------------------------------
General Partner
Address: c/o Craig Andrews,
Brobeck, Phleger & Harrison
550 West "C" Street, Suite 1200
San Diego, CA 92101
Fax No: (619) 234-3848
PRUDENTIAL SECURITIES, CUSTODIAN FOR
KEVIN L. SHIBUYA IRA
By: /s/ Kevin Shibuya
------------------------------
Address: 9255 Towne Center Drive, Suite 800
San Diego, CA 92121
Fax No.:
/s/ R. Alex Kaseberg
-----------------------------------
R. Alex Kaseberg
Address: 12801 Corbett Court
San Diego, CA 92130
Fax No: ____________________
/s/ Tod Thoele
-----------------------------------
Tod Thoele
Address: 63 San Bernardino Avenue
Ventura, CA 93004
Fax No: ____________________
[COUNTERPART SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
T. LARRY AND MARGARET EDDINGTON
/s/ T. Larry Eddington
-----------------------------------
T. Larry Eddington
/s/ Margaret Eddington
-----------------------------------
Margaret Eddington
Address: 3330 Dove Hollow Road
Olivenhain, CA 92024
Fax No: 759-0483
/s/ George H. Adams, Jr.
-----------------------------------
George H. Adams, JR.
Address: 6045 Beaumont Avenue
La Jolla, CA 92037
Fax No: 619-456-5369
/s/ John Brice
-----------------------------------
John Brice
Address: 1331 Park Road
La Jolla, CA 92037
Fax No: 619/454-7092
PRUDENTIAL SECURITIES, CUSTODIAN FOR
FRANK O. HOLLOWAY IRA
By:
------------------------------
Address: 9255 Towne Centre Drive, Suite 800
San Diego, CA 92121
Fax No: ___________________
[COUNTERPART SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
FARALLON CAPITAL PARTNERS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark Wehrly
FARALLON CAPITAL INSTITUTIONAL
PARTNERS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark Wehrly
FARRALON CAPITAL INSTITUTIONAL
PARTNERS II, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark Wehrly
[COUNTERPART SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
FARALLON CAPITAL INSTITUTIONAL
PARTNERS III, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark Wehrly
RR CAPITAL PARTNERS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark Wehrly
/s/ James Stryker
-----------------------------------
James Stryker
Address: c/o Rubios Restaurants, Inc.
5151 Shoreman Place, Suite 260
San Diego, CA 92122
Fax No: ____________________
[COUNTERPART SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
/s/ Kim Lopdrup
-----------------------------------
Kim Lopdrup
Address: One Tamarack Way
Sharon, MA 02067
Fax No: ___________________
W.A. & H. INVESTMENT, L.L.C.
By: /s/ illegible
------------------------------
Title:
------------------------------
Address: Wessels, Arnold & Henderson, L.L.C.
c/o Kim-Hue Phan
601 Second Avenue South
Minneapolis, MN 55402-4314
Fax No: 612-373-6159
/s/ Arthur Yelsey
-----------------------------------
Arthur R. Yelsey
Address: 1550 Bayside Drive
Corona Del Mar, CA 92625
Fax No: 714-721-0555
/s/ Bruce Frazer
-----------------------------------
Bruce Frazer
/s/ Joanne Frazer
-----------------------------------
Joanne Frazer
Address: 5151 Shoreham Place, Suite 260
San Diego, CA 92122
Fax No: ____________________
[COUNTERPART SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
/s/ John Brice
-----------------------------------
John Brice
/s/ Ellen Brice
-----------------------------------
Ellen Brice
Address: 1331 Park Road
La Jolla, CA 92037
Fax No: 619-454-7092
H.A. LAVEZZI CO., INC. PROFIT SHARING
TRUST FOR THE BENEFIT OF JOHN RICHARD
CUCHNA & JOHN RANDALL CUCHNA
By: /s/ John Cuchna
------------------------------
Trustee
Address: c/o Lynn Capps
2515 Industry Street
Oceanside, CA 92054
Fax No: 760 757-0323
BRIAN AND ANN ROBERTS
/s/ Brian Roberts
-----------------------------------
Brian Roberts
/s/ Ann Roberts
-----------------------------------
Ann Roberts
Address: 16 Leroy Street
San Francisco, CA 94109
Fax No: 415-292-9892
[COUNTERPART SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
/s/ Frank Holloway
-----------------------------------
Frank O. Holloway
Address: 81 South Peak Drive
Laguna Niguel, CA 92677
Fax No: __________________
RICHARD AND MARTHA PARKER
/s/ Richard Parker
-----------------------------------
Richard Parker
/s/ Martha Parker
-----------------------------------
Martha Parker
Address: 430 Silvergate
San Diego, CA 92106
Fax No: 582-1497
BROBECK, PHLEGER & HARRISON LLP
By: /s/ Craig S. Andrews
----------------------------
Title: Partner
----------------------------
Address: Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
Fax No: ___________________
/s/ Thomas Huppert
-----------------------------------
Thomas Huppert
Address: 13311 Kibbings Road
San Diego, CA 92130
Fax No.: ____________________
[COUNTERPART SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
/s/ Kevin Kelly
-----------------------------------
Kevin Kelly
Address: 2350 Melville Drive
San Marino, CA 91108
Fax No.: ____________________
EVEREN CLEARING CORP. CUST.
FBO: KEVIN L. SHIBUYA IRA
By: /s/ Kevin Shibuya
----------------------------
Title:
----------------------------
Address: 2141 Palomar Airport Road, Suite 100
Carlsbad, CA 92009
Fax No: (760) 804-0399
/s/ Lic. Eugenio Clariond
-----------------------------------
Lic. Eugenio Clariond R.R.
Address: Batallon De San Patricio No. 111
Torre Comercial America Piso 26
Fracc. Valle Oriente
Garza Garcia, N.L. CP66269 Mexico
Fax No: __________________
DANIEL K. AND KUMIKO SHIBUYA JTWROS
/s/ Daniel Shibuya
-----------------------------------
Daniel K. Shibuya
/s/ Kumiko Shibuya
-----------------------------------
Kumiko Shibuya
Address: 8451 Cranford Avenue
Sun Valley, CA 91352
Fax No: (818) 982-2423
[COUNTERPART SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
EVEREN CLEARING CORP. CUST.
FBO: GAIL L. ROSS IRA
By: /s/ Gail Ross
------------------------------
Title:
----------------------------
Address: 2141 Palomar Airport Road, Suite 100
Carlsbad, CA 92009
Fax No: (760) 804-0399
/s/ Ronald Sellers
-----------------------------------
Ronald B. Sellars
Address: 11381 Eastview Pt.
San Diego, CA 92131
Fax No: 619-546-9501
EVEREN CLEARING CORP. CUST.
FBO: RONALD B. SELLARS IRA
By: /s/ Ronald Sellers
------------------------------
Title:
----------------------------
Address: 2141 Palomar Airport Road, Suite 100
Carlsbad, CA 92009
Fax No: (760) 804-0399
EVEREN CLEARING CORP. CUST.
FBO: SHAWN O. ROWE IRA
By: /s/ Shawn Rowe
------------------------------
Title:
----------------------------
Address: 2141 Palomar Airport Road, Suite 100
Carlsbad, CA 92009
Fax No: (760) 804-0399
[COUNTERPART SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
EVEREN CLEARING CORP. CUST.
FBO: SHARON ROWE IRA
By: /s/ Sharon Rowe
------------------------------
Title:
----------------------------
Address: 2141 Palomar Airport Road, Suite 100
Carlsbad, CA 92009
Fax No: (760) 804-0399
SHAWN O. ROWE AND SHARON ROWE JTWROS
/s/ Shawn Rowe
-----------------------------------
Shawn O. Rowe
/s/ Sharon Rowe
-----------------------------------
Sharon Rowe
Address: 823 Pochontas Court
Paso Robles, CA 93446
/s/ Mike Blackman
-----------------------------------
Mike Blackman
Address: Nations Bank Montgomery Securities
9 West 57th Street, 47th Floor
New York, NY 10019
Fax No: 212-583-8450
/s/ J. Richard Fredericks
-----------------------------------
J. Richard Fredericks
Address: Nations Bank Montgomery Securities
600 Montgomery Street
San Francisco, CA 94111
Fax No: (415) 627-2696
[COUNTERPART SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
/s/ Murray Huneke
-----------------------------------
Murray Huneke, Trustee for Huneke Family
Trust
Address: Nations Bank Montgomery Securities
600 Montgomery Street
San Francisco, CA 94111
Fax No: 415 913 5513
[COUNTERPART SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
Acknowledged and agreed solely
with respect to Section 2.4:
RALPH RUBIO AND DIONE RUBIO AS
TRUSTEES OF THE RALPH RUBIO AND
DIONE RUBIO FAMILY TRUST
By: /s/ Ralph Rubio
------------------------------
Ralph Rubio, Trustee
By: /s/ Dione Rubio
------------------------------
Dione Rubio, Trustee
Address: 1115 Los Caballitos
Del Mar, CA 92014
Fax No: ___________________
RAFAEL R. RUBIO AND GLORIA G.
RUBIO, CO-TRUSTEES OF THE
RAFAEL R. RUBIO AND GLORIA G.
RUBIO FAMILY TRUST
By: /s/ Rafael Rubio
------------------------------
Rafael R. Rubio
/s/ Gloria Rubio
------------------------------
Gloria G. Rubio
Address: 5134 Pendelton Street
San Diego, CA 92109
Fax No: ___________________
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
ROBERT L. GARCIA AND GLORIA
R. GARCIA AS TRUSTEES OF THE
ROBERT AND GLORIA GARCIA TRUST
By: /s/ Robert Garcia
------------------------------
Robert L. Garcia, Trustee
/s/ Gloria Garcia
------------------------------
Gloria R. Garcia, Trustee
Address: 2724 Penrose Street
San Diego, CA 92110
Fax No: (619) 275-2053
RICHARD M. RUBIO AND VICTORIA E.
RUBIO AS TRUSTEES OR SUCCESSORS
OF THE RICHARD AND VICTORIA RUBIO
TRUST
By: /s/ Richard Rubio
------------------------------
Richard M. Rubio, Trustee
/s/ Victoria Rubio
------------------------------
Victoria E. Rubio, Trustee
Address: 2107 Blackmore Court
San Diego, CA 92109
Fax No: ___________________
ROBERT RUBIO AS THE TRUSTEE OF
THE ROBERT RUBIO TRUST
By: /s/ Robert Rubio
------------------------------
Robert Rubio, Trustee
Address: 1724 Folus
Encinitas, CA 92024
Fax No: ___________________
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
GLORIA GARCIA AS THE TRUSTEE
OF THE TRUST FBO ROMAN RUBIO
By: /s/ Gloria Garcia
------------------------------
Gloria Garcia, Trustee
Address: 2724 Penrose Street
San Diego, CA 92110
Fax No: (619) 275-2053
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
SCHEDULE A
INVESTORS
Rosewood Capital, L.P.
Dooling Family Trust dated December 8, 1988
Brophar Investor Partners
R. Alex Kaseberg
Tod Thoele
T. Larry Eddington and Margaret Eddington
George H. Adams, Jr.
John Brice
Prudential Securities, Custodian for Frank O. Holloway IRA
Frank O. Holloway
UMB Bank, n.a., Trustee of the Brobeck, Phleger & Harrison Savings Plan f/b/o
William F. Sullivan IRA
UMB Bank, n.a., Trustee of the Brobeck, Phleger & Harrison Savings Plan f/b/o
Todd J. Anson IRA
UMB Bank, n.a., Trustee of the Brobeck, Phleger & Harrison Savings Plan f/b/o
Craig S. Andrews IRA
UMB Bank, n.a., Trustee of the Brobeck, Phleger & Harrison Savings Plan f/b/o
John A. Denniston IRA
UMB Bank, n.a., Trustee of the Brobeck, Phleger & Harrison Savings Plan f/b/o
Jay De Groot IRA
James Stryker
Kim Lopdrup
Farallon Capital Partners, L.P..
A-1
<PAGE>
Farallon Capital Institutional Partners, L.P.
Farallon Capital Institutional Partners II, L.P.
Farallon Capital Institutional Partners III, L.P.
RR Capital Partners, L.P.
Lic. Eugenio Clariond R.R.
W.A. & H. Investment, L.L.C.
Arthur R. Yelsey
Bruce and Joanne Frazer
John and Ellen Brice
H.A. Lavezzi Co., Inc. Profit
Sharing Trust for the benefit of
John Richard Cuchna & John Randall Cuchna
EVEREN Clearing Corp. Cust.
FBO Kevin L. Shibuya IRA
Daniel K. & Kumiko Shibuya JTWROS
Brian and Ann Roberts
Frank O. Holloway
R. Alex Kaseberg
EVEREN Clearing Corp. Cust.
FBO: Gail L. Ross IRA
Ronald B. Sellars
EVEREN Clearing Corp. Cust.
FBO: Ronald B. Sellars IRA
EVEREN Clearing Corp. Cust.
FBO: Shawn O. Rowe IRA
EVEREN Clearing Corp. Cust.
FBO: Sharon Rowe IRA
A-2
<PAGE>
Shawn O. Rowe & Sharon Rowe JTWROS
T. Larry and Margaret Eddington
Richard and Martha Parker
Brobeck, Phleger & Harrison LLP
Thomas Huppert
Lisa Conder
Kevin Kelly
Jeff Barker
Robert Paul Nunez
Julie Blair
John Joseph Canning II
Michael Blackman
J. Richards Fredericks
Huneke Family Trust
A-3
<PAGE>
SCHEDULE 2.4
RUBIO FAMILY MEMBERS
Ralph Rubio and Dione Rubio as
Trustees of the Ralph Rubio and Dione Rubio Family Trust
Rafael R. Rubio and Gloria G. Rubio, Co-Trustees of
the Rafael R. Rubio and Gloria G. Rubio Family Trust
Robert L. Garcia and Gloria R. Garcia as
Trustees of the Robert and Gloria Garcia Trust
Richard M. Rubio and Victoria E. Rubio as Trustees
or Successors of the Richard and Victoria Trust
Robert Rubio as the Trustee of the Robert Rubio Trust
Gloria Garcia as the Trustee of the Trust FBO Roman Rubio
A-4
<PAGE>
EXHIBIT 10.8
RUBIO'S RESTAURANTS, INC.
AMENDMENT NO. 1 TO THE
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
This Amendment No. 1 ("Amendment") to the Amended and Restated Investors'
Rights Agreement (the "Agreement"), dated November 19, 1997, is made as of this
31st day of December, 1997 by and among RUBIO'S RESTAURANTS, INC., a Delaware
corporation (the "Company"), the investors listed on SCHEDULE A of the Agreement
(the "Existing Investors") and the investor listed on EXHIBIT A attached hereto,
(the "New Investor"). Capitalized terms used herein which are not defined
herein shall have the definition ascribed to them in the Agreement.
RECITALS
The Company desires to sell and issue to the New Investor a warrant to
purchase shares of the Company's Series D Preferred Stock.
The Existing Investors desire for the New Investor to invest in the
Company and, as a condition thereof and to induce such investment, the Existing
Investors and the Company are willing to enter into this Amendment to permit the
New Investor to become a party to the Agreement, as amended.
In consideration of the foregoing and the promises and covenants contained
herein and other good and valuable consideration the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. ADDITIONAL PARTIES TO THE AGREEMENT.
The New Investor hereby enters into and becomes a party to the
Agreement. SCHEDULE A to the Agreement is amended to include the New Investor.
2. EFFECT OF AMENDMENT.
Except as amended and set forth above, the Agreement shall continue in full
force and effect.
3. COUNTERPARTS.
This Amendment may be executed in any number of counterparts, each which
will be deemed an original, and all of which together shall constitute one
instrument.
<PAGE>
4. SEVERABILITY.
If one or more provisions of this Amendment are held to be
unenforceable under applicable law, such provision(s) shall be excluded from
this Amendment and the balance of the Amendment shall be interpreted as if such
provision(s) were so excluded and shall be enforceable in accordance with its
terms.
5. ENTIRE AGREEMENT.
This Amendment, together with the Agreement, constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.
6. GOVERNING LAW.
This Amendment shall be governed by and construed under the laws of
the State of California as applied to agreements among California residents
entered into and to be performed entirely within California.
[Remainder of This Page Intentionally Left Blank]
-2-
<PAGE>
This Amendment is hereby executed as of the date first above written.
RUBIO'S RESTAURANTS, INC.,
a Delaware corporation
By: /s/ Ralph Rubio
-------------------------------
Ralph Rubio, President
Address: 5151 Shoreham Place, Suite 260
San Diego, CA 92122
Fax No.: (619) 452-0181
EXISTING INVESTORS:
ROSEWOOD CAPITAL, L.P.
By: Rosewood Capital Associates, L.P.,
General Partner
By: /s/ Kyle Anderson
-------------------------------
Kyle A. Anderson, Principal
Address: One Maritime Plaza, Suite 1330
San Francisco, CA 94111
Fax No: (415) 362-1192
FARALLON CAPITAL PARTNERS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
-------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark
Wehrly
[COUNTERPART SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
FARALLON CAPITAL INSTITUTIONAL
PARTNERS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
-------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark
Wehrly
FARRALON CAPITAL INSTITUTIONAL
PARTNERS II, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
-------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark
Wehrly
[COUNTERPART SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
FARALLON CAPITAL INSTITUTIONAL
PARTNERS III, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
-------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark
Wehrly
RR CAPITAL PARTNERS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
-------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark
Wehrly
[COUNTERPART SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
RAFAEL R. RUBIO AND GLORIA G.
RUBIO, CO-TRUSTEES OF THE
RAFAEL R. RUBIO AND GLORIA G.
RUBIO FAMILY TRUST
By: /s/ Rafael Rubio
-------------------------------
Rafael R. Rubio
By: /s/ Gloria Rubio
-------------------------------
Gloria G. Rubio
Address: 5134 Pendelton Street
San Diego, CA 92109
Fax No: ___________________
RALPH RUBIO AND DIONE RUBIO AS
TRUSTEES OF THE RALPH RUBIO AND
DIONE RUBIO FAMILY TRUST
By: /s/ Ralph Rubio
-------------------------------
Ralph Rubio, Trustee
By: /s/ Dione Rubio
-------------------------------
Dione Rubio, Trustee
Address: 1115 Los Caballitos
Del Mar, CA 92014
Fax No: ___________________
[COUNTERPART SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
NEW INVESTOR:
NATIONSBANC MONTGOMERY SECURITIES, LLC
By: /s/ illegible
-------------------------------
Title: Senior Managing Director
-------------------------------
Address: NationsBanc Montgomery Securities,
LLC
600 Montgomery Street
San Francisco, CA 94111
Fax No: ___________________
[COUNTERPART SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
EXHIBIT A
NEW INVESTOR
NATIONSBANC MONTGOMERY SECURITIES, LLC
A-1
<PAGE>
EXHIBIT 10.9
RUBIO'S RESTAURANTS, INC.
AMENDMENT NO. 2 TO THE
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
This Amendment No. 2 ("Amendment") to the Amended and Restated
Investors' Rights Agreement, as amended (the "Agreement"), dated November 19,
1997, is made as of this ___ day of May, 1998 by and among RUBIO'S RESTAURANTS,
INC., a Delaware corporation (the "Company"), the investors listed on SCHEDULE A
of the Agreement (the "Existing Investors") and the investor listed on EXHIBIT A
attached hereto, (the "New Investor"). Capitalized terms used herein which are
not defined herein shall have the definition ascribed to them in the Agreement.
RECITALS
The Company desires to sell and issue to the New Investor a
warrant to purchase shares of the Company's Series D Preferred Stock.
The Existing Investors desire for the New Investor to invest
in the Company and, as a condition thereof and to induce such investment, the
Existing Investors and the Company are willing to enter into this Amendment to
permit the New Investor to become a party to the Agreement, as amended.
In consideration of the foregoing and the promises and
covenants contained herein and other good and valuable consideration the receipt
of which is hereby acknowledged, the parties hereto agree as follows:
1. ADDITIONAL PARTIES TO THE AGREEMENT.
The New Investor hereby enters into and becomes a party to the
Agreement. SCHEDULE A to the Agreement is amended to include the New Investor.
2. EFFECT OF AMENDMENT.
Except as amended and set forth above, the Agreement shall
continue in full force and effect.
3. COUNTERPARTS.
This Amendment may be executed in any number of counterparts,
each which will be deemed an original, and all of which together shall
constitute one instrument.
<PAGE>
4. SEVERABILITY.
If one or more provisions of this Amendment are held to be
unenforceable under applicable law, such provision(s) shall be excluded from
this Amendment and the balance of the Amendment shall be interpreted as if such
provision(s) were so excluded and shall be enforceable in accordance with its
terms.
5. ENTIRE AGREEMENT.
This Amendment, together with the Agreement, constitutes the
full and entire understanding and agreement between the parties with regard to
the subjects hereof and thereof.
6. GOVERNING LAW.
This Amendment shall be governed by and construed under the
laws of the State of California as applied to agreements among California
residents entered into and to be performed entirely within California.
[Remainder of This Page Intentionally Left Blank]
2
<PAGE>
This Amendment is hereby executed as of the date first above written.
RUBIO'S RESTAURANTS, INC.,
a Delaware corporation
By: /s/ Ralph Rubio
--------------------------------
Ralph Rubio, President
Address: 5151 Shoreham Place,
Suite 260
San Diego, CA 92122
Fax No.: (619) 452-0181
EXISTING INVESTORS:
ROSEWOOD CAPITAL, L.P.
By: Rosewood Capital Associates,
L.P., General Partner
By: /s/ Kyle Anderson
--------------------------------
Kyle A. Anderson, Principal
Address: One Maritime Plaza,
Suite 1330
San Francisco, CA 94111
Fax No: (415) 362-1192
FARALLON CAPITAL PARTNERS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
--------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and
Mark Wehrly
<PAGE>
FARALLON CAPITAL INSTITUTIONAL
PARTNERS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
--------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and
Mark Wehrly
FARRALON CAPITAL INSTITUTIONAL
PARTNERS II, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
--------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and
Mark Wehrly
FARALLON CAPITAL INSTITUTIONAL
PARTNERS III, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
-------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and
Mark Wehrly
<PAGE>
RR CAPITAL PARTNERS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
--------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and
Mark Wehrly
RAFAEL R. RUBIO AND GLORIA G.
RUBIO, CO-TRUSTEES OF THE
RAFAEL R. RUBIO AND GLORIA G.
RUBIO FAMILY TRUST
By: /s/ Rafael Rubio
--------------------------------
Rafael R. Rubio
By: /s/ Gloria Rubio
--------------------------------
Gloria G. Rubio
Address: 5134 Pendelton Street
San Diego, CA 92109
Fax No:
-------------------
RALPH RUBIO AND DIONE RUBIO AS
TRUSTEES OF THE RALPH RUBIO AND
DIONE RUBIO FAMILY TRUST
By: /s/ Ralph Rubio
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Ralph Rubio, Trustee
By: /s/ Dione Rubio
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Dione Rubio, Trustee
Address: 1115 Los Caballitos
Del Mar, CA 92014
Fax No:
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NEW INVESTOR:
FSC CORP.
By:
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Title:
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Address: c/o BancBoston Capital
175 Federal Street, 18th
Floor
Boston, MA 02110
Fax No: (617) 434-1153
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EXHIBIT A
NEW INVESTOR
FSC CORP.
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EXHIBIT 10.10
AMENDED AND RESTATED STOCK RESTRICTION AGREEMENT
This Amended and Restated Stock Restriction Agreement (the "Agreement") is
made and entered into as of November 19, 1997, by and among Rubio's Restaurants,
Inc., a Delaware corporation with its principal office at 5151 Shoreham Place,
Suite 260, San Diego, California 92122 (the "Company"), the holders of shares of
the Company's Common Stock and Series A Preferred Stock listed on SCHEDULE A
hereto (the "Stockholders") and the holders of the Company's Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock (the "Investors").
RECITALS
A. The Company and the Stockholders are parties to that certain Stock
Restriction Agreement dated February 1, 1995, as amended on March 28, 1996 (the
"Prior Agreement"), pursuant to which certain restrictions were placed on the
transferability of the Stockholders' shares of capital stock of the Company.
B. Pursuant to that certain Series D Preferred Stock Purchase Agreement
of even date herewith by and among the Company and certain of the Investors (the
"Series D Agreement"), certain of the Investors are purchasing an aggregate of
up to 1,389,943 shares of the Company's Series D Preferred Stock (the "Series D
Financing").
C. In order to induce the Series D Investors to purchase the Series D
Preferred Stock, the Company and the Stockholders desire amend and restate the
Prior Agreement by entering into this Agreement, the execution of which is a
condition precedent to the closing of the Series D Financing.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and in the
Series D Agreement, the parties mutually agree as follows:
1. RESTRICTIONS ON TRANSFER. Except as permitted by the terms of this
Agreement, a Stockholder may not make any sale, exchange, transfer, assignment,
gift, pledge, encumbrance, hypothecation or alienation of any shares of Common
Stock or Series A Preferred Stock of the Company, or any interest in such
shares, now held by or hereafter acquired by such Stockholder ("Restricted
Shares"), whether voluntarily or involuntarily or by operation of law
(hereinafter collectively referred to as a "transfer").
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2. RIGHT OF FIRST REFUSAL.
2.1 NOTICE TO THE COMPANY.
(a) In the event any Stockholder (the "Transferring Stockholder")
desires to transfer any Restricted Shares other than as specifically provided in
SECTION 4 below, he, she or it must deliver a notice in writing to the Company
(the "Company Notice") stating such Stockholder's bona fide intention to
transfer such Restricted Shares, the names of the prospective Transferee or
Transferees (as defined in SECTION 6.3 below), the number of Restricted Shares
proposed to be transferred, and the price per share at which such Restricted
Shares are proposed to be transferred.
(b) In the event the proposed transfer is partially or completely in
exchange for assets other than cash, then such assets will be deemed to have a
cash value in the amount determined by the Company's Board of Directors in its
sole good faith opinion, in which case such cash value ascertained by the Board,
when added to any cash to be exchanged and then divided by the number of
Restricted Shares to be transferred, will be deemed the price per share set
forth in the Company Notice. In the event of a gift, property settlement or
other transfer in which the proposed Transferee is not paying the full price for
the Restricted Shares, and that is not otherwise exempted from the terms of
SECTIONS 2 and 3 hereof, the price shall be deemed to be the fair market value
of the stock at such time as determined in good faith by the Company's Board of
Directors.
2.2 COMPANY OPTION. For twenty (20) days following receipt of a Company
Notice, the Company will have an exclusive, irrevocable option to purchase any
or all of the Restricted Shares proposed to be transferred at the price per
share and upon the terms set forth in the Company Notice (the "Company Option").
2.3 EXERCISE OF COMPANY OPTION. In the event the Company elects to
acquire any or all of the Restricted Shares proposed to be transferred, prior to
the expiration of the Company Option, the Company shall deliver a notice in
writing to the Transferring Stockholder (the "Company Settlement Notice")
stating its election to acquire the subject Restricted Shares.
2.4 COMPANY SETTLEMENT. Within ten (10) days of receipt of the Company
Settlement Notice, the Transferring Stockholder must deliver to the Company all
certificates for the Restricted Shares being acquired by the Company which are
not already in the Company's custody, together with proper assignments in blank
of the Restricted Shares with signatures properly guaranteed and with such other
documents as may be required by the Company to provide reasonable assurance that
each necessary endorsement is genuine and effective, and the Company must
thereupon deliver to the Transferring Stockholder full cash payment for the
Restricted Shares being acquired, provided that if the terms of payment set
forth in the Company Notice were other than cash against delivery, the Company
shall pay for said Restricted Shares on the same terms and conditions set forth
in such Company Notice.
2.5 OPTION TO THE INVESTORS. For purposes of Section 2 only, "Investors"
and
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"Investor" shall mean only those Investors (or groups of Investors which are
Affiliates) holding more than 100,000 shares of Series B Preferred Stock, Series
C Preferred Stock or Series D Preferred Stock, in the aggregate. In the event
the Company elects not to acquire all of the Restricted Shares proposed to be
transferred, prior to the expiration of the Company Option, it shall notify the
Transferring Stockholder in writing of such election and shall promptly deliver
a notice in writing to each Investor (the "Investor Notice") stating such
election to not acquire all the subject Restricted Shares and reciting the
Transferring Stockholder's bona fide intention to transfer such Restricted
Shares, the names of the prospective Transferee or Transferees, the number of
Restricted Shares proposed to be transferred, and the numbers of Restricted
Shares the Company has elected not to purchase, and the price per share at which
such Restricted Shares are proposed to be transferred. In the event the Company
does not provide notice to the Transferring Stockholder within the period of the
Company Option, the Transferring Stockholder shall provide the Investor Notice
to each Investor and to the Company. For twenty (20) days following receipt of
the Investor Notice, each Investor shall have the option to purchase not more
than its pro rata share (as defined in SECTION 2.6 below) of the Restricted
Shares proposed to be transferred to the Transferees at the price per share and
upon the terms set forth in the Investor Notice (the "Investor Option"). The
Company shall promptly, in writing inform each Investor which purchases all the
Restricted Shares available to it ("Fully-Exercising Investor") of any other
Investor's failure to do likewise. During the ten-day period commencing after
receipt of such information, each Fully-Exercising Investor shall be entitled to
obtain that portion of the Restricted Shares for which Investors were entitled
to subscribe but which were not subscribed for by the Investors which is equal
to the proportion at the number of shares of Common Stock issued and held, or
issuable upon conversion of Series B Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock then held, by such Fully-Exercising Investor bears
to the total number of shares of Common Stock issued and held, or issuable upon
conversion of the Series B Preferred Stock, the Series C Preferred Stock and the
Series D Preferred Stock, then held, by all Fully-Exercising Investors who wish
to purchase some of the unsubscribed Shares.
2.6 DETERMINATION OF PRO RATA SHARE. For purposes of this Section 2, each
Investor's "pro rata share" is a ratio of (i) the total number of shares of
Common Stock and Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock of the Company held by such Investor as of the date of the
Investor Notice (on an as-if-converted to Common Stock basis) to (ii) the total
aggregate shares of Common Stock and Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock (on an as-if-converted to Common
Stock basis) of the Company held by all Investors who deliver an Investor Notice
as of such date.
2.7 ASSIGNMENT OF INVESTOR OPTION. Each Investor may assign his, her or
its rights under this SECTION 2 to another Investor or to any Stockholder who
acquires an Investor's shares or to any general partner or limited partner of an
Investor who will after the assignment (together with any of its Affiliates)
hold at least 100,000 shares of stock of the
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Company; PROVIDED, HOWEVER, that if payment is to be made in any manner other
than all cash against delivery of the Restricted Shares being sold, such
assignee must be reasonably creditworthy.
2.8 EXERCISE OF INVESTOR OPTION. In the event an Investor and/or its
assignee elects to acquire a portion of the Restricted Shares proposed to be
transferred, prior to the expiration of the Investor Option, such Investor
and/or assignee shall deliver a written notice of exercise ("First Refusal
Exercise Notice") to the Company. The Investor and/or assignee shall specify in
the First Refusal Exercise Notice the number of shares such Investor and/or
assignee thereby irrevocably elects to purchase from the Transferring
Stockholder. In the event the number of shares so elected to be purchased by
Investors exceeds, in the aggregate, the number of Restricted Shares proposed to
be transferred pursuant to the Investor Notice and not subscribed to by the
Company, such shares shall be allocated among the electing Investors according
to each electing Investor's pro rata share (as defined in SECTION 2.6 above).
Settlement for said shares shall be made as provided in SECTION 2.9 below.
2.9 INVESTOR SETTLEMENT. Promptly upon expiration of the Investor Option,
the Company shall deliver a notice in writing to the Transferring Stockholder
and each Investor and/or assignee who elected to acquire a portion of the
Restricted Shares subject to the Investor Option (the "Investor Settlement
Notice") setting forth the number of Restricted Shares to be sold to each
Investor and/or assignee and the price thereof. Within ten (10) days of receipt
of the Investor Settlement Notice, the Transferring Stockholder must deliver to
the Company any certificates for the Restricted Shares being acquired by the
Investors and/or assignees which are not already in the Company's custody,
together with proper assignments in blank of the Restricted Shares with
signatures properly guaranteed and with such other documents as may be required
by the Company to provide reasonable assurance that each necessary endorsement
is genuine and effective. Within ten (10) days of receipt of the Investor
Settlement Notice, each Investor and/or assignee acquiring a portion of the
Restricted Shares must deliver to the Company (a) full cash payment for the
portion of the subject Restricted Shares being so acquired, provided that if the
terms of payment set forth in the Investor Notice were other than cash against
delivery, the Investors electing to acquire a portion of the subject Restricted
Shares and/or their assignees shall pay for said shares on the same terms and
conditions set forth in such Investor Notice; and, if applicable, (b) evidence
satisfactory to the Company that such assignee has become a party to this
Agreement. The Company shall thereafter promptly remit full payment for the
Restricted Shares acquired hereby to the Transferring Stockholder and deliver
the new or assigned certificates to the Investors and/or assignees, as
appropriate.
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3. RIGHT OF CO-SALE.
3.1 CO-SALE NOTICE. In the event that less than all of the Restricted
Shares proposed to be transferred by a Transferring Stockholder are acquired by
the Company or the Investors pursuant to SECTION 2 above, the Company shall
deliver, promptly upon expiration of the Investor Option, a notice in writing to
each Investor (the "Co-Sale Notice") reiterating the names of the prospective
Transferee or Transferees, the number of Restricted Shares proposed to be
transferred and not acquired pursuant to the Company Option or the Investor
Option, and the price per share at which such Restricted Shares are proposed to
be transferred.
3.2 RIGHT OF CO-SALE. Each Investor shall have the right to sell to the
Transferee (or, upon the unwillingness of any Transferee to purchase directly
from such Investor, to the Transferring Stockholder) not more than its pro rata
share (as defined in SECTION 3.3 below) of the Restricted Shares subject to the
Co-Sale Notice on the terms set forth in the Co-Sale Notice. If the
consideration to be paid by the Transferee is of a nature that cannot be given
to Investors, then each Investor shall have the right to sell its pro rata share
of the Restricted Shares subject to the Co-Sale Notice to the Transferring
Stockholder at the fair market value per share of such consideration.
3.3 DETERMINATION OF PRO RATA SHARE. For purposes of this Section 3, each
Investor's "pro rata share" is a ratio of (i) the total number of shares of
Common Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock of the Company held by an Investor as of the date of the Co-Sale
Notice (on an as-if-converted to Common Stock basis) to (ii) the total aggregate
shares of Common Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock of the Company held by all Investors electing to sell
to the Transferee or Transferees (on an as-if-converted to Common Stock basis).
3.4 EXERCISE OF RIGHT OF CO-SALE. In order to exercise the right of
co-sale, an Investor shall deliver a notice of exercise (the "Co-Sale
Exercise Notice") to the Transferring Stockholder, with a simultaneous copy
to the Company, within fifteen (15) days after receipt of the Co-Sale Notice.
The Investor shall specify in the Co-Sale Exercise Notice the number of
shares, up to its pro rata share (as defined in SECTION 3.3 above), such
Investor desires to sell.
3.5 CONSUMMATION OF CO-SALE.
(a) Each Investor exercising its right of co-sale hereunder shall
effect its participation in the sale by promptly delivering to the Transferring
Stockholder for transfer to the prospective Transferee one or more certificates,
properly endorsed for transfer, which represent:
(i) the type and number of shares of capital stock which such
Investor elects to sell; or
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(ii) that number of shares of Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock which is at such time convertible
into the number of shares of Common Stock which such Investor elects to sell;
PROVIDED, HOWEVER, that if the prospective Transferee objects to the delivery of
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock
in lieu of Common Stock or Series A Preferred Stock, such Investor shall convert
such Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock into Common Stock and deliver Common Stock. The Company agrees to make
any such conversion concurrent with the actual transfer of such shares to the
Transferee.
(b) The stock certificate or certificates that the Investor delivers
to the Transferring Stockholder pursuant to SECTION 3.5(a) shall be transferred
to the prospective Transferee in consummation of the sale of the subject
Restricted Shares pursuant to the terms and conditions specified in the Co-Sale
Notice, and the Transferring Stockholder shall concurrently therewith remit to
such Investor that portion of the sale proceeds to which such Investor is
entitled by reason of its participation in such sale. To the extent that any
prospective Transferee prohibits the assignment of any certificates or refuses
to purchase shares from an Investor exercising its right of co-sale hereunder,
the Transferring Stockholder shall not sell such prospective Transferee any
shares of Common Stock unless and until, simultaneously with such sale, the
Transferring Stockholder shall purchase such shares of Common Stock from such
Investor for the same consideration and on the same terms and conditions as the
proposed transfer described in the Co-Sale Notice.
3.6 TRANSFER OF RESTRICTED SHARES UPON FAILURE TO EXERCISE RIGHT OF
CO-SALE. If none of the Investors elect to participate in the sale of the
Restricted Shares subject to the Co-Sale Notice, the Transferring Stockholder
may, not later than sixty (60) days following the Investors' receipt of the
Co-Sale Notice, conclude a transfer of not less than all of the Restricted
Shares covered by the Notice on terms and conditions not more favorable to
the Transferring Stockholder than those described in the Co-Sale Notice. Any
proposed transfer on terms and conditions more favorable than those described
in the Co-Sale Notice, as well as any subsequent proposed transfer of any
Restricted Shares by the Transferring Stockholder, shall again be subject to,
and require compliance with, the provisions of SECTIONS 2 and 3 hereof.
4. EXCEPTIONS TO RESTRICTIONS ON TRANSFER.
4.1 Notwithstanding the restrictions on transfer set forth in SECTION 1,
or the rights of first refusal and co-sale rights set forth in SECTIONS 2 and 3
of this Agreement, any "Rubio Stockholder" may transfer, by sale, gift or
otherwise, all or any part of their Restricted Shares, to any other Rubio
Stockholder. For this purpose, a Rubio Stockholder shall mean and include (i)
Rafael Rubio, Ralph Rubio, Robert Rubio, Gloria Rubio Garcia, Richard Rubio or
Roman Rubio, individually or as a trustee, (the "Rubios"), (ii) any lineal
descendant of a Rubio, and (iii) any trust or other entity in which
substantially all of the beneficial ownership interests are held, directly or
indirectly through one or more intermediaries, by any one or
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more Rubios or lineal descendant of a Rubio.
4.2 Notwithstanding the Investors' rights of first refusal and co-sale set
forth in SECTION 2 and 3 of this Agreement, any Stockholder other than a Rubio
Stockholder may transfer all or part of the Restricted Shares owned by such
Stockholder:
(a) in the case of individuals, (i) to members of his or her
Immediate Family, if by gift, where "Immediate Family" means any parent, spouse,
child, grandchild, brother or sister of the Stockholder, or any trust for the
sole benefit of any or all of such persons, and (ii) to his or her heirs,
executors or other fiduciaries pursuant to a last will and testament of the
Stockholder or pursuant to the terms of any trust which take effect upon death
of the Stockholder; and
(b) in the case of any other stockholder, (i) to its Affiliates,
where "Affiliates" means any other person or entity that, directly or indirectly
through one or more intermediaries, is in control of, is controlled by, or is
under common control with such Stockholder, and (ii) to its successors in
interest.
4.3 Any transfer of Restricted Shares made pursuant to the provisions of
this SECTION 4 shall be subject to the following:
(a) This Agreement shall be binding upon each Transferee of such
Restricted Shares;
(b) Prior to the completion of such transfer, each such Transferee or
such Transferee's legal representative shall have executed documents in form and
substance satisfactory to the Company, evidenced by the Company's written
acknowledgement of such satisfaction, assuming the obligations of a Stockholder
under this Agreement with respect to the transferred Restricted Shares; and
(c) Such transferred Restricted Shares shall remain subject to the
provisions of this Agreement, and references to "Stockholders" hereunder shall
be deemed thereafter to apply to and include the Transferee or Transferees of
any such Restricted Shares.
5. TERMINATION OF RESTRICTIONS ON TRANSFERS. Notwithstanding anything in this
Agreement to the contrary, the right of first refusal and right of co-sale set
forth in SECTIONS 2 and 3 hereof shall not apply to and shall terminate upon the
closing date of the sale and purchase of shares of Common Stock pursuant to an
effective registration statement of the Company filed under the Securities Act
with respect to an underwritten public offering of its Common Stock in which the
Company and any selling stockholders receive not less than $15,000,000 aggregate
net proceeds.
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6. LEGENDS; STOP-TRANSFER INSTRUCTIONS.
6.1 LEGENDS. All certificates representing Restricted Shares subject to
this Agreement will bear the following legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SHARES REPRESENTED
BY THIS CERTIFICATE IS RESTRICTED BY AND SUBJECT TO THE PROVISIONS OF
A STOCKHOLDERS AGREEMENT, AS THE SAME MAY BE AMENDED, AMONG THE
PARTIES NAMED THEREIN, A COPY OF WHICH IS AVAILABLE AT THE PRINCIPAL
OFFICE OF THE ISSUER OF SUCH SHARES."
In addition, such certificates will bear legends required under any other
applicable agreement or securities law.
6.2 STOP-TRANSFER INSTRUCTIONS. The Company may impose stop-transfer
instructions with respect to the Restricted Shares or other securities subject
to the foregoing restrictions and will make a notation regarding the
restrictions on transfer of the Restricted Shares in its stock books. The
Restricted Shares will be transferred on the books of the Company only if
transferred in compliance with this Agreement and applicable securities laws.
Each Stockholder agrees to use his, her or its best efforts to cause the
officers of the Company to refuse to record on the Company's books any transfer
made or attempted to be made except in accordance with this Agreement and to
cause such officers to refuse to cancel old certificates or to issue or deliver
new certificates therefor where the purchaser or assignee has acquired
Restricted Shares, except strictly in accordance with this Agreement.
6.3 TRANSFEREES. Without limiting the restrictions on transfer set forth
herein, each transferee (including, without limitation, any vendee, transferee,
successor, assignee, donee, pledgee or hypothecate) who acquires an interest in
any shares of Common Stock or Series A Preferred Stock (the "Transferee") will
be subject to all the transfer restrictions and other obligations with respect
to such shares imposed by this Agreement as if he, she or it were a Stockholder
and will, for purposes of this Agreement, be deemed to be a Stockholder. The
conditions and stipulations contained in this Agreement constitute a covenant
running with the Restricted Shares, and any actual or attempted transfer in
violation of this Agreement is null and void and of no legal effect.
7. MISCELLANEOUS.
7.1 CONDITIONS TO EXERCISE OF RIGHTS. Exercise of the rights granted to
the Company and the Investors under this Agreement shall be subject to and
conditioned upon, and the parties shall use their best efforts to assist the
Company and Investors in, compliance with applicable laws.
7.2 CORPORATE LAW COMPLIANCE. The right of the Company to repurchase any
of
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the Restricted Shares is subject to the restrictions governing the rights of
a corporation to purchase its own shares contained in any applicable state laws
and such other pertinent governmental restrictions as may from time to time be
effective.
7.3 GOVERNING LAW; JURISDICTION AND VENUE. This Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of California applicable to contracts between California residents entered
into and to be performed entirely within the State of California, excluding its
choice of law provisions. Any suit arising hereunder will be brought in the
United States District Court for the Southern District of California or the
Superior Court of California for the County of San Diego, and the parties hereby
irrevocably consent to the exclusive jurisdiction and venue thereof, as well as
to service of process within or without the State of California by certified
mail requiring a signed receipt.
7.4 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto
(collectively, "Successors").
7.5 POWER OF ATTORNEY. Each Stockholder and Investor, by executing this
Agreement, irrevocably appoints each of the officers of the Company his, her or
its true and lawful attorney-in-fact to execute any amendments hereto for the
sole purpose of adding or deleting Stockholders or Investors.
7.6 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement among the parties with regard to the subjects
hereof.
7.7 NOTICES. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be sent to the
address/fax number indicated for such party on the signature page hereof
(provided that any party may at any time change its address/fax number for
notice by ten (10) days' advance written notice to the other parties), and shall
be deemed effectively given upon (i) personal delivery to the party to be
notified, (ii) the time of successful facsimile transmission to the party to be
notified, (iii) sending by reputable overnight delivery service or (iv) three
(3) days after deposit with the United States Post Office, by registered or
certified mail.
7.8 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any party, upon any breach or default of any other
party under this Agreement, shall impair any such right, power or remedy of such
party nor shall it be construed to be a waiver of any such breach or default, or
an acquiescence therein, or of or in any similar breach or default thereunder
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any party of any provisions or conditions of this Agreement, must be in
writing and shall be
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effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.
7.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the Stockholders
and Investors, all of which together shall constitute one instrument. This
Agreement shall be enforceable by and against only the parties actually
executing such counterparts (and their Successors).
7.10 SEVERABILITY. In the case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
7.11 AMENDMENTS. The provisions of this Agreement may be amended at any
time and from time to time, and particular provisions of this Agreement may
be waived, with and only with an agreement or consent in writing signed by
the Company, by the holders of eighty percent (80%) of the Common Stock
issuable or issued upon conversion of the Preferred Stock held by the
Investors as of the date of such amendment or waiver, and, to the extent that
the rights of the Stockholder are specifically affected by such amendment or
waiver, by the holders of a majority-in-interest of the Stockholders. Each
Investor and each Stockholder acknowledges that by the operation of this
SECTION 7.11 eighty percent (80%) of the Investors or a majority-in-interest
of the Stockholders, as the case may be, may have the right and power to
diminish or eliminate all rights of such Investor or Stockholder under this
Agreement.
7.12 COMPANY REPRESENTATION. The Company and the Stockholders represent to
the Investors that the Shareholders Agreement dated January 31, 1995 does not
conflict with or reduce any rights or privileges of the Investors or
Stockholders under this Agreement or the Amended and Restated Investors' Rights
Agreement dated the same date as this Agreement, except, with respect to the
Stockholders, as set forth in Section 4.1 of this Agreement.
[Remainder of This Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE COMPANY: RUBIO'S RESTAURANTS, INC.
By: /s/ Ralph Rubio
---------------------------------
Ralph Rubio
President
Address: 5151 Shoreham Place, Suite 260
San Diego, CA 92122
Fax No.: (619) 452-0181
STOCKHOLDERS: RALPH RUBIO AND DIONE RUBIO AS
TRUSTEES OF THE RALPH RUBIO AND
DIONE RUBIO FAMILY TRUST
By: /s/ Ralph Rubio
---------------------------------
Ralph Rubio, Trustee
/s/ Dione Rubio
---------------------------------
Dione Rubio, Trustee
Address: 1115 Los Caballitos
Del Mar, CA 92014
Fax No.:
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RAFAEL R. RUBIO AND GLORIA G. RUBIO,
Co-Trustees of the Rafael R. Rubio
and Gloria G. Rubio Family Trust
By: /s/ Rafael Rubio
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Rafael R. Rubio
/s/ Gloria Rubio
---------------------------------
Gloria G. Rubio
Address: 5134 Pendleton St.
San Diego, CA 92109
Fax No.:
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[COUNTERPART SIGNATURE PAGE TO AMENDED AND
RESTATED STOCK RESTRICTION AGREEMENT]
<PAGE>
ROBERT L. GARCIA AND GLORIA R. GARCIA,
AS TRUSTEES OF THE ROBERT AND
GLORIA GARCIA TRUST
By: /s/ Robet Garcia
---------------------------------
Robert L. Garcia, Trustee
/s/ Gloria Garcia
---------------------------------
Gloria R. Garcia, Trustee
Address: 2724 Penrose Street
San Diego, CA 92110
Fax No.: (619) 275-2053
RICHARD M. RUBIO AND VICTORIA E. RUBIO
AS TRUSTEES OR SUCCESSORS OF THE RICHARD
AND VICTORIA RUBIO TRUST
By: /s/ Richard Rubio
---------------------------------
Richard M. Rubio, Trustee
/s/ Victoria Rubio
---------------------------------
Victoria E. Rubio, Trustee
Address: 2107 Blackmore Court
San Diego, CA 92109
Fax No.:
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ROBERT RUBIO AS TRUSTEE OF THE
ROBERT RUBIO TRUST
By: /s/ Robert Rubio, Trustee
---------------------------------
Robert Rubio, Trustee
Address: 1724 Folus
Encinitas, CA 92024
Fax No.:
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[COUNTERPART SIGNATURE PAGE TO AMENDED AND
RESTATED STOCK RESTRICTION AGREEMENT]
<PAGE>
GLORIA GARCIA AS TRUSTEE OF THE TRUST
FBO ROMAN RUBIO
By: /s/ Gloria Garcia
---------------------------------
Gloria Garcia, Trustee
Address: 2724 Penrose Street
San Diego, CA 92110
Fax No.: (619) 275-2053
THE INVESTORS: ROSEWOOD CAPITAL, L.P.
By: Rosewood Associates L.P.,
its general partner
By: /s/ Kyle Anderson
---------------------------------
Kyle A. Anderson, Principal
Address: One Maritime Plaza,
Suite 1330
San Francisco, CA 94111
Fax No.: (415) 362-1192
DOOLING FAMILY TRUST DATED
DECEMBER 8, 1988
By:
---------------------------------
, Trustee
------------------
Address: 427 South Marengo Avenue #3
Pasadena, CA 91101
Fax No.:
----------------------------
BROPHAR INVESTOR PARTNERS
By: /s/ Craig Andrews
---------------------------------
General Partner
Address: c/o Craig Andrews,
Brobeck, Phleger & Harrison LLP
550 West "C" Street, Suite 1200
San Diego, CA 92101
Fax No.: (619) 234-3848
[COUNTERPART SIGNATURE PAGE TO AMENDED AND
RESTATED STOCK RESTRICTION AGREEMENT]
<PAGE>
EVEREN SECURITIES, CUSTODIAN FOR
KEVIN L. SHIBUYA IRA
By: /s/ Kevin Shibuya
---------------------------------
Address: 9255 Towne Centre Drive, Suite 800
San Diego, CA 92121
Fax No.:
---------------------------
/s/ R. Alex Kaseberg
------------------------------------
R. ALEX KASEBERG
Address: 12801 Corbett Court
San Diego, CA 92130
Fax No.:
----------------------------
/s/ Tod Thoele
------------------------------------
TOD THOELE
Address: 63 San Bernardino Avenue
Ventura, CA 93004
Fax No.:
----------------------------
T. LARRY AND MARGARET EDDINGTON
/s/ T. Larry Eddington
------------------------------------
T. Larry Eddington
/s/ Margaret Eddington
------------------------------------
Margaret Eddington
Address: 3330 Dove Hollow Road
Olivenhain, CA 92024
Fax No.: 759-0483
[COUNTERPART SIGNATURE PAGE TO AMENDED AND
RESTATED STOCK RESTRICTION AGREEMENT]
<PAGE>
/s/ George Adams
------------------------------------
GEORGE H. ADAMS, JR.
Address: 6045 Beaumont Avenue
La Jolla, CA 92037
Fax No.: (619) 456-5369
/s/ John Brice
------------------------------------
JOHN BRICE
Address: 1331 Park Road
La Jolla, CA 92037
Fax No.: 619/ 454-7092
PRUDENTIAL SECURITIES, CUSTODIAN FOR
FRANK O. HOLLOWAY IRA
By:
---------------------------------
Address: 9255 Towne Centre Drive, Suite 800
San Diego, CA 92121
Fax No.:
----------------------------
UMB BANK, N.A., TRUSTEE OF THE
BROBECK, PHLEGER & HARRISON
RETIREMENT PLAN F/B/O WILLIAM F.
SULLIVAN
By:
---------------------------------
Vice President
Address: 1010 Grand Avenue
P. O. Box 419692
Kansas City, MO 64141-0692
Fax No.:
----------------------------
[COUNTERPART SIGNATURE PAGE TO AMENDED AND
RESTATED STOCK RESTRICTION AGREEMENT]
<PAGE>
UMB BANK, N.A., TRUSTEE OF THE
BROBECK, PHLEGER & HARRISON
RETIREMENT PLAN F/B/O JAY DE GROOT
By:
---------------------------------
Vice President
Address: 1010 Grand Avenue
P. O. Box 419692
Kansas City, MO 64141-0692
Fax No.:
---------------------------
-------------------------------------
Frank O. Holloway
Address: 81 South Peak Drive
Laguna Niguel, CA 92077
Fax No.:
----------------------------
/s/ James Stryker
------------------------------------
James Stryker
Address: c/o Rubio's Restaurants, Inc.
5151 Shoreham Place, Suite 260
San Diego, CA 92122
Fax No.: (619) 452-0181
/s/ Kim Lopdrup
-------------------------------------
Kim Lopdrup
Address: One Tamarack Way
Sharon, MA 02067
Fax No.: (650) 948-2383
[COUNTERPART SIGNATURE PAGE TO AMENDED AND
RESTATED STOCK RESTRICTION AGREEMENT]
<PAGE>
/s/ Kevin Shibuya
-------------------------------------
Kevin Shibuya
Address: c/o EVEREN Securities
2141 Palomar Airport Road, Suite 100
Carlsbad, CA 92009
Fax No.:
---------------------------
-------------------------------------
J. Richard Fredericks
Address: 2395 Vallejo Street
San Francisco, CA 94123
Fax No.:
---------------------------
/s/ Bruce Frazer
-------------------------------------
Bruce Frazer
Address: c/o Rubio's Restaurants, Inc.
5151 Shoreham Place, Suite 260
San Diego, CA 92122
(619) 452-0181
FARALLON CAPITAL PARTNERS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
--------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark Wehrly
[COUNTERPART SIGNATURE PAGE TO AMENDED AND
RESTATED STOCK RESTRICTION AGREEMENT]
<PAGE>
FARALLON CAPITAL INSTITUTIONAL
PARTNERS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
--------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark Wehrly
FARRALON CAPITAL INSTITUTIONAL
PARTNERS II, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
--------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark Wehrly
[COUNTERPART SIGNATURE PAGE TO AMENDED AND
RESTATED STOCK RESTRICTION AGREEMENT]
<PAGE>
FARALLON CAPITAL INSTITUTIONAL
PARTNERS III, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
--------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark Wehrly
RR CAPITAL PARTNERS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
-------------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark Wehrly
W.A. & H. INVESTMENT, L.L.C.
By: /s/ illegible
--------------------------------
Title:
--------------------------------
Address: Wessels, Arnold & Henderson, L.L.C.
c/o Kim-Hue Phan
601 Second Avenue South
Minneapolis, MN 55402-4314
Fax No:
------------------------------
[COUNTERPART SIGNATURE PAGE TO AMENDED AND
RESTATED STOCK RESTRICTION AGREEMENT]
<PAGE>
/s/ Arthur Yelsey
-------------------------------------
Arthur R. Yelsey
Address: 1550 Bayside Drive
Corona Del Mar, CA 92625
Fax No: 714-721-0555
BRUCE AND JOANNE FRAZER
/s/ Bruce Frazer
-------------------------------------
Bruce Frazer
/s/ Joanne Frazer
-------------------------------------
Joanne Frazer
Address: 5151 Shoreham Place, Suite 260
San Diego, CA 92122
Fax No:
---------------------------
JOHN AND ELLEN BRICE
/s/ John Brice
-------------------------------------
John Brice
/s/ Ellen Brice
-------------------------------------
Ellen Brice
Address: 1331 Park Road
La Jolla, CA 92037
Fax No: 619/454-7092
[COUNTERPART SIGNATURE PAGE TO AMENDED AND
RESTATED STOCK RESTRICTION AGREEMENT]
<PAGE>
H.A. LAVEZZI CO., INC. PROFIT SHARING
TRUST FOR THE BENEFIT OF JOHN
RICHARD CUCHNA & JOHN RANDALL
CUCHNA
By: /s/ illegible
--------------------------------
Trustee
Address:
2515 Industry Street
Oceanside, CA 92054
Fax No: 760 757-0323
BRIAN AND ANN ROBERTS
/s/ Brian Roberts
-------------------------------------
Brian Roberts
/s/ Ann Roberts
-------------------------------------
Ann Roberts
Address: 16 Leroy Street
San Francisco, CA 94109
Fax No: 415-292-9892
/s/ Frank Holloway
-------------------------------------
Frank O. Holloway
Address: 81 South Peak Drive
Laguna Niguel, CA 92677
Fax No: 714-595-5901
[COUNTERPART SIGNATURE PAGE TO AMENDED AND
RESTATED STOCK RESTRICTION AGREEMENT]
<PAGE>
RICHARD AND MARTHA PARKER
/s/ Richard Parker
-------------------------------------
Richard Parker
/s/ Martha Parker
-------------------------------------
Martha Parker
Address: 430 Silvergate
San Diego, CA 92106
Fax No: 582-1497
BROBECK, PHLEGER & HARRISON LLP
By: /s/ Craig Andrews
--------------------------------
Title: Partner
-------------------------------
Address: Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
Fax No: (650) 496-2885
/s/ Lic Eugenio Clariond
-------------------------------------
Lic. Eugenio Clariond R.R.
Address: Batallon De San Patricio No. 111
Torre Comercial America Piso 26
Fracc. Valle Oriente
Garza Garcia, N.L. CP66269 Mexico
Fax No:
------------------------------
[COUNTERPART SIGNATURE PAGE TO AMENDED AND
RESTATED STOCK RESTRICTION AGREEMENT]
<PAGE>
DANIEL K. AND KUMIKO
SHIBUYA JTWROS
/s/ Daniel Shibuya
-------------------------------------
Daniel K. Shibuya
/s/ Kumiko Shibuya
-------------------------------------
Kumiko Shibuya
Address: 8451 Cranford Avenue
Sun Valley, CA 91352
Fax No: (818) 982-2423
EVEREN CLEARING CORP. CUST. FBO:
GAIL L. ROSS IRA
By: /s/ Gail Ross
----------------------------------
Title:
--------------------------------
Address: 2141 Palomar Airport Road
Carlsbad, CA 92009
Fax No: (760) 804-0399
/s/ Ronald Sellers
-------------------------------------
Ronald B. Sellers
Address: 11381 Eastview Pt.
San Diego, CA 92131
Fax No: 619-546-9501
EVEREN CLEARING CORP. CUST. FBO:
RONALD B. SELLERS IRA
By: /s/ Ronald Sellers
----------------------------------
Title:
-------------------------------
Address: 2141 Palomar Airport Road
Carlsbad, CA 92009
Fax No: (760) 804-0399
[COUNTERPART SIGNATURE PAGE TO AMENDED AND
RESTATED STOCK RESTRICTION AGREEMENT]
<PAGE>
EVEREN CLEARING CORP. CUST. FBO:
SHAWN O. ROWE IRA
By: /s/ Shawn Rowe
----------------------------------
Title:
-------------------------------
Address: 2141 Palomar Airport Road
Carlsbad, CA 92009
Fax No: (760) 804-0399
EVEREN CLEARING CORP. CUST. FBO:
SHARON ROWE IRA
By: /s/ Sharon Rowe
----------------------------------
Title:
-------------------------------
Address: 2141 Palomar Airport Road
Carlsbad, CA 92009
Fax No: (760) 804-0399
SHAWN O. ROWE & SHARON ROWE JTWROS
/s/ Shawn Rowe
-------------------------------------
Shawn O. Rowe
/s/ Sharon Rowe
-------------------------------------
Sharon Rowe
Address: 823 Pocahontas Court
Paso Robles, CA 93446
Fax No: 805 237-3458
/s/ Mike Blackman
-------------------------------------
Mike Blackman
Address: Nations Bank Montgomery Securities
9 West 57th Street, 47th Floor
New York, NY 10019
Fax No: 212-583-8420
[COUNTERPART SIGNATURE PAGE TO AMENDED AND
RESTATED STOCK RESTRICTION AGREEMENT]
<PAGE>
/s/ J. Richard Fredericks
-------------------------------------
J. Richard Fredericks
Address: Nations Bank Montgomery Securities
600 Montgomery Street
San Francisco, CA 94111
Fax No: 627-2230
/s/ Murray Huneke
-------------------------------------
Murray Huneke, Trustee for Hueneke
Family Trust
Address: Nations Bank Montgomery Securities
600 Montgomery Street
San Francisco, CA 94111
Fax No: 415 913 5513
[COUNTERPART SIGNATURE PAGE TO AMENDED AND
RESTATED STOCK RESTRICTION AGREEMENT]
<PAGE>
SCHEDULE A
Schedule of Stockholders
<TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<S> <C>
Ralph Rubio and Dione Rubio as
Trustees of the Ralph Rubio
and Dione Rubio Family Trust
- -------------------------------------------------------------------------------
Rafael R. Rubio and Gloria G.
Rubio, Co-Trustees of the
Rafael R. Rubio and Gloria G.
Rubio Family Trust
- -------------------------------------------------------------------------------
Robert L. Garcia and Gloria R.
Garcia, as Trustees of the
Robert and Gloria Garcia Trust
- -------------------------------------------------------------------------------
Richard M. Rubio and Victoria
E. Rubio as Trustees or
Successors of the Richard and
Victoria Rubio Trust
- -------------------------------------------------------------------------------
Robert Rubio as Trustee of the
Robert Rubio Trust
- -------------------------------------------------------------------------------
Gloria Garcia, as Trustee of
the Trust FBO Roman Rubio
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.11
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE HEREUNDER HAS BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES, OR DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE COMPANY THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE
OR HYPOTHECATION IS IN COMPLIANCE WITH THE ACT OR UNLESS SOLD IN FULL COMPLIANCE
WITH RULE 144 UNDER THE ACT.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS WARRANT HAS NOT BEEN
QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA OR
ANY OTHER STATE AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF
ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES PRIOR TO SUCH QUALIFICATION IS
UNLAWFUL, UNLESS THE SALE OF SUCH SECURITIES IS EXEMPT FROM QUALIFICATION BY
SECTION 25110, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE OR SUCH
PROVISIONS OF THE CORPORATIONS CODE OF ANY SUCH OTHER STATE. THE RIGHTS OF THE
HOLDER OF THIS WARRANT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING
OBTAINED, UNLESS THE SALE IS SO EXEMPT.
THIS WARRANT IS NOT TRANSFERABLE OR ASSIGNABLE IN ANY MANNER AND NO INTEREST IN
THIS WARRANT MAY BE PLEDGED OR OTHERWISE ENCUMBERED BY NATIONSBANC MONTGOMERY
SECURITIES, LLC WITHOUT THE EXPRESS WRITTEN CONSENT OF THE COMPANY, WHICH MAY BE
GIVEN OR WITHHELD BY THE COMPANY IN ITS SOLE DISCRETION.
Warrant to Purchase up to
27,104 Shares of
Series D Preferred Stock
(Subject to Adjustment)
RUBIO'S RESTAURANTS, INC.
SERIES D PREFERRED STOCK PURCHASE WARRANT
December 31, 1997
RUBIO'S RESTAURANTS, INC., a Delaware corporation (the "COMPANY"),
hereby certifies that for value received, NationsBanc Montgomery Securities,
LLC ("MONTGOMERY SECURITIES") is entitled, subject to the terms and
conditions set forth below to purchase from the Company at the price of
$8.63345 per share (the "EXERCISE PRICE") up to Twenty-Seven Thousand One
Hundred and Four (27,104) fully paid and nonassessable shares of Series D
Preferred Stock of the Company at any time or from time to time before 5:00
PM Pacific Standard Time on the earlier of (i) the business day immediately
preceding the effective date of the Company's registration statement in
connection with its initial public offering (a "Public Offering"), (ii) the
<PAGE>
business day immediately preceding the date of the closing of an acquisition
of all or substantially all of the Company's outstanding stock or assets by
an unrelated entity, by merger or otherwise (an "Acquisition") or (iii)
December 31, 2002 (the "EXPIRATION DATE"). The Exercise Price and the number
of shares of Series D Preferred Stock of the Company issuable upon exercise
of this Warrant are subject to adjustment as provided in Section 3 below.
The Company shall notify Montgomery Securities in writing, in accordance with
the notice requirements of Section 8.3 of this Warrant, at least 20 days
prior to the occurrence of the events described in section (i) and (ii) above.
As used herein the following terms shall have the following respective
meanings:
(a) The term "COMMON STOCK" shall mean the Common Stock of the Company,
and any other securities or property of the Company or of any other person
(corporate or otherwise) which Montgomery Securities at any time shall be
entitled to receive upon the conversion of the Preferred Stock issuable upon the
exercise of this Warrant in lieu of or in addition to such Common Stock, or
which at any time shall be issuable in exchange for or in replacement of such
Common Stock.
(b) The term "SERIES D PREFERRED STOCK" shall mean the Series D Preferred
Stock of the Company, and any other securities or property of the Company or of
any other person (corporate or otherwise) which Montgomery Securities at any
time shall be entitled to receive upon the exercise of this Warrant in lieu of
or in addition to such Series D Preferred Stock, or which at any time shall be
issuable in exchange for or in replacement of such Series D Preferred Stock.
(c) The term "WARRANT SHARES" shall mean the shares of Series D Preferred
Stock issuable upon the exercise of this Warrant.
1. INITIAL EXERCISE DATE; EXPIRATION. This Warrant may be exercised by
Montgomery Securities at any time or from time to time before the Expiration
Date.
2. METHOD OF EXERCISE.
2.1 EXERCISE OF WARRANT; PARTIAL EXERCISE. This Warrant may be
exercised in full or in part by Montgomery Securities by surrender of this
Warrant, together with the form of subscription attached hereto as EXHIBIT A
duly executed by Montgomery Securities, to the Company at its principal
office, accompanied by payment, in cash or by certified or official bank
check payable to the order of the Company, of the Exercise Price of the
Warrant Shares to be purchased hereunder. For any partial exercise hereof,
Montgomery Securities shall designate in a subscription in the form of
EXHIBIT A attached hereto delivered to the Company the number of Warrant
Shares that it wishes to purchase. On any such partial exercise, the Company
at its expense shall forthwith issue and deliver to Montgomery Securities a
new warrant of like tenor, in the name of Montgomery Securities, which shall
be exercisable for such number of Warrant Shares represented by this Warrant
which have not been purchased upon such exercise.
-2-
<PAGE>
2.2 NET ISSUANCE.
(a) RIGHT TO CONVERT. In addition to and without limiting the
rights of Montgomery Securities under the terms of this Warrant, Montgomery
Securities shall have the right to convert this Warrant or any portion thereof
(the "Conversion Right") into shares of Series D Preferred Stock as provided in
this Section 2.2 at any time or from time to time prior to the Expiration Date.
Upon exercise of the Conversion Right with respect to a particular number of
shares subject to the Warrant (the "Converted Warrant Shares"), the Company
shall deliver to Montgomery Securities (without payment by Montgomery Securities
of any exercise price or any cash or other consideration) that number of shares
of fully paid and nonassessable Series D Preferred Stock computed using the
following formula:
X = Y (A - B)
---------
A
Where: X = the number of shares of Series D Preferred
Stock to be delivered to Montgomery
Securities
Y = the number of Converted Warrant Shares
A = the per share fair market value of the Series
D Preferred Stock on the Conversion Date (as
defined below)
B = the Exercise Price of the Warrant (as adjusted to
the Conversion Date)
The Conversion Right may only be exercised with respect to a whole number of
shares subject to the Warrant. No fractional shares shall be issuable upon
exercise of the Conversion Right, and if the number of shares to be issued
determined in accordance with the foregoing formula is other than a whole
number, the Company shall pay to Montgomery Securities an amount in cash equal
to the fair market value of the resulting fractional share on the Conversion
Date (as defined below). Shares issued pursuant to the Conversion Right shall
be treated as if they were issued upon the exercise of the Warrant.
(b) METHOD OF EXERCISE. The Conversion Right may be exercised
by Montgomery Securities by the surrender of the Warrant at the principal office
of the Company together with a written statement specifying that Montgomery
Securities thereby intends to exercise the Conversion Right and indicating the
total number of shares under the Warrant that Montgomery Securities is
exercising through the Conversion Right. Such conversion shall be effective
upon receipt by the Company of the Warrant together with the aforesaid written
statement, or on such later date as is specified therein (the "Conversion
Date"). Certificates for the shares issuable upon exercise of the Conversion
Right and, if applicable, a new warrant
-3-
<PAGE>
evidencing the balance of the shares remaining subject to the Warrant, shall
be issued as of the Conversion Date and shall be delivered to Montgomery
Securities promptly following the Conversion Date.
(c) DETERMINATION OF FAIR MARKET VALUE. For purposes of this
Section 2.2, fair market value of a share of Series D Preferred Stock on the
Conversion Date shall mean:
(i) If the Conversion Right is exercised in connection with a Public
Offering, and if the Company's Registration Statement relating to such
Public Offering has been declared effective by the Securities and Exchange
Commission, the initial "Price to Public" specified in the final prospectus
with respect to such offering times the number of shares of Common Stock
into which each Converted Warrant Share is then convertible.
(ii) If the Conversion Right is exercised in connection with an
Acquisition, the effective per share consideration to be received in an
Acquisition by holders of the Common Stock, which price shall be as
specified in the agreement entered into with respect to such Acquisition
and determined assuming receipt of the aggregate exercise price of all
outstanding warrants to purchase equity securities of the Company (the
"Outstanding Warrants"), or if no such price is set forth in the agreement
concerning the Acquisition, than as determined in good faith by the
Company's Board of Directors upon a review of relevant factors, including
the aggregate exercise price of all Outstanding Warrants.
(iii) If the Conversion Right is not exercised in connection with
an Acquisition or in connection with and contingent upon a Public Offering,
then as follows:
(A) If such type of security is traded on a securities exchange,
the fair market value shall be deemed to be the average of the closing
prices of such type of security on such exchange over the 30-day period
ending five business days prior to the Conversion Date;
(B) If such type of security is traded over-the-counter, the
fair market value shall be deemed to be the average of the closing bid
prices of such type of security over the 30-day period ending five business
days prior to the Conversion Date; and
(C) If there is no public market for such type of security, then
fair market value shall be determined by mutual agreement of Montgomery
Securities and the Company, and if Montgomery Securities and the Company
are unable to so agree, by an investment banker of national reputation
selected by the Company and reasonably acceptable to Montgomery
Securities. All fees and expenses for such investment banker shall be
paid for by Montgomery Securities.
2.3 WHEN EXERCISE EFFECTIVE. The exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
business day on which this Warrant and any other items necessary for the
effective exercise of this Warrant are surrendered to the Company as provided in
this Section 2 (such day is referred to herein as the
-4-
<PAGE>
"Exercise Date"), and at such time the person in whose name any certificate
for shares of Series D Preferred Stock are issuable upon such exercise, as
provided in Section 2.3, shall be deemed to be the record holder of such
Series D Preferred Stock for all purposes.
2.4 DELIVERY ON EXERCISE. As soon as practicable after the exercise
of this Warrant in full or in part, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to Montgomery Securities, or as Montgomery Securities may
direct, a certificate or certificates for the number of fully paid and
nonassessable full shares of Series D Preferred Stock to which Montgomery
Securities shall be entitled on such exercise.
3. ADJUSTMENTS TO SERIES D PREFERRED STOCK AND EXERCISE PRICE. The
number of shares of Series D Preferred Stock (or any shares of stock or other
securities which may be) issuable upon exercise of this Warrant and the Exercise
Price shall be subject to adjustment from time to time upon the happening of
certain events, as follows:
3.1 SPLITS AND SUBDIVISIONS. In the event the Company should at any
time or from time to time fix a record date for the effectuation of a split or
subdivision of the outstanding shares of Series D Preferred Stock or the
determination of the holders of Series D Preferred Stock entitled to receive a
dividend or other distribution payable in additional shares of Series D
Preferred Stock or other securities or rights convertible into, or entitling the
holder thereof to receive directly or indirectly, additional shares of Series D
Preferred Stock ("SERIES D PREFERRED STOCK EQUIVALENTS") without payment of any
consideration by such holder for the additional shares of Series D Preferred
Stock or Series D Preferred Stock Equivalents (including the additional shares
of Series D Preferred Stock issuable upon conversion or exercise thereof), then,
as of such record date (or the date of such split, subdivision, dividend or
other distribution if no record date is fixed), the Exercise Price shall be
appropriately decreased and the number of shares of Series D Preferred Stock
issuable upon exercise of this Warrant shall be appropriately increased in
proportion to such increase in outstanding shares of Series D Preferred Stock.
3.2 COMBINATION OF SHARES. If the number of shares of Series D
Preferred Stock outstanding at any time after the date hereof is decreased by a
combination of the outstanding shares of Series D Preferred Stock, the Exercise
Price shall be appropriately increased and the number of shares of Series D
Preferred Stock issuable upon exercise of this Warrant shall be appropriately
decreased in proportion to such decrease in outstanding shares of Series D
Preferred Stock.
3.3 ADJUSTMENTS FOR OTHER DISTRIBUTIONS. In the event the Company
shall declare a distribution payable to the holders of Series D Preferred Stock
in securities of other persons, evidences of indebtedness issued by the Company
or other persons, assets (excluding cash dividends) or options or rights not
referred to in Section 3.1, then, in each such case for the purpose of this
Section 3.3, upon exercise of this Warrant Montgomery Securities shall be
entitled to a proportionate share of any such distribution as though Montgomery
Securities was the holder of the number of shares of Series D Preferred Stock of
the Company issuable upon exercise of this Warrant as of the record date fixed
for the determination of the holders of Series D Preferred Stock entitled to
receive such distribution.
-5-
<PAGE>
3.4 RECLASSIFICATION OR REORGANIZATION. If the Series D Preferred
Stock (or any shares of stock or other securities which may be) issuable upon
exercise of this Warrant shall be changed into the same or different number of
shares of any class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of shares
or stock dividend provided for in Sections 3.1, 3.2 or 3.3 above, or an
acquisition of all or substantially all of the Company's outstanding stock or
assets by an unrelated entity, by merger or otherwise, prior to which this
Warrant shall cease to be exercisable as provided above), then and in each such
event Montgomery Securities shall be entitled to receive upon the exercise of
this Warrant the kind and amount of shares of stock and other securities and
property receivable upon such reorganization, reclassification or other change,
to which a holder of the number of shares of Series D Preferred Stock (or any
shares of stock or other securities which may be) issuable upon exercise of this
Warrant would have received if this Warrant had been exercised immediately prior
to such reorganization, reclassification or other change.
3.5 NOTICE OF ADJUSTMENTS AND RECORD DATES. The Company shall
promptly notify Montgomery Securities in writing of each adjustment or
readjustment of the Exercise Price and the number of shares of Series D
Preferred Stock (or any shares of stock or other securities which may be)
issuable upon exercise of this Warrant. Such notice shall state the adjustment
or readjustment and show in reasonable detail the facts on which the adjustment
or readjustment is based. In the event of any taking by the Company of a record
of (a) the holders of Series D Preferred Stock for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution, or (b) the holders of the Company's outstanding capital stock for
the purpose of approving any acquisition of all or substantially all of the
Company's outstanding stock or assets by an unrelated entity, by merger or
otherwise, the Company shall notify Montgomery Securities in writing of such
record date at least twenty (20) days prior to such record date.
3.6 NO IMPAIRMENT. The Company will not avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Warrant.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants that:
4.1 STOCK TO BE RESERVED. The Company will at all times reserve
and keep available out of its authorized Series D Preferred Stock and Common
Stock, solely for the purpose of issuance upon the exercise of this Warrant
as herein provided, such number of shares of Series D Preferred Stock as
shall then be issuable upon the exercise of this Warrant and such number of
shares of Common Stock as shall be issuable upon conversion of such Series D
Preferred Stock. The Company shall from time to time in accordance with
applicable law increase the authorized amount of its Series D Preferred Stock
and/or Common Stock if at any time the number of shares of Series D Preferred
Stock and/or Common Stock remaining unissued and available for issuance shall
not be sufficient to permit exercise of this Warrant and the conversion of
such shares of Series D Preferred Stock to Common Stock. The Company
covenants that, upon issuance in accordance with the terms of this Warrant,
all shares of Series
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<PAGE>
D Preferred Stock which shall be so issued and any Common Stock issued upon
the conversion of such Series D Preferred Stock, shall be duly and validly
issued and fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof, and, without limiting the
generality of the foregoing, the Company will take all such action as may be
necessary to assure that all such shares of Series D Preferred Stock and
Common Stock may be so issued without violation of any applicable law or
regulation, or of any requirements of any national securities exchange upon
which shares of capital stock of the Company may be listed.
4.2 ISSUE TAX. The issuance of certificates for shares of Series D
Preferred Stock upon exercise of this Warrant shall be made without charge to
Montgomery Securities for any issue tax in respect thereof provided that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than that of Montgomery Securities of this Warrant.
4.3 CLOSING OF BOOKS. The Company will at no time close its transfer
books against the transfer of the shares of Series D Preferred Stock issued or
issuable upon the exercise of this Warrant in any manner which interferes with
the timely exercise of this Warrant.
5. REPRESENTATIONS AND WARRANTIES OF MONTGOMERY SECURITIES. Montgomery
Securities hereby represents and warrants that:
5.1 AUTHORIZATION. Montgomery Securities represents that it has full
power and authority to enter into this Warrant and that this Warrant constitutes
a valid and legally binding obligation of Montgomery Securities.
5.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Warrant is issued and
sold to Montgomery Securities in reliance upon Montgomery Securities's
representation to the Company, which by Montgomery Securities's execution of
this Warrant Montgomery Securities hereby confirms, that this Warrant, the
Series D Preferred Stock issuable upon exercise hereof and the Common Stock
issuable upon conversion of such Series D Preferred Stock (collectively, the
"Securities") will be acquired for investment for Montgomery Securities's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that Montgomery Securities has no present
intention of selling, granting any participation in, or otherwise distributing
the same. By executing this Warrant, Montgomery Securities further represents
that Montgomery Securities does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Securities.
5.3 RELIANCE UPON MONTGOMERY SECURITIES'S REPRESENTATIONS.
Montgomery Securities understands that this Warrant is not, and any Series D
Preferred Stock acquired upon the exercise hereof and any Common Stock acquired
upon the conversion of any such Series D Preferred Stock at time of issuance may
not be, registered under the Securities Act on the ground that the sale provided
for in this Warrant and the issuance of the Series D Preferred Stock hereunder
is exempt from registration under the Securities Act pursuant to Section 4(2)
thereof or Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act, and that the Company's reliance on such exemption is
predicated on Montgomery
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<PAGE>
Securities's representations set forth herein. Montgomery Securities realizes
that the basis for the exemption may not be present if, notwithstanding such
representations, Montgomery Securities has in mind merely acquiring any of
the Securities for a fixed or determinable period in the future, or for a
market rise, or for sale if the market does not rise. Montgomery Securities
has no such intention.
5.4 RECEIPT OF INFORMATION. Montgomery Securities believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase this Warrant. Montgomery Securities further represents that
it has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of this Warrant and the
business, properties, prospects and financial condition of the Company and to
obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to it or to which
it had access.
5.5 INVESTMENT EXPERIENCE. Montgomery Securities represents that it
is experienced in evaluating and investing in securities of companies in the
development stage and acknowledges that it is able to fend for itself, can bear
the economic risk of its investment, and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in this Warrant. Montgomery Securities also represents
it has not been organized for the purpose of acquiring this Warrant.
5.6 RESTRICTED SECURITIES. Montgomery Securities understands that
this Warrant and the Securities are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired from the
Company in a transaction not involving a public offering and that under such
laws and applicable regulations this Warrant and the Securities may be resold
without registration under the Securities Act only in certain limited
circumstances. Montgomery Securities has no need for liquidity of its
investment in this Warrant or the Securities. In this connection, Montgomery
Securities represents that it is familiar with Securities and Exchange
Commission Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act.
5.7 LEGENDS. To the extent applicable, any certificates for the
shares of Series D Preferred Stock issued upon exercise of this Warrant and the
shares of Common Stock issued upon conversion of such Series D Preferred Stock
shall be endorsed with the legends set forth below, and Montgomery Securities
covenants that, except to the extent such restrictions are waived by the
Company, Montgomery Securities shall not dispose of any interest in any of the
shares of Series D Preferred Stock issued upon exercise of this Warrant or the
shares of Common Stock issued upon conversion of such Series D Preferred Stock
without complying with the restrictions on transfer described in the legends
endorsed on such certificates:
(a) THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN EFFECTIVE
REGISTRATION THEREOF UNDER SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED
UNDER SUCH ACT, OR UNLESS THE
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<PAGE>
COMPANY HAS RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND
ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
(b) Any legend required by (i) any other agreement with the
Company to which Montgomery Securities is a party or (ii) the securities laws
of any state or other governmental or regulatory agency having authority over
the issuance of the shares of Series D Preferred Stock issued upon exercise
of this Warrant or the shares of Common Stock issued upon conversion of such
Series D Preferred Stock.
6. REPLACEMENT OF WARRANT. On receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver to Montgomery Securities, in lieu thereof, a
new Warrant of like tenor.
7. NO RIGHTS OR LIABILITY AS A STOCKHOLDER. This Warrant does not
entitle Montgomery Securities hereof to any voting rights or other rights as a
stockholder of the Company. No provisions hereof, in the absence of affirmative
action by Montgomery Securities to purchase the Series D Preferred Stock of the
Company, and no enumeration herein of the rights or privileges of Montgomery
Securities, shall give rise to any liability of Montgomery Securities as a
stockholder of the Company.
8. MISCELLANEOUS.
8.1 TRANSFER OF WARRANT. This Warrant shall not be transferable or
assignable in any manner and no interest shall be pledged or otherwise
encumbered by Montgomery Securities without the express written consent of the
Company, which may be given or withheld by the Company in its sole discretion,
and any such attempted disposition of this Warrant or any portion hereof shall
be of no force or effect.
8.2 TITLES AND SUBTITLES. The titles and subtitles used in this
Warrant are for convenience only and are not to be considered in construing or
interpreting this Warrant.
8.3 NOTICES. Any notice required or permitted under this Warrant
shall be given in writing and shall be deemed effectively given to the party to
be notified upon personal delivery by hand or professional courier service, upon
delivery by facsimile transmission or five (5) days after deposit with the
United States Post Office, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party on
the signature page hereof, or at such other address as such party may designate
by ten (10) days' advance written notice to the other party.
8.4 ATTORNEYS' FEES. If any action at law or in equity is necessary
to enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and disbursements in addition to
any other relief to which such party may be entitled.
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<PAGE>
8.5 AMENDMENTS AND WAIVERS. Any term of this Warrant may be amended
and the observance of any term of this Warrant may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and Montgomery Securities.
8.6 SEVERABILITY. If one or more provisions of this Warrant are held
to be unenforceable under applicable law, such provision shall be excluded from
this Warrant and the balance of the Warrant shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
8.7 GOVERNING LAW. This Warrant shall be governed by and construed
and enforced in accordance with the laws of the State of California, without
giving effect to its conflicts of laws principles.
8.8 ENTIRE AGREEMENT. This Warrant contains the entire agreement
between the Company and Montgomery Securities with regard to the subject matter
hereof, and supersedes all prior agreements and understandings, whether written
or oral, with regard to the subject matter hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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8.9 COUNTERPARTS. This Warrant may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Date: December 31, 1997 Rubio's Restaurants, Inc.,
a Delaware corporation
By: /s/ Ralph Rubio
-------------------------------
Its: President
-------------------------------
Address: 5151 Shoreham Place, Suite 260
San Diego, CA 92122
Fax No.: (619) 452-0181
ACKNOWLEDGED AND AGREED:
NationsBanc Montgomery Securities, LLC
By: /s/ illegible
--------------------------
Its: Senior Managing Director
--------------------------
Address: 600 Montgomery Street
San Francisco, CA 94111
Fax No.: (415) 913-5704
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<PAGE>
EXHIBIT A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
To: Rubio's Restaurants, Inc.
NationsBanc Montgomery Securities, LLC hereby (a) irrevocably elects to
exercise the purchase rights represented by such Warrant for, and to purchase
thereunder, _____________________________* shares of Series D Preferred Stock
of Rubio's Restaurants, Inc., and herewith makes payment of $_________________
therefor, (b) requests that the certificates for such shares be issued in the
name of, and delivered to _____________________________________________, whose
address is __________________________________________________________________,
and (c) reaffirms that all of the representations and warranties of NationsBanc
Montgomery Securities, LLC contained in Section 5 of the Warrant are true and
correct as of the date hereof.
Dated: ________________________
NationsBanc Montgomery Securities, LLC
By: ____________________________________
Its: ____________________________________
Address: 600 Montgomery Street
San Francisco, CA 94111
Fax No.: (415) ___________
- ------------------
* Insert here the number of shares as to which the Warrant is being exercised.
A-1
<PAGE>
EXHIBIT 10.12
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE HEREUNDER HAS BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES, OR DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE COMPANY THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE
OR HYPOTHECATION IS IN COMPLIANCE WITH THE ACT OR UNLESS SOLD IN FULL COMPLIANCE
WITH RULE 144 UNDER THE ACT.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS WARRANT HAS NOT BEEN
QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA OR
ANY OTHER STATE AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF
ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES PRIOR TO SUCH QUALIFICATION IS
UNLAWFUL, UNLESS THE SALE OF SUCH SECURITIES IS EXEMPT FROM QUALIFICATION BY
SECTION 25110, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE OR SUCH
PROVISIONS OF THE CORPORATIONS CODE OF ANY SUCH OTHER STATE. THE RIGHTS OF THE
HOLDER OF THIS WARRANT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING
OBTAINED, UNLESS THE SALE IS SO EXEMPT.
THIS WARRANT IS NOT TRANSFERABLE OR ASSIGNABLE IN ANY MANNER AND NO INTEREST IN
THIS WARRANT MAY BE PLEDGED OR OTHERWISE ENCUMBERED BY FSC CORP. WITHOUT THE
EXPRESS WRITTEN CONSENT OF THE COMPANY, WHICH MAY BE GIVEN OR WITHHELD BY THE
COMPANY IN ITS SOLE DISCRETION.
Warrant to Purchase
up to 45,000 Shares of
Series D Preferred Stock
(Subject to Adjustment)
RUBIO'S RESTAURANTS, INC.
SERIES D PREFERRED STOCK PURCHASE WARRANT
May 11, 1998
RUBIO'S RESTAURANTS, INC., a Delaware corporation (the "COMPANY"),
hereby certifies that for value received, FSC Corp., a Massachusetts securities
holding corporation ("FSC CORP.") is entitled, subject to the terms and
conditions set forth below to purchase from the Company shares of Series D
Preferred Stock of the Company, subject to adjustment as provided herein.
As used herein the following terms shall have the following respective
meanings:
<PAGE>
(a) The term "COMMON STOCK" shall mean the Common Stock of the
Company, and any other securities or property of the Company or of any other
person (corporate or otherwise) which FSC Corp. at any time shall be entitled to
receive upon the conversion of the Preferred Stock issuable upon the exercise of
this Warrant in lieu of or in addition to such Common Stock, or which at any
time shall be issuable in exchange for or in replacement of such Common Stock.
(b) The term "SERIES D PREFERRED STOCK" shall mean the Series D
Preferred Stock of the Company, and any other securities or property of the
Company or of any other person (corporate or otherwise) which FSC Corp. at any
time shall be entitled to receive upon the exercise of this Warrant in lieu of
or in addition to such Series D Preferred Stock, or which at any time shall be
issuable in exchange for or in replacement of such Series D Preferred Stock.
(c) The term "WARRANT SHARES" shall mean the shares of Series D
Preferred Stock issuable upon the exercise of this Warrant.
1. LOAN AGREEMENT. This Warrant is issued in connection with that
certain Revolving Credit and Term Loan Agreement dated May 11, 1998 (the "Loan
Agreement") by and between the Company and BankBoston, N.A., a national banking
association.
2. EXERCISE OF WARRANT. The terms and conditions upon which this
Warrant may be exercised, and the Series D Preferred Stock covered hereby may be
purchased, are as follows:
2.1 TERM. Subject to the terms hereof, this Warrant may be exercised
at any time after the date hereof, or from time to time, in whole or in part;
provided, however, that in no event may this Warrant be exercised later than
5:00 p.m. (Pacific Time) on the earlier of (i) the business day immediately
preceding the date of the closing of an acquisition of all or substantially all
of the Company's outstanding stock or assets by an unrelated entity, by merger
or otherwise (an "Acquisition") or (ii) December 31, 2002 (the "EXPIRATION
DATE"). The Exercise Price and the number of shares of Series D Preferred Stock
of the Company issuable upon exercise of this Warrant are subject to adjustment
as provided in Section 4 below. The Company shall notify FSC Corp. in writing,
in accordance with the notice requirements of Section 9.3 of this Warrant, at
least 20 days prior to the occurrence of the events described in sections (i)
and (ii) above. If the Company sends such notice less than 20 days prior to the
occurrence of such events, FSC Corp.'s right to exercise this Warrant shall be
extended for a period of 20 days after the date of notice, after which time FSC
Corp.'s rights under this Warrant shall terminate.
2.2 NUMBER OF SHARES. This Warrant may be exercised for the number
of shares of Series D Preferred Stock set forth below.
2.2.1 CLOSING OF LOAN AGREEMENT. Upon the closing of the
Loan Agreement, this Warrant will be exercisable for 25,000 shares of Series D
Preferred Stock.
2.2.2 $5,000,001 BORROWED UNDER LOAN AGREEMENT. In the event
that the Company borrows an aggregate of at least $5,000,001 under the Loan
Agreement, then this Warrant will be exercisable for an additional 10,000 shares
of Series D Preferred Stock (the "5M Shares") in excess of the Warrant Shares
referenced in Sections 2.2.1
2
<PAGE>
2.2.3 $7,500,001 BORROWED UNDER LOAN AGREEMENT. In the event
that the Company borrows an aggregate of at least $7,500,001 or more under the
Loan Agreement, then this Warrant will be exercisable for an additional 10,000
shares of Series D Preferred Stock (the "7.5M Shares") in excess of the Warrant
Shares referenced in Sections 2.2.1 and 2.2.2.
2.3 PURCHASE PRICE. The per share purchase price for the shares of
stock to be issued upon exercise of this Warrant (the "Exercise Price") shall be
$7.19454, subject to adjustment as provided herein; PROVIDED, HOWEVER, in the
event that the Company's EBITDA for the fiscal year ending December 27, 1998 is
greater than or equal to $3,176,000, the Exercise Price for the 5M Shares and
7.5M Shares, if any, to be issued upon exercise of this Warrant shall be $10.00
per share, subject to adjustment as provided herein.
3. METHOD OF EXERCISE.
3.1 EXERCISE OF WARRANT; PARTIAL EXERCISE. This Warrant may be
exercised in full or in part by FSC Corp. by surrender of this Warrant, together
with the form of subscription attached hereto as EXHIBIT A duly executed by FSC
Corp., to the Company at its principal office, accompanied by payment, in cash
or by certified or official bank check payable to the order of the Company, of
the Exercise Price of the Warrant Shares to be purchased hereunder. For any
partial exercise hereof, FSC Corp. shall designate in a subscription in the form
of EXHIBIT A attached hereto delivered to the Company the number of Warrant
Shares that it wishes to purchase. On any such partial exercise, the Company at
its expense shall forthwith issue and deliver to FSC Corp. a new warrant of like
tenor, in the name of FSC Corp., which shall be exercisable for such number of
Warrant Shares represented by this Warrant which have not been purchased upon
such exercise.
3.2 NET ISSUANCE.
3.2.1 RIGHT TO CONVERT. In addition to and without limiting
the rights of FSC Corp. under the terms of this Warrant, FSC Corp. shall have
the right to convert this Warrant or any portion thereof (the "Conversion
Right") into shares of Series D Preferred Stock as provided in this Section 3.2
at any time or from time to time prior to the Expiration Date.
Upon exercise of the Conversion Right with respect to a particular number of
shares subject to the Warrant (the "Converted Warrant Shares"), the Company
shall deliver to FSC Corp. (without payment by FSC Corp. of any exercise price
or any cash or other consideration) that number of shares of fully paid and
nonassessable Series D Preferred Stock computed using the following formula:
X = Y (A - B)
-------
A
Where: X = the number of shares of Series D Preferred Stock to
be delivered to FSC Corp.
Y = the number of Converted Warrant Shares
3
<PAGE>
A = the per share fair market value of the Series D
Preferred Stock on the Conversion Date (as defined
below)
B = the Exercise Price of the Warrant (as adjusted to
the Conversion Date)
The Conversion Right may only be exercised with respect to a whole number of
shares subject to the Warrant. No fractional shares shall be issuable upon
exercise of the Conversion Right, and if the number of shares to be issued
determined in accordance with the foregoing formula is other than a whole
number, the Company shall pay to FSC Corp. an amount in cash equal to the fair
market value of the resulting fractional share on the Conversion Date (as
defined below). Shares issued pursuant to the Conversion Right shall be treated
as if they were issued upon the exercise of the Warrant.
3.2.2 METHOD OF EXERCISE. The Conversion Right may be
exercised by FSC Corp. by the surrender of the Warrant at the principal office
of the Company together with a written statement specifying that FSC Corp.
thereby intends to exercise the Conversion Right and indicating the total number
of shares under the Warrant that FSC Corp. is exercising through the Conversion
Right. Such conversion shall be effective upon receipt by the Company of the
Warrant together with the aforesaid written statement, or on such later date as
is specified therein (the "Conversion Date"). Certificates for the shares
issuable upon exercise of the Conversion Right and, if applicable, a new warrant
evidencing the balance of the shares remaining subject to the Warrant, shall be
issued as of the Conversion Date and shall be delivered to FSC Corp. promptly
following the Conversion Date.
3.2.3 DETERMINATION OF FAIR MARKET VALUE. For purposes of
this Section 3.2, fair market value of a share of Series D Preferred Stock on
the Conversion Date shall mean:
(i) If the Conversion Right is exercised in connection with the
Company's initial public offering pursuant to a registration statement
(a "Public Offering"), and if the Company's Registration Statement
relating to such Public Offering has been declared effective by the
Securities and Exchange Commission, the initial "Price to Public"
specified in the final prospectus with respect to such offering times
the number of shares of Common Stock into which each Converted Warrant
Share is then convertible.
(ii) If the Conversion Right is exercised in connection with an
Acquisition, the effective per share consideration to be received in
an Acquisition by holders of the Common Stock, which price shall be as
specified in the agreement entered into with respect to such
Acquisition and determined assuming receipt of the aggregate exercise
price of all outstanding warrants to purchase equity securities of the
Company (the "Outstanding Warrants"), or if no such price is set forth
in the agreement concerning the Acquisition, than as determined in
good faith by the Company's Board of Directors upon a review of
relevant factors, including the aggregate exercise price of all
Outstanding Warrants.
4
<PAGE>
(iii) If the Conversion Right is not exercised in connection with an
Acquisition or in connection with and contingent upon a Public
Offering, then as follows:
(A) If such type of security is traded on a securities
exchange, the fair market value shall be deemed to be the average of
the closing prices of such type of security on such exchange over the
30-day period ending five business days prior to the Conversion Date;
(B) If such type of security is traded over-the-counter,
the fair market value shall be deemed to be the average of the closing
bid prices of such type of security over the 30-day period ending five
business days prior to the Conversion Date; and
(C) If there is no public market for such type of security,
then fair market value shall be determined by mutual agreement of FSC
Corp. and the Company, and if FSC Corp. and the Company are unable to
so agree, by an investment banker of national reputation selected by
the Company and reasonably acceptable to FSC Corp.. All fees and
expenses for such investment banker shall be paid for by FSC Corp..
3.3 WHEN EXERCISE EFFECTIVE. The exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
business day on which this Warrant and any other items necessary for the
effective exercise of this Warrant are surrendered to the Company as provided in
this Section 3, and at such time the person in whose name any certificate for
shares of Series D Preferred Stock are issuable upon such exercise, as provided
in Section 3.3, shall be deemed to be the record holder of such Series D
Preferred Stock for all purposes.
3.4 DELIVERY ON EXERCISE. As soon as practicable after the
exercise of this Warrant in full or in part, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to FSC Corp., or as FSC Corp. may direct, a
certificate or certificates for the number of fully paid and nonassessable full
shares of Series D Preferred Stock to which FSC Corp. shall be entitled on such
exercise.
4. ADJUSTMENTS TO SERIES D PREFERRED STOCK AND EXERCISE PRICE.
The number of shares of Series D Preferred Stock (or any shares of stock or
other securities which may be) issuable upon exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
4.1 SPLITS AND SUBDIVISIONS. In the event the Company should at
any time or from time to time fix a record date for the effectuation of a split
or subdivision of the outstanding shares of Series D Preferred Stock or the
determination of the holders of Series D Preferred Stock entitled to receive a
dividend or other distribution payable in additional shares of Series D
Preferred Stock or other securities or rights convertible into, or entitling the
holder thereof to receive directly or indirectly, additional shares of Series D
Preferred Stock ("SERIES D PREFERRED STOCK EQUIVALENTS") without payment of any
consideration by such holder for the additional shares of Series D Preferred
Stock or Series D Preferred Stock Equivalents (including the
5
<PAGE>
additional shares of Series D Preferred Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such split,
subdivision, dividend or other distribution if no record date is fixed), the
Exercise Price shall be appropriately decreased and the number of shares of
Series D Preferred Stock issuable upon exercise of this Warrant shall be
appropriately increased in proportion to such increase in outstanding shares
of Series D Preferred Stock.
4.2 COMBINATION OF SHARES. If the number of shares of Series D
Preferred Stock outstanding at any time after the date hereof is decreased by a
combination of the outstanding shares of Series D Preferred Stock, the Exercise
Price shall be appropriately increased and the number of shares of Series D
Preferred Stock issuable upon exercise of this Warrant shall be appropriately
decreased in proportion to such decrease in outstanding shares of Series D
Preferred Stock.
4.3 ADJUSTMENTS FOR OTHER DISTRIBUTIONS. In the event the Company
shall declare a distribution payable to the holders of Series D Preferred Stock
in securities of other persons, evidences of indebtedness issued by the Company
or other persons, assets (excluding cash dividends) or options or rights not
referred to in Section 4.1, then, in each such case for the purpose of this
Section 4.3, upon exercise of this Warrant FSC Corp. shall be entitled to a
proportionate share of any such distribution as though FSC Corp. was the holder
of the number of shares of Series D Preferred Stock of the Company issuable upon
exercise of this Warrant as of the record date fixed for the determination of
the holders of Series D Preferred Stock entitled to receive such distribution.
4.4 RECLASSIFICATION OR REORGANIZATION. If the Series D Preferred
Stock (or any shares of stock or other securities which may be) issuable upon
exercise of this Warrant shall be changed into the same or different number of
shares of any class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of shares
or stock dividend provided for in Sections 4.1, 4.2 or 4.3 above, or an
acquisition of all or substantially all of the Company's outstanding stock or
assets by an unrelated entity, by merger or otherwise, prior to which this
Warrant shall cease to be exercisable as provided above), then and in each such
event FSC Corp. shall be entitled to receive upon the exercise of this Warrant
the kind and amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification or other change, to which
a holder of the number of shares of Series D Preferred Stock (or any shares of
stock or other securities which may be) issuable upon exercise of this Warrant
would have received if this Warrant had been exercised immediately prior to such
reorganization, reclassification or other change.
4.5 NOTICE OF ADJUSTMENTS AND RECORD DATES. The Company shall
promptly notify FSC Corp. in writing of each adjustment or readjustment of the
Exercise Price and the number of shares of Series D Preferred Stock (or any
shares of stock or other securities which may be) issuable upon exercise of this
Warrant. Such notice shall state the adjustment or readjustment and show in
reasonable detail the facts on which the adjustment or readjustment is based.
In the event of any taking by the Company of a record of (a) the holders of
Series D Preferred Stock for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or (b) the holders
of the Company's outstanding capital stock for the purpose of approving any
acquisition of all or substantially all of the Company's outstanding stock or
assets by an unrelated entity, by merger or otherwise, the Company shall
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<PAGE>
notify FSC Corp. in writing of such record date at least twenty (20) days
prior to such record date.
4.6 NO IMPAIRMENT. The Company will not avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Warrant.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants that:
5.1 STOCK TO BE RESERVED. The Company will at all times reserve and
keep available out of its authorized Series D Preferred Stock and Common Stock,
solely for the purpose of issuance upon the exercise of this Warrant as herein
provided, such number of shares of Series D Preferred Stock as shall then be
issuable upon the exercise of this Warrant and such number of shares of Common
Stock as shall be issuable upon conversion of such Series D Preferred Stock.
The Company shall from time to time in accordance with applicable law increase
the authorized amount of its Series D Preferred Stock and/or Common Stock if at
any time the number of shares of Series D Preferred Stock and/or Common Stock
remaining unissued and available for issuance shall not be sufficient to permit
exercise of this Warrant and the conversion of such shares of Series D Preferred
Stock to Common Stock. The Company covenants that, upon issuance in accordance
with the terms of this Warrant, all shares of Series D Preferred Stock which
shall be so issued and any Common Stock issued upon the conversion of such
Series D Preferred Stock, shall be duly and validly issued and fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, and, without limiting the generality of the foregoing, the
Company will take all such action as may be necessary to assure that all such
shares of Series D Preferred Stock and Common Stock may be so issued without
violation of any applicable law or regulation, or of any requirements of any
national securities exchange upon which shares of capital stock of the Company
may be listed.
5.2 ISSUE TAX. The issuance of certificates for shares of Series D
Preferred Stock upon exercise of this Warrant shall be made without charge to
FSC Corp. for any issue tax in respect thereof provided that the Company shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name other than
that of FSC Corp. of this Warrant.
5.3 CLOSING OF BOOKS. The Company will at no time close its transfer
books against the transfer of the shares of Series D Preferred Stock issued or
issuable upon the exercise of this Warrant in any manner which interferes with
the timely exercise of this Warrant.
7
<PAGE>
6. REPRESENTATIONS AND WARRANTIES OF FSC CORP. FSC Corp. hereby represents
and warrants that:
6.1 AUTHORIZATION. FSC Corp. represents that it has full power and authority
to enter into this Warrant and that this Warrant constitutes a valid and
legally binding obligation of FSC Corp..
6.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Warrant is issued and sold to
FSC Corp. in reliance upon FSC Corp.'s representation to the Company, which
by FSC Corp.'s execution of this Warrant FSC Corp. hereby confirms, that this
Warrant, the Series D Preferred Stock issuable upon exercise hereof and the
Common Stock issuable upon conversion of such Series D Preferred Stock
(collectively, the "Securities") will be acquired for investment for FSC
Corp.'s own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that FSC Corp. has no present
intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Warrant, FSC Corp. further
represents that FSC Corp. does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participations to
such person or to any third person, with respect to any of the Securities.
6.3 RELIANCE UPON FSC CORP.'S REPRESENTATIONS. FSC Corp. understands that
this Warrant is not, and any Series D Preferred Stock acquired upon the
exercise hereof and any Common Stock acquired upon the conversion of any such
Series D Preferred Stock at time of issuance may not be, registered under the
Securities Act on the ground that the sale provided for in this Warrant and
the issuance of the Series D Preferred Stock hereunder is exempt from
registration under the Securities Act pursuant to Section 4(2) thereof or
Regulation D promulgated by the Securities and Exchange Commission under the
Securities Act, and that the Company's reliance on such exemption is
predicated on FSC Corp.'s representations set forth herein. FSC Corp.
realizes that the basis for the exemption may not be present if,
notwithstanding such representations, FSC Corp. has in mind merely acquiring
any of the Securities for a fixed or determinable period in the future, or
for a market rise, or for sale if the market does not rise. FSC Corp. has no
such intention.
6.4 RECEIPT OF INFORMATION. FSC Corp. believes it has received all the
information it considers necessary or appropriate for deciding whether to
purchase this Warrant. FSC Corp. further represents that it has had an
opportunity to ask questions and receive answers from the Company regarding
the terms and conditions of the offering of this Warrant and the business,
properties, prospects and financial condition of the Company and to obtain
additional information (to the extent the Company possessed such information
or could acquire it without unreasonable effort or expense) necessary to
verify the accuracy of any information furnished to it or to which it had
access.
6.5 INVESTMENT EXPERIENCE. FSC Corp. represents that it is experienced in
evaluating and investing in securities of companies in the development stage
and acknowledges that it is able to fend for itself, can bear the economic
risk of its investment, and has such knowledge and experience in financial or
business matters that it is capable of evaluating the merits and risks of the
investment in this Warrant. FSC Corp. also represents it has not been
organized for the purpose of acquiring this Warrant.
8
<PAGE>
6.6 RESTRICTED SECURITIES. FSC Corp. understands that this Warrant and the
Securities are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations this Warrant and the Securities may be resold without
registration under the Securities Act only in certain limited circumstances.
FSC Corp. has no need for liquidity of its investment in this Warrant or the
Securities. In this connection, FSC Corp. represents that it is familiar
with Securities and Exchange Commission Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.
6.7 LEGENDS. To the extent applicable, any certificates for the shares of
Series D Preferred Stock issued upon exercise of this Warrant and the shares
of Common Stock issued upon conversion of such Series D Preferred Stock shall
be endorsed with the legends set forth below, and FSC Corp. covenants that,
except to the extent such restrictions are waived by the Company, FSC Corp.
shall not dispose of any interest in any of the shares of Series D Preferred
Stock issued upon exercise of this Warrant or the shares of Common Stock
issued upon conversion of such Series D Preferred Stock without complying
with the restrictions on transfer described in the legends endorsed on such
certificates:
6.7.1 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN EFFECTIVE
REGISTRATION THEREOF UNDER SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED
UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.
6.7.2 Any legend required by (i) any other agreement with the
Company to which FSC Corp. is a party or (ii) the securities laws of any state
or other governmental or regulatory agency having authority over the issuance of
the shares of Series D Preferred Stock issued upon exercise of this Warrant or
the shares of Common Stock issued upon conversion of such Series D Preferred
Stock.
7. REPLACEMENT OF WARRANT. On receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver to FSC Corp., in lieu thereof, a new Warrant of
like tenor.
8. NO RIGHTS OR LIABILITY AS A STOCKHOLDER. This Warrant does not
entitle FSC Corp. hereof to any voting rights or other rights as a stockholder
of the Company. No provisions hereof, in the absence of affirmative action by
FSC Corp. to purchase the Series D Preferred Stock of the Company, and no
enumeration herein of the rights or privileges of FSC Corp., shall give rise to
any liability of FSC Corp. as a stockholder of the Company.
9
<PAGE>
9. MISCELLANEOUS.
9.1 TRANSFER OF WARRANT. This Warrant shall not be transferable or
assignable in any manner and no interest shall be pledged or otherwise
encumbered by FSC Corp. without the express written consent of the Company,
which may be given or withheld by the Company in its sole discretion, and any
such attempted disposition of this Warrant or any portion hereof shall be of no
force or effect.
9.2 TITLES AND SUBTITLES. The titles and subtitles used in this
Warrant are for convenience only and are not to be considered in construing or
interpreting this Warrant.
9.3 NOTICES. Any notice required or permitted under this Warrant shall be
given in writing and shall be deemed effectively given to the party to be
notified upon personal delivery by hand or professional courier service, upon
delivery by facsimile transmission or five (5) days after deposit with the
United States Post Office, by registered or certified mail, postage prepaid
and addressed to the party to be notified at the address indicated for such
party on the signature page hereof, or at such other address as such party
may designate by ten (10) days' advance written notice to the other party.
9.4 ATTORNEYS' FEES. If any action at law or in equity is
necessary to enforce or interpret the terms of this Warrant, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and disbursements
in addition to any other relief to which such party may be entitled.
9.5 AMENDMENTS AND WAIVERS. Any term of this Warrant may be
amended and the observance of any term of this Warrant may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and FSC Corp..
9.6 SEVERABILITY. If one or more provisions of this Warrant are
held to be unenforceable under applicable law, such provision shall be excluded
from this Warrant and the balance of the Warrant shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
9.7 GOVERNING LAW. This Warrant shall be governed by and construed
and enforced in accordance with the laws of the State of California, without
giving effect to its conflicts of laws principles.
9.8 ENTIRE AGREEMENT. This Warrant contains the entire agreement
between the Company and FSC Corp. with regard to the subject matter hereof, and
supersedes all prior agreements and understandings, whether written or oral,
with regard to the subject matter hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
9.9 COUNTERPARTS. This Warrant may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Date: May 11, 1998 Rubio's Restaurants, Inc.,
a Delaware corporation
By: /s/
-----------------------------
Its:
----------------------------
Address: 5151 Shoreham Place, Suite 260
San Diego, CA 92122
Fax No.: (619) 452-0181
ACKNOWLEDGED AND AGREED:
FSC Corp., a Massachusetts
securities holding corporation
By: _____________________________
Its: _____________________________
Address: _________________________
_________________________
Fax No.: ________________
11
<PAGE>
EXHIBIT A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
To: Rubio's Restaurants, Inc.
FSC Corp. hereby (a) irrevocably elects to exercise the purchase
rights represented by such Warrant for, and to purchase thereunder,
_____________________________* shares of Series D Preferred Stock of Rubio's
Restaurants, Inc., and herewith makes payment of $___________ therefor, (b)
requests that the certificates for such shares be issued in the name of, and
delivered to ________________________________, whose address is _____________
________________________________________________________, and (c) reaffirms
that all of the representations and warranties of FSC Corp. contained in Section
6 of the Warrant are true and correct as of the date hereof.
Dated: _________________
FSC Corp., a Massachusetts securities holding
corporation
By: _______________________________
Its: _______________________________
Address: ___________________________
____________________________________
Fax No.: ___________________________
- --------------
* Insert here the number of shares as to which the Warrant is being exercised.
A-1
<PAGE>
EXHIBIT 10.13
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of the 16 day of June,
1998, by and among the Company (the "Company"), and the investors listed on
Schedule A hereto, each of which is herein referred to as an "Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE OF SERIES D PREFERRED STOCK.
(a) Subject to the terms and conditions of this Agreement,
each Investor agrees, severally and not jointly, to purchase at the Closing
(as hereinafter defined) and the Company agrees to sell to each Investor at
the Closing that number of shares of Rubio's Restaurants, Inc.'s (the
"Company") Series D Preferred Stock (the "Series D Preferred Stock") set
forth opposite each Investor's name on SCHEDULE A hereto for the purchase
price set forth thereon.
1.2 CLOSING. The purchase and sale of the Series D Preferred
Stock shall take place at the offices of Brobeck, Phleger & Harrison LLP, 550
West C Street, Suite 1300, San Diego, California 92101, at 10:00 A.M., on
June 16, 1998, or at such other time and place as the Company and Investors
mutually agree upon orally or in writing (which time and place are designated
as the "Closing"). At the Closing, the Company shall deliver to each
Investor a certificate representing the shares of Series D Preferred Stock
that such Investor is purchasing against payment of the purchase price
therefor by check or by wire transfer to the Company's designated bank
account.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Investor as of the date of the Closing as
follows:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted. The Company is duly
qualified to transact business and is in good standing in each jurisdiction
in which the failure so to qualify would have a material adverse effect on
its business, prospects, properties or financial condition. The Company is
the successor to all of the business, assets, properties, rights, permits,
licenses, approvals, liabilities, and obligations of Rubio's Restaurants,
Inc., a California corporation.
2.2 CAPITALIZATION AND VOTING RIGHTS.
(a) The authorized capital of the Company consists, or will
consist prior to the Closing, of:
<PAGE>
(i) PREFERRED STOCK. 5,383,637 shares of Preferred
Stock, $0.001 par value per share (the "Preferred Stock"), of which (a)
1,973,395 shares have been designated Series A Preferred Stock, all of which
are currently issued and outstanding; (b) 1,092,007 shares of which have been
designated Series B Preferred Stock, all of which are currently issued and
outstanding; (c) 793,640 shares of which have been designated Series C
Preferred Stock, all of which are currently issued or outstanding; and (d)
1,524,595 shares of which have been designated Series D Preferred Stock,
1,403,843 of which are currently issued or outstanding and 48,648 of which
may be sold pursuant to this Agreement. The rights, privileges and
preferences of the Series D Preferred Stock are as stated in the Company's
Amended and Restated Certificate of Incorporation (the "Restated
Certificate") previously delivered to the Investors.
(ii) COMMON STOCK. 7,298,725 shares of common stock,
$0.001 par value per share ("Common Stock"), of which 1,014,282 shares are
issued and outstanding.
(b) The outstanding shares of Common Stock have been issued
in accordance with the registration or qualification provisions of the Act
(as defined below) and any applicable state securities laws or pursuant to a
valid exemption therefrom.
(c) Except for (A) the conversion privileges of the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock
and the Series D Preferred Stock to be issued under this Agreement, (B) the
rights provided in paragraph 2.4 of the Amended and Restated Investors'
Rights Agreement, dated November 19, 1997, as amended (the "Investors' Rights
Agreement"), (C) currently authorized options to purchase 475,000 shares of
Common Stock of which 320,432 (14,282 of which have been exercised) have been
granted to employees, (D) warrants to purchase 50,000 shares of Common Stock
issued to Flemming & Lessard, Inc. and (E) warrants to purchase up to 72,104
shares of Series D Preferred Stock issued to various entities, there are not
outstanding any options, warrants, rights (including conversion or preemptive
rights and rights of first refusal) or agreements for the purchase or
acquisition from the Company of any shares of its capital stock. The Company
is not a party or subject to any agreement or understanding, and, to the
Company's knowledge, there is no agreement or understanding between any
persons and/or entities, which affects or relates to the voting or giving of
written consents with respect to any security or by a director of the Company.
2.3 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement and any other
agreement to which the Company is a party, the execution and delivery of
which is contemplated hereby (collectively, the "Ancillary Agreements"), the
performance of all obligations of the Company hereunder and thereunder and
the authorization, issuance (or reservation for issuance) and delivery of the
Series D Preferred Stock being sold hereunder and the Common Stock issuable
upon conversion of the Series D Preferred Stock has been taken or will be
taken prior to the Closing, and this Agreement and any Ancillary Agreements
constitute valid and legally binding obligations of the Company, enforceable
in accordance with their respective terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors' rights generally
and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.
2
<PAGE>
2.4 Valid Issuance of Preferred and Common Stock.
(a) The Series D Preferred Stock which is being purchased by
the Investors hereunder, when issued, sold and delivered in accordance with
the terms hereof for the consideration expressed herein, will be duly and
validly issued, fully paid and nonassessable and, based in part upon the
representations of the Investors in this Agreement, will be issued in
compliance with all applicable federal and state securities laws. The shares
of Series D Preferred Stock are being issued free of restrictions on transfer
other than restrictions on transfer set forth in this Agreement, the
Investors' Rights Agreement, the Amended and Restated Stock Restriction
Agreement, dated November 19, 1997, as amended, or any Ancillary Agreement
and other than pursuant to federal or state securities laws. The Common
Stock issuable upon conversion of the Series D Preferred Stock purchased
under this Agreement has been duly and validly reserved for issuance and,
upon issuance in accordance with the terms of the Restated Certificate, shall
be duly and validly issued, fully paid and nonassessable, and issued in
compliance with all applicable securities laws, as then in effect, of the
United States and each of the states whose securities laws govern the
issuance of any of the Series D Preferred Stock hereunder.
2.5 CONSENTS. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state, local or provincial governmental authority or any other
person or entity on the part of the Company is required in connection with
the consummation of the transactions contemplated by this Agreement, except
for the filing pursuant to Section 25102(f) of the California Corporate
Securities Law of 1968, as amended, and the rules thereunder, which filing
will be effected within 15 days of the sale of the Series D Preferred Stock
hereunder.
2.6 LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company which
questions the validity of this Agreement or any Ancillary Agreements, or the
right of the Company to enter into any of them, or to consummate the
transactions contemplated hereby or thereby, or which might result, either
individually or in the aggregate, in any material adverse changes in the
assets, financial condition, business affairs or prospects of the Company,
financially or otherwise, taken as a whole or any change in the current
equity ownership of the Company. The foregoing includes, without limitation,
any action, suit, proceeding or investigation pending or threatened involving
the prior employment of any of the Company's employees, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers or negotiations by the Company with
potential investors in the Company or its proposed business.
2.7 DISCLOSURE. The Company has fully provided each Investor with
all the information that such Investor has requested for deciding whether to
purchase the Series D Preferred Stock and all information that the Company
believes is reasonably necessary to enable such Investor to make such
decision. Neither this Agreement and any Ancillary Agreements nor any other
statements or certificates made or delivered in connection herewith or
therewith contains any untrue statement of a material fact or omits to state
a material fact necessary to make the statements herein or therein not
misleading.
3
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor
hereby represents and warrants that:
3.1 AUTHORIZATION. Such Investor has full power and authority to
enter into this Agreement and such Agreement constitutes its valid and
legally binding obligation, enforceable in accordance with its terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made
with such Investor in reliance upon such Investor's representation to the
Company, which by such Investor's execution of this Agreement such Investor
hereby confirms, that the Series D Preferred Stock to be received by such
Investor and the Common Stock issuable upon conversion thereof (collectively,
the "Securities") will be acquired for investment for such Investor's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that such Investor has no present
intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, such Investor further
represents that such Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of
the Securities.
3.3 DISCLOSURE OF INFORMATION. Such Investor believes it has
received all the information it considers necessary or appropriate for
deciding whether to purchase the Series D Preferred Stock. Such Investor
further represents that it has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the
offering of the Series D Preferred Stock and the business, properties,
prospects and financial condition of the Company.
3.4 INVESTMENT EXPERIENCE. Each Investor represents that it is an
investor in securities of companies in the development stage and acknowledges
that it is able to fend for itself, can bear the economic risk of its
investment, and has such knowledge and experience in financial or business
matters such that it is capable of evaluating the merits and risks of the
investment in the Securities. Investor also represents that it has not been
organized for the purpose of acquiring Securities.
3.5 ACCREDITED INVESTOR. Such Investor is an "accredited
investor" within the meaning of Securities and Exchange Commission ("SEC")
Rule 501 of Regulation D, as presently in effect.
4
<PAGE>
3.6 RESTRICTED SECURITIES. Such Investor understands that the
Series D Preferred Stock it is purchasing is characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering
and that under such laws and applicable regulations the Series D Preferred
Stock may be resold without registration under the Securities Act of 1933, as
amended (the "Act"), only in certain limited circumstances. In this
connection, such Investor represents that it is familiar with SEC Rule 144,
as presently in effect, and understands the resale limitations imposed
thereby and by the Act.
3.7 FURTHER LIMITATIONS ON DISPOSITION. Without in any way
limiting the representations set forth above, such Investor further agrees
not to make any disposition of all or any portion of the Securities unless
and until the transferee has agreed in writing for the benefit of the Company
to be bound by this Section 3 and:
(a) There is then in effect a registration statement under
the Act covering such proposed disposition and such disposition is made in
accordance with such registration statement or an exemption from such
registration is available; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii)
if reasonably requested by the Company, such Investor shall have furnished
the Company with an opinion of counsel, reasonably satisfactory to the
Company that such disposition will not require registration of such shares
under the Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, or any legend on certificates representing the Securities pursuant to
Section 3.8 below, no such registration statement or opinion of counsel shall
be necessary for a transfer (i) by an Investor to any person or entity that,
directly or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such Investor or (ii) by an
Investor which is a partnership to a partner of such partnership or a retired
partner of such partnership who retires after the date hereof, or to the
estate of any such partner or retired partner or the transfer by gift, will
or intestate succession of any partner to his spouse or to the siblings,
lineal descendants or ancestors of such partner or his spouse, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if he were an original Investor hereunder.
3.8 LEGENDS. It is understood that the certificates evidencing
the Series D Preferred Stock may bear one or all of the following legends:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR
ANY STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER
THE ACT, OR PURSUANT TO RULE 144 UNDER THE ACT OR AN OPINION OF COUNSEL
5
<PAGE>
SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT."
(b) Any legend required by the laws of any state.
4. CALIFORNIA COMMISSIONER OF CORPORATIONS.
4.1 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES THAT ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH
SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF
THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS
AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED,
UNLESS THE SALE IS SO EXEMPT.
5. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING. The obligations
of each Investor under subsection 1.1(a) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not
consent thereto:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of
the Closing with the same effect as though such representations and
warranties had been made on and as of the date of such Closing.
5.2 PERFORMANCE. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement
that are required to be performed or complied with by it on or before the
Closing.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The
obligations of the Company to each Investor under this Agreement are subject
to the fulfillment on or before the Closing of each of the following
conditions by that Investor:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investor contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
6.2 PAYMENT OF PURCHASE PRICE. The Investor shall have delivered
the purchase price specified in Section 1.2.
6.3. SIDE LETTER. The Company shall use its best efforts to assure
that all parties thereto have entered into that certain side letter, dated as
of the date of the Closing, no later than June 24, 1998.
8. MISCELLANEOUS.
6
<PAGE>
8.1 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.
8.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and
be binding upon the respective successors and assigns of the parties
(including transferees of any Securities). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the
parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
8.3 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
8.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.6 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other
address as such party may designate by ten (10) days' advance written notice
to the other parties.
8.7 EXPENSES. Irrespective of whether the Closing is effected,
the Company shall pay all costs and expenses that it incurs with respect to
the negotiation, execution, delivery and performance of this Agreement.
8.8 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
8.9 ENTIRE AGREEMENT. This Agreement and the documents referred
to herein constitute the entire agreement among the parties and no party
shall be liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
RUBIO'S RESTAURANTS, INC.
By: /s/ Ralph Rubio
-----------------------------------
Ralph Rubio, President
Address: 5151 Shoreham Place, Suite 260
San Diego, CA 92122
Fax No: (619) 452-0181
INVESTORS:
FARALLON CAPITAL PARTNERS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
-----------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325 San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark Wehrly
FARALLON CAPITAL INSTITUTIONAL
PARTNERS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
-----------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325 San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark Wehrly
<PAGE>
FARALLON CAPITAL INSTITUTIONAL
PARTNERS II, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
-----------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325 San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark Wehrly
FARALLON CAPITAL INSTITUTIONAL
PARTNERS III, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
-----------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325 San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark Wehrly
RR CAPITAL PARTNERS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Jason Fish
-----------------------------------
Managing Member
Address: One Maritime Plaza
Suite 1325 San Francisco, CA 94111
Fax No: (415) 421-2133
Attention: Jason Fish and Mark Wehrly
<PAGE>
SCHEDULE A
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name Purchase Price Number of Shares
- --------------------------------------------------------------------------------
<S> <C> <C>
Farallon Capital Partners, $146,998.84 20,432
L.P.
- --------------------------------------------------------------------------------
Farallon Capital $122,501.43 17,027
Institutional Partners, L.P.
- --------------------------------------------------------------------------------
Farallon Capital $ 52,498.56 7,297
Institutional Partners II,
L.P.
- --------------------------------------------------------------------------------
Farallon Capital $ 14,000.57 1,946
Institutional Partners III,
L.P.
- --------------------------------------------------------------------------------
RR Capital Partners, L.P. $ 14,000.57 1,946
- --------------------------------------------------------------------------------
Total: $349,999.97 48,648
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.14
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
REVOLVING CREDIT AND TERM LOAN AGREEMENT
dated as of
May 1998
between
Rubio's Restaurants, Inc.
and its Subsidiaries
and
BANKBOSTON, N.A.
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.2 Terms Generally. . . . . . . . . . . . . . . . . . . . . . . . -13-
1.3 Accounting Terms; GAAP . . . . . . . . . . . . . . . . . . . . -13-
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
The Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
2.1 Revolving Credit and Term Loan Commitments . . . . . . . . . . -14-
2.2 Loans and Borrowings . . . . . . . . . . . . . . . . . . . . . -14-
2.3 Requests for Borrowings. . . . . . . . . . . . . . . . . . . . -15-
2.4 Termination and Reduction of Commitments . . . . . . . . . . . -15-
2.5 Repayment of Loans; Evidence of Debt . . . . . . . . . . . . . -16-
2.6 Prepayment of Loans. . . . . . . . . . . . . . . . . . . . . . -16-
2.7 Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . -18-
2.8 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
2.9 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
2.10 Alternative Rate of Interest . . . . . . . . . . . . . . . . . -22-
2.11 Increased Costs. . . . . . . . . . . . . . . . . . . . . . . . -22-
2.12 Break Funding Payments . . . . . . . . . . . . . . . . . . . . -23-
2.13 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
2.14 Payments Generally . . . . . . . . . . . . . . . . . . . . . . -25-
ARTICLE III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
Representations and Warranties. . . . . . . . . . . . . . . . . . . . -25-
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
3.1 Organization; Powers . . . . . . . . . . . . . . . . . . . . . -25-
3.2 Authorization; Enforceability. . . . . . . . . . . . . . . . . -25-
3.3 Governmental Approvals; No Conflicts . . . . . . . . . . . . . -26-
3.4 Financial Condition; No Material Adverse Change. . . . . . . . -26-
3.5 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
3.6 Litigation and Environmental Matters . . . . . . . . . . . . . -27-
3.7 Compliance with Laws and Agreements. . . . . . . . . . . . . . -27-
3.8 Investment and Holding Company Status. . . . . . . . . . . . . -28-
3.9 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
3.10 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
3.11 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
3.12 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . -29-
3.13 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . -29-
3.14 Material Indebtedness, Liens and Agreements. . . . . . . . . . -29-
3.15 Federal Reserve Regulations. . . . . . . . . . . . . . . . . . -29-
3.16 Burdensome Restrictions. . . . . . . . . . . . . . . . . . . . -29-
3.17 Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . . -29-
3.18 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . .-30-
3.19 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
4.1 ClosingDate. . . . . . . . . . . . . . . . . . . . . . . . . . -30-
4.2 Each Extension of Credit . . . . . . . . . . . . . . . . . . . -32-
ARTICLE V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . -33-
5.1 Financial Statements and Other Information . . . . . . . . . . -33-
5.2 Notices of Material Events . . . . . . . . . . . . . . . . . . -35-
5.3 Existence; Conduct of Business . . . . . . . . . . . . . . . . -35-
5.4 Payment of Obligations . . . . . . . . . . . . . . . . . . . . -35-
5.5 Maintenance of Properties; Insurance . . . . . . . . . . . . . -36-
5.6 Books and Records; Inspection Rights . . . . . . . . . . . . . -36-
5.7 Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . -36-
5.8 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . -36-
5.9 Compliance with Agreements . . . . . . . . . . . . . . . . . . -36-
5.10 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . -37-
5.11 Certain Obligations Respecting Collateral Security . . . . . . -37-
5.12 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
5.13 Communication with Accountants . . . . . . . . . . . . . . . . -38-
5.14 Intellectual Property. . . . . . . . . . . . . . . . . . . . . -38-
5.15 Landlord Consent . . . . . . . . . . . . . . . . . . . . . . . -38-
ARTICLE VI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . -38-
6.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . -38-
6.2 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
6.3 Contingent Liabilities . . . . . . . . . . . . . . . . . . . . -40-
6.4 Fundamental Changes; Asset Sales; Permitted Acquisitions . . . -40-
6.6 Restricted Payments. . . . . . . . . . . . . . . . . . . . . . -41-
6.7 Transactions with Affiliates . . . . . . . . . . . . . . . . . -41-
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
6.8 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . -41-
6.9 Certain Financial Covenants. . . . . . . . . . . . . . . . . . -41-
6.10 Sale-Leaseback Transactions. . . . . . . . . . . . . . . . . . -42-
6.11 Lines of Business. . . . . . . . . . . . . . . . . . . . . . . -42-
6.12 Name and Location. . . . . . . . . . . . . . . . . . . . . . . -42-
ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
7.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . -42-
ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -45-
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . -45-
8.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . -45-
8.2 Waivers; Amendments. . . . . . . . . . . . . . . . . . . . . . -45-
8.3 Expenses; Indemnity: Damage Waiver . . . . . . . . . . . . . . -46-
8.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . -47-
8.5 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . -48-
8.6 Counterparts; Integration; References to Agreement;
Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . -48-
8.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . -48-
8.8 Right of Setoff. . . . . . . . . . . . . . . . . . . . . . . . -48-
8.9 Governing Law; Jurisdiction; Consent to Service of Process . . -49-
8.10 Waiver of Jury Trial.. . . . . . . . . . . . . . . . . . . . . -49-
8.11 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . -49-
8.12 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . -50-
</TABLE>
(iv)
<PAGE>
LIST OF EXHIBITS/SCHEDULES
Exhibit A Revolving Credit Note
Exhibit B Term Note
Exhibit C Notice of Borrowing/Conversion
Exhibit D Security Agreement
Exhibit E Warrant
Exhibit F Intellectual Property Security Agreement
Exhibit G Landlord Waiver
Exhibit H Monthly Finished Goods Inventory Reports
Exhibit I Compliance Certificate
Schedule 3.3 Governmental Approvals
Schedule 3.4 Balance Sheets
Schedule 3.5 Properties
Schedule 3.6 Litigation and Environmental Matters
Schedule 3.11 Acquisition Agreement
Schedule 3.12 Capitalization
Schedule 3.13 Subsidiaries
Schedule 3.14 Material Indebtedness
Schedule 3.18 Labor Matters
Schedule 3.19 Brokers
Schedule 5.10 Existing Term Debt
Schedule 6.6 Stock Option Plans
Schedule 6.7 Transactions with Affiliates
Schedule 6.8 Distributions
(v)
<PAGE>
REVOLVING CREDIT AND TERM LOAN AGREEMENT
REVOLVING CREDIT AND TERM LOAN AGREEMENT dated as of May __, 1998 between
Rubio's Finished Goods Inventorys, Inc. and its Subsidiary listed on Schedule
3.13, (collectively the "Borrower) and BANKBOSTON, N.A., (the "Bank").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms have
the meanings specified below:
"ADJUSTED BASE RATE" means, for any day, a rate per annum equal to the
greater of (a) the Base Rate in effect on such day, and (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Adjusted
Base Rate due to a change in the BankBoston Base Rate or the Federal Funds
Effective Rate shall be effective from and including the effective date of such
change in the BankBoston Base Rate or the Federal Funds Effective Rate,
respectively.
"ADJUSTED LIBO RATE" means, with respect to any LIBOR Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.
"AFFILIATE" means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
Notwithstanding the foregoing, (a) no individual shall be an Affiliate solely by
reason of his or her being a director, officer or employee of any Borrower or a
Subsidiary thereof and (b) none of the Borrower or its Subsidiaries shall be
Affiliates.
"BANKBOSTON" means BankBoston, N.A., a national banking association.
"BASE RATE" means the rate of interest per annum publicly announced from
time to time by BankBoston as its base rate in effect at its principal office in
Boston, Massachusetts; each change in the BankBoston Base Rate shall be
effective from and including the date such change is publicly announced as being
effective.
"BASE RATE LOAN" means any Loan hereunder which bears interest at a rate
determined by reference to the Adjusted Base Rate.
"BOARD" means the Board of Governors of the Federal Reserve System of the
United States of America.
"BORROWER" means Rubio's Restaurants, Inc., a Delaware Corporation and the
Subsidiary listed on Schedule 3.13.
<PAGE>
"BORROWER'S ACCOUNTANT" means Deloitte, Touche LLP or such other accountant
reasonably satisfactory to the Bank.
"BORROWING" means Loans of a particular Class, made, converted or continued
on the same date and, in the case of LIBOR Loans, as to which a single Interest
Period is in effect.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or other day on
which commercial banks in Boston, Massachusetts are authorized or required by
law to remain closed;
Capital Expenditures.
"CAPITAL LEASE OBLIGATIONS" of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.
"CASUALTY EVENT" means, with respect to any Property of any Person, any
loss of or damage to, or any condemnation or other taking of, such Property for
which such Person or any of its Subsidiaries receives insurance proceeds, or
proceeds of a condemnation award or other compensation.
"CHANGE IN LAW" means (a) the adoption of any law, rule or regulation after
the Closing Date, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
Closing Date or (c) compliance by the Bank with any request, guideline or
directive (whether or not having the force of law) of any Governmental Authority
made or issued after the Closing Date.
"CLASS" when used in reference to any Loan, Borrowing or Commitment, refers
to whether such Loan or the Loans comprising such Borrowing are Revolving Credit
Loans or Term Loans.
"CLOSING DATE" means the date upon which all conditions set forth in
Section 4.1 are satisfied or have been waived by the Bank in writing or the Bank
permits the Borrower to complete at a date after the Closing Date in writing.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"COLLATERAL" means, collectively, all of the Property (including capital
stock) in which Liens are granted pursuant to the Collateral Documents as
security for all obligations of the Borrower hereunder.
"COLLATERAL DOCUMENTS" means the Security Agreement, the Intellectual
Property Security Agreement, and all other instruments or documents delivered by
the Borrower or any shareholder pursuant to this Agreement or any of the other
Loan Documents in order to grant to the Bank a Lien on any real, personal or
mixed property of the Borrower as security for any of its obligations hereunder.
-2-
<PAGE>
"COMMITMENTS" means the Revolving Credit Commitment and the Term Loan
Commitment, as applicable.
"COMPLIANCE CERTIFICATE" means a certificate required to be delivered by
the Borrower to the Bank pursuant to Section 5.1(d) signed by a Senior Officer,
in substantially the form of Exhibit I hereto.
"CONSOLIDATED CASH FLOW" means for any period, the amount equal to the sum
of (a) Consolidated EBITDAR for such period minus (b) cash payments for all
taxes paid during such period, plus (c) net proceeds of Dispositions of assets
minus (d) the aggregate amount of Maintenance Capital Expenditures during such
period (all of the forgoing on a consolidated basis with any Subsidiary of the
Borrower).
"CONSOLIDATED EBITDA" means, for any period, the sum of (a) Consolidated
Net Income of the Borrower and its Subsidiaries, if any, (determined in
accordance with GAAP), plus (b) the consolidated income tax expense and
consolidated Interest Expense of the Borrower and its Subsidiaries, if any,
plus, (c) consolidated depreciation and amortization expenses of the Borrower
and its Subsidiaries, if any, plus (d) other consolidated non-cash charges of
the Borrower and its Subsidiaries, if any, minus (e) other consolidated non-cash
credits of the Borrower and its Subsidiaries, if any (provided that all of the
forgoing shall be calculated without reference to any extraordinary and unusual
gain during such period).
"CONSOLIDATED EBITDAR" means, for any period, Consolidated EBITDA for any
period plus Consolidated Rental Expenses of the Borrower and its Subsidiaries,
if any.
"CONSOLIDATED FINANCIAL OBLIGATIONS" for any period, the sum of scheduled
payments of Indebtedness of the Borrower and its Subsidiaries, if any,
including, without limitation, payments of principal and interest (including the
interest portion of any payment under a Capital Lease Obligation), commitment or
similar fees on Indebtedness of the Borrower and its Subsidiaries, if any, and
Consolidated Rental Expenses for such period.
"CONSOLIDATED FUNDED INDEBTEDNESS" means the Indebtedness of the Borrower
and it Subsidiaries, if any, on a consolidated basis as described in clauses
(a), (b) and (c) of the definition of "Indebtedness.", plus the aggregate
maximum amount which can be drawn under all outstanding Letters of Credit, plus
(without duplication) all Indebtedness under clauses (e) and (f) of the
definition of "Indebtedness".
"CONSOLIDATED NET INCOME" means net income of the Borrower on a
consolidated basis with its Subsidiaries, if any, determined in accordance with
GAAP.
"CONSOLIDATED RENTAL EXPENSES" means for any period the total rental
payments on operating leases of the Borrower and its Subsidiaries, if any.
"CONTROL" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
-3-
<PAGE>
"DEFAULT" means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"DISCLOSED MATTERS" means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 3.6.
"DISPOSITION" means any sale, assignment, transfer or other disposition of
any property (whether now owned or hereafter acquired) by the Borrower to any
Person excluding (a) the granting of Liens to the Bank pursuant to the
Collateral Documents and (b) any sale, assignment, transfer or other disposition
of (i) any property sold or disposed of in the ordinary course of business and
on ordinary business terms, (ii) any property no longer used or useful in the
business of the Borrower and (iii) any Collateral under and as defined in the
Collateral Documents pursuant to an exercise of remedies by the Bank thereunder;
provided that the first $100,000 of such sales, transfers or other dispositions
of property in any twelve month period shall not be a Disposition for purposes
hereof and the proceeds may be retained by the Borrower.
"ENVIRONMENTAL LAWS" means all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
management, release or threatened release of any Hazardous Material.
"ENVIRONMENTAL LIABILITY" means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of any Borrower directly or indirectly resulting from
or based upon (a) violation of any Environmental Law, (b) the generation, use,
handling, transportation, storage, treatment or disposal of any Hazardous
Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the environment or (e) any
contract, agreement or other consensual arrangement pursuant to which liability
is assumed or imposed with respect to any of the foregoing.
"EQUITY RIGHTS" means, with respect to any Person, any subscriptions,
options, warrants, commitments, preemptive rights or agreements of any kind
(including any stockholders' or voting trust agreements) for the issuance or
sale of, or securities convertible into, any additional shares of capital stock
of any class, or partnership or other ownership interests of any type in, such
Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not incorporated)
that, together with the Borrower, is treated as a single employer within the
meaning of Section 414(b), (c), (m) or (o) of the Code.
"ERISA EVENT" means (a) any "reportable event", as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to any Pension Plan,
(b) the existence with respect to any Pension Plan of an "accumulated funding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived, (c) the filing pursuant to Section
-4-
<PAGE>
412(d) of the Code or Section 303(d) of ERISA of an application for a waiver
of the minimum funding standard with respect to any Pension Plan, (d) the
incurrence by the Borrower or any of its ERISA Affiliates of any liability
under Title IV of ERISA with respect to the termination of any Pension Plan,
(e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a
plan administrator of any notice relating to an intention to terminate any
Pension Plan or Pension Plans or to appoint a trustee to administer any
Pension Plan or (f) the receipt by the Borrower or any ERISA Affiliate of any
notice, or the receipt by any Multiemployer Plan from the Borrower or any
ERISA Affiliate of any notice of Withdrawal Liability or a determination that
a Multiemployer Plan is, or is expected to be, insolvent or in
reorganization, within the meaning of Title IV of ERISA.
"EVENT OF DEFAULT" has the meaning assigned to such term in Section 7.1.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the weighted average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of Boston, or, if such rate is not so published
for any day that is a Business Day, the average (rounded upwards, if necessary,
to the next 1/100 of 1%) of the quotations for such day for such transactions
received by the Bank from three Federal funds brokers of recognized standing
selected by it.
"FIRST PRIORITY" means, with respect to any Lien purported to be created in
any Collateral pursuant to any Collateral Document, that such Lien is the most
senior Lien (other than Liens permitted pursuant to Section 6.2 to the extent
not perfected by filing of any UCC financing statements) to which such
Collateral is subject.
"GAAP" means generally accepted accounting principles in the United States
of America.
"GOVERNMENTAL AUTHORITY" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"GUARANTY" means a guaranty, an endorsement, a contingent agreement to
purchase or to furnish funds for the payment or maintenance of, or otherwise to
be or become contingently liable under or with respect to, the Indebtedness,
other obligations, net worth, working capital or earnings of any Person, or a
guaranty of the payment of dividends or other distributions upon the stock or
equity interests of any Person, or an agreement to purchase, sell or lease (as
lessee or lessor) property, products, materials, supplies or services primarily
for the purpose of enabling a debtor to make payment of such debtor's
obligations or an agreement to assure a creditor against loss, and including,
without limitation, causing a bank or other financial institution to issue a
letter of credit or other similar instrument for the benefit of another Person,
but excluding endorsements for collection or deposit in the ordinary course of
business. The terms "Guaranty" and "Guarantees" used as a verb shall have a
correlative meaning.
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"HAZARDOUS MATERIALS" means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"INDEBTEDNESS" means, for any Person, without duplication: (a) obligations
created, issued or incurred by such Person for borrowed money (whether by loan,
advance, the issuance and sale of debt securities or the sale of Property to
another Person subject to an understanding or agreement, contingent or
otherwise, to repurchase such Property from such Person); (b) obligations of
such Person to pay the deferred purchase or acquisition price of Property or
services, other than trade accounts payable (other than for borrowed money)
arising, and accrued expenses incurred, in the ordinary course of business so
long as such trade accounts are payable within 90 days after the date the
respective goods are delivered or the respective services are rendered; (c)
Capital Lease Obligations of such Person; (d) obligations of such Person in
respect of letters of credit or similar instruments issued or accepted by banks
and other financial institutions for the account of such Person; (e)
Indebtedness of others secured by a Lien on the Property of such Person, whether
or not the respective indebtedness so secured has been assumed by such Person;
and (f) Indebtedness of others Guarantied by such Person. The Indebtedness of
any Person shall include the Indebtedness of any other Person (including any
partnership other than an LLP in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.
"INTELLECTUAL PROPERTY SECURITY AGREEMENT" means the Intellectual Property
Security Agreement in form attached as Exhibit F.
"INTEREST EXPENSE" means, for any period, the sum, for the Borrower and its
Subsidiaries, if any, on a consolidated basis (determined in accordance with
GAAP), of the following: (a) all interest in respect of Consolidated Funded
Indebtedness accrued, paid or capitalized during such period plus (b) all fees
due the Bank hereunder related to loans hereunder.
"INTEREST PAYMENT DATE" means (a) with respect to any Base Rate Loan, each
Quarterly Date and (b) with respect to any LIBOR Loan, the last Business Day of
the Interest Period applicable to the Borrowing of which such Loan is a part.
"INTEREST PERIOD" means with respect to any LIBOR Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; provided, that (i) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (ii) any Interest Period
that commences on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the last calendar month of
such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period. For purposes hereof, the date of a Borrowing
initially shall be the date on which such Borrowing is made and thereafter shall
be the effective date of the most recent conversion or continuation of such
Borrowing. Notwithstanding the foregoing,
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(x) if any Interest Period for any Revolving Credit Loan would
otherwise end after the Revolving Credit Maturity Date, such Interest
Period shall end on the Revolving Credit Maturity Date,
(y) no Interest Period for any Term Loan may commence before and end
after any Quarterly Date unless, after giving effect thereto, the aggregate
principal amount of the Term Loans having Interest Periods that end after
such Quarterly Date shall be equal to or less than the aggregate principal
amount of the Term Loans scheduled to be outstanding after giving effect to
the payments of principal required to be made on such Quarterly Date, and
(z) notwithstanding the foregoing clauses (x) and (y), no Interest
Period shall have a duration of less than one month and, if the Interest
Period for any LIBOR Loan would otherwise be a shorter period, such Loan
shall not be available hereunder as a LIBOR Loan for such period.
"INVESTMENT" means, for any Person: (a) the acquisition (whether for cash,
Property, services or securities or otherwise) of capital stock, bonds, notes,
debentures, partnership or other ownership interests or other securities of any
other Person or any agreement to make any such acquisition (including, without
limitation, any "short sale" or any sale of any securities at a time when such
securities are not owned by the Person entering into such short sale); (b) the
making of any deposit with, or advance, loan or other extension of credit to,
any other Person (including the purchase of Property from another Person subject
to an understanding or agreement, contingent or otherwise, to resell such
Property to such Person, but excluding any such advance, loan or extension of
credit having a term not exceeding 180 days representing the purchase price of
inventory or supplies sold by such Person in the ordinary course of business);
or (c) the entering into of any Guaranty of, or other contingent obligation with
respect to, Indebtedness or other liability of any other Person and (without
duplication) any amount committed to be advanced, lent or extended to such
Person. Notwithstanding the foregoing, Capital Expenditures shall not be deemed
"Investments" for purposes hereof.
"LANDLORD WAIVER" means, with respect to a letter from the Borrower's
lessors in the form of Exhibit G annexed hereto or such other form as may be
approved by the Bank in its sole discretion.
"LETTER OF CREDIT" means a documentary or standby letter of credit issued
by the Bank on behalf of the Borrower under the terms of this Agreement.
"LC DISBURSEMENT" means a payment made by the Bank pursuant to a Letter of
Credit.
"LC EXPOSURE" means, at any time, the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time plus (b) the aggregate
amount of all LC Disbursements that have not yet been reimbursed by or on behalf
of the Borrower at such time.
"LIBOR" when used in reference to any Loan, refers to whether such Loan are
bearing interest at a rate determined by reference to the Adjusted LIBO Rate.
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"LIBO RATE" means, with respect to any LIBOR Borrowing for any Interest
Period, the rate appearing on Page 3750 of the Dow Jones Markets (Telerate)
Service (or on any successor or substitute page of such Service, or any
successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page of such Service, as
determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to U.S. dollar deposits in the
London interbank market) at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period, as the rate for U.S.
dollar deposits with a maturity comparable to such Interest Period. In the
event that such rate is not available at such time for any reason, then the
"LIBO Rate" with respect to such LIBOR Borrowing for such Interest Period shall
be the rate at which U.S. dollar deposits of $5,000,000, and for a maturity
comparable to such Interest Period, are offered by the principal London office
of the Administrative Agent in immediately available funds in the London
interbank market at approximately 11:00 a.m., London time, two Business Days
prior to the commencement of such Interest Period.
"LIEN" means, with respect to any asset, (a) any mortgage, deed of trust,
lien, pledge, hypothecation, encumbrance, charge or security interest in, on or
of such asset, (b) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement (other than an
operating lease) (or any financing lease having substantially the same economic
effect as any of the foregoing) relating to such asset and (c) in the case of
securities, any purchase option, call or similar right of a third party with
respect to such securities.
"LOAN DOCUMENTS" means this Agreement, any promissory notes evidencing
Loans hereunder, the Collateral Documents and any other instruments or documents
delivered or to be delivered from time to time pursuant to this Agreement.
"LOANS" means the Revolving Credit Loans and the Term Loan.
"MAINTENANCE CAPITAL EXPENDITURES" means Capital Expenditures made by the
Borrower or any of its Subsidiaries related directly to the maintenance of the
existing properties in proper operating condition and in accordance with
recognized standards for similar properties and as required under Section 5.5 of
this Agreement.
"MATERIAL ADVERSE EFFECT" means a materially adverse effect on (a) the
business, assets (tangible or intangible), operations, prospects or condition,
financial or otherwise, of the Borrower taken as a whole, (b) the ability of the
Borrower to perform its obligations under this Agreement or the other Loan
Documents or (c) the rights of or benefits available to the Bank under this
Agreement and the other Loan Documents.
"MATERIAL INDEBTEDNESS" means Indebtedness of the Borrower in an aggregate
principal amount exceeding $100,000 and subject to specific dollar amounts set
forth else where in this Agreement.
"MONTHLY RESTAURANT REPORTS" means in form appended hereto as Exhibit H.
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"MULTIEMPLOYER PLAN" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"NET CASH PAYMENTS" means,
(i) with respect to any Casualty Event, the aggregate amount of
proceeds of insurance (excluding proceeds of business interruption
insurance), condemnation awards and other compensation received by the
Borrower in respect of such Casualty Event net of (A) reasonable expenses
incurred by the Borrower in connection therewith, (B) contractually
required repayments of Indebtedness to the extent secured by a Lien on such
property and (c) any income and transfer taxes payable by the Borrower in
respect of such Casualty Event; and
(ii) with respect to any Disposition, the aggregate amount of all cash
payments received by the Borrower or any its Subsidiaries directly or
indirectly in connection with such Disposition, whether at the time of such
Disposition or after such Disposition under deferred payment arrangements
or Investments entered into or received in connection with such
Disposition.
"NOTICE OF THE BORROWING" means a written request by the Borrower for a
Loan in accordance with Section 2.2 in the form attached as Exhibit C.
"OBLIGATIONS" means, any and all obligations of the Borrower to the Bank of
every kind and description, direct or indirect, absolute or contingent, primary
or secondary, due or become due, now existing or hereafter arising, regardless
of how they arise or by what agreement or instrument they may be evidenced or
whether evidenced by any agreement or instrument, and the Borrower's obligations
to perform acts and to refrain from acting as well as obligations to pay money.
"PENSION PLAN" means any Plan that is a defined benefit pension plan
subject to the provisions of Title IV of ERISA or Section 412 of the Code or
Section 302 of ERISA, and in respect of which the Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"PERMITTED INVESTMENTS" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guarantied by, the United States of
America (or by any agency thereof to the extent such obligations are backed
by the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the
date of acquisition thereof and having, at such date of acquisition, the
highest credit rating obtainable from Standard and Poor's Ratings Service
or from Moody's Investors Service, Inc.;
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(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 180 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts
issued or offered by, any domestic office of any commercial bank organized
under the laws of the United States of America or any State thereof which
has a combined capital and surplus and undivided profits of not less than
$250,000,000;
(d) fully collateralized repurchase agreements with a term of not
more than 30 days for securities described in clause (a) above and entered
into with a financial institution satisfying the criteria described in
clause (c) above;
(e) advances, loans and extensions of credit to any director, officer
or employee of a Borrower not to exceed $50,000.
(f) investments in money market mutual funds that are rated AAA by
Standard & Poor's Rating Service.
(g) investments made in accordance with the investment policy
delivered to the Bank by the Borrower prior to the execution of this
Agreement, which policy may not be amended without the consent of the Bank.
"PERMITTED NEW RESTAURANTS" means a new restaurant location opened by the
Borrower after the date of this agreement which (i) is financed in whole or in
part by Revolving Loans and (ii) is opened after demonstrating to the Bank that
90% of the existing restaurants, open for in excess of 9 calender months, of the
Borrower have Positive Store Cash Flow.
"PERSON" means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
"PLAN" means any employee benefit plan within the meaning of Section 3(3)
of ERISA in which the Borrower or any ERISA Affiliate is an "employer" as
defined in Section 3(5) of ERISA.
"POSITIVE STORE CASH FLOW" means that the results of operations for each
restaurant location show that gross sales exceed costs of goods sold plus
operating expenses, rent, payroll and facility related expenses (not otherwise
included in the forgoing), but excluding non-cash charges such as depreciation
and amortization.
"POST-DEFAULT RATE" means, for Base Rate Loans, a rate per annum equal to
the Adjusted Base Rate plus the Applicable Margin plus 3%
"PREPAYMENT PENALTY" is as defined in Section 2.8.
"PROPERTY" means any interest of any kind in property or assets, whether
real, personal or mixed, and whether tangible or intangible.
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"QUARTERLY DATES" means the last Business Day of March, June, September and
December of each year.
"RESTRICTED PAYMENTS" means (i) any dividend or other distribution, direct
or indirect, on account of any shares of any class of stock or membership
interest of the Borrower now or hereafter outstanding, except a dividend payable
solely in shares of that class of stock or membership interest to the holders of
that class or distribution consisting solely of a class of membership interests
to the owners of that class of membership interest, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of stock of the Borrower
now or hereafter outstanding, (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of the Borrower now or hereafter outstanding, (iv)
any payment made to any Affiliates of the Borrower in respect of management,
consulting or other services provided to the Borrower.
"REVOLVING CREDIT AVAILABILITY PERIOD" means the period from and including
the Closing Date to but excluding the earlier of (a) the Revolving Credit
Maturity Date and (b) the date of termination of the Revolving Credit
Commitment.
"REVOLVING CREDIT COMMITMENT" means an amount not to exceed $10,000,000
less the original Term Loan Commitment; provided that the Revolving Credit
Commitment may exceed (i) $5,000,000 less the original Term Loan Commitment only
if the Warrant provides for an additional 10,000 shares of Series D Convertible
Preferred stock of Rubio's and (ii) $7,500,000 less the original Term Loan
Commitment only if the Warrant continues to provide for an additional 10,000
shares of Series D Convertible Preferred stock of Rubio's.
"REVOLVING CREDIT NOTE" means the note substantially in the form appended
hereto as Exhibit A.
"REVOLVING CREDIT LOAN" means a Loan made pursuant to Section 2.1(a) that
utilizes the Revolving Credit Commitment.
"REVOLVING CREDIT MATURITY DATE" means the earlier of May __, 2001 or the
date upon which the Borrower receives notice of redemption under any series of
preferred stock issued by the Borrower, unless extended in accordance with
Section 2.3(a), in which case the "Revolving Credit Maturity Date" shall be such
extended date.
"RUBIO'S" means Rubio's Restaurants, Inc. a Delaware Corporation.
"SECURITY AGREEMENT" means the Security Agreement executed and delivered by
the Borrower on the Closing Date and thereafter in accordance with Section 5.11,
substantially in the form of Exhibit D annexed hereto, as such agreements may be
amended, supplemented or otherwise modified from time to time.
"SENIOR OFFICER" means the President, or Chief Financial Officer or
Treasurer or Assistant Treasurer.
"SPECIAL COUNSEL" means Lawson & Weitzen, LLP.
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"STATUTORY RESERVE RATE" means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Bank is subject with respect to the
Adjusted LIBO Rate, for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D. LIBOR
Loans shall be deemed to constitute eurocurrency funding and to be subject to
such reserve requirements. The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"SUBSIDIARY" means, with respect to any Person at any date, any
corporation, limited liability company, partnership, association or other entity
the accounts of which would be combined with those of the parent in the parent's
combined financial statements if such financial statements were prepared in
accordance with GAAP as of such date, as well as any other corporation, limited
liability company, partnership, association or other entity (a) of which
securities or other ownership interests representing more than 50% of the
ordinary voting power or, in the case of a partnership, more than 50% of the
general partnership interests are, as of such date, owned, controlled or held,
or (b) that is, as of such date, otherwise Controlled, by the parent or one or
more subsidiaries of the parent or by the parent and one or more subsidiaries of
the parent. References herein to "Subsidiaries" shall, unless the context
requires otherwise, be deemed to be references to Subsidiaries of the Borrower.
"TAXES" means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.
"TERM LOAN" has the MEANING ASSIGNED TO SUCH TERM IN SECTION 2.1(B).
"TERM Loan Commitment" means the amount necessary and sufficient to pay off
Union Bank and Bank of Commerce in the approximate amount of $2,500,000.
"TERM NOTE" means the note substantially the form appended hereto as
Exhibit B.
"TRANSACTIONS" means, with respect to the Borrower, the execution, delivery
and performance by the Borrower of the Loan Documents to which it is a party,
the borrowing of Loans and the use of the proceeds thereof.
"UCC" means the Uniform Commercial Code (or any similar or equivalent
legislation) as in effect in any applicable jurisdiction.
"U.S. DOLLARS" or "$" refers to lawful money of the United States of
America.
"WARRANT" means that certain Series D Preferred Stock Purchase for up to
45,000 share of Series D Convertible Preferred Stock of Rubio's, in the form
appended hereto as Exhibit E, exercisable through December 31, 2002 at the
exercise prices under the circumstances provided in Exhibit E.
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"WHOLLY OWNED SUBSIDIARY" means, with respect to any Person at any date,
any corporation, limited liability company, partnership, association or other
entity of which securities or other ownership interests representing 100% of the
equity or ordinary voting power (other than directors' qualifying shares) or, in
the case of a partnership, 100% of the general partnership interests are, as of
such date, directly or indirectly owned, controlled or held by such Person or
one or more Wholly Owned Subsidiaries of such Person or by such Person and one
or more Wholly Owned Subsidiaries of such Person.
"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.
1.2 TERMS GENERALLY. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without limitation". The word
"will" shall be construed to have the same meaning and effect as the word
"shall". Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such
Person's successors and assigns, (c) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
1.3 ACCOUNTING TERMS; GAAP. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; provided that, if the
Borrower notifies the Bank that the Borrower requests an amendment to any
provision hereof to eliminate the effect of any change occurring after the date
hereof in GAAP or in the application thereof on the operation of such provision,
regardless of whether any such notice is given before or after such change in
GAAP or in the application thereof, then such provision shall be interpreted on
the basis of GAAP as in effect and applied immediately before such change shall
have become effective until such notice shall have been withdrawn or such
provision amended in accordance herewith.
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ARTICLE II
THE CREDITS
2.1 REVOLVING CREDIT AND TERM LOAN COMMITMENTS.
(a) REVOLVING CREDIT LOANS. Subject to the terms and conditions set
forth herein, the Bank agrees to make Revolving Credit Loans to the Borrower
from time to time during the Revolving Credit Availability Period in an
aggregate principal amount that will not result in the aggregate of all
Revolving Credit Loans plus Letters of Credit issued and outstanding to exceed
the Revolving Credit Commitment. Notwithstanding the forgoing, the Bank shall
not make any Revolving Credit Loan which does not comply with the use of
proceeds set forth in Section 5.10 of this Agreement. Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrower
may borrow, prepay and reborrow Revolving Credit Loans until maturity. The
Revolving Credit Loans shall be evidenced by a Revolving Credit Note in the form
appended hereto as EXHIBIT A.
(b) TERM LOAN. In addition to Revolving Credit Loans pursuant to
paragraph (a) above, and subject to the terms and conditions set forth herein,
the Bank shall make the Term Loan to the Borrower (the "TERM LOAN") to the
Borrower in the full amount of its Term Loan Commitment, on the Closing Date.
Principal amounts of Term Loan which have been repaid or prepaid may not be
reborrowed. The Term Loan will be evidenced by the Term Note in the form
appended hereto as EXHIBIT B.
2.2 LOANS AND BORROWINGS.
(a) Each Loan of a particular Class shall be made as part of a Borrowing
consisting of Loans of such Class made by the Bank.
(b) At the commencement of each Interest Period for a LIBOR Borrowing,
such Borrowing shall be in an aggregate amount at least equal to $100,000 or any
greater integer multiple of $100,000. At the time that each Base Rate Borrowing
is made, such Borrowing shall be in an aggregate amount that is at least equal
to $50,000 or any greater integer multiple of $50,000; provided that
notwithstanding the foregoing (i) a Base Rate Borrowing of Revolving Credit
Loans may be in an aggregate amount that is equal to the entire unused balance
of the total Revolving Credit Commitments and (ii) a Revolving Credit Base Rate
Borrowing may be in an amount that is required to finance the reimbursement of
an LC Disbursement as contemplated by Section 2.7(e). Borrowings of more than
one Class may be outstanding at the same time; provided that there shall not at
any time be more than a total of five LIBOR Borrowings outstanding for all
Loans.
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2.3 REQUESTS FOR BORROWINGS.
(a) Rubio's on behalf of the Borrower shall request a Revolving Credit
Borrowing by notifying the Bank of such request by telephone confirmed in
writing by delivery of a written notice substantially in the form of EXHIBIT C
annexed hereto executed by a Senior Officer (a "NOTICE OF BORROWING/CONVERSION")
with blanks appropriately completed, to the Bank (i) in the case of a LIBOR
Borrowing, not later than 1:00 p.m., Boston, Massachusetts time, two Business
Days before the date of the proposed Borrowing or (ii) in the case of a Base
Rate Borrowing not later than 1:00 p.m., Boston, Massachusetts time, on the date
of the proposed Borrowing. Each such Notice of Borrowing/Conversion shall be
irrevocable.
(b) The Borrower has requested a Term Loan of approximately
1,991,134.16 advance on the date hereof to repay all of the obligations of the
Borrower to Union Bank and may request a Term Loan (in the manner provided for
Revolving Loans under Section 2.3 (a) in an amount of approximately $236,316.86
for the sole purpose of repaying Bank of Commerce, but only if the request for
such Term Loan is accompanied by a payoff letter in form reasonably satisfactory
to the Bank (including terminations of all existing liens held by Bank of
Commerce).
(c) Each Notice of Borrowing/Conversion shall specify the following
information in compliance with Section 2.2:
(i) the aggregate amount of such Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be a Base Rate Borrowing or a
LIBOR Borrowing;
(iv) in the case of a LIBOR Borrowing, the initial Interest Period
to be applicable thereto, which shall be a period contemplated by the
definition of the term "Interest Period"; and
(v) the location and number of the account to which funds are to
be disbursed as required by Section 2.5.
If no election as to the Borrowing is specified, then the requested Borrowing
shall be a Base Rate Borrowing. If no Interest Period is specified with respect
to any requested LIBOR Borrowing, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
2.4 TERMINATION AND REDUCTION OF COMMITMENTS.
(a) Unless previously terminated, the Revolving Credit Commitment shall
terminate at the close of business on the Revolving Credit Maturity Date as it
may be extended by the Bank in the exercise of its sole discretion; PROVIDED
that, by written notice delivered by the Bank to the Borrower prior to the
Revolving Credit Maturity Date or any extended Revolving Credit Maturity Date,
the Bank may grant a one year extension of the Revolving Credit Maturity Date,
but only if accepted in writing by the Borrower prior to the then current
Revolving Credit Maturity Date.
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(b) The Borrower may, upon seven days prior written notice executed by a
Senior Officer and delivered to the Bank, at any time terminate, or from time to
time reduce, the Revolving Credit Commitment; PROVIDED that (i) each reduction
of the Revolving Credit Commitment shall be in an amount that is at least equal
to $50,000 or any greater integer multiple of $50,000, and (ii) the Borrower
shall not terminate or reduce the Revolving Credit Commitment if, after giving
effect to any concurrent repayment under Section 2.4(a) or prepayment of the
Revolving Credit Loans the total of the Revolving Credit Loans would exceed the
total Revolving Credit Commitment as reduced.
2.5 REPAYMENT OF LOANS; EVIDENCE OF DEBT.
(a) The Borrower hereby unconditionally promises to pay to the Bank then
unpaid principal amount of the Revolving Credit Loans on the Revolving Credit
Maturity Date. Also, if following any reduction in the Revolving Credit
Commitment the aggregate principal amount of the outstanding Revolving Credit
Loans shall exceed the aggregate Revolving Credit Commitment, the Borrower shall
pay Revolving Credit Loans in the amount of such excess.
(b) The Borrower hereby unconditionally promises to pay the Term Note in
principal installments of the final amount necessary to repay obligations to
Union Bank and Bank of Commerce (in an amount not to exceed $2,500,00) in equal
quarterly installments of principal based on the final amount so advance due on
each Quarterly Date with interest in arrears to the date of payment with all of
the principal and interest on the Term Note due on the earlier of April 1, 2001
or the date of any IPO.
(c) The Bank shall maintain accounts in which it shall record (i) the
amount of each Loan made hereunder, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower hereunder and
(iii) the amount of any sum received by the Bank hereunder.
(d) The entries made in the accounts maintained pursuant to paragraph
(c) of this Section 2.5 shall be prima facie evidence of the existence and
amounts of the obligations recorded therein absent manifest error; PROVIDED that
the failure of the Bank to maintain such accounts or any error therein shall not
in any manner affect the obligation of the Borrower to repay the Loans in
accordance with the terms of this Agreement.
2.6 PREPAYMENT OF LOANS.
(a) OPTIONAL PREPAYMENTS. The Borrower shall have the right at any time
upon one (1) day's notice to the Bank (in accordance with this Section 2.6(d)),
and from time to time to prepay any Revolving Credit Loan in whole or in part
without penalty. Each prepayment of Term Loans in full shall be subject to the
Prepayment Penalty. Any such prepayment shall be applied in accordance with
paragraph (c) of this Section 2.6.
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(b) Mandatory Prepayments. The Borrower shall make prepayments of the
Loans hereunder (and reduce the Commitments hereunder) as follows:
(i) CASUALTY EVENTS. Upon the date 30 days following the receipt
by the Borrower of the proceeds of insurance (other than business
interruption insurance), condemnation award or other compensation in
respect of any Casualty Event affecting any property of the Borrower (or
upon such earlier date as such Borrower, as the case may be, shall have
determined not to repair or replace the property affected by such Casualty
Event), the Borrower shall prepay the Term Loan in the inverse order of
maturity, in an amount equal to 100% of the Net Cash Payments from such
Casualty Event not theretofore applied or committed to be applied to the
repair or replacement of such property (it being understood that if Net
Cash Payments committed to be applied are not in fact applied within twelve
months of the respective Casualty Event, then such Proceeds shall be
applied to the prepayment of the Term Loan as herein provided at the
expiration of such twelve-month period), such prepayment and reduction to
be effected in each case in the manner and to the extent specified in
Section 2.9(c).
(ii) DISPOSITION. Within 30 days following the receipt by the
Borrower of the proceeds of any Disposition permitted under the terms of
this Agreement the Borrower shall deliver to the Bank 100% of Net Cash
Payments received. Thereafter, within thirty days of the receipt, to the
extent any Borrower shall receive Net Cash Payments in cash under deferred
payment arrangements entered into or received in connection with any
Disposition, an amount equal to (A) 100% of the aggregate amount of such
Net Cash Payments minus (B) any transaction expenses associated with
Dispositions and not previously deducted in the determination of Net Cash
Payments plus (or minus, as the case may be) (C) any other adjustment
received or paid by the Borrower pursuant to the respective agreements
giving rise to Dispositions and not previously taken into account in the
determination of the Net Cash Payments.
(iii) INCURRENCE OF DEBT. Without limiting the obligation of the
Borrower to obtain the consent of the Bank to any incurrence of
Indebtedness not otherwise permitted hereunder, the Borrower agrees, on or
prior to the closing of any incurrence of debt permitted hereunder to
deliver to the Bank a statement certified by a Senior Officer, in form and
detail reasonably satisfactory to the Bank, of the estimated amount of the
Net Cash Payments of such incurrence of debt that will (on the date of such
incurrence) be received by the Borrower in cash and within 30 days of the
receipt by the Borrower of the proceeds of such incurrence of debt. The
Borrower will prepay the Term Loan hereunder, upon the date of such
incurrence of debt, in an aggregate amount equal to 100% of such estimated
amount of the Net Cash Payments from such incurrence of debt received by
the Borrower, such prepayment and reduction to be applied to payments to be
applied first to the Prepayment Penalty and then to the payments of the
Term Loan in the inverse order of payment.
(iv) OFFERING OF EQUITY (OTHER THAN AN IPO). Without limiting the
obligation of the Borrower to obtain the consent of the Bank, any sale of
equity securities (other than an IPO) not otherwise permitted hereunder,
the Borrower agrees, on or prior to the sale of equity securities to
deliver to the Bank a statement certified by a Senior Officer, in form and
detail reasonably satisfactory to the Bank, of the estimated amount
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of the Net Cash Payments of such sale of equity securities that will (on
the date of such sale) be received by the Borrower in cash and within 30
days of the receipt by the Borrower of the proceeds of such offering of
equity. The Borrower will prepay the Term Loan hereunder, upon the date
of such sale of securities, in an aggregate amount equal to 50% of such
estimated amount of the Net Cash Payments from such sale of equity
securities received by the Borrower, such prepayment and reduction to be
applied to the payments of the Term Loan in the inverse order of
payment, without Prepayment Penalty.
(v) IPO. Not later than the date 90 days after the completion of
an IPO, the Borrower agrees to prepay the Term Loan in full with interest
to date, but without Prepayment Penalty.
(c) APPLICATION. In the event of any mandatory prepayment of Loans
pursuant to this Section 2.6(a) and (b)(i) and (ii), if such prepayment is made
at a time when the Term Loan remains outstanding, any such prepayment shall be
applied first to the Prepayment Penalty, if any, and then to the quarterly
principal installments due on the Term Loan in inverse order of maturity.
(d) NOTIFICATION OF PREPAYMENTS. The Borrower shall notify the Bank by
telephone (confirmed by telecopy) of any prepayment hereunder not later than
12:00 noon, Boston, Massachusetts time, the Business Day one day prior to the
date of prepayment. Each such notice shall be irrevocable and shall specify the
prepayment date and the principal amount of each Loan or portion thereof to be
prepaid.
(e) PREPAYMENTS ACCOMPANIED BY INTEREST. Prepayments of LIBOR based
Borrowings and Term Loans ( as provided in this Agreement) shall be accompanied
by accrued interest and applicable prepayment penalties ( as provided in this
Agreement).
2.7 LETTERS OF CREDIT.
(a) GENERAL. Subject to the terms and conditions set forth herein, in
addition to the Revolving Credit Loans provided for in Section 2.1(a), the
Borrower may request the issuance of Letters of Credit for its own account by
the Bank, in a form reasonably acceptable to the Bank, at any time and from time
to time prior to the Revolving Credit Maturity Date. Letters of Credit issued
hereunder shall constitute utilization of the Revolving Credit Commitment. In
the event of any inconsistency between the terms and conditions of this
Agreement and the terms and conditions of any form of letter of credit
application or other agreement submitted by the Borrower to, or entered into by
the Borrower with the Bank relating to any Letter of Credit, the terms and
conditions of this Agreement shall control.
(b) NOTICE OF ISSUANCE, AMENDMENT, RENEWAL, EXTENSION; CERTAIN
CONDITIONS. To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Bank) to the Bank
(reasonably in advance of the requested date of issuance, amendment, renewal or
extension) a notice requesting the issuance of a Letter of Credit, or
identifying the Letter of Credit to be amended, renewed or extended, the date of
issuance, amendment, renewal or extension, the date on which such Letter of
Credit is to expire (which shall comply with
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paragraph (c) of this Section 2.7), the amount of such Letter of Credit, the
name and address of the beneficiary thereof, and such other information as
shall be necessary to prepare, amend, renew or extend such Letter of Credit.
As required by the Bank, the Borrower also shall submit a letter of credit
application on the Bank's standard form in connection with any request for a
Letter of Credit. A Letter of Credit shall be issued, amended, renewed or
extended only if (and upon issuance, amendment, renewal or extension of each
Letter of Credit the Borrower shall be deemed to represent and warrant that),
after giving effect to such issuance, amendment, renewal or extension (i) the
aggregate LC Exposure of the Bank (determined for these purposes without
giving effect to the participations therein of the Revolving Credit Lenders
pursuant to paragraph (d) of this Section 2.7) shall not exceed with all
outstanding Revolving Credit Loans the Revolving Credit Maximum Amount.
(c) EXPIRATION DATE. Each Letter of Credit shall expire (without giving
effect to any extension thereof by reason of an interruption of business) at or
prior to the close of business on the earlier of (i) the date 365 days after the
date of the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, 365 days after such renewal or extension) provided that any
such Letter of Credit may provide for automatic extensions thereof to a date not
later than 365 days beyond its current expiration date, and (ii) the date that
is fifteen Business Days prior to the Revolving Credit Maturity Date. No Letter
of Credit may be extended beyond the date that is fifteen Business Days prior to
the Revolving Credit Maturity Date.
(d) REIMBURSEMENT. If the Bank shall make any LC Disbursement in
respect of a Letter of Credit, the Borrower shall reimburse the Bank in respect
of such LC Disbursement by paying to the Bank an amount equal to such LC
Disbursement not later than 1:30 p.m., Boston, Massachusetts time, on (i) the
Business Day that the Borrower receives notice of such LC Disbursement, if such
notice is received prior to 12:00 noon, Boston, Massachusetts time, or (ii) the
Business Day immediately following the day that the Borrower receives such
notice, if such notice is not received prior to such time, provided that the
Borrower may, subject to the conditions to borrowing set forth herein, request
in accordance with Section 2.3 that such payment be financed with a Base Rate
Revolving Credit Loan in an equivalent amount and, to the extent so financed,
the Borrower's obligation to make such payment shall be discharged and replaced
by the resulting Revolving Credit Loan.
(e) OBLIGATIONS ABSOLUTE.
(i) The Borrower's obligation to reimburse LC Disbursements as provided
in paragraph (d) of this Section 2.7 shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement under any and all circumstances whatsoever and irrespective of
(A) any lack of validity or enforceability of any Letter of Credit, or any term
or provision therein, (B) any draft or other document presented under a Letter
of Credit proving to be forged, fraudulent or invalid in any respect or any
statement therein being untrue or inaccurate in any respect, (C) payment by the
Bank under a Letter of Credit against presentation of a draft or other document
that does not comply strictly with the terms of such Letter of Credit and (D)
any other event or circumstance whatsoever, whether or not similar to any of the
foregoing, that might, but for the provisions of this Section 2.7, constitute a
legal or equitable discharge of the Borrower's obligations hereunder; provided
that the foregoing shall not waive the liability of the Bank under applicable
law or regulation
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requiring a reasonable review of documents and the Bank's obligation not to
honor any presentment which on its face does not conform to a reasonable
degree with requirements of the Letter of Credit.
(ii) The Bank shall have no liability or responsibility by reason of or
in connection with the issuance or transfer of any Letter of Credit by the Bank
or any payment or failure to make any payment thereunder (irrespective of any of
the circumstances referred to in clause (e)(i) above), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
Bank; PROVIDED that the foregoing shall not be construed to excuse the Bank from
liability to the Borrower to the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are hereby waived by the
Borrower to the extent permitted by applicable law) suffered by the Borrower
that are caused by the Bank's gross negligence or wilful misconduct when
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof. Subject in all respects to the foregoing,
the parties hereto expressly agree that:
(A) the Bank may accept documents that appear on their face to be
in substantial compliance with the terms of a Letter of Credit without
responsibility for further investigation, regardless of any notice or
information to the contrary, and may make payment upon presentation of
documents that appear on their face to be in substantial compliance with
the terms of such Letter of Credit;
(B) the Bank shall have the right, in its sole discretion, to
decline to accept such documents and to make such payment if such documents
are not in strict compliance with the terms of such Letter of Credit; and
(C) this clause (e)(ii) shall establish the standard of care to be
exercised by the Bank when determining whether drafts and other documents
presented under a Letter of Credit comply with the terms thereof (and the
parties hereto hereby waive, to the extent permitted by applicable law, any
standard of care inconsistent with the foregoing).
(f) DISBURSEMENT PROCEDURES. The Bank shall, promptly following its
receipt thereof, examine all documents purporting to represent a demand for
payment under any Letter of Credit. The Bank shall promptly notify the Borrower
by telephone (confirmed by telecopy) of such demand for payment and whether the
Bank has made or will make an LC Disbursement thereunder; PROVIDED that any
failure to give or delay in giving such notice shall not relieve the Borrower of
its obligation to reimburse the Bank with respect to any such LC Disbursement.
(g) INTERIM INTEREST. If the Bank shall make any LC Disbursement in
respect of any Letter of Credit, then, unless the Borrower shall reimburse such
LC Disbursement in full on the date such LC Disbursement is made, the unpaid
amount thereof shall bear interest, for each day from and including the date
such LC Disbursement is made to but excluding the date that the Borrower
reimburses such LC Disbursement, at the rate per annum then applicable to Base
Rate Revolving Credit Loans; PROVIDED that, if the Borrower fails to reimburse
such LC Disbursement
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when due pursuant to paragraph (d) of this Section 2.7, then interest at the
Post-Default Rate shall accrue on the unpaid amount thereof.
(h) CASH COLLATERALIZATION. If an Event of Default shall occur and be
continuing and the Borrower receives notice from the Bank demanding the deposit
of cash collateral pursuant to this paragraph, or the Borrower shall immediately
deposit with the Bank an amount in cash equal to the LC Exposure as of such date
plus any accrued and unpaid interest thereon; PROVIDED that the obligation to
deposit such cash collateral shall become effective immediately, and such
deposit shall become immediately due and payable, without demand or other notice
of any kind, upon the occurrence of any Event of Default. Such deposit shall be
held by the Bank as collateral in the first instance for the LC Exposure under
this Agreement and thereafter for the payment of any other obligations of the
Borrower hereunder.
2.8 FEES.
(a) The Borrower agrees to pay to the Bank on the daily average unused
amount of the respective Revolving Credit Commitment, during each fiscal quarter
from and including the Closing Date any unused commitment fees equal to .50% per
annum. Accrued commitment fees shall be payable in arrears on each Quarterly
Date commencing on the first such date occurring after the date hereof. All
commitment fees shall be computed on the basis of a year of 360 days and shall
be payable for the actual number of days elapsed (including the first day but
excluding the last day).
(b) The Borrower agrees to pay an additional fee of $100,000 which is
due on the Closing Date but payable $50,000 at closing and an additional $25,000
on the first anniversary of the Closing Date and $25,000 on the second
anniversary of the Closing Date; provided that the entire remaining amount of
the additional fee shall be due and payable upon the repayment of the
Commitments.
(c) The Borrower agrees to pay to the Bank an additional fee (the
"Prepayment Penalty") as follows: (i) 3% of the amount prepaid if the Term Loan
is paid by the first anniversary of the Closing Date, (ii) 2% of the amount
prepaid if the Term Loan is paid on and after the first anniversary of the
Closing Date and prior to the second anniversary of the Closing Date and (iii)
1% of the amount prepaid if paid on or after the second anniversary of the
Closing Date.
(d) The Borrower agrees to pay the Bank with respect to Letters of
Credit a fee per annum equal 2.00% of the average daily amount of the Bank's LC
Exposure (excluding any portion thereof attributable to unreimbursed LC
Disbursements). Accrued fees shall be payable in arrears on each Quarterly Date
and on the date the Revolving Credit Commitment terminates, commencing on the
first such date to occur after the date hereof, PROVIDED that any such fees
accruing after the date on which the Revolving Credit Commitment terminates
shall be payable on demand.
(e) All fees payable hereunder shall be paid on the dates due, in
immediately available funds. Fees paid shall not be refundable under any
circumstances, absent manifest error in the determination thereof.
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2.9 INTEREST.
(a) The Loans comprising Revolving Credit Loans and Term Loans at the
Base Rate shall bear interest at a rate per annum equal to the Adjusted Base
Rate plus 1.00% per annum or the Adjusted Base Rate plus 1.50% for all Revolving
Credit Loans if there is no pledge of the stock of the Borrower to the Bank.
(b) The Loans comprising Revolving Credit Loans and Term Loans at the
LIBO Rate shall bear interest of a rate per annum equal to the Adjusted LIBO
Rate plus 3.50% per annum; provided that, if there is no pledge of the stock of
the Borrower to the Bank, Revolving Credit Loans which are at the LIBO Rate
shall bear interest at a rate per annum equal to the Adjusted LIBO Rate plus
4.00% per annum.
(c) Notwithstanding the foregoing all obligations shall bear interest
until paid in full at the Adjusted Base Rate plus 3.00% per annum (the
"Post-Default Rate") when any Event of Default shall have occurred and be
continuing after as well as before judgment.
(d) The Borrower shall pay the Bank a late payment fee equal to 5% of
the amount of any payment of principal or interest or any mandatory prepayment
not received by the Bank within ten (10) days of the date required for such
payment under this Agreement.
(e) Accrued interest on each Loan shall be payable quarterly in arrears
on each Interest Payment Date for such Loan; PROVIDED that (i) interest accrued
at the Post-Default Rate and any late payment fee shall be payable on demand,
(ii) in the event of any repayment or prepayment of any LIBOR Loan (or the
repayment or prepayment in full of the Term Loans), accrued interest on the
principal amount repaid or prepaid shall be payable on the date of such
repayment or prepayment, (iii) in the event of any conversion of any LIBOR Loan
prior to the end of the current Interest Period therefor, accrued interest on
such Loan shall be payable on the effective date of such conversion and (iv) all
accrued interest on Revolving Credit Loans shall be payable upon expiration of
the Revolving Credit Availability Period.
(f) All interest hereunder shall be computed on the basis of a year of
360 days, and in each case shall be payable for the actual number of days
elapsed (including the first day but excluding the last day). The applicable
Adjusted Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the
Bank, and such determination shall be conclusive absent manifest error.
2.10 ALTERNATIVE RATE OF INTEREST.
(a) if the Bank determines (which determination shall be conclusive
absent manifest error) that adequate and reasonable means do not exist for
ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such
Interest Period; or
(b) if the Bank determines that the Adjusted LIBO Rate or the LIBO Rate,
as applicable, will not adequately and fairly reflect the cost to the Bank of
making or maintaining Loans of a Class included in a Borrowing for any Interest
Period;
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(c) then the Bank shall give notice thereof to the Borrower by telephone
or telecopy as promptly as practicable thereafter and, until the Bank notifies
the Borrower that the circumstances giving rise to such notice no longer exist,
(i) any Interest Election Request that request the conversion of any Borrowing
to, or continuation of any Borrowing as, a LIBOR Borrowing shall be ineffective
and (ii) if any Borrowing Request requests a LIBOR Borrowing, such Borrowing
shall be made as a Base Rate Borrowing.
2.11 INCREASED COSTS.
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit
or similar requirement against assets of, deposits with or for the account
of, or credit extended by, the Bank (except any such reserve requirement
reflected in the Adjusted LIBO Rate); or
(ii) impose on the Bank or the London interbank market any other
condition affecting this Agreement or LIBOR Loans made by the Bank or any
Letter of Credit;
and the result of any of the foregoing shall be to increase the cost to the Bank
of making or maintaining any LIBOR Loan (or of maintaining its obligation to
make any such Loan) or to increase the cost to the Bank, issuing or maintaining
any Letter of Credit or to reduce the amount of any sum received or receivable
by the Bank (whether of principal, interest or otherwise), then the Borrower
will pay to the Bank, such additional amount or amounts as will compensate the
Bank for such additional costs incurred or reduction suffered.
(b) If the Bank reasonably determines that any Change in Law regarding
capital requirements has or would have the effect of reducing the rate of return
on such the Bank's capital or on the capital of the Bank holding company, if
any, as a consequence of this Agreement or the Loans made by, or participations
in Letters of Credit held by, the Bank or the Letters of Credit issued to a
level below that which such the Bank's holding company could have achieved but
for such Change in Law (taking into consideration the Bank's policies and the
policies of the Bank's holding company with respect to capital adequacy), then
from time to time the Borrower will pay to the Bank, such additional amount or
amounts as will compensate the Bank, or such the Bank's holding company, for
any such reduction suffered.
(c) A certificate of the Bank setting forth the amount or amounts
necessary to compensate the Bank or its holding company, as the case may be, as
specified in paragraph (a) or (b) of this Section 2.11 and setting forth in
reasonable detail the basis for such claim and a calculation of the amount
payable to the Bank shall be delivered to the Borrower and shall be conclusive
so long as it reflects a reasonable basis for the calculation of the amounts set
forth therein and does not contain any manifest error. The Borrower shall pay
the Bank the amount shown as due on any such certificate within 10 days after
receipt thereof.
(d) Failure or delay on the part of the Bank to demand compensation
pursuant to this Section 2.11 shall not constitute a waiver of the Bank's right
to demand such compensation; PROVIDED that the Borrower shall not be required to
compensate pursuant to this Section 2.11 for
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any increased costs or reductions incurred more than six months prior to the
date that the Bank, notifies the Borrower of the Change in Law giving rise to
such increased costs or reductions and of the Bank's intention to claim
compensation therefor; PROVIDED FURTHER that, if the Change in Law giving rise
to such increased costs or reductions is (i) retroactive and (ii) occurred
within such six-month period, then the six-month period referred to above may be
extended to include the period of retroactive effect thereof, but in no event
any period prior to the Closing Date.
2.12 BREAK FUNDING PAYMENTS.
(a) In the event of (i) the payment of any principal of any LIBOR Loan
other than on the last day of an Interest Period applicable thereto (including
as a result of an Event of Default), (ii) the conversion of any LIBOR Loan other
than on the last day of the Interest Period applicable thereto or, (iii) the
failure to borrow, convert, continue or prepay any LIBOR Loan on the date
specified in any notice delivered pursuant hereto (regardless of whether such
notice is permitted to be revocable and is revoked in accordance herewith) in
any such event, the Borrower shall compensate the Bank for the loss, cost and
expense attributable to such event.
(b) In the case of a LIBOR Loan, the loss to the Bank attributable to
any such event shall be deemed to include an amount determined by the Bank to be
equal to the excess, if any, of
(i) the amount of interest that the Bank would pay for a deposit
equal to the principal amount of such Loan for the period from the date of
such payment, conversion, failure or assignment to the last day of the then
current Interest Period for such Loan (or, in the case of a failure to
borrow, convert or continue, the duration of the Interest Period that would
have resulted from such borrowing, conversion or continuation) if the
interest rate payable on such deposit were equal to the Adjusted LIBO Rate
for such Interest Period,
OVER
(iv) the amount of interest that such Lender would earn on such
principal amount for such period if the Bank were to invest such
principal amount for such period at the interest rate that would be bid
by the Bank (or an affiliate of the Bank) for U.S. dollar deposits from
other banks in the eurodollar market at the commencement of such period.
(c) A certificate of the Bank setting forth any amount or amounts that
such Lender is entitled to receive pursuant to this Section 2.12 and setting
forth in reasonable detail the basis for such claim and a calculation of the
amount payable to such Lender shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay such Lender the amount
shown as due on any such certificate within 10 days after receipt thereof.
2.13 TAXES.
(a) Any and all payments by or on account of any obligation of the
Borrower hereunder shall be made free and clear of and without deduction for any
Taxes; PROVIDED that if the Borrower shall be required to deduct any Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions the Bank
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receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii)
the Borrower shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Taxes to the relevant
Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Bank, within 30 days after
written demand therefor, for the full amount of any Taxes which may become
payable as described in this Section 2.13(a) (other than taxes on income of
the Bank) paid by the Bank (and any penalties, interest and reasonable
expenses arising therefrom or with respect thereto during the period prior to
the Borrower making the payment demanded under this paragraph (c)), whether
or not such Taxes were correctly or legally imposed or asserted by the
relevant Governmental Authority. A certificate as to the amount of such
payment or liability delivered to the Borrower by the Bank shall be
conclusive absent manifest error.
(d) As soon as practicable after any payment of such Taxes by the
Borrower to a Governmental Authority, the Borrower shall deliver to the Bank the
original or a certified copy of a receipt issued by such Governmental Authority
evidencing such payment under Section 2.13(a), a copy of the return reporting
such payment or other evidence of such payment reasonably satisfactory to the
Bank.
2.14 PAYMENTS GENERALLY.
(a) The Borrower shall make each payment required to be made by them
hereunder prior to 4:00 p.m., Boston, Massachusetts time, on the date when due,
in immediately available funds, without set-off or counterclaim. Any amounts
received after such time on any date may, in the discretion of the Bank, be
deemed to have been received on the next succeeding Business Day for purposes of
calculating interest thereon. All such payments shall be made to the Bank at
such of its offices in Boston, Massachusetts as shall be notified to the
Borrower from time to time. If any payment hereunder shall be due on a day that
is not a Business Day, the date for payment shall be extended to the next
succeeding Business Day and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All
payments hereunder shall be made in U.S. dollars.
(b) If at any time insufficient funds are received by and available to
the Bank to pay fully all amounts of principal, interest and fees then due
hereunder under any circumstances, including, without limitation during, or as a
result of the exercise by the Bank of remedies under the Collateral Documents
and applicable law, such funds shall be applied (i) first, to pay interest and
fees then due hereunder and (ii) second, to pay principal.
(c) The Borrower authorizes the Bank to charge its deposit accounts
maintained by the Borrower with the Bank any Obligation due hereunder when due.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Bank, as to itself, that:
3.1 ORGANIZATION; POWERS. The Borrower is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. The Borrower has all requisite power and authority under its
organizational documents to carry on its business as now conducted and, except
where the failure to be so qualified or in good standing, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect, is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required.
3.2 AUTHORIZATION; ENFORCEABILITY. The Transactions are within the
corporate power of the Borrower and have been duly authorized by all necessary
corporate and, if required, stockholder action on the part of the Borrower.
This Agreement has been duly executed and delivered by the Borrower and
constitutes a legal, valid and binding obligation of such Borrower, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.
3.3 GOVERNMENTAL APPROVALS; NO CONFLICTS. Except as set forth on
SCHEDULE 3.3, the Transactions (a) do not require any consent or approval of,
registration or filing with, or any other action by, any Governmental Authority
that has not been obtained, (b) will not violate any applicable law, policy or
regulation or the charter, by-laws or other organizational documents of the
Borrower or any order of any Governmental Authority, (c) will not violate or
result in a default under any indenture, agreement or other instrument binding
upon the Borrower, or any of its assets, or give rise to a right thereunder to
require any payment to be made by the Borrower, and (d) except for the Liens
created by the Collateral Documents, will not result in the creation or
imposition of any Lien on any asset of the Borrower.
3.4 FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE.
(a) The Borrower has heretofore delivered to the Bank the following
financial statements:
(i) The audited balance sheet and statement of earnings (loss),
stockholder's deficit and cash flows of the Borrower, as of and for fiscal
years ending December 28, 1997 and December 29, 1996, respectively,
accompanied by an opinion of Deloitte, Touche LLP, independent public
accountants;
(ii) the unaudited balance sheet and statements of earnings (loss),
stockholders' deficit and cash flows of the Borrower as of and for the
three months ending four-week periods ended March 29, 1998, certified by a
Senior Officer that such financial statements fairly present (subject to
normal year-end audit adjustments) the financial condition of the Borrower
as at such dates and the results of the operations of
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the Borrower for the periods ended on such dates and that all such
financial statements, including the related schedules and notes thereto
have been prepared in accordance with GAAP applied consistently throughout
the periods involved; and
Such financial statements present fairly, in all material respects, the
respective actual or pro forma combined financial position and results of
operations and cash flows of the respective entities as of such respective dates
and for such periods in accordance with GAAP, subject to year-end audit
adjustments and the absence of footnotes in the case of such unaudited or pro
forma statements and are accurate and complete in all respects.
(b) Since the last day of the Borrower's most recent audited period,
there has been no material adverse change in the business, assets, operations,
prospects or condition, financial or otherwise, of the Borrower.
(c) The Borrower has furnished to the Bank annual combined financial
projections dated as of August 1997 and covering fiscal years 1998 through
2001. Such financial projections are based on good faith estimates and
assumptions made by the Borrower and its management, and on the Closing Date,
such parties believed that the projections were reasonable and attainable, it
being recognized by the Bank, however, that projections as to future events are
not to be viewed as facts and that actual results during the period or periods
covered by the projections may differ from the projected results and that the
differences may be material.
(d) The Borrower does not have on the date hereof any contingent
liabilities, liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments in each case
that are material, except as referred to or reflected or provided for in the
balance sheets referred to above or as provided for in SCHEDULE 3.4 annexed
hereto, or as otherwise expressly provided in this Agreement, or as referred to
or reflected or provided for in the financial statements described in this
Section 3.4.
3.5 PROPERTIES.
(a) Except as set forth on SCHEDULE 3.5, the Borrower has good title to,
or valid, subsisting and enforceable leasehold interests in, all of its Property
material to its business.
(b) Except as set forth on Schedule 3.5, the Borrower owns, or is
licensed to use, all trademarks, service marks, tradenames, copyrights, patents
and other intellectual property ("PROPRIETARY RIGHTS") material to its business
and the use thereof by the Borrower does not infringe upon the rights of any
other Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect. All such trademark applications and registrations, trademarks,
registered copyrights, patents and patent applications which are owned by or
licensed to the Borrower are listed on SCHEDULE 3.5 annexed hereto ("REGISTERED
RIGHTS").
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3.6 LITIGATION AND ENVIRONMENTAL MATTERS.
(a) There are no actions, suits or proceedings by or before any
arbitrator or Governmental Authority pending against or, to the knowledge of any
of the Borrower, threatened against or affecting the Borrower (i) as to which
there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters) or (ii) that involve any of the Loan Documents or the Transactions.
(b) Except for the Disclosed Matters and except with respect to any
other matters that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, the Borrower (i) has not failed
to comply with any Environmental Law or to obtain, maintain or comply with any
permit, license or other approval required under any Environmental Law, (ii) has
not become subject to any Environmental Liability, (iii) has not received notice
of any claim with respect to any Environmental Liability or any inquiry,
allegation, notice or other communication from any Governmental Authority
concerning its compliance with any Environmental Law or (iv) does not know of
any basis for any Environmental Liability.
(c) Since the date of this Agreement, there has been no change in the
status of the Disclosed Matters that, individually or in the aggregate, has
resulted in, or materially increased the likelihood of, a Material Adverse
Effect.
3.7 COMPLIANCE WITH LAWS AND AGREEMENTS. The Borrower is in compliance
with all laws, regulations, policies and orders of any Governmental Authority
applicable to it or its property and all indentures, agreements and other
instruments binding upon it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
3.8 INVESTMENT AND HOLDING COMPANY STATUS. Neither the Borrower nor any
of its Affiliates is (a) an "investment company" as defined in, or subject to
regulation under, the Investment Company Act of 1940, as amended, (b) a "holding
company" as defined in, or subject to regulation under, the Public Utility
Holding Company Act of 1935, as amended or (c) a "bank holding company" as
defined in, or subject to regulation under, the Bank Holding Company Act of
1956, as amended.
3.9 TAXES. The Borrower has timely filed or caused to be filed all Tax
returns and reports required to have been filed and has paid or caused to be
paid all Taxes required to have been paid by it, except (a) Taxes that are being
contested in good faith by appropriate proceedings and for which such Borrower
has set aside on its books adequate reserves with respect thereto in accordance
with GAAP or (b) to the extent that the failure to do so could not reasonably be
expected to result in a Material Adverse Effect.
3.10 ERISA. No ERISA Event has occurred or is reasonably expected to
occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for
purposes of Statement of Financial Accounting Standards No. 87) did not, as
of the date of the
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most recent financial statements reflecting such amounts, exceed the fair
market value of the assets of such Plan.
3.11 DISCLOSURE. As of the Closing Date, the Borrower has disclosed to
the Bank all agreements, instruments and corporate or other restrictions to
which the Borrower is subject after the Closing Date, and all other matters
known to the Borrower, that, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect. A list of the senior
management of the Borrower is set forth on SCHEDULE 3.11 annexed hereto. The
information, reports, financial statements, exhibits and schedules furnished in
writing by or on behalf of the Borrower to the Bank on or prior to the Closing
Date in connection with the negotiation, preparation or delivery of this
Agreement and the other Loan Documents or included herein or therein or
delivered pursuant hereto or thereto, when taken as a whole do not contain any
untrue statement of material fact or omit to state any material fact necessary
to make the statements herein or therein, in light of the circumstances under
which they were made, not misleading. All written information furnished after
the Closing Date by the Borrower to the Bank in connection with this Agreement
and the other Loan Documents and the transactions contemplated hereby and
thereby will be true, complete and accurate in every material respect, or (in
the case of projections) based on reasonable estimates, on the date as of which
such information is stated or certified. There is no fact known to the Borrower
that could reasonably be expected to have a Material Adverse Effect that has not
been disclosed herein, in the other Loan Documents or in a report, financial
statement, exhibit, schedule, disclosure letter or other writing furnished to
the Bank for use in connection with the transactions contemplated hereby or
thereby.
3.12 CAPITALIZATION. On the Closing Date, the capital structure and
ownership of the Borrower are correctly described in SCHEDULE 3.12. The
authorized, issued and convertible preferred STOCK and other capital stock of
the Borrower consists, on the date hereof, of the stock described on SCHEDULE
3.12, all of which is duly and validly issued and outstanding, fully paid and
non-assessable. Except as set forth in SCHEDULE 3.12, as of the date hereof,
(x) there are no outstanding Equity Rights with respect to each of the Borrower
and (y) there are no outstanding obligations of any Borrower to repurchase,
redeem, or otherwise acquire any shares of capital stock of the Borrower nor are
there any outstanding obligations of the Borrower to make payments to any
Person, such as "phantom stock" payments, where the amount thereof is calculated
with reference to the fair market value or equity value of the Borrower.
3.13 SUBSIDIARIES. The Borrower has no Subsidiaries other than as listed
on SCHEDULE 3.13.
3.14 MATERIAL INDEBTEDNESS, LIENS AND AGREEMENTS.
(a) SCHEDULE 3.14 hereto is a complete and correct list, as of the date
of this Agreement, of all Material Indebtedness or any extension of credit (or
commitment for any extension of credit) to, or guaranty by, any Borrower the
aggregate principal or face amount of which equals or exceeds (or may equal or
exceed) $100,000, and the aggregate principal or face amount outstanding or that
may become outstanding with respect thereto is correctly described in SCHEDULE
3.14.
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(b) SCHEDULE 3.14 hereto is a complete and correct list, as of the date
of this Agreement, of each Lien securing Indebtedness of any Person and covering
any property of the Borrower, and the aggregate Indebtedness secured (or which
may be secured) by each such Lien and the Property covered by each such Lien is
correctly described in SCHEDULE 3.14.
3.15 FEDERAL RESERVE REGULATIONS. The Borrower is not engaged
principally or as one of its important activities in the business of extending
credit for the purpose of purchasing or carrying margin stock (as defined in
Regulation U of the Board). The value of all margin stock owned by the Borrower
does not constitute more than 25% of the value of the assets of the Borrower.
3.16 BURDENSOME RESTRICTIONS. The Borrower is not a party to or
otherwise bound by any indenture, loan or credit agreement or any lease or other
agreement or instrument or subject to any charter, corporate or partnership
restriction which would reasonably foreseeably have a Material Adverse Effect.
3.17 FORCE MAJEURE. Since the date of the most recent financial
statements referred to in Section 3.4(a)(i) to the Closing Date, the business,
properties and other assets of the Borrower have not been materially and
adversely affected in any way as the result of any fire or other casualty,
strike, lockout or other labor trouble, embargo, sabotage, confiscation,
contamination, riot, civil disturbance, activity of armed forces or act of God.
3.18 LABOR MATTERS. Except as disclosed in SCHEDULE 3.18, (i) there are
no employee strikes, work stoppages or other similar labor disputes among the
Borrower and any of their respective employees, (ii) the Borrower is not a party
to any collective bargaining agreement or other labor union contract applicable
to persons employed by the Borrower, and (iii) to the Borrower's knowledge,
there are no organizational efforts presently being made involving any of the
employees of the Borrower. To the Borrower's knowledge, there is no pending or
threatened employee strike, work stoppage or other similar labor dispute with
respect to the employees of the Borrower. To the best of its knowledge, the
Borrower is in compliance with all material and applicable legal requirements
respecting employment and employment practices, terms and conditions of
employment, and wage and hour and labor management relations requirements.
3.19 BROKERS. Except as disclosed in SCHEDULE 3.19, no broker or finder
acting on behalf of any of the Borrower brought about the obtaining, making or
closing of the Loans or the transactions contemplated by the Loan Documents and
the Company has no obligation to any Person other than as disclosed in SCHEDULE
3.19 in respect of any finder's or brokerage fees in connection therewith.
ARTICLE IV
CONDITIONS
4.1 CLOSING DATE. The obligations of the Bank to make Loans hereunder
shall not become effective until the date on which each of the following
conditions is satisfied:
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(a) COUNTERPARTS OF AGREEMENT. The Bank shall have received from each
party hereto either (i) a counterpart of this Agreement signed on behalf of
such party or (ii) written evidence satisfactory to the Bank that such party
has signed a counterpart of this Agreement.
(b) NOTES. The Bank shall have received the Term Note and the Revolving
Credit Note duly completed and executed by the Borrower.
(c) CORPORATE STRUCTURE. The corporate organizational structure,
capital structure and ownership of the Borrower are set forth on SCHEDULE 3.12
annexed hereto.
(d) CORPORATE MATTERS. The Bank shall have received such documents and
certificates as the Bank or Special Counsel may reasonably request relating to
the organization, existence and good standing of the Borrower, the authorization
of the Transactions and any other legal matters relating to the Borrower, this
Agreement, the other Loan Documents or the Transactions, all in form and
substance reasonably satisfactory to the Bank and its counsel.
(e) SECURITY INTERESTS . The Bank shall have received evidence
satisfactory to it that the Borrower shall have taken or caused to be taken all
such actions, executed and delivered or caused to be executed and delivered all
such agreements, documents and instruments, and made or caused to be made all
such filings and recordings (other than the filing or recording of items
described in clauses (iii), (iv) and (v) below) that may be necessary or, in the
opinion of the Bank, desirable in order to create in favor of the Bank a valid
and (upon such filing and recording) perfected First Priority security interest
in the entire personal and mixed property Collateral. Such actions shall
include, without limitation, the following:
(i) COLLATERAL DOCUMENTS. Delivery to the Bank of all the
Collateral Documents, duly executed by the Borrower, together with accurate
and complete schedules to all such Collateral Documents;
(ii) WARRANT. Delivery to the Bank of the Warrant in form appended
hereto as Exhibit E with all additional documents and instruments or
agreements necessary to make the Warrant enforceable and exercisable as
provided in the Warrant.
(iii) LIEN SEARCHES AND UCC TERMINATION STATEMENTS. Delivery to the
Bank of (A) the results of a recent search, by a Person satisfactory to the
Bank, of all effective UCC financing statements and all judgment and tax
lien filings which may have been made with respect to any personal or mixed
property of the Borrower, together with copies of all such filings
disclosed by such search, and (B) UCC termination statements duly executed
by all applicable Persons for filing in all applicable jurisdictions as may
be necessary to terminate any effective UCC financing statements or fixture
filings disclosed in such search (other than any such financing statements
or fixture filings in respect of Liens permitted to remain outstanding
pursuant to the terms of this Agreement);
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(iv) UCC FINANCING STATEMENTS. Delivery to the Bank of UCC
financing statements duly executed by the Borrower with respect to all
personal and mixed property Collateral of the Borrower, for filing in all
jurisdictions as may be necessary or, in the opinion of the Bank, desirable
to perfect the security interests created in such Collateral pursuant to
the Collateral Documents;
(v) PERFECTION CERTIFICATE. Delivery to the Bank of a perfection
certificate for the Borrower dated the Closing Date substantially in the
form of SCHEDULE I to the form of Security Agreement annexed hereto as
Exhibit D duly executed by a senior officer of the Borrower.
(f) LANDLORD WAIVERS. The Borrower will use all of its best efforts to
deliver Landlord Waivers in the form appended hereto as EXHIBIT G for the
locations listed on Schedule 3.5.
(g) PAYOFF LETTERS. The following payoff letters and related
termination statements and releases shall have been duly executed and delivered
to the Bank:
(i) Union Bank Loan for $1,991,134.16 plus a 526.01 per diem on an
after May 11, 1998 until paid.
(h) EVIDENCE OF INSURANCE. The Bank shall have received a certificate
from the Borrower's insurance broker or other evidence satisfactory to it that
all insurance required to be maintained pursuant to Section 5.5 is in full force
and effect and that the Bank has been named as additional insured and loss payee
thereunder to the extent required under Section 5.5.
(i) MANAGEMENT; EMPLOYMENT AND CONSULTING CONTRACTS. The management
structure of the Borrower is set forth on Schedule 3.11, and the Bank shall have
received copies of, and shall be satisfied with the form and substance of (i)
any and all employment contracts with any senior management of the Borrower (ii)
any and all shareholders' agreements among any of the shareholders of the
Borrower, (iii) any and all consulting agreements with any Persons and (iv) any
stock option plans, phantom stock incentive programs and similar arrangements
provided by the Borrower, in each case as such will be in effect from and after
the Closing Date.
(j) NECESSARY GOVERNMENTAL AUTHORIZATIONS AND CONSENTS. The Borrower
shall have obtained all permits, licenses, authorizations or consents from all
Governmental Authorities and all consents of other Persons with respect to
Material Indebtedness, Liens and agreements listed on SCHEDULE 3.14 (and so
identified thereon) annexed hereto, in each case that are necessary or advisable
in connection with the Loan Documents and the continued operation of the
business conducted by the Borrower, in substantially the same manner as
presently conducted, and each of the foregoing shall be in full force and
effect, in each case other than those the failure to obtain or maintain which,
either individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect.
(k) NO MATERIAL ADVERSE EFFECT. There shall have occurred no Material
Adverse Effect (in the reasonable opinion of the Bank) since the end of fiscal
years ending December 29, 1996 and December 28, 1997, respectively, in the case
of the Borrower taken as a whole.
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(l) OPINION OF COUNSEL TO BORROWER. The Bank shall have received a
favorable written opinion (addressed to the Bank and dated the Closing Date) of
Brobeck, Phleger & Harrison, LLP, counsel to the Borrower covering such matters
relating to the Borrower, this Agreement, the other Loan Documents or the
Transactions as the Bank shall reasonably request (and the Borrower hereby
requests such counsel to deliver such opinion).
(m) FEES AND EXPENSES. The Bank shall have received all fees and other
amounts due and payable at or prior to the Closing Date, including, to the
extent invoiced, reimbursement or payment of all out-of-pocket expenses required
to be reimbursed or paid by the Borrower hereunder and payment of fees and
expenses due to Special Counsel which fees shall not exceed $20,000 and all out
of pocket expenses.
(n) FINANCIAL STATEMENTS. The Bank shall have received the financial
statements for fiscal year ending December 28, 1997, as audited by Borrower's
Accountant.
(o) OTHER DOCUMENTS. The Bank shall have received such other documents
as the Bank or any Lender or Special Counsel shall have reasonably requested.
4.2 EACH EXTENSION OF CREDIT. The obligation of the Bank to make a Loan
on the occasion of any Loan is subject to the satisfaction of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Borrower set forth in this Agreement and the other Loan Documents shall
be true and correct on and as of the date of such Loan, both before and after
giving effect thereto and to the use of the proceeds thereof (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date, such representation or warranty shall be or have been true and
correct as of such specific date) unless the Borrower shall notify the Bank in
writing of any material changes to such representations and warranties.
(b) NO DEFAULTS. At the time of and immediately after giving effect to
such Loan no Default shall have occurred and be continuing.
The making of each Loan shall be deemed to be a representation and warranty
by the Borrower on the date of the Loan as to the accuracy of the facts referred
to in subsections (a) and (b) of this Section 4.2.
ARTICLE V
AFFIRMATIVE COVENANTS
Until the Commitments have expired or been terminated and the principal of
and interest on each Loan and all fees payable hereunder shall have been paid in
full the Borrower covenants and agrees with the Bank that:
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5.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. The Borrower will
furnish to the Bank:
(a) as soon as available and in any event within 90 days after the end
of each fiscal year of the Borrower:
(i) consolidated and consolidating statements of income, retained
earnings and cash flows of the Borrower for such fiscal year and the
related consolidated and consolidating balance sheets of the Borrower as at
the end of such fiscal year, setting forth in each case in comparative form
the corresponding consolidated and consolidating figures for the preceding
fiscal year;
(ii) an opinion of independent certified public accountants of
recognized standing (without a "going concern" or like qualification or
exception and without any qualification or exception as to the scope of
such audit) stating that said financial statements referred to in the
preceding clause (i) fairly present the financial condition and results of
operations of the Borrower as at the end of, and for, such fiscal year in
accordance with GAAP, and a statement of such accountants to the effect
that, in making the examination necessary for their opinion, nothing came
to their attention that caused them to believe that the Borrower was not in
compliance with Section 6.9, insofar as such Section relates to accounting
matters, and
(iii) a certificate of a Senior Officer stating that said financial
statements referred to in the preceding clause (i) fairly present the
financial condition and results of operations of the Borrower, in each case
in accordance GAAP consistently applied, as at the end of, and for, such
fiscal year;
(b) as soon as available and in any event within 45 days after the end
of each fiscal month of the Borrower, Monthly Restaurant Reports, in the form of
appended hereto as Exhibit H and the balance sheets of the Borrower as at the
end of such period, setting forth in each case in comparative form the
corresponding figures for the corresponding period in the preceding fiscal year
(except that, in the case of balance sheets, such comparison shall be to the
last day of the prior fiscal year),
(c) as soon as available and in any event within 45 days after the end
of the first three quarterly fiscal periods of each fiscal year of the Borrower:
(i) statements of income, retained earnings and cash flows of the
Borrower for such period and for the period from the beginning of the
respective fiscal year to the end of such period, and the related balance
sheets of the Borrower as at the end of such period, setting forth in each
case in comparative form the corresponding combined and combining figures
for the corresponding period in the preceding fiscal year and a comparison
to the plan presented to the Bank, together with a "management discussion"
of the Borrower' results for such fiscal quarter,
(ii) a certificate of a Senior Officer, which certificate shall
state that said financial statements referred to in the preceding clause
(i) fairly present the financial condition and results of operations of the
Borrower and that said financial statements
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referred to in the preceding clause (i) fairly present the respective
individual uncombined financial condition and results of operations of
the Borrower, in each case in accordance with generally accepted
accounting principles, consistently applied, as at the end of, and for,
such period (subject to normal year-end audit adjustments and the omission
of footnotes);
(d) concurrently with any delivery of financial statements under clauses
(a), (b) (for the annual statements only) and (c) above, a Compliance
Certificate duly executed by a Senior Officer;
(e) as soon as available and in any event within 30 days after the
beginning of the fiscal year of the Borrower an annual operating budget for the
Borrower for each fiscal quarter in the current fiscal year, together with
supporting assumptions which were reasonable when made, as at the end of each
fiscal month or year, as applicable, all prepared in good faith in reasonable
detail and consistent with the Borrower's past practices in preparing
projections and otherwise reasonably satisfactory in scope to the Bank;
(f) promptly after the same become publicly available, copies of all
registration statements, regular periodic reports and press releases filed by
the Borrower with the Securities and Exchange Commission, or any Governmental
Authority succeeding to any or all of the functions of said Commission, or with
any national securities exchange;
(g) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed; and.
(h) other information that may from time to time be reasonably requested
by the Bank.
5.2 NOTICES OF MATERIAL EVENTS. The Borrower will furnish to the Bank
prompt written notice of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting the
Borrower that, if adversely determined, could reasonably be expected to result
in a Material Adverse Effect;
(c) the occurrence of any ERISA Event;
(d) the acquisition or creation of any Subsidiary of the Borrower
(e) notice of any material change in annual operating budget delivered
hereunder, any amendment or modification of any of the agreements referred to in
Section 3.14, any new insurance policies and any change in the ownership of the
Borrower or agreements with key employees;
(f) the occurrence of any event that would require the Borrower to make
a prepayment of the Loans or reduce any Commitment; and
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(g) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect (provided such notice shall be
considered prompt if given within ten (10) days of the Borrower becoming aware
of such development).
Each notice delivered under this Section 5.2 shall be accompanied by a statement
of a Senior Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
5.3 EXISTENCE; CONDUCT OF BUSINESS. The Borrower will do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence and the rights, licenses, permits, privileges and franchises
(including without limitation patent and trademark registrations) material to
the conduct of its business unless curable and cured within thirty (30) days of
its renewable date.
5.4 PAYMENT OF OBLIGATIONS. The Borrower will pay its obligations,
including Tax Liabilities before the same shall become delinquent or in default,
except where (a) the validity or amount thereof is being contested in good faith
by appropriate proceedings, (b) the Borrower has set aside on its books adequate
reserves with respect thereto in accordance with GAAP and (c) the failure to
make payment pending such contest could not reasonably be expected to result in
a Material Adverse Effect.
5.5 MAINTENANCE OF PROPERTIES; INSURANCE. The Borrower will (a) keep
and maintain all property material to the conduct of its business in good
working order and condition, ordinary wear and tear excepted, and (b) maintain,
with financially sound and reputable insurance companies, such insurance as may
be required by law and such other insurance in such amounts and against such
risks as are customarily maintained by companies engaged in the same or similar
businesses operating in the same or similar locations, including, without
limitation, business interruption and product liability insurance. Without
limiting the generality of the foregoing, the Borrower will (i) maintain or
cause to be maintained flood insurance with respect to each Flood Hazard
Property, each in amounts required by the Flood Hazard Act, or provide evidence
acceptable to the Bank that such insurance is not available and (ii) maintain or
cause to be maintained replacement value casualty insurance on the Collateral
under such policies of insurance, in each case with such insurance companies, in
such amounts, with such deductibles, and covering such terms and risks as are at
all times satisfactory to the Bank in its commercially reasonable judgment.
Each such policy of insurance shall (x) name the Bank as an additional insured
thereunder as its interests may appear and (y) in the case of each business
interruption and casualty insurance policy, contain a loss payable clause or
endorsement, satisfactory in form and substance to the Bank that names the Bank
as the loss payee thereunder and provides for at least 30 days' prior written
notice to the Bank of any modifications or cancellation of such policy.
5.6 BOOKS AND RECORDS; INSPECTION RIGHTS. The Borrower will keep proper
books of record and account in which full, true and correct entries are made of
all dealings and transactions in relation to its business and activities. The
Borrower will permit any representatives designated by the Bank to visit and
inspect its properties, to examine and make extracts from its books and records,
and to examine its affairs, finances and condition with its officers and
independent accountants PROVIDED that, so long as no Default has occurred and is
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continuing, all such visits shall be at reasonable times during regular
business hours of the Borrower and shall be limited to no more than one per
year and PROVIDED FURTHER that after the occurrence and during the
continuance of any Default the Bank may visit and/or perform "examinations"
at any reasonable time and as often as the Bank reasonably deems necessary.
5.7 FISCAL YEAR. To enable the ready and consistent determination of
compliance with the covenants set forth in Section 6.9 hereof, the Borrower will
not change its fiscal year without the prior written consent of the Bank and the
Borrower, which consent may not be unreasonably withheld.
5.8 COMPLIANCE WITH LAWS. The Borrower will comply with (i) all laws,
rules, regulations and orders including, without limitation, Environmental Laws,
of any Governmental Authority and (ii) all contractual obligations, in each case
applicable to it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
5.9 COMPLIANCE WITH AGREEMENTS. The Borrower will comply in all
material respects with each term, condition and provision of all leases,
agreements and other instruments entered into in the conduct of its business
including any agreement listed on SCHEDULE 3.14; PROVIDED that the Borrower may
contest any such lease, agreement and other instrument in good faith so long as
adequate reserves are maintained in accordance with GAAP.
5.10 USE OF PROCEEDS. The proceeds of the Loans will be used only as
follows (i) the proceeds of the Term Loan will be used solely for the
refinancing of the existing term debt of the Borrower as set forth on SCHEDULE
5.10, (ii) no more than $1,000,000 outstanding at any one time of the Revolving
Loans may be used for working capital and general corporate purposes of the
Borrower, (iii) to fund Letters of Credit, and (iv) the balance of the Revolving
Loans may be used for Permitted New Restaurants. No part of the proceeds of any
Loan will be used, whether directly or indirectly, for any purpose that entails
a violation of any of the Regulations of the Board, including Regulations G, U
and X.
5.11 CERTAIN OBLIGATIONS RESPECTING COLLATERAL SECURITY.
(a) ADDITIONAL SUBSIDIARIES. In the event that the Borrower shall form
or acquire any new Subsidiary after the date hereof, the Borrower will cause
such new Subsidiary within five Business Days after such formation or
acquisition:
(i) to execute and deliver to the Bank the following documents:
(1) a counterpart to this Agreement (and thereby to become a party to this
Agreement, as a "Co-Borrower" or "Guarantor" hereunder), (2) a Security
Agreement, and (3) such other instruments documents and agreements as may
be required by the Bank; and
(ii) to take such action (including executing and delivering such
UCC financing statements) as shall be necessary to create and perfect valid
and enforceable first priority Liens consistent with the provisions of the
applicable Collateral Documents; and
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(iii) to deliver such proof of corporate action, incumbency of
officers and other documents as is consistent with those delivered by the
Borrower pursuant to Section 5.1 on the Closing Date or as the Bank shall
have reasonably requested.
(b) OWNERSHIP OF SUBSIDIARIES. Except as expressly permitted by this
Agreement, the Borrower shall not sell, transfer or otherwise dispose of any
shares of stock in any Subsidiary owned by it, nor permit any Subsidiary to
issue any shares of stock of any class whatsoever to any Person.
5.12 ERISA. The Borrower will maintain, and cause each Subsidiary to
maintain, each Plan in material compliance with all applicable requirements of
ERISA and of the Code and with all applicable rulings and regulations issued
under the provisions of ERISA and of the Code and will not and not permit any of
the ERISA Affiliates to (a) engage in any transaction with respect to any Plan
which would subject any Borrower to either a civil penalty assessed pursuant to
Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code, in any
amount, (b) fail to make full payment when due of all amounts which, under the
provisions of any Plan, the Borrower or any ERISA Affiliate is required to pay
as contributions thereto, or permit to exist any accumulated funding deficiency
(as such term is defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, with respect to any Pension Plan in any amount or (c)
fail to make any payments in any amount to any Multiemployer Plan that the
Borrower or any of the ERISA Affiliates may be required to make under any
agreement relating to such Multiemployer Plan or any law pertaining thereto.
5.13 COMMUNICATION WITH ACCOUNTANTS. The Borrower authorizes the Bank to
communicate directly with the independent certified public accountants to
disclose to the Bank any and all financial statements and other supporting
financial documents and schedules including copies of any management letter with
respect to the business, financial condition and other affairs of the Borrower.
On or before the Closing Date, on each anniversary of the Closing Date, and
promptly upon its engagement of new accountants and tax advisors, the Borrower
shall have delivered a letter addressed to such accountants and tax advisors,
which letter shall (a) provide that such accountants and tax advisors are
authorized and directed to disclose to the Bank any and all financial statements
and other supporting financial documents and schedules including copies of any
management letter with respect to the business, financial condition and other
affairs of the Borrower, (b) state that a primary intent of the Borrower is for
the financial statements prepared by such accountants to benefit or influence
the Bank and that the Bank will rely upon such financial statements, and (c)
instruct such accountants and tax advisors to communicate directly with the
Bank.
5.14 INTELLECTUAL PROPERTY. The Borrower will conduct its business and
affairs without infringement of or interference with any intellectual property
of any other Person.
5.15 LANDLORD WAIVER. The Borrower shall each use its reasonable efforts
to obtain a Landlord waiver from the lessor of each leased property where
Collateral is located. The Borrower shall timely and fully pay and perform its
obligations under all leases and other agreements with respect to each leased
location or public warehouse where any Collateral is or may be located.
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ARTICLE VI
NEGATIVE COVENANTS
Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder have been paid in full, the
Borrower covenants and agrees with the Lenders that:
6.1 INDEBTEDNESS. The Borrower will not create, incur, assume or permit
to exist any Indebtedness, except:
(a) Indebtedness created hereunder;
(b) Indebtedness existing on the date hereof and set forth in Schedule
3.14 (excluding, however, following the making of the initial Loans hereunder,
the Indebtedness outstanding under the existing credit agreements with Union
Bank and if not refinanced by June 15, 1998 the existing credit agreements with
Bank of Commerce);and
(c) Indebtedness of the Borrower (determined on a combined basis without
duplication in accordance with GAAP) consisting of Capital Lease Obligations
and/or secured by Liens permitted under Section 6.2(h), in an aggregate
principal amount not in excess of $250,000 in fiscal year 1998 and an
additional $250,000 per year thereafter.
6.2 LIENS. The Borrower will not create, incur, assume or permit to
exist any Lien on any Property or asset now owned or hereafter acquired by it,
or assign or sell any income or revenues (including accounts receivable) or
rights in respect of any thereof, except:
(a) Liens created under the Collateral Documents;
(b) any Lien on any property or asset of the Borrower existing on the
date hereof and set forth on the Perfection Certificate attached to the Security
Agreements and/or listed on SCHEDULE 3.14 (excluding, however, following the
making of the initial Loans hereunder, the Liens securing Indebtedness under the
existing credit agreements with Union Bank and if not refinanced by June 15,
1998, the existing credit agreement with Bank of Commerce), PROVIDED that (i)
such Lien shall not apply to any other property or asset of any Borrower and
(ii) such Lien shall secure only those obligations which it secures on the date
hereof and extensions, renewals and replacements thereof that do not increase
the outstanding principal amount thereof;
(c) Liens imposed by any Governmental Authority for taxes, assessments
or charges not yet due or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are maintained
on the books of the Borrower in accordance with GAAP;
(d) carriers', warehousemen's, mechanics', materialmen's, landlord's,
repairmen's or other like Liens, and vendors' Liens imposed by statute or common
law not securing the repayment of Indebtedness, arising in the ordinary course
of business which are not overdue for a period of more than 60 days or which are
being contested in good faith and by appropriate
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proceedings and Liens securing judgments (including, without limitation,
pre-judgment attachments) but only to the extent for an amount and for a
period not resulting in an Event of Default under Section 7.1(j) hereof;
(e) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
(f) deposits to secure the performance of bids, tenders, trade contracts
(other than for borrowed money), leases (other than capital leases), statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the use
of Property or minor imperfections in title thereto which, in the aggregate, are
not material in amount, and which do not, in the aggregate, materially detract
from the value of the Property of the Borrower or interfere with the ordinary
conduct of the business of the Borrower;
(h) Liens on fixed or capital assets, including real or personal
property, acquired, constructed or improved by any Borrower, PROVIDED that (A)
such Liens secure Indebtedness (including Capital Lease Obligations) permitted
by Section 6.1(d), (B) such Liens and the Indebtedness secured thereby are
incurred prior to or within 90 days after such acquisition or the completion of
such construction or improvement, (C) the Indebtedness secured thereby does not
exceed the cost of acquiring, constructing or improving such fixed or capital
assets and (D) such security interests shall not apply to any other property or
assets of the Borrower.
6.3 CONTINGENT LIABILITIES. The Borrower will not guaranty the
Indebtedness or other obligations of any Person, or guaranty the payment of
dividends or other distributions upon the stock of, or the earnings of, any
Person, except:
(a) endorsements of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business,
(b) any guaranty in effect on the date hereof which is disclosed in
SCHEDULE 3.14, and any replacements thereof in amounts not exceeding such
Guaranty;
6.4 FUNDAMENTAL CHANGES; ASSET SALES; PERMITTED ACQUISITIONS. The
Borrower will not enter into any transaction of merger or consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution) or acquire any business or property from, or capital
stock of, or be a party to any acquisition of, any Person except for purchases
by any Borrower of inventory and other property to be sold or used in the
ordinary course of business, Investments permitted under Section 6.5 and
Permitted New Restaurants. Borrower will not convey, sell, lease, transfer or
otherwise dispose of, in one transaction or a series of transactions, any part
of its business or property, whether now owned or hereafter acquired (including,
without limitation, receivables and leasehold interests other than (x) obsolete
or worn-out property (including leasehold interests), tools or equipment no
longer used or useful in its business, (y) any inventory or other property sold
or disposed of in the ordinary course of
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business and on ordinary business terms and (z) other assets not included
under the preceding clauses (x) and (y), the fair market value of which does
not exceed an aggregate amount of (i) $100,000 in any fiscal year of the
Borrower or (ii) $100,000 cumulatively after the Closing Date.
6.5 INVESTMENTS
The Borrower will not make or permit to remain outstanding any
Investment, except:
(i) Permitted New Restaurants;
(ii) Permitted Investments; and
(iii) Checking and deposit accounts with banks used in the ordinary
course of business.
6.6 RESTRICTED PAYMENTS. The Borrower shall not declare or make any
Restricted Payment at any time without the prior written consent of the Bank,
other than salaries and bonus paid to employees who are shareholders at normal
and customary amounts and distributions of additional shares of the common or
convertible preferred shares of the Borrower under certain stock option plans
more fully described on SCHEDULE 6.6 hereto or as Distributions permitted under
Section 6.8.
6.7 TRANSACTIONS WITH AFFILIATES. Except as expressly permitted by this
Agreement, the Borrower will not directly or indirectly (a) make any Investment
in an Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any
property to an Affiliate; (c) merge into or consolidate with an Affiliate, or
purchase or acquire property from an Affiliate; or (d) enter into any other
transaction directly or indirectly with or for the benefit of an Affiliate
(including, without limitation, guaranties and assumptions of obligations of an
Affiliate); PROVIDED that:
(i) any Affiliate who is an individual may serve as a director,
officer, employee or consultant of the Borrower, receive reasonable
compensation for his or her services in such capacity and benefit; or
(ii) the Borrower may engage in and continue the transactions with
or for the benefit of Affiliates which are described in SCHEDULE 6.7; or
(iii) Rubio's may make use of the liquor licenses held by Rubio's
Restaurants of Nevada, Inc.
6.8 DISTRIBUTIONS. The Borrower shall not issue additional shares of
any class except as provided in SCHEDULE 6.8 hereof.
6.9 CERTAIN FINANCIAL COVENANTS. All of the following covenants shall
be measured at the end of each fiscal quarter of the Borrower, based on the four
immediately preceding fiscal quarters of the Borrower, except as otherwise set
forth below.
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(a) FIXED CHARGE COVERAGE RATIO. The Borrower shall not permit the
ratio of Consolidated Cash Flow on the last day of each fiscal quarter for the
four quarters then ended to Consolidated Financial Obligations to be at the end
of:
Each fiscal quarter ending in fiscal year 1998, less than 1.25 to 1.00
Each fiscal quarter ending in fiscal year 1999, less than 1.4 to 1.00
Each fiscal quarter ending in fiscal year 2000, less than 1.6 to 1.00
Each fiscal quarter ending in fiscal year 2001, less than 1.7 to 1.00
(b) MINIMUM INTEREST COVERAGE RATIO. The Borrower will not permit the
ratio of Consolidated EBITDA on the last day of each fiscal quarter for the four
fiscal quarters then ending to Interest Expense to be less than 5.00 to 1.00.
(c) MAXIMUM TOTAL LEVERAGE RATIO. The Borrower will not permit the
ratio of Consolidated Funded Indebtedness to Consolidated EBITDA at the end of
each fiscal quarter for the four fiscal quarters then ended to exceed 1.40 to
1.00 through December 31, 1998 and 1.00 to 1.00 thereafter.
(d) CAPITAL EXPENDITURES. The Borrower shall not incur Capital
Expenditures in each of the following fiscal years which exceed: $10,000,000 in
fiscal year 1998, $13,000,000 in fiscal year 1999, $16,000,000 in fiscal year
2000, and $19,500,000 in fiscal year 2001; provided that notwithstanding any
other provision of this Agreement, including without limitation Section 5.10
hereof, the Borrower shall not open more than 27 new restaurants in fiscal year
1998, 35 new restaurants in fiscal year 1999, 45 new restaurants in fiscal year
2000 and 55 new restaurants in fiscal year 2001. Up to 50% of the total amount
of Capital Expenditures permitted hereunder which is not used in any fiscal year
may be carried forward to the next fiscal year, but not thereafter.
6.10 SALE-LEASEBACK TRANSACTIONS. The Borrower will not directly or
indirectly, enter into any arrangements with any Person whereby the Borrower
shall sell or transfer any property, real, personal or mixed, used or useful in
its business, whether now owned or hereafter acquired, and thereafter rent or
lease such property from any Person.
6.11 LINES OF BUSINESS. The Borrower shall not engage to any substantial
extent in any line or lines of business activity other than (i) the types of
businesses engaged in by the Borrower as of the Closing Date and businesses
directly related thereto and (ii) such other lines of business as may be
consented to by the Bank.
6.12 NAME AND LOCATION. Without thirty days' prior written notice to the
Bank, the Borrower shall not change its name, its federal tax identification
number or the location of its chief executive office.
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ARTICLE VII
EVENTS OF DEFAULT
7.1 EVENTS OF DEFAULT.
If any of the following events ("EVENTS OF DEFAULT") shall occur:
(a) the Borrower shall fail to pay to the Bank any principal of, or
interest on, any Loan or any other amount payable under this Agreement or any
fee payable under this Agreement or any other agreement, after the same shall
become due and payable, whether at the due date thereof or at a date fixed for
prepayment thereof, by acceleration of such due or prepayment date, or
otherwise;
(b) any representation or warranty made or deemed made by or on behalf
the Borrower in or in connection with this Agreement, any of the other Loan
Documents or any amendment or modification hereof or thereof, or in any report,
certificate, financial statement or other document furnished pursuant to or in
connection with this Agreement, any of the other Loan Documents or any amendment
or modification hereof or thereof, shall prove to have been incorrect when made
or deemed made in any material respect;
(c) the Borrower (i) shall fail to observe or perform any covenant,
condition or agreement contained in Sections 5.1(a) through (g), inclusive, 5.2,
5.3, 5.4, 5.5, 5.6, 5.8, 5.10, 5.12, 5.15 or in Article VI, or (ii) shall fail
to observe or perform any other covenant, condition or agreement contained in
Article V and, in the case of events described in such clause (ii), such failure
shall continue unremedied for a period of 30 days after the earlier of (x)
actual knowledge by an officer of the Borrower or (y) notice thereof from the
Bank the Borrower;
(d) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement (other than those specified
in clauses (a), (b) or (c) of this Article) or any other Loan Document, and such
failure shall continue unremedied for a period of 30 days after notice thereof
from the Bank.
(e) the Borrower shall fail to make any payment (whether of principal or
interest and regardless of amount) in respect of any Material Indebtedness when
and as the same shall become due and payable, after giving effect to any grace
period with respect thereto;
(f) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits (with or without the giving of notice, the lapse of time or both) the
holder or holders of any Material Indebtedness or any trustee or agent on its or
their behalf to cause any Material Indebtedness to become due, or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled
maturity;
(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other relief
in respect of the Borrower or its debts, or of a substantial part of its assets,
under any Federal, state or foreign bankruptcy, insolvency,
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receivership or similar law now or hereafter in effect or (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or for a substantial part of its assets,
and, in any such case, such proceeding or petition shall continue undismissed
for 60 days or an order or decree approving or ordering any of the foregoing
shall be entered;
(h) the Borrower shall (i) voluntarily commence any proceeding or file
any petition seeking liquidation, reorganization or other relief under any
Federal, state or foreign bankruptcy, insolvency, receivership or similar law
now or hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition described
in clause (g) of this Article, (iii) apply for or consent to the appointment of
a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Borrower or for a substantial part of its assets, (iv) file an answer
admitting the material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors or (vi)
take any action for the purpose of effecting any of the foregoing;
(i) the Borrower shall become generally unable, admits in writing, or
generally fails to pay its debts as they become due;
(j) a final judgment or judgments for the payment of money in excess of
$150,000 in the aggregate (exclusive of judgment amounts fully covered by
insurance where the insurer has admitted liability in respect of such judgment)
or in excess of $2,000,000 in the aggregate (regardless of insurance coverage)
shall be rendered by one or more courts, administrative tribunals or other
bodies having jurisdiction against any Borrower and the same shall not be
discharged (or provision shall not be made for such discharge), or a stay of
execution thereof shall not be procured, within 45 days from the date of entry
thereof and the relevant Borrower shall not, within said period of 45 days, or
such longer period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal;
(k) an ERISA Event shall have occurred;
(l) there shall have been asserted against the Borrower claims or
liabilities, whether accrued, absolute or contingent, based on or arising from
the generation, storage, transport, handling or disposal of Hazardous Materials
by the Borrower or Affiliates, or any predecessor in interest of the Borrower or
Affiliates, or relating to any site or facility owned, operated or leased by the
Borrower or any of its Affiliates, which claims or liabilities (insofar as they
are payable by the Borrower) are in an amount singly or in the aggregate,
reasonably likely to have a Material Adverse Effect;
(m) the failure of the current holders of the common stock of the
Borrower (x) to own collectively, beneficially and of record, at least 66% of
the capital stock of the Borrower or (y) to control at least 66% of the voting
rights in the Borrower; provided that upon the death of any of the foregoing, no
Event of Default shall occur if such stock or interest is transferred to members
of the deceased's immediate family or such person's personal representative and
it shall not be an Event of Default if the common stock ownership is reduced
after and as part of an IPO, provided that the Term Loan is repaid as provided
in Section 2.6 (b) (iv) hereof; or
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(n) any of the following shall occur: (i) the Liens created by the
Collateral Documents shall at any time (other than by reason of the Bank
relinquishing such Lien) cease to constitute valid and perfected Liens on the
Collateral intended to be covered thereby; (ii) except for expiration in
accordance with its respective terms, any Collateral Document shall for whatever
reason be terminated, or shall cease to be in full force and effect; or (iii)
the enforceability of any Collateral Document shall be contested by any
Borrower.
then, and in every such event (other than an event with respect to the Borrower
described in clause (g) or (h) of this Section 7.1), and at any time thereafter
during the continuance of such event, the Bank may by notice to the Borrower
take either or both of the following actions, at the same or different times:
(i) terminate the Commitments, and thereupon the Commitments shall terminate
immediately, (ii) declare the Loans then outstanding to be due and payable in
whole (or in part, in which case any principal not so declared to be due and
payable may thereafter be declared to be due and payable), and thereupon the
principal of the Loans so declared to be due and payable, together with accrued
interest thereon and all fees and other obligations of the Borrower accrued
hereunder, shall become due and payable immediately, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower, and (iii) the Bank may exercise all of the rights as secured party
and mortgagee under the Collateral Documents; and in case of any event with
respect to the Borrower described in clause (g) or (h) of this Section 7.1, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and all fees and other
obligations of the Borrower accrued hereunder, shall automatically become due
and payable, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower, and the Bank shall be permitted
to exercise such rights as secured party and mortgagee under the Collateral
Documents to the extent permitted by applicable law.
ARTICLE VIII
MISCELLANEOUS
8.1 NOTICES. Except in the case of notices and other communications
expressly permitted to be given by telephone, all notices and other
communications provided for herein shall be in writing and shall be delivered by
hand or overnight courier service, mailed by certified or registered mail or
sent by telecopy, as follows:
(a) if to the Borrower, to James Stryker , Rubio's Restaurants, Inc.,
5151 Shoreham Place, Suite 260 San Diego, CA 92122 (Fax no.619-452-0181) with a
copy to Ray Nopper 5151 Shoreham Place, Suite 260 San Diego, CA 92122 (Fax
no.619-452-0181)
(b) if to the Bank, to BankBoston, N.A., 100 Federal Street, Mail Code
01-09-05, Boston, Massachusetts 02110, Attention: Debra Zurka, Director (Fax
No. (617) 434-0637 ), with a copy to Lawson & Weitzen LLP, 425 Summer Street,
Boston, Massachusetts 02210, Attention: Richard S. Rosenstein, Esq. (Fax No.
617-439-3987).
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by written notice to the other parties hereto. All
notices and other
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communications given to any party hereto in accordance with the provisions of
this Agreement shall be deemed to have been given on the date of receipt.
8.2 WAIVERS; AMENDMENTS.
(a) No failure or delay by the Bank in exercising any right or power
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of
the Bank hereunder are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. No waiver of any provision of this
Agreement or consent to any departure by any Borrower therefrom shall in any
event be effective unless the same shall be permitted in their entirety by the
Bank and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. Without limiting the generality
of the foregoing, the making of a Loan shall not be construed as a waiver of any
Default, regardless of whether the Bank may have had notice or knowledge of such
Default at the time.
(b) None of the Collateral Documents nor any provision thereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Borrower and by the Bank.
8.3 EXPENSES; INDEMNITY; DAMAGE WAIVER.
(a) The Borrower agrees to pay, or reimburse the Bank for paying, (i)
all reasonable out-of-pocket expenses incurred by the Bank including the
reasonable fees, charges and disbursements of Counsel to the Bank in connection
with the preparation of this Agreement and the other Loan Documents or any
amendments, modifications or waivers of the provisions hereof or thereof
(whether or not the transactions contemplated hereby or thereby shall be
consummated), (ii) all reasonable out-of-pocket expenses incurred by the Bank
including the reasonable fees, charges and disbursements of any counsel for the
Bank, in connection with the enforcement or protection of its rights in
connection with this Agreement and the other Loan Documents, including its
rights under this Section 8.3, or in connection with the Loans made hereunder,
including in connection with any workout, restructuring or negotiations in
respect thereof, (iv) all fees and reasonable out-of-pocket expenses of the Bank
(including per diem fees and expenses) for any and all "examinations" of the
properties, assets and records of the Borrower in each fiscal year, (v) all
Taxes levied by any Governmental Authority in respect of this Agreement or any
of the other Loan Documents or any other document referred to herein or therein
and (vi) all costs, expenses, taxes, assessments and other charges incurred in
connection with any filing, registration, recording or perfection of any
security interest contemplated by any Collateral Document or any other document
referred to therein.
(b) The Borrower agrees to indemnify the Bank and any persons acting for
and on behalf of the Bank (each such Person being called an "INDEMNITEE")
against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including the reasonable fees,
charges and disbursements of any counsel for any Indemnitee and settlement
costs, incurred by or asserted against any Indemnitee arising out of, in
connection with, or as a result of (i) the execution or delivery of this
Agreement, the other Loan Documents or any agreement or instrument contemplated
hereby, the performance by the parties hereto and
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<PAGE>
thereto of their respective obligations hereunder or thereunder or the
consummation of the Transactions or any other transactions contemplated
hereby or thereby, (ii) any Loan or the use of the proceeds therefrom , (iii)
any actual or alleged presence or release of Hazardous Materials on or from
any property owned or operated by the Borrower or any of their subsidiaries,
or any Environmental Liability related in any way to the Borrower or any of
their subsidiaries, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based
on contract, tort or any other theory and regardless of whether any
Indemnitee is a party thereto; provided that such indemnity shall not, as to
any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses (are determined by a court of competent
jurisdiction by final and non-appealable judgment to have) resulted from the
gross negligence or wilful misconduct of such Indemnitee.
(c) To the extent permitted by applicable law, the Borrower shall not
assert, and the Borrower hereby waives, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement, the other Loan Documents or any agreement or
instrument contemplated hereby or thereby, the Transactions, any Loan or Letter
of Credit or the use of the proceeds thereof.
(d) All amounts due under this Section 8.3 shall be payable promptly
after written demand therefor.
8.4 SUCCESSORS AND ASSIGNS.
(a) The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that the Borrower may not assign or otherwise transfer
any of its rights or obligations hereunder without the prior written consent of
the Bank (and any attempted assignment or transfer by any Borrower without such
consent shall be null and void). Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby and, to the
extent expressly contemplated hereby) any legal or equitable right, remedy or
claim under or by reason of this Agreement.
(b) The Bank may assign all of its rights and obligations under this
Agreement (including its Commitments and the Loans at the time owing to it),
subject to the consent of the Borrower (so long as no Default exists), which
consent shall not be unreasonably withheld.
(c) Upon acceptance of an assignment and from and after the effective
date specified in such assignment, the assignee thereunder shall be a party
hereto and, to the extent of the interest assigned by such assignment, have the
rights and obligations of the Bank under this Agreement, and the Bank shall, to
the extent of the interest assigned by such assignment, be released from its
obligations under this Agreement (and, in the case of an assignment covering all
of the Bank's rights and obligations under this Agreement, the Bank shall cease
to be a party hereto but shall continue to be entitled to the benefits of
Sections 2.10, 2.12 and 8.3).
(d) The Bank may sell participations to one or more banks or other
entities (a "PARTICIPANT") in all or a portion of the Bank's rights and
obligations under this Agreement (including all or a portion of its Commitments
and the Loans owing to it); PROVIDED that (i) such
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<PAGE>
the Bank's obligations under this Agreement shall remain unchanged, (ii) the
Bank shall remain solely responsible to the other parties hereto for the
performance of such obligations and (iii) the Borrower shall continue to deal
solely and directly with the Bank in connection with the Bank's rights and
obligations under this Agreement. The Borrower agrees that each Participant
shall be entitled to the benefits of Sections 2.8, 2.9 and 2.10 to the same
extent as if it were the Bank and had acquired its interest by assignment
pursuant to paragraph (b) of this Section 8.4.
(e) The Bank may at any time pledge or assign a security interest in
all or any portion of its rights under this agreement to secure obligations of
the Bank, including any such pledge or assignment to a Federal Reserve Bank and
this Section shall not apply to any such pledge or assignment of a security
interest.
8.5 SURVIVAL. All covenants, agreements, representations and warranties
made by the Borrower herein and in the other Loan Documents, and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement and the other Loan Documents, shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of this Agreement and the other Loan Documents and the making of any
Loans and shall continue in full force and effect so long as the principal of or
any accrued interest on any Loan or any fee or any other amount payable under
this Agreement or the other Loan Documents is outstanding and so long as the
Commitments have not expired or terminated. The provisions of Sections 2.10,
2.12 and 8.3 shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the Loans
and the Commitments or the termination of this Agreement or any other Loan
Document or any provision hereof or thereof.
8.6 COUNTERPARTS; INTEGRATION; REFERENCES TO AGREEMENT; EFFECTIVENESS.
This Agreement may be executed in counterparts (and by different parties hereto
on different counterparts), each of which shall constitute an original, but all
of which when taken together shall constitute a single contract. This Agreement
and the collateral Documents constitute the entire contract among the parties
relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof. Whenever there is a reference in any Collateral Document or UCC
Financing Statement to the "Credit Agreement" to which the Bank and the Borrower
are parties, such reference shall be deemed to be made to this Agreement among
the parties hereto. Except as provided in Section 4.1, this Agreement shall
become effective when it shall have been executed by the Bank and when the Bank
shall have received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Delivery of an executed counterpart of a signature page
of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.
8.7 SEVERABILITY. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.
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<PAGE>
8.8 RIGHT OF SETOFF. If an Event of Default shall have occurred and be
continuing, the Bank is hereby authorized at any time and from time to time, to
the fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender to or for the credit or the
account of the Borrower against any of and all the obligations of the Borrower
now or hereafter existing under this Agreement held by such Lender, irrespective
of whether or not such Lender shall have made any demand under this Agreement
and although such obligations may be unmatured. The rights of each Lender under
this Section 8.8 are in addition to any other rights and remedies (including
other rights of setoff) which such Lender may have.
8.9 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.
(a) This Agreement shall be construed in accordance with and governed by
the law of the Commonwealth of Massachusetts (excluding its conflicts of laws
principles).
(b) Each party hereto hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdiction of the courts
of the Commonwealth of Massachusetts and of the United States District Court
for the District of Massachusetts, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement or
the other Loan Documents, or for recognition or enforcement of any judgment,
and each of the parties hereto hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in such Massachusetts court (or, to the extent permitted by law,
in such Federal court). Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Agreement shall affect any right
that the Bank may otherwise have to bring any action or proceeding relating
to this Agreement against the Borrower or its properties in the courts of any
jurisdiction.
(c) Each party hereto hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents in any court referred to in paragraph (b) of this Section 8.9. Each
of the parties hereto hereby irrevocably waives, to the fullest extent permitted
by law, the defense of an inconvenient forum to the maintenance of such action
or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 8.1. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
8.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
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<PAGE>
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
8.11 HEADINGS. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
8.12 CONFIDENTIALITY. The Bank agrees to take, and to cause its
Affiliates to take, normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as "confidential" or
"secret" by the Borrower and provided to it by the Borrower, or by any agent on
the Borrower's behalf, under this Agreement or any other Loan Document, and
neither the Bank nor any of its Affiliates shall use any such information other
than in connection with or in enforcement of this Agreement and the other Loan
Documents or in connection with other business now or hereafter existing or
contemplated with the Borrower, except to the extent such information (i) was or
becomes generally available to the public other than as a result of disclosure
by the Bank, or (ii) was or becomes available on a non-confidential basis from a
source other than the Borrower, provided that such source is not bound by a
confidentiality agreement with the Borrower known to the Bank; provided,
however, that the Bank may disclose such information (A) at the request or
pursuant to any requirement of any Governmental Authority to which the Bank is
subject or in connection with an examination of the Bank by any such authority;
(B) pursuant to subpoena or other court process; (C) when required to do so in
accordance with the provisions of any applicable law; (D) to the extent
reasonably required in connection with any litigation or proceeding to which the
Bank or any of their respective Affiliates may be party; (E) to the extent
reasonably required in connection with the exercise of any remedy hereunder or
under any other Loan Document; (F) to the Bank's independent auditors and other
professional advisors; (G) to any participant in or assignee or any Loans,
actual or potential, provided that such Person agrees in writing to keep such
information confidential to the same extent required of the Bank hereunder; (H)
as to the Bank or its Affiliates, as expressly permitted under the terms of any
other document or agreement regarding confidentiality to which the Borrower is
party or is deemed party with the Bank or such Affiliate; and (I) to its
Affiliates if they agree to be bound by this confidentially provision as though
it were the Bank.
8.13 ENTIRE AGREEMENT. This and the other Loan Documents comprise the
entire agreement between the Bank and the Borrower and supersede all prior
drafts, understandings or agreements.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
RUBIO'S RESTAURANTS, INC.
By /S/ RALPH RUBIO
------------------------------
Name: Ralph Rubio
Title: President
RUBIO'S RESTAURANTS OF NEVADA, INC.
By /S/ ROBERT RUBIO
------------------------------
Name: Robert Rubio
Title: President
BANKBOSTON, N.A.
By /S/ DEBRA ZURKA
------------------------------
Name: Debra Zurka
Title: Director
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<PAGE>
EXHIBIT A
REVOLVING CREDIT NOTE
$7,500,000 Boston, Massachusetts
May , 1998
FOR VALUE RECEIVED, the undersigned, jointly and severally, (the
"Borrower") hereby promises to pay to BANKBOSTON, N.A. (the "Bank"), or
order, on the Revolving Credit Maturity Date as defined in the Credit
Agreement (defined below), the principal amount of Seven Million Five Hundred
Thousand Dollars ($7,500,000) or, if less, the aggregate unpaid principal
amount of all Revolving Credit Loans (as defined in the Credit Agreement
defined below) made by the Bank to the Borrower pursuant to the Credit
Agreement, together with interest (computed on the basis of the actual number
of days elapsed over a 360-day year) on the unpaid principal amount hereof
until paid in full at the rates provided in the Credit Agreement ("Interest
Rate"). Interest shall be payable as and when set forth in Section 2.9 of
the Credit Agreement.
If the unpaid principal hereof or any portion thereof is not paid when due,
then the unpaid balance of principal shall bear interest, to the extent
permitted by law, at the Post-Default Rate as defined in the Credit Agreement.
All payments under this Note shall be made at the head office of the Bank
at 100 Federal Street, Boston, Massachusetts 02110 (or at such other place as
the Bank may designate from time to time in writing) in lawful money of the
United States of America in federal or other immediately available funds. The
Borrower may prepay this Note in whole or in part at any time without premium.
Amounts so paid and other amounts may be borrowed and reborrowered by the
Borrower hereunder from time to time as provided in the Credit Agreement
referred to below and subject to the limitation provided in the Credit
Agreement.
This Note is issued pursuant to, is entitle to the benefits of, and is
subject to the provisions of a certain Revolving Credit and Term Loan Agreement
as of even date herewith by and between the undersigned and the Bank (herein, as
the same may from time to time be amended or extended, referred to as the
"Credit Agreement"), but neither this reference to the Credit Agreement nor any
provision thereof shall affect or impair the absolute and unconditional
obligation of the undersigned maker of this Note to pay the principal of and
interest on this Note as herein provided.
Upon an Event of Default, as defined in the Credit Agreement, the aggregate
unpaid balance of principal plus accrued interest may become or may be declared
to be due and payable in the manner and with the effect provided in the Credit
Agreement.
<PAGE>
The maker of this Note hereby waives presentment, demand, notice of
dishonor, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note.
WITNESS the execution of this Note under seal on the date first above
written.
RUBIO'S RESTAURANTS, INC.
By:
--------------------------
Title:
Witness:
----------------------
RUBIO'S RESTAURANTS OF NEVADA, INC.
By:
--------------------------
Title:
Witness:
----------------------
<PAGE>
EXHIBIT B
TERM NOTE
$2,227,720.01 Boston, Massachusetts
May , 1998
FOR VALUE RECEIVED, the undersigned, jointly and severally,
(collectively the "Borrower") hereby promises to pay to BANKBOSTON, N.A. (the
"Bank"), or order, the principal amount of One Million Nine Hundred Ninety
Two Thousand One Hundred Eighty Six and 18/100 Dollars ($1,992,186.18) plus
up to Two Hundred Thirty Five Thousand Five Hundred Thirty Three and 83/100
Dollars ($235,533.83) advanced hereunder by June 15, 1998, or such lesser
amount required to repay all of the obligation of the maker to Union Bank and
Bank of Commerce, payable in installments of principal as provided in the
Credit Agreement, together with interest (computed on the basis of the actual
number of days elapsed over a 360-day year) on the unpaid principal amount
hereof from the date that each of the respective two "advances" were made
that make up the principal balance of this Term Note until paid in full at
the rate or rates provided in the Credit Agreement ("Interest Rate").
Interest shall be payable as and when set forth in Section 2.9 of the Credit
Agreement. All principal outstanding hereunder and interest accrued thereon
and all other amounts outstanding hereunder shall be due and payable in full
on the earlier of April 1, 2001 or upon an IPO (as defined in the Credit
Agreement).
If the unpaid principal hereof or any portion thereof is not paid when due,
then the unpaid balance of principal shall bear interest, to the extent
permitted by law, at a Post-Default Rate as provided in the Credit Agreement
from and after the first Business Day on which the principal or such portion
thereof becomes overdue, such interest to be payable on demand.
All payments under this Note shall be made at the head office of the Bank
at 100 Federal Street, Boston, Massachusetts 02110 (or at such other place as
the Bank may designate from time to time in writing) in lawful money of the
United States of America in federal or other immediately available funds.
Amounts so paid and other amounts may not be reborrowed.
This Note is issued pursuant to, is entitled to the benefits of, and is
subject to the provisions of a certain Revolving Credit and Term Loan Agreement
of even date herewith by and between the undersigned and the Bank (herein, as
the same may from time to time be amended or extended, referred to as the
"Credit Agreement"), but neither this reference to the Credit Agreement nor any
provision thereof shall affect or impair the absolute and unconditional
obligation of the undersigned maker of this Note to pay the principal of and
interest on this Note as herein provided.
Prepayment of this note shall be subject to the Prepayment Penalty under
certain circumstances as more fully set forth in the Credit Agreement.
<PAGE>
Upon an Event of Default, as defined in the Credit Agreement, the aggregate
unpaid balance of principal plus accrued interest may become or may be declared
to be due and payable in the manner and with the effect provided in the Credit
Agreement.
The maker of this Note hereby waives presentment, demand, notice of
dishonor, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note.
WITNESS the execution of this Note under seal on the date first above
written.
RUBIO'S RESTAURANTS, INC
By:
--------------------------
Ralph Rubio
President
Witness
- -------------------------
RUBIO'S RESTAURANTS OF NEVADA, INC
By:
--------------------------
Robert Rubio
President
Witness
- -------------------------
<PAGE>
EXHIBIT C
FORM OF NOTICE OF BORROWING/CONVERSION
RUBIO'S RESTAURANTS, INC.
5151 Shoreham Place
Suite 260
San Diego, CA 92122
[Date]
BankBoston, N.A.
100 Federal Street
Boston, Massachusetts 02110
Re: NOTICE OF BORROWING/CONVERSION UNDER CREDIT AGREEMENT
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as of May , 1998 (the
"AGREEMENT") among Rubio's Restaurants, Inc. and Rubio's Restaurants of Nevada,
Inc. (collectively, the "BORROWER"), and BankBoston, N.A. (the "Bank"). In
accordance with Section 2.3 of the Agreement the Borrowers hereby request the
following Borrowings or Conversion of the following Borrowings:
(1) Amount requested: $____________;
(2) Date of Borrowing or Conversion: [date]
(3) Type of Borrowing: [Base Rate][LIBOR Rate]
(4) Location and account number to which funds are to be disbursed (if
not a Conversion):
____________________________
____________________________
<PAGE>
(5) [The Interest Period applicable to said Loan will be [one] [two]
[three] months.](1)
(6) [Said Loan represents a converson/continuation of the [Base Rate]
[LIBOR] Loan in the same amount made on ______.](2)
(7) [The facts contained or referred to in Subsections (a) and (b),
Section 5.2 of the Agreement are true and accurate on and as of the
effective date of the Borrowing as though made at and as of such
dated (except to the extent that such representations and warranties
expressly relate to an earlier date).(3)
Terms used above in this Notice of Borrowing/Conversion are as defined in
the Agreement. The foregoing Notice of Borrowing/Conversion is in accordance
with the applicable provisions of the Agreement.
[Date]
-------------------------------------
[Name and Title of Financial Officer]
- -----------------------
(1) To be inserted in any request for a Eurodollar Borrowing.
(2) To be inserted in any request for a conversion or continuation.
(3) To be inserted on any request other than for a continuation.
<PAGE>
EXHIBIT D
SECURITY AGREEMENT
THIS AGREEMENT, dated as of May , 1998, by and between Rubio's
Restaurants, Inc., a California corporation (the "Debtor"), having its principal
place of business at 5151 Shoreham Place, Suite 260, San Diego, California 92122
and BANKBOSTON, N.A., (the "Bank") under the Credit Agreement described below,
having an address at 100 Federal Street, Boston, Massachusetts 02110.
W I T N E S S E T H:
WHEREAS, the Debtor is the Borrower under the terms of a Revolving Credit
and Term Loan Agreement dated as of the date hereof (as amended from time to
time, the "CREDIT AGREEMENT") between Rubio's Restaurants, Inc. (the "Borrower")
and pursuant to which the Bank agreed, subject to the terms and conditions set
forth therein, to make Revolving Credit Loans and a Term Loan (as defined in the
Credit Agreement) to the Borrower (the "LOANS"); and
WHEREAS, the obligation of the Bank to make the Loans is subject to the
condition, among others, that the Debtor shall execute and deliver this
Agreement and grant the security interest hereinafter described;
NOW THEREFORE, in consideration of the willingness of the Bank to enter
into the Credit Agreement and to agree, subject to the terms and conditions set
forth therein, to make the Loans to the Borrower pursuant thereto, and for other
good and valuable consideration, receipt of which is hereby acknowledged, it is
hereby agreed, with the intent to be legally bound, as follows:
1. DEFINED TERMS. Except as otherwise expressly defined herein, all
capitalized terms shall have the meanings ascribed to them in the Credit
Agreement.
2. SECURITY INTEREST. As security for the Secured Obligations described
in Section 3 hereof, the Debtor hereby grants to the Bank a security interest in
and lien on all of the tangible and intangible personal property and fixtures of
the Debtor, including, without limitation, the property described below, whether
now owned or existing or hereafter acquired or arising, together with any and
all additions thereto and replacements therefor and proceeds and products
thereof (hereinafter referred to collectively as the "Collateral"):
(a) all of the Debtor's tangible personal property, including
without limitation all present and future goods, inventory (including, without
limitation, all inventory, merchandise, raw materials, work in process, finished
goods and supplies), equipment, merchandise, furniture, fixtures, office
supplies, equipment, vehicles, machinery, tools, computers, and associated
equipment now owned or hereafter acquired, including without limitation, the
tangible personal property used in the operation of the restaurant business of
the Debtor;
<PAGE>
(b) to the extent that such rights are assignable as collateral,
the Debtor's rights under all present and future authorizations, permits,
licenses and franchises issued, granted or licensed to the Debtor for the
operation of its business, including, without limitation, each of the
authorizations, permits, licenses and franchises listed on the Intellectual
Property Security Agreement, if any, executed this date from the Debtor to the
Bank;
(c) to the extent that such rights are assignable, all of the
Debtor's rights under all present and future service, financing or customer
contracts and all franchise, license, software, construction, engineering,
management and advertising and related agreements; and
(d) all of the Debtor's other personal property, including,
without limitation, all present and future accounts, accounts and notes
receivable, investment property, contract rights, general intangibles
(including, without limitation, all advertiser lists, goodwill, and other
printed materials, including all copies of catalogs, indexes, lists, data and
other documents and papers relating thereto, blue prints, designs and research
and development, included the Properties listed on the Intellectual Property
Security Agreement), any information stored on any medium, including electronic
medium, related to any of the personal property of the Debtor, all instruments,
documents and chattel paper, and all debts, obligations and liabilities in
whatever form owing to the Debtor from any person, firm or corporation or any
other legal entity, whether now existing or hereafter arising, now or hereafter
received by or belonging or owing to the Debtor, and all guaranties and security
therefor.
Any of the foregoing terms which are defined in the Uniform Commercial Code
shall have the meaning provided in the Uniform Commercial Code as supplemented
and expanded by the foregoing.
3. SECURED OBLIGATIONS. The security interest hereby granted shall
secure the prompt and punctual payment and faithful performance of the following
liabilities and obligations of the Debtor (herein called the "SECURED
OBLIGATIONS"):
(a) Principal of and premium, if any, and interest on the Loans;
(b) Any and all other obligations of the Borrower to the Bank
under the Credit Agreement or under any agreement or instrument relating
thereto, all as amended from time to time; and
(c) Any and all other Indebtedness of the Debtor to the Bank
whether direct or indirect, absolute or contingent, due or to become due or now
existing or hereafter arising.
4. PERFECTION CERTIFICATE. The Debtor has delivered to the Bank a
Perfection Certificate in the form appended hereto as SCHEDULE I attached
hereto. The Debtor represents that the completed Perfection Certificate
delivered to the Bank is true and correct in every respect and the facts
contained in such certificate are accurate. The Debtor shall supplement the
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<PAGE>
Perfection Certificate promptly after obtaining information which would require
a correction or addition to the Perfection Certificate.
5. SPECIAL WARRANTIES AND COVENANTS OF THE DEBTOR. The Debtor hereby
warrants and covenants to the Bank:
(a) The address shown at the beginning of this Agreement is the
current principal place of business of the Debtor, and all of the Debtor's
current additional places of business, if any, and the locations of all of the
Collateral currently are listed in SCHEDULE I. The Debtor will not change its
principal or any other place of business, or the location of any Collateral from
the locations set forth in SCHEDULE I, or make any change in the Debtor's name
or conduct the Debtor's business operations under any fictitious business name
or trade name, without, in any such case, at least thirty (30) days' prior
written notice to the Bank.
(b) Except for the security interest created hereunder and as
otherwise expressly disclosed in or permitted by the Credit Agreement, the
Debtor is the owner of the Collateral free from any lien, security interest or
encumbrance and the Debtor will defend the Collateral against all claims and
demands of all persons at any time claiming the same or any interest therein.
(c) Except as permitted by the Credit Agreement or otherwise
consented to in writing by the Bank, the Debtor will not sell or otherwise
dispose of any of the Collateral or any interest therein other than in the
ordinary course of business nor will the Debtor create, incur or permit to exist
any mortgage, lien, charge, encumbrance or security interest whatsoever with
respect to the Collateral.
(d) Except for Collateral that is obsolete or no longer used in
the Debtor's business, the Debtor will keep the Collateral in good order and
repair (normal wear excepted) and adequately insured at all times in accordance
with the provisions of the Credit Agreement. The Debtor will pay promptly when
due all taxes and assessments on the Collateral or for its use or operation,
except for taxes and assessments permitted to be contested as provided in
Section 5.4 of the Credit Agreement. The Bank may at its option discharge any
taxes, liens, security interests or other encumbrances to which any Collateral
is at any time subject, and may, upon the failure of the Debtor to do so in
accordance with the Credit Agreement, purchase insurance on any Collateral and
pay for the repair, maintenance or preservation thereof, and the Debtor agrees
to reimburse the Bank on demand for any payments or expenses incurred by the
Bank pursuant to the foregoing authorization and any unreimbursed amounts shall
constitute Secured Obligations for all purposes hereof.
(e) The Debtor will promptly execute and deliver to the Bank such
financing statements, certificates and other documents or instruments as may be
necessary to enable the Bank to perfect or from time to time renew the security
interest granted hereby, including, without limitation, such financing
statements, certificates and other documents as may be necessary to perfect a
security interest in any additional Collateral hereafter acquired by the Debtor
or in any replacements or proceeds thereof. The Debtor authorizes and appoints
the Bank
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<PAGE>
to execute such financing statements, certificates and other documents
pertaining to the Bank security interest in the Collateral in its stead, with
full power of substitution, as the Debtor's attorney in fact. The Debtor
further agrees that a carbon, photographic or other reproduction of a
security agreement or financing statement is sufficient as a financing
statement under this Agreement.
(f) The Debtor will give the Bank notice of each office at which
records of the Debtor pertaining to all intangible items of Collateral are
kept. Except as may be provided in such notice, the records concerning all
intangible Collateral are and will be kept at the address shown at the
beginning of this Agreement as the principal place of business of the Debtor.
6. FIXTURES, ETC. Debtor will take all such reasonable action or
actions as may be necessary consistent with past business practices to prevent
any of the Collateral from becoming fixtures and, in any event, subject to the
terms of real property leases.
7. EVENTS OF DEFAULT. The Debtor shall be in default under this
Agreement upon the happening of any of the following events or conditions
(herein called "Events of Default"):
(a) Default shall be made in the due and punctual payment of any
principal of or premium, if any, or interest on any of the Secured Obligations
as and when the same shall become due and payable (whether at maturity or at a
date fixed for any prepayment or installment or by declaration or acceleration
or otherwise) and such default shall continue beyond the expiration of the
applicable period of grace, if any; or
(b) The breach, violation or other non-performance of any term,
covenant, condition, agreement or obligation of the Debtor contained herein; or
(c) Any other Event of Default (as defined or provided in the
Credit Agreement) shall occur.
8. RIGHTS AND REMEDIES OF SECURED PARTIES. Upon the occurrence of any
Event of Default, such Event of Default not having previously been waived,
remedied or cured, the Bank shall have the following rights and remedies:
(a) All rights and remedies provided by law, including, without
limitation, those provided by the Uniform Commercial Code;
(b) All rights and remedies provided in this Agreement; and
(c) All rights and remedies provided in the Credit Agreement, or
in the Loans, or in the Collateral Documents, or in any other agreement,
document or instrument pertaining to the Secured Obligations.
-4-
<PAGE>
9. RIGHT OF THE BANK TO DISPOSE OF COLLATERAL, ETC. Upon the
occurrence of any Event of Default, such Event of Default not having previously
been waived, remedied or cured, but subject to the provisions of the Uniform
Commercial Code or other applicable law, the Bank shall have the right to take
possession of the Collateral and, in addition thereto, the right to enter upon
any premises on which the Collateral or any part thereof may be situated and
remove the same therefrom. The Bank may require the Debtor to make the
Collateral (to the extent the same is moveable) available to the Bank at a place
to be designated by the Bank which is reasonably convenient to both parties or
transfer any information related to the Collateral to the Bank by electronic
medium. Unless the Collateral is perishable or threatens to decline speedily in
value or is of a type customarily sold on a recognized market, the Bank will
give the Debtor at least ten (10) days' prior written notice at the address of
the Debtor set forth above (or to such other address or addresses as the Debtor
shall specify in writing to the Bank) of the time and place of any public sale
thereof or of the time after which any private sale or any other intended
disposition thereof is to be made. Any such notice shall be deemed to meet any
requirement hereunder or under any applicable law (including the Uniform
Commercial Code) that reasonable notification be given of the time and place of
such sale or other disposition.
10. CREDIT AGREEMENT. Notwithstanding any other provision of this
Agreement, the rights of the parties hereunder are subject to the provisions of
the Credit Agreement, including the provisions thereof pertaining to the rights
and responsibilities of the Bank.
11. RIGHT OF THE BANK TO USE AND OPERATE COLLATERAL, ETC. Upon the
occurrence of any Event of Default, such Event of Default not having
previously been waived, remedied or cured, but subject to the provisions of
the Uniform Commercial Code or other applicable law, the Bank shall have the
right and power to take possession of all or any part of the Collateral, and
to exclude the Debtor and all persons claiming under the Debtor wholly or
partly therefrom, and thereafter to hold, store, and/or use, operate, manage
and control the same. Upon any such taking of possession, the Bank may, from
time to time, at the expense of the Debtor, make all such repairs,
replacements, alterations, additions and improvements to and of the
Collateral as the Bank may deem proper. In any such case the Bank shall have
the right to manage and control the Collateral and to carry on the business
and to exercise all rights and powers of the Debtor in respect thereto as the
Bank shall deem best, including the right to enter into any and all such
agreements with respect to the operation of the Collateral or any part
thereof as the Bank may see fit; and the Bank shall be entitled to collect
and receive all rents, issues, profits, fees, revenues and other income of
the same and every part thereof. Such rents, issues, profits, fees, revenues
and other income shall be applied to pay the expenses of holding and
operating the Collateral and of conducting the business thereof, and of all
maintenance, repairs, replacements, alterations, additions and improvements,
and to make all payments which the Bank may be required or may elect to make,
if any, for taxes, assessments, insurance and other charges upon the
Collateral or any part thereof, and all other payments which the Bank may be
required or authorized to make under any provision of this Agreement
(including reasonable legal costs and attorneys' fees). The remainder of
such rents, issues, profits, fees, revenues and other income shall be applied
as provided in Section 13.
12. COLLECTION OF ACCOUNTS RECEIVABLE, ETC. At any time after an Event
of Default, upon notice to the Debtor from the Bank, all of the proceeds of the
Debtor's accounts receivable
-5-
<PAGE>
and all other proceeds of Collateral of any nature, whether now existing or
hereafter arising, and domestic cash receipts in the Debtor's possession
shall be paid into a lock box account with the Bank or under an agency
agreement with other institutions, and after an Event of Default, the Bank
may take any other steps which the Bank deems necessary or advisable to
collect any or all such accounts receivable or other Collateral or proceeds
thereof.
13. PROCEEDS OF COLLATERAL. After deducting all costs and expenses of
collection, storage, custody, sale or other disposition and delivery (including
reasonable legal costs and attorneys' fees) and all other charges against the
Collateral, the residue of the proceeds of any such sale or disposition shall be
applied to the payment of the Secured Obligations in such order of priority as
the Bank shall determine and any surplus shall be returned to the Debtor or to
any person or party lawfully entitled thereto. By way of enlargement and not by
way of limitation of the rights of the Bank under applicable law or the Loans,
Credit Agreement or Collateral Documents, but notwithstanding any provision of
the Loans, Credit Agreement or Collateral Documents to the contrary, the Bank
shall be entitled to allocate its application of the Collateral, and the
proceeds thereof, to the Secured Obligations (including without limitation
either or both of the Loans) in such proportions and in such order as the Bank,
in its sole discretion, shall decide. In the event the proceeds of any sale,
lease or other disposition of the Collateral hereunder are insufficient to pay
all of the Secured Obligations in full, the Debtor will be liable for the
deficiency, together with interest thereon at the maximum rate provided in the
Credit Agreement, and the cost and expenses of collection of such deficiency,
including (to the extent permitted by law), without limitation, reasonable
attorneys' fees, expenses and disbursements.
14. WAIVERS, ETC. The Debtor hereby waives presentment, demand, notice,
protest and, except as is otherwise provided herein, all other demands and
notices in connection with this Agreement or the enforcement of the Bank's
rights hereunder or in connection with any Secured Obligations or any
Collateral; consents to and waives notice of the granting of renewals,
extensions of time for payment or other indulgences to the Debtor or to any
account debtor in respect of any account receivable or to any other third party,
or substitution, release or surrender of any Collateral, the addition or release
of persons primarily or secondarily liable on any Secured Obligation or on any
account receivable or other Collateral, the acceptance of partial payments on
any Secured Obligation or on any account receivable or other Collateral and/or
the settlement or compromise thereof. No delay or omission on the part of the
Bank in exercising any right hereunder shall operate as a waiver of such right
or of any other right hereunder. Any waiver of any such right on any one
occasion shall not be construed as a bar to or waiver of any such right on any
future occasion. THE DEBTOR FURTHER WAIVES ANY RIGHT IT MAY HAVE UNDER THE
CONSTITUTION OF THE COMMONWEALTH OF MASSACHUSETTS, UNDER THE CONSTITUTION OF ANY
STATE IN WHICH ANY OF THE COLLATERAL MAY BE LOCATED, OR UNDER THE CONSTITUTION
OF THE UNITED STATES OF AMERICA, TO NOTICE (OTHER THAN ANY REQUIREMENT OF NOTICE
PROVIDED HEREIN) OR TO A JUDICIAL HEARING PRIOR TO THE EXERCISE OF ANY RIGHT OR
REMEDY PROVIDED BY THIS AGREEMENT TO THE BANK AND WAIVES ITS RIGHTS, IF ANY, TO
SET ASIDE OR INVALIDATE ANY SALE DULY CONSUMMATED IN ACCORDANCE WITH THE
FOREGOING PROVISIONS HEREOF ON THE GROUNDS (IF SUCH BE THE CASE) THAT THE SALE
WAS CONSUMMATED WITHOUT A PRIOR JUDICIAL HEARING. The Debtor's waivers under
this section have
-6-
<PAGE>
been made voluntarily, intelligently and knowingly and after the Debtor has
been apprised and counseled by its attorneys as to the nature thereof and its
possible alternative rights.
15. TERMINATION; ASSIGNMENT, ETC. This Agreement and the security
interest in the Collateral created hereby shall terminate when all of the
Secured Obligations have been paid and finally discharged in full. In such
event, the Bank agrees to execute appropriate releases of liens on the
Collateral. No waiver by the Bank or by any other holder of Secured Obligations
of any Default shall be effective unless in writing nor operate as a waiver of
any other Default or of the same Default on a future occasion. In the event of
a sale or assignment of part or all of the Secured Obligations by the Bank, the
Bank may assign or transfer its rights and interest under this Agreement in
whole or in part to the purchaser or purchasers of such Secured Obligations,
whereupon such purchaser or purchasers shall become vested with all of the
powers and rights of the Bank hereunder.
16. REINSTATEMENT. Notwithstanding the provisions of Section 15, this
Agreement shall continue to be effective or be reinstated, as the case may be,
if at any time any amount received by the Bank in respect of the Secured
Obligations is rescinded or must otherwise be restored or returned by the Bank
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
the Debtor or upon the appointment of any intervener or conservator of, or
trustee or similar official for, the Debtor or any substantial part of its
properties, or otherwise, all as though such payments had not been made.
17. GOVERNMENTAL APPROVAL. Prior to or, where permitted, upon the
exercise by the Bank of any power, right, privilege or remedy pursuant to this
Agreement which requires any consent, approval, registration, qualification or
authorization of any governmental authority or instrumentality, the Debtor at
the request of the Bank will execute and deliver, or will cause the execution
and delivery of, all applications, certificates, instruments and other documents
and papers that the Debtor may be reasonably required to obtain for such
governmental consent, approval, registration, qualification or authorization.
18. NOTICES. All notices, consents, approvals, elections and other
communications hereunder shall be in writing (whether or not the other
provisions of this Agreement expressly so provide) and shall be deemed to have
been duly given if delivered in accordance with the terms of the Credit
Agreement.
19. MISCELLANEOUS. This Agreement shall inure to the benefit of and be
binding upon the Bank and the Debtor and their respective successors and
assigns. In case any provision in this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions hereof shall not in any way be affected or impaired
thereby. This Agreement may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which shall be an
original, but all of which together shall constitute one instrument.
20. GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL. This Agreement,
including the validity hereof and the rights and obligations of the parties
hereunder, shall be construed in
-7-
<PAGE>
accordance with and governed by the laws of the Commonwealth of Massachusetts
(excluding its conflicts of laws principles). The Debtor, to the extent that
it may lawfully do so, hereby consents to service of process, and to be sued,
in the Commonwealth of Massachusetts and consents to the jurisdiction of the
courts of the Commonwealth of Massachusetts and the United States District
Court for the District of Massachusetts, as well as to the jurisdiction of
all courts to which an appeal may be taken from such courts, for the purpose
of any suit, action or other proceeding arising out of any of the Secured
Obligations or with respect to the transactions contemplated hereby, and
expressly waives any and all objections it may have as to venue in any such
courts. The Debtor further agrees that a summons and complaint commencing an
action or proceeding in any of such courts shall be properly served and shall
confer personal jurisdiction if served personally or by certified mail to it
at its address provided in Section 18 hereof or as otherwise provided under
the laws of the Commonwealth of Massachusetts.
THE DEBTOR IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY
PROCEEDING HEREAFTER INSTITUTED BY OR AGAINST THE DEBTOR IN RESPECT OF ITS
OBLIGATIONS HEREUNDER OR THE TRANSACTIONS CONTEMPLATED HEREBY.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
RUBIO'S RESTAURANTS, INC.
By:
----------------------------
Name:
Title:
BANKBOSTON, N.A.
By:
----------------------------
Name: Debra Zurka
Title: Director
<PAGE>
SCHEDULE I
PERFECTION CERTIFICATE
(UCC Financing Statements)
The undersigned, the President of Rubio's Restaurants, Inc., a California
corporation (the "Debtor"), hereby certifies, with reference to a certain
Security Agreement dated as of May __, 1998 (terms defined in such Security
Agreement having the same meanings herein as specified therein), between the
Debtor and BANKBOSTON, N.A., as follows:
1. NAMES. (a) The exact corporate name of the Debtor as that name
appears on its Certificate of Incorporation is as follows:
Source: UCC Section 9-402(7) (first sentence)
(b) The following is a list of all other names (including trade names or
similar appellations) used by the Debtor, or any other business or organization
to which the Debtor became the successor by merger, consolidation, acquisition,
change in form, nature or jurisdiction of organization or otherwise, now or at
any time during the past five years:
Source: UCC Section 9-402(7) (second and third sentences)
(c) The following is the Debtor's federal employer identification
number:
2. CURRENT LOCATIONS. (a) The chief executive office of the Debtor is
located at the following address:
Source: UCC Sections 9-103(3), 9-103(4), 9-401(6)
<PAGE>
(b) The following are all other locations in the United States of
America in which the Debtor maintains and books or records relating to any of
the Collateral consisting of accounts, contract rights, chattel paper, general
intangibles or mobile goods:
Source: UCC Sections 9-103(3), 9-103(4), 9-401(6)
(c) The following are all other places of business of the Debtor in the
United States of America:
Source: UCC Section 9-401(1) (Third Alternative)
(d) The following are all other locations in the United States of
America where any of the Collateral consisting of Inventory or equipment is
located:
Source: UCC Section 9-103(1)
(e) The following are the names and addresses of all persons or entities
other than the Debtor, such as lessees, consignees, warehousemen or purchasers
of chattel paper, which have possession or are intended to have possession of
any of the Collateral consisting of chattel paper, inventory or equipment:
-2-
<PAGE>
Source: UCC Sections 9-103(1), 9-103(4), 9-304(2) and 9-304(3); see
also UCC Sections 2-326(3), 9-114, 9-305, 9-308 and 9-408
(f) The following are the names and addresses of all persons or entities
which hold leases or other ownership interest in personal property held and used
by the Debtor, such as lessors, consignors or conditional sales vendors with
purchase money liens on Collateral consisting of chattel paper, inventory or
equipment:
Source: UCC 9-312,
3. PRIOR LOCATIONS. (a) Set forth below is the information required
by subparagraphs (a), (b) and (c) of Section 2 with respect to each location or
place of business previously maintained by the Debtor at any time during the
past five years in a state in which the Debtor has previously maintained a
location or place of business at any time during the past four months:
Source: UCC Sections 9-103(3)(e) and 9-401(3)
(b) Set forth below is information required by subparagraphs (d) and (e)
of Section 2 with respect to each other location at which, or other person or
entity with which, any of the Collateral consisting of inventory or equipment
has been previously held at any time during the past four months:
Source: UCC Sections 9-103(1)(d) and 9-401(3)
4. UNUSUAL TRANSACTIONS. Except for those purchases, acquisitions and
other transactions described on SCHEDULE 4 attached hereto, all of the
Collateral has been originated by the Debtor in the ordinary course of the
Debtor's business or consists of goods which have been
-3-
<PAGE>
acquired by the Debtor in the ordinary course from a person in the business
of selling goods of that kind.
Source:UCC Sections 1-201(9), 9-306(2) and 9-402(7) (third sentence); see
also UCC
5. FILE SEARCH REPORTS. Attached hereto as SCHEDULE 5 is a true copy
of a file search report from the Uniform Commercial Code filing officer (or, if
such officer does not issue such reports, from an experienced Uniform Commercial
Code search organization acceptable to the Bank) (i) in each jurisdiction
identified in Section 2 or 3 above with respect to each name set forth in
Section 1 above and (ii) in each jurisdiction in which any of the transactions
described in SCHEDULE 4 took place with respect to the legal name of the person
from which the Debtor purchased or otherwise acquired nay of the Collateral.
6. UCC FILINGS. A duly signed financing statement on Form UCC-1 in
form acceptable to the Bank and containing the description of the Collateral set
forth on SCHEDULE 6 has been duly filed in the Uniform Commercial Code filing
office in each jurisdiction identified in Section 2 hereof.
7. TERMINATION STATEMENTS. A duly signed termination statement on Form
UCC-3 in form acceptable to the Bank has been duly filed in each applicable
jurisdiction identified in Section 2 hereof or on Schedule 4 hereto has been
delivered to the Bank.
IN WITNESS WHEREOF, we have hereunto signed this Certificate on April __, 1998
RUBIO'S RESTAURANTS, INC.
By:
-----------------------------
Name:
Title:
-4-
<PAGE>
SCHEDULE I
PERFECTION CERTIFICATE
(UCC Financing Statements)
The undersigned, the President of Rubio's Restaurants of Nevada, Inc., a Nevada
corporation (the "Debtor"), hereby certifies, with reference to a certain
Security Agreement dated as of May __, 1998 (terms defined in such Security
Agreement having the same meanings herein as specified therein), between the
Debtor and BANKBOSTON, N.A., as follows:
1. NAMES. (a) The exact corporate name of the Debtor as that name
appears on its Certificate of Incorporation is as follows:
Rubio's Restaurants of Nevada, Inc.
Source: UCC Section 9-402(7) (first sentence)
(b) The following is a list of all other names (including trade names or
similar appellations) used by the Debtor, or any other business or organization
to which the Debtor became the successor by merger, consolidation, acquisition,
change in form, nature or jurisdiction of organization or otherwise, now or at
any time during the past five years:
Rubio's Baja Grill
Rubio's Fish Tacos
Rubio's
Rubio's Restaurants, Inc.
Source: UCC Section 9-402(7) (second and third sentences)
(c) The following is the Debtor's federal employer identification
number:
88-0377609
<PAGE>
2. CURRENT LOCATIONS. (a) The chief executive office of the Debtor is
located at the following address:
Rubio's Restaurants, Inc.
5151 Shoreham Place, Suite 260
San Diego, CA 92122
Source: UCC Sections 9-103(3), 9-103(4), 9-401(6)
(b) The following are all other locations in the United States of
America in which the Debtor maintains and books or records relating to any of
the Collateral consisting of accounts, contract rights, chattel paper, general
intangibles or mobile goods:
Certain books and records are maintained at the location
of restaurants operated by the Debtor. A list of the
addresses of all restaurants owned or operated by the
Debtor or its parent, Rubio's Restaurants, Inc., is
attached hereto as EXHIBIT A.
Source: UCC Sections 9-103(3), 9-103(4), 9-401(6)
(c) The following are all other places of business of the Debtor in the
United States of America:
See EXHIBIT A for a list of all restaurants owned or
operated by the Debtor or its parent, Rubio's
Restaurants, Inc.
Source: UCC Section 9-401(1) (Third Alternative)
(d) The following are all other locations in the United States of
America where any of the Collateral consisting of Inventory or equipment is
located:
See EXHIBIT A for a list of all restaurants owned or
operated by the Debtor or its parent, Rubio's
Restaurants, Inc.
Source: UCC Section 9-103(1)
-2-
<PAGE>
(e) The following are the names and addresses of all persons or entities
other than the Debtor, such as lessees, consignees, warehousemen or purchasers
of chattel paper, which have possession or are intended to have possession of
any of the Collateral consisting of chattel paper, inventory or equipment:
None
Source: UCC Sections 9-103(1), 9-103(4), 9-304(2) and 9-304(3); see
also UCC Sections 2-326(3), 9-114, 9-305, 9-308 and 9-408
(f) The following are the names and addresses of all persons or entities
which hold leases or other ownership interest in personal property held and used
by the Debtor, such as lessors, consignors or conditional sales vendors with
purchase money liens on Collateral consisting of chattel paper, inventory or
equipment:
(1) Coca Cola USA Fountain, 6 Executive Circle, Suite
100, Irvine, California 92714, owns certain
equipment installed or located at certain of
Debtor's restaurants that are neither owned nor
leased by the Debtor.
(2) Everay, Inc., dba Speedy Fountain Service, P.O. Box
6219, Long Beach, California 90806, leases certain
CO2 tanks with Fill Stations to the Debtor.
(3) Airgas Beverages Service, Inc., dba Speedy Fountain
Service, P.O. Box 6219, Long Beach, California
90806, leases certain CO2 tanks with Fill Stations
to the Debtor.
Source: UCC 9-312,
-3-
<PAGE>
3. PRIOR LOCATIONS. (a) Set forth below is the information required
by subparagraphs (a), (b) and (c) of Section 2 with respect to each location or
place of business previously maintained by the Debtor at any time during the
past five years in a state in which the Debtor has previously maintained a
location or place of business at any time during the past four months:
None.
Source: UCC Sections 9-103(3)(e) and 9-401(3)
(b) Set forth below is information required by subparagraphs (d) and (e)
of Section 2 with respect to each other location at which, or other person or
entity with which, any of the Collateral consisting of inventory or equipment
has been previously held at any time during the past four months:
None.
Source: UCC Sections 9-103(1)(d) and 9-401(3)
4. UNUSUAL TRANSACTIONS. Except for those purchases, acquisitions and
other transactions described on SCHEDULE 4 attached hereto, all of the
Collateral has been originated by the Debtor in the ordinary course of the
Debtor's business or consists of goods which have been acquired by the Debtor in
the ordinary course from a person in the business of selling goods of that kind.
Source: UCC Sections 1-201(9), 9-306(2) and 9-402(7) (third sentence);
see also UCC Section 9-301 (1)(c)
5. FILE SEARCH REPORTS. Attached hereto as SCHEDULE 5 is a true copy
of a file search report from the Uniform Commercial Code filing officer (or, if
such officer does not issue such reports, from an experienced Uniform Commercial
Code search organization acceptable to the Bank) (i) in each jurisdiction
identified in Section 2 or 3 above with respect to each name set forth in
Section 1 above and (ii) in each jurisdiction in which any of the transactions
described in SCHEDULE 4 took place with respect to the legal name of the person
from which the Debtor purchased or otherwise acquired nay of the Collateral.
-4-
<PAGE>
6. UCC FILINGS. A duly signed financing statement on Form UCC-1 in
form acceptable to the Bank and containing the description of the Collateral set
forth on SCHEDULE 6 has been duly EXECUTED AND IS AVAILABLE TO BE filed in the
Uniform Commercial Code filing office in each jurisdiction identified in Section
2 hereof.
7. TERMINATION STATEMENTS. A duly signed termination statement on Form
UCC-2 in form acceptable to the Bank has been EXECUTED AND IS AVAILABLE TO BE
filed in each applicable jurisdiction identified in Section 2 hereof or on
SCHEDULE 4 hereto has been delivered to the Bank, PENDING FILING WHEN SUCH
SECURED CREDITOR HAS BEEN PAID OFF WITH THE PROCEEDS OF THE LOANS FROM
BANKBOSTON, N.A..
IN WITNESS WHEREOF, we have hereunto signed this Certificate on May __, 1998
RUBIO'S RESTAURANTS OF NEVADA, INC.
By:
-----------------------------------
Name:
Title:
-5-
<PAGE>
SCHEDULE 4: UNUSUAL TRANSACTIONS
None.
-6-
<PAGE>
<TABLE>
<S> <C> <C> <C>
MISSION BAY #1 CARMEL MOUNTAIN RANCH #15 CARLSBAD #29 HENDERSON #43
4604 E. Mission Dr. 12002 Carmel Mtn. Rd #260 2604-A El Camino Real 1500 N. Green Valley Pkwy
San Diego, CA 92109 San Diego, CA 92128 Carlsbad, CA 92008 Bldg 200, Suite 210
Phone 272-2801 Phone 675-9388 Phone 760-434-6298 Henderson, NV 89014
Phone 702-270-6097
S.D.S.U. #2 TEMECULA #16 LA HABRA #30 SAN CLEMENTE #44
5157 College Suite C 27480 Ynez Road, Ste 0-2 1401 Imperial Hwy. #A 638 Camino de los Mares #D1
San Diego, CA 92115 Temecula, CA 92591 La Habra, CA 90631 San Clemente, CA 92673
Phone 286-3844 Phone 909-694-9948 Phone 562-697-4356 Phone 949-661-8683
PACIFIC BEACH #3 COSTA MESA #17 HILLLCREST #31 RANCHO BERNARDO #45
910 Grand Avenue 1836 Newport Blvd., #D-158 3900 5th Ave, Suite 120 16588 Bernardo Ctr Dr #100
San Diego, CA 92109 Costa Mesa, CA 92627 San Diego, CA 92103-3112 San Diego, CA 92128
Phone 270-4800 Phone 949-648-6992 Phone 619-299-8873 Phone 619-613-7785
POINT LOMA #4 LAGUNA NIGUEL #18 CYPRESS/STANTON #32 NORTHRIDGE #46
3555 Rosecrans St#101B 27000 Alicia Pkwy #A 7063 Katelia Ave 19500 Plummer St #B3
San Diego, CA 92110 Laguna Niguel, CA 92677 Stanton, CA 90680 Northridge, CA 91324
Phone 223-2631 Phone 949-448-7622 Phone 714-827-6495 Phone 818-998-6704
SAN MARCOS #5 ANAHEIM #19 BELMONT #33 YORBA LINDA #47
763 Center Dr., Sta. #102 520 North Euclid Avenue 4702 E. 2nd St 20355 Yorba Linda Bl #F
San Marcos, CA 92069 Anaheim, CA 92801-5587 Long Beach, CA 90803 Yorba Linda, CA 92866
Phone 760-746-2962 Phone 714-899-1525 Phone 562-439-8317 SCHEDULED TO OPEN 8-98
CHULA VISTA #6 MISSION VALLEY #2O MISSION VIEJO #34 VILLA PARK #48
481 Broadway 2075-A Camino De La Reina 25482 Marguerita PK#104 2318 North Tustin St #A
Chula Vista, CA 91910 San Diego, CA 92108 Mission Viejo,CA 92692 Orange, CA 92865
Phone 427-3811 Phone 619-299-6502 Phone 949-588-6085 Phone 714-685-0013
ENCINITAS #7 ENCINO #21 AHWATUKEE #35 GILBERT #49
252 El Camino Real 17200 Ventura Blvd. #224-5 4906 E. Ray Road, STE.101 84 West Warner Road #88
Encinitas, CA 92024 Encino, CA 91316 Ahwatukee, AZ 85044 Gilbert, AZ 86234
Phone 760-632-7396 Phone 818-784-1497 Phone 602-961-0621 SCHEDULED TO OPEN 5-98
EL CAJON #8 IRVINE SPECTRM #22 CERRITOS #36 CHANDLER #50
399 Magnolia Ave 31 Fortune Drive, Suite 210 12751 Towne Ctr Dr., #N-1 5055 West Ray Road, Ste. 3-4
El Cajon, CA 92020 Irvine, CA 92618 Cerritos, CA 90701 Chandler, AZ
Phone 440-3325 Phone 949-727-9627 Phone 582-924-0334 SCHEDULED TO OPEN 9-98
KEARNY MESA #9 GROSSMONT CENTER #23 TORRANCE #37 SUMMERLIN #51
7420 Clairmontt Mesa #111 5500 Grossmont Ctr Dr #D22 25366 Crenshaw Blvd. 1910 Village Center Dr #M9
San Diego, CA 92111 La Mesa, CA 91942 Torrance, CA 90606 Summerlin, NV 81928
Phone 268-5770 Phone 697-1286 Phone 310-891-1811 SCHEDULED TO OPEN 6-98
SAN DIEGO MANHATTAN BEACH #24 SCOTTSDALE #38
8935 Towne Center Dr#100 2000 S. Sepulveda Blvd. 15704 N. Pima Rd., #C8-9
San Diego, CA 92122 Manhattan Beach, CA 90266 Scottsdale, AZ 85260
Phone 453-1666 Phone 310-939-7098 Phone 602-348-0195
TUSTIN #11 LA JOLLA #25 VISTA #39 TEMPE #53
2955 El Camino Real 8855 Villa La Jolla Dr#404-06 1711 Unversity Dr. #110 SCHEDULE TO OPEN 11-98
Tustin, CA 92782 La Jolla, CA 92037 Vista, CA 92083
Phone 714-838-0902 Phone 546-3377 760-724-5341
IRVINE #12 SANTA ANA #26 ONTARIO #40 FASHION VALLEY #54
17565 Harvard Ave 2841 West MacArthur Bl #A 980 No Ontario Mills Dr #A 7007 FRIARS ROAD #931
Irvine, CA 92714 Santa Ana, CA 92704 Ontario, CA 91764 SAN DIEGO, CA 92108
Phone 949-261-1016 Phone 714-751-0981 Phone 909-484-0484 Phone 718-9975
SOLANA BEACH #13 HALL OF JUSTICE #27 RANCHO CUCAMONGA #41 CITY MILLS #55
437 South Highway 101, #117 330 W. Broadway 10798 Foothill Blvd., #120 20 City Blvd West Bldg G3,F8
Solana Beach, CA 92075 1st FLR. West Wing Food Court Rancho Cucamonga, CA 91730 Orange, CA 92868
Phone 259-26111 San Diego, CA 92101 Phone 909-989-3949 SCHEDULED TO OPEN 11-98
Phone 338-8081, 8082
DOWNTOWN #14 MARINA DEL REY #28 MISSION GORGE #42 RANCHO SAN DIEGO #56
101 4th Ave 4250-4252 Lincoln Blvd. 10460 Friars Road, Suite A 2961 Jamacha Road #20
San Diego, CA 92101 Marina Del Rey, CA 90292 San Diego, CA 92120 El Cajon, CA 92019
Phone 231-7731, 231-7742 Phone 310-574-1420 Phone 619-285-9985 SCHEDULED TO OPEN 10-98
</TABLE>
Revised 5-05-98
EXHIBIT A
<PAGE>
RUBIO'S RESTAURANTS, INC.
LANDLORD/PROPERTY MANAGEMENT LIST
<TABLE>
<CAPTION>
Name Center Company Contact
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Mission Bay N/A Larry & Margaret Eddington Larry Eddington
- ----------------------------------------------------------------------------------------------------------------------------------
2 SDSU Commons East SDSU Foundation Facilities Mgmt. Norma Clark
- ----------------------------------------------------------------------------------------------------------------------------------
3 Pacific Beach N/A Don Russell Beach Properties Don Russell
- ----------------------------------------------------------------------------------------------------------------------------------
4 Point Loma Rosecrans Center John Burnham & Co. Colleen Labertew
- ----------------------------------------------------------------------------------------------------------------------------------
5 San Marcos Vallecitos Center A & J Vallecitos Partnership Harry Sinanian
- ----------------------------------------------------------------------------------------------------------------------------------
6 Chula Vista N/A c/o Boyd Commercial Brokerage Tracy Clark
- ----------------------------------------------------------------------------------------------------------------------------------
7 Encinitas Welgand Plaza Burnham Pacific Properties Terry Hall
- ----------------------------------------------------------------------------------------------------------------------------------
8 El Cajon El Cajon Towne Center Harmon Realtors Julie Godsey
- ----------------------------------------------------------------------------------------------------------------------------------
9 Kearny Mesa Crossroads Center Commercial Facilities Greg Cartwright
- ----------------------------------------------------------------------------------------------------------------------------------
10 U.T.C. Renaissance Center Monarch Management Co. Julie Richards
- ----------------------------------------------------------------------------------------------------------------------------------
11 Tustin Tustin Marketplace Donahue Schriber Carol Reedy
- ----------------------------------------------------------------------------------------------------------------------------------
12 Irvine Harvard Place Hollis & Associates Lori Stites
- ----------------------------------------------------------------------------------------------------------------------------------
13 Solana Beach Beach Walk Business Real Estate Management Elizabeth Soder
- ----------------------------------------------------------------------------------------------------------------------------------
14 Downtown N/A Meissner Jacquet Andrea Webb
- ----------------------------------------------------------------------------------------------------------------------------------
15 Carmel Mountain N/A Community Centers One LLC Diana Lawless
- ----------------------------------------------------------------------------------------------------------------------------------
16 Temecula Towne Center Randor West Pagt Snow
- ----------------------------------------------------------------------------------------------------------------------------------
17 Costa Mesa Costa Mesa Courtyard Festival Management Corp. Melissa Chesney
- ----------------------------------------------------------------------------------------------------------------------------------
18 Laguna Niguel The Market Place Shapell Industries, Inc. Linda Remley
- ----------------------------------------------------------------------------------------------------------------------------------
19 Anaheim Anaheim Plaza Ralf Woebken
- ----------------------------------------------------------------------------------------------------------------------------------
20 Mission Valley N/A Terra Enterprises Kevin Nell
- ----------------------------------------------------------------------------------------------------------------------------------
21 Encino Encino Towne Center Encino Management Group Jacob Kohanzadah
- ----------------------------------------------------------------------------------------------------------------------------------
22 Irvine Spect. Irvine Spectrum Hollis & Associates Michelle Sumudin
- ----------------------------------------------------------------------------------------------------------------------------------
23 Grossmont Grossmont Center Grossmont Center Thomas Magee
- ----------------------------------------------------------------------------------------------------------------------------------
24 Manhattan Beach N/A West America Nick Brown
- ----------------------------------------------------------------------------------------------------------------------------------
25 La Jolla Village La Jolla Village Donahue Schriber Pamela Hartwell X18
- ----------------------------------------------------------------------------------------------------------------------------------
26 Santa Ana South Coast Markektplace Donahue Schriber Realty Group Jackie Check
- ----------------------------------------------------------------------------------------------------------------------------------
27 Hall of Justice Food Court Samanda LLC Mark Freed
- ----------------------------------------------------------------------------------------------------------------------------------
28 Marina DelRey N/A Sachse Real Estate Co., Inc. Diane Harris
- ----------------------------------------------------------------------------------------------------------------------------------
29 Carlsbad N/A Plaza South Associates Matt Waken
- ----------------------------------------------------------------------------------------------------------------------------------
30 La Habra La Habra Marketplace M&H Property Management Debbie Thornton
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Phone/Fax Address City, State Zip
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 T (619) 756-1433 3330 Dove Hollow Road Olivehain, CA 920224
F (619) 759-0483
- -------------------------------------------------------------------------------------------------------------
2 T (619) 594-5761 5250 Campanile Dr. San Diego, CA 92182
F (619) 759-0483
- -------------------------------------------------------------------------------------------------------------
3 T (619) 459-5382 5746 Dolphin Place La Jolla, CA 92037
- -------------------------------------------------------------------------------------------------------------
4 T (619) 525-2745 610 Ash Street, Ste. #2000 San Diego, CA 92101
- -------------------------------------------------------------------------------------------------------------
5 T (818) 996-9666 18980 Ventura Boulevard, Ste. #200 Tarzana, CA 91356
F (818) 705-7914
- -------------------------------------------------------------------------------------------------------------
6 T (619) 498-4596 660 Bay Blvd., Ste. #210 Chula Vista, CA 91910
- -------------------------------------------------------------------------------------------------------------
7 T (619) 652-4728 610 Ash Street, Ste. #1600 San Diego, CA 92112-1551
F (619) 652-4711
- -------------------------------------------------------------------------------------------------------------
8 T (619) 454-0101 7835 Ivanhoe Ave. La Jolla, CA 92037
F (619) 454-7777
- -------------------------------------------------------------------------------------------------------------
9 T (619) 452-1231 10951 Sorrento Valley Rd., Ste. #2-A San Diego, CA 92121
F (619) 452-7361
- -------------------------------------------------------------------------------------------------------------
10 T (619) 457-2167 4510 Executive Drive, Ste. #125 San Deigo, CA 92121-3022
F (619) 452-2404
- -------------------------------------------------------------------------------------------------------------
11 T (714) 730-4124 2777 El Camino Real Tustin, CA 92782
F (714) 730-9690
- -------------------------------------------------------------------------------------------------------------
12 T (714) 857-2606 4672 Barranca Parkway Irvine, CA 92604
F (714) 857-2789
- -------------------------------------------------------------------------------------------------------------
13 T (619) 931-1134 703 Palomar Airport Rd. Ste. 250 Carlsbad, CA 92009
F (619) 931-7634
- -------------------------------------------------------------------------------------------------------------
14 T (619) 576-1665 3870 Murphy Canyon Rd. Ste. #300 San Diego, CA 92122
F (619) 541-0479
- -------------------------------------------------------------------------------------------------------------
15 T (619) 247-4700 34555 Chagrin Blvd. Moreland Hills, OH 44022
F (619) 247-1118
- -------------------------------------------------------------------------------------------------------------
16 T (808) 308-2700 2745 Ynez Road. Stec. 314 Temecula, CA 92591
- -------------------------------------------------------------------------------------------------------------
17 T (714) 548-0638 1835 Newport Blvd. D-252 Costa Mesa, CA 92627
F (714) 548-3102
- -------------------------------------------------------------------------------------------------------------
18 T (714) 448-0061 2715K Alicia Pkwy. Laguna Niguel, CA 92677
F (714) 448-0059
- -------------------------------------------------------------------------------------------------------------
19 T (714) 635-3431 530 N. Euclid Street Anaheim, CA 92801
F (714) 758-1374
- -------------------------------------------------------------------------------------------------------------
20 T (619) 282-6814 P.O. Box 60087 San Diego, CA 92160-0807
F (619) 282-6790
- -------------------------------------------------------------------------------------------------------------
21 T (818) 788-6100 17200 Ventura Blvd., #115 Encino, CA 91316
- -------------------------------------------------------------------------------------------------------------
22 T (714) 721-2022 550 N. Newport Center Dr., Ste. 125 Newport Beach, CA 92660
F (714) 820-3350
- -------------------------------------------------------------------------------------------------------------
23 T (619) 465-2900 5500 Grossmont Center Dr., Ste. #213 La Mesa, CA 91942
F (619) 465-9207
- -------------------------------------------------------------------------------------------------------------
24 T (310) 652-8288 8929 Wilshire Blvd. Ste. #400 Beverly Hills, 90211
- -------------------------------------------------------------------------------------------------------------
25 T (619) 458-1300 12925 El Camino Real, #122 San Diego, CA 29130
F (619) 458-4238
- -------------------------------------------------------------------------------------------------------------
26 T (714) 854-2100 3501 Jamboree Rd. Ste. 300 Newport Beach, CA 92660
F (714) 854-4251
- -------------------------------------------------------------------------------------------------------------
27 T (619) 299-2071 2850 Sixth Avenue, Stc. #602 San Diego, CA 92103
F (619) 299-2151
- -------------------------------------------------------------------------------------------------------------
28 T (310) 284-7100 315 South Beverly Drive, Suite 415 Beverly Hills, 90212
F (310) 284-7817
- -------------------------------------------------------------------------------------------------------------
29 T (818) 574-7430 150 n. Santa Anita Ave. Ste. #645 Arcadia, CA 91006
F (818) 574-5872
- -------------------------------------------------------------------------------------------------------------
30 T (310) 691-0737 1721 West Imperial Hwy., #G La Habra, CA 90631
F (310) 691-2172
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Name Center Company Contact
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
31 Hillcrest Union Bank Bldg. 5th & University Partners Ron Pearlman
- ----------------------------------------------------------------------------------------------------------------------------------
32 Cypress/Stanton N/A Y & W Enterprises Linda McDonald
- ----------------------------------------------------------------------------------------------------------------------------------
33 Belmont Shore Sunrise Plaza Henry Meyer Henry Meyer
- ----------------------------------------------------------------------------------------------------------------------------------
34 Mission Viejo MV Village Plaza Black Equities Marilyn Zanelli
- ----------------------------------------------------------------------------------------------------------------------------------
35 Ahwatukee, AZ Ahwahkee Foothills Towne Vestar Property Management Tina Gaede
Center
- ----------------------------------------------------------------------------------------------------------------------------------
36 Cerritos Cerritos Towne Center Vestar Property Management Mike Gamer
- ----------------------------------------------------------------------------------------------------------------------------------
37 Torrance Rolling Hills Plaza Rolling Hills Plaza Management Erwin Becy
Shopping Center
- ----------------------------------------------------------------------------------------------------------------------------------
38 N. Scottsdale, AZ Sonora Village Shopping Pederson Group Shari Burson
Center
- ----------------------------------------------------------------------------------------------------------------------------------
39 Vista North County Square Newport National Corporation Gary Elam/Lynn Halber
- ----------------------------------------------------------------------------------------------------------------------------------
40 Ontario Daybreak Plaza Daybreak Properties Ben Day
- ----------------------------------------------------------------------------------------------------------------------------------
41 Rancho Cucamonga Terra Vista Town Center Lewis Holmes Management Corp. Jan Jasper
- ----------------------------------------------------------------------------------------------------------------------------------
42 Mission Gorge Friars Village Triarc Steve Grady X 303
- ----------------------------------------------------------------------------------------------------------------------------------
43 Henderson, NV Pebble Marketplace American Nevada Corp. Natalie Allred
- ----------------------------------------------------------------------------------------------------------------------------------
44 San Clemente, CA Ocean View Plaza M & H Property Management Robin Carnsin
- ----------------------------------------------------------------------------------------------------------------------------------
45 Rancho Bernardo, CA N/A Boardwalk Development Phil Ladman
- ----------------------------------------------------------------------------------------------------------------------------------
46 Northridge, CA L'Plaza d'Northridge Williams Real Estate Management Inc. Audrey Williams
- ----------------------------------------------------------------------------------------------------------------------------------
47 Yorba Linda Eastlake Village Shappell Industries Linda Remley
- ----------------------------------------------------------------------------------------------------------------------------------
48 Villa Park, CA Orange Mall Michael Grant Co. Michael Grant
- ----------------------------------------------------------------------------------------------------------------------------------
49 Gilbert, AZ Bayshore Plaza Vestar Property Management Pat McGinley
- ----------------------------------------------------------------------------------------------------------------------------------
50 Chandler, AZ Harmon Ranch Plaza Harmon Ranch Plaza LLC Bob Klepinger
- ----------------------------------------------------------------------------------------------------------------------------------
51 Summerlin, NV Trails Village Center Trails Village Center Company Jim Christensen
- ----------------------------------------------------------------------------------------------------------------------------------
53 Tempe, AZ Plaza on Guadalupe McMahon & Oliphant Ron McMahon
- ----------------------------------------------------------------------------------------------------------------------------------
54 Fashion Valley, CA Fashion Valley Mall The Yarmouth Group Linda Cantrell
- ----------------------------------------------------------------------------------------------------------------------------------
55 City Mills City Mills The Mills Corporation Nancy Barnes
- ----------------------------------------------------------------------------------------------------------------------------------
56 Rancho San Diego Rancho San Diego Town Vestar Property Management Kathy Kirk X114
Center
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Phone/Fax Address City, State Zip
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
31 T (619) 454-3139 3900 Fifth Avenue, Ste. #200 San Diego, CA 92103
F (619) 454-8206
- -------------------------------------------------------------------------------------------------------------
32 T (714) 449-1000 311 S. Highland Ave. Fullerton, CA 92832
F (714) 447-2946
- -------------------------------------------------------------------------------------------------------------
33 T (562) 433-7070 256 Park Ave. Long Beach, CA 90803
F (310) 437-2199
- -------------------------------------------------------------------------------------------------------------
34 T (310) 278-5333 433 North Camden Dr., Ste. #1070 Beverly Hills, CA 90210
F (310) 274-4017
- -------------------------------------------------------------------------------------------------------------
35 T (602) 993-1626 2425 E. Camelback Rd. Ste. #750 Phoenix, AZ 84016
F (602) 955-2298
- -------------------------------------------------------------------------------------------------------------
36 T (562) 403-4624 12731 Towne Center Dr., Ste. 1 Cerritos, CA 90703
F (562) 403-4638
- -------------------------------------------------------------------------------------------------------------
37 T (310) 534-4441 2601 Airport Drive, Ste. 300 Torrance, CA 90505-7035
F (310) 534-8549
- -------------------------------------------------------------------------------------------------------------
38 T (602) 265-2888 2800 N. Central Ave. 15th floor. Phoenix, AZ 85004
F (602) 265-2889
- -------------------------------------------------------------------------------------------------------------
39 T (760) 438-4242 5050 Avenida Encinas, Ste 350 Carlsbad, CA 92008
F (760) 438-0016
- -------------------------------------------------------------------------------------------------------------
40 T (425) 861-7714 2831 134th Avenue NE Bellvue, WA 98005
F (425) 881-1662
- -------------------------------------------------------------------------------------------------------------
41 T (909) 949-6750 1156 N. Mountain Ave., P.O. Box 670 Upland, CA 91785-0670
- -------------------------------------------------------------------------------------------------------------
42 T (619) 595-1600 2445 Fifth Ave., Suite 240 San Deigo, CA 92101
F (619) 595-1723
- -------------------------------------------------------------------------------------------------------------
43 T (702) 458-8855 901 North Green Valley Parkway, Suite 200 Henderson, NV 89014
F (702) 435-6605
- -------------------------------------------------------------------------------------------------------------
44 T (619) 259-9909 12555 Highbluff Drive Suite 385 San Diego, CA 92130
F (619) 259-8886
- -------------------------------------------------------------------------------------------------------------
45 T (619) 453-4444 5405 Morehouse Drive, Suite 320 San Diego, CA 92121
F (619) 453-9442
- -------------------------------------------------------------------------------------------------------------
46 T (714) 261-2423 3636 Birch Street Suite 200 Newport Beach, CA 92660
F (714) 261-2824
- -------------------------------------------------------------------------------------------------------------
47 T (714) 448-0061 27150K Alicia Pkwy. Laguna Niguel, CA 92677
F (714) 448-0059
- -------------------------------------------------------------------------------------------------------------
48 T (619) 874-0067 PO Box 1982 La Jolla, CA 92038-1982
F (619) 874-0101
- -------------------------------------------------------------------------------------------------------------
49 T (602) 553-2619 2425 Camelback Road., Suite 750 Phoenix, AZ 85016
F (602)
- -------------------------------------------------------------------------------------------------------------
50 T (818) 409-0115 100 West Broadway, Suite 990 Glendale, CA 91210
F (619) 409-0904
- -------------------------------------------------------------------------------------------------------------
51 T (714) 979-8800 3146 Redhill Ave., Suite 200A Costa Mesa, CA 92626
F (714) 979-4318
- -------------------------------------------------------------------------------------------------------------
53 T (619) 350-0204 380 Stevens Ave., Suite 313 Solana Beach, CA 92075
F (619) 350-0220
- -------------------------------------------------------------------------------------------------------------
54 T (619) 297-3381 452 Fashion Valley San Diego, CA 92108-1282
F (619) 294-8291
- -------------------------------------------------------------------------------------------------------------
55 T (714) 704-1635 1300 Wilson Blvd., Suite 400 Arlington, VA 22209
F (714) 704-1630
- -------------------------------------------------------------------------------------------------------------
56 T (619) 583-5313 3450 College Ave, Suite 321 San Diego, CA 92115
F (619) 583-2381
- -------------------------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
EXHIBIT E
RUBIO'S RESTAURANTS, INC.
FORM OF SERIES D STOCK PURCHASE WARRANT
(See Exhibit 10.12 to Registration Statement on Form S-1)
<PAGE>
EXHIBIT F
INTELLECTUAL PROPERTY SECURITY AGREEMENT
THIS INTELLECTUAL PROPERTY SECURITY AGREEMENT (this "AGREEMENT"), is made
as of May __, 1998, by and between Rubio's Restaurants, Inc., a California
corporation having its principal place of business at 5151 Shoreham Place, Suite
260 San Diego, CA 92122 5151 Shoreham Place, Suite 260 San Diego, CA 92122
("PLEDGOR"), in favor of BANKBOSTON, N.A., having an office at 100 Federal
Street, Boston, Massachusetts 02110 (the "SECURED PARTY").
RECITALS
A. Pursuant to that certain Revolving Credit and Term Loan Agreement
dated as of the date hereof (as amended or otherwise modified from time to time
in accordance with the terms thereof and in effect, the "CREDIT AGREEMENT") by
and between Rubio's Restaurants, Inc. and Rubio's Restaurants of Nevada, Inc.
(together the "Borrower") and Lenders party thereto and the Secured Party, the
Secured Party agreed to make a Revolving Credit Loan and Term Loan to the
Borrower. Capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed to them in the Credit Agreement.
B. Pledgor is the owner of the Pledged Collateral (as defined herein).
C. It is a condition precedent to the Secured Party' obligations to make
a Revolving Credit Loan and Term Loan that Pledgor shall execute and deliver the
applicable Loan Documents, including this Agreement.
D. This Agreement is given by Pledgor in favor of the Secured Party to
secure the payment and performance of all of the Secured Obligations (as defined
in Section 2 of this Agreement).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor and the Secured Party hereby agree as follows:
Section 1. PLEDGE. Pledgor hereby pledges and grants to the Secured Party
for itself and for the benefit of the other Secured Party a continuing first
priority security interest in and conditionally assigns, but does not transfer
title to, the Secured Party all of Pledgor's right, title and interest, whether
now existing or hereafter acquired, in and to the following property
(collectively, the "PLEDGED COLLATERAL") to secure payment and performance of
all of the Secured
<PAGE>
Obligations of Pledgor (and Borrower) to the Secured Party, whether such
obligations are direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter existing.
The collateral shall consist of the following:
(a) Trademarks (including service marks), federal and state trademark
registrations and applications made by Pledgor (excluding Federal Intent To
Use Applications), common law trademarks and trade names owned by or
assigned to Pledgor, all registrations and applications for the foregoing
and all exclusive licenses from third parties of the right to use
trademarks of such third parties, including, without limitation, the
registrations, applications, unregistered trademarks, service marks and
exclusive licenses listed on SCHEDULE A hereto, as the same may be updated
hereafter from time to time along with any and all (1) renewals and
extensions thereof, (2) income, royalties, damages and payments now and
hereafter due and/or payable with respect thereto, including, without
limitation, damages, claims and payments for past or future infringements
thereof, (3) rights (without obligation) to sue or bring opposition or
cancellation proceedings for past, present and future infringements
thereof, and (4) trademarks, trademark registrations, and trade name
applications for any thereof and any other rights corresponding thereto
throughout the world (collectively, "TRADEMARKS");
(b) Copyrights, whether statutory or common law, owned by or assigned
to Pledgor, and all exclusive licenses to Pledgor from third parties to use
copyrights owned by such third parties, including, without limitation, the
registrations, applications and exclusive licenses listed on SCHEDULE A as
the same may be updated hereafter from time to time hereto, along with any
and all (1) renewals and extensions thereof, (2) income, royalties,
damages, claims and payments now and hereafter due and/or payable with
respect thereto, including, without limitation, damages and payments for
past, present or future infringements thereof, (3) rights to sue for past,
present and future infringements thereof, and (4) copyrights and any other
rights corresponding thereto throughout the world (collectively,
"COPYRIGHTS");
(c) The entire goodwill of Pledgor's business and other general
intangibles (including know-how, trade secrets, customer lists, proprietary
information, inventions, methods, procedures and formulae) connected with
the use of and symbolized by Trademarks of Pledgor; and
(d) All Proceeds (as defined under the Uniform Commercial Code as in
effect in any relevant jurisdiction (the "UCC") or other relevant law) of
any of the foregoing, (including, without limitation, any and all (1)
proceeds of any insurance, indemnity, warranty or guaranty payable to the
Secured Party or to Pledgor from time to time with respect to any of the
Pledged Collateral, (2) payments (in any form whatsoever) made or due and
payable to Pledgor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Pledged Collateral by any Governmental Authority (or any person acting on
behalf of a
2
<PAGE>
Governmental Authority), (3) instruments representing amounts
receivable in respect of any Trademarks or Copyrights, (4) products of the
Pledged Collateral and (5) other amounts from time to time paid or payable
under or in connection with any of the Pledged Collateral.
Section 2. SECURED OBLIGATIONS. The security interest hereby granted
shall secure the due and punctual payment and performance of the following
liabilities and obligations of the Debtor (herein called the "SECURED
OBLIGATIONS"):
(1) Principal of and premium, if any, and interest on the loans made
to Borrower under the Credit Agreement (the "Loans");
(2) Any and all other obligations of the Borrower owed to the Secured
Party under the Credit Agreement or under any agreement or instrument
relating thereto, all as amended from time to time; and
(3) Any and all other Indebtedness of the Pledgor or the Borrower to
the Secured Party whether direct or indirect, absolute or contingent, due
or to become due or now existing or hereafter arising, including, without
limitation, any and all other fees, premiums, or penalties.
Section 3. NO RELEASE. Nothing set forth in this Agreement shall relieve
Pledgor from the performance of any term, covenant, condition or agreement on
Pledgor's part to be performed or observed under or in respect of any of the
Pledged Collateral or from any liability to any Person under or in respect of
any of the Pledged Collateral or impose any obligation on the Secured Party to
perform or observe any such term, covenant, condition or agreement on Pledgor's
part to be so performed or observed or impose any liability on the Secured Party
for any act or omission on the part of Pledgor relating thereto or for any
breach of any representation or warranty on the part of Pledgor contained in
this Agreement or any other Loan Document or under or in respect of the Pledged
Collateral or made in connection herewith or therewith. The obligations of
Pledgor contained in this Section 3 shall survive the termination of this
Agreement and the discharge of Pledgor's other obligations hereunder and under
the other Loan Documents.
Section 4. SUPPLEMENTS; FURTHER ASSURANCES. Pledgor (1) agrees that it
will join with the Secured Party in executing and, at its own expense, will file
and refile, or permit the Secured Party to file and refile, such financing
statements, continuation statements and other documents (including, without
limitation, this Agreement and exclusive licenses to use software and other
property protected by copyright), in such offices (including, without
limitation, the United States Patent and Trademark Office, appropriate state
trademark offices and the United States Copyright Office), as the Secured Party
may reasonably deem necessary or appropriate, wherever required or permitted by
law in order to perfect and preserve the rights and interests granted to the
Secured Party hereunder, and (2) hereby authorizes the Secured Party to file
financing statements and amendments, relative to all or any part thereof,
without the signature of
3
<PAGE>
Pledgor where permitted by law and agrees to do such further acts and things,
and to execute and deliver to the Secured Party such additional assignments,
agreements, powers and instruments, as the Secured Party may reasonably
require to carry into effect the purposes of this Agreement or better to
assure and confirm unto the Secured Party its respective rights, powers and
remedies hereunder. Pledgor shall, upon the reasonable request of the
Secured Party, and hereby authorizes the Secured Party to take any and all
such actions as may be deemed advisable by the Secured Party to perfect and
preserve the rights and interests granted to the Secured Party with respect
to the Pledged Collateral wherever located. All of the foregoing shall be at
the sole cost and expense of Pledgor.
Section 5. REPRESENTATIONS AND WARRANTIES OF PLEDGOR. Pledgor hereby
represents and warrants to the Secured Party as follows:
(a) Pledgor is, and, as to Pledged Collateral acquired by it from
time to time after the date hereof, Pledgor will be, the sole and exclusive
owner or, as applicable, licensee of all Pledged Collateral (except insofar
as another pledgor of such collateral to Secured Party is an owner or
licensee of such Pledged Collateral). The pledge and security interest
created by this Agreement shall not at any time be subject to any prior
lien, pledge, security interest, encumbrance, license, assignment,
collateral assignment or charge of any kind, including, without limitation,
any filing or agreement to file a financing statement as debtor under the
UCC or any similar statute or any subordination arrangement in favor of any
party other than Pledgor (collectively, "LIENS") and except as expressly
permitted hereunder and under the Credit Agreement ("Credit Agreement
Liens"). Pledgor further represents and warrants to the Secured Party that
SCHEDULE A hereto, respectively, are true, correct and complete lists as of
the date hereof.
(b) Pledgor has full corporate power, authority and legal right to
pledge and grant a security interest in the Pledged Collateral in
accordance with the terms of this Agreement and this Agreement constitutes
the legal, valid and binding obligation of Pledgor, enforceable against
Pledgor in accordance with its terms.
(c) Except for filings with the United States Patent and Trademark
Office, the filing of financing statements with the Secretary of State
under the UCC and under applicable foreign law, no authorization, consent,
approval, license, qualification or formal exemption from, nor any filing,
declaration or registration with, any court (other than in connection with
the exercise of judicial remedies), governmental agency or regulatory
authority, or with any securities exchange or any other Person is required
in connection with (1) the pledge by Pledgor of the Pledged Collateral
pursuant to this Agreement, or the execution, delivery or performance by
Pledgor of this Agreement, (2) the grant, and of a security interest
(including the priority thereof when the appropriate filings have been made
and accepted) in, the Pledged Collateral by Pledgor in the manner and for
the purpose contemplated by this Agreement or the Credit Agreement; or (3)
the exercise of the rights and remedies of the Secured Party created
hereby.
4
<PAGE>
(d) Pledgor has made and will continue to make all necessary filings
and recordations from time to time and use appropriate statutory notice to
protect its interests in the Pledged Collateral, including, without
limitation, recordations of all its interests in the Trademarks in the
United States Patent and Trademark Office and in corresponding offices
throughout the world and its claims to Copyrights in the United States
Copyright Office, in each case including exclusive licenses and as
otherwise requested from time to time by the Secured Party and in a manner
consistent with prudent business practices.
(e) Pledgor owns or has rights to use all the Pledged Collateral and
all rights with respect to any of the foregoing used in, necessary for or
material to Pledgor's business as currently conducted and as contemplated
to be conducted pursuant to the Loan Documents. To Pledgor's best
knowledge after due inquiry, the use of such Pledged Collateral and all
rights with respect to the foregoing by Pledgor does not infringe on the
rights of any Person and no material claim has been made and remains
outstanding that Pledgor's use of the Pledged Collateral does or may
violate the rights of any third person.
(f) Upon filings and the acceptance thereof in the appropriate
offices under the UCC and in the United States Patent and Trademark Office
and the United States Copyright Office, this Agreement will create a valid
and duly perfected first priority lien and security interest in the United
States in the Pledged Collateral on such property and to the extent that a
lien can be perfected by such filings, subject to no liens other than
Credit Agreement Liens. This Agreement has been duly and validly executed
and delivered by Pledgor, constitutes the legal, valid and binding
obligation of Pledgor and is enforceable against Pledgor in accordance with
its terms.
(g) Pledgor has used and will continue to use proper statutory notice
in connection with each of the trademarks.
Section 6. COVENANTS.
(a) On a continuing basis, Pledgor will, at the expense of Pledgor,
subject to any prior licenses, Liens and restrictions make, execute, acknowledge
and deliver, and file and record in the proper filing and recording offices, all
such instruments or documents, including, without limitation, appropriate
financing and continuation statements, exclusive licenses and collateral
agreements, and take all such action (limited, as aforesaid, if applicable) as
may reasonably be deemed necessary or appropriate by the Secured Party (1) to
carry out the intent and purposes of this Agreement, (2) to assure and confirm
to the Secured Party the grant or perfection of a security interest in the
Pledged Collateral for the benefit of the Secured Party, and (3) during the
continuation of an Event of Default, to enable the Secured Party to exercise and
enforce their rights and remedies hereunder with respect to any Pledged
Collateral. Without limiting the generality of the foregoing, Pledgor:
5
<PAGE>
(A) will not enter into any agreement that would impair or conflict
with Pledgor's obligations hereunder;
(B) will, from time to time, upon the Secured Party's request, cause
its books and records to be marked with such legends or segregated in such
manner as the Secured Party may specify and take or cause to be taken such
other action and adopt such procedures as the Secured Party may specify to
give notice or to perfect the security interest in the Pledged Collateral
intended to be conveyed hereby;
(C) will, promptly following its becoming aware thereof, notify the
Secured Party of
(i) any materially adverse determination in any proceeding in
the United States Patent and Trademark Office or United States
Copyright Office with respect to any Trademark or Copyright material
to Pledgor's business; or
(ii) the institution of any proceeding or any materially adverse
determination in any federal, state, local or foreign court or
administrative bodies regarding Pledgor's claim of ownership in or
right to use any of the Pledged Collateral, its right to register the
Pledged Collateral, or its right to keep and maintain such
registration in full force and effect;
(D) will properly maintain and protect the Pledged Collateral to the
extent necessary or appropriate for the conduct of Pledgor's business (as
presently conducted and as contemplated by the Loan Documents) and
consistent with Pledgor's current practice, in accordance with applicable
statutory requirements;
(E) will not grant or permit to exist any Lien upon or with respect
to the Pledged Collateral or any portion thereof except Liens in favor of
the Secured Party for itself and the Secured Party or as permitted under
this Agreement and Liens permitted by Section 7 hereof or with the express
consent of the Secured Parties, and will not execute any security agreement
or financing statement covering any of the Pledged Collateral except in the
name of the Secured Party for itself and the Secured Party or as permitted
under this Agreement;
(F) except in accordance with prudent business practices, will not
permit to lapse or become abandoned, settle or compromise any pending or
future litigation or administrative proceeding with respect to the Pledged
Collateral without the consent of the Secured Party, or contract for sale
or otherwise dispose of the Pledged Collateral or any portion thereof
except pursuant to Section 7 hereof;
(G) upon Pledgor obtaining knowledge thereof, will promptly notify
the Secured Party in writing of any event which may reasonably be expected
to materially affect the value or utility of the Pledged Collateral or any
portion thereof, the ability of
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Pledgor or the Secured Party to dispose of the Pledged Collateral or any
portion thereof or the rights and remedies of the Secured Party in
relation thereto including, without limitation, a levy or threat of levy
or any legal process against the Pledged Collateral or any portion
thereof;
(H) until the Secured Party exercises its rights to make collection,
will diligently keep adequate records respecting the Pledged Collateral;
(I) subject to the first sentence of this Section 6(a), hereby
authorizes the Secured Party, in its sole discretion, to file one or more
financing or continuation statements and amendments thereto, relative to
all or any part of the Pledged Collateral without the signature of Pledgor
where permitted by law;
(J) will furnish to the Secured Party from time to time statements
and amended schedules further identifying and describing the Pledged
Collateral and such other materials evidencing or reports pertaining to the
Pledged Collateral as the Secured Party may from time to time request, all
in reasonable detail;
(K) will pay when due any and all taxes, levies, maintenance fees,
charges, assessments, licenses fees and similar taxes or impositions
payable in respect of the Pledged Collateral unless contesting in good
faith pursuant to Section 5.4 of the Credit Agreement; and
(L) will comply in all material respects with all laws, rules and
regulations applicable to the Pledged Collateral.
(b) If, before the Secured Obligations shall have been paid and satisfied
in full in cash or cash equivalents, Pledgor shall, (1) obtain any rights to any
additional Pledged Collateral as identified in SCHEDULE A hereto and as from
time to time amended, or (2) become entitled to the benefit of any additional
Pledged Collateral or any renewal or extension thereof, the provisions of this
Agreement shall automatically apply thereto and any item enumerated in clause
6(b)(1) or clause 6(b)(2) with respect to Pledgor shall automatically constitute
Pledged Collateral if such would have constituted Pledged Collateral at the time
of execution of this Agreement, and be subject to the assignment, Lien and
security interest created by this Agreement without further action by any party
to this agreement. Pledgor shall promptly provide to the Secured Party written
notice of any of the foregoing. Pledgor shall, at least once in each calendar
quarter, provide written notice to the Secured Party of all applications for
registration of Trademarks or Copyrights made during the preceding calendar
quarter. Pledgor agrees, promptly following the written request by the Secured
Party, to confirm the attachment of the Lien and security interest created by
this Agreement to any rights described in clause 6(b)(1) or clause 6(b)(2) above
if such would have constituted Pledged Collateral at the time of execution of
this Agreement by execution of an instrument in form acceptable to the Secured
Party.
7
<PAGE>
(c) Pledgor authorizes the Secured Party to modify this Agreement by
amending SCHEDULE A annexed hereto as appropriate to include any future Pledged
Collateral of Pledgor. The provisions of this Agreement shall automatically
apply to any future Pledged Collateral.
(d) Pledgor shall commence and prosecute diligently in its own name, as
the real party in interest, for its own benefit, all applications for Trademarks
or Copyrights now or hereafter pending that would be useful or beneficial to the
business of Pledgor to which any such applications pertain, and to do all acts
necessary to preserve and maintain all rights in the Pledged Collateral unless
such Pledged Collateral has become obsolete to Pledgor's business, as reasonably
determined by Pledgor consistent with prudent business practices. Pledger shall
bear any expenses incurred in connection with future applications for trademark
registrations. Any and all costs and expenses incurred in connection with any
such actions shall be borne by Pledgor. Except in accordance with prudent
business practices, Pledgor shall not abandon any right to file a Trademark or
Copyright application or any pending Trademark or Copyright application or any
Trademark or Copyright without the consent of the Secured Party.
Section 7. TRANSFERS AND OTHER LIENS. Pledgor will not (a) sell, convey,
assign or otherwise dispose of, or grant any option with respect to, any of the
Pledged Collateral except for licensing in the ordinary course of business and
such other transactions as may be permitted under the Credit Agreement or (b)
create or permit to exist any Lien upon or with respect to any of the Pledged
Collateral, except for Liens for taxes, assessments or government charges or
claims the payment of which is not at the time required and inchoate Liens
imposed by law (each of which shall, except to the extent otherwise required by
law, be subordinate to the lien created by this Agreement) and the lien granted
to the Secured Party under this Agreement.
Section 8. REMEDIES UPON DEFAULT.
(a) If any Event of Default shall have occurred and be continuing, the
Secured Party may to the full extent permitted by law, (1) exercise any and all
rights as beneficial and legal owner of the Pledged Collateral, including,
without limitation, perfecting assignment of any and all consensual rights and
powers with respect to the Pledged Collateral and (2) sell or assign or grant a
license to use, or cause to be sold or assigned or a license granted to use any
or all of the Pledged Collateral (in the case of Trademarks, along with the
goodwill associated therewith) or any part thereof, in each case, free of all
rights and claims of Pledgor therein and thereto. In accordance with such
rights, the Secured Party shall have the (A) right to cause any or all of the
Pledged Collateral to be transferred of record into the name of the Secured
Party or its nominee and (B) the right to impose (i) such limitations and
restrictions on the sale or assignment of the Pledged Collateral as the Secured
Party may deem to be necessary or appropriate to comply with any law, rule or
regulation (federal, state or local) having applicability to the sale or
assignment, and (ii) any necessary or appropriate requirements for any required
governmental approvals or consents.
(b) Except as provided in this Section 8 and other express notice
provisions of the Loan Documents, Pledgor hereby expressly waives, to the
fullest extent permitted by applicable
8
<PAGE>
law, any and all notices, advertisements, hearings or process of law in
connection with the exercise by the Secured Party of any of their rights and
remedies hereunder.
(c) Pledgor agrees that, to the extent notice of sale shall be required by
law, ten (10) days' written notice from the Secured Party of the time and place
of any public sale or of the time after which a private sale or other intended
disposition is to take place shall be commercially reasonable notification of
such matters. In addition to the rights and remedies provided in this Agreement
and in the other Loan Documents, the Secured Party shall have all the rights and
remedies of a secured party under the UCC.
(d) Any sale of, or the grant of options to purchase, or any other
realization upon, any Pledged Collateral shall operate to divest all right,
title, interest, claim and demand, either at law or in equity, of Pledgor
therein and thereto, and shall be a perpetual bar both at law and in equity
against Pledgor and against any and all Persons claiming or attempting to claim
the Pledged Collateral so sold, optioned or realized upon, or any part thereof,
from, through or under Pledgor.
Section 9. APPLICATION OF PROCEEDS. The proceeds of any Pledged
Collateral obtained pursuant to the exercise of any remedy set forth in Section
8 shall be applied, together with any other sums then held by the Secured Party
pursuant to this Agreement, promptly by the Secured Party:
FIRST, to the payment of all reasonable costs and expenses, fees,
commissions and taxes of such sale, collection or other realization,
including, without limitation, reasonable reimbursement to the Secured
Party, the Secured Party and its agents and counsel for all expenses, fees,
liabilities and advances made or incurred by them in connection therewith
and all expenses, liabilities and advances made or incurred by the Secured
Party in connection therewith, together with interest on each such amount
at the highest rate then in effect under the Credit Agreement;
SECOND, to the payment of all other reasonable costs and expenses of
such sale, collection or other realization, including, without limitation,
reasonable reimbursement to the Secured Party and its agents and counsel
for all expenses, fees, liabilities and advances made or incurred by them
in connection therewith and all costs, liabilities and indebtedness made or
incurred by the Secured Party in connection therewith together with
interest on each such amount at the highest rate then in effect under the
Credit Agreement;
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<PAGE>
THIRD, to the indefeasible payment in full in cash of the Secured
Obligations, ratably according to the unpaid amounts thereof, without
preference or priority of any kind among amounts so due and payable; and
FOURTH, to Pledgor, or its successors or assigns, or to whomsoever may
be lawfully entitled to receive the same or as a court of competent
jurisdiction may direct, of any surplus then remaining from such Proceeds.
Section 10. NO WAIVER; CUMULATIVE REMEDIES. (a) No failure on
the part of the Secured Party to exercise, no course of dealing with respect
to, and no delay on the part of the Secured Party in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right, power or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The remedies herein provided are cumulative and are
not exclusive of any remedies provided by law.
(b) In the event the Secured Party shall have instituted any proceeding to
enforce any right, power or remedy under this instrument by foreclosure, sale,
entry or otherwise, and such proceeding shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the Secured
Party, then and in every such case, Pledgor and the Secured Party shall, to the
extent permitted by applicable law, be restored to their respective former
positions and rights hereunder with respect to the Pledged Collateral, and all
rights, remedies and powers of the Secured Party shall continue as if no such
proceeding had been instituted.
Section 11. THE SECURED PARTY MAY PERFORM; THE SECURED PARTY APPOINTED
ATTORNEY-IN-FACT. If Pledgor shall fail to do any act or thing that it has
covenanted to do hereunder or any warranty on the part of Pledgor contained
herein shall be breached, the Secured Party may (but shall not be obligated to)
do the same or cause it to be done or remedy any such breach, and may expend
funds for such purpose. Any and all amounts so expended by the Secured Party
shall be paid by Pledgor promptly upon demand therefor, with interest at the
highest rate then in effect under the Credit Agreement during the period from
and including the date on which such funds were so expended to the date of
repayment. Pledgor's obligations under this Section 11 shall survive the
termination of this Agreement and the discharge of Pledgor's other obligations
hereunder. Pledgor hereby appoints the Secured Party, its attorney-in-fact with
an interest, with full authority in the place and stead of Pledgor and in the
name of Pledgor, or otherwise, from time to time in the Secured Party's
reasonable discretion to take any action and to execute any instruments
consistent with the terms of this Agreement and the other Loan Documents which
the Secured Party may deem necessary or advisable to accomplish the purposes of
this Agreement. The foregoing grant of authority is a power of attorney coupled
with an interest and such appointment shall be irrevocable for the term of this
Agreement. Pledgor hereby ratifies all that such attorney shall lawfully do or
cause to be done by virtue hereof.
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Section 12. INDEMNITY.
(a) INDEMNITY. Pledgor agrees to indemnify, reimburse and hold the
Secured Party and its successors, assigns, employees, agents and servants
(collectively, "Indemnities") harmless from and against any and all liabilities,
obligations, damages, injuries, penalties, claims, demands, actions, suits,
judgments and any and all reasonable costs and expenses (including, without
limitation, attorneys' fees and expenses and the allocated costs of internal
counsel) of what ever kind and nature imposed on, asserted against or incurred
by any of the Indemnities in any way relating to or arising out of this
Agreement or in any other way connected with the administration of the
transactions contemplated hereby or the enforcement of any of the terms hereof,
or the preservation of any rights hereunder, or in any way relating to or
arising out of the manufacture, processing, ownership, ordering, purchase,
delivery, control, acceptance, lease, financing, possession, operation,
condition, sale, return or other disposition, or use of the Pledged Collateral
(including, without limitation, latent or other defects, whether or not
discoverable, any claim for trademark, trade secret or copyright infringement),
the violation of the laws of any country, state or other governmental body or
unit, any tort (including, without limitation, claims arising or imposed under
the doctrine of strict liability, or for or on account of injury to or the death
of any Person (including any Indemnitee)), or property damage, or contract
claim; provided that Pledgor shall have no obligation to an Indemnitee hereunder
to the extent it is finally judicially determined that such indemnified
liabilities arise solely from the gross negligence or willful misconduct of that
Indemnitee. Upon written notice by any Indemnitee of the assertion of such a
liability, obligation, damage, injury, penalty, claim, demand, action, judgment
or suit, Pledgor shall assume full responsibility for the defense thereof. If
any action, suit or proceeding arising from any of the foregoing is bought
against any Indemnitee, Pledgor shall, if requested by such Indemnitee, resist
and defend such action, suit or proceeding or cause the same to be resisted and
defended by counsel reasonably satisfactory to such Indemnitee. Each Indemnitee
shall, unless any other Indemnitee has made the request described in the
preceding sentence and such request has been complied with, have the right to
employ its own counsel (or internal counsel) to investigate and control the
defense of any matter covered by the indemnity set forth in this Section 12 and
the reasonable fees and expenses of such counsel shall be paid by Pledgor;
provided that, only to the extent that no conflict exists between or among the
Indemnities as reasonably determined by the Indemnitee, Pledgor shall not be
obligated to pay the fees and expenses of more than one counsel for all
Indemnitees as a group with respect to any such matter, action, suit or
proceeding.
(b) MISREPRESENTATIONS. Without limiting the application of subsection
12(a), Pledgor agrees to pay, indemnify and hold each Indemnitee harmless from
and against any loss, costs, damages and expenses which such Indemnitee may
suffer, expend or incur in consequence of or growing out of any material
misrepresentation by Pledgor in this Agreement or any of the other Loan
Documents or in any statement or writing contemplated by or made or delivered
pursuant to or in connection with this Agreement or any of the other Loan
Documents.
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<PAGE>
(c) CONTRIBUTION. If and to the extent that the obligations of Pledgor
under this Section 12 are unenforceable for any reason, Pledgor hereby agrees to
make the maximum contribution to the payment and satisfaction of such
obligations that is permissible under applicable law.
(d) SURVIVAL. The obligations of Pledgor contained in this Section 12
shall survive the termination of this Agreement and the discharge of Pledgor's
other obligations hereunder and under the other Loan Documents.
(e) REIMBURSEMENT. Any amounts paid by any Indemnitee as to which such
Indemnitee has the right to reimbursement shall constitute Secured Obligations
secured by the Pledged Collateral.
Section 13. LITIGATION. (a) Pledgor shall have the right to commence and
diligently prosecute in its own name, as real party in interest, for its own
benefit and at its own expense, such applications for protection of Pledged
Collateral, suits, administrative proceedings or other actions for infringement,
counterfeiting, unfair competition, dilution or other damage as are in its
reasonable business judgment necessary to protect the Pledged Collateral.
Pledgor shall promptly notify the Secured Party in writing as to the
commencement and prosecution of any such actions, or threat thereof relating to
the Pledged Collateral and shall provide to the Secured Party such information
with respect thereto as may be reasonably requested. The Secured Party shall
provide all reasonable and necessary cooperation in connection with any such
suit, proceeding or action, including, without limitation, joining as a
necessary party.
(b) Upon the occurrence and during the continuation of an Event of
Default, the Secured Party shall have the right but shall in no way be obligated
to file applications for protection of the Pledged Collateral and/or bring suit
in the name of Pledgor, the Secured Party or the Secured Party to enforce the
Pledged Collateral and any license thereunder; in the event of such suit,
Pledgor shall, at the request of the Secured Party, do any and all lawful acts
and execute any and all documents required by the Secured Party in aid of such
enforcement and Pledgor shall promptly, upon demand, reimburse and indemnify the
Secured Party, as the case may be, for all reasonable costs and expenses
incurred by the Secured Party in the exercise of its rights under this Section
13. In the event that the Secured Party shall elect not to bring suit to
enforce the Pledged Collateral, Pledgor agrees to use all measures, whether by
action, suit, proceeding or otherwise, to prevent the infringement,
counterfeiting or other diminution in value of any of the Pledged Collateral by
others and for that purpose agrees to diligently maintain any action, suit or
proceeding against any person so infringing necessary to prevent such
infringement as is in the reasonable business judgment of Pledgor necessary to
protect the Pledged Collateral and the Secured Party shall provide, at Pledgor's
expense, all necessary and reasonable assistance to Pledgor to maintain such
action.
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Section 14. MODIFICATIONS IN WRITING. No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement, nor
consent to any departure by Pledgor therefrom, shall be effective unless the
same shall be in writing and signed by the Secured Party. Any amendment,
modification or supplement of or to any provision of this Agreement, any waiver
of any provision of this Agreement, and any consent to any departure by Pledgor
from the terms of any provision of this Agreement, shall be effective only in
the specific instance and for the specific purpose for which made or given.
Except where notice is specifically required by this Agreement or any other Loan
Document, no notice to or demand on Pledgor in any case shall entitle Pledgor to
any other or further notice or demand in similar or other circumstances.
Section 15. TERMINATION; RELEASE. When all the Secured Obligations
(other than Secured Obligations in the nature of continuing Indemnitee or
expense reimbursement obligations not yet due and payable) have been paid in
full and have been terminated and the Revolving Credit Loan Commitments of
the Secured Party to make any Loan under the Credit Agreement have expired,
this Agreement shall terminate. Upon termination of this Agreement or any
release of Pledged Collateral in accordance with the provisions of the Credit
Agreement, the Secured Party shall, upon the request and at the expense of
Pledgor, forthwith assign, transfer and deliver to Pledgor against receipt
and without recourse to or warranty by the Secured Party, such of the Pledged
Collateral to be released (in the case of a release) as may be in the
possession of the Secured Party and as shall not have been sold or otherwise
applied pursuant to the terms hereof, on the order of and at the expense of
Pledgor, and proper instruments (including UCC termination statements on Form
UCC-2 and documents suitable for recordation in the United States Patent and
Trademark Office, the United States Copyright Office or similar domestic or
foreign authority) acknowledging the termination of this Agreement or the
release of such Pledged Collateral, as the case may be.
Section 16. REINSTATEMENT. Notwithstanding the provisions of Section 15,
this Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any amount received by the Secured Party in respect of the
Secured Obligations is rescinded or must otherwise be restored or returned by
the Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of Pledgor or upon the appointment of any intervenor or
conservator of, or trustee or similar official for, Pledgor or any substantial
part of its properties, or otherwise, all as though such payments had not been
made.
Section 17. CREDIT AGREEMENT. Notwithstanding any other provision of this
Agreement, the rights of the parties hereunder are subject to the provisions of
the Credit Agreement, including the provisions thereof pertaining to the rights
and responsibilities of the Secured Party.
Section 18. NOTICES. Unless otherwise provided herein or in the Credit
Agreement (with respect to the Secured Party), any notice or other communication
herein required or permitted to be given shall be in writing and may be
personally served, telecopied, telexed or sent by United States mail, if to
Pledgor, addressed to it at the address set forth in the Credit Agreement, if to
the
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<PAGE>
Secured Party, addressed to it at the address set forth on the signature page
of this Agreement, or as to any party at such other address as shall be
designated by such party in a written notice to the other party complying as
to delivery with the terms of this Section 18. All such notices and other
communications shall be deemed to have been given when delivered in person,
or received by telecopy or telex; or four Business Days after deposit in the
United States mail, registered or certified, with postage prepaid and
properly addressed; provided that notices to the Secured Party shall not be
effective until received by the Secured Party.
Section 19. CONTINUING SECURITY INTEREST; ASSIGNMENT. This Agreement
shall create a continuing security interest in the Pledged Collateral and shall
(a) remain in full force and effect until the payment in full in cash of all
Secured Obligations, and release in accordance with section 15 of this Agreement
if in accordance with the provisions of the Credit Agreement, (b) be binding
upon Pledgor, its successors and assigns, and (c) inure, together with the
rights and remedies of the Secured Party hereunder, to the benefit of the
Secured Party and its successors, transferees and assigns; no other Persons
(including, without limitation, any other creditor of Pledgor) shall have any
interest herein or any right or benefit with respect hereto. Without limiting
the generality of the foregoing clause 19(c), any the Secured Party may assign
or otherwise transfer any indebtedness held by it secured by this Agreement to
any other Person, and such other Person shall thereupon become vested with all
the benefits in respect thereof granted to the Secured Party, herein or
otherwise, subject however, to the provisions of the Credit Agreement.
SECTION 20. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY
INTEREST HEREUNDER, OR REMEDIES HEREUNDER IN RESPECT OF ANY PARTICULAR
INTELLECTUAL PROPERTY ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
COMMONWEALTH OF MASSACHUSETTS.
SECTION 21. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST PLEDGOR WITH RESPECT TO THIS AGREEMENT MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
COMMONWEALTH OF MASSACHUSETTS AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT
PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH THIS AGREEMENT. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY,
AND PLEDGOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
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FORUM NON CONVENIENCE, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. IN THE EVENT THAT
PLEDGOR DESIGNATES AND APPOINTS ANY PERSON AS ITS AGENT AND SUCH PERSON
IRREVOCABLY AGREES IN WRITING TO SO SERVE AS PLEDGOR'S AGENT TO RECEIVE ON
PLEDGOR'S BEHALF, SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH
COURT, SUCH SERVICE IS HEREBY ACKNOWLEDGED BY PLEDGOR TO BE EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE
MAILED BY REGISTERED MAIL TO PLEDGOR AT ITS ADDRESS PROVIDED FOR IN SECTION 18
HEREOF. IF ANY AGENT APPOINTED BY PLEDGOR REFUSES TO ACCEPT SERVICE, PLEDGOR
HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE.
NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE SECURED PARTY TO BRING
PROCEEDINGS AGAINST PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION.
Section 22. SEVERABILITY OF PROVISIONS. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 23. EXECUTION IN COUNTERPARTS. This Agreement and any amendments,
waivers, consents or supplements hereto may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original, but all
such counterparts together shall constitute one and the same agreement.
Section 24. HEADINGS. The Section headings used in this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
Section 25. OBLIGATIONS ABSOLUTE. To the extent permitted by applicable
law, all obligations of Pledgor hereunder shall be absolute and unconditional
irrespective of:
(a) any bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition liquidation or the like of Pledgor or any subsidiary of Pledgor;
(b) any lack of validity or enforceability of the Credit Agreement, any
other Loan Document, or any other agreement or instrument relating thereto;
(c) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Secured Obligations, or any other amendment or waiver
of or any consent to any departure from the Credit Agreement, any other Loan
Document, or any other agreement or instrument relating thereto;
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<PAGE>
(d) any exchange, release or non-perfection of any other collateral, or
any release or amendment or waiver of or consent to any departure from any
guarantee, for all or any of the Secured Obligations; or
(e) any exercise or non-exercise, or any waiver of any right, remedy,
power or privilege under or in respect of this Agreement or any other Loan
Document except as specifically set forth in a waiver granted pursuant to the
provisions of Section 14 hereof.
Section 26. FUTURE ADVANCES. This Agreement shall secure the payment of
any amounts advanced from time to time pursuant to the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
RUBIO'S RESTAURANTS, INC.
Pledgor
By:
--------------------------------------
Name:
Title:
BANKBOSTON, N.A.
By:
--------------------------------------
Name:
Title:
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SCHEDULE A
RUBIO'S RESTAURANTS, INC.
<TABLE>
<CAPTION>
Matter # Opened Description
-------- ------ -----------
<S> <C> <C>
0337005 5/22/86 "HOME OF THE FISH TACO" (U.S. SM)
Reg. No.: 1,429,640
0337007 5/22/86 "STYLIZED REPRESENTATION OF A FISH CHARACTER"
(U.S. SM) Reg. No.: 1,427,957
0337009 1/21/88 "RUBIO'S" (CA SM)
0337011 1/21/88 "RUBIO'S" & DESIGN (U.S. SM)
Reg. No.: 1,503,438
0337014 8/5/88 "PESKY" (CARTOON CHARACTER) (CA SM)
Reg. No.: 088,641
0337015 8/5/88 "TEAM PESKY" & DESIGN (CA SM)
Reg. No.: 089,467
0337016 2/10/92 "RUBIO'S" & DESIGN (U.S TM)
Reg. No.: 1,843,810
0337017 4/7/92 "PESKY" & DESIGN (U.S TM)
Reg. No.: 1,753,012
0337019 2/2/93 "HEALTH MEX" (U.S. SM)
Reg. No.: 1,842,535
0337021 11/1/94 "BEST OF BAJA" (U.S. SM)
Reg. No.: 1,974,667
0337022 4/20/95 "RUBIO'S" & DESIGN (U.S. TM)
Reg. No.: 1,973,747
0337023 4/20/95 "HEALTH MEX" (U.S. ITU TM)
SN: 74/670,967 - FILED: 5/8/95
0337024 4/20/95 "HEALTH MEX" (U.S. TM)
Reg. No.: 1,988,288
0337025 6/26/95 "CABO COMBO" (U.S. TM)
SN: 74/723,213 - FILED: 8/13/95
0337026 8/9/95 "RUBIO'S" AND DESIGN (MEXICO SM)
SN: 240,200 - FILED: 8/16/95
0337027 10/1/96 "BAJA GRILL" (U.S. TM) (ASSIGNED FROM VON'S)
Reg. No.: 1,850,443
(Original - 12/4/92)
</TABLE>
<PAGE>
EXHIBIT G
LANDLORD WAIVER
The undersigned, ____________, under ____________, dated ____________,,
recorded in ____________, Registry of Deeds in Book ____________, Page
____________, ("the Landlord"), with a principal office ____________, is the
Landlord under the certain lease, dated ____________, as amended ____________,
which, expires ____________,(the "Lease") with ____________,(the "Borrower")
covering certain property (the "Leased Premises") located at ____________, and
more fully described in the Lease. The Landlord represents that the Lease in
the form attached hereto as EXHIBIT A, is in full force and effect and has not
been assigned, modified, supplemented or amended in any way, [except], that no
lien exists on the property, and that it is unaware of any current condition
constituting a default under the Lease or which would permit Landlord to
terminate the Lease.
It is understood and acknowledged that BANKBOSTON, N.A. (the "Bank") has
entered into an Revolving Credit and Term Loan Agreement (the ____________
"Credit Agreement") and related documents and instruments (collectively, the
"Loan Documents") with the Borrower, secured, INTER ALIA, by all of the
Borrower's tangible and intangible personal property, now owned or hereafter
acquired, as set forth on Schedule A hereto (collectively, the "Collateral").
For valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Landlord does hereby waive any and all rights in the
Collateral which the Landlord may have under statute, case law or by contract
and hereby agrees that the Collateral shall remain personal property of the
Borrower at all times, notwithstanding that the Collateral, or any part thereof,
may now be or hereafter become in any manner affixed or attached to, or embedded
in, or permanently resting on, real property or any building thereon, or
attached in any manner to that which is permanent by any means.
The Landlord at all times during the term of the Lease shall permit the
Bank and its agents and representatives to come on to the Leased Premises to
dispose of, remove or conduct the sale of the Collateral, and further agrees
that if the Landlord shall commence any action to gain possession of the Leased
Premises or to terminate the Lease, that it shall notify the Bank of such action
and shall permit the Bank and its agents and representatives to come on the
Leased Premises after the Landlord has regained possession of the Leased
Premises to dispose of, remove or conduct the sale of the Collateral for up to
sixty (60) days upon payment of the basic rent due under the Lease (as in effect
immediately prior to such repossession by the Landlord) on a per diem basis for
the number of days the Bank is in possession, unless the Borrower has already
paid for such period. The Bank shall use due care during any such period in
which it is on the Leased Premises and shall, in a workman like manner, repair
any damage caused to the Leased Premises by the Bank's removal of the Collateral
from the Leased Premises.
The Landlord further agrees that it will notify the Bank if the Borrower
defaults on its obligations under the Lease and allow the Bank ten (10) days
from the Bank's receipt of such
<PAGE>
notice to cure or cause the Borrower to cure any payment default and thirty
(30) days from its receipt of notice to cure or cause the Borrower to cure
any other such defaults.
Without limiting the foregoing, nothing contained herein shall limit or
modify the current or future obligations of any nature due from the Borrower to
the Lender.
IN WITNESS WHEREOF, the Landlord has executed these presents this __ day of
_____________, 1998.
By:
Title:
Accepted and Agreed to:
BANKBOSTON, N.A.
By: Debra Zurka
Its: Director
<PAGE>
EXHIBIT H
MONTHLY RESTAURANT REPORTS
TO COME FROM BANKBOSTON
<PAGE>
EXHIBIT I
COMPLIANCE CERTIFICATE
OF
RUBIO'S RESTAURANTS, INC.
RUBIO'S RESTAURANTS OF NEVADA, INC.
BankBoston, N.A.,
100 Federal Street
Boston, MA 02110
Attention: Debra Zurka
Ladies and Gentlemen:
As required by Section 5.1(d) of the Revolving Credit and Term Loan
Agreement dated as of May , 1998 (the "Credit Agreement") among Rubio's
Restaurants, Inc and Rubio's Restaurants of Nevada, Inc. and BankBoston, N.A., a
review of the activities of the Borrower for the fiscal year and/or fiscal
quarter and/or calendar month ending ___________, _____ (the "FISCAL PERIOD")
has been made under my supervision to determine whether the Borrower has
performed and/or maintained all of its obligations under the Credit Agreement.
Based upon such review, I hereby certify to you, as a Senior Officer, that the
Borrower has performed and maintained all such Obligations under the Credit
Agreement for the Fiscal Period and, to the best of my knowledge, no event has
occurred that constitutes a Default or an Event of Default as defined in the
Credit Agreement.
As required by Section [5.1(a)][5.1(b)][5.1 (c)] of the Credit Agreement,
financial statements of the Company (the "FINANCIAL STATEMENTS") for the Fiscal
Period and other information required by such sections accompany this
certificate. The Financial Statements present fairly the financial position of
the Credit Parties as of the date thereof and the statements of operation of the
Credit Parties for the Fiscal Period covered thereby. No change in GAAP or in
the application thereof has occurred since the date of the financial statements
delivered pursuant to Section 3.4 (a)(ii) of the Credit Agreement.
I further certify to you, as a Senior Officer, that the figures set forth
below accurately represent the amounts required to be calculated under the
various provisions or covenants of the Credit Agreement, each as of the last day
of the Fiscal Period unless otherwise indicated.
<PAGE>
<TABLE>
<C> <S> <S> <S>
A. USE OF PROCEEDS (Section 5.10)
1. Revolving Loan for Working Capital Purposes $ (4)
---------------
2. Total Restaurants
---------------
3. Number open more than nine months
---------------
4. Number with Positive Store Cash Flow (5)
---------------
5. Percentage of A4 divided by A3
---------------
6. Total Outstanding Revolving Loans during
period $
---------------
7. Highest total outstanding Revolving Loans
during the period $
---------------
B. FIXED CHARGED COVERAGE RATIO (Section 6.9(a)) REQUIRED ___:1.00
1. CONSOLIDATED CASH FLOW (for Four Fiscal Quarter Ending on __/__/__):
Consolidated Net Income $
---------------
PLUS deductions for cash income taxes
and tax payments during period $
---------------
PLUS Interest Expense $
---------------
PLUS depreciation and amortization $
---------------
PLUS non-cash income or charges $
---------------
PLUS Consolidated Rental Expenses $
---------------
EBITDAR $
---------------
EBITDAR
LESS cash payments of taxes $
---------------
PLUS net proceeds of Dispositions $
---------------
LESS aggregate amount of Maintenance
</TABLE>
- ------------------
(4) Not to exceed $1,000,000 at any time
(5) As shown on Exhibit H appended hereto for the month ending at the current
fiscal period.
<PAGE>
<TABLE>
<C> <S> <S> <S>
Capital Expenditures $
---------------
Operating Cash Flow $
---------------
2. Consolidated Financial Obligations (for the four quarters ending as of __/__/__):
a. Regular Schedule Principal Payments $
---------------
b. Payments on Capital Leases $
---------------
c. Consolidated Rental Expense $
---------------
d. Interest Expense $
---------------
CONSOLIDATED FINANCIAL OBLIGATIONS (a+b+c+d) $
---------------
FIXED CHARGE COVERAGE RATIO
(Ratio of Consolidated Cash Flow to Consolidated Financial Obligations)
---------------
C. MINIMUM INTEREST COVERAGE RATIO (Section 6.9(b)) REQUIRED: 5.00:1.00
1. EDITDA
(for four fiscal quarters Ending on __/__/__):
FOUR QUARTER EBITDA (EBITDAR less
Consolidated Rental Expense) $
---------------
2. INTEREST EXPENSE
(for Four Fiscal Quarters Ending on __/__/__):
Interest Expense $
---------------
MINIMUM INTEREST COVERAGE RATIO _______________
(Ratio of EBITDA to Interest Expense)
---------------
D. MAXIMUM TOTAL LEVERAGE RATIO (Section 6.9(c)) REQUIRED: ______:1.00
1. Consolidated Funded Debt (as of __/__/__):
a. Obligations for borrowed money $
---------------
</TABLE>
<PAGE>
<TABLE>
<C> <S> <S> <S>
b. Obligations for differed purchase $
---------------
c. Capital Lease Obligations $
---------------
d. Letters of Credit $
---------------
e. Secured by Liens $
---------------
f. Guaranties $
---------------
Consolidated Funded Debt (a+b+c+d+e+f) $
---------------
2. CONSOLIDATED EDITDA
(as of __/__/__)
Consolidated EBITDA $
---------------
MAXIMUM TOTAL LEVERAGE RATIO
(Ratio of Consolidated Funded Debt to Consolidated EBITDA)
---------------
Maximum Leverage Ratio required
---------------
E. CAPITAL EXPENDITURES (Section 6.9 (d)) PERMITTED:$______________ Number of
New Restaurants Permitted ________
(for Period Ending on __/__/__):
Total Capital Expenditures to Date for fiscal year $
---------------
Total Number of Restaurant opened fiscal year to date
---------------
</TABLE>
Terms used herein shall have the meanings ascribed to them in the Credit
Agreement dated as of May , 1998 among Rubio's Restuarants, Inc. and Rubio's
Restaurants of Nevada, Inc. and BankBoston, N.A.
RUBIO'S RESTAURANTS. INC
__, ______ By:____________________________
Name:
Title:
d<PAGE>
EXHIBIT 10.15
LEASE AGREEMENT
- -----------------------------------------------------------------------------
LANDLORD
MARCO PLAZA ENTERPRISES,
a California general partnership
TENANT
RUBIO'S RESTAURANTS, INC.
a Delaware corporation
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY OF BASIC LEASE INFORMATION . . . . . . . . . . . . . . . . . 1
ARTICLE 1 -- DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Additional Rent. . . . . . . . . . . . . . . . . . . . . . 1
1.2 Base Annual Rent . . . . . . . . . . . . . . . . . . . . . 1
1.3 Base Monthly Rent. . . . . . . . . . . . . . . . . . . . . 1
1.4 Basic Terms. . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Business Days. . . . . . . . . . . . . . . . . . . . . . . 1
1.6 Commencement of Construction . . . . . . . . . . . . . . . 1
1.7 Common Area. . . . . . . . . . . . . . . . . . . . . . . . 1
1.8 Common Area Maintenance Charges. . . . . . . . . . . . . . 1
1.9 CPI. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.10 Declarations . . . . . . . . . . . . . . . . . . . . . . . 1
111 Excess Operating Costs Rent. . . . . . . . . . . . . . . . 2
1.12 Hazardous Materials. . . . . . . . . . . . . . . . . . . . 2
1.13 Hazardous Materials Laws . . . . . . . . . . . . . . . . . 2
1.14 Insurance Charges. . . . . . . . . . . . . . . . . . . . . 2
1.15 Landlord's Indemnitees . . . . . . . . . . . . . . . . . . 2
1.16 Lease Term . . . . . . . . . . . . . . . . . . . . . . . . 2
1.17 Lease Year . . . . . . . . . . . . . . . . . . . . . . . . 2
1.18 Operating Costs. . . . . . . . . . . . . . . . . . . . . . 2
1.19 Premises . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.20 Profit . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.21 Project. . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.22 Property Taxes . . . . . . . . . . . . . . . . . . . . . . 2
1.23 Rentable . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.24 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.25 Rules and Regulations. . . . . . . . . . . . . . . . . . . 3
1.26 Site Amenities . . . . . . . . . . . . . . . . . . . . . . 3
1.27 Site Plan. . . . . . . . . . . . . . . . . . . . . . . . . 3
1.28 Target Commencement Date . . . . . . . . . . . . . . . . . 3
1.29 Tenant Improvements. . . . . . . . . . . . . . . . . . . . 3
1.30 Tenant's Indemnitees . . . . . . . . . . . . . . . . . . . 3
1.31 Tenant's Proportional Share. . . . . . . . . . . . . . . . 3
1.32 Usable . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.33 Work Letter. . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2 -- PREMISES. . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1.1 Premises . . . . . . . . . . . . . . . . . . . . . . 3
2.1.2 Site Plan. . . . . . . . . . . . . . . . . . . . . . 4
2.2 Lease of the Premises. . . . . . . . . . . . . . . . . . . 4
2.3 Suitability of Premises. . . . . . . . . . . . . . . . . . 4
2.4 Landlord's Work in the Premises and Project. . . . . . . . 4
2.5 Expansion Right. . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 3 -- LEASE TERM. . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Lease Term . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Commencement Date. . . . . . . . . . . . . . . . . . . . . 5
3.3 Delay in Commencement; Acceptance Letter . . . . . . . . . 5
3.3.1 Acceptance Letter. . . . . . . . . . . . . . . . . . 5
3.3.2 LIQUIDATED DAMAGES . . . . . . . . . . . . . . . . . 5
</TABLE>
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(CONTINUED)
<TABLE>
<CAPTION>
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----
<S> <C>
3.4 Early Occupancy. . . . . . . . . . . . . . . . . . . . . . 6
3.3 Option(s) to Extend Term . . . . . . . . . . . . . . . . . 6
3.5.1 Extension Notice. . . . . . . . . . . . . . . . . . 6
3.5.2 Base Monthly Rent During Extension. . . . . . . . . 6
ARTICLE 4 -- RENTAL AND OTHER PAYMENTS . . . . . . . . . . . . . . . 7
4.1 Base Monthly Rent. . . . . . . . . . . . . . . . . . . . . 7
4.2 Interest on Past Due Obligations . . . . . . . . . . . . . 8
4.3 Late Charges . . . . . . . . . . . . . . . . . . . . . . . 8
4.4 Security Deposit . . . . . . . . . . . . . . . . . . . . . 8
4.4.1 Deposit of Funds. . . . . . . . . . . . . . . . . . 8
4.4.2 Transfer of Security Deposit. . . . . . . . . . . . 8
4.4.3 Return of Security Deposit. . . . . . . . . . . . . 8
ARTICLE 5 -- OTHER CHARGES PAYABLE BY TENANT . . . . . . . . . . . . 8
5.1 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.2 Common Area Maintenance Charges. . . . . . . . . . . . . . 8
5.2.1 Tenant to Bear Proportional Share of Common
Area Maintenance Charges. . . . . . . . . . . . . . 9
5.2.2 Landlord's Common Area Maintenance Charges. . . . . 9
5.2.3 Exclusions from Common Area Maintenance
Charges . . . . . . . . . . . . . . . . . . . . . . 9
5.2.4 Repairs Due to Misuse . . . . . . . . . . . . . . . 9
5.3 Payment of Excess Operating Costs Rent. . . . . . . . . . 9
5.3.1 Previous Charges. . . . . . . . . . . . . . . . . . 10
5.3.2 Year-End Adjustments. . . . . . . . . . . . . . . . 10
5.3.3 Audit . . . . . . . . . . . . . . . . . . . . . . . 10
5.4 Personal Property Taxes. . . . . . . . . . . . . . . . . . 10
ARTICLE 6 -- USE OF PREMISES . . . . . . . . . . . . . . . . . . . . 11
6.1 Permitted Uses . . . . . . . . . . . . . . . . . . . . . . 11
6.2 Manner of Use. . . . . . . . . . . . . . . . . . . . . . . 11
6.2.1 Interference with Use/Nuisance. . . . . . . . . . . 11
6.2.2 Violation of Law/Insurance Provisions . . . . . . . 11
6.2.3 Permits . . . . . . . . . . . . . . . . . . . . . . 11
6.3 Rules and Regulations. . . . . . . . . . . . . . . . . . . 11
6.4 Landlord's Access. . . . . . . . . . . . . . . . . . . . . 12
6.5 Quiet Possession . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 7 -- HAZARDOUS MATERIALS . . . . . . . . . . . . . . . . . . 12
7.1 Prohibition. . . . . . . . . . . . . . . . . . . . . . . . 13
7.1.1 Use . . . . . . . . . . . . . . . . . . . . . . . . 13
7.1.2 Normal Usage. . . . . . . . . . . . . . . . . . . . 13
7.1.2.1 Tenant's Normal Usage. . . . . . . . . . . 13
7.1.2.2 Landlord's Normal Usage. . . . . . . . . . 13
7.1.3 Existing Conditions . . . . . . . . . . . . . . . . 13
7.2 Disclosure and Warning Obligations . . . . . . . . . . . . 13
7.3 Notice of Actions. . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
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(CONTINUED)
<TABLE>
<CAPTION>
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----
<S> <C>
7.4 Hazardous Materials Indemnity. . . . . . . . . . . . . . . 14
7.4.1 Tenant. . . . . . . . . . . . . . . . . . . . . . . 14
7.4.2 Landlord. . . . . . . . . . . . . . . . . . . . . . 14
7.5 Assignment and Subletting. . . . . . . . . . . . . . . . . 14
7.6 Environmental Tests and Audits . . . . . . . . . . . . . . 15
7.7 Lease "As Is". . . . . . . . . . . . . . . . . . . . . . . 15
7.8 Survival . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 8 -- UTILITIES . . . . . . . . . . . . . . . . . . . . . . . 15
8.1 Payment and Arrangement. . . . . . . . . . . . . . . . . . 15
8.2 Interruption of Services and Utilities . . . . . . . . . . 15
8.3 Operating Hours. . . . . . . . . . . . . . . . . . . . . . 15
8.4 Security System. . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 9 -- PARKING AND CONTROL OF COMMON AREAS . . . . . . . . . . 16
9.1 Control of Common Areas by Landlord. . . . . . . . . . . . 16
9.2 License. . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 10 -- ALTERATIONS, IMPROVEMENTS AND SIGNAGE. . . . . . . . . 16
10.1 Changes/Alterations. . . . . . . . . . . . . . . . . . . . 16
10.2 Manner of Construction . . . . . . . . . . . . . . . . . . 16
10.2.1 Conditions to Consent . . . . . . . . . . . . . . . 16
10.2.2 Cost. . . . . . . . . . . . . . . . . . . . . . . . 16
10.2.3 Good and Workmanlike Manner . . . . . . . . . . . . 17
10.3 Construction Insurance . . . . . . . . . . . . . . . . . . 17
10.4 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.5 Signage. . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 11 -- INSURANCE AND INDEMNITY. . . . . . . . . . . . . . . . 17
11.1 Insurance to be Obtained by Landlord . . . . . . . . . . . 17
11.1.1 Fire and Casualty Insurance . . . . . . . . . . . 18
11.1.2 Liability Insurance. . . . . . . . . . . . . . . . 18
11.2 Insurance to be Obtained by Tenant . . . . . . . . . . . . 18
11.2.1 Liability Insurance. . . . . . . . . . . . . . . . 18
11.2.2 Insurance of Personal Property . . . . . . . . . . 18
11.2.3 Additional Insurance Obligations . . . . . . . . . 18
11.3 Waiver of Subrogation. . . . . . . . . . . . . . . . . . . 18
11.4 Form of Policies . . . . . . . . . . . . . . . . . . . . . 18
11.5 Indemnification. . . . . . . . . . . . . . . . . . . . . . 19
11.5.1 Indemnification of Landlord. . . . . . . . . . . . 19
11.5.2 Landlord's Nonliability. . . . . . . . . . . . . . 19
11.5.3 Indemnification of Tenant. . . . . . . . . . . . . 20
ARTICLE 12 -- ASSIGNMENT AND SUBLETTING. . . . . . . . . . . . . . . 20
12.1 Landlord's Consent Required. . . . . . . . . . . . . . . . 20
12.1.1 Transfer . . . . . . . . . . . . . . . . . . . . . 20
12.1.2 Procedure . . . . . . . . . . . . . . . . . . . . 20
12.1.3 Permitted Transfers. . . . . . . . . . . . . . . . 20
12.1.4 Public Offerings . . . . . . . . . . . . . . . . . 20
12.2 Recapture Right. . . . . . . . . . . . . . . . . . . . . . 20
12.3 Transfer Without Consent . . . . . . . . . . . . . . . . . 21
12.4 No Release of Tenant . . . . . . . . . . . . . . . . . . . 21
</TABLE>
I-(iii)
<PAGE>
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(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
12.5 Effect of a Transfer . . . . . . . . . . . . . . . . . . . 21
12.6 Event of Bankruptcy. . . . . . . . . . . . . . . . . . . . 21
12.7 No Merger. . . . . . . . . . . . . . . . . . . . . . . . . 21
12.8 Assignment Fees and Procedures . . . . . . . . . . . . . . 21
ARTICLE 13 -- DAMAGE OR DESTRUCTION. . . . . . . . . . . . . . . . . 22
13.1 Repair of Damage by Landlord . . . . . . . . . . . . . . . 22
13.2 Rent Abatement Due to Casualty . . . . . . . . . . . . . . 22
13.3 Landlord's Option to Repair. . . . . . . . . . . . . . . . 22
13.4 Damage Near End of Term. . . . . . . . . . . . . . . . . . 23
13.5 Waiver of Statutory Provisions . . . . . . . . . . . . . . 23
ARTICLE 14 -- CONDEMNATION . . . . . . . . . . . . . . . . . . . . . 23
14.1 Total Condemnation . . . . . . . . . . . . . . . . . . . . 23
14.2 Partial Condemnation . . . . . . . . . . . . . . . . . . . 23
14.3 Condemnation of Parking Area . . . . . . . . . . . . . . . 23
14.4 Distribution of Condemnation Award . . . . . . . . . . . . 23
14.5 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 15 -- DEFAULTS; REMEDIES . . . . . . . . . . . . . . . . . . 24
15.1 Covenants and Conditions . . . . . . . . . . . . . . . . . 24
15.2 Defaults by Tenant . . . . . . . . . . . . . . . . . . . . 24
15.3 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 25
15.4 The Right to Relet the Premises. . . . . . . . . . . . . . 25
15.5 Waiver of Rights of Redemption . . . . . . . . . . . . . . 26
15.6 Cumulative Remedies. . . . . . . . . . . . . . . . . . . . 26
15.7 Additional Remedies Upon Default . . . . . . . . . . . . . 26
15.7.1 Assumption of Rejection of Lease . . . . . . . . . 26
15.7.2 Assignment . . . . . . . . . . . . . . . . . . . . 26
15.7.3 Other Matters. . . . . . . . . . . . . . . . . . . 26
15.8 Default by Landlord . . . . . . . . . . . . . . . . . . . 26
15.9 Landlord's Cure. . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 16 -- PROTECTION OF CREDITORS. . . . . . . . . . . . . . . . 27
16.1 Subordination. . . . . . . . . . . . . . . . . . . . . . . 27
16.2 Attornment . . . . . . . . . . . . . . . . . . . . . . . . 27
16.3 Signing of Documents . . . . . . . . . . . . . . . . . . . 27
16.4 Estoppel Certificates. . . . . . . . . . . . . . . . . . . 28
16.4.1 Request. . . . . . . . . . . . . . . . . . . . . . 28
16.4.2 Failure to Respond . . . . . . . . . . . . . . . . 28
16.5 Tenant's Financial Condition . . . . . . . . . . . . . . . 28
16.6 Mortgagee Protection Clause. . . . . . . . . . . . . . . . 28
ARTICLE 17 -- TERMINATION OF LEASE . . . . . . . . . . . . . . . . . 28
17.1 Condition Upon Termination . . . . . . . . . . . . . . . . 28
17.2 Non-Removal by Tenant. . . . . . . . . . . . . . . . . . . 29
17.3 Abandoned Property . . . . . . . . . . . . . . . . . . . . 29
17.4 Landlord's Actions on Premises . . . . . . . . . . . . . . 29
17.5 Holding Over . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 18 MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . 29
18.1 Successors; No Third Party Beneficiaries . . . . . . . . . 29
18.2 Severability . . . . . . . . . . . . . . . . . . . . . . . 29
18.3 Interpretation . . . . . . . . . . . . . . . . . . . . . . 30
18.4 Other Tenancies. . . . . . . . . . . . . . . . . . . . . . 30
18.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . 30
18.6 Landlord's Liability . . . . . . . . . . . . . . . . . . . 30
18.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 31
18.8 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . 31
18.9 No Recordation . . . . . . . . . . . . . . . . . . . . . . 31
18.10 Choice of Law. . . . . . . . . . . . . . . . . . . . . . . 31
18.11 Corporate Authority; Partnership Authority . . . . . . . . 31
18.12 No Partnership . . . . . . . . . . . . . . . . . . . . . . 31
18.13 Joint and Several Liability. . . . . . . . . . . . . . . . 31
18.14 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . 31
18.15 Lender Modification. . . . . . . . . . . . . . . . . . . . 32
18.16 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . 32
18.17 Force Majeure. . . . . . . . . . . . . . . . . . . . . . . 32
18.18 Tenant Obligations Survive Termination . . . . . . . . . . 32
18.19 Grant of Security Interest . . . . . . . . . . . . . . . . 32
18.20 Tenant's Waiver. . . . . . . . . . . . . . . . . . . . . . 33
18.21 Submission of Lease. . . . . . . . . . . . . . . . . . . . 33
EXHIBITS
Exhibit "A". . . . . . . . . . . . . . . . . . . . . . . . . . . . .Site Plan
Exhibit "B". . . . . . . . . . . . . . . . . . . . . . .Rules and Regulations
Exhibit "C". . . . . . . . . . . . . . . . . . . . . . .Work Letter Agreement
Exhibit "D". . . . . . . . . . . . . . . . . . . . . . . . . . . .Definitions
Exhibit "E". . . . . . . . . . . . . . . . . . . . . Tenant Acceptance Letter
</TABLE>
I-(5)
<PAGE>
LEASE AGREEMENT
SUMMARY OF BASIC LEASE INFORMATION
<TABLE>
<S> <C> <C>
1. Lease Date: October 27, 1997
2. Landlord: Marco Plaza Enterprises, a California
general partnership.
3. Address of Landlord: c/o Newport National Corporation
5050 Avenida Encinas, Suite 350
Carlsbad, California 92008
Attn: Mr. Jeffry Bruseau
4. Tenant: Rubio's Restaurants, Inc., a Delaware
corporation
5. Address of Tenant: 5151 Shoreham Place, Suite 260
San Diego, CA 92122
Attn: Mr. Ted Frumken
6. Premises (Section 2.1 of Lease): Improved office space on the third floor.
Project Rentable Area: Approximately
102,000 square feet
Building Rentable Area: Approximately
51,000 square feet.
Premises Rentable Area: Approximately
16,425 square feet.
Premises: Usable Area: Approximately
14,408 square feet.
7. Project: Cornerstone Corporate Centre.
Building: Building "C."
8. Lease Term (Article 3 of Lease): Lease Term: Seven (7) years.
Estimated Commencement Date:
September 1, 1998
Estimated Expiration Date:
August 31, 2005
Options to Extend: One (1) for three (3)
years and two (2) for five (5) years
each.
9. Rent (Article 4 of Lease): Base Monthly Rent: $1.74 per Rentable
square foot of the Premises per month,
which shall be discounted for the first
one and one half months or the First
Lease Year and which shall increase each
Lease Year, as follows:
</TABLE>
<TABLE>
Base Monthly Rent
(Per Rentable Sq. Ft.)
Lease Year of Premises)
---------- ---------------------
<S> <C>
1 (months one and one
half of month two) $0
1 (second half of month
two and months three
through 12) $1.74
2 $1.79
3 $1.84
</TABLE>
II-(i)
<PAGE>
<TABLE>
Base Monthly Rent
(Per Rentable Sq. Ft.)
Lease Year of Premises)
---------- ---------------------
<S> <C>
4 $1.89
5 $1.94
6 $1.99
7 $2.04
</TABLE>
<TABLE>
<S> <C> <C>
Initial Base Monthly Rent: $28,580
(assumes Premises = 16,425 square feet).
Initial Base Annual Rent: $342,954
(assumes Premises = 16,425 square feet).
Base Monthly Rent During Extensions: At
the commencement of the first Extension
Term, Base Monthly Rent shall be
increased to equal the sum of Base
Monthly Rent in effect immediately
preceding the first Extension Term plus
$0.06 per Rentable square foot of the
Premises. At the commencement of each
Lease Year following the first Lease
Year of the first Extension Term, Base
Monthly Rent During Extension shall be
increased to equal the sum of the Base
Monthly Rent During Extension for the
immediately preceding Lease Year plus
$0.06 per Rentable square foot of the
Premises. At the commencement of each
of the second and third Extension Term,
Base Monthly Rent shall be increased to
equal the sum of Base Monthly Rent in
effect immediately preceding the
applicable Extension Term plus $0.08 per
Rentable square foot of the Premises.
At the commencement of each Lease Year
following the first Lease Year of each
such Extension Term, Base Monthly Rent
During Extension shall be increased to
equal the sum of the Base Monthly Rent
During Extension for the immediately
preceding Lease Year plus $0.08 per
Rentable square foot of the Premises.
First month's Base Monthly Rent due upon
commencement of construction of the
Premises: $28,580.
Late Charge: Seven percent (7%) of the
overdue amount.
Lease Interest Rate: Twelve percent
(12%).
10. Operating Costs Allowance Operating Costs during 1998 operating
expense base year calculated
(Article 5 of Lease): based on a deemed ninety-five Percent
(95%) occupancy and full assessment of
real estate taxes.
11. (Article 5 of Lease): General office in conformance with the
Declarations, and all laws, ordinances
and regulations. Tenant agrees to
operate in accordance with similar
operations in similar Class "A"
buildings in Southern California.
12. Security Deposit
(Article 4 of Lease): $28,580.
</TABLE>
II-(ii)
<PAGE>
<TABLE>
<S> <C> <C>
13. Brokers (Section 18.16 of
Lease): Landlord's Broker: Business Real Estate
Brokerage Company. Tenant's Broker: CB
Commercial Real Estate Group, Inc.
Lease Guarantors: None.
14. Tenant Improvements: Up to $28.60 per Usuable square foot of
the Premises (but in no event less than
$412,000).
16. Tenant Contingency Allowance: Up to $2.00 per Usable square foot of
the Premises.
17. The following exhibits are attached hereto and incorporated into this
Lease:
Exhibit "A" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Site Plan
Exhibit "B" . . . . . . . . . . . . . . . . . . . . . . .Rules and Regulations
Exhibit "C" . . . . . . . . . . . . . . . . . . . . . . . . . . . .Work Letter
Exhibit "D" . . . . . . . . . . . . . . . . . . . . . . . . . . . .Definitions
Exhibit "E" . . . . . . . . . . . . . . . . . . . . . . . . .Acceptance Letter
</TABLE>
The foregoing Summary of Basic Lease Information is hereby incorporated
into and made a part of this Lease. Each reference in this Lease to the Summary
of Basic Lease Information shall mean the information set forth above and shall
be construed to incorporate all of the terms provided under the particular lease
paragraph pertaining to such information. In the event of a conflict between
the Summary of Basic Lease Information and the Lease, the terms of the Lease
shall prevail.
LANDLORD:
MARCO PLAZA ENTERPRISES, a California general partnership
By: /s/ illegible 10-27-97
---------------------------------------------------
Name:
-------------------------------------------------
Title: Partner
-------------------------------------------------
TENANT:
RUBIO'S RESTAURANTS, INC., a Delaware corporation
By: /s/ Rafael R. Rubio 10-24-97
---------------------------------------------------
Name: Rafael R. Rubio
-------------------------------------------------
Title: Chairman
-------------------------------------------------
II-(iii)
<PAGE>
LEASE AGREEMENT
This Lease Agreement, which includes the Basic Terms (as hereinafter
defined) ("Lease"), is made as of the date shown in the Basic Terms, by and
between the Landlord shown in the Basic Terms and the Tenant shown in the Basic
Terms.
ARTICLE 1 -- DEFINITIONS
In addition to the defined terms set forth in the Basic Terms or elsewhere
in this Lease, unless the context otherwise requires, the following terms shall
have the meanings set forth below.
1.1 ADDITIONAL RENT. "Additional Rent" refers collectively to Excess
Operating Costs Rent and any other charges due and payable by Tenant under this
Lease other than Base Monthly Rent.
1.2 BASE ANNUAL RENT. "Base Annual Rent" shall mean the sum of the twelve
(12) Base Monthly Rent amounts due in any Lease Year.
1.3 BASE MONTHLY RENT. "Base Monthly Rent" means the rental specified in
Article 4 of this Lease.
1.4 BASIC TERMS. "Basic Terms" means the Summary of Basic Lease
Information set forth at the beginning hereof.
1.5 BUSINESS DAYS. "Business Days" means any day on which business is
conducted by federal savings bank in San Diego County, California.
1.6 COMMENCEMENT OF CONSTRUCTION. "Commencement of Construction" means
the date on which Landlord's Contractor (as defined in the Work Letter)
commences the foundation for the Building.
1.7 COMMON AREA. "Common Area" means all areas, space, equipment and
special services in the Building and in the Project which are from time-to-time
provided by Landlord for the common or joint use and benefit of the occupants of
the Project and Building, their employees, agents, servants, customers and other
invitees, including without limitation, parking areas, access roads, driveways,
retaining walls, landscaped areas, truck service-ways, stairs, ramps, sidewalks,
pools, patios, hardscapes, electrical rooms, mailrooms, common area restrooms
and locker rooms and hallways.
1.8 COMMON AREA MAINTENANCE CHARGES. "Common Area Maintenance Charges"
means the costs and expenses described in Section 5.2.2 of this Lease.
1.9 CPI. "CPI" shall mean the Consumer Price Index published by the
United States Bureau of Labor Statistics, Los Angeles-Anaheim-Riverside, All
Urban Consumers (1982 - 84 = 100), or a successor or similar statistic selected
by Landlord in the event the present index is no longer published.
1.10 DECLARATION. "Declarations" means any Declaration or Declarations of
Covenants, Conditions and Restrictions which have been or may be recorded
against the Building or all or a portion of the Project, including, but not
limited to, (i) that certain Declaration of Covenants, Conditions, and
Restrictions, Carlsbad Airport Centre, dated September 4, 1986, recorded
September 12, 1986, in the San Diego County Recorder's Office, Document No.
86-401456, as amended by a First Amendment dated January 15, 1987, recorded
January 28, 1987, as Document No. 87-048040, and (ii) that certain Mutual
Easement Agreement between Carlsbad Airport Centre and Opus Southwest
Corporation dated January 27, 1987, recorded in the San Diego County Recorder's
Office on January 28, 1987, as Document No. 87-048043.
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1.11 EXCESS OPERATING COSTS RENT. "Excess Operating Costs Rent" means
Tenant's Proportional Share of the amount by which the Operating Costs for each
calendar year exceeds the Operating Costs Allowance (as set forth in the Basic
Terms).
1.12 HAZARDOUS MATERIALS. The term "Hazardous Material(s)" shall mean any
toxic or hazardous substance, material or waste or any pollutant or containment
or infectious or radioactive material which are, or in the future become,
regulated under applicable local, state or federal law for the protection of
health or the environment, or which are classified as hazardous or toxic
substances, materials or wastes, pollutants or contaminants, as defined, listed
or regulated by any federal, state or local law, regulation or order or by
common law decision, including, without limitation, (i) trichloroethylene,
tetrachloroethylene, perchloroethylene and other chlorinated solvents, (ii) any
petroleum products or fractions thereof, (iii) asbestos, (iv) polychlorinated
biphenyls, (v) flammable explosives, (vi) urea formaldehyde and
(vii) radioactive materials and waste.
1.13 HAZARDOUS MATERIALS LAWS. The term "Hazardous Materials Law(s)" shall
mean any federal, state or local laws, ordinances, codes, statutes, regulations,
administrative rules, policies and orders, and other authority, existing now or
in the future, which classify, regulate, list or define hazardous substances,
materials, wastes contaminants, pollutants and/or the Hazardous Materials.
1.14 INSURANCE CHARGES. "Insurance Charges" shall mean any and all
premiums and other costs for insurance policies insuring the Premises,
Building, Project and Common Area, required by this Lease and paid by Landlord.
1.15 LANDLORD'S INDEMNITEES. "Landlord's Indemnitees" shall refer
collectively to Landlord's agents, partners, members, managers, shareholders,
officers, directors, employees, successors and/or assigns.
1.16 LEASE TERM. "Lease Term" means the entire period commencing with the
Commencement Date and continuing for the period specified in Item 8 of the Basic
Terms, plus any extensions, renewals or holding over periods.
1.17 LEASE YEAR. "Lease Year" or "lease year" shall mean a consecutive
twelve (12) month period during the Lease Term commencing on the Commencement
Date; provided that the Lease Year may be adjusted by Landlord to commence on
the first day of a calendar month after the Commencement Date.
1.18 OPERATING COSTS. "Operating Costs" means all of the Common Area
Maintenance Charges, Property Taxes, and Insurance Charges.
1.19 PREMISES. "Premises" means the space described in Section 2.1 and
delineated on the Site Plan.
1.20 PROFIT. "Profit" shall mean rent and all other amounts paid or
payable by a transferee to Tenant pursuant to a Transfer (as defined in Article
12 herein) which is in excess of the scheduled Base Monthly Rent and all other
Rent due hereunder.
1.21 PROJECT. "Project" means the project at the address set forth in the
Basic Terms, and more particularly described in the Site Plan, together with all
fixtures, equipment and personal property owned by Landlord, now or hereafter
situated or located therein or thereupon and used in connection with the
operation and maintenance thereof.
1.22 PROPERTY TAXES. "Property Taxes" means: (i) general real property and
improvements taxes, any form of assessment, special assessment or reassessment,
any fee, licensee fee, license tax, business license fee, commercial rental tax,
levy, charge, assessment, penalty or other tax imposed by any authority having
the direct or indirect power to tax, including any city, county, state or
federal government, or any school, agriculture, lighting, drainage or other
improvement district thereof, as against any legal or equitable interest of
Landlord in the Project; (ii) any tax on the Landlord's right to receive, or the
receipt of, rent or income from the Project or against Landlord's business of
leasing the Project; (iii) any tax or charge for fire protection, streets,
sidewalks, road maintenance, refuse or other services provided to the Project by
any governmental agency; (iv) any tax imposed upon this transaction or
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<PAGE>
based upon a reassessment of the Project due to a change in ownership, new
conservation or transfer of all or part of Landlord's interest in the Project
(except that (a) no such increase during the first two (2) years of the Lease
Term shall be includable, (b) increases for two (2) such reassessments during
the next eight (8) years of the Lease Term, and (c) one time each five (5)
year option term may be includable); and (v) any charge or fee replacing any
tax previously included within the definition of Property Taxes. "Property
Taxes" does not, however, include Landlord's Federal or State income,
franchise, inheritance or estate taxes.
1.23 RENTABLE. "Rentable" area or "Rentable" square feet shall mean the
square footage determined according to the definitions set forth on Exhibit "D"
attached hereto.
1.24 RENT. "Rent" and/or "rent" shall mean the Base Monthly Rent,
Additional Rent and any other amounts Tenant is required to pay under this
Lease.
1.25 RULES AND REGULATIONS. "Rules and Regulations" mean the rules and
regulations set forth in Exhibit "B" attached to this Lease.
1.26 SITE AMENITIES. "Site Amenities" shall mean the sand volleyball
court, barbeque area, lap pool, spa/jacuzzi, lunch patio, jogging trail, and
one-half court for basketball (over portions of the Project parking lot) to be
constructed by Landlord at its sole cost in a location selected by Landlord in
the Common Area, for the non-exclusive use of Tenant and other occupants of the
Project, in accordance with this Lease.
1.27 SITE PLAN. "Site Plan" refers to the Site Plan attached as Exhibit
"A."
1.28 TARGET COMMENCEMENT DATE. "Estimated Commencement Date" means October
1, 1998.
1.29 TENANT IMPROVEMENTS. "Tenant Improvements" shall refer to the Tenant
Improvements as defined in the Work Letter attached hereto as Exhibit "C."
1.30 TENANT'S INDEMNITEES. "Tenant's Indemnitees" shall refer collectively
to Tenant's agent, partners, members, managers, shareholders, officers,
directors, employees, successors and/or assigns.
1.31 TENANT'S PROPORTIONAL SHARE. "Tenant's Proportional Share" shall mean
all of Tenant's Building Proportional Share and Tenant's Project Proportional
Share. Tenant's Building Proportional Share shall be calculated from time to
time as determined by Landlord and shall be the percentage obtained by dividing
the Rentable square footage of the Premises by the total Rentable square footage
of the Building. Tenant's Project Proportional Share shall be calculated from
time to time as determined by Landlord and shall be the percentage obtained by
dividing the Rentable square footage of the Premises by the total Rentable
square footage of the Project as then constructed. Tenant's Building
Proportional Share and Tenant's Project Proportional Share shall initially be
calculated using the numbers set forth in Item 6 of the Basic Terms.
1.32 USABLE. "Usable" square feet shall mean the square footage determined
according to the definitions set forth on Exhibit "D."
1.33 WORK LETTER. "Work Letter" means the Work Letter which is attached to
this Lease as Exhibit "C."
ARTICLE 2 -- PREMISES
2.1 LEASE. Upon and subject to the terms, covenants and conditions
hereinafter set forth, Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord the Premises.
2.1.1 PREMISES. The Premises will be approximately 16,425
Rentable square feet on the third floor of the Building. The Building will be,
in turn, located in and constitute a portion of the Project. Landlord reserves
the right to reasonably change the shape, size, location, number and extent of
the improvements shown on
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<PAGE>
the Site Plan and reasonably eliminate or add any improvements to any portion
of the Project, provided there is no material adverse impact on access to the
Premises and such change is in a manner consistent with Class A office
buildings in Carlsbad, California. Upon Substantial Completion (as defined
in the Work Letter), the Rentable Area of the Premises shall be determined in
accordance with the Work Letter and Exhibit "D." In the event that Landlord
determines that the Rentable Area of any of the Premises, Building or the
Project differ from the amount set forth in the Basic Terms, all amounts,
percentages and figures appearing or referred to in this Lease, including,
without limitation, Tenant's Proportional Share, based upon such amount shall
be revised accordingly and such revised figures shall be deemed to be the
Rentable Area of the Premises, Building or Project, respectively. In such
case, the Base Monthly Rent and any other payments due hereunder which are
based on a Rentable square footage basis shall be increased or decreased
accordingly.
2.1.2 SITE PLAN. The purpose of the Site Plan is to show the
approximate location of the Premises. Notwithstanding any other provision
contained in this Lease, Landlord reserves the right at any time to vary and
adjust the size of the various buildings (other than the Building), the location
of any other tenant automobile parking areas, the Site Amenities (except in
accordance with this Lease), and other common areas as shown on said Site Plan,
provided, however, that (i) said parking area (including landscaped common
areas) shall at all times provide for not less than the minimum parking required
by the local jurisdiction in which the Project is located; and (ii) such change
is in a manner consistent with Class A office buildings in Carlsbad, California.
2.2 LEASE OF THE PREMISES. Tenant acknowledges that this Lease is
subordinate and subject to the Declarations, all liens, encumbrances, deeds of
trust, reservations, restrictions and other matters affecting the Project or the
Premises and any law, regulation, rule, order or ordinance of any governmental
entity applicable to the Project or the Premises or the use or occupancy
thereof, in effect on the execution of this Lease or thereafter promulgated.
Landlord grants Tenant during the Lease Term the concurrent right to use the
Common Area and the Site Amenities on a nonexclusive basis and subject to the
provisions of this Lease. Easements for light and air are not included in the
leasing of these Premises to Tenant. Landlord further reserves the exclusive
right of access to the roof, except for any rights of access specifically
granted to Tenant under the terms of this Lease or any rights of access approved
by Landlord, in its sole discretion, in writing.
2.3 SUITABILITY OF PREMISES. Tenant acknowledges that, except as
expressly set forth herein, Landlord has made no representation or warranty
regarding the condition of the Premises or the Project or the suitability of
such Premises or the Project for the operation or conduct of Tenant's business
thereon or for any other purpose. The taking of possession of the Premises by
Tenant shall conclusively establish that the Premises and the Project were
acceptable to Tenant and in satisfactory condition to conduct business at such
time.
2.4 LANDLORD'S WORK IN THE PREMISES AND PROJECT. The Premises shall be
completed as set forth in the Work Letter. Except as specifically set forth in
this Lease and the Work Letter, Landlord shall not provide or pay for any
interior improvement work or services related to the improvement of the Premises
or the construction of the Project. Tenant specifically acknowledges that
Landlord is under no obligation to construct all or any portion of the Project
except as set forth in this Lease, and Tenant will have no claim against
Landlord should Landlord decide for any reason or no reason to not build any
improvements or the Project except as set forth herein.
2.5 EXPANSION RIGHT. Commencing with the Lease Date and continuing until
the Lease Term expires or is earlier terminated, Tenant, shall have the right to
lease all or any portion of the available space on the first and second floors
of the Building on the same terms and conditions that Landlord has received in a
bona fide offer for such a lease ("Subordinate Right of Refusal"); provided,
however, that such right to lease is subordinate and secondary to all rights of
expansion, rights of first refusal, rights of first offer and other similar
rights which Landlord has granted to Triteal Corporation, a Delaware corporation
("Superior Leaseholder") in connection with its lease of a portion of the
Project. The rights granted to the Superior Leaseholder in this regard are
personal and, upon expiration or termination of such rights, the Subordinate
Right of Refusal shall no longer be subordinate to any other such rights to
lease space in the Building. Promptly after Landlord's receipt of a written
offer to lease all or any portion of the first or second floors of the Building
and rejection of such offer by the Superior Leaseholder, Landlord shall deliver
to Tenant a copy of such offer. If Tenant elects to exercise its Subordinate
Right of Refusal, Tenant must deliver written notice to Landlord within five (5)
business days after receipt of a copy of such offer to Landlord. In order to
elect to exercise Tenant's Subordinate Right of Refusal, Tenant must deliver
written notice of
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Tenant's election to Landlord within five (5) business days after receipt of
a copy of the offer from Landlord and stating in such notice that Tenant is
unconditionally committed to enter into a lease on the same terms and
conditions as contained in the offer. If Tenant fails to timely exercise its
Subordinate Right of Refusal or fails to timely notify Landlord within such
five (5) business day period, then Tenant shall be deemed to have declined to
exercise its right and Landlord shall be free to enter into a lease of the
portion of the Building specified in the offer. Notwithstanding any other
provision of this Lease, Tenant's Subordinate Right of Refusal is personal to
Rubio's Restaurants, Inc., a California corporation, and may not be assigned
or otherwise transferred to any other person or entity whether by assignment
of this Lease or otherwise except in conjunction with a Transfer to an
Affiliate. If a Transfer to an Affiliate is made, any and all such Affiliates
(or other Affiliates pursuant to future Transfers) shall also be prohibited
from assigning the Subordinate Right of Refusal to any other person or entity
except in conjunction with a Transfer to another Affiliate.
ARTICLE 3 -- LEASE TERM
3.1 LEASE TERM. Subject to the parties' respective rights of earlier
termination as provided in this Lease, the term of this Lease ("Lease Term")
shall be for the period of time specified in the Basic Terms, but shall be
extended to include any fraction of a calendar month between the commencement of
the Lease Term and the first day of the first full calendar month thereafter.
Notwithstanding the Lease Term, this Lease is a binding contract between
Landlord and Tenant from and after the date of full execution and delivery
hereof by both parties, enforceable in accordance with its terms.
3.2 COMMENCEMENT DATE. The commencement date of the Lease Term
("Commencement Date") shall be the earlier of the date of the Substantial
Completion of the Premises or the date Tenant occupies the Premises in
accordance with the Work Letter.
3.3 DELAY IN COMMENCEMENT; ACCEPTANCE LETTER. Landlord will use its
diligent, good faith efforts to Substantial Completion of the Premises by the
Estimated Commencement Date (as such date may be extended due to a Tenant Delay
[as defined in the Work Letter]) or as set forth anywhere in this Lease or the
Work Letter. If Landlord cannot Substantially Complete the Premises by the
Estimated Commencement Date, this Lease shall not be void or voidable, nor shall
Landlord be liable to Tenant for any loss or damage resulting therefrom except
as specifically set forth in Section 3.3.2 below.
3.3.1 ACCEPTANCE LETTER. Upon Substantial Completion of the
Premises, Tenant shall, within five (5) days of request therefor by Landlord,
execute an acceptance letter ("Acceptance Letter") in substantially the form of
the Acceptance Letter attached hereto as Exhibit "E"; provided, however, that
the failure of Tenant to execute such Acceptance Letter shall not affect any
obligation of Tenant hereunder or Landlord's determination of the Commencement
Date. If the Tenant fails to execute and deliver such Acceptance Letter in the
form proposed by Landlord, then Landlord and any prospective purchaser or
encumbrancer may conclusively presume and rely upon the following facts: (i)
that the Premises were in an acceptable condition and were delivered in
compliance with all requirements of the Work Letter and (ii) the Commencement
Date is the date specified in the Acceptance Letter proposed by Landlord.
3.3.2 LIQUIDATED DAMAGES. IF LANDLORD DOES NOT SUBSTANTIALLY
COMPLETE THE PREMISES BY THE ESTIMATED COMMENCEMENT DATE, THEN TENANT, AS ITS
SOLE AND EXCLUSIVE REMEDY, WILL BE ENTITLED TO RECEIVE LIQUIDATED DAMAGES IN AN
AMOUNT EQUAL TO TENANT'S PROXIMATE DAMAGES CAUSED BY SUCH FAILURE BUT NOT TO
EXCEED ONE THOUSAND FIVE HUNDRED DOLLARS ($1,500.00) FOR EACH DAY OF DELAY
BETWEEN THE ESTIMATED COMMENCEMENT DATE AND THE DATE LANDLORD SUBSTANTIALLY
COMPLETES THE PREMISES. IN THE EVENT OF SUCH A DELAY, TENANT WILL BE DAMAGED
AND WILL BE ENTITLED TO COMPENSATION FOR THOSE DAMAGES. SUCH DAMAGES WILL,
HOWEVER, BE EXTREMELY DIFFICULT AND IMPRACTICAL TO ASCERTAIN BECAUSE THE PROOF
OF THE AMOUNT OF SUCH DAMAGES WILL BE BASED ON OPINIONS OF SUCH DAMAGES, WHICH
CAN VARY IN SIGNIFICANT AMOUNTS, AND IT IS IMPOSSIBLE TO PREDICT AS OF THE DATE
ON WHICH THIS LEASE IS MADE THE AMOUNT OF SUCH DAMAGES. LANDLORD DESIRES TO
LIMIT THE
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AMOUNT OF DAMAGES FOR WHICH LANDLORD MIGHT BE LIABLE SHOULD LANDLORD FAIL TO
SUBSTANTIALLY COMPLETE THE PREMISES AS AFORESAID. LANDLORD AND TENANT WISH
TO AVOID THE COST AND LENGTHY DELAYS WHICH WOULD RESULT IF TENANT FILED A
LAWSUIT TO COLLECT ITS DAMAGES FOR SUCH FAILURE TO TIMELY DELIVER.
THEREFORE, IF LANDLORD FAILS TO TIMELY SUBSTANTIALLY COMPLETE THE PREMISES AS
DESCRIBED ABOVE. THE FOREGOING AMOUNT OF LIQUIDATED DAMAGES SHALL BE DEEMED
TO CONSTITUTE A REASONABLE ESTIMATE OF TENANT'S DAMAGES UNDER THE PROVISIONS
OF SECTION 1671 OF THE CALIFORNIA CIVIL CODE, AND TENANT'S SOLE AND EXCLUSIVE
REMEDY 1N THE EVENT OF A DELAY IN THE SUBSTANTIAL COMPLETION OF THE PREMISES.
IN CONSIDERATION OF THE PAYMENT OF SUCH LIQUIDATED DAMAGES, TENANT WILL BE
DEEMED TO HAVE WAIVED ALL OTHER CLAIMS FOR DAMAGES OR RELIEF AT LAW OR IN
EQUITY INCLUDING ANY RIGHTS TENANT MAY HAVE PURSUANT TO SECTION 1680 OR
SECTION 3389 OF THE CALIFORNIA CIVIL CODE. LANDLORD SHALL PAY SUCH
LIQUIDATED DAMAGES TO TENANT WITHIN TEN (10) DAYS AFTER LANDLORD
SUBSTANTIALLY COMPLETES THE PREMISES IN ACCORDANCE WITH THE WORK LETTER.
3.4 EARLY OCCUPANCY. Tenant shall be permitted to enter the Premises
thirty (30) days prior to the anticipated Commencement Date solely for the
purpose of preparing the Premises for the conduct of business thereon and not
for the purposes of conducting business thereon, Tenant's entry and/or occupancy
of the Premises shall be subject to all of the provisions of this Lease and the
Work Letter with the exception of the payment of Base Monthly Rent and
Additional Rent, which obligations shall commence as of the Commencement Date.
If requested by Landlord, Tenant shall execute a hold harmless agreement in a
form prepared by Landlord. Early occupancy of the Premises shall not advance
the expiration date of this Lease. Landlord shall not charge Tenant for the use
of elevators for move-in or electrical consumption during such early occupancy
period.
3.5 OPTION(S) TO EXTEND TERM. Tenant shall have the option(s) to extend
("Extension Option") the Term as set forth in the Basic Terms (as exercised, in
an "Extension Term"), on the following terms and conditions:
3.5.1 EXTENSION NOTICE. Tenant's option to extend the Term shall
be subject to satisfaction of each of the following conditions precedent, which
are solely for the benefit of Landlord:
3.5.1.1 Each Extension Option shall be exercised by written
notice ("Extension Notice") delivered by Tenant to Landlord not sooner than two
hundred seventy (270) days and not later than two hundred ten (210) days prior
to the then scheduled end of the Term ("Extension Deadline"); and
3.5.1.2 This Lease shall be in effect and Tenant shall not be
in default hereunder both on the day of the Extension Notice and on the last day
of the Term.
3.5.2 BASE MONTHLY RENT DURING EXTENSION. In the event the
Term is extended following exercise by Tenant of an Extension Option, then
all of the terms, covenants and conditions of the Lease shall remain in full
force and effect, except that Base Monthly Rent to be applicable during the
Extension Term shall be adjusted to the Base Monthly Rent During Extension as
described in Item 9 of the Basic Terms.
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ARTICLE 4 -- RENTAL AND OTHER PAYMENTS
4.1 BASE MONTHLY RENT. From and after the Commencement Date, Tenant shall
pay to Landlord, in advance, on the first day of each and every calendar month
during the Lease Term, The Base Monthly Rent; provided, however, that the Base
Monthly Rent for thc first month of the Lease Term shall be paid upon
commencement of the construction of the Premises. The Base Monthly Rent for any
fraction of a month at the beginning of the Lease Term will be prorated.
Payment of the Base Monthly Rent, Additional Rent and all other charges deemed
to be Rent under this Lease shall be without prior notice, deduction, offset or
demand, shall be in lawful money of the United States of America and shall be
made at the address set forth for Landlord in the Basic Terms or at such other
place as Landlord may direct. Base Monthly Rent payable for any period of less
than one (1) month shall be prorated based upon a thirty (30) day month. Tenant
shall pay to Landlord as prepaid Base Monthly Rent, immediately upon execution
of this Lease (in addition to the security deposit required), the amount
specified in the Basic Terms, which sum shall be applied to the first calendar
month of the Lease Term for which payment of Base Monthly Rent is due; provided,
however, that the Option Consideration shall be credited against Tenant's
obligation to deliver such prepaid Base Monthly Rent.
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4.2 INTEREST ON PAST DUE OBLIGATIONS. Any amount owed by Tenant to
Landlord which is not paid when due shall bear interest from the date which is
five (5) days after the due date at the Lease Interest Rate but if such Lease
Interest Rate exceeds the maximum interest rate permitted by law, such Lease
Interest Rate shall be reduced to the highest rate allowed by law under the
circumstances. Interest shall not be payable on late charges to be paid by
Tenant under this Lease. The payment of interest on such amounts shall not
excuse or cure any default by Tenant under this Lease and the parties agree that
such amounts are a reasonable estimate of the costs Landlord will incur as a
result of its loss of the use of its money due to such late payment by Tenant.
4.3 LATE CHARGES. Tenant's failure to pay any Rent promptly may cause
Landlord to incur unanticipated costs. The exact amount of such costs are
impractical or extremely difficult to ascertain. Such costs may include, but
are not limited to, processing and accounting charges and late charges which may
be imposed on Landlord under any mortgage or trust deed encumbering the
Premises. Therefore, if Landlord does not receive any Rent payment within five
(5) days after it becomes due, Tenant shall pay Landlord a late charge in the
amount specified in the Basic Terms. The parties agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by
reason of such late payment. Acceptance of such late charge by Landlord shall,
in no event, constitute a waiver of Tenant's default with respect to such
overdue amount. The late charge shall be deemed Rent and the rights to require
it shall be in addition to all of Landlord's rights and remedies hereunder or at
law and shall not be construed as liquidated damages or as limiting Landlord's
remedies in any manner.
4.4 SECURITY DEPOSIT.
4.4.1 DEPOSIT OF FUNDS. Concurrently with the execution of this
Lease, Tenant shall deposit with Landlord a cash security deposit ("Security
Deposit") in the amount set forth in the Basic Terms. Landlord may, but
shall not be obligated to, apply all or part of the Security Deposit to any
unpaid Rent or other charges due from Tenant or to cure any other defaults of
Tenant. If Landlord uses any part of the Security Deposit, Tenant shall
restore the Security Deposit to its full amount within ten (10) days after
Landlord's written request. Tenant's failure to do so shall be a default
under this Lease. Interest shall accrue on the Security Deposit in Tenant's
favor at a rate equal to the then average rate given by San Diego, California
banks for three-month certificates of deposit, and shall become part of the
Security Deposit. Landlord shall not be required to keep the Security Deposit
separate from its other accounts and no trust relationship is created with
respect to the Security Deposit.
4.4.2 TRANSFER OF SECURITY DEPOSIT. Landlord may deliver the funds
deposited hereunder by Tenant to a purchaser of Landlord's interest in the
Premises, in the event that such interest be sold; and thereupon Landlord shall
be discharged from any further liability with respect to such Security Deposit
and Additional Security.
4.4.3 RETURN OF SECURITY DEPOSIT. Notwithstanding the foregoing
provisions of this Section 4.4, Landlord shall return the Security Deposit to
Tenant within ten (10) business days following the twenty-four (24) month of the
Lease Term, subject to the following conditions precedent: (i) Tenant shall not
have been late more than two (2) times in making Rent payment during such
twenty-fourth (24) month; and (ii) Tenant shall not have been in default under
this Lease at any time during such thirty (30) month period. Unless such
conditions precedent are satisfied (or waived by Landlord, in Landlord's sole
and absolute discretion), then Landlord shall retain the Security Deposit, and
Tenant shall continue to be bound by its Security Deposit restoration
obligations set forth in Section 4.4.1 above.
ARTICLE 5 -- OTHER CHARGES PAYABLE BY TENANT
5.1 RENT. All Rent under this Lease shall, unless this Lease expressly
provides otherwise, be paid with the next installment of Base Monthly Rent
falling due.
5.2 COMMON AREA MAINTENANCE CHARGES. Landlord shall operate, maintain,
manage and repair the Budding, Project and Common Area in a neat, orderly
condition, in a manner consistent with Class A projects in Carlsbad, California.
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5.2.1 TENANT TO BEAR PROPORTIONAL SHARE OF COMMON AREA MAINTENANCE
CHARGES. Tenant agrees to pay to Landlord, as part of Excess Operating Costs
Rent, Tenant's Proportional Share of the Common Area Maintenance Charges and
certain charges for the Site Amenities as set forth below which are allocable to
the Lease Term.
5.2.2 LANDLORD COMMON AREA MAINTENANCE CHARGES. For the purpose
of this Lease, the term "Common Area Maintenance Charges" means the total cost
and expense incurred by Landlord in operating, maintaining, managing and
repairing the Building, Project, the Common Area, and the Site Amenities,
including, without limitation, all costs and expenses for the following:
servicing, maintenance, replacement and repair of heating/ventilation and
air-conditioning systems (amortized over an appropriate industry standard useful
life); gardening and landscaping; maintenance and repair of roof; pest
extermination services; janitorial services for the Premises; utilities, water
and sewer charges (other than with respect to utilities separately metered and
paid directly by Tenant); maintenance of parking areas; fees, charges and other
costs (including, without limitation, consulting, accounting and legal fees, but
excluding legal and accounting fees directly attributable to other terms)
reasonably necessary to manage the Building and the Project, including, but not
limited to, a fee to Landlord for management of the Project; costs of compliance
with any and all governmental laws, ordinances, and regulations applicable to
the Building or Project which were not imposed as of the Commencement Date;
installation, maintenance and replacement of signs identifying the Building and
Project (other than Tenant's signs whose maintenance is paid for by Tenant);
charges under any Declarations; Property Taxes for the Building and Project;
Insurance Charges for the Building and Project; all personal property taxes
levied on or attributable to personal property used in connection with the
Common Area; rental or lease payments paid by Landlord for rented or leased
personal property used in the operation or maintenance of the Building Common
Area; fees for required licenses and permits (except as set forth in Work
Letter); repairing, resurfacing, repaving, maintaining, painting, lighting,
cleaning, refuse removal, security (if any), and similar items; reasonable and
customary operating reserves; and the amortized costs (as reasonably determined
by Landlord over an appropriate industry standard useful life) to repair,
maintain or install capital improvements. Project Operating Expenses would
include the operating expenses for the Site Amenities. Landlord may cause any
or all of such services to be provided by an independent contractor.
5.2.3 EXCLUSIONS FROM COMMON AREA MAINTENANCE CHARGES.
Notwithstanding anything in this Lease to the contrary, the term "Common Area
Maintenance Charges" (and hence Operating Costs) shall in no event include any
of the following: (i) any ground lease rental; (ii) costs incurred by Landlord
for the repair of damage to the Building or the Common Area, to the extent that
Landlord is reimbursed by insurance proceeds; (iii) advertising and promotional
expenditures for the Building or the Common Area, and marketing costs,
including, without limitation, leasing commissions, attorneys' fees in
connection with the negotiation and preparation of letters of intent, leases,
subleases and/or assignments with present or prospective tenants or other
occupants in the Building; (iv) electric power costs for which any tenant
directly contracts at the local public service company or for which any tenant
is separately metered or submetered and pays Landlord directly; or (v) the cost
of any utility services obtained and paid for by Tenant; (vi) Landlord's income
tax on general corporate overhead, or costs associated with the operation of the
business of the ownership or entity which constitutes Landlord as distinguished
from the costs of maintaining, repairing or replacing the Common Areas; (vii)
costs for items and services for which Tenant reimburses Landlord, or third
parties reimburse Landlord; (viii) costs incurred due to violation by Landlord
or its representatives of the terms and conditions of the Lease, (ix) any costs,
fees, dues, contributions or similar expenses for political or charitable
organizations; or (x) any bad debt loss, rent loss or reserves for bad debt or
rent loss.
5.2.4 REPAIRS DUE TO MISUSE. Notwithstanding any provision of this
Lease to the contrary, Tenant shall be responsible for all of Landlord's
reasonable costs and expenses due to repairs to the Premises, Site Amenities or
Project which are made necessary by any misuse or neglect by (a) Tenant or any
of its agents, employees, contractors, or subtenants or (b) any visitors,
patrons, guests or invitees of Tenant while in or upon the Premises. If
Landlord holds a warranty from a manufacturer or a contractor relating to any
such damages, Landlord will use commercially reasonable efforts to enforce such
warranty and, to the extent Landlord is successful in recovering on such
warranty, Tenant will not be charged.
5.3 PAYMENT OF EXCESS OPERATING COSTS RENT. The parties acknowledge that
Tenant is leasing the Premises on a modified gross (net of utilities) basis.
Tenant shall pay Excess Operating Costs Rent, in advance, in
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monthly installments on the first day of each month during the Lease Term
(prorated for any fractional month). Landlord shall provide to Tenant a
written notice of Landlord's budget showing a reasonable estimate of the
Excess Operating Costs Rent, approximately thirty (30) days prior to the
commencement of each calendar year or portion thereof after the expiration of
the first Lease Year (which amount may be re-estimated by Landlord during the
calendar year not more than two (2) times, unless an extraordinary event
occurs) and an estimate of Tenant's share thereof for the ensuing year or
portion thereof. Tenant shall pay to Landlord, monthly in advance,
one-twelfth (1/12th) of the estimate of Excess Operating Costs Rent (or, if
less than a full calendar year has been estimated, then the monthly pro rata
share).
5.3.1 PREVIOUS CHARGES. If, for any reason, Landlord is unable to
provide to Tenant the estimate of the Excess Operating Costs Rent at least
thirty (30) days prior to the commencement of any calendar year during the Lease
Term, then Tenant shall continue to pay monthly the same amount of Excess
Operating Costs Rent as was applicable for the most recent previous month
("Previous Charges") until thirty (30) days after receipt of such estimate at
which time Tenant shall commence paying as of the first day of the first
calendar month after delivery of such new estimate, the new estimated Excess
Operating Costs Rent. Subject to the foregoing, Tenant shall also pay, together
with its next installment, the difference between the Previous Charges and the
amount of the new estimated Excess Operating Costs Rent for such preceding
months. Any delay by Landlord in delivering the new estimated Excess Operating
Costs Rent shall not be deemed a waiver of any such Excess Operating Costs Rent.
5.3.2 YEAR-END ADJUSTMENTS. Within one hundred twenty (120) days
after the end of each calendar year during the Lease Term, Landlord shall
provide Tenant with a written statement showing in reasonable detail the actual
Excess Operating Costs Rent for such year. Landlord and Tenant shall, within
thirty (30) days thereafter, make any payment or credit necessary to bring
Tenant's previously estimated Excess Operating Costs Rent into conformance with
the actual Excess Operating Costs Rent as determined by Landlord. Any amount
due Tenant as a credit shall be credited against installments next coming due
from Tenant under the Lease and any amounts owed to Landlord shall be paid with
the next installment of Base Monthly Rent; provided, however, that if the Lease
Term has terminated and no other amounts are then owing to Landlord from Tenant
pursuant to this Lease, any such amount due Tenant or Landlord shall be remitted
to the party owed such amount within thirty (30) days of the date Landlord
calculates and notifies Tenant of the amount of such adjustment.
5.3.3 AUDIT. Landlord shall retain its records regarding Common
Area Maintenance Charges for a period of at least three (3) years following the
final billing for the calendar year in question. At any time during such three
(3) year period, upon reasonable advance written notice to Landlord, but not
more frequently than once in any calendar year, Tenant shall have the right to
audit all of Landlord's or Landlord's agent's records pertaining to Common Area
Maintenance Charges by a representative of Tenant's choice. If such audit
reveals that Landlord's annual statement was incorrect, any over-billing
discovered in the course of such audit shall be refunded to Tenant within thirty
(30) days of Landlord's receipt of a copy of the audit (with interest from the
date which is thirty (30) days after Landlord's receipt of the copy of such
audit until paid at the Lease Interest Rate), unless Landlord disputes the
audit, and any underbilling shall be paid by Tenant to Landlord within thirty
(30) days of the audit. In the event that any overbilling exceeds the amount
actually due from Tenant for the year by five percent (5%) or more, then
Landlord shall reimburse Tenant for the reasonable costs of the audit. If
Landlord disputes the results of Tenant's audit, Landlord and Tenant shall
attempt to resolve such dispute in good faith. If Landlord and Tenant are
unable to do so within thirty (30) days, then Landlord shall commission a second
audit by an independent accounting firm selected by Landlord. The results of
such second audit shall be deemed conclusive as to any such dispute. Landlord
shall pay the cost of such second audit and Tenant's audit unless such second
audit reveals amounts actually due from Tenant for the year are within the five
percent (5%) noted above, in which event Tenant shall pay for the second audit
as well as Tenant's audit. In any event, Tenant shall continue to pay all Rent
and Excess Operating Costs Rent as otherwise provided by this Lease until the
dispute is resolved or the results of the second audit are available.
5.4 PERSONAL PROPERTY TAXES. Tenant shall pay prior to delinquency all
taxes charged against trade fixtures, furnishings, equipment or any other
personal property belonging to Tenant. Tenant shall use its best efforts to
have such personal property taxed separately from the Premises. If any of
Tenant's personal property is taxed with the Premises or Project, Tenant shall
pay Landlord the taxes for the personal property within fifteen (15) days after
Tenant receives a written statement from Landlord for such personal property
taxes.
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ARTICLE 6 -- USE OF PREMISES
6.1 PERMITTED USES. Tenant shall use the Premises only for the Permitted
Uses set forth in the Basic Terms and for no other use or purpose without the
prior written consent of Landlord, which consent may be withheld in the sole,
absolute and/or arbitrary discretion of Landlord.
6.2 MANNER OF USE.
6.2.1 INTERFERENCE WITH USE/NUISANCE. Tenant shall not do or
permit anything to be done in or about the Premises which will in any way
obstruct or interfere with or infringe on the rights of other occupants or
customers of the Project, or injure or annoy them, or use or allow the Premises
to be used for any improper, immoral, or objectionable purposes; nor shall
Tenant cause, maintain or permit any nuisance in, on or about the Premises or
commit or suffer to be committed any waste in, on or about the Premises. Tenant
shall keep the interior of the Premises (except for Landlord's obligation to
maintain the Common Areas), and every part thereof, in a clean condition, free
from any noises, vibrations, music volumes, lighting (including, without
limitation, strobe lighting), speakers, videos, odors or nuisances deemed
objectionable by Landlord, and shall comply with all health and police
regulations in all respects. Tenant shall not display or sell merchandise, or
place carts, portable signs, devices or any other objects, outside the defined
exterior walls or roof and permanent doorways of the Premises or in corridors,
without the prior written consent of Landlord.
6.2.2 VIOLATION OF LAW/INSURANCE PROVISIONS. Tenant shall not
use or occupy the Premises in violation of any law, ordinance, regulation or
requirement or other directive of any federal, state or local governmental or
quasi-governmental authority having or exercising jurisdiction over the
Project. Subject to Landlord's obligations hereunder, Tenant shall, at its
sole cost and expense, fully comply with all laws, ordinances, regulations,
requirements and other directives of any federal, local, governmental or
quasi-governmental authority having jurisdiction over the Premises and the
Project, including, without limitation, operational and other requirements
imposed upon either owners or operators of any public accommodation under the
Americans with Disabilities Act 42 U.S.C. Section 12101 ET. SEQ., and shall
immediately discontinue any use of the Premises which is declared by any
governmental authority having or exercising jurisdiction thereover to be a
violation of any law, ordinance, regulation or directive. If requested by
Landlord, Tenant shall provide evidence satisfactory to Landlord of Tenant's
compliance. Tenant shall not do or permit to be done anything which will (i)
increase the premium of any insurance policy covering the Premises or the
Project and/or the property located therein; (ii) cause a cancellation of or
be in conflict with any such insurance policies; or (iii) result in a refusal
by insurance companies in good standing to issue or continue any such
insurance in amounts satisfactory to Landlord. Tenant shall, at Tenant's
expense, comply with all rules, orders, regulations and requirements of
insurers and of the American Insurance Association or any other organization
performing a similar function. Tenant shall promptly, upon demand, reimburse
Landlord for any additional premium charges for such policy or policies
caused by reason of Tenant's failure to comply with the provisions of this
Section. Additionally, after Substantial Completion of the Premises pursuant
to the Work Letter, Tenant agrees at its sole cost to install any
improvements, changes or alterations in the Premises authorized in writing by
Landlord and required by any governmental authority as a result of Tenant's
proposed use of the Premises or its manner of operation thereunder, and
Tenant's failure to perform same shall constitute a default by Tenant
hereunder.
6.2.3 PERMITS. Except as set forth in the Work Letter, Tenant
shall obtain and pay for all permits required for Tenant's occupancy of the
Premises and shall promptly take all substantial and non-substantial actions
necessary to comply with all applicable statutes, ordinances, rules,
regulations, orders and requirements regulating the use by Tenant of the
Premises, including the Occupational Health and Safety Act.
6.3 RULES AND REGULATIONS. Tenant shall comply with the Rules and
Regulations and any reasonable amendments, modifications and/or additions
thereto as may hereafter be adopted and published by Landlord. Landlord shall
not be liable to Tenant for any violation of such Rules and Regulations or the
breach in any provision in any lease by any other tenant or other party. In the
event of any inconsistency between the Rules and Regulations and this Lease,
this Lease shall prevail. Landlord will not interfere with Tenant's quiet
enjoyment to which Tenant is entitled under this Lease by virtue of any
inconsistent enforcement of such Rules and Regulations.
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6.4 LANDLORD'S ACCESS. Landlord and its agents, independent contractors
and designated representatives, may enter the Premises at all reasonable times
to post notices of non-responsibility, to make repairs and/or to show the
Premises to holders of any encumbrances, potential buyers, mortgagees, investors
or tenants or other parties, or for any other purpose Landlord deems reasonably
necessary. Landlord shall give Tenant prior notice of such entry, except in the
case of an emergency, in which case no prior notice need be given. Any entry to
the Premises by Landlord in the event of an emergency shall not, under any
circumstances, be construed or deemed to be a forcible or unlawful entry onto
the Premises or to be an eviction of Tenant from the Premises or any part
thereof Landlord may place customary "For Lease" signs on the Premises during
the last nine (9) months of the Lease Term.
6.5 QUIET POSSESSION. If Tenant pays the Rent and complies with all other
terms of this Lease, Landlord assures Tenant that it may occupy and enjoy the
Premises for the full Lease Term, subject to the provisions of this Lease and to
any mortgages or deeds of trust encumbering the Project (as set forth in Section
16.1 below).
ARTICLE 7 -- HAZARDOUS MATERIALS
7.1 PROHIBITION. Tenant shall not cause or permit any Hazardous Materials
to be brought upon, kept, or used in connection with the Premises or Project by
Tenant, its agents, employees, contractors or invitees, in a manner or for a
purpose prohibited by or which could result in liability under any applicable
law, regulation, rule or ordinance, including, without limitation, the Hazardous
Materials Laws. Tenant shall, at its own expense, at all times and in all
respects comply with all Hazardous Materials Laws, including, without
limitation, any Hazardous Materials Laws relating to industrial hygiene,
environmental protection or the use, analysis, generation, manufacture, storage,
disposal or transportation of any Hazardous Materials. In addition, Landlord,
its agents, employees, contractors or invitees, will not cause any Hazardous
Materials to be brought upon, kept, or used in connection with the Project in a
manner or for a purpose prohibited by or which could result in liability under
any applicable law, regulation, rule or ordinance, including without limitation,
the Hazardous Materials Laws. Landlord shall also include in other tenant
leases for the Project a requirement that Hazardous Materials may not be brought
upon, kept, or used in connection with the Premises or Project in a manner or
for a purpose prohibited by or which could result in liability under any
applicable law, regulation, rule or ordinance, including without limitation, the
Hazardous Materials Laws.
7.1.1 USE. Tenant shall, at its own expense, procure, maintain in
effect and comply with all conditions of any and all permits, licenses and other
governmental and regulatory approvals relating to the presence of Hazardous
Materials within, on, under or about the Premises or required for Tenant's use
of any Hazardous Materials in or about the Premises in conformity with all
applicable Hazardous Materials Laws and prudent industry practices regarding
management of such Hazardous Materials. Upon termination or expiration of the
Lease, Tenant shall, at its own expense, cause all Hazardous Materials placed in
or about the Premises or Project by Tenant or at Tenant's direction to be
removed from the Premises and Project and transported for use, storage or
disposal in accordance and compliance with all applicable Hazardous Materials
Laws. Landlord shall, at its own expense, procure, maintain in effect and
comply with all conditions of any and all permits, licenses and other
governmental and regulatory approvals relating to the presence of Hazardous
Materials within, on, under or about the Project or required for Landlord's use
of any Hazardous Materials in or about the Project in conformity with all
applicable Hazardous Materials Laws and prudent industry practices regarding
management of such Hazardous Materials.
7.1.2 NORMAL USAGE.
7.1.2.1 TENANT'S NORMAL USAGE. Landlord recognizes and agrees
that Tenant may use materials in normal quantities that are applicable to
general office use ("Tenant's Normal Usage") and that such use by Tenant shall
not be deemed a violation of this Section, so long as the levels are not in
violation of any Hazardous Materials Laws. Landlord acknowledges that it is not
the intent of this Article 7 to prohibit Tenant from operating its business as
described in this Lease. Tenant may operate its business according to the
custom of the industry so long as the use or presence of Hazardous Materials is
strictly and properly monitored according to all applicable governmental
requirements.
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7.1.2.2 LANDLORD'S NORMAL USAGE. Tenant recognizes and agrees
that Landlord may use materials in normal quantities that are applicable to the
management and operation of the Project, including but not limited to pesticides
and insecticides used for landscaping and chlorine and other chemicals used at
the pool, ("Landlord's Normal Usage") and that such use by Landlord shall not be
deemed a violation of this Section, so long as the levels are not in violation
of any Hazardous Materials Laws. Tenant acknowledges that it is not the intent
of this Article 7 to prohibit Landlord from operating its business as described
in this Lease. Landlord may operate its business according to the custom of the
industry so long as the use or presence of Hazardous Materials is strictly and
properly monitored according to all applicable governmental requirements.
7.1.3 EXISTING CONDITIONS. On the Lease Date, to the best of
Landlord's actual knowledge, there are no Hazardous Materials within, on, under
or about the Premises in violation of any Hazardous Materials laws. As used
herein, Landlord's "knowledge" shall mean the actual knowledge of Scott Brusseau
or James McCann as of the Lease Date, without any duty of investigation or
inquiry.
7.2 DISCLOSURE AND WARNING OBLIGATIONS. Tenant shall comply with all laws,
ordinances and regulations in the State where the Premises is located regarding
the disclosure of the presence or danger of Hazardous Materials. Tenant
acknowledges and agrees that all reporting and warning obligations required
under the Hazardous Materials Laws are the sole responsibility of Tenant,
whether or not such Hazardous Materials Laws permit or require Landlord to
provide such reporting or warnings, and Tenant shall be solely responsible for
complying with Hazardous Materials Laws regarding the disclosure of, the
presence or danger of Hazardous Materials, including without limitation, all
notices or other requirements under California Health and Safety Code Section
25915 ET. SEQ., and 25249.5 ET. SEQ., and California Code of Regulations Section
12000 ET. SEQ.
7.3 NOTICE OF ACTIONS; HAZARDOUS MATERIALS LIST.
7.3.1 TENANT'S OBLIGATIONS. Tenant shall immediately notify Landlord
in writing of (a) any enforcement, cleanup, removal or other governmental or
regulatory action instituted, completed or threatened pursuant to any Hazardous
Materials Laws; (b) any claim made or threatened by any person against Landlord,
or the Premises or the Project, relating to damage, contribution, cost recovery,
compensation, loss or injury resulting from or claimed to result from any
Hazardous Materials; (c) any reports made to any environmental agency arising
out of or in connection with any Hazardous Materials in, on or about the
Premises or with respect to any Hazardous Materials removed from the Premises,
including, any complaints, notices, warnings, reports or asserted violations in
connection therewith; and (d) any release of a Hazardous Material that Tenant
knows or has reason to believe has or will come to be released or located
within, on, under or about the Premises or the Project (except for Tenant's
Normal Usage). Tenant shall also provide to Landlord, as promptly as possible,
and in any event within five (5) Business Days after Tenant first receives or
sends the same, copies of all claims, reports, complaints, notices, warnings or
asserted violations relating in any way to the Premises or Tenant's use thereof,
Upon written request of Landlord (to enable Landlord to defend itself from any
claim or charge related to any Hazardous Materials Law), Tenant shall promptly
deliver to Landlord notices of hazardous waste manifests reflecting the legal
and proper disposal of all such Hazardous Materials removed or to be removed
from the Premises. All such manifests shall list the Tenant or its agent as a
responsible party and in no way shall attribute responsibility for any such
Hazardous Materials to Landlord. As a material inducement to Landlord to allow
Tenant to use Hazardous Materials in connection with its business, Tenant agrees
to deliver to Landlord prior to the Commencement Date, a list identifying each
type of Hazardous Material (except as to Tenant's Normal Usage) to be present on
the Premises and setting forth any and all governmental approvals or permits
required in connection with the presence of Hazardous Materials on the Premises
("Tenant Hazardous Materials List"). Tenant shall deliver to Landlord an
updated Tenant Hazardous Materials List at least once a year and shall also
deliver an updated list before any new Hazardous Materials are brought onto the
Premises or on or before the date Tenant obtains any additional permits or
approvals.
7.3.2 LANDLORD'S OBLIGATIONS. Landlord shall immediately notify
Tenant in writing of (a) any enforcement, cleanup, removal or other governmental
or regulatory action relating to the Premises instituted, completed or
threatened pursuant to any Hazardous Materials Laws; and (b) any release of a
Hazardous Material that Landlord knows or has reason to believe has or will come
to be released or located within, on, under or about the Premises or the Project
(except for Landlord's Normal Usage). Landlord agrees to deliver to Tenant
prior to the Commencement Date, a list identifying each type of Hazardous
Material (except as to Landlord's Normal Usage)
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Landlord caused to be present at the Project and setting forth any and all
governmental approvals or permits required in connection with the presence of
these Hazardous Materials at the Project ("Landlord Hazardous Materials
List"). Landlord shall deliver to Tenant an updated Landlord Hazardous
Materials List at least once a year and shall also deliver an updated list
before Landlord brings any new Hazardous Materials to the Project on or
before the date Landlord obtains any additional permits or approvals.
7.4 HAZARDOUS MATERIALS INDEMNITY.
7.4.1 TENANT. Tenant shall indemnify, defend (by counsel
reasonably acceptable to Landlord), protect, and hold Landlord and each of
Landlord's Indemnitees free and harmless from and against any and all claims,
liabilities, penalties, forfeitures, losses and/or expenses, attorneys' fees,
consultant fees and expert fees, judgments, administrative rulings or orders,
fines, costs for death of or injury to any person or damage to any property
whatsoever (including, without limitation, water tables, sewer systems and
atmosphere), arising from, or caused or resulting, in whole or in part, directly
or indirectly, by the release, presence or discharge in, on, under or about the
Premises or Project of any Hazardous Materials caused by or arising from the
activities of Tenant, Tenant's agents, employees, licensees, or invitees or from
the transportation or disposal of any Hazardous Materials to or from the
Premises or Project by Tenant, Tenant's agents, employees, licensees or invitees
or at Tenant's direction, or by Tenant's failure to comply with any Hazardous
Materials Laws, or from Tenant's failure to provide adequate disclosures or
warnings required by the Hazardous Materials Laws, or from any breach by Tenant
of the obligations in this Article 7. Tenant's indemnification obligations
hereunder shall include, without limitation, and whether foreseeable or
unforeseeable, all costs of any required or necessary Hazardous Materials
management plan, investigation, repairs, cleanup or detoxification or
decontamination of the Premises or Project, and the presence and implementation
of any closure, remedial action or other required plans in connection therewith,
and shall survive the expiration of or early termination of the Lease Term.
7.4.2 LANDLORD. Landlord shall indemnify, defend (by counsel
reasonably acceptable to Tenant), protect, and hold Tenant and each of Tenant's
indemnitees free and harmless from and against any and all claims, liabilities,
penalties, forfeitures, losses and/or expenses, attorneys' fees, consultant's
fees and expert fees, judgments, administrative rulings or orders, fines, costs
for death of or injury to any person or damage to any property whatsoever,
arising from, or caused or resulting, in whole or in part, directly or
indirectly, by the release, presence or discharge in, on, under or about the
Premises of any Hazardous Materials caused by or arising from the activities of
Landlord, Landlord's agents or employees, or by Landlord's failure to comply
with any Hazardous Materials laws. Landlord's indemnification obligations
hereunder shall include, without limitation, and whether foreseeable or
unforeseeable, all costs of any required or necessary Hazardous Materials
management plan, investigation, repairs, cleanup or detoxification or
decontamination of the Premises or Project, and the presence and implementation
of any closure, remedial action or other required plans in connection therewith.
and shall survive the expiration of or early termination of the Lease Term.
7.5 ASSIGNMENT AND SUBLETTING. If (i) any anticipated use of the Premises
by any proposed assignee or sublessee involves the generation, storage, use,
treatment or disposal of Hazardous Materials in a manner or for a purpose
prohibited by any governmental agency or authority, (ii) the proposed assignee
or sublessee has been required by any prior landlord, lender or governmental
authority to take remedial action in connection with Hazardous Material
contaminating a property if the contamination resulted from such party's action
or use of the property in question or (iii) the proposed assignee or sublessee
is subject to an enforcement order issued by any governmental authority in
connection with the use, disposal or storage of a Hazardous Material, it shall
not be unreasonable for Landlord to withhold its consent to an assignment or
subletting to such proposed assignee or sublessee. Landlord may require a
written statement from the proposed assignee or sublessee attesting to such
matters.
7.6 ENVIRONMENTAL TESTS AND AUDITS. Tenant shall not perform or cause to
be performed any Hazardous Materials surveys, studies, reports or inspections,
relating to the Premises or Project, without obtaining Landlord's prior written
consent. At any time prior to the expiration of the Lease Term, if Landlord has
a reasonable basis to believe that Hazardous Materials are present in, on or
about the Premises in violation of any Hazardous Materials Laws, Landlord shall
have the right to enter upon the Premises in order to conduct appropriate tests
and to deliver to Tenant the results of such tests to demonstrate that levels of
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excess of permissible levels has occurred as a result of Tenant's use of the
Premises. Such testing shall be at Tenants expense if Landlord has a
reasonable basis for suspecting and confirms the presence of Hazardous
Materials in the soil or surface or ground water in, on, under, or about the
Premises, or the Project which has been caused by or resulted from the
activities of Tenant, its agents, employees, contractors or invitees.
7.7 LEASE "AS IS". Subject to the express provisions of this Lease
(including the Work Letter), Tenant, in entering into this Lease, is leasing the
Premises "As Is" and is relying solely upon its own inspections, investigations
and analyses of the Premises relating to Hazardous Materials. Tenant further
acknowledges Tenant is not relying in any way upon any representations,
statements, warranties, studies, reports, or other information of Landlord or
its representatives, whether oral or written, of any nature whatsoever regarding
any Hazardous Materials.
7.8 SURVIVAL. The respective rights and obligations of Landlord and
Tenant under this Article 7 shall survive the expiration or termination of this
Lease. During any period of time employed by Tenant after the termination of
this Lease to complete the removal from the Premises or Project or remediation
of any such Hazardous Materials, Tenant shall continue to pay the full rental in
accordance with this Lease, which rental shall be prorated daily.
ARTICLE 8 -- UTILITIES
8.1 PAYMENT AND ARRANGEMENT. Tenant shall arrange for and pay, directly to
the appropriate supplier, the cost of all electric power, and telephone supplied
to the Premises. In the event the Premises are less than the entire Building,
and if any utilities to the Premises are jointly metered and such utilities are
not otherwise included as a Common Area Maintenance Charge, Landlord shall
determine, and Tenant shall pay, Tenant's share of the monthly costs of such
utilities. Tenants share shall be determined by the ratio of the Rentable
square footage of the Premises as compared to the Rentable square footage of all
the leased and occupied property within the Project subject to the common
metering. Landlord shall have the right to bill Tenant for such amounts on an
estimated basis, in which case, such estimated statements shall be delivered to
Tenant and Tenant shall pay such amounts to Landlord concurrently with its
payment of Base Monthly Rent. The Tenant shall pay such charges, as Rent,
within five (5) days of notification of the amount by the Landlord. Landlord
reserves the right to require Tenant to install and maintain, at Tenant's sole
expense, separate meters for any public utility servicing the Premises for which
a separate meter is not presently installed.
8.2 INTERRUPTION OF SERVICES AND UTILITIES. Except as set forth in
Articles 11 and 13, Landlord shall not be liable for, and Tenant shall not be
entitled to any reduction of, the Base Monthly Rent, Additional Rent or any
other Rent payable hereunder by reason of Landlord's failure to make available
any of the services or utilities described in this Lease, when such failure or
interruption is caused by acts of God, accident, breakage, repairs, strikes,
lockouts or other labor disturbances or disputes, necessary repairs,
installations, construction and expansion, nonpayment of utility charges due
from Tenant, or by reason of governmental regulation, statute, ordinance,
restriction or decree or any other similar cause. Notwithstanding the
foregoing, Landlord shall be responsible for the consequences of Landlord's own
negligence or intentional misconduct. Furthermore, unless due to Landlord's
negligence or intentional misconduct, Landlord shall not be liable under any
circumstances for a loss of, or injury to, property or for injury to, or
interference with, Tenant's business, including, without limitation, loss of
profits, however occurring, through or in connection with or incidental to a
failure to furnish any of the foregoing services or utilities. Tenant, as a
material part of the consideration to be rendered to Landlord, hereby waives all
claims against Landlord for the foregoing damages from any cause arising at any
time.
8.3 OPERATING HOURS. Normal operating hours for the Building and included
within the Operating Costs Allowance are 7:00 a.m. to 6:00 p.m. weekdays and
Saturday from 8:00 a.m. to 12:00 noon. Tenant shall be permitted
heating/ventilation/air conditioning ("HVAC") service at other hours for which
Tenant shall pay at a rate equal to twenty dollars ($20.00) per hour of usage
(subject to a reasonable adjustment based on actual design of the HVAC system
pursuant to the Work Letter), increased in proportion to the increase of the CPI
on each annual anniversary of the Lease Date. Landlord shall meter and Tenant
shall pay for such operation of the HVAC systems beyond the normal sixty hours
weekly usage on a quarterly basis.
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8.4 SECURITY SYSTEM. Landlord is installing as part of the Tenant
Improvements a security system for the Building, which security system shall be
maintained by Landlord as part of the Common Areas.
ARTICLE 9 -- PARKING AND CONTROL OF COMMON AREAS
9.1. CONTROL OF COMMON AREAS BY LANDLORD. All Common Areas, the Site
Amenities, and all automobile parking areas, driveways, entrances and exits
thereto, and other facilities furnished by Landlord in or near the Project shall
at all times be subject to the exclusive control and management of Landlord or
Landlord's designated agent. Landlord shall have the right to construct,
maintain and operate lighting facilities on all said areas and improvements; to
police the same; from time to time to change the area, level, location and
arrangement of parking areas and other facilities hereinabove referred to; to
reasonably restrict parking by tenants, their officers, agents and employees to
parking areas; to close all or any portion of said areas or facilities to such
extent as may, in the reasonable opinion of Landlord, be legally sufficient to
prevent a dedication thereof or the accrual of any rights to any person or the
public therein; to close temporarily all or any portion of the parking areas or
facilities, if necessary so long as reasonable prior arrangements for parking
are made with Tenant; to discourage non-customer parking; to convert such areas
into leasable areas; to construct additional parking facilities and to do and
perform such other acts in and to said areas and improvements as, in the use of
good business judgement, the Landlord shall determine to be advisable with a
view to the improvement of the convenience and use thereof by tenants, their
officers, agents, employees and customers, provided that such changes shall not
reduce the number of parking spaces below the number required as stated below.
No such change shall entitle Tenant to an abatement of Rent. Tenant will have
the nonexclusive use of not less than four (4) parking spaces per one thousand
(1,000) Usable square feet of the Premises in the Project.
9.2 LICENSE. All Common Areas are to be used and occupied under a license
which may be revoked by Landlord in the event of a default by Tenant and
termination of the Lease, and if any such license be revoked, or if the amount
of such areas be diminished, Landlord shall not be subject to any liability nor
shall Tenant be entitled to any compensation or diminution or abatement of Rent,
or shall such revocation or diminution of such areas be deemed constructive or
actual eviction.
ARTICLE 10 -- ALTERATIONS, IMPROVEMENTS AND SIGNAGE
10.1 CHANGES/ALTERATIONS. Tenant shall not make any alterations, additions,
or changes, including, without limitation, installation of any permanently
attached trade fixtures, exterior signs, exterior machinery, floor coverings,
interior or exterior lighting, plumbing fixtures, shades or awnings
(collectively "Alterations") in and to the Premises or any part thereof without
the prior written consent of Landlord which consent may be withheld in
Landlord's sole and absolute discretion; provided, however, that Tenant may make
nonstructural Alterations that do not affect the electrical, plumbing, heating,
ventilation, air conditioning or other systems of the Premises and that cost
less than five thousand dollars ($5,000) in any Lease Year without Landlord's
consent. Landlord shall respond to Tenant's request for approval to make
Alterations which cost up to Ten Thousand Dollars ($10,000.00) within five (5)
Business Days, and for Alterations which cost in excess of Ten Thousand Dollars
($10,000.00), Landlord shall respond within fifteen (15) Business Days. Any
construction undertaken in or to the Premises shall be performed in accordance
with this Article and the other obligations of this Lease
10.2 MANNER OF CONSTRUCTION.
10.2.1 CONDITIONS TO CONSENT. Landlord may impose, as a condition
of its consent to any Alterations or repairs on or about the Premises, such
requirements as Landlord in its reasonable discretion may deem desirable,
including, but not limited to, the requirements that Tenant obtain bonds and
that Tenant utilize for such purposes only contractors, materials, mechanics and
materialmen approved by Landlord, in its sole discretion. Tenant shall
construct such Alterations or repairs in strict conformance with any and all
applicable rules and regulations of Landlord and any federal, state, county or
municipal code or ordinance and pursuant to a valid building permit, issued by
the local government entity, and obtained at Tenant's sole cost and expense.
All fixtures installed by Tenant shall be new.
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10.2.2 COST. In any event, a licensed contractor approved by
Landlord shall perform all mechanical, electrical, plumbing, air conditioning,
permanent partition and ceiling tile work, and such work shall be performed at
Tenant's cost. If Landlord's consent is required, Landlord reserves the right
to approve, in Landlord's reasonable discretion, the contractor selected by
Tenant for the completion of any Alterations. In the event Tenant orders any
construction, alteration, decorating or repair work and fails to pay amounts
when due to the contractor or contractors in connection with such items,
Landlord, without any obligation to do so, may pay any such amounts directly to
such contractor or contractors (with a notice to Tenant of such payment) and the
amounts paid by Landlord shall be deemed Rent under this Lease, payable upon
billing therefor.
10.2.3 GOOD AND WORKMANLIKE MANNER. All work with respect to any
Alterations or repairs must be done in a good and workmanlike manner and
diligently prosecuted to completion to the end that the Premises shall at all
times be a complete unit except during the period of work. Upon completion of
any Alterations, Tenant agrees to deliver to the Landlord's management office a
copy of the "as built" drawings of the Alterations and record any necessary
notices to evidence completion. In performing the work of any such Alterations,
Tenant shall have the work performed in such manner as not interfere with or to
obstruct the access to the Common Area and to any other tenant of the Project.
10.3 CONSTRUCTION INSURANCE. Whether or not Landlord's consent is required,
Tenant agrees to obtain, carry and deliver to Landlord prior to the commencement
of any Alterations and maintain in effect until completion of all Alterations
"Builder's All Risk" insurance in an appropriate amount covering the
construction of such Alterations, and such other insurance as Landlord may
require, it being understood and agreed that all of such Alterations shall be
insured by Tenant pursuant to Section 11.2 of this Lease immediately upon
completion thereof.
10.4 LIENS. Tenant shall keep the Premises and the Project free from any
mechanics', materialmen's, designer's or other liens arising out of any work
performed, materials furnished or obligations incurred by or for Tenant or any
person or entity claiming by, through or under Tenant. If any such liens are
filed and are not released of record by payment or posting of a proper bond
within ten (10) days after such filing, Landlord may, without waiving its rights
and remedies based on such breach by Tenant and without releasing Tenant from
any obligations hereunder, cause such liens to be released by any means it shall
deem proper, including payment of the claim giving rise to such lien, in which
event all amounts paid by Landlord shall immediately be due and payable by
Tenant as Rent. Tenant hereby indemnifies, protects, defends (with legal
counsel acceptable to Landlord) and holds Landlord and Landlord's Indemnitees,
the Premises and the Project harmless from any liability, cost, obligation,
expense (including, without limitation, reasonable attorneys' fees and
expenses), or claim of any mechanics', materialmen's, design professional's or
other liens in any manner relating to any work performed, materials furnished or
obligations incurred by or for Tenant or any person or entity claiming by,
through or under Tenant. Whether or not Landlord's consent is required, Tenant
shall notify Landlord in writing within fifteen (15) days prior to commencing
any Alterations so that Landlord shall have the right to record and post notices
of non-responsibility or any other notices deemed necessary by Landlord on the
Premises.
10.5 SIGNAGE. As an Alteration, Tenant may request signage at locations
acceptable to Landlord. Any such signage shall be at Tenant's sole cost and
expense and subject to the requirements of all government agencies with
jurisdiction over the Project, and the Declarations. Tenant shall use a signage
company acceptable to Landlord. Tenant shall pay all costs of Landlord
associated with installing such signage within ten (10) days of receiving an
invoice from Landlord setting forth such costs. All such signage shall be
subject to Landlord's specifications and approval as to size, graphics and
style, which approval may be withheld in Landlord's reasonable discretion.
ARTICLE 11 -- INSURANCE AND INDEMNITY
11.1 INSURANCE TO BE OBTAINED BY LANDLORD.
11.1.1 FIRE AND CASUALTY INSURANCE. Landlord shall maintain during
the Lease Term a policy or policies of insurance insuring the Premises and the
Common Area and, at Landlord's election, other portions of the Project, against
all direct physical loss or damage, whether due to fire or other casualties
covered within the classification of fire and extended coverage, vandalism
coverage and malicious mischief, sprinkler leakage, water damage and special
extended coverage. Such coverage shall be for full replacement value, and may
include, at the
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option of Landlord, the risks of earthquakes and/or flood damage and
additional hazards, a rental loss endorsement and one or more loss payee
endorsements in favor of the holders of any mortgages or deeds of trust
encumbering the interest of Landlord in all or any portion of the Project or
the interest of any ground or underlying lessors in the Project. The costs
of such insurance shall be included as a component of the Common Area
Maintenance Charges.
11.1.2. LIABILITY INSURANCE. Landlord shall maintain a commercial
general liability insurance policy, or an equivalent, written on an occurrence
form that includes personal injury coverage, bodily injury, death, property
damage, and advertising injury coverage, insuring against liability arising out
of the ownership, use, or maintenance of the Common Area or the Project. The
initial amount of such insurance shall be two million dollars ($2,000,000) each
occurrence/three million dollars ($3,000,000) general aggregate on a per
location basis and two million dollars ($2,000,000) for personal injury and
advertising injury coverage. Landlord may also obtain umbrella coverage up to
ten million dollars ($10,000,000). The costs of all such insurance shall be
included as part of the Common Area Maintenance Charges.
11.2 INSURANCE TO BE OBTAINED BY TENANT.
11.2.1 LIABILITY INSURANCE. During the Lease Term, Tenant shall,
at Tenant's expense, maintain a commercial general liability insurance policy,
or an equivalent, written on an occurrence form that includes personal injury
coverage, bodily injury, death, property damage, advertising injury coverage and
contractual liability coverage including Tenant's indemnity obligations under
this Lease, insuring against liability arising out of the ownership, use,
occupancy or maintenance of the Premises, and the business operated by Tenant
and any subtenants or licensees of Tenant in the Premises. The initial amount
of such insurance shall be three million dollars ($3,000,000.00) each
occurrence/five million dollars ($5,000,000.00) general aggregate on a per
location basis and three million dollars ($3,000,000.00) for personal injury and
advertising injury coverage. If alcohol will be served from or in the Premises,
such coverage shall contain endorsements deleting any liquor liability exclusion
and adding a liquor liability endorsement.
11.2.2 INSURANCE OF PERSONAL PROPERTY. Tenant shall at all times
during the Lease Term, and at its own expense, maintain a policy or policies of
standard fire, extended coverage and special extended coverage insurance ("All
Risks") with extended coverage in the name of the Tenant, and naming Landlord as
an additional insured, in an amount adequate to cover the cost of replacement of
all trade fixtures, alterations, decorations, inventory additions or
improvements, and all plate and tempered glass within the Premises, made to the
Premises by Tenant or by Landlord on Tenant's behalf in the event of fire or
extended coverage loss in an amount equal to the full replacement value.
Notwithstanding such insurance coverage by Tenant for plate glass, Landlord may
replace, at the expense of Tenant, any and all plate and other glass, frames or
glazing damaged or broken from any cause whatsoever in and about the Premises.
11.2.3. ADDITIONAL INSURANCE OBLIGATIONS. Landlord may reasonably
require Tenant to increase the amounts of coverage and/or to maintain additional
coverage based on insurance coverages and amounts maintained by lessees of
similar space in San Diego County.
11.3 WAIVER OF SUBROGATION. Landlord and Tenant each hereby waive any and
all rights of recovery against the other or against the officers, employees,
agents and representatives of the other, on account of loss or damage occasioned
to such waiving parry or its property or the property of others under its
control, to the extent that such loss or damage is insured against under any
fire and extended coverage insurance policy which either may have in force at
the time of such loss or damage or under the insurance policies required to be
maintained under this Article. Landlord and Tenant shall, if required, for each
of the policies of insurance required under this Lease, give notice to the
insurance carrier or carriers that the foregoing mutual waiver of subrogation is
contained in this Lease.
11.4 FORM OF POLICIES. The minimum limits of policies of insurance
required of Tenant under this Lease shall in no event limit the liability of
Tenant under this Lease. Such insurance shall: (i) be an occurrence policy (or
policies); (ii) name Landlord, the Project or Building manager or managers, and
any other party having an interest in the Project as an additional insured;
(iii) be issued by an insurance company having a General Policyholders Rating of
B+ or better and a financial size of "VI" or better, as set forth in the most
current issue of Best's Rating Guide, or which is otherwise acceptable to
Landlord and licensed to do business in California; (iv) be
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primary insurance as to all claims thereunder and provide that any insurance
carried by Landlord is excess and noncontributing with any insurance required
of Tenant, (v) provide that said insurance shall not be canceled or coverage
changed unless thirty (30) days prior written notice shall have been given
to Landlord and any mortgagee of Landlord's; and (vi) with respect to the
liability insurance described in Section 11.2.1, contain a cross-liability
endorsement or severability of interest clause reasonably acceptable to
Landlord. Any insurance policies required hereunder may be part of a blanket
policy with a "per project, per location" endorsement so long as such blanket
policy contains all provisions required hereby and does not reduce the
coverage, impair the rights of either party or negate the requirements of
this Lease. Tenant shall deliver said policy or policies or certificates
thereof (at Tenant's election), together with any endorsements reflecting the
changes to the policy required to comply with the requirements of this Lease,
to Landlord on or before the Commencement Date and at least ten (10) days
before the expiration date of such policies. In the event Tenant shall fail
to procure such insurance, or to deliver such policies or certificates (at
Tenant's election) and appropriate endorsements, Landlord may, at its option,
procure such policies for the account of Tenant, and the cost thereof plus a
ten percent (10%) handling charge shall be paid by Tenant to Landlord as
Additional Rent within five (5) days after delivery to Tenant of bills
therefor.
11.5 INDEMNIFICATION.
11.5.1 INDEMNIFICATION OF LANDLORD. To the fullest extent permitted
by law, Tenant shall indemnify, protect, defend (with legal counsel acceptable
to Landlord) and save Landlord and Landlord's Indemnitees harmless from and
against any and all claims, actions, damages, liabilities and expenses,
including attorneys' fees, in connection with loss of life, personal injury,
bodily injury and/or damage to property arising from or out of any occurrence
in, upon or about the Premises, and/or the Project or any part thereof, or the
occupancy or use by Tenant of the Premises and/or Project or any part thereof,
or occasioned wholly or in part by any act or omission of Tenant, its agents,
contractors, employees, servants, tenants or concessionaires, except to the
extent caused by Landlord's negligence or willful misconduct. Tenant shall
further indemnify, defend, protect and hold Landlord and Landlord's Indemnitees
harmless from and against any and all claims arising from any breach or default
in performance of any obligation on Tenant's part to be performed under the
terms of this Lease, or arising from any act, neglect, fault or omission of
Tenant or its agents, contractors, employees, servants, tenants or
concessionaires, and from and against all costs, attorneys' fees, expenses and
liabilities incurred in connection with such claim or any action or proceeding
brought thereon. In case any action or proceeding shall be brought against
Landlord by reason of any such claim, Tenant, upon notice from Landlord, shall
defend the same at Tenant's expense by counsel approved in writing by Landlord.
Tenant, as a material part of the consideration to Landlord, hereby assumes all
risk of damage to property or injury to persons in, upon or about the Premises
from any cause whatsoever except Landlord's negligence or intentional
misconduct. Subject to the terms hereof, Tenant hereby waives all its claims in
respect thereof against Landlord.
11.5.2 LANDLORD'S NONLIABILITY. Landlord shall not be liable for
injury or damage which may be sustained by a person, goods, wares, merchandise,
or other property of Tenant, or Tenant's employees, invitees, customers, or of
any other person in or about the Premises caused by or resulting from any peril
which may affect the Premises, including, without limitation, fire, steam,
electricity, gas, water, or rain which may leak or flow from or into any part of
the Premises, or from the breakage, leakage, obstruction, or other defects of
the pipes, sprinklers, wires, appliances, plumbing, air conditioning, or
lighting fixtures of the Premises, whether such damage or injury results from
conditions arising upon the Premises or upon other portions of the Project or
from other sources. Landlord shall not be liable for any damages arising from
any act or neglect of: (a) any other tenant or occupant of the Project; or (b)
any officer, employee, agent, representative, customer, business visitor, or
invitee of any such tenant. Notwithstanding the foregoing, nothing contained in
this Lease shall operate to relieve Landlord of the consequences of its own
negligence or willful misconduct or the negligence or willful misconduct of its
agents or employees. Also notwithstanding the foregoing, in the event of any
interruption of the services and utilities described in Section 8.2 above or the
services described hereinabove, where such interruption is caused by the gross
negligence or the willful misconduct of Landlord, Tenant shall be entitled to an
abatement of Rent in proportion to the reasonable denial of use caused by such
interruption. Such abatement of Rent shall be begin on the later of (i) the
third (3rd) day after Tenant provides Landlord notice of such interruption, or
(ii) the date Tenant stops using the affective portion of the Premises because
of such interruption. Such abatement of Rent shall continue until the
restoration of the interrupted service. Tenant acknowledges that any and all
such services supplied by Landlord may be interrupted because of accidents,
repairs alterations, improvements or other reasons beyond the reasonable
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control of Landlord. No such interruption shall be consideredan eviction or
disturbance of Tenant's use or possession of the Premises, make Landlord
liable to Tenant for damages, abate Rent (except as aforesaid), or relieve
Tenant from performing its obligations under this Lease.
11.5.3 INDEMNIFICATION OF TENANT. To the fullest extent permitted
by law, Landlord shall indemnify, protect, defend (with legal counsel acceptable
to Tenant) and save Tenant and Tenant's Indemnitees harmless from and against
any and all claims, actions, damages, liabilities and expenses, including
attorneys' fees, in connection with loss of life, personal injury, bodily injury
and/or damage to property arising from or out of any occurrence in, upon or
about the Premises, Building and/or Project and due to the negligence or willful
misconduct of Landlord. Except as otherwise set forth in this Lease, and
subject to Section 11.5.2 above, Landlord shall further indemnify, defend,
protect and hold Tenant and Tenant's Indemnitees harmless from and against any
and all losses, expenses and damages arising from any breach or default in
performance of any obligation on Landlord's part to be performed under the terms
of this Lease.
ARTICLE 12 -- ASSIGNMENT AND SUBLETTING
12.1 LANDLORD'S CONSENT REQUIRED.
12.1.1 TRANSFER. Tenant shall not either voluntarily or by
operation of law, assign, mortgage, pledge, hypothecate or encumber this Lease
or the leasehold interest created hereby or any interest herein, or sublet the
Premises or any portion thereof, or license the use of all or any portion of the
Premises or permit any other person to occupy or use the Premises or any portion
thereof (collectively referred to herein as a "Transfer"), without the prior
written consent of Landlord, which consent is subject to the following
conditions: (i) the proposed transferee's use of the Premises must be consistent
with Article 6 hereof; (ii) the transferee is of a character and engaged in a
business which is in keeping with the Landlord's standards for the Project;
(iii) the proposed Transfer must not breach any financing agreement or any other
agreement relating to the Project; (iv) the net worth of the proposed transferee
must be sufficient to discharge the obligation under this Lease (in Landlord's
reasonable judgment); and (v) subject to Landlord not having available space in
the Project for such proposed transferee, the proposed transferee must not be an
existing tenant in the Project.
12.1.2 PROCEDURE. Prior to a Transfer, Tenant shall request
Landlord's consent in writing, and shall include with such request a copy of
all proposed contracts, agreements, subleases, or other documents describing
the Transfer between Tenant and the proposed transferee. Landlord shall
respond to Tenant's request for consent to a proposed Transfer within thirty
(30) days after receipt of all information described above and reasonably
necessary to allow Landlord to evaluate all the conditions set forth in
Section 12.1.1 above. If Tenant hereunder is a corporation or is an
unincorporated association or partnership, then the transfer, assignment or
hypothecation of any stock or interest in such corporation, association or
partnership in the aggregate in excess of twenty-five percent (25%) shall be
deemed a Transfer under the meaning of this Article 12 (other than normal
bulk transactions of publicly held stock).
12.1.3 PERMITTED TRANSFERS. Notwithstanding the foregoing,
Landlord's prior written consent shall not be required for a Transfer to a
wholly owned subsidiary or a parent of Tenant or to a new entity created by
merger or consolidation (collectively, "Affiliate") or to an entity which
acquires all or substantially of Tenant's assets. Any such transfer is a
"Permitted Transfer" provided, however, that in all events all requirements
of this Lease (including, but not limited to Section 16.5) shall remain
applicable. Promptly upon a Permitted Transfer, Tenant shall deliver written
notice to Landlord thereof
12.1.4 PUBLIC OFFERINGS. Notwithstanding the foregoing, Landlord's
prior written consent shall not be required for a Transfer in connection with
any public offering of Tenant's stock or any other Transfer to any entity that
is a public company. Promptly upon a Transfer in connection with a public
offering of Tenant's stock or a transfer to an entity that is a public company,
Tenant shall deliver written notice to Landlord thereof.
12.2 RECAPTURE RIGHT. In lieu of giving or withholding consent pursuant to
Section 12.1, Landlord may, at its option, terminate this Lease (or in the case
of a proposed subletting or assignment of a portion of the Premises, elect to
terminate this Lease as respects that portion) upon thirty (30) days' prior
notice. Thereafter
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Landlord may enter into a lease agreement with such proposed transferee and
shall be entitled to all of the Profit related thereto. If Landlord does
elect to terminate this Lease as set forth in this Section 12.2 such
termination shall not in and of itself require Tenant to deliver the Tenant's
Termination Payment (as described in Section 3.6.2 above). If Landlord has
terminated the Lease as to a portion of the Premises and thereafter Tenant
elects to terminate this Lease pursuant to the terms of Section 3.6, Tenant's
Termination Payment shall be proportionate to the Rentable Square Footage of
the Premises still occupied by Tenant and subject to this Lease at the time
Tenant delivers the Tenant's Termination Notice. In consideration for
Landlord's right and election to terminate this Lease as set forth above,
Landlord will release Tenant from liability under this Lease for Base Monthly
Rent and Additional Rent with respect to the Premises (or the portion of the
Premises subject to the proposed Transfer) accruing after termination of this
Lease resulting from Landlord's exercise of such right. Landlord and Tenant
agree and acknowledge that Landlord's right to recapture as set forth above
is intended to permit Landlord to maintain control over the leasing of space
in the Project to protect its interest in the Project and the interest of any
lenders and to prevent such interest from being impaired. Tenant understands
the nature of this right and has approved the recapture provisions in
consideration for Landlord's agreement to release Tenant from liability for
future Rent due with respect to the recaptured portion of the Premises
pursuant to the provisions of this Section.
12.3 TRANSFER WITHOUT CONSENT. Any Transfer without Landlord's prior
written consent shall, at the option of the Landlord, constitute a non-curable
breach of this Lease.
12.4 NO RELEASE OF TENANT. No Transfer shall release Tenant or any
guarantor or change Tenant's primary liability to pay the Rent and to perform
all other obligations of Tenant under this Lease. Landlord's acceptance of Rent
from any other person is not a waiver of any provision of this Article 12.
Consent to one Transfer is not a consent to any subsequent Transfer. If
Tenant's transferee defaults under this Lease, Landlord may proceed directly
against Tenant without pursuing remedies against the transferee and without
releasing such transferee from its obligations under this Lease. Landlord may
consent to subsequent assignments or modifications of this Lease by Tenant's
transferee, without notifying Tenant or obtaining its consent. Such action
shall not relieve Tenant's liability under this Lease.
12.5 EFFECT OF A TRANSFER. Whether or not Landlord's consent is required,
the transferee shall agree to comply with and be bound by all of the terms,
covenants, conditions, provisions and agreements of this Lease to the extent or
the space transferred, assigned or sublet; and Tenant shall deliver to Landlord
promptly after execution an executed copy of each such Transfer document between
Tenant and the transferee. In addition, any sublease shall provide that it
shall be subject and subordinate to this Lease and to all mortgages; that
Landlord may enforce the provisions of the sublease, including collection of
rents and that in the event of termination of this Lease for any reason,
including without limitation, a voluntary surrender by Tenant, or in the event
of any reentry or repossession of the Premises by Landlord, Landlord may, at its
option, either (i) terminate the sublease, or (ii) take over all of the right,
title and interest of Tenant, as sublessor, under such sublease, in which case
such sublessee shall attorn to Landlord but in such event Landlord shall not (a)
be liable for any previous act or omission of Tenant under such sublease, (b) be
subject to any defense or offset previously accrued in favor of the sublessee
against Tenant, or (c) be bound by any previous modification of any sublease
made without Landlord's written consent, or by any previous prepayment by
sublessee of more than one month's rent.
12.6 EVENT OF BANKRUPTCY. If this Lease is assigned to any person or entity
pursuant to the provisions of the United States Bankruptcy Code, 11 U.S.C.
Section 101, et. seq. (the "Bankruptcy Code"), any and all monies or other
consideration payable or otherwise to be delivered in connection with such
assignment shall be paid or delivered to Landlord, shall be and remain the
exclusive property of Landlord, and shall not constitute the property of Tenant
or of the estate of Tenant within the meaning of the Bankruptcy Code. Any and
all monies or other considerations constituting Landlord's property under this
Section not paid or delivered to Landlord shall be held in trust for the benefit
of Landlord and shall be promptly paid or delivered to Landlord. Any person or
entity to which this Lease is assigned pursuant to the provisions of the
Bankruptcy Code shall be deemed without further act or deed to have assumed all
of the obligations arising under this Lease on and after the date of such
assignment.
12.7 NO MERGER. No merger shall result from Tenant's sublease of the
Premises under this Article l2, Tenant's surrender of this Lease or the
termination of this Lease in any other manner.
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12.8 ASSIGNMENT FEES AND PROCEDURES. In the event Landlord shall be
requested to consent to a Transfer, Tenant shall pay Landlord a reasonable fee
to reimburse Landlord for costs and expenses, including attorneys' fees,
incurred in connection with reviewing Tenant's request for consent.
ARTICLE 13 -- DAMAGE OR DESTRUCTION
13.1 REPAIR OF DAMAGE BY LANDLORD. Tenant agrees to promptly notify
Landlord in writing of any damage to the Premises resulting from fire,
earthquake or any other casualty (such events referred to collectively as
"Casualty"). If the Premises, or any common areas of the Building providing
access to the Premises (such that Tenant does not have reasonable access to the
Premises) shall be damaged by a Casualty, Landlord shall, as soon as possible
using diligent efforts but in no event later than sixty (60) days after the date
of the Casualty, provide written notice to Tenant indicating the anticipated
time period for repairing the Casualty (the "Repair Period Notice"). In the
event the Repair Period Notice indicates that the time period for repairing the
Casualty is estimated to exceed two hundred seventy (270) days from the date of
the Repair Period Notice, Landlord (pursuant to the provisions of Section 13.3
below) or Tenant may elect to terminate this Lease ("Tenant's Termination
Election"). Such election must be made by Tenant within sixty (60) days after
the receipt of the Repair Period Notice or will be deemed waived by Tenant. If
Tenant elects to terminate the Lease, the termination shall be effective thirty
(30) days after Landlord's receipt of Tenant's Termination Election. If the
Repair Period Notice indicates that the time period for repairing the Casualty
is estimated to not exceed two hundred seventy (270) days from the date of the
Repair Period Notice, or if Tenant does not exercise Tenant's Termination
Election as provided above, then subject to the other provisions of this
Article, Landlord will repair the damage pursuant to the provisions hereof. If
Landlord is obligated to or elects to repair the Casualty as provided herein,
Landlord agrees to promptly and diligently, subject to reasonable delays for
insurance adjustment and other matters beyond Landlord's reasonable control, and
subject to the other provisions of this Article, restore the Premises and the
Tenant Improvements originally constructed by Landlord to substantially the same
condition as existed prior to the Casualty, except for modifications required by
building codes and other laws, and any other modifications to the common areas
deemed desirable by Landlord provided that access to the Premises shall not
thereby be materially impaired. If Tenant requests that Landlord make any
modifications to the Tenant Improvements in connection with the rebuilding,
Landlord may condition its consent to such modifications on (i) Tenant's payment
to Landlord prior to commencement of construction of any sums necessary to
complete the Tenant Improvements in excess of the amount of insurance proceeds
received by Landlord and (ii) confirmation by Landlord's architect that the
modifications will not increase the scope of work or time period necessary to
complete the Tenant Improvements.
13.2 RENT ABATEMENT DUE TO CASUALTY. Landlord and Tenant agree and
acknowledge that Tenant shall be provided with full abatement of Rent during the
time period commencing on the last to occur of (i) the date of the Casualty or
(ii) the date Tenant ceases to enjoy the substantial benefit of the Premises,
and continuing until Substantial Completion of Landlord's restoration
obligations as provided herein ("Abatement Period"), provided that if Tenant is
only able to occupy a portion of the Premises and receive the substantial
benefit of such portion for Tenant's uses of the Premises, Rent shall be abated
during the Abatement Period for the portion of the Premises not occupied by
Tenant. Landlord and Tenant acknowledge and agree that the Rent abatement as
provided in this Section is Tenant's sole remedy due to the occurrence of the
Casualty and that Landlord shall not be liable to Tenant or any other person for
any direct, indirect or consequential damage (including, but not limited to,
lost profits of Tenant or loss of or interference with Tenant's business, or
otherwise), whether or not caused by the negligence of Landlord or Landlord's
employees, contractors, licensees, or invitees, due to or arising out of or as a
result of the Casualty (including but not limited to the termination of the
Lease in connection therewith). Tenant acknowledges and agrees that Tenant
shall maintain adequate business interruption insurance to provide coverage as
to such matters.
13.3 LANDLORD'S OPTION TO REPAIR. Notwithstanding the terms of Section 13.1
of this Lease, Landlord may elect not to rebuild and/or restore the Premises
and/or Building and to instead terminate this Lease by notifying Tenant in
writing of such termination within sixty (60) days after the date of the
Casualty in the event the Building shall be damaged by Casualty (whether or not
the Premises are affected) when one or more of the following conditions exists:
(i) Landlord determines that the time period for repair will exceed two hundred
seventy (270) days as provided in Section 13.1 above; (ii) the damage is not
fully covered, except for deductible amounts, by insurance required to be
carried by Landlord under the terms of this Lease; (iii) the holder of the
mortgage on the Building or
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ground lessor with respect to the Project requires that the insurance
proceeds or a portion thereof be used to retire the mortgage debt, or
terminates the ground Lease, as the case may be; or (iv) Landlord elects not
to rebuild the Building for any reason, provided that in connection with such
election Landlord also terminates all other leases in the Building.
13.4 DAMAGE NEAR END OF TERM. In the event that the Premises or more than
twenty-five percent (25%) of the rentable area of the Building is destroyed or
damaged by a Casualty during the last two (2) years of the Lease Term,
notwithstanding anything else contained in this Article, Landlord shall have the
option to terminate this Lease by giving written notice to Tenant of the
exercise of such option within thirty (30) days after such damage or
destruction, in which event this Lease shall cease and terminate as of the date
of the notice. In such event or in the event of a termination pursuant to the
other provisions of this Article, Tenant shall pay Rent, properly apportioned up
to the date of the Casualty, and both parties shall thereafter be freed and
discharged of all future obligations hereunder, except for any provisions of
this Lease which by their terms survive the expiration or earlier termination of
the Lease Term.
13.5 WAIVER OF STATUTORY PROVISIONS. The provisions of this Lease,
including this Article 13, constitute an express agreement between Landlord and
Tenant with respect to the occurrence of any Casualty to the Premises and/or
Building or any other portion of the Project and Tenant therefore fully waives
the provisions of any statute or regulation, including, without limitation,
Sections 1932(2) and 1933(4) of the California Civil Code, with respect to any
rights or obligations concerning a Casualty.
ARTICLE 14 CONDEMNATION
14.1 TOTAL CONDEMNATION. If the whole of the Premises shall be acquired or
condemned by eminent domain for any public or quasi-public use or purpose, then
the Lease Term shall cease and terminate as of the date of title vesting in such
proceeding and all rentals shall be paid up to that date.
14.2 PARTIAL CONDEMNATION. If any part of the Premises shall be acquired or
condemned by eminent domain for any public or quasi-public use or purpose, and
if such partial taking or condemnation renders the Premises reasonably
unsuitable for the business of the Tenant, then Tenant shall have the right to
terminate the Lease Term as of the date of title vesting in such proceeding by
delivering written notice thereof to Landlord within thirty (30) days after
Tenant becomes aware of the proposed condemnation. In the event of a partial
taking or condemnation which is not extensive enough to render the Premises
unsuitable for the business of the Tenant then this Lease shall continue in full
force and effect.
14.3 CONDEMNATION OF PARKING AREA. If the whole or any part of the parking
area in the Project shall be acquired or condemned by eminent domain for any
public or quasi-public use or purpose and if, as the result of such partial
taking, the ratio of the number of parking stalls does not conform to the
parking requirements of this Lease ("Parking Restrictions"), in effect at the
time that title to such parking area is acquired through such condemnation
process, then at Tenant's option the Lease Term shall cease and terminate from
the date of title vesting in such proceeding unless Landlord provides
substantially equal parking facilities in the vicinity of the Project within
sixty (60) days after the date of acquisition and such alternative parking
satisfies the requirements of the Parking Restrictions. If the Lease is not
terminated as aforesaid, the Lease shall be deemed amended to conform to the
Project remaining after such condemnation.
14.4 DISTRIBUTION OF CONDEMNATION AWARD. Any condemnation award or payment
shall be distributed in the following order: (a) first, to any ground lessor,
mortgagee or beneficiary under a deed of trust encumbering the Premises, the
amount of its interest in the Premises; (b) second, to Tenant, only the amount,
if any, of any award specifically designated for loss of or damage to Tenant's
movable trade fixtures or removable personal property and/or Tenant Work, and
the Tenant hereby assigns any other rights which the Tenant may have now or in
the future to any other award to the Landlord; and (c) third, to Landlord, the
remainder of such award, whether as compensation for reduction in the value of
the leasehold, the taking of the fee, or otherwise. In no event shall Tenant
have any claim against Landlord for the value of any unexpired term of this
Lease. If this Lease is not terminated, Tenant shall be entitled to abatement
of rent in same manner as set forth in Section 13.2 above and
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Landlord shall repair any damage to the Premises caused by the condemnation,
except that Landlord shall not be obligated to repair any damage for which
Tenant has been reimbursed by the condemning authority.
14.5 WAIVER. Tenant hereby waives any statutory rights of termination
which may arise by reason of any taking of the Premises under the power of
eminent domain including, without limitation, the provisions of Section 1265.130
of the California Code of Civil Procedure.
ARTICLE 15 -- DEFAULTS; REMEDIES
15.1 COVENANTS AND CONDITIONS. Tenant's performance of each of Tenant's
obligations under this Lease is a condition as well as a covenant. Tenant's
right to continue in possession of the Premises is conditioned upon such
performance. Time is of the essence in the performance of all covenants and
conditions.
15.2 DEFAULT BY TENANT. Tenant shall be in default under this Lease if
Tenant breaches its obligations hereunder and fails to cure such breach within
the period set forth herein, except that there shall be no cure period for
breaches of Sections 15.2.3 and 15.2.4, and the cure period for breaches of
Section 15.2.2 shall be the minimum mandated by California statute. Tenant
shall be in breach of its obligations under this Lease:
15.2.1 If Tenant abandons or vacates the Premises;
15.2.2 If Tenant fails to pay Base Monthly Rent, Additional Rent or
any Rent required to be paid by Tenant, for a period of five (5) days after
written notice from Landlord (such notice required by this subsection is
intended to satisfy any and all notice requirements imposed by law on Landlord
prior to the commencement of an unlawful detainer action and is not in addition
to any such requirement);
15.2.3 If Tenant fails or refuses to occupy and operate the
Premises in accordance with Article 6 for a period of ten (10) days after
written notice from Landlord (such notice required by this subsection is
intended to satisfy any and all notice requirements imposed by law on Landlord
prior to the commencement of an unlawful detainer action and is not in addition
to any such requirement),
15.2.4 If (i) Tenant's use of the Premises involves the generation
or storage, use, treatment or disposal of Hazardous Material in a manner or for
a purpose prohibited by any Hazardous Materials Law; (ii) Tenant has been
required by any lender or governmental authority to take remedial action in
connection with Hazardous Material contaminating the Premises if the
contamination resulted from Tenant's action or use of the Premises; or (iii)
Tenant is subject to an enforcement order issued by any governmental authority
in connection with the use, disposal or storage of a Hazardous Material on the
Premises.
15.2.5 If Tenant fails to perform any of Tenants nonmonetary
obligations under this Lease (other than Tenant's obligations under Sections
15.2.3, 15.2.4 and 15.2.6 for which there will be no additional cure periods)
for a period of ten (10) days after written notice from Landlord; provided that
if such cure is not reasonably susceptible of being cured within such ten (10)
day period, Tenant shall not be in default if Tenant commences such performance
within the ten (10) day period and uses its best efforts and due diligence to
promptly cure the default. However, Landlord shall not be required to give such
notice if Tenant's failure to perform constitutes a non-curable breach of this
Lease. The notice required by this Section is intended to satisfy any and all
notice requirements imposed by law on Landlord prior to the commencement of an
unlawful detainer action and is not in addition to any such requirement;
15.2.6 If (i) Tenant makes a general assignment or general
arrangement for the benefit of creditors; (ii) Tenant files a petition for
adjudication of bankruptcy or for reorganization or rearrangement or any similar
proceeding; (iii) a petition for adjudication of bankruptcy or for
reorganization or rearrangement is filed against Tenant and is not dismissed
within forty-five (45) days; (iv) a trustee or receiver is appointed to take
possession of substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease and possession is not restored to Tenant within
forty-five (45) days; or (v) substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease is subjected to attachment,
execution or other judicial seizure which is not discharged within forty-five
(45) days. If a court of competent jurisdiction determines that any of the
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acts described in this subsection is not a default under this Lease, and a
trustee is appointed to take possession (or if Tenant remains a debtor in
possession) and such trustee or Tenant transfers Tenant's interest hereunder,
then Landlord shall receive, as Additional Rent, the difference between the
Rent (or any other consideration) paid in connection with such assignment or
sublease and the Rent payable by Tenant hereunder.
15.3 REMEDIES. On the occurrence of any default by Tenant, Landlord may,
at any time thereafter, with or without notice or demand and without limiting
Landlord in the exercise of any right or remedy which Landlord may have:
15.3.1 Terminate Tenant's right to possession of the Premises by
any lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Premises to Landlord. In such event
Landlord shall have the immediate right to re-enter the Premises and remove all
persons and property and such property may be removed and stored in a public
warehouse or elsewhere at the cost of, and for the account of Tenant; and
Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant's default, including (i) the worth at the time of
the award of all Base Monthly Rent, Additional Rent and other charges which were
earned or were payable at the time of the termination; (ii) the worth at the
time of the award of the amount by which the unpaid Base Monthly Rent,
Additional Rent and other charges which would have been earned or were payable
after termination until the time of the award exceeds the amount of such rental
loss that Tenant proves could have been reasonably avoided; (iii) the worth at
the time of the award of the amount by which the unpaid Base Monthly Rent,
Additional Rent and other charges which would have been payable for the balance
of the term after the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided; and (iv) any other amount
necessary to compensate Landlord for all the detriment proximately caused by
Tenant's failure to perform its obligations under this Lease or which in the
ordinary course of things would be likely to result therefrom, including, but
not limited to, any costs or expenses incurred by Landlord in maintaining or
preserving the Premises after such default, the cost of recovering possession of
the Premises, expenses of resetting, including, without limitation, necessary
renovation or alteration of the Premises, Landlord's reasonable attorneys' fees,
and any real estate commissions or other such fees paid or payable. Any such
sums which are based on percentages of income, increased costs or other data
shall be reasonable estimates or projections computed by Landlord on the basis
of the amounts thereof accruing during the twenty-four (24) month period
immediately prior to the default, except that if it becomes necessary to compute
such sums before a twenty-four (24) month period has expired, then the
computation shall be made on the basis of the amounts accruing during such
shorter period. As used in subsections (i) and (ii) above, the "worth at the
time of the award" is computed by allowing interest on unpaid amounts at the
rate of fifteen percent (15%) per annum, but if such rate exceeds the maximum
interest rate permitted by law, such rate shall be reduced to the highest rate
allowed by law under the circumstances. As used in subsection (iii) above, the
"worth at the time of the award" is computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of the
award, plus one percent (1%). If Tenant shall have abandoned the Premises,
Landlord shall have the option of (a) retaking possession of the Premises and
recovering from Tenant the amount specified in this Section 15.3.1, or (b)
proceeding under Section 15.3.2 below;
15.3.2 Maintain Tenant's right to possession, in which case this
Lease shall continue in effect whether or not Tenant shall have abandoned the
Premises. This remedy is intended to be that remedy described in California
Code of Civil Procedure Section 1951.4. In such event, Landlord shall be
entitled to enforce all of Landlord's rights and remedies under this Lease,
including the right to recover the Rent as it becomes due hereunder; and/or
15.3.3 Whether or not Landlord elects to terminate this Lease on
account of any default by Tenant, Landlord shall have all rights and remedies at
law or in equity including, but not limited to, the right to re-enter the
Premises, and Landlord shall have the right to terminate any and all subleases,
licenses, concessions or other arrangements for possession entered into by
Tenant and affecting the Premises or may, in Landlord's sole discretion, succeed
to Tenant's interest in such subleases, licenses, concessions or arrangements.
In the event of Landlord's election to succeed to Tenant's interest in any such
subleases, licenses, concessions or arrangements, Tenant shall, as of the date
of notice by Landlord of such election, have no further right to or interest in
the Rent or other consideration receivable thereunder.
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15.4 THE RIGHT TO RELET THE PREMISES. Should Landlord elect to re-enter,
as herein provided, or should take possession pursuant to legal proceedings or
pursuant to any notice provided for by law, it may either terminate this Lease
or it may from time to time without terminating this Lease, make such
alterations and repairs as may be necessary in order to relet the Premises, and
relet said Premises or any part thereof for such term or terms (which may be for
a term extending beyond the Lease Term) and at such rental or rentals and upon
such other terms and conditions as Landlord in its sole discretion may deem
advisable; upon each such reletting all rentals received by the Landlord from
such reletting shall be applied, first, to the repayment of any indebtedness
other than Rent due hereunder from Tenant to Landlord; second, to the payment of
any costs and expenses of such reletting, including brokerage fees and
attorneys' fees and of costs of such alterations and repairs; third, to the
payment of Rent due and unpaid hereunder, and the residue, if any, shall be held
by Landlord and applied in payment of future Rent as the same may become due and
payable hereunder. If such rentals received from such reletting during any
month are less than that to be paid during that month by Tenant hereunder,
Tenant shall pay any such deficiency to Landlord. Such deficiency shall be
calculated and paid monthly. No such re-entry or taking possession of said
Premises by Landlord shall be construed as an election on its part to terminate
this Lease unless a written notice of such intention be given to Tenant or
unless the termination thereof be decreed by a court of competent jurisdiction.
15.5 WAIVER OF RIGHTS OF REDEMPTION. Tenant hereby expressly waives any
and all rights of redemption granted by or under any present or future laws in
the event of Tenant being evicted or dispossessed for any cause, or in the event
of Landlord obtaining possession of the Premises, by reason of the violation by
Tenant of any of the covenants or conditions of this Lease, or otherwise.
15.6 CUMULATIVE REMEDIES. Landlord's exercise of any right or remedy stated
or set forth anywhere in this Lease shall not prevent Landlord from exercising
any other right or remedy which may be provided by law, in equity or this Lease,
whether or not stated in this Lease. The termination of this Lease under this
Article 15 shall not release Tenant from obligations arising as a result of any
acts or omissions occurring prior to such expiration or termination, including,
without limitation, any indemnity obligations of Tenant and any obligations of
Tenant under Article 7 of this Lease and all such obligations shall survive such
termination.
15.7 ADDITIONAL REMEDIES UPON DEFAULT. In addition to any rights or
remedies hereinbefore or hereinafter conferred upon Landlord under the terms of
this Lease, the following remedies and provisions shall specifically apply in
the event Tenant engages in any one or more of the acts contemplated by the
provisions of Section 15.2.6 of this Lease:
15.7.1 ASSUMPTION OR REJECTION OF LEASE. In all events, any
receiver or trustee in bankruptcy shall either expressly assume or reject this
Lease within sixty (60) days following the entry of an "Order for Relief" or
within such earlier time as may be provided by applicable law. In the event of
an assumption of this Lease by a debtor or by a trustee, such debtor or trustee
shall within fifteen (15) days after such assumption (i) cure any default or
provide adequate assurance that defaults will be promptly cured; (ii) compensate
Landlord for actual monetary loss or provide adequate assurance that
compensation will be made for actual monetary loss, including, but not limited
to, all attorneys' fees and costs incurred by Landlord resulting from any such
proceedings; and (iii) provide adequate assurance of future performance. Where
a default exists under this Lease, the trustee or debtor assuming this Lease may
not require Landlord to provide services or supplies incidental to this Lease
before its assumption by such trustee or debtor, unless Landlord is compensated
under the terms of this Lease for such services and supplies provided before the
assumption of such Lease;
15.7.2 ASSIGNMENT. The debtor or trustee may only assign this Lease
if (i) it is assumed and assignee agrees to be bound by this Lease, (ii)
adequate assurance of future performance by the assignee is provided, whether or
not there has been a default under this Lease, and (iii) the debtor or trustee
has received Landlord's prior written consent pursuant to the provisions of
Section 12.1 of this Lease. Any consideration paid by any assignee in excess
of the rental reserved in this Lease shall be the sole property of, and paid to,
Landlord. Landlord shall be entitled to the fair market value for the Premises
and the services provided by Landlord (but in no event less than the Rent
reserved in this Lease) subsequent to the commencement of a bankruptcy event;
15.7.3 OTHER MATTERS. Any Security Deposit given by Tenant to
Landlord or Landlord's construction lender to secure the future performance by
Tenant of all or any of the terms and conditions of this
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Lease shall be automatically transferred to Landlord upon the entry of an
"Order of Relief." The parties agree that Landlord is entitled to adequate
assurance of future performance of the terms and provisions of this Lease in
the event of an assignment under the provisions of the Bankruptcy Code. For
purposes of any such assumption or assignment of this Lease, the parties
agree that the term "adequate assurance" shall include, without limitation,
at least the following: (a) any proposed assignee must have, as demonstrated
to Landlord's satisfaction, a net worth (as defined in accordance with
generally accepted accounting principles consistently applied) in an amount
sufficient to assure that the proposed assignee will have the resources to
meet the financial responsibilities under this Lease, including the payment
of all Rent. The financial condition and resources of Tenant are material
inducements to Landlord entering into this Lease; (b) any proposed assignee
must not be engaged in any business or activity which it will conduct on the
Premises and which will subject the Premises to contamination by any
Hazardous Materials; (c) any proposed assignee must agree in writing to be
bound by all the terms and provisions of this Lease.
15.8 DEFAULT BY LANDLORD. Landlord shall not be in default unless Landlord
falls to perform obligations required of Landlord within a reasonable time, but
in no event later than thirty (30) days after written notice by Tenant to
Landlord and to the holder of any first mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been furnished to Tenant
in writing, specifying wherein Landlord has failed to perform such obligation;
provided, however, that if the nature of Landlord's obligation is such that more
than thirty (30) days are required for performance, then Landlord shall not be
in default if Landlord commences performance within such thirty (30) day period
and thereafter diligently prosecutes the same to completion.
15.9 LANDLORD'S CURE. All covenants and agreements to be kept or performed
by Tenant under this Lease shall be performed by Tenant at Tenant's sole cost
and expense and without any reduction or abatement of Base Monthly Rent,
Additional Rent or any other Rent payable under the Lease except for any
abatement specifically permitted under this Lease. If Tenant shall default in
the performance of its obligations under this Lease, Landlord may, but shall not
be obligated to, make any such payment or perform any such act on Tenant's part
without waiving its right based upon any default of Tenant and without releasing
Tenant from any obligations hereunder and Tenant shall, within fifteen (15) days
after delivery by Landlord to Tenant of statements therefor reimburse Landlord
for all such expenditures, losses, costs, liabilities, damages and expenses.
All sums so paid by Landlord and all necessary incidental costs, and interest
thereon at the Lease Interest Rate accruing from the date paid or incurred by
Landlord until reimbursed to Landlord by Tenant, shall be payable to Landlord by
Tenant as Rent on demand and Tenant covenants to pay all such sums. Tenant's
obligations under this Section shall survive the expiration or sooner
termination of the Lease Term.
ARTICLE 16 -- PROTECTION OF CREDITORS
16.1 SUBORDINATION. Landlord shall have the right to require Tenant to
subordinate this Lease to any ground lease, deed of trust, mortgage or the
Declarations encumbering the Premises, any advances made on the security thereof
and any renewals, modifications, consolidations, replacements or extensions
thereof, whenever made or recorded. Landlord may, by written notice to Tenant,
subordinate this Lease to any new Declarations. If any beneficiary under a deed
of trust or mortgagee under a mortgage elects to have this Lease prior to the
lien of its deed of trust or mortgage and gives written notice thereof to
Tenant, this Lease shall be deemed prior to such deed of trust or mortgage
whether this Lease is dated prior or subsequent to the date of said deed of
trust or mortgage or the date of recording thereof. As a condition to any such
subordination, Landlord's lender shall provide to Tenant a commercially
reasonable nondisturbance agreement signed by the party requesting such
subordination (which may be part of a subordination and attornment agreement)
recognizing Tenant's right to possession of the Premises so long as Tenant is
not in default under this Lease beyond any applicable cure period.
16.2 ATTORNMENT. If Landlord's interest in the Premises is acquired by any
ground lessor, beneficiary under a deed of trust, mortgagee, or purchaser at a
foreclosure sale, or by any other person or entity, as a result of any other
transfer by Landlord, Tenant shall attorn to the transferee of or successor to
Landlord's interest in the Premises and recognize such transferee or successor
as Landlord under this Lease so long as such other person or entity agrees in
writing to recognize Tenant's rights to possession and occupancy of the Premises
pursuant to this Lease.
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16.3 SIGNING OF DOCUMENTS. Tenant shall sign and deliver any instrument or
documents necessary or appropriate to effectuate or evidence any such attornment
or subordination or agreement to do so. If Tenant fails to do so within ten
(10) days after written request, such failure shall constitute a default under
this Lease entitling Landlord to terminate this Lease.
16.4 ESTOPPEL CERTIFICATES.
16.4.1 REQUEST. Upon either party's written request ("Requesting
Party"), the other party ("Responding Party") shall execute, acknowledge and
deliver to the Requesting Party a written statement certifying: (i) that none of
the terms or provisions of this Lease have been changed (or if they have been
changed, stating how they have been changed); (ii) that this Lease has not been
canceled or terminated and is in full force and effect; (iii) the last date of
payment of the Base Monthly Rent, and other charges and the time period covered
by such payment; (iv) than the Requesting Party is not in default under this
Lease (or, if the Requesting Party is claimed to be in default, stating why) and
(v) such other statements as required by the Requesting Party, or any lender or
prospective lender, investor or purchaser. The Responding Party shall deliver
such statement to the Requesting Party within ten (10) days after the Requesting
Party's request. Any such statement by the Responding Party may be given by the
Requesting Party to any prospective purchaser or encumbrancer of the Premises.
Such purchaser or encumbrancer may rely conclusively upon such statement as true
and correct.
16.4.2 FAILURE TO RESPOND. If the Responding Party does not
deliver such statement to the Requesting Party within such ten (10) day period,
such failure shall constitute a default under this Lease. Further, the
Requesting Party and any prospective purchaser or encumbrancer, may conclusively
presume and rely upon the following facts: (i) that the terms and provisions of
this Lease have not been changed except as otherwise represented by the
Requesting Party; (ii) that this Lease has not been canceled or terminated
except as otherwise represented by the Requesting Party; (iii) that not more
than one month's Base Monthly Rent or other charges have been paid in advance;
and (iv) that Landlord is not in default under this Lease. In such event, the
Requesting Party shall be estopped from denying the truth of such facts.
16.5 TENANT'S FINANCIAL CONDITION. Within ten (10) days after written
request from Landlord, Tenant shall deliver to Landlord such financial
statements as are reasonably required by Landlord and are available to the
public to verify the net worth of Tenant, or any assignee, subtenant, or
guarantor of Tenant. Tenant covenants that during the term of this Lease Tenant
shall maintain a minimum net worth of five million dollars ($5,000,000.00). In
addition, Tenant shall deliver to any lender or proposed purchaser of the
Premises or any portion of the Project designated by Landlord any financial
statements required by such lender or purchaser (which are available to the
public) to facilitate the sale, financing or refinancing of the Premises or any
portion of the Project. Tenant represents and warrants to Landlord that each
such financial statement is a true and accurate statement as of the date of such
statement. All financial statements shall be confidential and shall be used
only for the purposes set forth herein. Each such financial statement shall be
executed by Tenant and shall be certified by Tenant to be true and correct.
16.6 MORTGAGEE PROTECTION CLAUSE. Tenant agrees to give any mortgagees
and/or trust deed holders, by registered mail, a copy of any notice of default
served upon the Landlord, provided that prior to such notice Tenant has been
notified in writing of the addresses of such mortgagees and/or trust deed
holders. Tenant further agrees that if Landlord shall have failed to cure such
default within the time provided for in this Lease, then the mortgagees and/or
trust deed holders shall have an additional thirty (30) days within which to
cure such default or if such default cannot be cured within that time, then such
additional time as may be necessary if within such thirty (30) days any
mortgagee and/or trust deed holder has commenced and. is diligently pursuing the
remedies necessary to cure such default (including but not limited to
commencement of foreclosure proceedings if necessary to effect such cure), in
which event this Lease shall not be terminated while such remedies are being so
diligently pursued.
ARTICLE 17 -- TERMINATION OF LEASE
17.1 CONDITION UPON TERMINATION. Upon the termination of this Lease,
Tenant shall surrender the Premises to Landlord, broom clean and in the same
condition as received except for ordinary wear and tear which Tenant was not
otherwise obligated to remedy under any provision of this Lease. However,
Tenant shall not be
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obligated to repair any damage which Landlord is required to repair under
Article 14 of this Lease. No act done by Landlord or any agent or employee
of Landlord during the Lease Term shall be deemed to constitute an acceptance
by Landlord of a surrender of the Premises unless such intent is specifically
acknowledged in writing and signed by Landlord. The delivery of keys to the
Premises to Landlord or any agent or employee of Landlord shall not
constitute a surrender of the Premises or effect a termination of this Lease,
whether or not the keys are thereafter retained by Landlord and,
notwithstanding such delivery, Tenant shall be entitled to the return of such
keys at any reasonable time upon request until this Lease shall have been
properly terminated. The voluntary or other surrender of this Lease by
Tenant, whether accepted by Landlord or not, or a mutual termination hereof,
shall not work a merger, and, at the option of Landlord, shall operate as an
assignment to Landlord of all subleases or subtenancies affecting the
Premises.
17.2 NON-REMOVAL BY TENANT. All alterations, including signs and sign
cases, made by Tenant, or made by the Landlord on the Tenant's behalf and for
which Tenant has paid Landlord in accordance with this Lease, shall remain the
property of the Tenant for the Lease Term. Such Alterations (not including
Tenant's trade fixtures) shall not be removed from the Premises. At the
expiration or termination of this Lease Term, all such Alterations become the
property of the Landlord; provided, however, Landlord may require that Tenant,
at Tenant's sole cost, remove any such Alterations or utility installations at
the expiration of the Lease Term and to restore the Premises to their prior
condition. In removing any such Alterations as may be required by the Landlord,
the Tenant shall remove any of its personal property and shall repair any damage
to the Premises caused by such removal and, prior to such removal, Tenant shall
post a bond or other security as may be required by the Landlord in order to
insure the Landlord that the Premises will be repaired in a prompt and
workmanlike manner. If Tenant fails promptly to commence and diligently pursue
to completion such removal and restoration required by the provisions of this
Article 17, Tenant shall pay to Landlord the cost of such removal and
restoration, such cost to include a reasonable charge for Landlord's overhead.
Tenant shall continue to pay Rent for the portion of the Premises not completely
vacated during such time together with all costs and expenses incurred by
Landlord in removing, storing and disposing of such property together with all
costs and expenses of repair to and clean up of the Premises. Thereafter,
Landlord may retain or dispose of in any manner the personal property not so
removed, without liability to Tenant.
17.3 ABANDONED PROPERTY. Any property of Tenant not removed by Tenant upon
the expiration of the Lease Term (or within five (5) Business Days after a
termination by reason of Tenant's default) shall be considered abandoned, and
Landlord may remove any or all such items and dispose of the same in any manner
or store the same in a public warehouse or elsewhere for the account of and at
the expense and risk of Tenant. If Tenant shall fail to pay the cost of storing
any such property after it has been stored for a period of thirty (30) days or
more, Landlord may sell any or all of such property at public or private sale,
in such manner and at such times and places as Landlord, in its sole discretion,
may deem proper, without notice to or demand upon Tenant. Landlord shall apply
the proceeds of such sale (a) first, to the costs and expenses of such sale,
including reasonable attorneys' fees actually incurred; (b) second, to the
payment of the expense of or charges for removing and storing any such property;
and (c) the balance to Landlord.
17.4 LANDLORD'S ACTIONS ON PREMISES. Tenant hereby waives all claims for
damages or other liability in connection with Landlord's re-entering and taking
possession of the Premises or removing, retaining, storing or selling the
property of Tenant as herein provided, and Tenant hereby indemnifies and holds
Landlord and Landlord's Indemnitees harmless from any such damages or other
liability, and no such re-entry shall be considered or construed to be a
forcible entry.
17.5 HOLDING OVER. Tenant shall vacate the Premises upon the expiration or
earlier termination of this Lease. Tenant shall reimburse Landlord for and
indemnify Landlord and Landlord's Indemnitees against all damages incurred by
Landlord from any delay by Tenant in vacating the Premises. If Tenant remains
in possession of all or any part of the Premises after the expiration of the
Lease Term with or without the express or implied consent of Landlord, such
tenancy shall be from month-to-month only and not a renewal hereof or an
extension for any further term, and in such case, Base Monthly Rent then in
effect shall be increased by fifty percent (50%) and other monetary sums due
hereunder shall be payable in the amount and at the time specified in this
Lease, and such month-to-month tenancy shall be subject to every other term,
covenant and agreement contained herein, except that the month-to-month tenancy
will be terminable on thirty (30) days notice given at any time by either party.
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ARTICLE 18 -- MISCELLANEOUS PROVISIONS
18.1 SUCCESSORS; NO THIRD PARTY BENEFICIARIES. Subject to limitations
expressed elsewhere in this Lease, all rights and liabilities herein given to,
or imposed upon, the respective parties hereto shall extend to and bind the
several respective heirs, executors, administrators, successors, and assigns of
the said parties; and if there shall be more than one Tenant, they shall all be
bound jointly and severally by the terms, covenants and agreements herein. No
rights, however, shall inure to the benefit of any assignee of Tenant unless the
assignment to such assignee has been approved by Landlord in writing as provided
in Article 12 hereof. This Lease grants certain rights and imposes certain
obligations by and between Landlord and Tenant only, and there are no third
party beneficiaries of the agreement contained herein.
18.2 SEVERABILITY. A determination by a court of competent jurisdiction
that any provision of this Lease or any part thereof is illegal or unenforceable
shall not cancel or invalidate the remainder of such provision or this Lease,
which shall remain in full force and effect.
18.3 INTERPRETATION. The captions of the Articles or Sections of this
Lease are to assist the parties in reading this Lease and are not a part of the
terms or provisions of this Lease. Whenever required by the context of this
Lease, the singular shall include the plural and the plural shall include the
singular. The masculine, feminine and neuter genders shall each include the
other. In any provision relating to the conduct, acts or omissions of Tenant,
the term "Tenant" shall include Tenant's agents, employees, contractors,
invitees, successors or others using the Premises with Tenant's expressed or
implied permission.
18.4 OTHER TENANCIES. Landlord reserves the absolute right to effect such
other tenancies in the Project as Landlord, in the exercise of its sole business
judgment, shall determine to best promote the interest of the Project. Tenant
does not rely on the fact, nor does Landlord represent, that any specific tenant
or type or number of tenants shall, during the term of this Lease, either (i)
enter into a lease for any space in the Project or (ii) continue to lease any
space in the Project under any lease which is in effect as of the date of this
Lease, or that any tenant under any lease in effect as of the date of this Lease
will not assign or transfer its interest under its lease or change the use of
the premises under such lease. By executing this Lease, Tenant acknowledges
that Landlord has not made any representations, warranties or statements as to
any of the foregoing and agrees that the occurrence of any of the foregoing or
any similar event shall not affect Tenant's obligations under this Lease.
Notwithstanding the foregoing, Landlord agrees not to lease any space in the
Building for a term which falls with in the Lease Term to any tenant whose
primary use will consist of (a) the operation of any executive suite service,
excluding any office suite service for doctors, dentists or medical-related
professionals and practitioners, or (b) providing to the general business
community and the tenants in the Building of any of the following services (as
opposed to the sale or servicing of equipment: (i) telephone answering services,
(ii) secretarial services, (iii) word processing services (excluding temporary
employment services), (iv) electronic mail services, (v) facsimile transmission
services, and (vi) video conferencing services. Landlord further agrees not to
lease any space within the Building consisting of less than 500 Rentable square
feet except as may be used for retail purposes, such as, but not limited to, a
delicatessen.
18.5 ENTIRE AGREEMENT. Any Exhibits attached hereto shall be incorporated
herein as though fully set forth herein. This Lease and the Exhibits, if any,
attached hereto and forming a part hereof, set forth all the covenants,
promises, agreements, conditions and understandings, either oral or written,
between Landlord and Tenant concerning the Premises and there are no covenants,
promises, agreements, conditions or understandings, either oral, or written,
between them other than are herein set forth, including the Option to Lease.
Except as herein otherwise provided, no subsequent alteration, amendment, change
or addition to this Lease shall be binding upon Landlord or Tenant unless
reduced to writing and signed by the party to be charged with their performance.
18.6 LANDLORD'S LIABILITY. As used in this Lease, the term "Landlord"
means only the current owner or owners of the fee title to the Premises or the
leasehold estate under a ground lease of the Premises at the time in question.
Each Landlord is obligated to perform the obligations of Landlord under this
Lease only during the time such Landlord owns such interest or title. Any
Landlord who transfers its title or interest is relieved of all liability with
respect to the obligations of Landlord under this Lease to be performed on or
after the date of transfer, provided the transferee assumes the obligations in
writing and a copy of such writing is delivered to Tenant. However, each
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Landlord shall deliver to its transferee all funds previously paid by Tenant if
such funds have not yet been applied under the terms of this Lease. The
obligations of Landlord under this Lease do not constitute personal obligations
of Landlord, or its partners, directors, employees, officers, members, managers
or shareholders and Tenant shall look solely to the Project and to no other
assets of Landlord for satisfaction of any liability with respect to this Lease
and will not seek recourse against the partners, directors, officers, members,
managers or shareholders of Landlord herein, nor against any of their personal
assets for such satisfaction.
18.7 NOTICES. All notices required or permitted under this Lease shall be
in writing and shall be personally delivered or sent by certified mail, return
receipt requested, postage prepaid or by overnight courier marked for delivery
next Business Day. Notices to Tenant shall be delivered to the address
specified in Item 5 of the Basic Terms, except that upon Tenant's taking
possession of the Premises, the Premises shall be Tenant's address for notice
purposes. Notices to Landlord shall be delivered to the address specified in
Item 3 of the Basic Terms or such other address as may be instructed by
Landlord. All notices shall be effective upon personal delivery or three (3)
Business Days after deposit in the U.S. Mail or one (1) Business Day after
deposit with an overnight courier.
18.8 WAIVERS. All waivers must be in writing and signed by the waiving
party. Landlord's failure to enforce any provision of this Lease or its
acceptance of Rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision or any other provision of this Lease in the future. No
statement on a payment check from Tenant or in a letter accompanying a payment
check shall be binding on Landlord. Landlord may, with or without notice to
Tenant, negotiate such check without being bound to the conditions of such
statement.
18.9 NO RECORDATION. Tenant shall not record this Lease or a memorandum
hereof without prior written consent from Landlord. However, Landlord may
require that a "Short Form" memorandum of this Lease be executed by both parties
and recorded.
18.10 CHOICE OF LAW. The internal laws without regard to choice of law
rules of the State of California shall govern this Lease.
18.11 CORPORATE AUTHORITY; PARTNERSHIP AUTHORITY. If Tenant is a
corporation, each person signing this Lease on behalf of Tenant represents and
warrants that he or she has full authority to do so and that this Lease binds
the corporation. Concurrently with execution of this Lease, Tenant shall
deliver to Landlord a certified copy of a resolution of Tenant's Board of
Directors authorizing the execution of this Lease or other evidence of such
authority reasonably acceptable to Landlord. If Tenant is a partnership, each
person signing this Lease for Tenant represents and warrants that he or she :is
a general partner of the partnership, that he or she has full authority to sign
for the partnership and that this Lease binds the partnership and all general
partners of the partnership. Tenant shall give written notice to Landlord of
any general partner's withdrawal or addition. Concurrently with execution of
this Lease, Tenant shall deliver to Landlord a copy of Tenant's recorded
statement of partnership or certificate of limited partnership.
18.12 NO PARTNERSHIP. Landlord shall not by virtue of this Lease, in
any way or for any purpose, be deemed to have become a partner of Tenant in the
conduct of its business, or otherwise, or joint venturer or a merger of a joint
enterprise with Tenant, nor is Tenant an agent of Landlord for any reason
whatsoever.
18.13 JOINT AND SEVERAL LIABILITY. All parties signing this Lease as
Tenant shall be jointly and severally liable for all obligations of Tenant.
18.14 ATTORNEYS' FEES. If either party commences litigation against the
other for the specific performance of this Lease, the interpretation of this
Lease, for damages for breach hereof or otherwise for enforcement of any remedy
hereunder, the parties hereto agree to and hereby do waive any right to a trial
by jury and, in the event of any such commencement of litigation, the prevailing
party shall be entitled to recover from the other party such costs and
reasonable attorneys' fees as may have been incurred. Further, if Landlord is
named as a defendant in any suit brought against Tenant in connection with or
arising out of Tenant's occupancy hereunder, Tenant shall be obligated to pay to
Landlord, in addition to all other amounts for which Tenant is obligated
hereunder, all of Landlord's reasonable costs and expenses incurred in
connection with any such acts, including
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reasonable attorneys' fees. Any attorneys' fees incurred in enforcing any
right of indemnity set forth in this Lease shall be recoverable and deemed to
be within the scope of such indemnity and/or this attorneys' fees provision.
18.15 LENDER MODIFICATION. If, in connection with obtaining any loans
including but not limited to a construction loan, permanent financing or
refinancing for the Project, a lender shall request reasonable modifications to
this Lease as a condition to such financing, Tenant will not unreasonably
withhold, delay or defer its consent thereto, provided that such modifications
do not increase the obligations of Tenant hereunder or materially adversely
affect the leasehold interest hereby created or Tenant's rights hereunder.
18.16 BROKERS. Except as specifically set forth herein, nothing
contained herein shall impose upon Landlord any obligation to pay any commission
or payment to Tenant's Broker specified in Item 13 of the Basic Terms. Landlord
shall pay Landlord's Broker pursuant to a separate agreement. Landlord shall be
responsible for paying a commission to Tenant's Broker in an amount equal to
three percent (3%) of the Base Monthly Rent for the first two (2) Lease Years;
two and one-half percent (2.5%) of the Base Monthly Rent for the third Lease
Year; two percent (2%) of Base Monthly Rent for the fourth and fifth Lease
Years; and one and one-half percent (1.5%) of the Base Monthly Rent for the
sixth, seventh, eighth, ninth and tenth Lease Years of the Lease Term; provided,
however, that in no event shall the total commission payable by Landlord exceed
three and one-quarter percent (3.25%) of the Base Monthly Rent for Lease Years 1
through 10. Such commission payable to Tenant's broker shall be deemed earned
only at the rate of fifty percent (50%) upon mutual execution of the Lease, and
fifty percent (50%) upon the Commencement Date. If and to the extent Landlord
owes a commission to Tenant's broker as aforesaid, Landlord shall pay such
commission fifty percent (50%) upon Landlord's obtaining a construction loan for
construction of the Building (and actual receipt of the proceeds thereof), and
fifty percent (50%) upon the Commencement Date, it being agreed that Landlord's
responsibility to pay any commission to Tenant's broker is contingent upon
Landlord's obtaining such construction loan and actual receipt of the proceeds
thereof. Landlord and Tenant hereby warrant to each other that they have had no
dealings with any real estate broker or agent in connection with the negotiation
of this Lease, excepting only the real estate brokers or agents specified in
Item 13 of the Basic Terms, and that they know of no other real estate broker or
agent who may be entitled to a commission in connection with this Lease. Each
party agrees to indemnify and defend the other party against and hold the other
party harmless from any and all claims, demands, losses, liabilities, lawsuits,
judgments, and costs and expenses (including, without limitation, reasonable
attorneys' fees) with respect to any leasing commission or equivalent
compensation alleged to be owing on account of the indemnifying party's dealings
with any real estate broker or agent other than that specified herein.
18.17 FORCE MAJEURE. If Landlord or Tenant cannot perform any of their
obligations due to events beyond their reasonable control, the time provided for
performing such obligations shall be extended by a period of time equal to the
duration of such events. Events beyond Landlord's control include, but are not
limited to, acts of God, war, civil commotion, labor disputes, strikes, fire,
flood or other casualty, shortages of labor or material, government regulation
or restriction and weather conditions. Notwithstanding any provision in this
Lease to the contrary, Tenant shall be required to make each and every payment
of Rent in a timely fashion, and the due date for such payment shall not be
extended for events of force majeure or otherwise.
18.18 TENANT OBLIGATIONS SURVIVE TERMINATION. All obligations of
Tenant hereunder not fully performed as of the expiration or earlier termination
of the Lease Term shall, survive the expiration or earlier termination of the
Lease Term, including, without limitation, all payment obligations and all
obligations concerning the condition of the Premises.
18.19 GRANT OF SECURITY INTEREST. In addition to any and all statutory
liens granted to landlords under the laws of California, Landlord shall have, at
all times, and Tenant hereby grants and agrees to grant Landlord a valid
security interest to secure payment of all sums payable under this Lease as Rent
becoming due hereunder from Tenant, and to secure payment of any damages or loss
which Landlord may suffer by reason of the breach by Tenant of any covenant,
agreement or condition contained herein, upon all goods, equipment, furniture,
improvements, inventory, chattel, and other personal property of Tenant
presently, or which may hereafter be situated within the Premises or used in
connection therewith wherever located, whether now owned or hereafter acquired,
and all proceeds therefrom, including, without limitation, insurance proceeds
(collectively "Personal Property"), and such Personal Property shall not be
removed from the Premises without the prior consent of Landlord, which consent
may
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be withheld in Landlord's sole discretion, until all arrearages in Rent, as
well as any and all other sums of money then due to Landlord hereunder, shall
first have been paid and discharged and all the covenants, agreements and
conditions hereof have been fully complied with and performed by Tenant. In
the event of a default by Tenant hereunder, Landlord may, in addition to any
other remedies provided elsewhere herein or allowed by law, all of which are
cumulative, enter upon the Premises and take possession of any and all
Personal Property of Tenant situated within the Premises without liability
for trespass or conversion, and sell the same at public or private sale, with
or without having such property at the sale, after giving Tenant reasonable
notice of the time and place of any public sale or of the time after which
any private sale is to be made, at which sale the Landlord or its assigns may
purchase such Personal Property unless otherwise prohibited by law. Unless
otherwise provided by law, and without intending to exclude any other manner
of giving Tenant reasonable notice, the requirement of reasonable notice
shall be met if such notice is given in the manner prescribed in this Lease
at least five (5) days before the time of sale. The proceeds from any such
disposition, less any and all expenses connected with the taking of
possession, holding and selling of the Personal Property (including, without
limitation, reasonable attorneys' fees and legal expenses) shall be applied
as a credit against the indebtedness secured by the security interest granted
in this Section. Any surplus shall be paid to Tenant or as otherwise
required by law, and Tenant shall pay any deficiencies forthwith.
Contemporaneous with the execution of this Lease, and, at any other time
during the Lease Term if requested by Landlord, Tenant shall execute and
deliver to Landlord uniform commercial code financing statements in
sufficient form so that when properly filed, the security interest hereby
given shall thereupon be perfected. If requested hereafter by Landlord,
Tenant shall also execute and deliver to Landlord uniform commercial code
financing statement change instruments in sufficient form to reflect any
proper amendment or modification in or extension of the aforesaid contract
lien and security interest hereby granted. Landlord is hereby granted by
Tenant, Tenant's power of attorney to execute said financing statements and
change instruments in Tenant's name, place, and stead. Said power is coupled
with an interest and is irrevocable. Landlord shall, in addition to all of
its rights hereunder, also have all of the rights and remedies of a secured
party under the uniform commercial code as adopted in California.
18.20 TENANT'S WAIVER. Any claim which Tenant may have against
Landlord for default in performance of any of the obligations herein contained
to be kept and performed by Landlord shall be deemed waived unless such claim is
asserted by written notice thereof to Lessor within forty-five (45) days of
Tenant's knowledge of the alleged default or of accrual of the cause of action
and unless suit be brought thereon within six (6) months subsequent to the
accrual of such cause of action.
18.21 SUBMISSION OF LEASE. Submission of this instrument for
examination or signature by Tenant does not constitute a reservation of or an
option for lease, and it is not effective as a lease or otherwise until
execution and delivery by both Landlord and Tenant.
LANDLORD:
Dated: 10-27-97 MARCO PLAZA ENTERPRISES, a California general partnership
--------
By: /s/ illegible
--------------------------------
Name: illegible
--------------------------------
Title: Partner
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TENANT:
Dated: 10/24/97 RUBIO'S RESTAURANTS, INC., a Delaware corporation
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By: /s/ Rafael R. Rubio
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Name: Rafael R. Rubio
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Title:
--------------------------------
By:
--------------------------------
Name:
--------------------------------
Title:
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EXHIBIT A
SITE PLAN
CORNERSTONE CORPORATE CENTER
[PICTURE]
<PAGE>
EXHIBIT "B"
RULES AND REGULATIONS
1. WALKWAYS. The sidewalks, roadways, and other public portions in the
Project shall be used by the Tenant for the purpose solely of ingress and egress
to and from the Premises of the Tenant. Tenant, its employees and agents, shall
not loiter in the entrances or corridors, nor in any way obstruct the sidewalks,
halls, stairways or elevators, and shall use the same only as a means of ingress
and egress for the Premises.
2. CONDITIONS OF PREMISES. The Tenant shall keep the interior portion of
the Premises, to include all windows, doors, and all other glass, plate
fixtures, and trim in a clean condition. No improvements, additions, or
materials of any kind are permitted to be placed on the outside of any of the
Premises by Tenant.
3. STORAGE OF REFUSE. All waste paper, garbage and refuse shall be kept
in the kind of container specified by Landlord, and shall be placed outside of
the Premises in specified trash containers prepared for collection in the manner
and at the times and places specified by Landlord. Landlord may implement a
recycling program and in such case, Tenant shall deposit refuse in accordance
with any requirements of such recycling program. If Landlord shall provide or
designate a service for picking up refuse and garbage, Tenant shall use same at
Tenant's cost whether billed directly or as part of Common Area Maintenance
Charges.
4. AERIALS. No aerial shall be erected on the roof or exterior walls of
the Premises, or within the Project, without in each instance, the written
consent of the Landlord, which may be withheld in Landlord's sole discretion.
Any aerial so installed without such written consent shall be subject to removal
without notice at any time.
5. CONDUCT. Tenant shall conduct its business in an orderly manner in the
best interests of the Project. No loudspeakers, televisions, phonographs,
radios, or other devices shall be used in a manner so as to be heard or seen
outside of the Premises without the prior written consent of the Landlord, which
may be withheld in Landlord's sole discretion.
6. OUTSIDE AREAS. Tenant shall not place or permit any dirt or rubbish
in any Common Area or any obstruction or materials in such areas, including,
without limitation, inventory, costs or signage of any type or kind. No
exterior storage shall be allowed without permission in writing from Landlord.
7. PARKING. Subject to the terms of the Lease, Tenant and Tenant's
employees shall park only in those portions of the parking area designated for
that purpose by Landlord. Landlord has the right to make changes in the parking
procedures and guidelines from time-to-time, to benefit the Project, in
Landlord's sole opinion.
8. PLUMBING. The plumbing facilities shall not be used for any purpose
other than that for which they are constructed, and no foreign substance of any
kind shall be thrown therein, and the expense of any breakage, stoppage, or
damage resulting from a violation of this provision shall be borne by Tenant,
who shall, or whose employees, agents or invitees shall have caused it.
9. FLAMMABLE MATERIALS. The Tenant shall not keep or permit to be kept
on the Premises any flammable or combustible fluid, chemical, or explosive
material of any kind. Tenant shall not burn any trash or garbage of any kind in
or about the Premises, or the Project.
10. AUCTIONS. Tenant shall not hold any auction, fire, or bankruptcy sale
in the Premises.
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11. NO ANIMALS. Tenant shall not bring into the Premises at the Project
any animals of any type or kind, except animals necessary to assist persons with
disabilities.
12. SAFES. Landlord shall have the right to prescribe the weight, size
and position of all safes and other heavy property brought into the Project and
also the times and manner of moving the same in and out of the Project. Safes
and other heavy objects shall, if considered necessary by Landlord, stand on
supports of such thickness as is necessary to properly distribute the weight.
Landlord will not be responsible for loss of or damage to any such safe or
property in any case. All damage done to any part of the Project, its contents,
occupants or visitors by moving or maintaining any such safe or other property
shall be the sole responsibility of Tenant and any expense of said damage or
injury shall be borne by Tenant.
13. SAFETY PROCEDURES. Tenant shall comply with all safety, fire
protection and evacuation procedures and regulations established by Landlord or
any governmental agency.
14. PROTECTION FROM THEFT. Tenant acknowledges that Landlord may not
provide any guard service or other security measures. In any event, Tenant
shall assume any and all responsibility for protecting the Premises from theft,
robbery and pilferage, which includes keeping doors locked and other means of
entry to the Premises closed.
15. WAIVER BY LANDLORD. Landlord may waive any one or more of these Rules
and Regulations for the benefit of any particular tenant or tenants, but no such
waiver by Landlord shall (i) be effective unless in writing, or (ii) be
construed as a waiver of such Rules and Regulations in favor of any other tenant
or tenants, or (iii) prevent Landlord from thereafter enforcing any such Rules
and Regulations against any or all tenants of the Project.
16. CHANGES TO RULES. Landlord reserves the right from time to time to
amend or supplement the foregoing rules and regulations, and to adopt and
promulgate additional rules and regulations applicable to the Premises. Notice
of such rules and regulations and amendments and supplements thereto, if any,
shall be given to the Tenant and Tenant agrees to comply with all such rules and
regulations upon receipt of notice. Landlord shall not be liable in any way to
Tenant for any damage or inconvenience caused by any other tenant's
noncompliance with these rules and regulations.
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EXHIBIT "C"
WORK LETTER AGREEMENT
MARCO PLAZA ENTERPRISES, a California general partnership ("Landlord') and
RUBIO'S RESTAURANTS, INC., a Delaware corporation ("Tenant") as of this 24th day
of October, 1997, are executing simultaneously with this Work Letter Agreement
("Work Letter"), a written lease (the "Lease") covering the Premises described
in the Lease.
This Work Letter defines the scope of Improvements (as defined below) which
Landlord shall be obligated to construct or install. If there is a conflict
between the terms and provisions of thus Work Letter and the Lease, this Work
Letter shall control. Terms which have initial capital letters and are not
otherwise defined in this Work Letter shall have the meaning set forth in the
Lease.
This Work Letter is a part of the Lease and shall be subject to all of its
terms and conditions, including all definitions contained therein. In
consideration of the mutual covenants hereinafter contained, Landlord and Tenant
mutually agree as set forth below.
SECTION I - IMPROVEMENTS; PLANNING AND DOCUMENTS
1.1 CONSTRUCTION. Landlord agrees to furnish all of the material, labor
and equipment as may be reasonably necessary for the construction of the
Improvements (as defined below) in a good and workmanlike manner in substantial
conformance with the Shell Plans and Specifications (as defined below) and the
T.I. Plans and Specifications (as defined below) and in compliance with all
covenants, conditions and restrictions to which the Land is subject and all
applicable building laws, ordinances, orders, rules, regulations and
requirements of any governmental agency having jurisdiction over the development
of the Land. Landlord shall use its reasonable efforts to achieve Substantial
Completion of the Improvements by the Estimated Commencement Date.
1.1.1 IMPROVEMENTS. "Improvements" shall mean the Building and
all improvements, machinery, equipment, fixtures and other property, real,
personal or mixed (excepting Tenant's trade fixtures, machinery, and
equipment) installed or constructed on the Land or in the Building by
Landlord (including, without limitation, Common Area, Site Amenities, and
other site improvements and landscaping), together with all additions,
alterations and replacements thereof. Improvements shall include the Shell
Improvements (as defined below) and Tenant Improvements (as defined below)
constructed by Landlord.
1.1.2 LAND. "Land" shall mean that portion of the Project upon
which Landlord shall construct the Building and the portions of the Common Area
as required pursuant to this Lease.
1.2 SHELL IMPROVEMENTS.
1.2.1 SHELL DEFINITIONS.
1.2.1.1 PRELIMINARY PLANS AND SPECIFICATIONS. "Preliminary
Plans and Specifications" shall mean those preliminary plans and specifications
for the Shell Improvements, prepared by Brian Paul and Associates, Architects
and Planners ("Building Architect"), which describe and depict the site plan and
Common Area within the Building and certain preliminary exterior elevation
improvements, and which are referenced and/or described on Schedule 2 attached
hereto.
1.2.1.2 SHELL CONSTRUCTION DRAWINGS. "Shell Construction
Drawings" shall mean 1/4 or 1/8 scale construction drawings for the Shell
Improvements containing all information reasonably necessary to construct the
Shell Improvements, which drawings shall be reasonably consistent with the
Preliminary Plans and Specifications and shall incorporate the selected Exterior
Building Finishes.
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1.2.1.3 SHELL IMPROVEMENTS. "Shell improvements" shall mean a
three-story office building of steel frame construction, including two finished
elevators, fire sprinkler systems (distributed with heads required for building
shell final inspection by the City of Carlsbad), emergency stairway exits,
central plant for HVAC system and an HVAC water loop for each floor, finished
restrooms on each floor, finished Common Area for fire existing on the ground
floor and finished lobby of the ground floor from the front of the Building
entrance to the Building core, all such improvements to be reasonably comparable
to "Class A" standards of a suburban office building, and substantially in
conformance with the office Building-Outline Specifications dated May 28, 1997,
attached hereto as Schedule 1. Shell Improvements shall include the Site
Amenities and those components of the Premises which are identified in the
Preliminary Plans and Specifications as elements of the basic Building shell, or
more specifically as "Shell Improvements," land, land preparation, landscaping
and all necessary utilities stubbed to the Building, or as otherwise mutually
identified by Landlord and Tenant, in writing.
1.2.1.4 SHELL PLANS AND SPECIFICATIONS. "Shell Plans and
Specifications" shall mean collectively the Preliminary Plans and
Specifications, the Exterior Building Finishes Plans, the Shell Construction
Drawings, and all related plans, drawings, specifications and notes developed or
prepared in connection therewith.
1.2.2 PREPARATION OF SHELL IMPROVEMENT DOCUMENTS. Landlord and
Tenant have approved the Preliminary Plans and Specifications, including the
size, location and design of the Site Amenities.
1.2.2.1 SHELL CONSTRUCTION DRAWINGS. As soon as is reasonably
practicable, Landlord shall prepare the Shell Construction Drawings in
substantial conformance with the Preliminary Plans and Specifications.
1.3 TENANT IMPROVEMENTS.
1.3.1 TENANT DEFINITIONS.
1.3.1.1 DESIGN DEVELOPMENT DRAWINGS. "Design Development
Drawings" shall mean reasonably detailed preliminary construction drawings for
the Tenant Improvements, which drawings shall be reasonably consistent with the
approved Schematic Design Drawings.
1.3.1.2 SCHEMATIC DESIGN DRAWINGS. "Schematic Design Drawings"
shall mean reasonably detailed and dimensioned 1/8 scale preliminary schematic
design drawings for the Tenant Improvements, which drawings are reasonably
consistent with the approved Space Plan.
1.3.1.3 SPACE PLAN. "Space Plan" shall mean a floor by floor
layout designation of all counters, fixtures, demising walls and partitions, and
other equipment to be included in the Building as the Tenant Improvements. The
Space Plan shall be prepared by the Tenant's space planner or as otherwise
selected by Tenant in its reasonable discretion.
1.3.1.4 TENANT IMPROVEMENTS. "Tenant improvements" shall mean
all those portions of the Premises which are identified in the Space Plan and
which are the responsibility of Landlord's Contractor, or as otherwise mutually
identified by Landlord and Tenant, in writing. The Tenant Improvements shall be
based on the approved Space Plan.
1.3.1.5 T.I. CONSTRUCTION DRAWINGS. "T.I. Construction
Drawings" shall mean 1/4 or 1/8 scale construction drawings for the Tenant
Improvements containing all information reasonably necessary to construct the
Tenant Improvements, which drawing shall be reasonably consistent with the
approved Design Development Drawings.
1.3.1.6 T.I. PLANS AND SPECIFICATIONS. "T.I. Plans and
Specifications" shall mean collectively the Space Plan, Schematic Design
Drawings, Design Development Drawings, and T.I. Construction Drawings, and all
related plans, drawings, specifications and notes developed or prepared in
connection therewith.
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1.3.2 PLANNING: PREPARATION OF TENANT IMPROVEMENT DOCUMENTS.
1.3.2.1 SPACE PLAN. Concurrently with the execution of this
Work Letter, Tenant shall cause the Space Plan to be prepared in accordance with
this Work Letter. Landlord will have the right to reasonably review and approve
the draft Space Plan. Tenant shall submit the proposed Space Plan to Landlord
for Landlord's review and approval, which approval shall not be unreasonably
withheld or delayed. Landlord shall respond in writing to Tenant within ten
(10) days of receipt of any portion of the Space Plan specifying its approval or
reasonable changes to the plans submitted, if any. Failure of Landlord to
respond within said ten (10) day period shall be deemed Landlord's approval of
the Space Plan so submitted. If Landlord requests reasonable revisions to the
Space Plan in conformance with the terms of this Lease, Tenant shall revise said
documents and resubmit them to Landlord for its review and approval. Failure of
Landlord to respond within ten (10) days shall be deemed Landlord's approval on
the revised Space Plan so submitted. The foregoing process shall continue until
the Space Plan is approved. Notwithstanding any provision in this Work Letter
to the contrary, Tenant shall be responsible for producing a final Space Plan
approved by Landlord no later than December 1, 1997. Tenant acknowledges that
Landlord is relying on Tenant's timely delivery of the final approved Space Plan
in order to allow Landlord to Substantially Complete the Premises by the
Estimated Commencement Date. Accordingly, for each day which passes after the
foregoing date and before an approved Space Plan is delivered to Landlord, the
Estimated Commencement Date shall be delayed the same number of days.
1.3.2.2 SCHEMATIC DESIGN DRAWING. As soon as is reasonably
practicable following Landlord's approval of the Space Plan, Tenant shall submit
to Landlord proposed Schematic Design Drawings. The Schematic Design Drawings
shall be subject to the approval of Landlord, which approval shall not be
unreasonably withheld or delayed. Landlord shall respond in writing to Tenant
within ten (10) days of receipt of any portion of the Schematic Design Drawings
specifying its approval or disapproval thereof. Landlord may only disapproved
proposed Schematic Design Drawings if they do not substantially conform to the
approved Space Plan. If Landlord disapproves any portion of the Schematic
Design Drawings, then Landlord shall, timely and specifically and in writing,
(a) approve those portions which are acceptable to Landlord, and (b) disapprove
those portions which are not acceptable to Landlord, specifying the reasons for
such disapproval and describing in detail the change Landlord requests for each
item disapproved. Failure of Landlord to respond within said ten (10) day
period shall be deemed Landlord's approval of the Schematic Design Drawings so
submitted. In the event the Schematic Design Drawings have been disapproved by
Landlord, and Tenant and Landlord are unable to resolve Landlord's disapproval
after good faith efforts to do so over a period of ten (10) Business Days after
delivery of Landlords notice disapproving Schematic Design Drawings, Landlord
and Tenant shall submit their disagreement to the dispute resolution procedure
described in Section 1.3.2.5 below.
1.3.2.3 DESIGN DEVELOPMENT DRAWING. As soon as is reasonably
practicable following approval of the Schematic Design Drawings, Tenant shall
submit to Landlord proposed Design Development Drawing. The Design Development
Drawings shall be subject to the approval of Landlord, which approval shall not
be unreasonably withheld or delayed. Landlord shall respond in writing to
Tenant within ten (10) days of receipt of any portion of the Design Development
Drawings. Landlord may only disapprove proposed Design Development Drawings if
they do not substantially conform to the approved Schematic Design Drawings. If
Landlord disapproves any portion of the Design Development Drawings, then
Landlord shall, timely and specifically and in writing, (a) approve those
portions which are acceptable to Landlord, and (b) disapprove those portions
which are not acceptable to Landlord, specifying the reasons for such
disapproval and describing in detail the change Landlord requests for each item
disapproved. Failure of Landlord to respond within said ten (10) day period
shall be deemed Landlord's approval of the Design Development Drawings so
submitted. In the event the Design Development Drawings have been disapproved
by Landlord, and Tenant and Landlord are unable to resolve Landlord's
disapproval after good faith efforts to do so over a period of ten (10) Business
Days after delivery of Landlord's notice disapproving the Design Development
Drawings, Landlord and Tenant shall submit the disagreement to the dispute
resolution procedure described in Section 1.3.2.5 below.
1.3.2.4 T.I. CONSTRUCTION DRAWINGS. As soon as is reasonably
practicable following approval of the Design Development Drawings, Tenant shall
submit to Landlord proposed T.I. Construction Drawings. The T.I. Construction
Drawings shall be subject to the approval of Landlord, which approval shall not
be
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unreasonably withheld or delayed. Landlord shall respond in writing to
Tenant within ten (10) days of receipt of any portion of the T.I.
Construction Drawings. Landlord may only disapprove the T.I. Construction
Drawings if they do not substantially conform to the approved Design
Development Drawings. If Landlord disapproves any portion of the T.I.
Construction Drawings, then Landlord shall, timely and specifically and in
writing, (a) approve those portions which are acceptable to Landlord, and (b)
disapprove those portions which are not acceptable to Landlord, specifying
the reasons for such disapproval and describing in detail the change Landlord
requests for each item disapproved. The failure of Landlord to respond
within said ten (10) day period shall be deemed Landlord's approval of the
T.I. Construction Drawings so submitted. In the event the T.I. Construction
Drawings have been disapproved by Landlord, and Tenant and Landlord are
unable to resolve Landlord's disapproval after good faith efforts to do so
over a period of ten (10) Business Days after delivery of Landlord's notice
disapproving the T.I. Construction Drawings, Landlord and Tenant shall submit
their disagreement to the dispute resolution procedure described in Section
1.3.2.5 below. Notwithstanding any provision of this Work Letter to the
contrary, Tenant shall be responsible for delivering final T.I. Construction
Drawings approved by Landlord no later than February 15, 1998. Tenant
acknowledges that Landlord is relying on Tenant's timely delivery of the
final approved T.I. Construction Drawings in order to allow Landlord to
timely deliver the Premises on the Estimated Commencement Date. Accordingly,
for each day which passes after the foregoing date and before approved T.I.
Construction Drawings are delivered to Landlord, the Estimated Commencement
Date shall be delayed the same number of days.
1.3.2.5 DESIGN DISPUTES. In the event Landlord and Tenant are
unable to resolve Landlord's disapproval of a phase of the development of the
T.I. Plans and Specifications as described in Sections 1.3.2.2, 1.3.2.3, and
1.3.2.4 above (a "Design Dispute"), they shall resolve those differences through
the binding arbitration of a neutral third party in accordance with this
provision. In the event of a Design Dispute, Landlord and Tenant shall meet
within three (3) days to make a good faith attempt to mutually appoint a single
party who shall be a licensed architect ("Arbitrating Architect"), with not less
than ten (10) years experience in commercial and industrial architecture and who
is not then employed or otherwise previously affiliated with either party, to
arbitrate their differences and resolve the Design Dispute. If Landlord and
Tenant are unable to agree upon a single Arbitrating Architect, then each shall,
within two (2) Business Days after the meeting, select an architect that meets
the foregoing qualifications. The two (2) architects so appointed shall, within
two (2) Business Days after their appointment, appoint a third architect meeting
the foregoing qualifications who shall serve as the Arbitrating Architect. If
the two (2) architects so selected cannot agree on the selection of the
Arbitrating Architect within the time above specified, then either party, on
behalf of both parties, may request appointment of the Arbitrating Architect by
the Presiding Judge of the San Diego Superior Court. The procedures for
arbitrating and resolving the Design Dispute shall be established by the
Arbitrating Architect in a mariner designed to promptly resolve the Design
Dispute. The determination of the Arbitrating Architect shall be limited solely
to the issue of the Design Dispute and shall be made within ten (10) Business
Days of its submission by the parties for arbitration. The decision of the
Arbitrating Architect shall be binding on both parties. The cost of the
arbitration, including, without limitation, attorneys' fees and costs, witness
fees, expert witness fees, and costs of the arbitration proceeding, may be
awarded by the Arbitrating Architect to the prevailing party. The
non-prevailing party shall be charged with any time delays caused by the Design
Dispute. In the event of army judicial enforcement or confirmation proceeding
relating to an arbitration award or a Design Dispute, the prevailing party shall
be entitled to recover from the other party all related costs, including
reasonable attorneys' fees and costs.
1.3.2.6 OWNERSHIP. Notwithstanding the fact that Tenant is
responsible for developing all phases of the approved T.I. Plans and
Specifications, the parties have agreed that, by execution hereof, Tenant is
assigning to Landlord all of Tenant's right, title and interest in and to the
ownership of the T.I. Plans and Specifications.
1.4 BUILDING PERMITS. Landlord shall be responsible for obtaining from
any relevant and jurisdictional governmental authority all governmental
approvals necessary for the construction of the Shell Improvements, including a
building permit. Tenant shall be responsible for obtaining from any relevant
and jurisdictional governmental authority all governmental approvals necessary
for the construction of the Tenant Improvements, including a building permit.
Landlord shall be responsible for the payment of the building permit fees for
the Shell Improvements and, pursuant to the Tenant Improvement Allowance and/or
the Tenant Contingency Allowance, Landlord shall also be responsible for the
payment of the building permit fees for the
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Tenant Improvements. If a change to the approved Shell Plans and
Specifications or T.I. Plans and Specifications is required by any
governmental authority as a condition to obtaining a building permit, such
change shall be made to the Shell Plans and Specifications and/or T.I. Plans
and Specifications and deemed to have been approved by Landlord and/or
Tenant, as appropriate. Tenant shall negotiate in good faith for the
allocation of any increase in construction costs due to such a change. The
costs associated with any such changes related to the Shell Improvements
shall be Landlord's responsibility and related to the Tenant Improvements
shall be Tenant's responsibility. The parties shall cooperate with each
other as may be reasonably necessary to obtain the building permit and any
and all other permits, as appropriate. Notwithstanding any provision of this
Work Letter or the Lease to the contrary, Tenant shall obtain the necessary
building permits for the approved T.I. Plans and Specifications no later than
April 1, 1998. Tenant acknowledges that Landlord is relying upon Tenant's
timely acquisition of the Tenant Improvements building permits so that
Landlord may Substantially Complete the Premises by the Estimated
Commencement Date. Accordingly, for each day which passes after the
foregoing date and before all building permits for the Tenant Improvements
are obtained and delivered to Landlord, the Estimated Commencement Date shall
be delayed the same number of days.
1.5 CONDITION OF PREMISES; LIMITATION. Except as specifically provided in
this section, Landlord makes no warranties or representations with regard to the
Premises or the Improvements, or any portion thereof, and Tenant shall accept
the Premises in the condition in which they are delivered on the Commencement
Date; provided, however, that the Premises shall be constructed in substantial
conformance with the approved T.I. Plans and Specifications and in accordance
with all applicable laws then in effect. Landlord makes no warranty to Tenant
regarding any other aspect of the Improvements or the Premises, including but
not limited to, any patent or latent defects, which Tenant expressly waives any
rights to make claims therefore; provided, however, that Landlord hereby assigns
to Tenant on a nonexclusive basis all guarantees and warranties from any
contractors, subcontractors, materialmen and suppliers which provide
construction, labor or materials to the Premises.
1.6 APPROVALS. After Landlord's approval of any of the T.I. Plans and
Specifications, no significant changes, modifications or alterations may be made
without the prior written consent of both Landlord and Tenant; provided,
however, if any changes are required (i) by any governmental agency with
jurisdiction over the Project, (ii) as a result of field conditions, or (iii) to
substitute reasonably equivalent materials to avoid unanticipated delays,
strikes or shortages, then Landlord shall be authorized to make such changes.
The costs of any such changes to the T.I. Plans and Specifications are to be
included within the Total Cost (as hereinafter defined). Any changes to the
T.I. Plans and Specifications after approval thereof, other than any changes
required under Subsections (i), (ii) and (iii) above, shall constitute a Change
Order (as hereinafter defined).
1.7 COSTS. All costs and fees associated with the preparation of the
Shell Plans and Specifications, including, without limitation, all consultant or
subcontractor design fees, and all costs of constructing the Shell Improvements
shall be borne solely by Landlord, except as expressly set forth herein. Shell
Plans and Specifications shall be prepared by the Budding Architect and other
consultants selected by Landlord in its sole discretion. T.I. Plans and
Specifications shall be prepared by Tenant's space planner and other consultants
selected by Tenant and reasonably approved by Landlord.
SECTION 2 - TENANT IMPROVEMENTS
2.1 TENANT IMPROVEMENTS. The Tenant Improvements and shall remain
Landlord's property and shall be surrendered to Landlord upon expiration or
earlier termination of the Lease in accordance with the provisions of the Lease.
2.2 PREMISES FURNISHINGS. It is expressly understood that Landlord's
obligation to construct Tenant Improvements in the Premises is limited to
construction of the Tenant Improvements specifically contemplated by the T.I.
Plans and Specifications. Tenant shall be solely responsible for the
performance and expense of the design, layout, provision, delivery and
installation of any furniture, furnishings, equipment, and any other personal
property Tenant will use at the Premises. In arranging for the performance of
any of the work referred to in the preceding sentence, Tenant shall be permitted
to enter the Premises only upon the prior consent of Landlord and shall adopt a
schedule in conformance with the schedule(s) of Landlord's Contractor (as
hereinafter defined) and conduct its work
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in such a manner as to maintain harmonious labor relations so as not to
interfere unreasonably with or delay the work of Landlord's contractors in
substantially completing the Tenant Improvements.
SECTION 3 - TENANT IMPROVEMENT ALLOWANCE
3.1 TENANT IMPROVEMENT ALLOWANCE. Landlord has agreed to contribute a
one-time tenant improvement allowance for the cost of preparing the T.I. Plans
and Specifications related to Tenant Improvements and toward the cost of
constructing the Tenant Improvements, including any necessary permits and
demolition work in an amount up to the amount specified in Item 15 of the Basic
Terms of the Lease ("Tenant Improvement Allowance"). The Tenant Improvement
Allowance is based on the Usable square feet of the Premises, and the
calculation of Usable square feet for the Premises shall be mutually agreed to
by the Building Architect and Tenant's space planner. Tenant shall be solely
responsible for any and all costs of constructing the Tenant Improvements in
excess of the Tenant Improvement Allowance pursuant to the provisions of Section
3.2 and Section 3.3 below. The total of all costs incurred by Landlord in
connection with the design and construction of the Tenant Improvements shall be
referred to as the "Total Costs."
3.1.1 ALLOCATION. Notwithstanding Section 3.1 above, the parties
have agreed that certain portions of Tenant Improvement Allowance may only be
used for certain portions of the Tenant Improvements. Such allocations are as
follows: (a) a minimum of twenty-two dollars and fifty cents ($22.50) per Usable
square foot (as defined in the Lease) of the Tenant Improvement Allowance shall
be used for building standard tenant improvements as described on Schedule 3
attached hereto and incorporated herein; (b) a maximum of two dollars fifty
cents ($2.50) per Usable square foot of the Tenant Improvement Allowance shall
be used for Tenant's space planner, architecture and engineering fees; (c) a
maximum of one dollar fifty cents ($1.50) per Usable square foot of the Tenant
Improvement Allowance shall be used for fees and permits related to the Tenant
Improvements; and (d) the remainder of the Tenant Improvement Allowance shall be
used for Tenant Improvement which are more expensive than building standard, as
Tenant requests in its sole discretion. Portions of the Tenant Improvement
Allowance may be utilized for nonbuilding standard Tenant Improvements if and
only if Tenant incorporates such requests into the Space Plan, as appropriate,
prior to their initial approval.
3.2 TENANT CONTINGENCY ALLOWANCE. In the event Tenant elects to exceed
the Tenant Improvement Allowance, and Tenant elects to not pay such excess in a
cash lump sum to Landlord upon Substantial Completion of the Premises, and/or
the actual cost of the Tenant Improvements exceeds either the total Tenant
Improvement Allowance or the specific allocations set forth in Section 3.1.1
above (collectively, the "Excess Costs"), Landlord has agreed to advance payment
towards the Excess Costs in an amount up to the amount of the Tenant Contingency
Allowance specified in Item 16 of the Basic Terms of the Lease. In such event,
Tenant shall repay to Landlord as Additional Rent the amount of the Tenant
Contingency Allowance paid by Landlord. Such repayment of the Tenant
Contingency Allowance shall be at the rate of one and thirty-two hundredths
cents ($0.0132) per Rentable square foot per month in the Premises for each one
dollar ($1.00) per Rentable square foot in the Premises of Excess Cost paid by
Landlord, and adding the resulting monthly amount to the Base Monthly Rent due
hereunder. For example, and not by way of limitation, if the Tenant Improvement
costs exceeded the Tenant Improvement Allowance by sixteen thousand four hundred
twenty-five dollars ($16,425), which sixteen thousand four hundred twenty-five
dollars ($16,425) were the total Excess Cost, then the Base Monthly Rent due
hereunder would be increased by one and thirty-two hundredths cents ($0.0132)
per Rentable square foot per month (because such Excess Cost is equal to one
dollar ($l.00) per Rentable square foot of Premises).
3.3 COST OF TENANT IMPROVEMENT WORK.
3.3.1 OBTAINING COST QUOTATION. Landlord shall retain a
contractor, acceptable to Landlord in its reasonable discretion ("Contractor"),
as contractor for the Tenant Improvements. The Contractor may be an affiliate
of Landlord or any of its partners. Within ten (10) days after Landlord's
approval of the T.I. Construction Documents, Landlord shall provide to Tenant
the cost of the Tenant Improvements ("Cost Quotation") based upon the approved
T.I. Construction Documents. Landlord will require the Contractor to
competitively bid all major subtrades for the Tenant Improvements construction.
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3.3.2 APPROVAL OF COST QUOTATION BY TENANT. Tenant shall, within
five (5) Business Days of receipt thereof, either: (i) agree in writing to pay
the cost by which the Cost Quotation exceeds the sum of the Tenant Improvement
Allowance and the Tenant Contingency Allowance ("Additional Cost"), or (ii)
revise the T.I. Construction Documents or Space Plan so that the Cost Quotation
is either (a) no more than the Tenant Improvement Allowance plus Tenant
Contingency Allowance, or (b) in excess of the Tenant Improvement Allowance plus
Tenant Contingency Allowance by the amount of Additional Cost which Tenant
agrees to pay. If Tenant elects to revise the T.I. Construction Documents in
order to reduce the Cost Quotation, the period of time between Tenant's election
to revise the T.I. Construction Documents and the approval of the revised T.I.
Construction Documents by Tenant shall constitute a Tenant Delay (as defined
below). If the sum of the Cost Quotation plus the amounts described in Section
3.1.I (b) and 3.1.1 (c) is less than the maximum Tenant Improvement Allowance
set forth in the Basic Terms, the Tenant Improvement Allowance shall be deemed
to be an amount equal to such sum. The failure of Tenant to respond within the
five (5) Business Day period shall be a Tenant Delay. Upon approval by Tenant,
Landlord shall be authorized to proceed with the Improvements in accordance with
the approved T.I. Construction Documents. All costs of revising the T.I.
Construction Documents, including, without limitation, re-engineering,
estimating, printing of drawings, costs of any space planner, architect,
engineering consultants and other consultants and any other incidental expenses
shall be chargeable against the Tenant Improvement Allowance and includable in
the Total Cost.
3.4 LANDLORD COSTS FOR TENANT IMPROVEMENTS. All costs incurred by
Landlord in connection with (a) the design, construction and installation of the
Tenant Improvements, (b) any demolition or modification of any existing
improvements as may be necessary to accomplish construction of the Tenant
Improvements in conformance with the T.I. Construction Documents, or (c) any
other measures taken by Landlord which may be reasonably required to accomplish
Landlord's construction of the Tenant Improvements, including but not limited to
Landlord's procurement of bonds, insurance policies and governmental permits,
and shall be charged against the Tenant Improvement Allowance and included with
the Total Cost.
3.5 TENANT COSTS FOR TENANT IMPROVEMENTS. Tenant shall deliver to
Landlord at least twenty (20) days prior to the commencement of construction of
the Tenant Improvements cash equal to one hundred percent (100%) of the amount
of the Additional Costs. Tenant shall be solely responsible for all Additional
Costs.
SECTION 4 - CONSTRUCTION OF TENANT IMPROVEMENTS
4.1 COMMENCEMENT OF CONSTRUCTION. Landlord intends to arrange for the
Commencement of Construction to occur on or before February 15, 1998. If
Commencement of Construction does not occur on or before February 15, 1998,
Landlord shall not in any event be liable to Tenant for damages as a result
thereof but Tenant shall have the right, as its sole and exclusive remedy, to
terminate this Lease by delivering written notice thereof to Landlord by on or
before February 20, 1998. If Tenant fails to deliver such notice of termination
by on or before February 20, 1998, such right to terminate shall be deemed
waived and the Lease shall continue in full force and effect.
4.2 CONSTRUCTION OF TENANT IMPROVEMENTS. After approval of the T.I.
Construction Documents, Landlord's Contractor shall use its diligent efforts to
Substantially Complete (as defined below) the Tenant Improvements on or before
the Estimated Commencement Date set forth in the Lease. Landlord shall enter
into a construction contract with Contractor which contains a guaranteed
delivery date for the Tenant Improvements, including a liquidated damage penalty
provision, such date of delivery to be established after approval of the final
T.I. Construction Drawings and subject to events of force majeure.
4.3 COMPLETION OF TENANT IMPROVEMENTS. Landlord shall be responsible for
the construction of the Tenant Improvements in substantial conformance with the
approved T.I. Construction Documents. Landlord shall use its good faith efforts
to estimate when the Premises will be Substantially Complete and deliver to
Tenant written notice sixty (60) days prior to such estimated date. Upon
Substantial Completion (as defined below) of the Tenant Improvements, Landlord
shall provide a "punchlist" identifying the corrective work of the type commonly
found on an architectural punchlist with respect to the Tenant Improvements,
which list shall be in Landlord's reasonable discretion based on whether such
items were required by the approved T.I. Construction Documents. Within ten
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(10) Business Days after delivery of the punchlist, Landlord shall commence the
correction of punchlist items and diligently pursue such work to completion
within thirty (30) days after Substantial Completion. The punchlist procedure
to be followed by Landlord and Tenant shall in no way limit Tenant's obligation
to occupy the Premises under the Lease nor shall it in any way excuse Tenant's
obligation to pay Rent as provided under the Lease, unless such punchlist items
reasonably precludes Tenant from occupying the Premises, as reasonably
determined by Landlord and Tenant.
4.4 PROGRESS REPORTS; SITE MEETINGS. Landlord shall provide to Tenant
monthly progress reports describing the condition and estimated schedule for
completing the Tenant Improvements ("Progress Reports"). Landlord shall include
in the Progress Report a comparison of then-known actual costs of the Tenant
Improvements compared to the estimated cost as reflected in the approved Cost
Quotation. In no event shall the Progress Reports be deemed to be a
representation, warranty or an assurance by Landlord of the date of Substantial
Completion or the Total Cost of the Tenant Improvements and Tenant specifically
acknowledges that the Progress Report is only an estimate by Landlord based on
information provided to Landlord. Landlord shall have no liability or
responsibility for any errors or inaccuracies in a Progress Report. In
addition, Landlord and Tenant shall coordinate on-site meetings of construction
personnel as reasonably appropriate in order to implement the construction
described in this Work Letter.
4.5 SUBSTANTIAL COMPLETION. 'Substantial Completion" or "Substantially
Completed" as used herein shall mean both (a) delivery of written notice to
Tenant of the completion of construction of the Tenant Improvements in the
Premises pursuant to the approved T.I. Construction Documents with the exception
of minor details of construction installation, decoration, or mechanical
adjustments and punchlist items as certified to by Landlord, and (b) the
issuance by the City of Carlsbad of a final inspection approval, certificate of
occupancy, a temporary certificate of occupancy or some other authorization or
Tenant has occupied and obtained the beneficial use of the Premises.
Substantial Completion shall be deemed to have occurred notwithstanding the
requirement to complete "punchlist" items or similar corrective work. Tenant
agrees that if Landlord shall be delayed in causing such work to be
Substantially Completed as a result of any of the events as defined below
(referred to herein as a "Tenant Delay"), then such delay shall be the
responsibility of Tenant, and will result in the Commencement Date of the Term
being the earlier of: (i) Tenant's opening of the Premises for business; (ii)
the date of Substantial Completion or (iii) the date when Substantial Completion
would have occurred if there had been no Tenant Delay, providing that Landlord
shall not be required to work on an overtime basis in order to bring the
Premises to Substantial Completion. For the purposes of this Work Letter, a
Tenant Delay is defined as follows: (a) Tenant's failure to comply with any time
frames set forth herein or in the Lease, (b) any changes in any stage of the
T.I. Plans and Specifications requested by Tenant after Landlord's and Tenant's
final approval of such stage, including, without limitation, any changes made to
reduce the Cost Quotation pursuant to this Work Letter, (c) tenant's failure to
furnish any documents required herein or approve any item or any cost estimates
as required herein, (d) Tenant's request for materials, finishes, or
installations other than Landlord's Building Standard items, (e) Tenant's
failure to perform any act or obligation imposed on Tenant by the Lease or this
Work Letter as and when requested thereunder or hereunder, or any other delay
otherwise caused by Tenant, its agents, employees or contractors which operates
to delay Landlord's Substantial Completion of the Tenant Improvements, as
reasonably determined by Landlord.
SECTION 5 - TENANT WORK
5.1 FINISH WORK. All finish work and decoration and other work desired by
Tenant and not included within the Improvements as set forth in the approved
Shell Construction Documents or T.I. Construction Documents, including
specifically, without limitation, all computer systems, cabling, telephone
systems, telecommunications systems and other items (the "Tenant Work") shall be
finished and installed by Tenant at Tenant's sole expense and shall not be
chargeable against the Tenant Improvement Allowance. If any Tenant Work is not
set forth on the approved T.I. Construction Documents, Tenant shall secure
Landlord's prior consent for such Tenant Work in the same manner and following
the same procedures provided for in the Lease. Tenant shall not commence the
construction or installation of any improvements on the Premises, including,
specifically, the Tenant Work, without Landlord's prior written approval (which
shall not be unreasonably withheld) of: (i) Tenant's contractor, (ii) detailed
plans and specifications for the Tenant Work, and (iii) a certificate(s) of
insurance accurately showing that Tenant's contractor maintains insurance
coverage in amounts, types, form and with companies
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reasonably acceptable to Landlord. All such certificates or policies shall
be endorsed to show Landlord as an additional insured and insurance shall be
maintained by Tenant or Tenant's contractor at all times during the
performance of the Tenant Work.
5.2 LANDLORD'S OBLIGATIONS. Landlord is under no obligation to construct
or supervise construction of any of the Tenant Work and any inspection by
Landlord shall not be construed as a representation that the Tenant Work is in
compliance with the final plans and specifications therefor or that the
construction will be free from faulty material or workmanship or that the Tenant
Work is in conformance with any building codes or other applicable regulations.
All of the Tenant Work shall be undertaken and performed in strict accordance
with the provisions of the Lease and this Work Letter.
SECTION 6 - CHANGE ORDERS
Tenant may request changes in the Tenant Improvements during construction
only by written instructions to Landlord, or its designated representative, on a
form approved by Landlord. All such changes will be subject to Landlord's prior
written approval, which shall be approved or disapproved by Landlord in its
reasonable discretion, within three (3) Business Days of receipt. Prior to
commencing any change, Landlord will prepare and deliver to Tenant, for Tenant's
approval, a change order (the "Change Order") setting forth the additional time,
if any, needed for such change and the total costs of such change which will
include associated architectural, engineering and construction contractor's
fees. If a Change Order requires additional time to construct, the Estimated
Commencement Date shall be extended by a similar number of days. Within two (2)
Business Days after delivery to Tenant of the total costs of the Change Order,
Tenant shall deliver notice of approval, together with a cash payment equal to
one hundred percent (100%) of the cost of the Change Order if and to the extent
such cost exceeds the sum of the Tenant Improvement Allowance and the Tenant
Contingency Allowance ("Payment"). If Tenant fails to approve such Change Order
and deliver the Payment within five (5) days after delivery by Landlord, Tenant
will be deemed to have withdrawn the proposed Change Order and Landlord will not
proceed to perform the change. Upon Landlord's receipt of Tenant's approval and
Payment, Contractor will proceed to perform the change.
SECTION 7 - RESPONSIBILITY FOR FUNCTION
Tenant will be responsible for the function of all Tenant Improvements
whether or not approved by Landlord or installed by Landlord at Tenant's
request. Landlord's preparation and/or approval of any design or constriction
documents will not constitute any representation or warranty as to the adequacy,
efficiency, performance or desirability of the improvements.
SECTION 8 - TENANT AND LANDLORD OBLIGATIONS
8.1 ACCESS AND ENTRY. During Landlord's construction of the Premises,
Landlord agrees to provide reasonable access as described herein to the Premises
to Tenant and :Its agents, for the purpose of installing Tenant's fixtures,
Tenant Work and furniture, so long as such access does not unreasonably
interfere with the conduct of Landlord's construction activities or affect
Landlord's ability to diligently bring the Premises to Substantial Completion by
the Estimated Commencement Date. Landlord acknowledges that access during the
construction of the Tenant Improvements for purpose of performing Tenant Work is
important to Tenant. If Landlord, in its reasonable discretion, determines that
the providing of such access may affect its ability to bring the Premises to
Substantial Completion on the Estimated Lease Term Commencement Date as set
forth in this Lease, Landlord shall have the right to deny or otherwise restrict
such access to Tenant and its agents until Substantial Completion of the Tenant
Improvements. The terms of such access may require that Tenant and Tenant's
agents perform work at times and in the manner designated by Landlord, including
nights, weekends, and holidays. Also, Tenant and its agents may be required to
utilize only certain access areas at certain times, designated by Landlord.
With respect to any approved Tenant Work, Tenant shall adopt a schedule in
conformance with the schedule of Landlord's Contractor and conduct its work in
such a manner as to maintain harmonious labor relations so as not to interfere
unreasonably with or delay the work of Landlord's Contractor. Tenant's
contractors and agents shall be subject to the supervision of Landlord's
construction supervisor.
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8.2 RISK OF LOSS. All materials, work, installations and decorations of
any nature brought upon or installed in the Premises before the Commencement
Date shall be at the risk of the party who brought such materials or items onto
the Premises. Neither Landlord nor any party acting on Landlord's behalf shall
be responsible for any damage or loss or destruction of such items brought to or
installed in the Premises by Tenant prior to such date, except in the event of
Landlord's negligence or willful misconduct. As a condition to such early
entry, Landlord may require Tenant to execute a hold harmless agreement, in a
form acceptable to Landlord. Such early occupancy shall be subject to the terms
and provisions of the Lease.
8.3 CONFORMANCE WITH LAWS. All Tenant Work shall be done in conformity
with applicable codes and regulations of governmental authorities having
jurisdiction over the Project and the Premises and valid building permits and
other necessary authorization from appropriate governmental agencies when
required, shall be obtained by Tenant for the Tenant Work at Tenant's expense.
Any Tenant Work not acceptable to the applicable governmental authority or not
reasonably satisfactory to Landlord in accordance with the standard in the
preceding sentence (unless previously approved by Landlord), shall be promptly
corrected, replaced, or brought into compliance with such applicable codes and
regulations at Tenant's expense. Notwithstanding any failure by Landlord to
object to any such Tenant Work, Landlord shall have no responsibility therefor.
8.4 LIENS. Tenant shall keep the Premises and Project free from any
mechanics', materialmen's or other liens arising out of any work performed upon
or materials or furniture, fixtures or improvements delivered to the Premises
including but not limited to any Tenant Work performed, materials furnished or
obligations incurred by or for Tenant or any person or entity claiming by,
through or under Tenant. Landlord shall have the right at all times to post and
keep posted on the Premises any notices which it deems necessary for its
protection from such liens. If any such liens are filed and are not released of
record by payment or posting of a proper bond within ten (10) days after such
filing, Landlord, may, without waiving its rights and remedies based on such
breach by Tenant and without releasing Tenant from any obligations hereunder or
under the Lease, cause such liens to be released by any means it shall deem
proper, including payment of the claim giving rise to such lien in which event
all amounts paid by Landlord shall immediately be due and payable by Tenant.
SECTION 9 - TENANT'S REPRESENTATIVE
Tenant has designated Richard Rubio as its sole representative with respect
to the matters set forth in this Work Letter, who shall have full authority and
responsibility to act on behalf of Tenant as required in this Work Letter.
Tenant may change its representative under this Work Letter at any time by
providing five (5) days prior written notice to Landlord. All inquiries,
requests, instructions, authorizations and other communications with respect to
matters covered by this Work Letter from Landlord will be made to Tenant's
Representative.
SECTION 10 - LANDLORD'S REPRESENTATIVE
Landlord has designated James McCann as its sole representative with
respect to the matters set forth in this Work Letter, who shall have full
authority and responsibility to act on behalf of Landlord as required in this
Work Letter. Landlord may change its representative under this Work Letter at
any time by providing five (5) days prior written notice to Tenant. All
inquiries, requests, instructions, authorizations and other communications with
respect to the matters covered by this Work Letter from Landlord will be made to
Tenant's representative. Tenant will communicate solely with Landlord's
Representative and will not make any inquiries of or requests to, and will not
give any instructions or authorizations to, any other employee or agent of
Landlord, including Landlord's architect, engineers, and contractors or any of
their agents or employees, with regard to matters covered by this Work Letter.
SECTION 11 - MISCELLANEOUS
11.1 SOLE OBLIGATIONS. Except as herein expressly set forth with respect
to the Improvements or in the Lease. Landlord has no agreement with Tenant and
has no obligation to do any work with respect to the Premises. Any other work
in the Premises which may be permitted by, Landlord pursuant to the terms and
conditions of the
EXHIBIT "C"
Page 10 of 12
Landlord Initials: EC JN
-------------
Tenant Initials: RR
-------------
9/30/97
<PAGE>
Lease, including any alteration or improvements as contemplated in the Lease,
shall be done at Tenant's sole cost and expense and in accordance with the
terms and conditions of the Lease.
11.2 APPLICABILITY. This Work Letter shall not be deemed applicable to:
(a) any additional space added to the original Premises at any time, whether by
the exercise of the Right of First Refusal or any options under the Lease or
otherwise, or (b) any portion of the original Premises or any additions thereto
In the event of a renewal or extension of the original Lease Term, whether by
the exercise of any options under the Lease or any amendment or supplement
thereto. The construction of any additions or improvements to the Premises not
contemplated by this Work Letter shall be effected pursuant to a separate work
letter agreement, in the form then being used by Landlord and specifically
addressed to the allocation of costs relating to such construction.
11.3 AUTHORITY; COUNTERPARTS. Any person signing this Work Letter on
behalf of Tenant warrants and represents that such person has authority to do
so. This Work Letter may be executed in counterparts, each of which shall be
deemed an original, but all of which together constitute one instrument.
11.4 BINDING ON SUCCESSORS. Subject to the limitations on assignment and
subletting contained in the Lease, this Work Letter shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns.
11.5 LANDLORD'S APPROVAL RIGHTS. Landlord may withhold its approval of the
Space Plan, including any revisions requested by Tenant, the T.I. Construction
Documents, Change Orders or other work requested by Tenant which require work
which: (i) exceeds or affects the structural integrity of the Project, or any
part of the heating, ventilating, air conditioning, plumbing, mechanical,
electrical, communication or other systems of the Project; (ii) is not approved
by the holder of any mortgage or deed of trust encumbering the Project at the
time the work is proposed; (iii) would not be approved by a prudent owner of
property similar to the Project; (iv) violates any agreement which affects the
Project or binds Landlord; (v) Landlord reasonably believes will increase the
cost of operation or maintenance of the common areas within or any of the
systems of the Project; (vi) Landlord reasonably believes will reduce the market
value of the Premises or Project at the end of the Lease Term; (vii) does not
conform to applicable building codes or is not approved by any governmental
authority with jurisdiction over the Premises; (viii) is not a Building Standard
item or an item of equal or higher quality; (ix) in Landlord's determination
detrimentally affects the uniform exterior appearance of the Project; or (x) is
reasonably disapproved by Landlord for any other reason not set forth herein.
11.6 TIME OF THE ESSENCE. Time is of the essence as to each and every term
and provision of this Work Letter. In all instances where Tenant is required to
approve an item, if no written notice of disapproval is given within the stated
time period at the end of said period the item shall automatically be deemed
approved and the next succeeding time period shall commence. Except as
otherwise provided, all references herein to a "number of days" shall mean and
refer to calendar days.
11.7 FORCE MAJEURE. If either party cannot perform any of its obligations
due to events beyond such party's control, the time provided for performing such
obligations shall be extended by a period of time equal to the duration of such
events; provided, however, that in no event shall the due date for the payment
of any money be extended.
11.8 ATTORNEY'S FEES. In any action to enforce or interpret the terms of
this Work Letter, the party prevailing in that action shall be entitled to
recover its reasonable attorneys' fees and costs of suit, both at trial and on
appeal.
11.9 INCORPORATION. This Work Letter is and shall be incorporated by
reference in the Lease and all of the terms and provisions of the Lease are
incorporated herein for all purposes. Any default by Tenant hereunder also
constitutes a default under the Lease.
EXHIBIT "C"
Page 11 of 12
Landlord Initials: EC JN
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Tenant Initials: RR
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9/30/97
<PAGE>
IN WITNESS WHEREOF, the Work Letter has been made and executed as of the
date set forth below.
LANDLORD
Dated: 10/27/97 MARCO PLAZA ENTERPRISES, a
--------------------- California general partnership
By: /s/ illegible
----------------------------
Name: illegible
----------------------------
Title: Partner
----------------------------
TENANT:
Dated: 10/27/97
-------------------- RUBIO'S RESTAURANTS, INC., a
Delaware corporation
By: /s/
----------------------------
Name: Rafael R. Rubio
----------------------------
Title: Chairman
----------------------------
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
EXHIBIT "C"
Page 12 of 12
Landlord Initials: EC JN
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Tenant Initials: RR
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9/30/97
<PAGE>
SCHEDULE 1 TO EXHIBIT "C"
CORNERSTONE CORPORATE CENTRE
OFFICE BUILDING OUTLINE SPECIFICATIONS
-----------------------------------------------
MAY 28, 1997
<TABLE>
<S> <C>
Project Name: CornerStone Corporate Center Number of buildings: Four (4)
-------------------------------
Project Location: Carlsbad Airport Centre Gross Building: 52,000 SF
--------------------------- ---------------
Lot 8 Rentable Building (GLA) 50,506 SF
- --------------------------------------------- ---------
Building Address: to be determined Rentable floor plate size: 16,425 SF
--------------------------- ---------
Core factor 14.0 %
- --------------------------------------------- -------
Gross Site Area: 3.31 Acres GLA building coverage 48 % (GLA/NetSite Area)
------- ------
Net Site Area: 2.5 Acres
-------
Parking Spaces Provided 208 Ea.
-------
Parking Ratio per GLA 4.0 / 1000 SF
-----
</TABLE>
BUILDING SHELL DESCRIPTION
1. UBC Construction Type: III 1 hour.
2. Foundations: Typical pad/spread footings at bearing columns. Excludes any
caisson or pile footings.
3. Slab on Grade: 4" concrete slab on grade, 2500 PSI, with #3 bars 24" on
center each way over 2" coarse sand over vapor barrier over 2" coarse sand.
4. Structural System: Structural steel framing system of columns and beams
with wood floor joists, plywood subdeck with 11/2" lightweight concrete.
5. Floor loading: Designed for 100 lb. per square foot, which includes 80 lb.
per square foot of live load (i.e.: fixtures and furnishings) and 20 lb. per
square foot of dead/partition load.
6. Bay Depth Spacing: 34 feet to 48 feet.
7. Exit Stairs: 2 exit stairwells, one on each end of the building with steel
pan concrete filled landings and treads and painted round steel pipe
handrails.
8. Typical Floor ceiling height: Finished ceiling height of 9' within 13' 4"
floor to floor structural system.
SCHEDULE 1 TO EXHIBIT "C"
Page 1 of 3
Landlord Initials: EC JN
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Tenant Initials: RR
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<PAGE>
9. Building Exterior: A composition system of applied stone (slate and
limestone) over stucco and high performance vision glass in an anodized
aluminum frame.
10. Roofing: 4-ply built up roof with mineral cap sheet, 10 year bondable.
11. Elevators: 2 hydraulic elevators to service each of the floors with 3,000
lb. load capacity.
12. Common Area Restrooms: Men's and women's restrooms on each floor designed
to meet Title 24 and ADA requirements and shall include flush valve toilets,
wall hung urinals, ceiling hung plastic laminate toilet partitions, and 2
sinks with stone countertops.
13. Common Area Showers/Lockers: Men's and women's shower and locker
facilities shall be provided to service the building.
14. Automatic Fire Sprinklers: The fire sprinkler system will be designated to
provide coverage for the shell building with provisions for standard office
type tenant improvements.
15. Heating, Ventilating and Air Conditioning System (HVAC): Cooling tower and
boiler together with piped water loops on each floor and central make-up air
shafts (and/or soffits supply) throughout shell building.
16. Electrical System: The building will provide with a 1200 amp 277/480 volt,
3 phase, 4 wire main electrical system including conduit only distribution
to electrical rooms on each floor. Metering will be provided in the main
electrical room for the Building Shell.
17. Security System: The building will be equipped with a card key access
system. Each tenant must provide their own security system for their
premises.
INTERIOR OFFICE IMPROVEMENTS
1. Deleted
2. Deleted
3. Deleted
4. Deleted
5. Deleted
6. Deleted
7. Deleted
8. Deleted
SCHEDULE 1 TO EXHIBIT "C"
Page 2 of 3
Landlord Initials: EC JN
-------------
Tenant Initials: RR
-------------
<PAGE>
9. Fire Sprinklers - The fire sprinkler system will be modified for complete
coverage utilizing semi-recessed heads.
10. HVAC - Provide supply and return conditioned air distribution from the
shell building package unit system to the office space at approximately 1
ton per 400 SF.
SCHEDULE 1 TO EXHIBIT "C"
Page 3 of 3
Landlord Initials: EC JN
-------------
Tenant Initials: RR
-------------
<PAGE>
SCHEDULE 2 TO EXHIBIT "C"
[PICTURE]
CORNERSTONE CORPORATE CENTRE
SCHEDULE 2 TO EXHIBIT "C"
Page 1 of 3
Landlord Initials: EC JN
-------------
Tenant Initials: RR
-------------
<PAGE>
SCHEDULE 2
[PICTURE]
SCHEDULE 2 TO EXHIBIT "C"
Page 2 of 3
Landlord Initials: EC JN
-------------
Tenant Initials: RR
-------------
<PAGE>
SCHEDULE 2
[PICTURE]
SCHEDULE 2 TO EXHIBIT "C"
Page 3 of 3
Landlord Initials: EC JN
-------------
Tenant Initials: RR
-------------
<PAGE>
SCHEDULE 3 TO EXHIBIT "C"
NEWPORT NATIONAL CONSTRUCTION CO
PRELIMINARY TENANT IMPROVEMENT COST ESTIMATE
<TABLE>
<S> <C> <C> <C>
PROJECT: RUBIO'S
Cornerstone Corporate Center Estimate based on Maggetti Elam preliminary
Bldg 3rd Flr Usable TI S.F.: 14.719 space plan dated 3/4/97, Excld's corridor S.F. & cost
</TABLE>
<TABLE>
<CAPTION>
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
COST DESCRIPTION QTY UNIT UNIT UNIT TOTAL
CODES PRICE TOTAL LINE ITEM
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
<S> <C> <C> <C> <C> <C> <C>
1-000 GENERAL REQUIREMENTS
1-200 Final Clean up 14,719 $0.10 SF $1,472
1-100 Progress Clean up 14,719 $0.07 SF $1,030
$2,502
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
3-000 CONCRETE
$0.00 SF $0
$0
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
6-000 ROUGH CARPENTRY
$0.00 EA $0
$0
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
8-235 MILLWORK
P-lam base cabinet 10 $175.00 LF $1,750
P-lam uppers & lowers 32 $275.00 LF $8,800
P-lam worksurface 36" 75 $75.00 LF $5,625
P-lam reco desk 28 $300.00 LF $8,400
$24,575
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
7-000 INSULATION
Walls - ????? 1,647 $0.30 SF $494
$0.00 SF $0
$494
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
7-011 ROOFING
$0.00 LS $0
$0
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
8-000 DOORS/FRMS/HRDW
Sngl 1 rh 3086 sc maple dr/frm/hrdw $895.00 EA $0
Dbl 1 rh 3086 sc maple dr/frm/hrdw $1,740.00 EA $0
Sngl unrtd 3086 sc maple dr/frm/hrd 32 $700.00 EA $22,400 1 DrFrJrdw per 400 sf
Dbl unrtd 3086 ac maple dr/frm/hrdw 1 $1,375.00 EA $1,375
By-pass closet drs 2 $450.00 EA $900
Cypher locks $450.00 EA $0
Locksets $50.00 EA $0
Card key proximity reader $1,500.00 EA $0
$24,675
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
<CAPTION>
- ------------- ---------------- --------- ------------- --------- ---------- ------
COST TOTAL STD STANDARD NON-STD
CODES COST PSF UNIT TI COST TI COST
- ------------- ---------------- --------- ------------- --------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
1-000
1-200 $1,472 $0
1-100 $1,030 $0
0.17
- ------------- ---------------- --------- ------------- --------- ---------- ------
3-000
$0 $0
0.00
- ------------- ---------------- --------- ------------- --------- ---------- ------
6-000
$0
0.00
- ------------- ---------------- --------- ------------- --------- ---------- ------
8-235
$0 $1,750
$0 $8,800
$0 $5,625
$0 $8,400
1.67
- ------------- ---------------- --------- ------------- --------- ---------- ------
7-000
$0 $494
$0 $0
0.03
- ------------- ---------------- --------- ------------- --------- ---------- ------
7-011
$0 $0
0.00
- ------------- ---------------- --------- ------------- --------- ---------- ------
8-000
$0 $0
$0 $0
$22,400 $0
$1,375 $0
$0 $900
$0 $0
$0 $0
$0 $0
1.68
- ------------- ---------------- --------- ------------- --------- ---------- ------
</TABLE>
SCHEDULE 3 TO EXHIBIT "C"
Page 1 of 4
Landlord Initials: EC JN
-------------
Tenant Initials: RR
-------------
<PAGE>
<TABLE>
<CAPTION>
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
COST DESCRIPTION QTY UNIT UNIT UNIT TOTAL
CODES PRICE TOTAL LINE ITEM
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
<S> <C> <C> <C> <C> <C> <C>
8-030 GLASS & GLAZING
Interior Window Coverings 3,409 $2.25 SF $7,871
2' clerestory windows $20.00 SF $0
9' interior windows 495 $20.00 SF $9,900
9' mirror @ gym & showers $10.50 SF $0
Shower doors 1 $275.00 EA $275
Storefront doors balconies 4 $750.00 EA $3,000
$21,046
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
9-930 DRYWALL
Perimeter drywall 2,503 $1.50 SF $3,755
Full hgt wall 13' high to structure 195 $35.00 LF $6,825
Interior part 9'-0" high 748 $25.00 LF $18,700
Gyp board ceilings 612 $2.65 SF $1,622
Bracing @ folding part 29 $25.00 LF $725
$31,626
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
??? ACOUSTICAL CEILINGS
2'X2' regular 14,107 $1.50 SF $21,161
Open ceiling $1.10 SF $0
Total ceiling area excluding gyp clgs 14,107 $21,161
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
??? CERAMIC TILE
Ceramic tile flr @ exec restroom 112 $7.50 SF $840
Ceramic tile walls @ exec restroom 164 $9.50 SF $1,558
$2,398
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
9-090 CARPETING
Carpet-Allowance 14,161 $1.78 SF $25,207
$25,207
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
9-080 RESILIENT FLOORING/BASE
VCT-Armstrong 446 $1.60 SF $714
Base-Roppe 2-1/2" 2,420 $1.10 LF $2,662
$3,376
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
9-100 PAINTING/WALLCOVERING
Walls 20,089 $0.27 SF $5,424
Doors-Stain grade 33 $50.00 EA $1,650
Vinyl wallcovering 1,269 $1.75 SF $2,221
$9,295
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
10-000 SPECIALTIES
$0
$0
$0
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
<CAPTION>
- ------------- ---------------- --------- ------------- --------- ---------- ------
COST TOTAL STD STANDARD NON-STD
CODES COST PSF UNIT TI COST TI COST
- ------------- ---------------- --------- ------------- --------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
8-030
$7,871 $0
$0 $0
$0 $9,900
$0 $0
$0 $275
$0 $3,000
1.43
- ------------- ---------------- --------- ------------- --------- ---------- ------
9-930
$3,755 $0
$6,825 $0
1 LF per 10 sf $18,700 $0
$0 $1,622
$0 $725
2.15
- ------------- ---------------- --------- ------------- --------- ---------- ------
??? 2.15
$21,161 $0
$0 $0
1.44
- ------------- ---------------- --------- ------------- --------- ---------- ------
???
$0 $840
$0 $1,558
$0 $0
0.16
- ------------- ---------------- --------- ------------- --------- ---------- ------
9-090
1.78 $25,207 $0
1.71
- ------------- ---------------- --------- ------------- --------- ---------- ------
9-080
$0 $714
$2,662 $0
0.23
- ------------- ---------------- --------- ------------- --------- ---------- ------
9-100
$5,424 $0
$1,650 $0
0.63
- ------------- ---------------- --------- ------------- --------- ---------- ------
10-000
$0 $0
$0 $0
- ------------- ---------------- --------- ------------- --------- ---------- ------
</TABLE>
SCHEDULE 3 TO EXHIBIT "C"
Page 2 of 4
Landlord Initials: EC JN
-------------
Tenant Initials: RR
-------------
<PAGE>
<TABLE>
<CAPTION>
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
COST DESCRIPTION QTY UNIT UNIT UNIT TOTAL
CODES PRICE TOTAL LINE ITEM
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
<S> <C> <C> <C> <C> <C> <C>
10-010 Toilet Accessories/partitions
Toilet accessories 1 $375.00 EA $375
EA $0
$375
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
EQUIPMENT
Folding Partition 29 $250.00 LF $7,250
Dishwashers 1 $350.00 EA $350
Microwaves 2 $150.00 EA $300
Stove/oven 1 $750.00 EA $750
$8,650
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
15-000 MECHANICAL
15-010 Plumbing:
Insta-Hot Water heater 1 $300.00 EA $300
Sink @coffee rms & showers 3 $750.00 EA $2,250
Drain line 200 $15.00 EA $3,000
Hot/Cold waterline 200 $10.00 LF $2,000
Floor drains 1 $350.00 EA $350
Garbage disposal 2 $175.00 EA $350
Water heaters 2 $450.00 EA $900
$9,150
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
15- Heating/Air Conditioning:
Title 24/Engineering 14,719 $0.18 SF $2,649
Watersource heat pumps: 37 $1,125,00 TON $41,397 1 ton per 400 sf
$44,047
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
15-030 Fire Protection:
Fire sprinklers 98 $80.00 EA $7,850
$7,850
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
16-000 ELECTRICAL
Duplex 2 outlets 146 $40.00 EA $5,840
Dedicated duplex outlet 12 $105.00 EA $1,260
GFIC outlet 4 $60.00 EA $240
208 volt outlet copy machine 2 $185.00 EA $370
Floor outlet 2 $210.00 EA $420
Floor data/tele outlet 2 $180.00 EA $360
System furn power (4 cluster) 5 $320.00 EA $1,600
System furn 1-1/4" tele conduit (4 5 $150.00 EA $750
clst
System furn 1-1/4" data conduit (4 5 $150.00 EA $750
cls
2-Gang Switch 36 $49.00 EA $1,764
2-Gang 3 way Switch 6 $72.00 EA $432
2 x 4 2 Lamp Parabolic Fixtures 168 $140.00 EA $23,520
Incandsnt dwn lts in brd rm 12 $155.00 EA $1,860
Incandsnt wall wshr lts in brd rm 16 $176.00 EA $2,816
<CAPTION>
- ------------- ---------------- --------- ------------- --------- ---------- ------
COST TOTAL STD STANDARD NON-STD
CODES COST PSF UNIT TI COST TI COST
- ------------- ---------------- --------- ------------- --------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
10-010
$0 $375
$0 $0
0.03
- ------------- ---------------- --------- ------------- --------- ---------- ------
$0 $7,250
$0 $350
$0 $300
$0 $750
0.59
- ------------- ---------------- --------- ------------- --------- ---------- ------
15-000
15-010
$0 $300
$0 $2,250
$0 $3,000
$0 $2,000
$0 $350
$0 $350
$0 $900
0.62
- ------------- ---------------- --------- ------------- --------- ---------- ------
15-
$2,649 $0
$41,397 $0
2.99
- ------------- ---------------- --------- ------------- --------- ---------- ------
15-030
$7,850 $0
0.53
- ------------- ---------------- --------- ------------- --------- ---------- ------
16-000
1 per 10 LF $5,840 $0
wall
$0 $1,260
$0 $240
$370 $0
$0 $420
$0 $360
$0 $1,600
$0 $750
$0 $750
1 per 10 LF $1,764 $0
wall
$0 $432
1 per 90 sf $23,520 $0
$0 $1,860
$0 $2,816
</TABLE>
SCHEDULE 3 TO EXHIBIT "C"
Page 3 of 4
Landlord Initials: EC JN
-------------
Tenant Initials: RR
-------------
<PAGE>
<TABLE>
<CAPTION>
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
COST DESCRIPTION QTY UNIT UNIT UNIT TOTAL
CODES PRICE TOTAL LINE ITEM
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
<S> <C> <C> <C> <C> <C> <C>
shower lts 1 $220.00 EA $220
Exit lights 10 $200.00 EA $2,000
Emergency batteries 10 $110.00 EA $1,100
Title 24 Load ???? 14,719 $0.10 SF $1,1472
Package Heat pumps 15 $600.00 EA $8,831
Telephone backboards 1 $150.00 EA $150
Panel Transformers/elc 2 $3,500,00 EA $7,000
Subtotal $62,755
- ------------- -------------------------------------- --------- ----------- -------------------- ------------------
SUBTOTAL $299,181
17-005 Contingency 5% $299,181 $14,959
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
19-000 General Conditions 4% $314,140 $12,566
SUBTOTAL $326,705
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
23-005 CONTRACTOR FEE 4% $326,705 $13,068
SUBTOTAL $339,773
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
24-200 INSURANCE 1.00% $339,773 $3,398
- ------------- -------------------------------------- --------- ----------- -------- ----------- ------------------
TOTAL PRIME CONTRACT $343,171
- ------------- ====================================== ========= =========== ======== =========== ==================
ALLOWANCE 14,719 $0.00 SF $0
A&E 14,719 $.075 SF $11,039
Permits 14,719 $1.50 SF $22,079
- ------------- ====================================== ========= =========== ======== =========== ==================
TOTAL T.I. ESTIMATED COST $376,289
- ------------- ====================================== ========= =========== ======== =========== ==================
<CAPTION>
- ------------- ---------------- --------- ------------- --------- ---------- ------
COST TOTAL STD STANDARD NON-STD
CODES COST PSF UNIT TI COST TI COST
- ------------- ---------------- --------- ------------- --------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
$0 $220
$2,000 $0
$1,100 $0
$1,1472 $0
$8,831 $0
$150 $0
$7,000 $0
4.26
- ------------- ---------------- --------- ------------- --------- ---------- ------
20.33 $220,972 15.01 $78,208 5.31
17-005 1.02 $11,049 0.75 $3,910 0.27
- ------------- ---------------- --------- ------------- --------- ---------- ------
19-000 0.85 $9,281 0.63 $3,285 0.22
22.20 $241,302 16.39 $85,404 5.80
- ------------- ---------------- --------- ------------- --------- ---------- ------
23-005 0.89 $9,652 0.66 $3,416 0.23
23.08 $250,954 17.05 $88,820 6.03
- ------------- ---------------- --------- ------------- --------- ---------- ------
24-200 0.23 $2,510 0.17 $888 0.06
- ------------- ---------------- --------- ------------- --------- ---------- ------
23.21 $253,463 17.22 $89,708 6.09
- ------------- ================ ========= ============= ========= ========== ======
0.00 0.00 $0 0.00 $0 0.00
0.75 0.75 11,309 0.75 $0 0.00
1.50 1.50 $22,709 1.50 $0 0.00
- ------------- ================ ========= ============= ========= ========== ======
25.56 $285,581 19.47 $89,708 6.09
- ------------- ================ ========= ============= ========= ========== ======
</TABLE>
SCHEDULE 3 TO EXHIBIT "C"
Page 4 of 4
Landlord Initials: EC JN
-------------
Tenant Initials: RR
-------------
<PAGE>
EXHIBIT "D"
DEFINITIONS
1. BUILDING COMMON AREA shall mean the areas of the buildings that provide
services to building tenants but which are not included in the OFFICE AREA of
any specific tenant. These area may include, but shall not be limited to, main
and auxiliary lobbies, atrium spaces, concierge areas or security desks,
conference rooms, lounges or vending areas, food service facilities, health or
fitness centers, daycare facilities, locker or shower facilities, mail rooms,
fire control rooms, fully enclosed courtyards outside the exterior walls, and
building core and service areas such as fully enclosed mechanical or equipment
rooms. Specifically excluded from BUILDING COMMON AREA are FLOOR COMMON AREA,
parking space, portions of loading docks outside the building line, and MAJOR
VERTICAL PENETRATION.
2. FLOOR USABLE AREA shall mean the sum of USABLE AREAs of OFFICE AREAs and
BUILDING COMMON AREAs of a floor. The amount of FLOOR USABLE AREA can vary over
the life of a building as corridors expand and contract and as floors are
remodeled.
3. FLOOR COMMON AREA shall mean the areas on a floor such as but shall not be
limited to washrooms, janitorial closets, electrical rooms, telephone rooms,
mechanical rooms, elevator lobbies, and public corridors which are available
primarily for the use of tenants on that floor.
4. FLOOR R/U RATIO shall mean the conversion factor that, when applied to
USABLE AREA, give the BASIC RENTABLE AREA of the OFFICE AREA or BUILDING COMMON
AREA.
5. BASIC RENTABLE AREA of an OFFICE AREA or BUILDING COMMON AREA shall mean
the USABLE AREA of that OFFICE AREA or BUILDING COMMON AREA and its share of the
FLOOR COMMON AREA on that floor. BASIC RENTABLE AREA is determined by
multiplying the USABLE AREA of that OFFICE AREA or BUILDING COMMON AREA by the
FLOOR R/U RATIO. The total BASIC RENTABLE AREA of a tenant occupying more than
one floor shall be the sum of its BASIC RENTABLE AREAs on each floor. The total
of all BASIC RENTABLE AREAs on a floor shall equal the FLOOR RENTABLE AREA of
that same floor.
6. BUILDING RENTABLE AREA shall equal the sum of all the FLOOR RENTABLE AREAs.
7. BUILDING R/U RATIO shall mean the conversion factor that distributes the
BUILDING COMMON AREA of a building.
8. RENTABLE AREA shall mean the USABLE AREA of an OFFICE AREA with its
associated share of FLOOR COMMON AREAs and BUILDING COMMON AREAS. RENTABLE
AREA is determined by multiplying the USABLE AREA of an OFFICE AREA by the
R/U RATIO. The total of all RENTABLE AREAS equals the BUILDING RENTABLE AREA
for the building.
9. R/U RATIO shall mean the conversion factor that, when applied to USABLE
AREA, gives the RENTABLE AREA of the OFFICE AREA.
10. FINISHED SURFACE shall mean a wall, ceiling or floor surface, including
glass, as prepared for tenant use, excluding the thickness of any special
surfacing materials such as paneling, furring strips and/or carpet.
11. DOMINANT PORTION shall mean the portion of the inside FINISHED SURFACE of
the permanent center building wall which is 50% or more of the vertical
floor-to-ceiling dimension, at the given point being measured as one moves
horizontally along the wall. DOMINANT PORTION itself is a vertical measurement
between FINISHED SURFACEs (or a series of vertical measurements), with the
number of measurements needed based upon the conditions found along the wall.
If, for instance, a window system is 4'-6' (1.372 meters) high and the floor to
ceiling dimension is 9'-0" (2.743 meters), the DOMINANT PORTION is the inside
surface of the glass
EXHIBIT "D"
Page 1 of 2
Landlord Initials: EC JN
-------------
Tenant Initials: RR
-------------
9/30/97
<PAGE>
for the full width of the window system. If, however, the window system is
4'-5" (1.346 meters), the DOMINANT PORTION is the inside surface of the wall.
In designs of alternating window systems and wall sections, the DOMINANT
PORTION will move in and out as often as conditions dictate. If no FINISHED
SURFACE of the permanent outer building wall is 50% or more of the vertical
floor-to-ceiling dimension, or if the permanent outer building wall is not
vertical, the DOMINANT PORTION shall be the inside finished surface of the
wall where it intersects the finished floor.
12. GROSS MEASURED AREA shall mean the total constructed area of a building.
It is generally not used for leasing purposes.
13. GROSS MEASURED AREA shall mean the total area of a building enclosed by the
DOMINANT PORTION, excluding parking areas and loading docks (or portions of
same) outside the building line. It is generally not used for leasing purposes
and is calculated on a floor by floor basis.
14. MAJOR VERTICAL PENETRATION shall mean stairs, elevator shafts, flues, pipe
shafts, vertical ducts, and the like, and their enclosing walls. Not included,
however, are vertical penetrations built for the private use of a tenant
occupying OFFICE AREA on more than one floor. Structural columns, openings for
vertical electric cable or telephone distribution, and openings for plumbing
lines are not considered to be MAJOR VERTICAL PENETRATION.
15. FLOOR RENTABLE AREA shall mean the result of subtracting from the GROSS
MEASURED AREA of a floor the MAJOR VERTICAL PENETRATION on the same floor. It
is generally fixed for the life of the building and is rarely affected by
changes in corridor size or configuration.
16. USABLE AREA shall mean the measured area of an OFFICE AREA or BUILDING
COMMON AREA on a floor. The total of all the USABLE AREA for a floor shall
equal FLOOR USABLE AREA of that same floor.
17. OFFICE AREA shall mean the area where a tenant normally houses personnel
and/or furniture, for which a measurement is to be computed.
EXHIBIT "D"
Page 2 of 2
Landlord Initials: EC JN
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Tenant Initials: RR
-------------
9/30/97
<PAGE>
EXHIBIT "E"
TENANT ACCEPTANCE LETTER
[DATE]
[TENANT'S NAME]
[ADDRESS]
Re: [ADDRESS AND SPACE LEASED]
Dear [TENANT'S NAME]:
Please sign below to confirm that you accept the Premises as Substantially
Complete but for punchlist items described in Section 4.5 of Exhibit C to that
certain Lease Agreement dated ________________________, by and between
________________________, and ________________________, [AS AMENDED BY
_____________,] and that the Commencement Date is _________________ and the
expiration date is ______________.
Sincerely,
___________________________________
By:________________________________
Acknowledged and Agreed:
Tenant:______________________________ Date:____________________
By:__________________________________
Name:________________________________
Title:_______________________________
EXHIBIT "E"
Landlord Initials: EC JN
-------------
Tenant Initials: RR
-------------
9/30/97
<PAGE>
EXHIBIT 10.16
FIRST AMENDMENT TO LEASE AGREEMENT
This First Amendment to Lease Agreement (this "First Amendment") is
entered effective October 16, 1998 ("Effective Date") by and between
Cornerstone Corporate Centre, LLC, a California limited liability company
("Landlord") and Rubio's Restaurants, Inc., a Delaware corporation ("Tenant")
with reference to the facts set forth below.
RECITALS
A. Tenant and Marco Plaza Enterprises, a California general
partnership ("Marco") entered into that certain Lease Agreement executed
October 27, 1997 (the "Lease") whereunder Marco leased to Tenant and Tenant
leased from Marco the Premises (as defined in the Lease).
B. On or about October 28, 1997, Marco assigned its interest in the
Lease to Landlord.
C. Landlord and Tenant desire to amend the Lease as provided below.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
agree as follows:
1. DEFINITIONS. Initially capitalized terms used herein without
definition have the meanings given them in the Lease.
2. AMENDMENT TO SECTION 6 OF THE BASIC TERMS. Section 6 of the Basic
Terms is hereby deleted in its entirety and replaced with the following:
"6. Premises (Section 2.1 of Lease): Improved office space on the
third floor.
Project Rentable Area: Approximately
100,230 square feet.
Building Rentable Area: Approximately 50,117
square feet.
Premises Rentable Area: Approximately 16,563
square feet.
Premises Usable Area: Approximately 14,447
square feet."
3. AMENDMENT TO SECTION 9 OF THE BASIC TERMS. Section 9 of the Basic
Terms is hereby amended as follows:
3.1 INITIAL BASE MONTHLY RENT. Initial Base Monthly Rent equals
Twenty-Eight Thousand Eight Hundred Nineteen and 62/100 Dollars ($28,819.62)
assuming the Rentable area of the Premises equals 16,563 square feet.
3.2 INITIAL BASE ANNUAL RENT. Initial Base Annual Rent equals
Three Hundred Forty-Five Thousand Eight Hundred Thirty-Five and 44/100
Dollars ($345,835.44) assuming the Rentable area of the Premises equals
16,563 square feet.
<PAGE>
3.3 FIRST MONTH'S BASE MONTHLY RENT. The First Month's Base
Monthly Rent due upon commencement of construction of the Premises is
Twenty-Eight Thousand Eight Hundred Nineteen and 62/100 Dollars ($28,819.62).
3.4 TENANT CONTINGENCY ALLOWANCES ADDED TO BASE MONTHLY RENT.
Upon Landlord's determination of the monthly amounts of the Tenant
Contingency Allowance and the Additional Tenant Contingency Allowance, the
same shall be added to Base Monthly Rent pursuant to Section 3.2 of the Work
Letter of the Lease as amended by this First Amendment.
4. AMENDMENT TO SECTION 12 OF THE BASIC TERMS. Section 12 of the
Basic Terms is hereby deleted in its entirety and replaced with the following:
"Security Deposit" (Article 4 of Lease): $28,819.62."
5. AMENDMENT TO SECTION 2.1.1. OF THE LEASE. The first sentence of
Section 2.1.1 of the Lease is hereby deleted in its entirety and replaced
with the following:
"The Premises will be approximately 16,563 Rentable square
feet on the third floor of the Building."
6. ADDITIONAL CONTINGENCY ALLOWANCE. In addition to the Tenant
Contingency Allowance described in Section 16 of the Summary of Basic Lease
Provisions and Section 3.2 of the Work Letter, Tenant shall have the right to
a Tenant Contingency Allowance of up to ten dollars ($10.00) per Usable
square foot of the Premises (the "Additional Tenant Contingency Allowance").
The Additional Tenant Contingency Allowance shall be advance by Landlord, and
repaid by Tenant, pursuant to the terms of Section 3.2 of the Work Letter,
except that repayment shall be at the rate of one and sixty six hundredths
cents ($0.0166) per Rentable square foot of the Premises per month for each
one dollar ($1.00) per Rentable square foot of the Premises of Excess Cost
paid by Landlord.
7. AMENDMENTS TO EXHIBIT D. Sections 4 and 5 of Exhibit D are hereby
deleted in their entirety.
[Remainder of Page Intentionally Left Blank]
2
<PAGE>
8. BALANCE OF TERMS UNAFFECTED. Except as amended herein, the balance
of the provisions of the Lease are unmodified and remain in full force and
effect. In the event of a conflict between the provisions of this First
Amendment and the provisions of the Lease, the provisions of this First
Amendment shall govern.
IN WITNESS WHEREOF, Landlord and Tenant have executed this First
Amendment as of the Effective Date.
<TABLE>
<CAPTION>
TENANT: LANDLORD:
<S> <C>
RUBIO'S RESTAURANTS, INC., CORNERSTONE CORPORATE CENTRE, LLC,
a Delaware corporation a California limited liability company
By: /s/ Richard Rubio By: Newport National/Cornerstone LLC,
----------------------------- a California limited liability company,
Name: Richard Rubio Its Asset Manager
-----------------------------
Title: V.P. Real Estate By: Newport National Corporation,
----------------------------- a California corporation,
Its Manager
By:
----------------------------- By:
--------------------------------
Name: Scott R. Brusseau, President
----------------------------
Title:
--------------------------
By:
--------------------------------
Jeffrey A. Brusseau,
Senior Vice President
</TABLE>
3
<PAGE>
TENANT ESTOPPEL CERTIFICATE
The undersigned ("Tenant") as of the date of execution of this Certificate,
hereby certifies to FIRST BANK & TRUST, a California Corporation, ("Lender"):
a) Tenant is a lessee or tenant of Building C, which is to be constructed
on Lot 8 in Carlsbad Airport Centre more particularly shown on Exhibit
"A" attached hereto and made a part hereof ("Premises"), which
Premises are a part of Cornerstone Corporate Centre (Lots 7, 8, 11 and
15) located in the City of Carlsbad, County of San Diego, state of
California ("Property") pursuant to that certain Lease dated October
29, 1997 between Tenant and Marco Plaza Enterprises, a California
general partnership. Marco Plaza Enterprises has subsequently
assigned the lease to Cornerstone Corporate Centre, LLC ("Borrower"
or "Landlord"). The Lease is the only agreement with respect to the
subject matter thereof and is in full force and effect. A copy of the
executed, full and complete Lease is attached hereto as Exhibit "B"
(the "Lease").
b) Tenant is the only lessee or tenant under the Lease. The Lease is in
full force and effect with no defaults thereunder by Landlord or
Tenant.
c) The Lease is unmodified except None.
d) No rent under the Lease has been paid more than thirty (30) days in
advance of its due date.
e) The address for notices to be sent to Tenant is as set forth in the
Lease or as set forth in this Agreement.
f) Tenant has no charge, lien, claim, defense or offset under the Lease
or otherwise, against rents or other amounts due or to become due
under the Lease. The Lease sets forth the entire agreement between
Landlord and Tenant and all terms and conditions with respect to
Tenant's right to occupy the Leased Premises.
g) The initial term of the Lease is for a period of 7 years following
the commencement date. No options to extend the term of the Lease
exist, except for One (1) Three (3) year option, and two (2)
additional five (5) year options. The Lease may not be canceled or
terminated by Tenant (except pursuant to the specific terms of the
Lease (prior to the expiration of the initial term). The rent is
payable monthly in advance in the amounts set forth in the Lease.
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<PAGE>
h) No prepayment or deposit of cash or other property has been made to
cover or apply to future rent for security purposes, except as
follows: None as of execution here of.
i) There are no legal actions, voluntary or otherwise, currently pending
against Tenant under the bankruptcy laws of the United States or any
state thereof.
j) Tenant has no right, interest, right of first refusal or option,
whether arising out of the Lease or otherwise to (a) lease or expand
into any space within the Property, other than the Leased Premises, or
within any other property at the Office Park or owned by Borrower or
(b) purchase or otherwise acquire all or any portion of the Property,
the Leased Premises or the Office Park.
--------------------------------------------------
Except as set forth in Section 2.5 of the Lease.
--------------------------------------------------
k) Tenant is not in default in any respect under the Lease and has not
assigned, transferred or hypothecated the Lease or any interest
therein or subleased all or any portion of the Leased Premises.
Tenant makes this Estoppel Certificate with the understanding that the Lender
is relying upon it in making a loan to Borrower.
EXECUTED as of the __________ day of October, 1997.
TENANT:
RUBIO'S RESTAURANTS, INC. d/b/a RUBIO'S BAJA GRILL
By: R. Rubio
------------------------------------------
Name: Rafael R. Rubio
------------------------------------------
Title: Chairman
------------------------------------------
2
<PAGE>
EXHIBIT A
(SITE PLAN)
3
<PAGE>
EXHIBIT B
(LEASE)
(See Exhibit 10.15 to Registration Statement on Form S-1)
4
<PAGE>
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
First Bank & Trust
2400 Michelson Drive
Irvine, CA 92715
Attn: Ms. Pam Malally
(Space Above for Recorder Only)
SUBORDINATION OF LEASE
NONDISTURBANCE AND ATTORNMENT AGREEMENT
NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN THE LEASEHOLD ESTATE IN THE
PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF
SOME OTHER OR LATER SECURITY INSTRUMENT.
THIS SUBORDINATION OF LEASE, NONDISTURBANCE AND ATTORNMENT
AGREEMENT ("Agreement") is entered into as of October 29, 1997, by
CORNERSTONE CORPORATE CENTRE, LLC, a California limited liability company
("Borrower" or "Landlord"), RUBIO'S RESTAURANTS, INC., a Delaware corporation
("Tenant"), FIRST BANK & TRUST, a California corporation, ("Lender"), with
reference to the following facts:
A. Landlord is or will be the owner of certain land located in
the City of Carlsbad County of San Diego, State of California, more
particularly described in EXHIBIT A attached hereto (the "Land"). The Land
and all improvements now or hereafter to be constructed thereon, are
collectively called herein the "Property."
B. Pursuant to a lease dated October 29, 1997 (the "Lease")
between Landlord and Tenant, Tenant is a tenant of a portion of the Land,
identified in EXHIBIT A as the "Leased Premises."
C. The Leased Premises are a part of a larger development more
particularly described in EXHIBIT B attached hereto and referred to as
Cornerstone Corporate Centre (the "Office Park").
D. References In this Agreement to the "Lease" include, without
limitation, the Lease, including, without limitation, all attachments
thereto, the leasehold estate created thereby and all rights granted in the
Lease, including without limitation, all extension options, rights of first
refusal, exclusive operating rights and rights to restrict the uses made of
other portions of the Office Park.
E. Landlord and Lender have entered into or will enter into a
Building Loan Agreement (the "Loan Agreement") dated as of October 29 1997,
pursuant to which Landlord shall execute a promissory note of even date with
the Loan Agreement in favor of Lender (the "Note") evidencing Landlord's
indebtedness to Lender in connection with a loan of up to $6,280,000 (the
"Loan"). The Loan is being made by Lender to Landlord to, in part, partially
finance Landlord's construction obligations under the Lease.
F. Borrower's obligations under the Note and Loan Agreement are
secured by a Construction Trust Deed with Assignment of Rents, Security
Agreement and Fixture Filing by Borrower ("Borrower Deed of Trust"), dated of
even date with the Loan Agreement and to be recorded in the Official Records
of San Diego County, California (the "Official Records"), concurrently with
the recordation of this Agreement.
<PAGE>
G. The Borrower Deed of Trust and all the other documents
executed by Borrower in connection with the Loan and defined in the Loan
Agreement as "Loan Documents" are hereafter referred collectively as the
"Loan Documents." All references herein to the "Deed of Trust" and the "Loan
Documents" include without limitation, all renewals, modifications,
extensions and amendments thereto and replacements and substitutions therefor.
H. As a condition precedent to Borrower's obtaining the Loan and
Lender's approval of the Lease, Lender has required that Landlord and Tenant
subordinate the Lease to the lien of the Deed of Trust, subject to the terms
of this Agreement.
I. It is to the mutual benefit of Landlord and Tenant that Lender
make the Loan to Landlord and approve the Lease, and Landlord and Tenant are
willing to subordinate the Lease to the lien of the Deed of Trust.
NOW THEREFORE, in consideration of the foregoing facts and the
mutual covenants contained herein, the parties hereto hereby agree as follows:
1. PRIORITY OF DEED OF TRUST; SUBORDINATION OF LEASE. The Deed of
Trust shall be and remain at all times a lien on the Property, prior and
superior to the Lease. Landlord and Tenant intentionally and unconditionally
subject and subordinate the Lease in favor of the lien of the Deed of Trust,
and acknowledge that, in reliance upon and in consideration of this
subjection and subordination, the Loan is being made to Landlord and would
not be made but for this subjection and subordination.
2. SUCCESSOR LANDLORD. The term "Successor Landlord" means any person
or entity (including without limitation Lender or any third party) who
succeeds to the interest of Borrower in and to the Leased Premises and the
Lease pursuant to a judicial foreclosure, trustee's sale, or conveyance or
sale in lieu of foreclosure, and the successors and assigns of any such
person or entity.
3. RECOGNITION; TERMINATION RIGHT. Provided that Tenant is not in
default under any of the terms, covenants, or conditions of the Lease (after
the expiration of all applicable grace or cure periods with respect to such
default), any Successor Landlord (a) shall recognize the Lease and Tenant as
its direct tenant under the Lease for the full term thereof (including any
extensions set forth in the Lease that are exercised by Tenant), (b) shall be
bound by and perform all of the obligations of the Landlord (subject to any
limitations contained in this Agreement) under the terms and provisions of
the Lease, (c) shall not disturb Tenant's use or possession of the Leased
Premises, and (d) shall not join (except to the extent required by law)
Tenant in summary or foreclosure proceedings or other proceedings to remove
or evict Borrower from the Office Park. If Tenant is in default under any of
the terms, covenants or conditions of the Lease (and all applicable grace or
cure periods with respect to such default have expired), Successor Landlord
may at its option elect to treat the Lease and all rights granted therein as
terminated by virtue of the subordination contained in Section 1 above.
4. ATTORNMENT AND NONDISTURBANCE. If a Successor Landlord succeeds to
the interest of the Landlord under the Lease, and provided that such
Successor Landlord has not elected to terminate the Lease as permitted by
Section 3 above:
(a) The Lease shall continue in full force and effect as a direct
lease between the Successor Landlord and Tenant for the balance of the term
of the Lease, or any extensions or renewals thereof contemplated by the
Lease; and Tenant, for itself and all other parties bound or affected by the
Lease, agrees that it will attorn to, be liable to and recognize any
Successor Landlord as the owner and lessor of the Leased Premises upon the
same terms and conditions as are contained in the Lease (said attornment
shall be effective and self-operative without the execution of any other
instruments on the part of any party hereto, immediately upon Successor
Landlord succeeding to the interests of Borrower under the Lease), and Tenant
shall pay rent and all other amounts due under the Lease directly to the
Successor Landlord; and
2
<PAGE>
(b) From and after such Successor Landlord's acquisition of title,
Successor Landlord shall be deemed to have assumed the Landlord's obligations
under the Lease, provided, however, that the Successor Landlord shall not be:
(i) liable for any act or omission of any prior landlord
(including without limitation Borrower);
(ii) liable for the return of any security deposit or other
amount payable to Tenant upon the termination of the Lease, unless such
amounts were previously actually delivered to the Successor Landlord by
Borrower;
(iii) be obligated to cure any default of any prior landlord
(including, without limitation Borrower), which occurred prior to the date
the Successor Landlord acquired title to the Leased Premises unless the
default is continuing after the date the Successor Landlord acquires title;
(iv) subject to any offsets or defenses which Tenant may have
against any prior landlord (including without limitation Borrower);
(v) bound by any rent or additional rent which Tenant might
have paid for more than one (1) month in advance to any prior landlord
(including without limitation Borrower), unless Lender shall have consented
in writing thereto or shall have received, directly or indirectly, such
rent or additional rent; or
(vi) liable for any consequential damages attributable to any
acts or omissions of any prior landlord (including without limitation
Borrower); or
(vii) obligated to restore improvements following any casualty
not required to be insured under the Lease or pay the costs of any
restoration in excess of the proceeds recovered under any insurance
required to be carried under the Lease or any condemnation award; or
(viii) liable for any damages or other relief attributable to
any latent or patent defects in construction; or
(ix) liable for any costs or expenses related to any
indemnification or representation provided by any prior landlord
(including, but not limited to, Borrower) with respect to the Property or
the Leased Premises, including without limitation, (A) the presence or
clean-up of any hazardous substances or materials in, on, under or about
the Leased Premises or the Office Park or (B) the ability of Tenant to use
the Property for any purpose; or
(x) obligated to pay any expenses or damages in connection
with or arising from any failure of any prior landlord (including without
limitation Borrower) to enforce any restriction on use in the Office Park,
or any exclusive use provisions of the Lease.
(xi) bound by (A) except as otherwise specifically permitted
by the terms of the Lease, any surrender or consensual termination of the
Lease without Lender's consent (which consent may be withheld in Lender's
sole discretion), or (B) any amendment or modification of the Lease made
without Lender's prior written consent (which consent shall not be
unreasonably withheld or delayed, except that Lender may withhold its
consent in Lender's sole discretion to any amendment which would reduce
rent or other amounts payable under the Lease, shorten the term of the
Lease, materially increase any construction obligations of Landlord under
the Lease or otherwise materially and adversely change the economic terms
or value of the Lease).
5. ASSIGNMENT. Tenant acknowledges and agrees that it has notice
that the Lease and the rent and all other sums due thereunder have been
assigned or are to be assigned to Lender pursuant
3
<PAGE>
to the Deed of Trust. If Lender notifies Tenant of the occurrence of an
Event of Default under the Deed of Trust and demands that Tenant pay rents,
reimbursements and other amounts due under the Lease directly to Lender,
Tenant shall honor such demand and pay all rents, reimbursements and other
amounts due under the Lease directly to Lender or as otherwise directed
pursuant to such notice. In complying with these provisions, Tenant shall be
entitled to rely solely upon the notices given by Lender, and Landlord agrees
to indemnify and hold Tenant harmless from and against any and all loss,
claim, damage or liability arising out of Tenant's compliance with such
notice. Tenant shall be entitled to full credit under the Lease for any
rents paid to Lender in accordance with the provisions of this paragraph to
the same extent as if such rents were paid directly to Landlord. Any dispute
between Lender and Landlord as to the extent, nature, existence or
continuance of an Event of Default, or with respect to foreclosure of the
Deed of Trust by Lender, shall be dealt with and adjusted solely among
Lender, Landlord, and Tenant shall not be made a party thereto (unless
required by law).
6. REPLACEMENT LEASE. Upon the written request of either
Successor Landlord or Tenant to the other, given at or about the time of any
judicial or nonjudicial foreclosure sale, or any conveyance in lieu thereof,
the parties agree to execute a new replacement lease of the Leased Premises
upon the same terms and conditions as the Lease between Borrower and Tenant,
which replacement lease shall cover any unexpired term of the Lease (and
shall include any extension or renewal options contemplated thereby) existing
prior to such foreclosure sate or conveyance in lieu thereof.
7. INSURANCE AND CONDEMNATION. Provided that the conditions in
the Deed of Trust and other Loan Documents regarding the procedures and
conditions for the holding and disbursement of the Landlord's interest in the
proceeds of casualty insurance and condemnation awards shall govern, Lender
agrees that such proceeds shall be applied to rebuild or restore the Leased
Premises and the Property to the extent required by the Lease.
8. MODIFICATION OR TERMINATION. Borrower and Lender have advised
Tenant that Borrower does not have the authority, without Lender's prior
written consent, to consent to or agree to any cancellation, termination or
surrender of the Lease (except at the normal expiration of the term of the
Lease) nor to enter into any agreement, amendment or modification of the
Lease.
9. LENDER NOTICE AND CURE RIGHTS. Tenant agrees to give Lender a
copy of any notice of default served by Tenant upon Borrower. Such notice
shall be served in the manner described in Section 16 below at the same time
that notice is given to Borrower. Tenant further agrees that if Borrower
falls to cure such default within the time provided for in the Lease, then
Lender shall have an additional thirty (30) days, commencing after the
expiration of Borrower's cure period, within which to cure such default after
receipt of written notice thereof from Tenant, or if such default cannot be
cured within that time, then such additional time as may be necessary to cure
the default shall be granted if, within thirty (30) days, Lender has
commenced and is diligently pursuing the remedies necessary to cure such
default, including without limitation, commencement of foreclosure
proceedings (if necessary to effect such cure), in which event the Lease
shall not be terminated while such remedies are being diligently pursued by
Lender.
10. LIMITATIONS ON LENDER LIABILITY. Tenant acknowledges that
Lender assumes no duty, liability or other obligation under the Lease either
by virtue of Deed of Trust or by any receipt or collection of rents under the
Lease. If any Successor Landlord should at any time become obligated to
perform the covenants of Landlord under the Lease, then, upon any further
transfer of the Property or the Lease, by such Successor Landlord, all of
such obligations accruing after the date of that further transfer shall
terminate as to the Successor Landlord. No Successor Landlord shall have any
obligation or liability beyond its interest in the Property, and Tenant will
not collect or attempt to collect any judgment out of any assets of Lender
other than the Property.
11. OPTIONAL ADVANCES. All non-obligatory additional advances
made in connection with any construction of improvements on the Property and
secured by the Deed of Trust and any deed of
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<PAGE>
trust used in connection with any refinancing of the Loan by Lender, shall
unconditionally be and remain at all times a lien on the Property, prior and
superior to the Lease.
12. ENTIRE AGREEMENT REGARDING SUBORDINATION. This Agreement
shall be the whole and only agreement with regard to the subordination of the
Lease to the lien of the Deed of Trust, and shall supersede and cancel, but
only in so far as would affect the priority between the Lease and the Deed of
Trust, any prior agreements as to such subordination, including, but not
limited to, those provisions contained in the Lease or any exhibit attached
thereto which may provide for such subordination. If there is a conflict
between the terms and conditions of this Agreement and those of the Lease,
then the terms and conditions of this Agreement shall prevail.
13. CONSENT. Landlord and Tenant declare, agree and acknowledge
that in making disbursements of the Loan under the Loan Agreement, Lender is
under no obligation or duty to, nor has Lender represented that it will, see
to the application of such Loan proceeds by the person or persons to whom
Lender disburses such proceeds, and any application or use of such proceeds
for purposes other than those provided for in the Loan Agreement shall not
defeat the subordination herein.
14. FURTHER ASSURANCES. So long as the Deed of Trust shall remain
a lien upon the Property or any part thereof, Tenant, its successors or
assigns or any other holder of the leasehold estate created by the Lease
shall execute, acknowledge and deliver, upon Lender's reasonable demand, at
any time or times, any and all further subordinations, agreements, estoppel
certificates or other instruments in recordable form reasonably sufficient
for that purpose or that Lender or a Successor Landlord may hereafter
reasonably require for carrying out the purpose and intent of this Agreement.
15. NOTICES. All notices of any kind which any party hereto may
be required or may desire to serve on the other shall be deemed served upon
delivery by an overnight courier, or, if mailed, upon the first to occur of
receipt or the expiration of 72 hours after deposit in United States Postal
Service, certified mail, return receipt requested, postage prepaid, and
addressed as follows:
If to Lender: First Bank & Trust
2400 Michelson Drive
Irvine, CA 92715
Attention: Mr. Alan Rye
Senior Vice President
If to Tenant: Rubio's Restaurants Inc.
Attn: Richard Rubio
5151 Shoreham Place, Suite 260
San Diego, CA 92122
Attn: Richard Rubio
Vice President of Real Estate
16. MODIFICATION AND RELEASE. Lender may, without affecting the
subordination of the Lease: (a) release or compromise any obligation of any
nature with respect to the Loan Documents; (b) release its security interest
in, or surrender, release or permit any substitution or exchange of all or
any part of any properties securing repayment of the Loan; (c) retain or
obtain a security interest in any property to secure repayment of the Loan;
or (d) modify, amend, defer, extend, consolidate or supplement any of the
original or subsequent Loan Documents.
17. NO NOTICE. Except where required by law, Lender shall not be
obligated to give Tenant notices of any kind, including, but not limited to,
those in connection with the following circumstances: (a) for any default,
whether of money or of any other term or condition in the Loan Documents; or
(b) for any modification, amendment, deferral, extension, consolidation or
supplement to the original or any subsequent Loan Documents.
5
<PAGE>
18. MISCELLANEOUS. The captions and headings of various sections
of this Agreement are for convenience only and are not to be considered as
defining or limiting in any way the scope or intent of the provisions of this
Agreement. The Recitals to this Agreement are incorporated herein as part of
this Agreement. This Agreement shall be governed by and construed in
accordance with the laws of the State of California. This Agreement may not
be modified or amended except in writing signed by all parties hereto. In
the event any one or more of the provisions contained in this Agreement shall
for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement, but this Agreement shall be construed as
if such invalid, illegal or unenforceable provision had never been contained
herein. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which, taken together, shall
constitute one and the same agreement. This Agreement inures to the benefit
of and binds Landlord, Tenant and Lender and their respective successors and
assigns, including without limitation, Successor Landlords.
19. Limitation. The Deed of Trust shall not apply to any
equipment, inventory, merchandise, furniture, fixtures or other personal
property owned or leased by Tenant which is now or hereafter placed or
installed on the Leased Premises, and Tenant shall have the full right to
remove said property at any time during or at the expiration of the Lease
term, subject to Tenant's obligation to repair any damage to the Leased
Premises resulting from such removal.
NOTICE: THIS SUBORDINATION AGREEMENT CONTAINS A PROVISION WHICH MAY ALLOW THE
PARTIES AGAINST WHOM YOU CLAIM AN EQUITABLE INTEREST IN REAL PROPERTY
TO OBTAIN A LOAN A PORTION OF WHICH MAY BE EXPENDED FOR OTHER PURPOSES
THAN IMPROVEMENT OF THE LAND.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
TENANT: RUBIO'S RESTAURANTS, INC., d/b/a RUBIO'S BAJA
GRILL, a Delaware corporation
By: R. Rubio
-------------------------------------
Name: Rafael R. Rubio
-------------------------------------
Title: Chairman
-------------------------------------
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<PAGE>
LANDLORD/BORROWER: CORNERSTONE CORPORATE CENTRE, LLC, a
California limited liability company
By: MARCO PLAZA ENTERPRISES, a California
general partnership, its Managing
Member
By:
-------------------------------------
____________________, General Partner
By: NEWPORT NATIONAL/CORNERSTONE LLC,
a California limited liability
company, Its Asset Manager
By: Newport National Corporation, a
California corporation, Its Manager
By:
-------------------------------------
Scott Brusseau, President
By:
-------------------------------------
Jeffry Brusseau, Vice President
LENDER: FIRST BANK & TRUST, a California corporation
By:
-------------------------------------
Ron del Toro
Vice President
7
<PAGE>
State of California )
) ss.
County of San Diego )
On ______________ before me, Penny Ritter, Notary Public, personally
appeared Rafael Rubio personally known to me (or proved to me on the basis
of satisfactory evidence) to be the person whose name is subscribed to the
within instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
------------------------
Notary Seal
------------------------
(Seal)
Signature Penny Ritter
------------------------
State of __________ )
) ss.
County of _________ )
On __________ before me, __________________________, Notary Public,
personally appeared______________________________________________ personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature
------------------------
<PAGE>
EXHIBIT A
"LEASED PREMISES"
EXHIBIT A
<PAGE>
EXHIBIT B
"OFFICE PARK"
The legal description of the "Office Park" is as follows:
EXHIBIT B
<PAGE>
EXHIBIT 10.17
SERVICE AMERICA CORPORATION
SAN DIEGO JACK MURPHY STADIUM
THIS AGREEMENT is made this 9th day of April, 1992 by and between SERVICE
AMERICA CORPORATION ("SAC") , and RUBIO'S RESTAURANTS, INC. ("Rubio's"), a
California corporation with its principal place of business at 7857 Convoy
Court, San Diego, CA 92111.
WITNESSETH:
In consideration of the mutual covenants set forth below, and for other valuable
consideration, the parties agree, as follows:
1. OBLIGATIONS OF SAC:
a. SAC shall, in conjunction with Rubio's, as described below,
operate a concession stand ("the stand"), as part of SAC's
operation at the San Diego Jack Murphy Stadium, which "stand"
shall be located on the Upper Level, Section 21, and Kiosk C-34K
located on the Plaza Level, Section 34, or such additional
location as SAC may determine. SAC shall permit Rubio's to
advertise its products at the Stadium, in accordance with the
terms of this Agreement.
b. SAC shall provide the following materials and services for the
operation of "the stand":
i. Concession stand location.
ii. Utilities, including gas, water and electricity.
iii. Sufficient equipment mutually agreed upon, to prepare
Rubio's concession menu items.
iv. Menu strips for the menu board.
v. A suitable staff of employees.
vi. Additional smallwares, as required.
c. SAC shall maintain adequate insurance for the operation of The
Top Deck and Kiosk and shall indemnify and hold Rubio's harmless
from any claims, damages and expenses that may arise in
connection with SAC's negligent acts or omissions with respect to
The Top Deck or Kiosk.
d. All recipes and preparation procedures provided by Rubio's shall
be treated by SAC as proprietary and confidential.
<PAGE>
e. SAC shall pay Rubio's within *** after the end of SAC's monthly
accounting period, a sum equal to *** of the net sales
(revenues less all taxes) on Rubio's products sold in these
locations, excluding give-aways, employee meals and similar
adjustments. SAC shall provide Rubio's with periodic access to
The Top Deck and Kiosk to audit SAC's procedures.
f. As per this Amended Agreement, SAC will make an additional
investment of not more than *** to upgrade the cooking/serving
line in the Top Deck. As shown in the attachment of March 23rd,
this investment will include the cost of hook-up and
installation.
2. OBLIGATIONS OF RUBIO'S
a. Rubio's shall assist SAC in the operation of The Top Deck and
Kiosk and shall be subject at all times to and comply with, the
terms and conditions of the written Agreement between SAC and San
Diego Jack Murphy Stadium and with all applicable laws and
regulations.
b. Rubio's shall provide the following:
i. Neon sign acceptable to SAC, advertising The Top Deck,
which sign shall remain the *** upon termination of this
Agreement, and two (2) neon signs, advertising Rubio's
Fish Tacos, which shall remain the property of Rubio's and
be removed *** upon termination of this Agreement.
ii. Four replacement exterior signs acceptable to SAC and
consistent with other Stadium kiosks, which shall remain
the property of Rubio's and shall be removed, *** ,
upon the termination of this Agreement. *** shall be
*** for any and all *** to the *** and any other person
or entity in connection with
***.
iii. One walk-in refrigerator, minimum size 8' x 8' weather
protected, with electrical and plumbing and hookups,
concrete pad, fencing and installation and all necessary
labor.
iv. Interior layout and design and all kitchen equipment and
labor required for the conversion of the stand into a
high-production fish taco stand.
v. Recipes, procedures and training for SAC employees in the
preparation of foods to be sold at the Kiosk and ongoing
supervision in the preparation and sale of food products.
vi. Smallwares for the initial operation of the Kiosk.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
2
<PAGE>
vii. Public address system for order pick-up.
c. Rubio's shall make available for sale to SAC sufficient
quantities of spices and seasonings as may be required for the
sale of Rubio's products from The Top Deck and Kiosk.
d. Rubio's grants to SAC the right and license for the term and all
renewals of this Agreement, to use the name, "Rubio's" and any
and all other trademarks, tradenames, logos and/or copyrights
utilized by Rubio's in the sale of its products.
e. All operational procedures and policies of SAC shall be treated
by Rubio's as proprietary and confidential.
f. Rubio's shall be *** for any and all *** to the ***
and any other persons or entities in connection with ***
depicting *** .
g. As per this Amended Agreement, Rubio's will make an additional
investment of not more than *** to upgrade the appearance
and areas surrounding the C-34 Kiosk and the Top Deck.
3. THE TERM
a. This Agreement shall remain in effect for a period of Four (4)
years, commencing as of the date hereof.
b. This Agreement shall automatically renew for an additional
*** term, unless either party serves notice of its intent not to
renew, prior to March 1st of the initial or any renewal term.
Notwithstanding the foregoing, this Agreement shall terminate
upon termination of the ***
*** .
c. Upon termination of this Agreement, all equipment and materials
owned by Rubio's shall be removed by Rubio's, *** , unless
purchased by SAC upon such terms as the parties may agree.
4. MISCELLANEOUS
a. Neither party shall have any liability for any failure in
performance due to any Act of God, or any other reason beyond
such party's controls.
b. This Agreement contains the entire agreement between the parties
relating to the subject matter hereof, and supersedes all other
understandings and communications relating to such subject
matter.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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<PAGE>
c. All investments will be made by Service America, initially,
through its' Facility Planning Department. The investments will
be reimbursed to SAC by subtracting *** from the royalty
due to Rubio's on net sales until this investment has been
repaid.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized representatives, as of the
date first above written.
SERVICE AMERICA CORPORATION RUBIO'S RESTAURANTS, INC.
/s/ Gary L. Howath /s/ illegible
- -------------------------------- -------------------------------------
By: By:
Sr. V.P. President
- -------------------------------- -------------------------------------
Title: Title
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
4
<PAGE>
EXHIBIT 10.18
RUBIO'S TEST AGREEMENT
This Test Agreement (the "Test Agreement" or "Agreement") is made and
entered into this 4th day of August, 1995, by and between Rubio's Restaurants,
Inc., having an address of 5151 Shoreham Place (Suite 260), San Diego,
California 92122 (hereafter referred to as "Rubio's") , and Host International,
Inc., a Delaware corporation, having an address of 10400 Fernwood Road, Attn:
Dept. 72/923, Washington, DC 20817 (hereafter referred to as "Host") , with
respect to the following:
W I T N E S S E T H:
A. Rubio's is the owner of certain trademarks, service marks and
logotypes, including the mark "Rubio's" (together with any future marks
developed by Rubio's based upon some variation of the mark "Rubio's",
collectively referred to herein as the "Trademarks"), which it uses in
connection with the operation of food and beverage facilities and restaurants,
all of which are presently owned, leased and operated, or licensed by Rubio's.
B. Rubio's has developed and adopted unique and uniform plans, processes,
trade secrets, and styles for the layout and operation of such businesses
including signs, interior and exterior decoration and decor, and lines of food
and beverage product, a pricing strategy and, in general, a style, system and
method of business operations developed through and by reason of Rubio's
business experience.
C. Host is engaged in the business of operating food and beverage
facilities at San Diego International Airport (the "Airport").
D. Host wishes to obtain a trademark license agreement which will
authorize it to operate a "Rubio's" facility at the location set forth on
Exhibit A, attached hereto and made a part
<PAGE>
hereof (the "Licensed Location"), and Rubio's is willing to grant a trademark
license upon the terms and conditions herein set forth.
IN WITNESS WHEREOF, the parties hereto enter into this Test Agreement:
1. GRANT OF LICENSE. Rubio's grants to Host and Host accepts a
non-exclusive license to use and display the Trademarks and offer for sale the
Rubio's products at the Licensed Location or such other locations as may be
approved by Rubio's in writing, upon the terms and subject to the provisions of
this Agreement and all documents ancillary hereto.
2. LICENSED LOCATION. Host's Licensed Location shall be at the Airport.
3. TERM. Subject to the rights of termination set forth in Section 10
hereof, the term of this Agreement shall be for a test period of ***
(the "Test Period"), commencing with the opening of the Licensed Location for
business. At the end of the Test Period, the parties will confer regarding the
success or failure of the test, and if the test is successful, Rubio's and Host
may extend the term of this Agreement on mutually agreeable terms.
4. TRADEMARKS.
4.01. NON-OWNERSHIP OF TRADEMARKS. Host has no right, title or
interest in or to any of the Trademarks, except for Host's privilege and
license during the term hereof to display and use the Trademarks and offer
for sale Rubio's products. Host acknowledges that Host now asserts no
claim and later shall assert no claim to any goodwill, reputation or
ownership of the Trademarks by virtue of Host's licensed or franchised use
or both of them, or otherwise.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
2
<PAGE>
4.02. ACTS IN DEROGATION OF THE TRADEMARKS. Host agrees that Host
shall not do or permit any act or thing to be done in derogation of any of
the rights of Rubio's in connection with the Trademarks, either during the
term of this Agreement or after, and that Host shall use the Trademarks
only for the uses and in the manner licensed or franchised or both under,
and as provided in, this Agreement.
4.03. PROHIBITION AGAINST DISPUTING RUBIO'S RIGHTS. During or
after the term of this Agreement, Host shall not in any way dispute or
impugn the validity of the Trademarks, or the rights of Rubio's to them, or
the rights of Rubio's or other licensees of Rubio's to use them.
4.04. Use of Trademarks.
(a) Host shall affix to the Licensed Location, at such
places within and without the Licensed Location as shall be
mutually designated by Rubio's and Host, signs containing the
Trademarks. Except as expressly permitted by Rubio's, Host shall
not erect or display any other signs, or display any other
trademarks, logo-types, symbols or service marks in, upon, or in
connection with the Licensed Location without Rubio's prior
written approval. Such approval shall not be unreasonably
withheld.
(b) Within ninety (90) days following termination of this
Agreement for any reason, Host shall cease use of and remove from
the Licensed Location, each and all of the Trademarks, and any
physical objects bearing or containing any of the Trademarks.
3
<PAGE>
4.05. ASSUMED NAME REGISTRATION. If Host is required to do so by
any statute or ordinance, Host shall promptly, upon the execution of this
Agreement or upon the opening of the Licensed Location, as the case may be,
file with applicable government agencies or offices a notice of Host's
intent to conduct Host's business at the Licensed Location under the name
"Rubio's." Promptly upon the termination of this Agreement for any reason
whatsoever Host shall execute and file such documents as may be necessary
to revoke or terminate such assumed name registrations.
4.06. TRADEMARK CHANGES. From time to time, Rubio's may modify
the Trademarks. Host shall accept, use and display, as may be applicable,
such modified Trademarks in accordance with the procedures, policies, rules
and regulations so long as they are consistent with the procedures,
policies, rules and regulations followed by Rubio's in all of its owned
retail operations, as though such modifications were specifically set forth
in this Agreement.
4.07. DEFENSE OF MARK BY RUBIO'S. If Host receives notice or is
informed or learns of any claim, suit or demand against Host on account of
any alleged infringement, unfair competition, or similar matter relating to
Host's use of the Trademarks, Host shall promptly notify Rubio's of such
claim, suit or demand. Except as herein expressly provided, upon receiving
such notice Rubio's shall promptly take such action as may be necessary to
protect and defend Host against any such claim by any third party and shall
indemnify Host against any loss, cost or expense incurred in connection
with such claim. Host shall not settle or compromise any such claim
without the prior written consent of Rubio's. Rubio's shall have the right
to defend, compromise or settle any such claim at
4
<PAGE>
Rubio's sole cost and expense, using attorneys of its own choosing, and
Host agrees to cooperate fully with Rubio's in connection with the defense
of any such claim.
4.08. PROSECUTION OF INFRINGERS. If Host receives notice or is
informed or learns that any third party, which Host believes to be
unauthorized to use the Trademarks, is using the Trademarks or any variant
of them, Host shall promptly notify Rubio's of the facts relating to such
alleged infringing use. Thereupon, Rubio's shall take any action against
such third party on account of such alleged infringement of the Trademarks.
Host shall have no right to make any demand against any such alleged
infringer of Rubio's Trademarks or to prosecute any claim of any kind or
nature whatsoever against such alleged infringer of Rubio's Trademarks for
or on account of such infringement.
5. STANDARDS OF OPERATIONS. Rubio's shall furnish to Host a copy of its
various manuals which constitute the standards of operations (the "Standards of
Operation") developed by Rubio's for operation of the Licensed Location, which
standards include unique and uniform plans, processes, trade secrets, and styles
for the layout and operation of a "Rubio's" facility, including signs, interior
and exterior decoration and decor, and lines of food and beverage product, a
pricing strategy and, in general, a style, system and method of business
operations developed through and by reason of Rubio's business experience.
Rubio's may modify and supplement the Standards of Operation from time to time
upon written notice to Host and provided that such modification or supplement to
such Standards of Operation shall be consistent with the standards of operation
then in practice at Rubio's locations elsewhere.
The food and beverage products sold and services rendered by Host pursuant
to this Agreement shall at all times be sold and rendered with courtesy and with
a view to complete
5
<PAGE>
customer satisfaction, and shall be consistent with the standards of
excellence maintained by Rubio's as described in the Standards of Operation.
Rubio's may, but shall not be obligated to, enter the Licensed Location at
any time during normal business hours to examine the same and to determine if
Host is complying with its obligations under this Agreement.
Host shall be entitled to offer beverages at the Licensed Location in
conjunction with the sale of Rubio's proprietary products.
6. PERFORMANCE BY HOST AND RUBIO'S.
6.01. HOST PERFORMANCE. Host will abide by the Standards of
Operation provided pursuant to Section 5 of this Agreement.
6.02. RUBIO'S PERFORMANCE. Rubio's shall provide between ***
*** of management training at *** , for no more than *** Host
employees, at the Licensed Location or such other location agreed to
by Host. At least one Host employee must attend such management training.
Rubio's also will provide pre-opening training support and assistance to
Host at the Licensed Location, *** , for *** of Host's hourly
employees for at least *** prior to, and *** following, the opening of the
Licensed Location. Rubio's will develop,
*** , specific operations manuals and other supporting materials
needed to effectively operate the Rubio's concept at the Airport. Host agrees
to not use any of the manuals, concepts, or other supporting materials created
or supplied by Rubio's for any other purpose or at any other location except for
the Test Period at the Airport, without Rubio's prior written consent. Rubio's
also will provide *** operations support, *** ,
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
6
<PAGE>
with a minimum of *** Quality Assurance Evaluations for the Licensed Location,
on an *** basis. Rubio's will not be responsible for wages and benefits for
any Host employee.
Upon request by Host, Rubio's shall supply to Host such ingredients and
supplies as Host may reasonably require for performance of its obligations
hereunder. Nothing in this Agreement shall preclude Host, however, from
acquiring ingredients and supplies from third parties so long as such
ingredients and supplies reasonably comply with the standard specifications of
Rubio's for such items. Rubio's shall supply to Host only first quality
materials and fresh products complying with the specifications established in
writing by Rubio's.
7. COSTS AND FEES. Host shall pay Rubio's a license fee (the "License
Fee") during the Test Period, which equals *** of gross revenues from the
sale of the proprietary items set forth at Exhibit B (the "Proprietary Items").
8. RELATIONSHIP OF PARTIES. In all matters pertaining to the operation
of the Licensed Location, Host is and shall be an independent contractor of
Rubio's. Neither Host nor any officer or employee of Host shall be deemed to be
an employee of Rubio's. Nothing contained in this Agreement shall be construed
so as to create a partnership, joint venture or agency; and neither party to
this Agreement shall be liable for the debts or obligations of the other.
Rubio's shall not have the power to hire or fire Host's employees, may not
control or have access to Host's funds or the expenditures of these funds, or
any other way exercise control over Host's business.
9. ASSIGNMENT.
9.01. ASSIGNMENT BY RUBIO'S. Rubio's shall have the right to
assign this Agreement, and all of its rights and privileges, to any other
person, firm or corporation; provided, however, that all of the Trademarks
have been assigned to such person, firm or
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
7
<PAGE>
corporation and, with respect to any assignment resulting in the
subsequent performance by the assignee of the functions of Rubio's, (1) the
assignee shall, at the time of such assignment, be financially responsible
and capable of performing the obligations of Rubio's; and (2) the assignee
expressly shall assume and agree to perform such obligations.
9.02. ASSIGNMENT BY HOST. Host may assign, transfer or sell its
interest in this Agreement (voluntarily or by operation of law) or sell
such Licensed Location (collectively "Assignment"), voluntarily or
involuntarily, by operation of law or otherwise, in any manner without the
prior written consent of Rubio's, provided that Host sells or assigns
substantially all its assets at the Airport to the proposed purchaser or
assignee; provided, however, that Host may not assign, transfer or sell its
interest in this Agreement to a competitor of Rubio's without Rubio's prior
written consent to such assignment, transfer or sale. In all other
instances of transfer or assignment by Host of its rights hereunder,
Rubio's prior consent shall be required, such consent not to be
unreasonably withheld.
10. DEFAULT AND TERMINATION. If any one or more of the following events
shall occur:
(a) Either party fails to reasonably comply with the Standards of
Operations of Rubio's;
(b) Either party shall become insolvent, or shall take the benefit of
any present or future insolvency statute, or shall make a general
assignment for the benefit of creditors, or file a voluntary petition in
bankruptcy or a petition or answer seeking an arrangement for its
reorganization, or the readjustment of its indebtedness under the
8
<PAGE>
Federal bankruptcy laws, or under any other law or statute of the United
States or any state thereof, or shall consent to the appointment of a
receiver, trustee or liquidate of all or substantially all of its property;
(c) A petition under any part of the Federal bankruptcy laws, or an
action under any present or future insolvency law or statute, shall be
filed against either party and shall not be dismissed within thirty (30)
days after the filing thereof;
(d) Host shall fail duly and punctually to pay any License Fee when
due Rubio's within thirty (30) days after receipt of written demand for
payment by Rubio's; or
(e) Either party shall materially fail to keep, perform and observe
each and every other promise, covenant and agreement set forth in this
Agreement on its part to be kept, performed or observed,
and such breach or default shall continue for a period of more than thirty (30)
days after receipt of written notice of such breach or default, except where
fulfillment of its obligations requires activity over a period of time and the
party in default shall have commenced in good faith to perform whatever may be
required for fulfillment of its obligations and continued such performance
without interruption except for causes beyond its control, then in its
discretion Rubio's or Host, as the case may by, shall have the right to
terminate this Agreement. In the event that Host violates the terms of this
Agreement on *** within any *** period, and has received notice from Rubio's
with respect to such failure to comply for the *** *** , Rubio's shall not
be required to provide Host notice and the right to cure upon the third
violation, but may terminate this Agreement immediately upon notice to Host.
The remedies
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
9
<PAGE>
herein provided for shall not be exclusive, but shall be cumulative
upon all other remedies, legal or equitable in nature.
11. INSURANCE AND INDEMNIFICATION.
11.01. INSURANCE. Host, during the term of this Agreement, will,
at its sole cost and expense, maintain general public liability insurance
including blanket contractual liability, broad form property damage and all
risk coverage, personal injury, completed operations and products liability
and products property damage insurance with limits of not less than ***
for personal injury, disease or death to any persons arising out of an
occurrence and ***
*** for property damage for such damage arising out of an
occurrence. All policies, or certificates issued thereunder, insuring
against liability for personal injury, disease or death, or damage to
property shall contain an endorsement by which the insurer extends the
coverage thereunder, to the extent necessary, to include the contractual
liability of Host arising by reason of the indemnity provisions of this
Agreement, shall be issued in the names of Host and Rubio's, as their
interests may appear, and shall name Rubio's as an additional insured under
all such policies.
11.02. HOST'S INDEMNIFICATION OF RUBIO'S. For the consideration
stated in this Agreement, Host hereby agrees to indemnify and hold Rubio's,
its officers, directors, agents and affiliates harmless from and against
any and all claims, actions, expenses, losses, liabilities, damages, fines,
penalties, costs and demands whatsoever, together with reasonable counsel
fees and expenses, arising out of, concerning or affecting, in whole or in
part, this Agreement or the business conducted by Host, its agents or
employees,
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
10
<PAGE>
except for liability resulting from the sole negligence of Rubio's, its
employees, agents or servants.
12. INTEGRATION OF AGREEMENT.
12.01. ENTIRE AGREEMENT. This Agreement and all ancillary
agreements executed contemporaneously with it constitute the entire
agreement between the parties with reference to the subject matter of this
Agreement and supersede all prior negotiations, understandings,
representations and agreements, if any.
12.02. AMENDMENT. This Agreement, including but not limited to,
this provision, may not be amended orally, but may be amended only by a
written instrument signed by the parties. Rubio's and Host each expressly
acknowledge that no oral promises or declarations were made by either to
the other and that the obligation of both Rubio's and Host are confined
exclusively to the terms in this Agreement.
13. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be served upon the other party
personally, or by return receipt requested, postage prepaid, and shall be deemed
given when received. Notices shall be addressed to the addresses first above
written.
14. MISCELLANEOUS.
14.01. CONSTRUCTION AND INTERPRETATION.
(a) This Agreement is to be construed in accordance with the
laws of the state of California.
(b) The titles and subtitles of the various sections and
paragraphs of this Agreement are inserted for convenience and shall
not be deemed to affect the
11
<PAGE>
meaning or construction of any of the terms, provisions, covenants and
conditions of this Agreement.
(c) The language in all parts of this Agreement shall in all
cases be construed simply according to its fair meaning and not
strictly for or against either party.
(d) If any provision of this Agreement is capable of two
constructions, one of which would render the provision void and the
other of which would render the provision valid, then the provision
shall have the meaning that renders it valid.
(e) The word "shall" as used in this Agreement is used as a
command. The word "including" as used in this Agreement is used in a
nonexclusive sense.
14.02. SEVERABILITY. Nothing contained in this Agreement shall be
construed as requiring the commission of any act contrary to law. Whenever
there is any conflict between any provisions of this Agreement and any
present or future statute, law, ordinance or regulation contrary to which
the parties have no legal right to contract, the latter shall prevail, but
in such event the provision of this Agreement thus effected shall be
curtailed and limited only to the extent necessary to bring it within the
requirements of the law. If any part, article, paragraph, sentence or
clause of this Agreement is held to be indefinite, invalid or otherwise
unenforceable, the entire Agreement shall not fail on account of such
holding, and the balance of this Agreement shall continue in full force and
effect.
12
<PAGE>
14.03. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.
14.04. EFFECT OF WAIVER. No failure on the part of either party to
this Agreement to exercise any power reserved to it by this Agreement or to
insist on strict compliance by the other patty with any obligation or
condition under this Agreement, and no custom or practice of the parties
at variance with the terms of this Agreement, shall constitute a waiver of
such party's right to demand exact compliance with any of the terms in this
Agreement. Waiver by either party to this Agreement of any particular
default by the other party shall not affect or impair such parties rights
with respect to any subsequent default of the same, similar, or different
nature. Any delay, forbearance, or omission of either party to this
Agreement to exercise any power or right arising out of any breach or
default by the other party of any of the terms, provisions or covenants of
this Agreement, shall not affect or impair such party's rights under this
Agreement, or right to declare any subsequent breach or default and to
terminate this Agreement. Subsequent payments to Rubio's of any payments
due to it under this Agreement shall not be deemed to be a waiver by
Rubio's of any preceding breach by Host of any terms, covenants, or
conditions of this Agreement.
14.05. *** . In the event that the terms of this Test
Agreement *** with the terms of *** with the *** , the terms of
*** shall *** .
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
RUBIO'S RESTAURANTS, INC.
By: /s/ Robert Rubio
-------------------------------------
Vice President
HOST INTERNATIONAL, INC.
By: /s/ illegible
-------------------------------------
Vice President
14
<PAGE>
EXHIBIT "A"
LICENSED LOCATION
A-1
<PAGE>
EXHIBIT "B"
LIST OF PROPRIETARY PRODUCTS
***
***
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
B-1
<PAGE>
EXHIBIT 10.19
PACIFIC BASIN FOODS, INC.
GENERAL PURCHASING TERMS AGREEMENT
THIS GENERAL PURCHASING TERMS AGREEMENT (this "Agreement") is effective on this
21st day of October 1996, by and between Pacific Basin Foods, Inc. with its
office at 9586 Distribution Avenue, Ste D, San Diego, California 92121 herein
referred to as "PBF" and Rubio's Restaurants, Inc., with its principal offices
at 5151 Shoreham Place, Ste 260, San Diego, CA 92122 herein referred to as
"Buyer".
RECITALS
PBF is a corporation which purchases and distributes food, meat, beverages and
related supplies for restaurants and other food service businesses. Buyer is a
restaurant organization which purchases said items. The parties desire to
establish certain terms pursuant to which Buyer will purchase such food, meat,
beverages and related supplies from PBF.
NOW, THEREFORE, in consideration of the terms and covenants stated herein and
for other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree that the following terms shall relate to any
purchases by Buyer.
ARTICLE I
PURCHASE AND TERM
1(a). TERM. Buyer agrees to purchase from PBF, and PBF agrees to acquire and
to sell to Buyer, pursuant to Buyer's specifications, food, meat, beverages and
related supplies which are regularly stocked by PBF, herein referred to as
"Inventory" for an initial term beginning on the day of this Agreement and
expiring one year thereafter; PBF shall, in good faith, use its reasonable
efforts to provide such Inventory at the best cost and quality level consistent
with Buyer's specifications. PBF will use best efforts maintain a fill rate of
98% or more and to supply Buyer with relevant product information to make cost
and quality decisions.
ARTICLE II
INVENTORY
2(a). INVENTORY. Buyer shall buy for its account Inventory which shall be
categorized as either General Inventory or Dedicated Inventory.
2(b). DEDICATED INVENTORY. Dedicated Inventory is defined as specific food,
meat, beverages or other consumable supplies used by no other customer of PBF
and acquired by PBF for the exclusive, ongoing use of Buyer.
2(c). GENERAL INVENTORY. General Inventory is defined as all Inventory other
than Dedicated Inventory.
2(d). OBSOLETE DEDICATED INVENTORY. At the end of each PBF accounting period,
PBF will provide Buyer with an analysis of activity levels for all Dedicated
Inventory purchased for
<PAGE>
the exclusive use of Buyer. To the extent that such Dedicated Inventory has
been taken off the menu, discontinued by Buyer's restaurants or for any other
reason is no longer purchased by Buyer from PBF, *** for such *** shall be
*** *** of an *** therefore. If *** is not *** within that time
frame, Buyer shall be *** for any *** associated with *** of such inventory.
PBF shall have the right, but not the *** to dispose of such *** in a
commercially responsible manner and shall *** with any net proceeds from such
sales after deducting PBF's costs.
2(e). OPPORTUNISTIC PURCHASES. From time to time, PBF may, in its sole
discretion, offer Buyer the opportunity to acquire certain items of Inventory at
prices, in amounts and upon terms which differ from those ordinarily offered by
PBF. Such opportunities shall be referred to as "Opportunistic Purchases". All
such Opportunistic Purchases shall be available only on such terms and
conditions as may be established by PBF from time to time, including, without
limitation, requirements for advance payment from Buyer, and PBF shall have no
obligation to execute any Opportunistic Purchase ordered by Buyer until such
time as Buyer is in full and strict compliance with all such terms and
conditions. PBF may, at its option offer finance terms at *** plus any
*** incurred. *** will be determined as published by Bank of America.
2(f). OPPORTUNISTIC INVENTORY PAYMENTS. All Opportunistic Purchases to be
paid for by Buyer shall be paid within *** after PBF's delivery of written
notice to Buyer confirming PBF's receipt of such Opportunistic Purchases, or
within the terms of PBF's payment to vendor for such product, whichever is
longer.
2(g). PERIODIC STATEMENTS. Within *** after the end of each of PBF's four
week accounting periods, PBF shall provide to Buyer a statement summarizing in
reasonable detail the status of activity with respect to Opportunistic Purchases
held by PBF for Buyer's account during such period, and unless Buyer responds
within *** , such statement will be presumed to be correct.
2(h). NON FOOD MERCHANDISING MATERIALS. Any items such as uniforms
or promotional merchandise will be paid for by the Buyer directly pursuant to
the terms established by the vendor.
2(i). IDENTIFICATION OF INVENTORY AND WARRANTIES. Any description of the
Inventory sold under this Agreement is for the sole purpose of identifying such
Inventory and should not be construed as a warranty for any other purpose
whatsoever. PBF retains the right to change or to substitute with like kind the
Inventory. PBF will obtain Buyer's approval prior to substitution.
IT IS SPECIFICALLY AGREED THAT ANY WARRANTY FROM PBF TO BUYER WITH
REGARD TO ANY OF THE INVENTORY, WHETHER DEDICATED INVENTORY OR GENERAL
INVENTORY, MUST BE MADE IN WRITING FROM PBF TO BUYER, MUST BE SIGNED BY
A DULY AUTHORIZED OFFICER OF
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission
Page 2
<PAGE>
PBF, AND MUST CONTAIN THE EXPRESS TERMS "WARRANTY" AND "WARRANTS". ANY
SUCH WARRANTY GIVEN BY PBF TO BUYER SHALL BE IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OR ANY WARRANTY OF
MERCHANTABILITY. THE SOLE AND EXCLUSIVE REMEDY FOR BREACH OF ANY AND
ALL WARRANTIES WITH RESPECT TO THE INVENTORY, WHETHER DEDICATED INVENTORY
OR GENERAL INVENTORY, SHALL BE THE REPLACEMENT OF SUCH INVENTORY WITHOUT
CHARGE TO BUYER. IN NO EVENT SHALL PBF BE LIABLE FOR INDIRECT,
INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES, INCLUDING, BUT NOT LIMITED
TO, LOST PROFITS, PERSONAL INJURY OR ECONOMIC LOSS, ARISING IN CONNECTION
WITH OR OUT OF BUYER'S PURCHASE OR USE OF ANY INVENTORY.
Notwithstanding the foregoing, PBF agrees that, to the extent such
warranties or rights of recovery are assignable, PBF shall assign to
Buyer any manufacturers' or suppliers, warranties or rights or recovery
against manufactures or suppliers to which PBF may be entitled that are
applicable to the Inventory.
2(j). PRODUCT LIABILITY. At all times during the term of this Agreement, PFB
shall maintain product liability insurance in an amount which is not less than
*** per occurrence in accordance with then prevailing industry standards. All
such product liability insurance shall (1) be primary, (2) name Buyer and PBF as
insured, (3) contain waivers of subrogation, and (4) provide that no
cancellation or modification thereof will be effective without *** prior
written notice to Buyer and PBF. PBF will provide buyer with evidence of such
insurance. PBF will have Certificates of Insurance on file from its vendors.
ARTICLE III
PRICING
3(a). PRICING FOR INVENTORY. Inventory shall be sold to Buyer at Landed Cost
+ *** . Landed Cost shall be defined as the sum of the cost of an item of
Inventory to PBF, plus the actual cost of freight to PBF's facilities and, to
the extent necessary, the actual costs of outside storage (herein "Landed
Cost"). Outside storage costs will be deemed necessary in the event that PBF
takes delivery of Opportunistic Purchases for Buyer's benefit. PBF will provide
warehouse space for Buyer's normal requirements.
3(b). PRICING FOR FURNITURE, FIXTURES AND EQUIPMENT. Furniture, fixtures and
equipment shall be sold to Buyer at actual cost +***, plus the actual cost of
freight, installation and applicable sales tax.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission
Page 3
<PAGE>
3(c). RIGHT TO CONFIRM COSTS/PRICING
(i) During the term hereof, Buyer shall have the right to inspect,
during PBF's normal business hours, accounting records, including purchase
orders, of PBF as may be reasonably necessary to confirm that Buyer has, in
fact, been charged no more than is permissible under Section 3 (a) above, it
being understood that any such inspection shall be limited to the sole purpose
of confirming that the prices, fees, and other amounts charged to Buyer comply
with the provisions of this Agreement. Buyer shall give PBF 30 days notice
prior to inspection. Any costs incurred for purposes of this verification are
the responsibility of Buyer.
(ii) If Buyer elects to review the accounting records of PBF to
confirm that the prices, fees, and other amounts which PBF has charged to Buyer
comply with the provisions of this Agreement and Buyer thereafter claims that is
has been charged amounts in excess of that which is permissible under Section
3(a) above, PBF and Buyer will determine amount of overcharge, if any, and
return said overcharge to Buyer within 30 days. Any shortfall shall be paid
from Buyer to PBF within 30 days.
(iii) Buyer's right to inspect such records of PBF shall be limited as
follows: (a) Buyer shall not inspect the records of PBF any more frequently than
two times per calendar year; and (b) Buyer shall audit only those records which
relate to transactions which have occurred within the twelve months immediately
prior to the notice of request to inspect.
ARTICLE IV
PAYMENT
4(a). BILLING FOR INVENTORY. Payment for Inventory other than Opportunistic
Purchases will be due from Buyer to PBF based upon the attached schedule of
payment due dates. Such payment will be remitted through electronic funds
transfer. Invoices must be paid in full and deductions shall be permitted only
when documented by a credit memo invoice issued by PBF. PBF shall use its best
reasonable efforts to issue such credit memo invoices within one week after the
delivery of the items of Inventory which give rise to such deductions.
4(b). BILLING FOR FURNITURE, FIXTURES AND EQUIPMENT. Billing for Furniture,
Fixtures and Equipment will be by invoice from PBF to Buyer on a restaurant by
restaurant basis. PBF will invoice Buyer for such Furniture, Fixtures and
Equipment once the project is completed. Payment for Furniture, Fixtures and
Equipment invoices shall be due from Buyer to PBF within *** of receipt.
4(c). FINANCE CHARGES. In the event that any payment is not paid by Buyer
within *** of the schedule referred to in Sections 4(a) and 4(b) above,
finance charges will be assessed at a rate of *** .
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission
Page 4
<PAGE>
ARTICLE V
DELIVERY
5(a). DELIVERY. Unless otherwise agreed, the Inventory shall be delivered at
two times per week during normal restaurant operating hours to each location
provided by Buyer. The day of delivery shall be the same for each week unless
an alternative day(s) is agreed to by both parties.
5(b). RISK OF LOSS. The risk of loss of the Inventory shall not pass to Buyer
until PBF delivers the Inventory to a location specified by Buyer or to Buyer or
Buyer's agent.
5(c). INSURANCE. PBF shall secure, at its own expense, adequate insurance
coverage for the Inventory sold under this Agreement. If the Inventory is lost
or damaged, the party then bearing the risk of loss under the terms of this
Agreement and applicable law shall look to the insurance proceeds for full
satisfaction regardless of the adequacy of those proceeds and without regard to
any breach of this Agreement by either party.
ARTICLE VI
TERMINATION, NOTICES & REMEDIES.
6(a). TERMINATION BY PBF. Without limiting any other rights or remedies which
PBF may have hereunder, at law, in equity or otherwise, at any time during the
term of this Agreement and at any time thereafter, PBF shall have the right to
terminate this Agreement and cease deliveries to Buyer's restaurants (1) if
Buyer fails to pay an amount due within seven days of Buyer having received
written notice of late payment as defined in Sections 4(a) and 4(b). Such
written notice may be issued no earlier than three days after the payment due
date; or (2) upon the appointment of a receiver for the property of Buyer or the
initiation of any bankruptcy, insolvency, reorganization or other proceeding for
the relief or protection of debtors, whether voluntary or involuntary, by or
against Buyer, where such appointment or proceeding is not dismissed within
thirty days.
6(b). TERMINATION BY BUYER. Without limiting any other rights or remedies
which Buyer may have hereunder, at law, in equity or otherwise, at any time
during the term of this Agreement and at any time thereafter, Buyer shall have
the right to terminate this Agreement (1) upon thirty days' prior notice if PBF
is in default hereunder and fails to cure such default within such thirty day
period; (2) upon thirty days' prior notice if PBF fails to pay its debts as the
same become due in the ordinary course of business; or (3) upon the appointment
of a receiver for the property of PBF or the initiation of any bankruptcy
insolvency, reorganization or other proceedings for the relief or protection of
debtors, whether voluntary or involuntary, by or against PBF, where such
appointment or proceeding is not dismissed within thirty days. In any event, a
material default is necessary for termination.
6(c). INVENTORY, TERMINATION. Upon termination, Buyer shall purchase ***
*** , including *** , which was purchased *** and will ***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission
Page 5
<PAGE>
*** to PBF within *** of termination. PBF will deliver said *** to ***,
if desired.
6(d). *** OF INVENTORY. If Buyer *** any *** upon termination as
required under this Agreement, then PBF may, without limiting any other rights
and remedies which it may have hereunder, *** of all such *** in a
commercially reasonable manner apply the *** of such *** to all *** due
*** to PBF, and seek any *** from Buyer.
6(e). ACCOUNTS RECEIVABLE. Upon termination, Buyer will remit payment for all
amounts due related to accounts receivable within *** of termination.
6(f). NOTICES. Any notice required under this Agreement shall be provided by
first class, postage prepaid mail to the "designated party contacts" at the
addresses set forth below or by facsimile transmission to the number set forth
below unless otherwise changed by either party:
Designated Party Contacts:
Rubio's Restaurants, Inc. Pacific Basin Foods, Inc.
5151 Shoreham Place 9586 Distribution Avenue
Ste 260 Ste D
San Diego, CA 92122 San Diego, CA 92121
Phone: (619) 452-1770 Phone: (619) 566-8892
Fax: (619) 452-0181 Fax: (619) 566-9946
Attn: Reynaldo Ochoa Attn: Herschel Hendrickson
Attn: James Stryker
Mailed notices shall be deemed effective five days after mailing. Facsimile
notices shall be deemed effective on the date transmitted.
6(d). ATTORNEY'S FEES. Should any party be required to enforce its rights
under this Agreement, then in addition to any remedy or damage provided by law
or equity, the prevailing party shall be entitled to payment of its fees, costs
and reasonable attorney's fees incurred in enforcing such rights.
ARTICLE VII
MISCELLANEOUS
7(a). GENERAL. This Agreement constitutes the entire agreement between the
parties, shall be construed in accordance with the laws of the State of
California, and may not be assigned by any party without the consent of the
other party. Notwithstanding the foregoing, either party may assign its rights
under this Agreement to any person or entity which controls, is controlled by,
or is under common control with, the assigning party; provided, however, that
such assignment
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission
Page 6
<PAGE>
shall not serve to release the assigning party from its obligations under
this Agreement. This Agreement supersedes all prior agreements between the
parties.
7(b). FINANCIAL INFORMATION. Buyer shall provide PBF with *** , and will
notify PBF of any material changes in the *** of Buyer's organization.
7(c). CONFIDENTIALITY. Buyer acknowledges that the accounting books and
records and other financial information of PBF to which Buyer or its agents may
have access pursuant to Article III hereof and the compilation of prices and
other contents of PBF's Order Guide Book are confidential and proprietary to
PBF. Buyer shall not disclose such information to any other person without
PBF'S prior written consent and will use such information only in furtherance of
Buyer's proper performance of its obligations under this Agreement or in
enforcing its rights hereunder. Upon the termination of this Agreement, Buyer
shall immediately return all such information, in whatever form, to PBF, and
thereafter Buyer shall not use such information for any purpose, unless and to
the extent that such information is deemed to be in the public domain or has
been obtained by Buyer from third parties without any prohibitions on
disclosures thereof. PBF acknowledges that all information obtained about
Buyer's financial condition and business operations that is not otherwise
available is confidential and proprietary to Buyer. PBF shall not disclose such
information to any other person without Buyer's written consent and will use
such information only in furtherance of PBF's proper performance of its
obligations under this Agreement or in enforcing its rights hereunder.
7(d). EXCUSABLE DELAYS. Neither party shall be liable for any delay in the
performance of any of its obligations hereunder, or for any damages suffered by
the other party as a result of such delay, where such delay directly or
indirectly causes or in any manner arises in connection with fires, floods,
accidents, riots, strikes or other labor unrest, acts of God, war, governmental
restrictions or interference, shortages of fuel, labor, materials or supplies,
transportation delays or any other causes which are beyond the reasonable
control of the party whose performance is so delayed; provided, however, that no
delay in the payment of monies due from either party hereunder shall be deemed
or construed to be excused pursuant to this Section 7(c).
7(e). WAIVERS AND MODIFICATIONS. All waivers or modifications hereunder must
be made in writing and signed by both parties, and the failure to require a
party's performance of any obligation hereunder shall not affect the other
party's right subsequently to require performance of that obligation. No waiver
of any breach hereunder shall be construed as a waiver of any continuing or
succeeding breach or a waiver of modification of the terms of this Agreement.
7(f). SEVERABILITY. If any provision of this Agreement is deemed to be
invalid or unenforceable under applicable law, such provision shall be
ineffective to the extent required by such invalidity or unenforceability
without affecting the remainder of such provision or the remainder of this
Agreement.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission
Page 7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
PBF BUYER
By: /s/ Herschel Hendrickson By: /s/ James W. Stryker
------------------------------ --------------------------------
Title: President Title: Vice Pres.
--------------------------- -----------------------------
Page 8
<PAGE>
Rubio's Restaurants, Inc.
1999 Schedule of Payments Due: Pacific Basin Foods
SCHEDULE OF PAYMENT DUE DATES
<TABLE>
<CAPTION>
RUBIO'S FOR DELIVERIES
PERIOD/WEEK STARTING ENDING ***
FY96
<S> <C> <C> <C> <C>
P10 WEEK 2 9/30/96 10/13/96 ***
P10 WEEK 4 10/14/96 10/27/96 ***
P11 WEEK 2 10/28/96 11/10/96 ***
P11 WEEK 4 11/11/96 11/24/96 ***
P12 WEEK 2 11/25/96 12/08/96 ***
P12 WEEK 5 12/9/96 12/29/96 ***
FY97
P01 WEEK 2 12/30/96 01/12/97 ***
P01 WEEK 4 1/13/97 01/26/97 ***
P02 WEEK 2 1/27/97 02/09/97 ***
P02 WEEK 4 2/10/97 02/23/97 ***
P03 WEEK 2 2/24/97 03/09/97 ***
P03 WEEK 5 3/10/97 03/30/97 ***
P04 WEEK 2 3/31/97 04/13/97 ***
P04 WEEK 4 4/14/97 04/27/97 ***
P05 WEEK 2 4/28/97 05/11/97 ***
P05 WEEK 4 5/12/97 05/25/97 ***
P06 WEEK 2 5/26/97 06/08/97 ***
P06 WEEK 5 6/9/97 06/29/97 ***
P07 WEEK 2 6/30/97 07/13/97 ***
P07 WEEK 4 7/14/97 07/27197 ***
P08 WEEK 2 7/28/97 08/10/97 ***
P08 WEEK 4 8/11/97 08/24/97 ***
P09 WEEK 2 8/25/97 09/07/97 ***
P09 WEEK 5 9/8/97 09/28/97 ***
P10 WEEK 2 9/29/97 10/12/97 ***
P10 WEEK 4 10/13/97 10/26/97 ***
P11 WEEK 2 10/27/97 11/09/97 ***
P11 WEEK 4 11/10/97 11/23/97 ***
P12 WEEK 2 11/24/97 12/07/97 ***
P12 WEEK 5 12/8/97 12/28/97 ***
</TABLE>
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Page 9
<PAGE>
EXHIBIT 10.20
AMENDMENT TO AGREEMENT BETWEEN
PACIFIC BASIN FOODS, INC.
AND RUBIO'S RESTAURANTS, INC.
This Amendment is entered into the 20th day of November, 1998, by and between
Rubio's Restaurants Inc. (hereinafter referred to as "Buyer") and Pacific Basin
Foods, Inc. (hereinafter referred to as "PBF").
RECITALS
1. Buyer and PBF entered into a written agreement dated October 21, 1996,
(hereinafter referred to as "Master Agreement") for the provision of
purchase and distribution of certain food products, related supplies, and
furniture, fixtures and equipment, all as specifically set forth in such
Agreement, to Buyer by PBF.
2. By this Agreement, Buyer and PBF desire to amend the Master Agreement in
the manner more particularly set forth herein as of the date first written
above.
TERMS
NOW THEREFORE, for and in consideration of the premises and the mutual promises
contained herein, the parties hereto agree as follows:
3. AMENDMENT OF MASTER AGREEMENT, ARTICLE I, SECTION 1(a) "TERM" AS FOLLOWS:
The parties hereto mutually agree to extend the term of the Master
Agreement for an additional period of one (1) year, commencing as of the
date first written above, herein referred to as the "Effective Date", and
expiring on January 19, 2000 (on the last Payment Due Date of the Attached
Schedule).
4. AMENDMENT OF MASTER AGREEMENT, ARTICLE IV, SECTION 4(a) "BILLING FOR
INVENTORY" AS FOLLOWS:
The parties hereto mutually agree that payment for inventory other than
Opportunistic Purchases and Furniture and Equipment, will be due from Buyer
to PBF based upon the attached schedule of payment due dates. Buyer will
make such payments *** or *** to *** , provided that the funds are
*** *** by PBF *** , on the scheduled due dates.
5. [Deleted]
6. AMENDMENT OF MASTER AGREEMENT, ARTICLE IV, SECTION 4(b) "BILLING FOR
FURNITURE, FIXTURE AND EQUIPMENT" AS FOLLOWS:
Billing for furniture, fixtures and equipment will be by invoice from PBF
to Buyer on a restaurant by restaurant basis. PBF will invoice Buyer for
furniture, fixture and equipment per contract amount ones the product is
completed (i.e. final walkthrough if
*** Portions of this page have been omitted pursuant to a request for
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<PAGE>
applicable). Payment for furniture, fixtures and equipment shall be due
from Buyer to PBF within 10 days of the final installation date of the
original contract amount *** or *** , to *** , provided that the ***
*** , on the due dates. Any changes to the original contract (i.e. add
ons) shall be billed separately from the original contract. All add ons
and miscellaneous furniture, fixture and equipment purchases (i.e. other
than new restaurant openings) by Buyer shall be payable within 10 days of
the invoice date, and may be paid by any payment method (i.e. *** ).
7. AMENDMENT OF MASTER AGREEMENT, ARTICLE VII, SECTION 7(B) "FINANCIAL
INFORMATION" AS FOLLOWS:
Buyer shall provide PBF with *** , and will notify PBF of any
material changes in the *** of Buyer's organization. Furthermore, Buyer
shall provide PBF ***
*** .
IN WITNESS WHEREOF, the parties hereto have executed this amendment as of the
date and year first written above.
PBF BUYER
By: /s/ Herschel Hendrickson By: /s/ James W. Stryker
----------------------------------- ---------------------------------
Its: President Its: Vice Pres.
----------------------------------- ---------------------------------
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Confidential Treatment and filed separately with the Commission.
<PAGE>
<TABLE>
<CAPTION>
Rubio's Restaurants, Inc.
1999 Schedule of Payments Due: Pacific Basin Foods
Rubio's For Deliveries
- ---------------------------------------------------------------------------------------------------------------------
Period Acct. Week Starting Ending *** ***
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 1 12/28/98 01/03/99 *** 1
1 2 01/04/99 01/10/99 *** 2
1 3 01/11/99 01/17/99 *** 3
1 4 01/18/99 01/24/99 *** 4
2 5 01/25/99 01/31/99 *** 5
2 6 02/01/99 02/07/99 *** 6
2 7 02/08/99 02/14/99 *** 7
2 8 02/15/99 02/21/99 *** 8
3 9 02/22/99 02/28/99 *** 9
3 10 03/01/99 03/07/99 *** 10
3 11 03/08/99 03/14/99 *** 11
3 12 03/15/99 03/21/99 *** 12
3 13 03/22/99 03/28/99 *** 13
4 14 03/29/99 04/04/99 *** 14
4 15 04/05/99 04/11/99 *** 15
4 16 04/12/99 04/18/99 *** 16
4 17 04/19/99 04/25/99 *** 17
5 18 04/26/99 05/02/99 *** 18
5 19 05/03/99 05/09/99 *** 19
5 20 05/10/99 05/16/99 *** 20
5 21 05/17/99 05/23/99 *** 21
6 22 05/24/99 05/30/99 *** 22
6 23 05/31/99 06/06/99 *** 23
6 24 06/07/99 06/13/99 *** 24
6 25 06/14/99 06/20/99 *** 25
6 26 06/21/99 06/27/99 *** 26
7 27 06/28/99 07/04/99 *** 27
7 28 07/05/99 07/11/99 *** 28
7 29 07/12/99 07/18/99 *** 29
7 30 07/19/99 07/25/99 *** 30
8 31 07/26/99 08/01/99 *** 31
6 32 08/02/99 08/08/99 *** 32
8 33 08/09/99 08/15/99 *** 33
8 34 08/16/99 08/22/99 *** 34
9 35 08/23/99 08/29/99 *** 35
9 36 08/30/99 09/05/99 *** 36
9 37 09/06/99 09/12/99 *** 37
9 38 09/13/99 09/19/99 *** 38
9 39 09/20/99 09/26/99 *** 39
10 40 09/27/99 10/03/99 *** 40
10 41 10/04/99 10/10/99 *** 41
10 42 10/11/99 10/17/99 *** 42
10 43 10/18/99 10/24/99 *** 43
11 44 10/25/99 10/31/99 *** 44
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
Rubio's Restaurants, Inc.
1999 Schedule of Payments Due: Pacific Basin Foods
<CAPTION>
Rubio's For Deliveries
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Period Acct. Week Starting Ending *** ***
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<S> <C> <C> <C> <C> <C>
11 45 11/01/99 11/07/99 *** 45
11 46 11/08/99 11/14/99 *** 46
11 47 11/15/99 11/21/99 *** 47
12 48 11/22/99 11/28/99 *** 48
12 49 11/29/99 12/05/99 *** 49
12 50 12/06/99 12/12/99 *** 50
12 51 12/13/99 12/19/99 *** 51
12 52 12/20/99 12/26/99 *** 52
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
</TABLE>
<PAGE>
[COCA-COLA LOGO]
March 6, 1998 EXHIBIT 10.21
Ralph Rubio
President, CEO
Rubio's Restaurants, Inc.
5151 Shoreham Place
Suite 260
San Diego, CA 92122
Re: Coca-Cola USA Fountain Marketing Program
Dear Ralph:
This letter will confirm the agreement between Rubio's Restaurants, Inc.
("Rubio's") and Coca-Cola USA Fountain ("CCF") with regard to the availability
and promotion of CCF's fountain beverages in restaurants owned or operated by
Rubio's. When signed by both parties, this letter, with the Term Sheets (and
Lease Agreement), will constitute a legally binding agreement (the "Marketing
Agreement") between the parties for the duration of the Term defined in the
selected Term Sheet, and will be terminable only as stated in the selected Term
Sheet. Two individual and separate Term Sheets (Term Sheet "A" and Term
Sheet "B") are attached for consideration. Rubio's will have seven days from
date of signature to render a decision in writing to CCF as to the selection of
either Term Sheet "A" or Term Sheet "B".
This letter and its attachments are confidential and Rubio's may not disclose to
any third party, without the prior consent of CCF, any information concerning
the programs described in the Term sheet, except for disclosure to employees,
attorneys, accountants, and consultants involved in assisting with the
negotiation and closing of the contemplated transaction, or unless such
disclosure is required by law. Rubio's shall obtain assurances from any party
to whom disclosure is made that such party will keep confidential the
information disclosed, except where disclosure is required by law.
If this letter and its attachments correctly state the agreement between CCF and
Rubio's, please sign and date both copies and return one copy to me. In signing
this agreement, you represent and warrant that you are authorized to enter into
this agreement on behalf of Rubio's, and that Rubio's has the power and
authority to receive the funding contemplated by the Marketing Agreement and to
cause the outlets covered by the Marketing Agreement to perform the activities
required to earn the funding.
Suite 100
6 Executive Circle
Irvine, CA 92714
<PAGE>
Rubio's Restaurants, Inc.
March 6, 1998
Page 2 of 2
Sincerely,
/s/ Jerry S. Wilson
Jerry S. Wilson
Vice President, Western Area
Coca-Cola USA
Agreed to this 10th day of March, 1998.
Rubio's Restaurants, Inc.
By: /s/ James W. Stryker
-------------------------------
President, CFO
Attachments
<PAGE>
TERM SHEET
(B)
RUBIOS RESTAURANTS, INC.
APRIL 1, 1998
SCOPE OF MARKETING AGREEMENT
The parties to the Marketing Agreement are Rubios Restaurants, Inc. "Rubios"
d/b/a Rubios Baja Grill and Coca-Cola USA Fountain ("CCF"). The Marketing
Agreement will apply to all outlets where Fountain Beverages are served that are
owned or operated by Rubios or any of its subsidiaries including any outlets
that are opened after the Marketing Agreement is signed. The Marketing
Agreement will also apply to outlets acquired by Rubios, unless those outlets
are already governed by an agreement with CCF and that agreement is assigned to
Rubios as part of the acquisition. The Marketing Agreement will not apply to
any outlets outside the fifty United States, and may not be assigned to a third
party without CCF's approval, which would not be unreasonably withheld. All
outlets to which the Marketing Agreement applies are referred to as "Covered
Outlets".
TERM
The Marketing Agreement will go into effect as of the first day of the month in
which it is signed and will continue for a period of *** or until Rubio's has
purchased it's volume commitment of CCF's Fountain Syrups, whichever occurs
last. When used in the Marketing Agreement the term "Year" means each
consecutive twelve month period during the Term, beginning with the first day of
the Term.
BEVERAGE AVAILABILITY
The term "Beverage" means all soft drinks and other non-alcoholic beverages,
including waters, sports drinks, frozen beverages, juices, juice-containing
drinks, punches, ades, bar mixers and iced teas, whether carbonated or
non-carbonated, with the exception of coffee or tea brewed on the premises and
dairy beverages. "Fountain Beverages" are those Beverages that are dispensed
from post-mix, or frozen beverage dispensers, bubblers, or similar equipment.
The term "Fountain Syrup" means the post-mix syrup used to prepare Fountain
Beverages, but does not include other forms of concentrate, or Breakmate syrup
or syrup for frozen beverages that is purchased from a full service supplier of
frozen beverages to which CCF provides promotional funding.
Rubios will serve in each Covered Outlet a core brand set of Fountain Beverages
that consists of Coca-Cola-Registered Trademark- classic, diet Coke-Registered
Trademark- and Sprite-Registered Trademark-, and the remaining products will be
jointly selected by Rubios and CCF. CCF's Fountain Beverages will be the only
Fountain Beverages served in the Covered Outlets.
Rubios recognizes that the sale of competitive Beverages in bottles, cans or
other packaging would diminish the product availability rights given to CCF, and
therefore also agrees not to serve competitive Beverages in bottles or cans in
the Covered Outlets.
VOLUME COMMITMENT
Rubios agrees to purchase *** of CCF's Fountain Syrup during the Term.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
Projected annual volume is currently as follows:
***
***
***
MARKETING PROGRAM
The following marketing programs will be provided to assist Rubios in maximizing
the sale of Fountain Beverages in the Covered Outlets:
CONVERSION FUND CCF will provide funding of *** to offset costs
associated with the conversion to CCF brands. Funding is provided in return for
Rubios commitment to serve CCF's Fountain Beverages in the Covered Outlets
throughout the Term, and *** .
MARKETING ALLOWANCES. The amount of available funding is calculated at the rate
of *** for each gallon of CCF's Fountain Syrup Rubios purchases. To
qualify for funding Rubio's agrees to perform a minimum of *** of the
following activities annually:
Fully integrated (system wide) Co-op trademark cups, consistent in size
with current trademark cups.
Logo/brand identification on beverage portion of illuminated menuboards and
table menus.
Mutually agreeable *** .
Funding will be *** in years *** of the agreement and reconciled in
accordance actual volume purchases. Marketing allowances in the years ***
will be paid *** .
INCIDENCE IMPROVEMENT FUNDS. Funding is earned at the rate of *** for each
gallon of CCF's Fountain Syrups that Rubios Baja Grill purchases. To qualify
for this fund Rubios agrees to perform a minimum of *** of the following
activities annually:
Trademark identified meal combination program.
Trademark identified refill merchandising.
Annual crew incentive programs.
Mutually agreeable brand integration and activation initiatives.
Trademark Co-op advertising that supports mutually agreeable initiatives.
Funding will be *** in years *** of the agreement and reconciled in
accordance actual volume purchases. Incidence improvement funds in years ***
will be paid *** .
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
2
<PAGE>
NESTEA-Registered Trademark- PROGRAM CCF will make available Nestea-Registered
Trademark- Raspberry Tea for Rubio's testing and evaluation in certain mutually
determined Covered Outlets. If Rubio's elects to test Nestea-Registered
Trademark- Raspberry Tea in the Covered Outlets, CCF and Rubio's will agree what
the test criteria and parameters will be. If the results of the test are
successful according to the criteria that the parties have agreed to, Rubio's
will introduce Nestea-Registered Trademark- Raspberry Tea in the Covered Outlets
within (90) days after the test is complete.
FAIR SHARE
If Rubio's Baja Grill desires to use equipment provided by CCF to dispense one
competitive fountain beverage, an additional fair share lease charge of ***
per dispenser will be added. Equipment provided by CCF may not be used to
dispense any competitive cola product, more than one competitive beverage, or
any brand of Pepsico, Inc. Further, if service is provided to an outlet that
serves a competitive fountain beverage an additional fair share service charge
of *** per outlet will be incurred.
EQUIPMENT PROGRAM
CCF will provide for Rubios use the Fountain Beverage dispensers, water
filtration equipment, and the annual water filter cartridges necessary to enable
Rubios to dispense a quality Fountain Beverage in the Covered Outlets. The cost
of installation and configuration of ice combo dispensing units are also the
financial responsibility of CCF. No dispensing equipment for frozen Beverages
or ice makers will be provided.
The equipment is provided by CCF subject to the terms and conditions of CCF's
standard lease agreement, but no lease payment will be charged. A copy of the
standard lease agreement is attached and is a part of the Marketing Agreement,
except as specifically changed by the Marketing Agreement.
SERVICE PROGRAM
CCF will provide free and reasonable service to Covered Outlets for mechanical
repair needed for Fountain Beverage dispensing equipment. Service calls will be
pro-actively managed across the Rubios system to ensure all regular mechanical
repair reasonably needed for the fountain beverage dispensing equipment is
provided at no charge. In addition to mechanical repair, parts [valued at no
more than *** ] will also be provided free of charge to restaurant managers
upon request via the CCF toll free service network.
TERMINATION
Once the Marketing Agreement is signed by both parties, it may be terminated
before the scheduled expiration date only in the following circumstances:
Either party may terminate the Marketing Agreement if the other party
fails to comply with a material term or condition of the Marketing
Agreement and does not remedy the failure within ninety (90) days
after receiving written notice (the "Cure Period"). Termination will
be effective thirty (30) days after the end of the Cure Period.
Either party may terminate the Marketing Agreement without cause after
giving twelve months' prior written notice.
CCF may terminate the Marketing Agreement if there is a transfer of a
substantial portion of the stock or assets of Rubios that is not in
the ordinary course of business. (An Initial Public Offering is
considered normal course of business)
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
3
<PAGE>
If the Marketing Agreement is terminated before its expiration date, Rubios must
return any dispensing equipment owned by CCF. Additionally, unless the
Marketing Agreement is terminated by CCF without cause, Rubio's will pay the
following damages at the time of termination:
All unearned funding. For purposes of this provision Conversion Funds
will be deemed earned at the rate of *** per month.
Interest on all advanced funding on a rate of *** per month,
accrued from the date funds were paid or costs were incurred.
The unamortized portion of the cost of installation (standard cost of
installation is *** per unit), and the entire cost of refurbishing
and removal (standard cost of removal and refurbishment is *** ) of
all equipment owned by CCF that was installed less than five years
before termination.
DISPUTE RESOLUTION
Should there be a dispute between CCF and Rubios arising out of the Marketing
Agreement or the breach of the Marketing Agreement, the parties agree that they
will make a good faith effort to settle the dispute in an amicable manner. If
the parties are unable to settle the dispute through direct discussions, they
will attempt to settle the dispute by mediation administered by the American
Arbitration Association (the "AAA"), and if that procedure is unsuccessful, the
dispute will be resolved by binding arbitration administered by AAA in
accordance with its Commercial Arbitration Rules, arbitration will occur in
California. A judgment on the award of the arbitrator(s) may be entered in any
court that has jurisdiction.
PERMITTED EXCEPTIONS
If Rubio's enters into an agreement to open a restaurant or restaurants in
venues or facilities e.g. (stadiums, colleges or airports) where the pouring
rights have been pre-determined, Rubio's will make reasonable efforts to insure
that Coca-Cola Fountain products are dispensed during the term of that
agreement.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
4
<PAGE>
EXHIBIT 10.22
AGREEMENT
This AGREEMENT, (the "Agreement") is executed and entered into this 23rd day of
June, 1998, by and between Dr Pepper/Seven Up, Inc. ("Dr Pepper") and Rubio's
Restaurants, Inc. (the "Fountain Account').
WITNESSETH:
WHEREAS, the marketing plan described in this Agreement has been offered to the
Fountain Account as a result of Dr Pepper's understanding that the Fountain
Account has received an offer from a competitor of Dr Pepper with regard to the
purchase of that competitor's post-mix products; and
WHEREAS, Dr Pepper is willing to make a competitive offer by means of the
marketing plan set forth herein to ensure the availability of DR PEPPER post-mix
products (collectively the "Product') in the Restaurants (as hereinafter defined
in Paragraph 3a), subject to the terms and conditions set forth below;
NOW, THEREFORE, for and in consideration of the covenants and promises contained
herein, the parties hereto agree as follows:
1. VOLUME COMMITMENT/TERM. The term (the "Term") of the Agreement commences
as of May 1, 1998, and ends on the later to occur of *** , or the
aggregate purchase of *** of Product by the Fountain Account.
2. MARKETING PLAN. In response to the competitive offer, Dr Pepper commits to
a marketing plan requiring payment of monies for the Term as follows:
a. TRADE ALLOWANCE FUND. A *** per gallon allowance off invoice pricing
shall be provided on Product purchased by the Fountain Account during
the Term.
b. EQUIPMENT/SERVICE FUND. *** per gallon shall be paid *** to
offset the costs associated with equipment and service on the fountain
equipment dispensing the Product.
c. MARKETING FUND. *** per gallon shall be paid to the Fountain
Account. To qualify for this fund, the Fountain Account agrees to
perform a minimum of *** of the following activities annually:
Mutually agreeable *** ;
Annual crew incentive programs;
Placement of DR PEPPER identified point of purchase
materials;
Trademark co-op advertising that supports mutually agreeable
initiatives.
d. PAYMENT SCHEDULE. Funding for these 2 funds will be *** in each
year of years *** of the Agreement and reconciled each year in
accordance with actual volume purchases of the Product. For years
***, payment shall be made within *** at the end of each *** in
each of these agreement years based on actual gallons of Product
purchased by the Fountain Account.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
e. GALLONAGE REPORT. Volume for the purpose of making the payments
outlined herein shall be provided via Dr Pepper's authorized computer
report or approved distributor reports/recaps reflecting actual
gallonage of Product purchased by the Restaurants which the Fountain
Account shall provide to Dr Pepper for verification and payment
purposes. The parties agree that in any discrepancy in reported
gallonage purchases Dr Pepper and the Fountain Account shall make the
mutual determination of such actual gallonage purchases of Product.
To qualify for this marketing plan, the Fountain Account must purchase the
Product and execute those performance requirements as outlined in
Paragraphs 2 and 3. It is understood and agreed that for purposes of this
entire Agreement, the Product will not be considered to have been
"purchased" until it has been paid for in full and performance requirements
have been fulfilled by the Fountain Account. Accordingly, any marketing
support based on the purchase of the Product will be earned only to the
extent that the Fountain Account has paid for such Product and performance
requirements have been fulfilled by the Fountain Account. Since Dr Pepper
will provide reimbursement for expenses before the Fountain Account has
purchased sufficient gallonage to earn such sums, such payment will be
deemed an advance of funding which must be refunded in the event of early
termination or at the end of the Term if any portion of the advanced sum
remains unearned.
3. RESPONSIBILITIES OF THE FOUNTAIN ACCOUNT. In consideration of the payments
to be made to the Fountain Account by Dr Pepper pursuant to this Agreement,
the Fountain Account also agrees to:
a. Guarantee that the Product will be available in all present and future
Restaurants owned or operated by the Fountain Account (collectively
the "Restaurants") during the Term, with the exception of external
venues (i.e., arenas, schools) that have preexisting post-mix soft
drink contracts;
b. Guarantee that all of the Restaurants dispensing the Product will not
dispense at the same time competing pepper-flavored post-mix products
of the same or similar flavor as the Product during the Term (i.e.,
MR. PIBB, DR SLICE). The Fountain Account and Dr Pepper shall make
the mutual determination of whether the dispensing of other competing
post-mix products violates the terms and conditions of this Agreement.
The Fountain Account also agrees that the Product shall be the only
approved flavored post-mix product in the Restaurants for that flavor
category;
c. Identify the Product in all Restaurants during the entire Term,
including but not limited to brand identification on the menu boards
and dispensing fountain heads in all Restaurants;
d. Provide to Dr Pepper upon the execution of this Agreement a list of
all Restaurants in the Fountain Account's system as of the current
time. The Fountain Account shall promptly notify Dr Pepper of all new
Restaurants in the Fountain Account's system which are opened or
acquired, and any Restaurants which are sold or transferred or
otherwise disposed of during the Term.
4. TERMINATION AND REFUND OF PAYMENTS. This Agreement may only be terminated
by either party hereto for cause. "Cause" shall be deemed the material
breach of this Agreement by the defaulting party which shall have 60 days
to cure such default upon receipt of written notice from the nondefaulting
party that such a material breach has occurred. Both parties agree to meet
and work together in good faith to resolve and cure such default. In the
event the material breach has not been cured to the reasonable satisfaction
of the nondefaulting party hereto, then this Agreement shall be deemed
terminated immediately following said 60 day period.
a. In the event termination occurs prior to the end of years *** of this
Term, the Fountain Account shall (i) repay to Dr Pepper all of the
estimated amount paid to the Fountain Account pursuant to Paragraph 2d
which have not been earned by the Fountain Account based on actual gallons
of Product purchased as of the date of termination, and (ii) pay interest
on all sums due to Dr Pepper under this paragraph at the rate of
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
-2-
<PAGE>
*** per month, or such lesser percentage as required by law, accrued
since the effective date of the Term. Such amounts shall be paid by the
Fountain Account to Dr Pepper within 60 days of termination of this
Agreement; and
b. In the event termination occurs at any time during the agreement years ***
of the Term, Dr Pepper and the Fountain Account shall mutually determine
the actual gallons of Product purchased as of the date of termination
pursuant to Paragraph 2d, for which payment shall then be made to the
Fountain Account within 60 days after the termination thereof; provided
that the Fountain Account has fulfilled all of its performance requirements
hereunder. Dr Pepper reserves the right to withhold payment due hereunder
as an offset against amounts not paid by the Fountain Account for Product
delivered to the Fountain Account.
5. BOTTLE/CAN AVAILABILITY. If at any time during the Term the Fountain
Account decides to sell bottled/canned carbonated soft drinks in the
Restaurants, the Fountain Account will provide Dr Pepper an opportunity to
present the same bottle/can products which correspond to the Product for
sale in its Restaurants and will consider such products in good faith.
6. NEW RESTAURANTS. If at any time during the Term the Fountain Account opens
or acquires additional Restaurants where post-mix products are or will be
sold ("New Restaurants"), the Product will also be dispensed at such New
Restaurants under the same terms, obligations and marketing plan of this
Agreement.
7. ENTIRE AGREEMENT. This Agreement contains the entire agreement between the
parties with respect to the transactions contemplated herein and supersedes
all previous oral or written negotiations or commitments. No amendment or
modification of this Agreement may be made except in a writing executed by
the party against whom such amendment or modification is sought to be
enforced.
8. VENUE. This Agreement shall be construed, interpreted and enforced under
the laws of the State of *** without regard to principles of conflict
or choice of laws. Any action or proceeding arising out of or in
connection with this Agreement shall be venued in a federal or state court
of appropriate subject matter jurisdiction located in *** and the
parties hereby consent to the personal jurisdiction in such courts.
9. BINDING AGREEMENT. This Agreement shall be binding upon each of the
parties hereto and shall inure to their respective benefits and the benefit
of their successors, assigns and legal representatives, as the case may be.
This Agreement may not be assigned or transferred by either party hereto
without the prior written consent of the other party.
10. COSTS AND EXPENSES. Except as expressly otherwise provided in this
Agreement, each party hereto shall bear its own costs and expenses in
connection with this Agreement and the transactions contemplated hereby.
If any legal action is taken by either party hereunder to enforce the terms
and conditions of this Agreement in the event of a material breach, the
prevailing party may recover its attorneys' fees in connection with
enforcement of the Agreement.
11. FORCE MAJEURE. Either party is excused from performance hereunder if such
nonperformance results from any acts of God, strikes, lockout, labor
trouble or other industrial disturbance, war, riots, acts of
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
-3-
<PAGE>
governmental authorities, shortages of raw materials or any other cause
outside the reasonable control of the nonperforming party. In the event
either party wishes to invoke this provision, it must give prompt written
notice to the other party, specifying the basis for the assertion of the
same and for how long it is expected that such situation will continue.
Upon the cessation of such situation, the invoking party shall give written
notice of such fact to the other party and shall resume performance of all
obligations covered hereunder with respect to which compliance has been so
interrupted.
12. NONDISCLOSURE. Except as may otherwise be required by law or legal
process, the Fountain Account shall not disclose to any third party the
terms and conditions of this Agreement.
13. NOTICES. Any notices given or related to the Agreement shall be in writing
and hand-delivered or sent by prepaid, certified or express mail, return
receipt requested, and if to the Fountain Account, to 5151 Shoreham Place,
San Diego, CA 92122-5940, Attn: Jim Stryker-Chief Financial Officer, and if
to Dr Pepper, to 5301 Legacy Drive, Plano, Texas 75024, Attn: Senior Vice
President Fountain Foodservice, National Accounts.
14. INDEPENDENT CONTRACTORS. It is understood and agreed by the parties that
this Agreement does not create a fiduciary relationship between them; each
party's relationship to the other party is that of an independent
contractor. Nothing herein contained shall be construed to place the
parties in the relationship of partners or joint venturers or to make
either party the agent of the other and neither party shall have any power
to obligate or bind the other in any manner whatsoever.
15. WAIVER. Failure of either party to require performance of any provision of
this Agreement shall not affect either party's right to require full
performance of this Agreement at any time thereafter during the Term hereof
and the waiver by either party of any provision hereof shall not constitute
or be deemed a waiver of a similar breach in the future.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on behalf of
the Fountain Account and Dr Pepper as of the day and year first above written.
DR PEPPER/SEVEN UP, INC. RUBIO'S RESTAURANTS, INC.
By: /s/ illegible By: /s/ James W. Stryker
-------------------------- ------------------------
Title: Senior VP Title: Vice Pres.
-------------------------- ------------------------
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<PAGE>
EXHIBIT 10.23
ORIGINAL - RENTOR AGREEMENT NO. 0498
1 DUPLICATE - PFS/CORPORATE DATE 07/10/98
1 DUPLICATE - PFS/DEL MAR
RENTAL AGREEMENT __FAIRTIME
__INTERIM
__SATELLITE WAGERING
__RACETRACK
THIS AGREEMENT by and between PREMIER FOOD SERVICES, INC., hereinafter called
Premier and RUBIO'S BAJA GRILL hereinafter called the Rentor,
WITNESSETH:
1. THAT WHEREAS, The Rentor desires to secure from Premier certain rights
and privileges and to obtain permission from Premier to use Premier's location
beginning on JULY, 10, 1998 THROUGH SEPTEMBER 20, 1998, JULY 10, 1999 THROUGH
SEPTEMBER 20, 1999, JULY 10, 2000 THROUGH SEPTEMBER 20, 2000.
2. NOW, THEREFORE, Premier hereby grants to the Renter the right to occupy
the space(s) described below for the purposes hereinafter set forth, subject to
the terms and conditions of this agreement: GRAND STAND C-2053-1
3. The purpose of occupancy shall be limited to: SALE OF FOOD AND
NON-ALCOHOLIC BEVERAGE
4. Rentor and Premier agree to pay fees as described on Addendum - A
4. Rentor agrees to guarantee the payment of :
a. Deleted
b. Any damage caused by Rentor to Fair property;
c. Removal of all property and the leaving of the premises in
condition satisfactory to Premier.
5. Premier and Rentor shall have the right to audit and monitor any and all
sales as well as access to the premises.
6. To the fullest extent permitted by law, the Operator shall defend,
indemnify and hold harmless Premier, Del Mar Thoroughbred Club and the District
and its agents, directors, and employees from and against all claims, damages,
losses and expenses, arising out of, connected with, or resulting from directly
and indirectly, any failure of the Operator to perform in accordance with the
terms, conditions, and specifications of this proposal. Said claims, damages,
losses and expenses shall include but not be limited to attorney's fees and any
claims, damages, losses and expenses due to the non-performance of this
proposal. The parties further acknowledge that experience will demonstrate
changes that will be required in the methods of management, operation,
maintenance and repair, and that a certain degree of flexibility will be
required.
7. Rentor further agrees that he will not sell, exchange or barter, or
permit his employees to sell, exchange or barter, any permits issued to Rentor
or his employees hereunder.
8. It is mutually agreed that this contract or the privileges granted
herein, or any part thereof cannot by assigned of otherwise disposed of without
the written consent of Premier.
9. It is mutually understood and agreed that no alteration or variation of
this contract shall be valid, unless made in writing and signed by the parties
hereto, and that no oral understandings or agreements not incorporated herein
and no alterations or variations of the terms thereof, unless made in writing
and signed by the parties hereto, shall be binding upon any of the parties
hereto.
10. The Rules and Regulations printed on the reverse side hereto are made a
part of this agreement as though fully incorporated herein, and Rentor agrees
that he has read this agreement and the said Rules and Regulations and
understands that they shall apply, unless amended by mutual consent in writing
of the parties hereto.
11. In the event Rentor fails to materially comply with the terms of this
agreement and the Rules and Regulations referred to herein, *** for
this rental space shall be *** and *** by Premier and Premier shall
have the right to occupy the space in any manner deemed for the best interest of
Premier.
12. Special Provisions: 1. PREMIER WILL APPROVE ALL REGISTER SYSTEMS AND
TRAINING OF REGISTER SYSTEM, WHEN APPLICABLE. 2. *** 3. DELETED.
13. This agreement is not binding upon Premier until it has been signed by
its authorized representative, and approved (if required by) Premier Food
Services Inc. Corporate Representative and 22nd District Agricultural
Association's authorized representative.
IN WITNESS WHEREOF, this agreement has been executed in triplicate, by and
behalf of the parties hereto, the day and year first above written.
PREMIER FOOD SERVICES, INC. RUBIO'S RESTAURANTS, INC.
-------------------------------
Rentor
Address: 2260 Jimmy Durante Blvd.
Del Mar CA 92014 Address 5151 Shoreham Pl. #260
---------------------------
SAN DIEGO, CALIFORNIA 92122
---------------------------
By By /s/ James W. Stryker
------------------------------------- --------------------------------
Title Title Vice President
----------------------------------- ------------------------------
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
RULES AND REGULATIONS GOVERNING RENTAL SPACE
1. No Renter will be allowed to open until all the preliminary
requirements herein set forth have been complied with.
2. Rentor will conduct his business in a quiet orderly manner: will
deposit all rubbish, slop, garbage, tin cans, paper, etc. in
receptacles provided by Premier within said concession plot for such
purpose, and will keep the area within and surrounding said concessions
free from all rubbish and debris.
3. All buildings, tents, or enclosures erected under the terms of Rental
Agreement shall have the prior approval of Premier and the local fire
suppression authorities. All eating concessions not restricted to
specific items will submit menus and prices to Premier for approval at
least twelve (12) hours in advance of each day's operation.
4. Rentor will furnish Premier with a list of all sales prices and other
charges of any kind whatsoever to be charged by the Rentor in said
space(s).
5. Rentor must furnish receipts for license fees, tax deposits, insurance,
etc., prior to event.
6. Rentor will conduct the privileges granted in the Rental Agreement
according to the rules and requirements of the State Department of
Health Services and local health authorities, and without infringement
upon the rights and privileges of others; will not handle or sell any
commodities or transact any business whatsoever for which an exclusive
privilege is sold by Premier, nor engage in any other business
whatsoever upon or within said premises or fairgrounds, except that
which its herein expressly stipulated and contracted for: will confine
said transactions to the space and privileges provided in the Rental
Agreement, and that any and all exclusive granted Rentor shall not
include the Carnival and Carnival Area.
7. Rentor will cause to be posted in conspicuous manner at the front
entrance to the concessions, a sign showing the prices to be charged
for all articles offered for sale to the public under the Rental
Agreement: the size of said sign, manner and place of posting to be
approved by Premier.
8. Premier will furnish necessary janitor service for all aisles, streets,
roads and areas used by the public, but Rentor must, at his own
expense, keep the concession space and adjacent areas properly arranged
and clean. All concessions must be clean, all coverings removed, and
the concessions ready for business each day at least one hour before
the fair is open to the public. Receptacles will be provided at several
locations to receive Rentor's trash, and such trash must not be swept
into the aisles or streets or any public space.
9. All sound-producing devices used by Rentor within or outside his space
must be of such a nature and must be so operated as not to cause
annoyance or inconvenience to his patrons or to other Concessionaires
or Exhibitors and the desirability of any such sound-producing device
shall be final and conclusive. Sound-amplification equipment may be
installed within or outside any space only by first obtaining written
permission thereof from Premier.
10. Rentor agrees that there will be no games, gambling or any other
activities within the confine of his space in which money is used as a
prize or premium, and that he will not buy and/or permit "buy backs"
for cash, any prizes or premiums given away to patrons in connection
with the use of the space. Only straight merchandising methods shall be
used and all methods of operation, demonstration and sale, shall be
subject to the approval of Premier and the local law enforcement
officials.
11. Rentor is entirely responsible for the space allotted to Rentor and
agrees to reimburse Premier for any damage to real property, equipment,
or grounds used in connection with the space allotted to Rentor,
reasonable wear and tear damage from causes beyond Rentor's control
excepted.
<PAGE>
12. Each and every article of the space and all boxes, crates, packing
materials, and debris of whatsoever nature used in connection with the
space and owned by Rentor must be removed from the buildings and
grounds by Rentor, at his own expense, not later than a date specified
by Premier. It is understood in the event of Rentor's failure to vacate
said premises as herein provided, unless permission in writing is first
obtained, Premier may and is hereby authorized and made the agent of
Rentor to remove and store the concession and all other material of any
nature whatsoever, at the Rentor's risk and expense, and rentor shall
reimburse Premier for expenses thus incurred.
13. No Rentor will be permitted to sell or dispose of alcoholic beverages
anywhere on the fairgrounds.
14. All safety orders of the Division of Industrial Safety, Department of
Industrial Relations, must be strictly observed.
15. Failure of Premier to insist in any one or more instances upon the
observance and/or performance of any of these rules and regulations
shall not constitute a waiver of any subsequent breach of any such
rules and regulations.
16. This rental agreement shall be subject to termination by either party
only upon material breach of this Agreement by the other Party.
17. Deleted.
18. Deleted.
19. Premier shall have the privilege of inspection the premises covered by
this agreement at any time or all times.
20. The parties hereto agree that Rentor, and any agents and employees of
Rentor, in the performance of this agreement, shall act in an
independent capacity and not as officers or employees or agents of
Premier.
21. Time is of the essence of each and all provisions of this agreement,
and the provisions of the agreement shall extend to and be binding upon
and inure to the benefit of the heirs, executors, administrators,
successors, and assigns of the respective parties hereto.
<PAGE>
Premier Food Services
Del Mar Fairgrounds & Racetrack
Addendum A
BASE TERM: Three (3) seasons.
TERM/RENT COMMENCEMENT: Three (3) Horse Racing seasons
July 10, 1998 through September 20, 1998
July 10, 1999 through September 20, 1999
July 10, 2000 through September 20, 2000
PREMISES: Space shall be located on the second floor of the Grandstand
Building, commonly known as Stand 2053.
REIMBURSEMENT SCHEDULE: Premier Food Services, Inc. (PFS) shall pay
Rubio's Restaurants, Inc. as follows:
1998 season *** of audited net sales (excluding alcohol
sales) In addition, *** of audited net sales
(excluding alcohol sales) to offset improvement
costs.
1999 season *** of audited net sales (excluding alcohol
sales) In addition, *** of audited net sales
(excluding alcohol sales) to offset improvement
costs.
2000 season *** of audited net sales (excluding alcohol sales)
In addition, *** of audited net sales (excluding
alcohol sales) to offset improvement costs (if
applicable).
Reimbursements will be due on Wednesday of each
week throughout the term of the Agreement; each
payment is to include all amounts due Rubio's
through sales recorded for the seven days ended on
the Sunday prior to each Wednesday's reimbursement
due date.
TOTAL ADDITIONAL REIMBURSEMENT NOT TO EXCEED *** .
IMPROVEMENTS: Rentor shall construct all improvements, at a cost not to exceed
***, as per Exhibit "A." Costs to be agreed upon by both parties
prior to commencement of construction. Improvements to include
all signage.
MERCHANDISE: Merchandise sales are not covered by this agreement.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
EXHIBIT "A" 7/8/98
Del Mar Track Remodel Estimate
EQUIPMENT BREAKDOWN:
<TABLE>
<CAPTION>
Qty Equipment *** ***
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2 Heat Shelves *** ***
2 Cup Dispensers 22 oz. *** ***
1 Salsa Bar Pan *** ***
1 Sneeze Guard *** ***
1 Wells Warmer *** ***
1 2 Burner Gas Range *** ***
1 36" Flat Grill *** ***
2 Gas Hose(s) for above *** ***
1 Equipment Stand 48" wide *** ***
1 Heat Holding Cabinet *** ***
2 Heat Lamps *** ***
1 Stainless Shelf *** ***
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
Total ***
<CAPTION>
SIGNAGE/DECOR
Qty Signage/Decor *** ***
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Illuminated Sign *** ***
1 House Rules sign *** ***
1 Story of Pesky *** ***
1 Max Map #115 *** ***
1 Locations sign *** ***
1 Photo #98 Aurora 30x36h *** ***
1 Photo #45 Cove Scene 16x20V *** ***
1 Surfboard Menu 22"x11' *** ***
1 Transparency Food Photo *** ***
1 Rubio's Sign on Facia *** ***
1 Menu vinyl on surfboard *** ***
1 Art Sign install *** ***
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
Total ***
<CAPTION>
FURNITURE
Qty Furniture *** ***
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
6 Bar Height Tables Bases *** ***
6 30" square Table tops *** ***
11 Bases for Stand up Bar *** ***
1 24' Long Laminate Bar Top *** ***
along Paddock Walk
1 Re Work Front Counter; *** ***
Add Stainless Steel
12 Add Electrical Outlets (12) *** ***
1 Construct Cashier/Beer Stand *** ***
1 Gas Plumbing for New Equip. *** ***
1 8' Diameter Palapa *** ***
1 Galvanized Cue Rail *** ***
1 Water Supply for Soda *** ***
1 Paint *** ***
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
Total ***
GRAND TOTAL ***
</TABLE>
Real Estate Development
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE>
EXHIBIT 10.25
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into this ___ day of March, 1999 between
Rubio's Restaurants, Inc., a Delaware corporation ("Corporation"), whose address
is 1902 Wright Place, Suite 300, Carlsbad, California 92008 and _______________
__________________ ("Director"), whose address is ___________________________.
RECITALS:
A. WHEREAS, Director, a member of the Board of Directors of Corporation
(the "Board"), performs a valuable service in such capacity for Corporation; and
B. WHEREAS, the stockholders of Corporation have adopted Bylaws (the
"Bylaws") providing for the indemnification of the officers, directors, agents
and employees of Corporation to the maximum extent authorized by Section 145 of
the Delaware General Corporation Law, as amended (the "Law"); and
C. WHEREAS, the Bylaws and the Law, as amended and in effect from time
to time or any successor or other statutes of Delaware having similar import and
effect, currently purport to be the controlling law governing Corporation with
respect to certain aspects of corporate law, including indemnification of
directors and officers; and
D. WHEREAS, in accordance with the authorization provided by the Law,
Corporation may from time to time purchase and maintain a policy or policies of
Directors and Officers Liability Insurance ("D & O Insurance"), covering certain
liabilities which may be incurred by its directors and officers in the
performance of services as directors and officers of Corporation; and
E. WHEREAS, as a result of developments affecting the terms, scope and
availability of D & O Insurance there exists general uncertainty as to the
extent and overall desirability of protection afforded members of the Board of
Directors by such D & O Insurance, if any, and by statutory and bylaw
indemnification provisions; and
F. WHEREAS, in order to induce Director to continue to serve as a member
of the Board, Corporation has determined and agreed to enter into this contract
with Director.
NOW, THEREFORE, in consideration of Director's continued service as a
director after the date hereof, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS. The following terms used in this Agreement shall
have the meanings set forth below. Other terms are defined where appropriate in
this Agreement.
(a) "DISINTERESTED DIRECTOR" shall mean a director of Corporation who
is not or was not a party to the Proceeding in respect of which indemnification
is being sought by Director.
(b) "EXPENSES" shall include all direct and indirect costs
(including, without limitation, attorneys' fees, retainers, court costs,
transcripts, fees of experts, witness fees, travel
<PAGE>
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, all other disbursements or out-of-pocket
expenses and reasonable compensation for time spent by Director for which he
or she is otherwise not compensated by Corporation) actually and reasonably
incurred in connection with a Proceeding or establishing or enforcing a right
to indemnification under this Agreement, applicable law or otherwise;
provided, however, that "Expenses" shall not include any Liabilities.
(c) "FINAL ADVERSE DETERMINATION" shall mean that a determination
that Director is not entitled to indemnification shall have been made pursuant
to Section 5 hereof and either (i) a final adjudication in a Delaware court or
decision of an arbitrator pursuant to Section 13(a) hereof shall have denied
Director's right to indemnification hereunder, or (ii) Director shall have
failed to file a complaint in a Delaware court or seek an arbitrator's award
pursuant to Section 13(a) for a period of one hundred twenty (120) days after
the determination made pursuant to Section 5 hereof.
(d) "INDEPENDENT LEGAL COUNSEL" shall mean a law firm or member of a
law firm selected by Corporation and approved by Director (which approval shall
not be unreasonably withheld) and that neither is presently nor in the past five
years has been retained to represent: (i) Corporation, in any material matter,
or (ii) any other party to the Proceeding giving rise to a claim for
indemnification hereunder. Notwithstanding the foregoing, the term "Independent
Legal Counsel" shall not include any person who, under the applicable standards
of professional conduct then prevailing, would have a conflict of interest in
representing either Corporation or Director in a Proceeding to determine
Director's right to indemnification under this Agreement.
(e) "LIABILITIES" shall mean liabilities of any type whatsoever
including, but not limited to, any judgments, fines, ERISA excise taxes and
penalties, and penalties and amounts paid in settlement (including all interest
assessments and other charges paid or payable in connection with or in respect
of such judgments, fines, penalties or amounts paid in settlement) of any
proceeding.
(f) "PROCEEDING" shall mean any threatened, pending or completed
action, claim, suit, arbitration, alternative dispute resolution mechanism,
investigation, administrative hearing or any other proceeding whether civil,
criminal, administrative or investigative, including any appeal therefrom.
(g) "CHANGE OF CONTROL" shall mean the occurrence of any of the
following events after the date of this Agreement:
(i) A change in the composition of the Board, as a result of
which fewer than two-thirds (2/3) of the incumbent directors are directors who
either (1) had been directors of Corporation twenty-four (24) months prior to
such change or (2) were elected, or nominated for election, to the Board with
the affirmative votes of at least a majority of the directors who had been
directors of Corporation 24 months prior to such change and who were still in
office at the time of the election or nomination; or
2
<PAGE>
(ii) Any "person" (as such term is used in section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) through the
acquisition or aggregation of securities is or becomes the beneficial owner,
directly or indirectly, of securities of Corporation representing twenty percent
(20%) or more of the combined voting power of Corporation's then outstanding
securities ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of directors (the "Capital
Stock"), except that any change in ownership of Corporation's securities by any
person resulting solely from a reduction in the aggregate number of outstanding
shares of Capital Stock, and any decrease thereafter in such person's ownership
of securities, shall be disregarded until such person increases in any manner,
directly or indirectly, such person's beneficial ownership of any securities of
Corporation.
2. INDEMNITY OF DIRECTOR. Corporation hereby agrees to hold harmless and
indemnify Director to the fullest extent authorized or permitted by the
provisions of the Law, as may be amended from time to time.
3. ADDITIONAL INDEMNITY. Subject only to the exclusions set forth in
Section 4 hereof, Corporation hereby further agrees to hold harmless and
indemnify Director:
(a) against any and all Expenses in connection with any Proceeding
(including an action by or in the right of Corporation) to which Director is,
was or at any time becomes a party, or is threatened to be made a party, by
reason of the fact that Director is, was or at any time becomes a director,
officer, employee or agent of Corporation, or is or was serving or at any time
serves at the request of Corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Director by
Corporation under the non-exclusivity provisions of the Bylaws of Corporation
and the Law.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section
3 hereof shall be paid by Corporation:
(a) except to the extent the aggregate of losses to be indemnified
thereunder exceeds the sum of such losses for which the Director is indemnified
pursuant to Section 2 hereof or reimbursed pursuant to any D & O Insurance
purchased and maintained by Corporation;
(b) in respect of remuneration paid to Director if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(c) on account of any Proceeding in which judgment is rendered
against Director for an accounting of profits made from the purchase or sale by
Director of securities of Corporation pursuant to the provisions of Section
16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar
provisions of any federal, state or local statutory law;
(d) on account of a Final Adverse Determination that Director's
conduct was knowingly fraudulent or deliberately dishonest or constituted
willful misconduct;
3
<PAGE>
(e) provided there has been no Change of Control, on account of or
arising in response to any Proceeding (other than a Proceeding referred to in
Section 10(b) hereof) initiated by Director or any of Director's affiliates
against Corporation or any officer, director or stockholder of Corporation
unless such Proceeding was authorized in the specific case by action of the
Board of Directors of Corporation;
(f) if a final decision by a Court having jurisdiction in the matter
shall determine that such indemnification is not lawful; or
(g) on account of any Proceeding to the extent that Director is a
plaintiff, a counter-complainant or a cross-complainant therein (other than a
Proceeding permitted by Section 4(e) hereof).
5. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION.
(a) Whenever Director believes that he or she is entitled to
indemnification pursuant to this Agreement, Director shall submit a written
request for indemnification to Corporation. Any request for indemnification
shall include sufficient documentation or information reasonably available to
Director to support his or her claim for indemnification. Director shall submit
his or her claim for indemnification within a reasonable time not to exceed five
years after any judgment, order, settlement, dismissal, arbitration award,
conviction, acceptance of a plea of nolo contendere or its equivalent, final
termination or other disposition or partial disposition of any Proceeding,
whichever is the later date for which Director requests indemnification. The
President, Secretary or other appropriate officer shall, promptly upon receipt
of Director's request for indemnification, advise the Board in writing that
Director has made such a request. Determination of Director's entitlement to
indemnification shall be made not later than ninety (90) days after
Corporation's receipt of his or her written request for such indemnification.
(b) The Director shall be entitled to select the forum in which
Director's request for indemnification will be heard, which selection shall be
included in the written request for indemnification required in Section 5(a).
This forum shall be any one of the following:
(i) The stockholders of Corporation;
(ii) A quorum of the Board consisting of Disinterested
Directors;
(iii) Independent Legal Counsel, who shall make the
determination in a written opinion; or
(iv) A panel of three arbitrators, one selected by Corporation,
another by Director and the third by the first two arbitrators selected. If for
any reason three arbitrators are not selected within thirty (30) days after the
appointment of the first arbitrator, then selection of additional arbitrators
shall be made by the American Arbitration Association. If any arbitrator
resigns or is unable to serve in such capacity for any reason, the American
Arbitration Association shall select his or her replacement. The arbitration
shall be conducted pursuant to the commercial arbitration rules of the American
Arbitration Association now in effect.
4
<PAGE>
If Director fails to make such designation, his or her claim shall be
determined by the forum selected by Corporation.
6. PRESUMPTION AND EFFECT OF CERTAIN PROCEEDINGS. Upon making a request
for indemnification, Director shall be presumed to be entitled to
indemnification under this Agreement and Corporation shall have the burden of
proof to overcome that presumption in reaching any contrary determination. The
termination of any Proceeding by judgment, order, settlement, arbitration award
or conviction, or upon a plea of nolo contendere or its equivalent shall not
affect this presumption or, except as may be provided in Section 4 hereof,
establish a presumption with regard to any factual matter relevant to
determining Director's rights to indemnification hereunder. If the person or
persons so empowered to make a determination pursuant to Section 5(b) hereof
shall have failed to make the requested determination within thirty (30) days
after any judgment, order, settlement, dismissal, arbitration award, conviction,
acceptance of a plea of nolo contendere or its equivalent, or other disposition
or partial disposition of any Proceeding or any other event which could enable
Corporation to determine Director's entitlement to indemnification, the
requisite determination that Director is entitled to indemnification shall be
deemed to have been made.
7. CONTRIBUTION. If the indemnification provided in Sections 2 and 3 is
unavailable and may not be paid to Director for any reason other than those set
forth in Section 4, then in respect of any Proceeding in which Corporation is or
is alleged to be jointly liable with Director (or would be if joined in such
Proceeding), Corporation shall contribute to the amount of Expenses and
Liabilities paid or payable by Director in such proportion as is appropriate to
reflect (i) the relative benefits received by Corporation on the one hand and
Director on the other hand from the transaction from which such Proceeding
arose, and (ii) the relative fault of Corporation on the one hand and of
Director on the other hand in connection with the events which resulted in such
Expenses and Liabilities, as well as any other relevant equitable
considerations. The relative fault of Corporation on the one hand and of
Director on the other shall be determined by reference to, among other things,
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent the circumstances resulting in such Expenses and
Liabilities. Corporation agrees that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing
equitable considerations.
8. INSURANCE AND FUNDING. Corporation hereby represents and warrants
that it shall purchase and maintain insurance to protect itself and/or Director
against any Expenses and Liabilities in connection with any Proceeding to the
fullest extent permitted by the Law.
9. CONTINUATION OF OBLIGATIONS. All agreements and obligations of
Corporation contained herein shall continue during the period Director is a
director, officer, employee or agent of Corporation (or is or was serving at the
request of Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise) and shall continue thereafter so long as Director shall be subject
to any possible Proceeding, by reason of the fact that Director was serving
Corporation or such other entity in any capacity referred to herein.
5
<PAGE>
10. NOTIFICATION AND DEFENSE OF CLAIM. Promptly after receipt by Director
of notice of the commencement of any Proceeding, Director will, if a claim in
respect thereof is to be made against Corporation under this Agreement, notify
Corporation of the commencement thereof; but the omission so to notify
Corporation will not relieve it from any liability which it may have to Director
otherwise than under this Agreement. With respect to any Proceeding as to which
Director notifies Corporation of the commencement thereof:
(a) Corporation will be entitled to participate therein at its own
expense;
(b) Except as otherwise provided below, to the extent that it may
wish, Corporation jointly with any other indemnifying party similarly notified
will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Director. After notice from Corporation to Director of its
election to assume the defense thereof, Corporation will not be liable to
Director under this Agreement for any Expenses subsequently incurred by Director
in connection with the defense thereof other than reasonable costs of
investigation or as otherwise provided below. Director shall have the right to
employ his or her own counsel in such Proceeding but the Expenses associated
with the employment of such counsel incurred after notice from Corporation of
its assumption of the defense thereof shall be at the expense of Director unless
(i) the employment of counsel by Director has been authorized by Corporation,
(ii) Director shall have reasonably concluded that there may be a conflict of
interest between Corporation and Director in the conduct of the defense of such
Proceeding or (iii) Corporation shall not in fact have employed counsel to
assume the defense of such Proceeding, in each of which cases the Expenses of
Director's separate counsel shall be at the expense of Corporation. Corporation
shall not be entitled to assume the defense of any Proceeding brought by or on
behalf of Corporation or as to which Director shall have made the conclusion
provided for in (ii) above; and
(c) Provided there has been no Change of Control, Corporation shall
not be liable to indemnify Director under this Agreement for any amounts paid in
settlement of any Proceeding effected without its written consent, which consent
shall not be unreasonably withheld. Corporation shall be permitted to settle
any Proceeding except that it shall not settle any Proceeding in any manner
which would impose any penalty, out-of-pocket liability, or limitation on
Director without Director's written consent.
11. ADVANCEMENT AND REPAYMENT OF EXPENSES.
(a) In the event that Director employs his or her own counsel
pursuant to Section 10(b)(i) through (iii) above, Corporation shall advance to
Director, prior to any final disposition of any Proceeding any and all Expenses
incurred in investigating or defending any such Proceeding within ten (10) days
after receiving copies of invoices presented to Director for such Expenses.
(b) Director agrees that Director will reimburse Corporation for all
Expenses paid by Corporation in defending any Proceeding against Director in the
event and only to the extent that there has been a Final Adverse Determination
that Director is not entitled, under the provisions of the Law, the Bylaws, this
Agreement or otherwise, to be indemnified by Corporation for such Expenses.
6
<PAGE>
12. REMEDIES OF DIRECTOR.
(a) In the event that (i) a determination pursuant to Section 5
hereof is made that Director is not entitled to indemnification, (ii) advances
of Expenses are not made pursuant to this Agreement, (iii) payment has not been
timely made following a determination of entitlement to indemnification pursuant
to this Agreement, or (iv) Director otherwise seeks enforcement of this
Agreement, Director shall be entitled to a final adjudication in an appropriate
court of his or her rights. Alternatively, Director at his or her option may
seek an award in arbitration to be conducted by a single arbitrator pursuant to
the commercial arbitration rules of the American Arbitration Association now in
effect, whose decision is to be made within ninety (90) days following the
filing of the demand for arbitration. The Corporation shall not oppose
Director's right to seek any such adjudication or arbitration award.
(b) In the event that a determination that Director is not entitled
to indemnification, in whole or in part, has been made pursuant to Section 5
hereof, the decision in the judicial proceeding or arbitration provided in
paragraph (a) of this Section 12 shall be made de novo and Director shall not be
prejudiced by reason of a determination that he or she is not entitled to
indemnification.
(c) If a determination that Director is entitled to indemnification
has been made pursuant to Section 5 hereof or otherwise pursuant to the terms of
this Agreement, Corporation shall be bound by such determination in the absence
of (i) a misrepresentation of a material fact by Director or (ii) a specific
finding (which has become final) by an appropriate court that all or any part of
such indemnification is expressly prohibited by law.
(d) In any court proceeding pursuant to this Section 12, Corporation
shall be precluded from asserting that the procedures and presumptions of this
Agreement are not valid, binding and enforceable. The Corporation shall
stipulate in any such court or before any such arbitrator that Corporation is
bound by all the provisions of this Agreement and is precluded from making any
assertion to the contrary.
(e) Expenses reasonably incurred by Director in connection with his
or her request for indemnification under this Agreement, meeting enforcement of
this Agreement or to recover damages for breach of this Agreement shall be borne
by Corporation.
(f) Corporation and Director agree herein that a monetary remedy for
breach of this Agreement, at some later date, will be inadequate, impracticable
and difficult to prove, and further agree that such breach would cause Director
irreparable harm. Accordingly, Corporation and Director agree that Director
shall be entitled to temporary and permanent injunctive relief to enforce this
Agreement without the necessity of proving actual damages or irreparable harm.
The Corporation and Director further agree that Director shall be entitled to
such injunctive relief, including temporary restraining orders, preliminary
injunctions and permanent injunctions, without the necessity of posting bond or
other undertaking in connection therewith. Any such requirement of bond or
undertaking is hereby waived by Corporation, and Corporation acknowledges that
in the absence of such a waiver, a bond or undertaking may be required by the
court.
7
<PAGE>
13. ENFORCEMENT. Corporation expressly confirms and agrees that it has
entered into this Agreement and assumed the obligations imposed on Corporation
hereby in order to induce Director to continue as a director of Corporation, and
acknowledges that Director is relying upon this Agreement in continuing in such
capacity.
14. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any or all of
the provisions hereof shall be held to be invalid or unenforceable to any extent
for any reason, such invalidity or unenforceability shall not affect the
validity or enforceability of the other provisions hereof, or the obligation of
the Corporation to indemnify the Director to the full extent provided by the
Bylaws or the Law, and the affected provision shall be construed and enforced so
as to effectuate the parties' intent to the maximum extent possible.
15. GOVERNING LAW. This Agreement shall be governed by and interpreted
and enforced in accordance with the internal laws of the State of Delaware.
16. CONSENT TO JURISDICTION. The Corporation and Director each
irrevocably consent to jurisdiction of the courts of the State of Delaware for
all purposes in connection with any Proceeding which arises out of or relates to
this Agreement and agree that any Proceeding instituted under this Agreement
shall be brought only in the state courts of the State of Delaware.
17. BINDING EFFECT. This Agreement shall be binding upon Director and
upon Corporation, its successors and assigns, and shall inure to the benefit of
Director, his or her heirs, executors, administrators, personal representatives
and assigns and to the benefit of Corporation, its successors and assigns.
18. ENTIRE AGREEMENT. This Agreement represents the entire agreement
between the parties hereto and there are no other agreements, contracts or
understandings between the parties hereto with respect to the subject matter of
this Agreement, except as specifically referred to herein. This Agreement
supersedes any and all agreements regarding indemnification heretofore entered
into by the parties.
19. AMENDMENT AND TERMINATION. No amendment, modification, waiver,
termination or cancellation of this Agreement shall be effective for any purpose
unless set forth in writing signed by both parties hereto.
20. SUBROGATION. In the event of payment under this agreement,
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Director, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
Corporation effectively to bring suit to enforce such rights.
21. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Director by this
Agreement shall not be exclusive of any other right which Director may have or
hereafter acquire under any statute, provision of Corporation's Certificate of
Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
8
<PAGE>
22. SURVIVAL OF RIGHTS. The rights conferred on Director by this
Agreement shall continue after Director has ceased to be a director, officer,
employee or other agent of Corporation or such other entity.
23. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be addressed to Director or to
Corporation, as the case may be, at the address shown on page 1 of this
Agreement, or to such other address as may have been furnished by either party
to the other, and shall be deemed to have been duly given if (a) delivered by
hand and receipted for by the party to whom said notice or other communication
shall have been directed, or (b) mailed by certified or registered mail with
postage prepaid, on the third business day after the date on which it is so
mailed.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
DIRECTOR: RUBIO'S RESTAURANTS, INC.,
a Delaware corporation
______________________________ By: _______________________________
Its: _______________________________
[SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT]
<PAGE>
EXHIBIT 10.26
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into this ___ day of March, 1999 between
Rubio's Restaurants, Inc., a Delaware corporation ("Corporation"), whose address
is 1902 Wright Place, Suite 300, Carlsbad, California 92008 and
__________________ ("Officer"), whose address is
__________________________________.
RECITALS:
A. WHEREAS, Officer, an officer of Corporation (but not currently a
member of the Board of Directors of Corporation (the "Board")), performs a
valuable service in such capacity for Corporation; and
B. WHEREAS, the stockholders of Corporation have adopted Bylaws (the
"Bylaws") providing for the indemnification of the officers, directors, agents
and employees of Corporation to the maximum extent authorized by Section 145 of
the Delaware General Corporation Law, as amended (the "Law"); and
C. WHEREAS, the Bylaws and the Law, as amended and in effect from time
to time or any successor or other statutes of Delaware having similar import and
effect, currently purport to be the controlling law governing Corporation with
respect to certain aspects of corporate law, including indemnification of
directors and officers; and
D. WHEREAS, in accordance with the authorization provided by the Law,
Corporation may from time to time purchase and maintain a policy or policies of
Directors and Officers Liability Insurance ("D & O Insurance"), covering certain
liabilities which may be incurred by its directors and officers in the
performance of services as directors and officers of Corporation; and
E. WHEREAS, as a result of developments affecting the terms, scope and
availability of D & O Insurance there exists general uncertainty as to the
extent and overall desirability of protection afforded officers by such D & O
Insurance, if any, and by statutory and bylaw indemnification provisions; and
F. WHEREAS, in order to induce Officer to continue to serve as an officer
of Corporation, Corporation has determined and agreed to enter into this
contract with Officer.
NOW, THEREFORE, in consideration of Officer's continued service as an
officer after the date hereof, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS. The following terms used in this Agreement shall
have the meanings set forth below. Other terms are defined where appropriate in
this Agreement.
(a) "DISINTERESTED DIRECTOR" shall mean a director of Corporation who
is not or was not a party to the Proceeding in respect of which indemnification
is being sought by Officer.
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(b) "EXPENSES" shall include all direct and indirect costs
(including, without limitation, attorneys' fees, retainers, court costs,
transcripts, fees of experts, witness fees, travel expenses, duplicating costs,
printing and binding costs, telephone charges, postage, delivery service fees,
all other disbursements or out-of-pocket expenses and reasonable compensation
for time spent by Officer for which he or she is otherwise not compensated by
Corporation) actually and reasonably incurred in connection with a Proceeding or
establishing or enforcing a right to indemnification under this Agreement,
applicable law or otherwise; provided, however, that "Expenses" shall not
include any Liabilities.
(c) "FINAL ADVERSE DETERMINATION" shall mean that a determination
that Officer is not entitled to indemnification shall have been made pursuant to
Section 5 hereof and either (i) a final adjudication in a Delaware court or
decision of an arbitrator pursuant to Section 13(a) hereof shall have denied
Officer's right to indemnification hereunder, or (ii) Officer shall have failed
to file a complaint in a Delaware court or seek an arbitrator's award pursuant
to Section 13(a) for a period of one hundred twenty (120) days after the
determination made pursuant to Section 5 hereof.
(d) "INDEPENDENT LEGAL COUNSEL" shall mean a law firm or member of a
law firm selected by Corporation and approved by Officer (which approval shall
not be unreasonably withheld) and that neither is presently nor in the past five
years has been retained to represent: (i) Corporation, in any material matter,
or (ii) any other party to the Proceeding giving rise to a claim for
indemnification hereunder. Notwithstanding the foregoing, the term "Independent
Legal Counsel" shall not include any person who, under the applicable standards
of professional conduct then prevailing, would have a conflict of interest in
representing either Corporation or Officer in a Proceeding to determine
Officer's right to indemnification under this Agreement.
(e) "LIABILITIES" shall mean liabilities of any type whatsoever
including, but not limited to, any judgments, fines, ERISA excise taxes and
penalties, and penalties and amounts paid in settlement (including all interest
assessments and other charges paid or payable in connection with or in respect
of such judgments, fines, penalties or amounts paid in settlement) of any
proceeding.
(f) "PROCEEDING" shall mean any threatened, pending or completed
action, claim, suit, arbitration, alternative dispute resolution mechanism,
investigation, administrative hearing or any other proceeding whether civil,
criminal, administrative or investigative, including any appeal therefrom.
(g) "CHANGE OF CONTROL" shall mean the occurrence of any of the
following events after the date of this Agreement:
(i) A change in the composition of the Board, as a result of
which fewer than two-thirds (2/3) of the incumbent directors are directors who
either (1) had been directors of Corporation twenty-four (24) months prior to
such change or (2) were elected, or nominated for election, to the Board with
the affirmative votes of at least a majority of the directors who had been
directors of Corporation 24 months prior to such change and who were still in
office at the time of the election or nomination; or
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(ii) Any "person" (as such term is used in section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) through the
acquisition or aggregation of securities is or becomes the beneficial owner,
directly or indirectly, of securities of Corporation representing twenty percent
(20%) or more of the combined voting power of Corporation's then outstanding
securities ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of directors (the "Capital
Stock"), except that any change in ownership of Corporation's securities by any
person resulting solely from a reduction in the aggregate number of outstanding
shares of Capital Stock, and any decrease thereafter in such person's ownership
of securities, shall be disregarded until such person increases in any manner,
directly or indirectly, such person's beneficial ownership of any securities of
Corporation.
2. INDEMNITY OF OFFICER. Corporation hereby agrees to hold harmless and
indemnify Officer to the fullest extent authorized or permitted by the
provisions of the Law, as may be amended from time to time.
3. ADDITIONAL INDEMNITY. Subject only to the exclusions set forth in
Section 4 hereof, Corporation hereby further agrees to hold harmless and
indemnify Officer:
(a) against any and all Expenses in connection with any Proceeding
(including an action by or in the right of Corporation) to which Officer is, was
or at any time becomes a party, or is threatened to be made a party, by reason
of the fact that Officer is, was or at any time becomes a director, officer,
employee or agent of Corporation, or is or was serving or at any time serves at
the request of Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise; and
(b) otherwise to the fullest extent as may be provided to Officer by
Corporation under the non-exclusivity provisions of the Bylaws of Corporation
and the Law.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section
3 hereof shall be paid by Corporation:
(a) except to the extent the aggregate of losses to be indemnified
thereunder exceeds the sum of such losses for which the Officer is indemnified
pursuant to Section 2 hereof or reimbursed pursuant to any D & O Insurance
purchased and maintained by Corporation;
(b) in respect of remuneration paid to Officer if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(c) on account of any Proceeding in which judgment is rendered
against Officer for an accounting of profits made from the purchase or sale by
Officer of securities of Corporation pursuant to the provisions of Section 16(b)
of the Securities Exchange Act of 1934 and amendments thereto or similar
provisions of any federal, state or local statutory law;
(d) on account of a Final Adverse Determination that Officer's
conduct was knowingly fraudulent or deliberately dishonest or constituted
willful misconduct;
(e) provided there has been no Change of Control, on account of or
arising in response to any Proceeding (other than a Proceeding referred to in
Section 10(b) hereof) initiated
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by Officer or any of Officer's affiliates against Corporation or any officer,
director or stockholder of Corporation unless such Proceeding was authorized
in the specific case by action of the Board;
(f) if a final decision by a Court having jurisdiction in the matter
shall determine that such indemnification is not lawful; or
(g) on account of any Proceeding to the extent that Officer is a
plaintiff, a counter-complainant or a cross-complainant therein (other than a
Proceeding permitted by Section 4(e) hereof).
5. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION.
(a) Whenever Officer believes that he or she is entitled to
indemnification pursuant to this Agreement, Officer shall submit a written
request for indemnification to Corporation. Any request for indemnification
shall include sufficient documentation or information reasonably available to
Officer to support his or her claim for indemnification. Officer shall submit
his or her claim for indemnification within a reasonable time not to exceed five
years after any judgment, order, settlement, dismissal, arbitration award,
conviction, acceptance of a plea of nolo contendere or its equivalent, final
termination or other disposition or partial disposition of any Proceeding,
whichever is the later date for which Officer requests indemnification. The
President, Secretary or other appropriate officer shall, promptly upon receipt
of Officer's request for indemnification, advise the Board in writing that
Officer has made such a request. Determination of Officer's entitlement to
indemnification shall be made not later than ninety (90) days after
Corporation's receipt of his or her written request for such indemnification.
(b) The Officer shall be entitled to select the forum in which
Officer's request for indemnification will be heard, which selection shall be
included in the written request for indemnification required in Section 5(a).
This forum shall be any one of the following:
(i) The stockholders of Corporation;
(ii) A quorum of the Board consisting of Disinterested
Directors;
(iii) Independent Legal Counsel, who shall make the
determination in a written opinion; or
(iv) A panel of three arbitrators, one selected by Corporation,
another by Officer and the third by the first two arbitrators selected. If for
any reason three arbitrators are not selected within thirty (30) days after the
appointment of the first arbitrator, then selection of additional arbitrators
shall be made by the American Arbitration Association. If any arbitrator
resigns or is unable to serve in such capacity for any reason, the American
Arbitration Association shall select his or her replacement. The arbitration
shall be conducted pursuant to the commercial arbitration rules of the American
Arbitration Association now in effect.
If Officer fails to make such designation, his or her claim shall be
determined by the forum selected by Corporation.
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6. PRESUMPTION AND EFFECT OF CERTAIN PROCEEDINGS. Upon making a request
for indemnification, Officer shall be presumed to be entitled to indemnification
under this Agreement and Corporation shall have the burden of proof to overcome
that presumption in reaching any contrary determination. The termination of any
Proceeding by judgment, order, settlement, arbitration award or conviction, or
upon a plea of nolo contendere or its equivalent shall not affect this
presumption or, except as may be provided in Section 4 hereof, establish a
presumption with regard to any factual matter relevant to determining Officer's
rights to indemnification hereunder. If the person or persons so empowered to
make a determination pursuant to Section 5(b) hereof shall have failed to make
the requested determination within thirty (30) days after any judgment, order,
settlement, dismissal, arbitration award, conviction, acceptance of a plea of
nolo contendere or its equivalent, or other disposition or partial disposition
of any Proceeding or any other event which could enable Corporation to determine
Officer's entitlement to indemnification, the requisite determination that
Officer is entitled to indemnification shall be deemed to have been made.
7. CONTRIBUTION. If the indemnification provided in Sections 2 and 3 is
unavailable and may not be paid to Officer for any reason other than those set
forth in Section 4, then in respect of any Proceeding in which Corporation is or
is alleged to be jointly liable with Officer (or would be if joined in such
Proceeding), Corporation shall contribute to the amount of Expenses and
Liabilities paid or payable by Officer in such proportion as is appropriate to
reflect (i) the relative benefits received by Corporation on the one hand and
Officer on the other hand from the transaction from which such Proceeding arose,
and (ii) the relative fault of Corporation on the one hand and of Officer on the
other hand in connection with the events which resulted in such Expenses and
Liabilities, as well as any other relevant equitable considerations. The
relative fault of Corporation on the one hand and of Officer on the other shall
be determined by reference to, among other things, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent the
circumstances resulting in such Expenses and Liabilities. Corporation agrees
that it would not be just and equitable if contribution pursuant to this Section
7 were determined by pro rata allocation or any other method of allocation which
does not take account of the foregoing equitable considerations.
8. INSURANCE AND FUNDING. Corporation hereby represents and warrants
that it shall purchase and maintain insurance to protect itself and/or Officer
against any Expenses and Liabilities in connection with any Proceeding to the
fullest extent permitted by the Law.
9. CONTINUATION OF OBLIGATIONS. All agreements and obligations of
Corporation contained herein shall continue during the period Officer is a
director, officer, employee or agent of Corporation (or is or was serving at the
request of Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise) and shall continue thereafter so long as Officer shall be subject to
any possible Proceeding, by reason of the fact that Officer was serving
Corporation or such other entity in any capacity referred to herein.
10. NOTIFICATION AND DEFENSE OF CLAIM. Promptly after receipt by Officer
of notice of the commencement of any Proceeding, Officer will, if a claim in
respect thereof is to be made against Corporation under this Agreement, notify
Corporation of the commencement thereof; but the omission so to notify
Corporation will not relieve it from any liability which it may have to
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Officer otherwise than under this Agreement. With respect to any Proceeding
as to which Officer notifies Corporation of the commencement thereof:
(a) Corporation will be entitled to participate therein at its own
expense;
(b) Except as otherwise provided below, to the extent that it may
wish, Corporation jointly with any other indemnifying party similarly notified
will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Officer. After notice from Corporation to Officer of its
election to assume the defense thereof, Corporation will not be liable to
Officer under this Agreement for any Expenses subsequently incurred by Officer
in connection with the defense thereof other than reasonable costs of
investigation or as otherwise provided below. Officer shall have the right to
employ his or her own counsel in such Proceeding but the Expenses associated
with the employment of such counsel incurred after notice from Corporation of
its assumption of the defense thereof shall be at the expense of Officer unless
(i) the employment of counsel by Officer has been authorized by Corporation,
(ii) Officer shall have reasonably concluded that there may be a conflict of
interest between Corporation and Officer in the conduct of the defense of such
Proceeding or (iii) Corporation shall not in fact have employed counsel to
assume the defense of such Proceeding, in each of which cases the Expenses of
Officer's separate counsel shall be at the expense of Corporation. Corporation
shall not be entitled to assume the defense of any Proceeding brought by or on
behalf of Corporation or as to which Officer shall have made the conclusion
provided for in (ii) above; and
(c) Provided there has been no Change of Control, Corporation shall
not be liable to indemnify Officer under this Agreement for any amounts paid in
settlement of any Proceeding effected without its written consent, which consent
shall not be unreasonably withheld. Corporation shall be permitted to settle
any Proceeding except that it shall not settle any Proceeding in any manner
which would impose any penalty, out-of-pocket liability, or limitation on
Officer without Officer's written consent.
11. ADVANCEMENT AND REPAYMENT OF EXPENSES.
(a) In the event that Officer employs his or her own counsel pursuant
to Section 10(b)(i) through (iii) above, Corporation shall advance to Officer,
prior to any final disposition of any Proceeding any and all Expenses incurred
in investigating or defending any such Proceeding within ten (10) days after
receiving copies of invoices presented to Officer for such Expenses.
(b) Officer agrees that Officer will reimburse Corporation for all
Expenses paid by Corporation in defending any Proceeding against Officer in the
event and only to the extent that there has been a Final Adverse Determination
that Officer is not entitled, under the provisions of the Law, the Bylaws, this
Agreement or otherwise, to be indemnified by Corporation for such Expenses.
12. REMEDIES OF OFFICER.
(a) In the event that (i) a determination pursuant to Section 5
hereof is made that Officer is not entitled to indemnification, (ii) advances of
Expenses are not made pursuant to
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this Agreement, (iii) payment has not been timely made following a
determination of entitlement to indemnification pursuant to this Agreement,
or (iv) Officer otherwise seeks enforcement of this Agreement, Officer shall
be entitled to a final adjudication in an appropriate court of his or her
rights. Alternatively, Officer at his or her option may seek an award in
arbitration to be conducted by a single arbitrator pursuant to the commercial
arbitration rules of the American Arbitration Association now in effect,
whose decision is to be made within ninety (90) days following the filing of
the demand for arbitration. The Corporation shall not oppose Officer's right
to seek any such adjudication or arbitration award.
(b) In the event that a determination that Officer is not entitled to
indemnification, in whole or in part, has been made pursuant to Section 5
hereof, the decision in the judicial proceeding or arbitration provided in
paragraph (a) of this Section 12 shall be made de novo and Officer shall not be
prejudiced by reason of a determination that he or she is not entitled to
indemnification.
(c) If a determination that Officer is entitled to indemnification
has been made pursuant to Section 5 hereof or otherwise pursuant to the terms of
this Agreement, Corporation shall be bound by such determination in the absence
of (i) a misrepresentation of a material fact by Officer or (ii) a specific
finding (which has become final) by an appropriate court that all or any part of
such indemnification is expressly prohibited by law.
(d) In any court proceeding pursuant to this Section 12, Corporation
shall be precluded from asserting that the procedures and presumptions of this
Agreement are not valid, binding and enforceable. The Corporation shall
stipulate in any such court or before any such arbitrator that Corporation is
bound by all the provisions of this Agreement and is precluded from making any
assertion to the contrary.
(e) Expenses reasonably incurred by Officer in connection with his or
her request for indemnification under this Agreement, meeting enforcement of
this Agreement or to recover damages for breach of this Agreement shall be borne
by Corporation.
(f) Corporation and Officer agree herein that a monetary remedy for
breach of this Agreement, at some later date, will be inadequate, impracticable
and difficult to prove, and further agree that such breach would cause Officer
irreparable harm. Accordingly, Corporation and Officer agree that Officer shall
be entitled to temporary and permanent injunctive relief to enforce this
Agreement without the necessity of proving actual damages or irreparable harm.
The Corporation and Officer further agree that Officer shall be entitled to such
injunctive relief, including temporary restraining orders, preliminary
injunctions and permanent injunctions, without the necessity of posting bond or
other undertaking in connection therewith. Any such requirement of bond or
undertaking is hereby waived by Corporation, and Corporation acknowledges that
in the absence of such a waiver, a bond or undertaking may be required by the
court.
13. ENFORCEMENT. Corporation expressly confirms and agrees that it has
entered into this Agreement and assumed the obligations imposed on Corporation
hereby in order to induce Officer to continue as an officer of Corporation, and
acknowledges that Officer is relying upon this Agreement in continuing in such
capacity.
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14. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any or all of
the provisions hereof shall be held to be invalid or unenforceable to any extent
for any reason, such invalidity or unenforceability shall not affect the
validity or enforceability of the other provisions hereof, or the obligation of
the Corporation to indemnify the Officer to the full extent provided by the
Bylaws or the Law, and the affected provision shall be construed and enforced so
as to effectuate the parties' intent to the maximum extent possible.
15. GOVERNING LAW. This Agreement shall be governed by and interpreted
and enforced in accordance with the internal laws of the State of Delaware.
16. CONSENT TO JURISDICTION. The Corporation and Officer each irrevocably
consent to jurisdiction of the courts of the State of Delaware for all purposes
in connection with any Proceeding which arises out of or relates to this
Agreement and agree that any Proceeding instituted under this Agreement shall be
brought only in the state courts of the State of Delaware.
17. BINDING EFFECT. This Agreement shall be binding upon Officer and upon
Corporation, its successors and assigns, and shall inure to the benefit of
Officer, his or her heirs, executors, administrators, personal representatives
and assigns and to the benefit of Corporation, its successors and assigns.
18. ENTIRE AGREEMENT. This Agreement represents the entire agreement
between the parties hereto and there are no other agreements, contracts or
understandings between the parties hereto with respect to the subject matter of
this Agreement, except as specifically referred to herein. This Agreement
supersedes any and all agreements regarding indemnification heretofore entered
into by the parties.
19. AMENDMENT AND TERMINATION. No amendment, modification, waiver,
termination or cancellation of this Agreement shall be effective for any purpose
unless set forth in writing signed by both parties hereto.
20. SUBROGATION. In the event of payment under this agreement,
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Officer, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
Corporation effectively to bring suit to enforce such rights.
21. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Officer by this
Agreement shall not be exclusive of any other right which Officer may have or
hereafter acquire under any statute, provision of Corporation's Certificate of
Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
22. SURVIVAL OF RIGHTS. The rights conferred on Officer by this Agreement
shall continue after Officer has ceased to be a director, officer, employee or
other agent of Corporation or such other entity.
23. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be addressed to Officer or to
Corporation, as the case may be, at the
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address shown on page 1 of this Agreement, or to such other address as may
have been furnished by either party to the other, and shall be deemed to have
been duly given if (a) delivered by hand and receipted for by the party to
whom said notice or other communication shall have been directed, or (b)
mailed by certified or registered mail with postage prepaid, on the third
business day after the date on which it is so mailed.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
OFFICER: RUBIO'S RESTAURANTS, INC.,
a Delaware corporation
______________________________ By: _______________________________
Its: ______________________________
[SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT]
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EXHIBIT 10.27
RUBIO'S RESTAURANTS, INC.
AMENDED AND RESTATED
1993 STOCK OPTION/STOCK ISSUANCE PLAN
(As Amended through October 31, 1996)
ARTICLE I
GENERAL PROVISIONS
1. PURPOSE
This 1993 Stock Option/Stock Issuance Plan ("Plan") is intended
to promote the interests of RUBIO'S RESTAURANTS, INC., a California
corporation (the "Corporation"), by providing individuals who render valuable
services to the Corporation and are thereby responsible for its financial
success with the opportunity to acquire ownership interests in the
Corporation so as to encourage them to continue to provide valuable services
to the Corporation.
2. STRUCTURE OF THE PLAN
The Plan shall be divided into two separate components: the
Option Grant Program specified in Article II and the Stock Issuance Program
specified in Article III. Under the Option Grant Program, eligible
individuals may be granted options to purchase shares of the Common Stock (as
defined below) at discounts of up to 15% of the fair market value of such
shares on the grant date. Under the Stock Issuance Program, eligible
individuals may be immediately issued shares of the Common Stock at discounts
of up to 15% from the fair market value of such shares at the time of
issuance. Any securities issued under the Plan may be fully vested when
issued or may vest over time.
3. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Corporation's
Board of Directors (the "Board") or by a committee (a "Committee") of two (2)
or more persons to which the Board has delegated one or more of its
administrative powers or responsibilities under the Plan (the "Plan
Administrator").
B. The Plan Administrator (the Board and any Committee, to
the extent of the Committee's delegated authority) shall have full power and
authority, subject to the express provisions of the Plan, to establish such
rules and regulations as it may deem appropriate for proper administration
and implementation of the Plan and to make such determinations under, and
issue such interpretations of, the Plan and any outstanding option grants or
share issuances as it deems necessary or advisable. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest
in the Plan or any outstanding option or share issuance.
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4. OPTION GRANTS AND SHARE ISSUANCES
A. The persons eligible to receive option grants pursuant
to the Option Grant Program ("Optionee") and/or share issuances under the
Stock Issuance Program ("Participant") are limited to the following:
(I) employees (including officers and directors) of
the Corporation (or any parent or subsidiary corporation);
(II) the non-employee members of the Board or the
non-employee members of the board of directors of any parent or subsidiary
corporations; and
(III) those consultants and other independent
contractors who provide valuable services to the Corporation (or any parent
or subsidiary corporations).
B. The Plan Administrator shall have the absolute
discretion and authority (I) either to grant options in accordance with
Article II of the Plan or to effect share issuances in accordance with
Article III of the Plan with respect to eligible individuals, (II) with
respect to the option grants made under the Plan, to determine the number of
shares to be covered by each such grant, the status of the granted option as
either an Incentive Option or a non-statutory option not intended to meet
such requirements, the time or times at which each granted option is to
become exercisable and the maximum term for which the option may remain
outstanding, and (III) with respect to share issuances under the Stock
Issuance Program, to determine the number of shares to be issued to each
Participant, the vesting schedule (if any) to be applicable to the issued
shares, and the consideration to be paid by the individual for such shares.
5. STOCK SUBJECT TO THE PLAN
A. The maximum number of shares of Common Stock which may
be issued over the term of the Plan shall not exceed 325,000 shares. The
total number of shares issuable under the Plan shall be subject to adjustment
from time to time in accordance with the provisions of Section 5.C of this
Article I.
B. Shares subject to the unexercised portion of any
outstanding options under the Plan which expire or terminate prior to
exercise in full or which are otherwise cancelled in accordance with the
cancellation-regrant provisions of Section 4 of Article II will not diminish
the number of shares of Common Stock available for issuance under the Plan.
Any share of Common
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Stock issued under the Plan will no longer be available for subsequent
reissuance even if repurchased by the Corporation.
C. In the event any change is made to the Common Stock
issuable under the Plan by reason of any stock dividend, stock split,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without receipt of consideration, then
appropriate adjustments shall be made to (i) the aggregate number and/or
class of shares issuable under the Plan and (ii) the aggregate number and/or
class of shares and the option price per share in effect under each
outstanding option in order to prevent the dilution or enlargement of
benefits thereunder. The adjustments determined by the Plan Administrator
shall be final, binding and conclusive.
D. Common Stock issuable under the Plan, whether under the
Option Grant Program or the Stock Issuance Program, may be subject to such
restrictions on transfer, repurchase rights or other restrictions as may be
imposed by the Plan Administrator.
6. AMENDMENT OF THE PLAN AND AWARDS
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects whatsoever.
However, no such amendment or modification shall adversely affect the rights
and obligations of an Optionee with respect to options at the time
outstanding under the Plan, nor adversely affect the rights of any
Participant with respect to Common Stock issued under the Plan prior to such
action, unless the Optionee or Participant consents to such amendment. In
addition, the Board shall not, without the approval of the Corporation's
shareholders, amend the Plan to (i) materially increase the maximum number of
shares issuable under the Plan (except for permissible adjustments under
Article I, Section 5.C), (ii) materially increase the benefits accruing to
individuals who participate in the Plan, or (iii) materially modify the
eligibility requirements for participation in the Plan.
B. Options to purchase shares of Common Stock may be
granted under the Option Grant Program and shares of Common Stock may be
issued under the Stock Issuance Program, which are in both instances in
excess of the number of shares then available for issuance under the Plan,
provided any excess shares actually issued under the Option Grant Program or
the Stock Issuance Program are held in escrow until there is obtained
shareholder approval of an amendment sufficiently increasing the number of
shares of Common Stock available for issuance under the Plan. If such
shareholder approval is not obtained within twelve (12) months after the date
the initial excess issuances are made, whether as stock option grants or
direct stock issuances, then
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(I) any unexercised options representing such excess shall terminate and
cease to be exercisable and (II) the Corporation shall promptly refund to the
Optionees and Participants the option or purchase price paid for any excess
shares issued under the Plan and held in escrow, together with interest (at
the applicable Short Term Federal Rate) for the period the shares were held
in escrow, and such shares shall thereupon be automatically cancelled and
cease to be outstanding.
7. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan shall become effective when adopted by the
Board, but no option granted under the Plan shall become exercisable, and no
shares shall be issuable under the Stock Issuance Program, unless and until
the Plan shall have been approved by the Corporation's shareholders. If such
shareholder approval is not obtained within twelve (12) months after the date
of the Board's adoption of the Plan, then all options previously granted
under the Plan shall terminate, and no further options shall be granted and
no shares shall be issued under the Stock Issuance Program. Subject to such
limitation, the Plan Administrator may grant options under the Plan at any
time after the effective date and before the date fixed herein for
termination of the Plan.
B. The Plan shall terminate upon the EARLIER of (i) October
1, 2003 or (ii) the date on which all shares available for issuance under the
Plan have been issued pursuant to the exercise of options granted under
Article II or the issuance of shares under Article III. The termination is
of the Plan shall have no effect on any outstanding options under or shares
issued and outstanding under the Plan, and such securities shall thereafter
continue to have force and effect in accordance with the provisions of the
agreements evidencing such options and issuances.
8. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon any person any right to
continue in the service or employ of the Corporation (or any parent or
subsidiary corporation of the Corporation employing or retaining such
Optionee or Participant) for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Corporation (or any
parent or subsidiary corporation of the Corporation employing or retaining
such Optionee or Participant) or of the Optionee or the Participant, which
rights are hereby expressly reserved by each, to terminate the Service of the
Optionee or Participant at any time for any reason whatsoever, with or
without cause.
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<PAGE>
9. DEFINITIONS
For all purposes under the Plan, unless specifically provided
otherwise in the option agreement evidencing the option grant and/or the
purchase agreement evidencing the purchased shares:
A. COMMON STOCK means shares of the Corporation's
authorized common stock ("Common Stock").
B. CORPORATE TRANSACTION means (i) a merger or
consolidation in which more than fifty percent (50%) of the Corporation's
outstanding voting stock is transferred to a person or persons different from
those who held the stock immediately prior to such transaction, or (ii) the
sale, transfer or other disposition of all or substantially all of the
Corporation's assets in complete liquidation or dissolution of the
Corporation.
C. EMPLOYEE means an individual in Service to the
Corporation (or any parent or subsidiary) and subject to its control and
direction as to both the work to be performed and the manner and method of
performance.
D. FAIR MARKET VALUE of a share of Common Stock on any
relevant date under the Plan shall be determined in accordance with the
following provisions:
(I) If the Common Stock is not at the time listed or
admitted to trading on any stock exchange but is traded on the NASDAQ
National Market System, the fair market value shall be the closing
selling price of one share of Common Stock on the date in question, as
such price is reported by the National Association of Securities Dealers
through its NASDAQ system or any successor system. If there is no
closing selling price for the Common Stock on the date in question, then
the closing selling price on the last preceding date for which such
quotation exists shall be determinative of fair market value.
(II) If the Common Stock is at the time listed or
admitted to trading on any stock exchange, then the fair market value
shall be the closing selling price per share of Common Stock on the date
in question on the stock exchange determined by the Plan Administrator to
be the primary market for the Common Stock, as such price is officially
quoted in the composite tape of transactions on such exchange. If there
is no reported sale of Common Stock on such exchange on the date in
question, then the fair
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<PAGE>
market value shall be the closing selling price on the exchange on the
last preceding date for which such quotation exists.
(III) If the Common Stock at the time is neither listed
nor admitted to trading on any stock exchange nor traded in the
over-the-counter market, or if the Plan Administrator determines that
the value determined pursuant to subparagraphs (I) and (II) above does
not accurately reflect the fair market value of the Common Stock, then
such fair market value shall be determined by the Plan Administrator
after taking into account such factors as the Plan Administrator shall
deem appropriate, including one or more independent professional
appraisals.
E. INCENTIVE OPTION means an option which satisfies the
requirements of Section 422 of the Internal Revenue Code.
F. PARENT corporation shall have the meaning set forth in
Sections 424 (e) of the Internal Revenue Code.
G. SERVICE to the Corporation will be considered to
continue for so long as an individual continues to render services on a
periodic basis to the Corporation (or any parent or subsidiary) whether in
the capacity of an Employee, a non-employee member of the board of directors
or a consultant or independent contractor.
H. SUBSIDIARY corporation shall have the meaning set forth
in Sections 424 (f) of the Internal Revenue Code.
I. TRANSFER shall mean (without limitation) any sale,
pledge, encumbrance, gift or other disposition of any security.
J. 10% SHAREHOLDER means an individual who owns (within the
meaning of Section 424(d) of the Internal Revenue Code) stock possessing 10%
or more of the total combined voting power of all classes of stock of the
Corporation (or any parent or subsidiary).
ARTICLE II
OPTION GRANT PROGRAM
1. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by
action of the Plan Administrator and may, at the Plan Administrator's
discretion, be either Incentive Options or nonstatutory options. Individuals
who are not Employees (as defined in subsection (c)(2) below) may only be
granted non-statutory options. Each granted option shall be evidenced by one
-6-
<PAGE>
or more instruments in the form approved by the Plan Administrator; PROVIDED,
however, that each such instrument shall comply with the terms and conditions
specified in Sections 1 and 3 of this Article II. Each instrument evidencing
an Incentive Option shall, in addition, be subject to the applicable
provisions of Section 2 of this Article II.
A. OPTION PRICE.
(I) The option price per share shall be fixed by the
Plan Administrator. In no event, however, shall the option price per share
be less than eighty-five percent (85%) of the fair market value of a share of
Common Stock on the date of the option grant.
(II) If the individual to whom the option is granted
is 10% Shareholder, then the option price per share shall not be less than
one hundred ten percent (110%) of the fair market value of the Common Stock
on the date of the option grant.
(III) The option price shall become immediately due
upon exercise of the option and shall, subject to the provisions of Article
IV, Section 1, be payable in cash or check drawn to the Corporation's order.
Notwithstanding the above, should the Corporation's outstanding Common Stock
be registered under Section 12(g) of the Securities Exchange Act of 1934, as
amended (the "1934 Act") at the time the option is exercised, then the option
price may also be paid as follows:
- in shares of Common Stock held by the Optionee for
the requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at fair market value
on the exercise date; or
- through a special sale and remittance procedure
pursuant to which the Optionee provides irrevocable written instructions
(I) to a designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, an amount sufficient to cover the
aggregate option price payable for the purchased shares plus all
applicable Federal and State income and employment taxes required to be
withheld by the Corporation by reason of such purchase and (II) to the
Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to effect the sale transaction.
-7-
<PAGE>
Except to the extent such sale and remittance procedure is utilized, payment
of the option price must occur at the time the option is exercised.
B. TERM AND EXERCISE OF OPTIONS. Each option granted under
the Plan shall be exercisable at such time or times, during such period, and
for such number of shares as shall be determined by the Plan Administrator
and set forth in the stock option agreement evidencing such option. However,
no option granted under the Plan shall have a term in excess of ten (10)
years from the grant date.
C. NO ASSIGNMENT. During the lifetime of the Optionee, the
option shall be exercisable only by the Optionee and shall not be assignable
or transferable by the Optionee otherwise than by will or by the laws of
descent and distribution following the Optionee's death.
D. TERMINATION OF SERVICE. Except to the extent otherwise
provided pursuant to Section 5 of this Article II, the following provisions
shall govern the exercise period applicable to any options held by the
Optionee at the time of cessation of Service or death.
(I) Should the Optionee cease to remain in Service for
any reason other than death or permanent disability, then the period during
which each outstanding option held by such Optionee is to remain exercisable
shall be limited to the three (3)-month period following the date of such
cessation of Service.
(II) In the event such Service terminates by reason of
permanent disability (as defined in Section 22(e)(3) of the Internal Revenue
Code) or should the Optionee die while holding one or more outstanding
options, then the period during which each such option is to remain
exercisable shall be limited to the twelve (12)-month period following the
date of the Optionee's cessation of service or death. During the limited
exercise period following the Optionee's death, the option may be exercised
by the personal representative of the Optionee's estate or by the person or
persons to whom the option is transferred pursuant to the Optionee's will or
in accordance with the laws of descent and distribution.
(III) Under no circumstances, however, shall any such
option be exercisable after the specified expiration date of the option term.
(IV) Each such option shall, during such limited
exercise period, be exercisable for any or all of the shares for which the
option is exercisable on the date of the Optionee's cessation of Service.
Upon the expiration of such
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<PAGE>
limited exercise period or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be exercisable.
E. SHAREHOLDER RIGHTS. An Optionee shall have none of the
rights of a shareholder with respect to any shares covered by the option
until such Optionee shall have exercised the option and paid the option price.
2. INCENTIVE OPTIONS
A. All provisions of the Plan shall be applicable to the
Incentive Options granted hereunder and, in addition, the terms and
conditions specified in this Section 2 shall be applicable to Incentive
Options granted under the Plan. Options which are specifically designated as
"nonstatutory" options when issued under the Plan shall NOT be subject to
such terms and conditions set forth herein. Incentive Options may only be
granted to individuals who are Employees.
B. OPTION PRICE. The option price per share of the Common
Stock subject to an Incentive Option shall in no event be less than one
hundred percent (100%) of the fair market value of a share of Common Stock on
the grant date.
C. DOLLAR LIMITATION. The aggregate fair market value
(determined as of the respective date or dates of grant) of the Common Stock
for which one or more options granted to any Employee under this Plan (or any
other option plan of the Corporation or any parent or subsidiary corporation)
may for the first time become exercisable as incentive stock options under
the Federal tax laws during any one calendar year shall not exceed the sum of
One Hundred Thousand Dollars ($100,000). To the extent the Employee holds
two or more such options which become exercisable for the first time in the
same calendar year, the foregoing limitation on the exercisability of such
options as Incentive Options under the Federal tax laws shall be applied on
the basis of the order in which such options are granted.
D. TERM. No option granted to a 10% Shareholder shall have
a term in excess of five (5) years from the grant date.
3. [RESERVED]
4. CANCELLATION AND NEW GRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected Optionees,
the cancellation of any or all outstanding options under the Plan and to
grant in substitution
-9-
<PAGE>
therefor new options under the Plan covering the same or a different numbers
of shares of Common Stock but having an option price per share established at
the time of such cancellation and regrant in accordance with the provisions
of this Plan.
5. EXTENSION OF EXERCISE PERIOD
The Plan Administrator shall have full power and authority to
extend (either at the time the option is granted or at any time while the
option remains outstanding) the period of time for which the option is to
remain exercisable following the Optionee's cessation of Service, from the
limited period otherwise applicable under subsection 1(c) of Article II, to
such greater period of time as the Plan Administrator may deem appropriate
under the circumstances. In no event, however, shall such option be
exercisable after the specified expiration date of the option term.
6. CASH-OUT OF OPTIONS
A. One or more Optionees may, in the Plan Administrator's
sole discretion, be granted limited cash-out rights to operate in tandem with
their outstanding options under the Plan; such limited cash-out rights shall
be exercisable only if the Corporation's outstanding Common Stock is
registered under Section 12(g) of the 1934 Act and the Optionee is subject to
the short-swing profit restrictions of the Federal securities laws. Any
option with such a limited right in effect for at least six (6) months shall
automatically be cancelled upon the acquisition of fifty percent (50%) or
more of the Corporation's outstanding Common Stock (excluding for purposes of
calculating such percent the Common Stock holdings of officers and directors
of the Corporation who are subject to the short-swing profit restrictions of
the Federal securities laws) pursuant to a tender or exchange offer made by a
person or group of related persons (other than the Corporation or a person
that directly or indirectly controls, is controlled by or is under common
control with the Corporation) which the Board does not recommend the
Corporation's shareholders to accept. In return for the cancelled option,
the Optionee shall be entitled to a cash distribution from the Corporation in
an amount equal to the excess of (i) the Cash-Out Price of the shares of
Common Stock in which the Optionee is vested under the cancelled option over
(ii) the aggregate exercise price payable for such vested shares. The cash
distribution payable upon such cancellation shall be made within five (5)
days following the completion of such tender or exchange offer, and neither
the approval of the Plan Administrator nor the consent of the Board shall be
required in connection with such cancellation and distribution.
-10-
<PAGE>
B. For purposes of calculating the cash distribution, the
Cash-Out Price per share of the vested Common Stock subject to the cancelled
option shall be deemed to be equal to the GREATER of (i) the value per share
on the date of surrender, as determined in accordance with the valuation
provisions of subsection 1(a)(4) of Article II, or (ii) the highest reported
price per share paid in effecting the tender or exchange offer. However, if
the cancelled option is an Incentive Option, then the Cash-Out Price shall
not exceed the value per share determined under clause (i) above.
C. The shares of Common Stock subject to any option
cancelled for an appreciation distribution in accordance with this Section 6
shall NOT be available for subsequent option grants or share issuances under
the Plan.
ARTICLE III
STOCK ISSUANCE PROGRAM
1. STOCK ISSUANCES
Shares of Common Stock shall be issuable under the Stock
Issuance Program through direct and immediate issuances without any
intervening stock option grants. Each such stock issuance shall be evidenced
by a Stock Issuance Agreement ("Issuance Agreement") which shall be in
compliance with the provisions of the Plan.
2. ISSUE PRICE
A. The purchase price per share shall be fixed by the Plan
Administrator, but in no event shall it be less than eighty-five percent
(85%) of the fair market value of a share of Common Stock at the time of
issuance.
B. If any individual to whom a share issuance is made
hereunder is a 10% Shareholder, the purchase price per share shall not be
less than one hundred ten percent (110%) of the fair market value of a share
of Common Stock at the time of issuance.
3. PAYMENT OF ISSUE PRICE
Except as provided in Article IV, Section 1, shares shall be
issued only in exchange for cash, a check payable to the Corporation or for
services rendered.
-11-
<PAGE>
ARTICLE IV
MISCELLANEOUS
1. LOANS
A. The Plan Administrator may assist any Optionee or
Participant (including an Optionee or Participant who is an officer or
director of the Corporation) in the exercise of one or more options granted
to such Optionee under the Option Grant Program or the purchase of one or
more shares issued to such Participant under the Stock Issuance Program,
including the satisfaction of any Federal and State income and employment tax
obligations arising therefrom, by (i) authorizing the extension of a loan
from the Corporation to such Optionee or Participant, or (ii) permitting the
Optionee or Participant to pay the option price or purchase price for the
purchased Common Stock in installments over a period of years.
B. The terms of any loan or installment method of payment
(including the interest rate and terms of repayment) shall be established by
the Plan Administrator in its sole discretion. Loans or installment payments
may be granted with or without security or collateral. However, any loan
made to a consultant or other non-employee advisor must be secured by
property other than the purchased shares of Common Stock. In all events the
maximum credit available to each Optionee or Participant may not exceed the
SUM of (i) the aggregate option price or purchase price payable for the
purchased shares plus (ii) any Federal and State income and employment tax
liability incurred by the Optionee or Participant in connection with such
exercise or purchase.
C. The Plan Administrator may, in its absolute discretion,
determine that one or more loans extended under the financial assistance
program shall be subject to forgiveness by the Corporation in whole or in
part upon such terms and conditions as the Board in its discretion deems
appropriate.
2. VESTING OF SHARES
A. Options granted or shares issued under the Plan shall
vest in one or more installments. The elements of the vesting schedule shall
be determined by the Plan Administrator and specified in the agreement
governing such issuance. Such elements may include, among others, the
performance or service objectives to be completed or achieved, the number of
installments in which the shares are to vest, the interval or intervals
between installments and the effect which death, disability or other event
designated by the Plan Administrator is to have upon the vesting schedule.
In no event, however, may the Plan Administrator impose a vesting schedule
upon any shares
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<PAGE>
issued under the Plan which is results in the shares vesting (or failure to
vest) of fewer than 20% of the total number of shares each year beginning one
year after the option grant date in the case of shares issued pursuant to
options granted under the Option Grant Program, or the issue date in the case
of the shares issued under the Stock Issuance Program. In extraordinary
circumstances, the Plan Administrator may grant options or issue shares which
are fully and immediately vested upon issuance.
B. Any new, additional or different shares of stock or
other property (including money paid other than as a regular cash dividend)
which the holder of unvested Common Stock may have the right to receive by
reason of a stock dividend, stock split, reclassification or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
limitations applicable to the unvested Common Stock with respect to which it
was paid or arose, and (ii) such escrow arrangements as the Plan
Administrator shall deem appropriate.
C. No person to whom shares of Common Stock have been issued
pursuant to the Plan may Transfer any such shares which have not vested.
Notwithstanding the above, the Participant shall have the right to make a
gift of unvested shares acquired under the Plan to his/her spouse, parents or
issue or to a trust established for such spouse, parents or issue, provided
the transferee of such shares delivers to the Corporation a written agreement
to be bound by all the provisions of the Plan and the Issuance or Stock
Purchase Agreement executed by the Participant at the time of his/her
acquisition of the gifted shares.
3. REPURCHASE RIGHTS
A. Should any person to whom shares of Common Stock have
been issued under the Plan terminate Service for any reason while any such
shares remain unvested (together with any other property described in Section
2.B), then the Corporation shall have the right to repurchase, at the
original purchase price paid by the Participant, all or (with the consent of
such person) any portion of the unvested shares, and such person shall
thereafter cease to have any further rights with respect to the repurchased
shares.
B. The Plan Administrator may in its discretion elect not
to exercise, in whole or in part, its repurchase rights with respect to any
unvested Common Stock (or other property) which would otherwise at the time
be subject to repurchase pursuant to the provisions of this Section 3.
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<PAGE>
4. SECURITIES LAWS AND LEGENDS
A. No shares of Common Stock or other assets shall be
issued or delivered under this Plan unless and until the Corporation shall
have determined that there has been full and adequate compliance with all
applicable requirements of the Federal and state securities laws and all
other applicable legal and regulatory requirements.
B. All unvested shares of Common Stock issued under the
Plan shall bear a restrictive legend until such legend is removed in
accordance with applicable law. The restrictive legend shall be
substantially as follows:
"The securities represented by this certificate are
unvested and are accordingly subject to repurchase by the
Corporation pursuant to the provisions of the agreement between
the Corporation and the registered holder of the securities (or
his/her predecessor in interest). Such agreement imposes
restrictions on the transferability of the securities represented
by this certificate and grants certain repurchase rights to the
Corporation in the event the registered holder (or predecessor in
interest) terminates his/her employment or service with the
Corporation. A copy of such agreement is on file at the principal
office of the Corporation."
As shares acquired under the Plan vest, the Corporation shall, upon the
request of the shareholder and delivery of appropriate certificates during
the period or periods designated each year by the Plan Administrator, issue a
new certificate for the vested shares without the restrictive legend set
forth above. If the Corporation repurchases any unvested shares from a
shareholder, the Corporation shall at the time the repurchase is effected
deliver a new certificate, without the restrictive legend, representing the
number of shares (if any) in which the shareholder is vested and which are
accordingly no longer subject to repurchase by the Corporation.
5. RIGHT OF FIRST REFUSAL
Until such time as the Corporation's outstanding shares of
Common Stock are first registered under Section 12(g) of the 1934 Act, the
Plan Administrator may subject any shares issued pursuant to the Plan to a
right of first refusal with respect to any proposed disposition of such
shares other than a Transfer permitted by Section 2.C of this Article IV.
Such right of first refusal shall be exercisable by the Corporation (or its
assignees) in accordance with the terms and conditions specified in the
instrument governing the issuance of such shares.
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<PAGE>
6. SHAREHOLDER RIGHTS
Subject to the rights of the Corporation set forth herein or in
any other agreement entered into between the Corporation and an issuee of
shares under the Plan, each person to whom shares of Common Stock have been
issued under the Plan shall have all the rights of a shareholder with respect
to those shares whether or not his/her interest in such shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any cash dividends or other distributions paid or made with respect
to such shares.
7. CORPORATE TRANSACTION
A. All of the Corporation's outstanding repurchase rights
under this Article III shall be assigned to the successor corporation (or
parent thereof) in connection with a Corporate Transaction (as defined in
Article I, Paragraph 9.B), provided that, should the Corporation determine
not to assign such rights, the repurchase rights will automatically terminate
upon the occurrence of the Corporate Transaction.
B. Upon the consummation of any shareholder-approved
Corporate Transaction, the corporation will use reasonable efforts to cause
the successor to assume all outstanding options. Any option outstanding
under the Plan which is not assumed in a Corporate Transaction shall
terminate and cease to be exercisable.
C. Each outstanding option which is assumed in connection
with the Corporate Transaction or is otherwise to continue in effect shall be
appropriately adjusted, immediately after such Corporate Transaction, to
apply and pertain to the number and class of securities which would be
issuable, in consummation of such Corporate Transaction, to an actual holder
of the same number of shares of Common Stock as are subject to such option
immediately prior to such Corporate Transaction, and appropriate adjustments
shall also be made to the option price payable per share, provided the
aggregate option price payable for such securities shall remain the same.
Appropriate adjustments shall also be made to the class and number of
securities available for issuance under the Plan following the consummation
of such Corporate Transaction.
D. The grant of options and the issuance of shares under
this Plan shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure
or to merge, consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.
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<PAGE>
8. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the issuance
of shares of Common Stock under the Plan shall be used for general corporate
purposes.
9. WITHHOLDING
The Corporation's obligation to deliver shares upon the
exercise of any options granted under Article II or upon the purchase of any
shares issued under Article III shall be subject to the satisfaction of all
applicable Federal, State and local income and employment tax withholding
requirements.
10. REGULATORY APPROVALS
The implementation of the Plan, the granting of any options
under the Option Grant Program, the issuance of any shares under the Stock
Issuance Program, and the issuance of Common Stock upon the exercise of the
option grants made hereunder shall be subject to the Corporation's
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the options granted under it, and the
Common Stock issued pursuant to it.
11. FINANCIAL REPORTS
The Corporation shall deliver a balance sheet and an income
statement at least annually to each Optionee holding an outstanding option
under the Plan and to each Participant holding a right to purchase stock
under the Plan, unless the Optionee or Participant is a key employee whose
duties in connection with the Corporation assure such employee access to
equivalent information.
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<PAGE>
EXHIBIT 10.28
Immediately exercisable
RUBIO'S RESTAURANT, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following stock option grant (the
"Option") to purchase shares of the Common Stock of Rubio's Restaurants, Inc.
(the "Corporation"):
OPTIONEE:
------------------------------------------
GRANT DATE:
----------------------------------------
GRANT NUMBER: OPTION PRICE: $ per share
------- ------
VESTING COMMENCEMENT DATE:
-------------------------
NUMBER OF OPTION SHARES: shares
---------------------
EXPIRATION DATE:
-----------------------------------
TYPE OF OPTION: Incentive Stock Option
---------
Non-Statutory Stock Option
---------
DATE EXERCISABLE: This Option shall be exercisable at any time or
from time to time with respect to all of the Option Shares whether or not
vested.
VESTING SCHEDULE: The Option Shares shall vest in accordance with the
following vesting schedule:
(i) No Option Shares shall vest unless and until the Optionee
has completed twelve (12) months of Service (as defined in the Plan)
measured from the Vesting Commencement Date.
(ii) Upon the completion of the twelve (12) month service period
specified in subparagraph (i) above, 25% of the Option Shares shall
become vested.
(iii) The Remaining Option Shares shall vest in a series of
successive equal monthly installments over each of the next thirty-six
(36) months of Service completed by the Optionee after the initial twelve
(12) month service period specified in subparagraph (i) above.
Optionee understands that the Option is granted pursuant to the
Corporation's 1993 STOCK OPTION/STOCK ISSUANCE PLAN (the "Plan"). By signing
below, optionee agrees to be bound by the
<PAGE>
terms and conditions of the Plan and the terms and conditions of the Option
as set forth in the Stock Option Agreement attached hereto as Exhibit A.
Optionee understands that any Option Shares purchased under the Option will
be subject to the terms and conditions set forth in the Stock Purchase
Agreement attached hereto as Exhibit B.
Optionee hereby acknowledges receipt of a copy of the Plan in
the form attached hereto as Exhibit C.
REPURCHASE RIGHTS. THE OPTIONEE HEREBY AGREES THAT ALL OPTION
SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO CERTAIN
REPURCHASE RIGHTS AND RIGHTS OF FIRST REFUSAL EXERCISABLE BY THE CORPORATION
AND ITS ASSIGNS UPON ANY PROPOSED SALE, ASSIGNMENT, TRANSFER, ENCUMBRANCE OR
OTHER DISPOSITION OF THE CORPORATION'S SHARES OR UPON TERMINATION OF SERVICE
WITH THE CORPORATION. THE TERMS AND CONDITIONS OF SUCH RIGHTS ARE SPECIFIED
IN THE ATTACHED STOCK PURCHASE AGREEMENT.
NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement
or in the Plan shall confer upon the Optionee any right to continue in the
Service of the Corporation for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Corporation or the
Optionee, which rights are hereby expressly reserved by each, to terminate
Optionee's Service at any time for any reason whatsoever, with or without
cause.
, 199
- ------------------------ -
Date
RUBIO'S RESTAURANTS, INC.
By
---------------------------
Title:
-----------------------
-----------------------------
Optionee
Address:
-----------------------------
-----------------------------
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
(See Exhibit 10.29 to the Registration Statement on Form S-1)
A-1
<PAGE>
EXHIBIT B
STOCK PURCHASE AGREEMENT
(See Exhibit 10.30 to the Registration Statement on Form S-1)
B-1
<PAGE>
EXHIBIT C
1993 STOCK OPTION/STOCK ISSUANCE PLAN
(See Exhibit 10.27 to the Registration Statement of Form S-1)
C-1
<PAGE>
EXHIBIT 10.29
RUBIO'S RESTAURANTS, INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board of Directors of the Corporation has adopted the Rubio's
Restaurants, Inc. 1993 Stock Option/Stock Issuance Plan (the "Plan") for the
purpose of attracting and retaining the services of persons who contribute to
the growth and financial success of the Corporation.
B. Optionee is a person who the Plan Administrator believes has and
will contribute to the growth and financial success of the Corporation and this
Agreement is executed pursuant to and is intended to carry out the purposes of
the Plan.
AGREEMENT
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and conditions set
forth in this Agreement, the Corporation hereby grants to Optionee, as of the
grant date (the "Grant Date") specified in the accompanying Notice of Grant of
Stock Option (the "Grant Notice"), a stock option to purchase up to that number
of shares of the Corporation's Common Stock (the "Option Shares") as is
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term at the option price per share (the "Option
Price") specified in the Grant Notice.
2. OPTION TERM. This option shall have a maximum term of ten (10)
years measured from the Grant Date and shall expire at the close of business on
the expiration date (the "Expiration Date") specified in the Grant Notice,
unless sooner terminated in accordance with Paragraph 5, 6 or 18.
3. LIMITED TRANSFERABILITY. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee.
4. DATES OF EXERCISE. This option may not be exercised in whole or
in part at any time prior to the time the Plan is approved by the Corporation's
shareholders in accordance with Paragraph 18. Provided such shareholder
approval is obtained, this option shall thereupon become exercisable for the
Option Shares in one or more installments as is specified in the Grant Notice.
As the option becomes exercisable in one or more installments, the installments
shall accumulate and the option shall remain exercisable for such installments
until the Expiration Date or the sooner termination of the option term under
Paragraph 5 or Paragraph 6 of this Agreement.
<PAGE>
5. ACCELERATED TERMINATION OF OPTION TERM. The option term specified
in Paragraph 2 shall terminate (and this option shall cease to be exercisable)
prior to the Expiration Date should any of the following provisions become
applicable:
(i) Except as otherwise provided in subparagraph (ii) or (iii)
below, should Optionee cease to remain in Service while this option is
outstanding, then the period for exercising this option shall be reduced to
a three (3)-month period commencing with the date of such cessation of
Service, but in no event shall this option be exercisable at any time after
the Expiration Date. Upon the expiration of such three (3)-month period or
(if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding.
(ii) Should Optionee die while this option is outstanding, then
the personal representative of the Optionee's estate or the person or
persons to whom the option is transferred pursuant to the Optionee's
will or in accordance with the law of descent and distribution shall
have the right to exercise this option. Such right shall lapse and
this option shall cease to be exercisable upon the EARLIER of (A) the
expiration of the twelve (12) month period measured from the date of
Optionee's death or (B) the Expiration Date. Upon the expiration of
such twelve (12) month period or (if earlier) upon the Expiration Date,
this option shall terminate and cease to be outstanding.
(iii) Should Optionee become permanently disabled and cease by
reason thereof to remain in Service while this option is outstanding,
then the Optionee shall have a period of twelve (12) months (commencing
with the date of such cessation of Service) during which to exercise
this option, but in no event shall this option be exercisable at any
time after the Expiration Date. Optionee shall be deemed to be
permanently disabled if Optionee is unable to engage in any substantial
gainful activity for the Corporation or the parent or subsidiary
corporation retaining his/her services by reason of any medically
determinable physical or mental impairment, which can be expected to
result in death or which has lasted or can be expected to last for a
continuous period of not less than twelve
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<PAGE>
(12) months. Upon the expiration of such limited period of exercisability
or (if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding.
(iv) During the limited period of exercisability applicable under
subparagraph (i), (ii) or (iii) above, this option may be exercised for any
or all of the Option Shares for which this option is, at the time of the
Optionee's cessation of Service, exercisable in accordance with the
exercise schedule specified in the Grant Notice and the provisions of
Paragraph 6 of this Agreement.
(v) For purposes of this Paragraph 5 and for all other purposes
under this Agreement:
A. The Optionee shall be deemed to remain in SERVICE for
so long as the Optionee continues to render periodic services to the
Corporation or any parent or subsidiary corporation, whether as an
Employee, a non-employee member of the board of directors, or an
independent contractor or consultant.
B. The Optionee shall be deemed to be an EMPLOYEE of the
Corporation and to continue in the Corporation's employ for so long as
the Optionee remains in the employ of the Corporation or one or more of
its parent or subsidiary corporations, subject to the control and
direction of the employer entity as to both the work to be performed
and the manner and method of performance.
C. A corporation shall be considered to be a SUBSIDIARY
corporation of the Corporation if it is a member of an unbroken chain
of corporations beginning with the Corporation, provided each such
corporation in the chain (other than the last corporation) owns, at the
time of determination, stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
D. A corporation shall be considered to be a PARENT
corporation of the Corporation if it is a member of an unbroken chain
ending with the Corporation, provided each such corporation in the
chain (other than the Corporation) owns, at the time of determination,
stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
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<PAGE>
6. SPECIAL TERMINATION OF OPTION.
A. In the event of one or more of the following shareholder-approved
transactions (a "Corporate Transaction"):
(i) a merger or consolidation in which more than fifty percent
(50%) of the Corporation's outstanding voting stock is transferred to a
person or persons different from those who held the stock immediately prior
to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation,
then this option, to the extent not previously exercised, shall terminate upon
the consummation of the Corporate Transaction and cease to be exercisable,
unless it is expressly assumed by the successor corporation or parent thereof.
B. This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise make changes in its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES.
A. In the event any change is made to the Corporation's outstanding
Common Stock by reason of any stock split, stock dividend, combination of
shares, exchange of shares, or other change affecting the outstanding Common
Stock as a class without receipt of consideration, then appropriate adjustments
shall be made to (i) the total number of Option Shares subject to this option,
(ii) the number of Option Shares for which this option is to be exercisable from
and after each installment date specified in the Grant Notice and (iii) the
Option Price payable per share in order to reflect such change and thereby
preclude a dilution or enlargement of benefits hereunder.
B. If this option is to be assumed in connection with a Corporate
Transaction described in Paragraph 6 or is otherwise to remain outstanding, then
this option shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply and pertain to the number and class of securities which
would have been issuable to the Optionee in the consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Option Price
payable per share,
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<PAGE>
PROVIDED the aggregate Option Price payable hereunder shall remain the same.
8. PRIVILEGE OF STOCK OWNERSHIP. The holder of this option shall
not have any of the rights of a shareholder with respect to the Option Shares
until such individual shall have exercised the option and paid the Option Price.
9. MANNER OF EXERCISING OPTION.
A. In order to exercise this option with respect to all or any part
of the Option Shares for which this option is at the time exercisable, Optionee
(or in the case of exercise after Optionee's death, the Optionee's executor,
administrator, heir or legatee, as the case may be) must take the following
actions:
(i) Execute and deliver to the Secretary of the Corporation
a stock purchase agreement (the "Purchase Agreement") in substantially the
form of Exhibit B to the Grant Notice.
(ii) Pay the aggregate Option Price for the purchased shares
in one or more of the following alternative forms:
1. full payment in cash or check; or
2. any other form which the Plan Administrator may, in its
discretion, approve at the time of exercise in accordance with
the provisions of paragraph 15 of this Agreement.(1)
Should the Corporation's outstanding Common Stock be registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "1934
Act") at the time the option is exercised, then the Option Price may also
be paid as follows:
3. in shares of Common Stock held by the Optionee for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial
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(1) Authorization of a loan or installment payment method under such
provisions may, under currently proposed Treasury Regulations, result in the
loss of incentive stock option treatment under the Federal tax laws.
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<PAGE>
reporting purposes and valued at fair market value on the
Exercise Date; or
4. through a special sale and remittance procedure
pursuant to which the Optionee is to provide irrevocable written
instructions (a) to a designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate Option Price
payable for the purchased shares plus all applicable Federal and
State income and employment taxes required to be withheld by the
Corporation by reason of such purchase and (b) to the Corporation
to deliver the certificates for the purchased shares directly to
such brokerage firm in order to effect the sale transaction.
(iii) Furnish to the Corporation appropriate documentation that
the person or persons exercising the option, if other than Optionee, have
the right to exercise this option.
Except to the extent the sale and remittance procedure is
utilized in connection with the exercise of the option, payment of the
Option Price must accompany the Purchase Agreement delivered to the
Corporation.
B. For purposes of this Agreement, the Exercise Date shall be the
date on which the executed Purchase Agreement shall have been delivered to the
Corporation, and the fair market value of a share of Common Stock on any
relevant date shall be determined in accordance with subparagraphs (i) through
(iii) below:
(i) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded on the NASDAQ National Market
System, the fair market value shall be the closing selling price of one
share of Common Stock on the date in question, as such price is reported by
the National Association of Securities Dealers through its NASDAQ system or
any successor system. If there is no closing selling price for the Common
Stock on the date in question, then the closing selling price on the last
preceding date for which such quotation exists shall be determinative of
fair market value.
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<PAGE>
(ii) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the fair market value shall be the
closing selling price per share of Common Stock on the date in question on
the stock exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no reported
sale of Common Stock on such exchange on the date in question, then the
fair market value shall be the closing selling price on the exchange on the
last preceding date for which such quotation exists.
(iii) If the Common Stock at the time is neither listed nor
admitted to trading on any stock exchange nor traded in the over-the-
counter market, or if the Plan Administrator determines that the value
determined pursuant to subparagraphs (i) and (ii) above does not accurately
reflect the fair market value of the Common Stock, then such fair market
value shall be determined by the Plan Administrator after taking into
account such factors as the Plan Administrator shall deem appropriate,
including one or more independent professional appraisals.
C. As soon after the Exercise Date as practical, the Corporation
shall mail or deliver to Optionee or to the other person or persons exercising
this option a certificate or certificates representing the shares so purchased
and paid for, with the appropriate legends affixed thereto.
D. In no event may this option be exercised for any fractional
shares.
10. REPURCHASE RIGHTS. THE OPTIONEE HEREBY AGREES THAT ALL OPTION
SHARES ACQUIRED UPON THE EXERCISE OF THIS OPTION SHALL BE SUBJECT TO CERTAIN
RIGHTS OF THE CORPORATION AND ITS ASSIGNS TO REPURCHASE SUCH SHARES IN
ACCORDANCE WITH THE TERMS AND CONDITIONS SPECIFIED IN THE PURCHASE AGREEMENT.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
A. The exercise of this option and the issuance of Option Shares
upon such exercise shall be subject to compliance by the Corporation and the
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange on which shares of the
Corporation's Common Stock may be listed at the time of such exercise and
issuance.
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<PAGE>
B. In connection with the exercise of this option, Optionee shall
execute and deliver to the Corporation such representations in writing as may be
requested by the Corporation in order for it to comply with the applicable
requirements of Federal and State securities laws.
12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraph 3 or 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the successors, administrators, heirs, legal
representatives and assigns of Optionee and the successors and assigns of the
Corporation.
13. LIABILITY OF CORPORATION.
A. If the Option Shares covered by this Agreement exceed, as of the
Grant Date, the number of shares of Common Stock which may without shareholder
approval be issued under the Plan, then this option shall be void with respect
to such excess shares, unless shareholder approval of an amendment sufficiently
increasing the number of shares of Common Stock issuable under the Plan is
obtained in accordance with the provisions of Article IV, Section 3, of the
Plan.
B. The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
14. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation in care of the Corporate Secretary at its principal corporate
offices. Any notice required to be given or delivered to Optionee shall be in
writing and addressed to Optionee at the address indicated below Optionee's
signature line on the Grant Notice. All notices shall be deemed to have been
given or delivered upon personal delivery or upon deposit in the U.S. mail,
postage prepaid and properly addressed to the party to be notified.
15. LOANS. The Plan Administrator may, in its absolute discretion
and without any obligation to do so, assist the Optionee in the exercise of this
option by (i) authorizing the extension of a loan to the Optionee from the
Corporation or (ii) permitting the Optionee to pay the option price for the
purchased Common Stock in installments over a period of years. The terms of any
such loan or installment method of payment
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<PAGE>
(including the interest rate, the requirements for collateral and the terms
of repayment) shall be established by the Plan Administrator in its sole
discretion.
16. CONSTRUCTION. This Agreement and the option evidenced hereby
are made and granted pursuant to the Plan and are in all respects limited by
and subject to the express terms and provisions of the Plan. All decisions
of the Plan Administrator with respect to any question or issue arising under
the Plan or this Agreement shall be conclusive and binding on all persons
having an interest in this option.
17. GOVERNING LAW. The interpretation, performance, and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE STOCK OPTION. In
the event this option is designated an incentive stock option in the Grant
Notice, the following terms and conditions shall also apply to the grant:
A. This option shall cease to qualify for favorable tax treatment as
an incentive stock option under the Federal tax laws if (and to the extent) this
option is exercised for one or more Option Shares: (i) more than three (3)
months after the date the Optionee ceases to be an Employee for any reason other
than death or permanent disability (as defined in Paragraph 5) or (ii) more than
one (1) year after the date the Optionee ceases to be an Employee by reason of
permanent disability.
B. Should this option be designated as immediately exercisable in
the Grant Notice, then this option shall not become exercisable in the calendar
year in which granted if (and to the extent) the aggregate fair market value
(determined at the Grant Date) of the Corporation's Common Stock for which this
option would otherwise first become exercisable in such calendar year would,
when added to the aggregate fair market value (determined as of the respective
date or dates of grant) of the Corporation's Common Stock for which this option
or one or more other incentive stock options granted to the Optionee prior to
the Grant Date (whether under the Plan or any other option plan of the
Corporation or its parent or subsidiary corporations) first become exercisable
during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in
the aggregate. To the extent the exercisability of this option is deferred by
reason of the foregoing limitation, the deferred portion will first become
exercisable in the first calendar year or years thereafter in which the One
Hundred Thousand Dollar ($100,000) limitation of this Paragraph 18.B would not
be contravened.
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<PAGE>
C. Should this option be designated as exercisable in installments
in the Grant Notice, then no installment under this option (whether annual or
monthly) shall qualify for favorable tax treatment as an incentive stock option
under the Federal tax laws if (and to the extent) the aggregate fair market
value (determined at the Grant Date) of the Corporation's Common Stock for which
such installment first becomes exercisable hereunder will, when added to the
aggregate fair market value (determined as of the respective date or dates of
grant) of the Corporation's Common Stock for which one or more other incentive
stock options granted to the Optionee prior to the Grant Date (whether under the
Plan or any other option plan of the Corporation or any parent or subsidiary
corporation) first become exercisable during the same calendar year, exceed One
Hundred Thousand Dollars ($100,000) in the aggregate.
19. WITHHOLDING. Optionee hereby agrees to make appropriate
arrangements with the Corporation or parent or subsidiary corporation employing
Optionee for the satisfaction of all Federal, State or local income tax
withholding requirements and Federal social security employee tax requirements
applicable to the exercise of this option.
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<PAGE>
EXHIBIT 10.30
REPURCHASE RIGHT
RIGHT OF FIRST REFUSAL
RUBIO'S RESTAURANTS, INC.
STOCK PURCHASE AGREEMENT
AGREEMENT made as of this ___ day of __________, 19__, by and among
Rubio's Restaurants, Inc., a California corporation (the "Corporation"), ______
___________________, the holder of a stock option (the "Optionee") under the
Corporation's 1993 Stock Option/Stock Issuance Plan and ______________________,
the Optionee's spouse.
I. EXERCISE OF OPTION
1.1 EXERCISE. Optionee hereby purchases ________________ shares
("Purchased Shares") of the Corporation's common stock ("Common Stock") pursuant
to that certain option ("Option") granted Optionee on _____________, 19___
("Grant Date") to purchase up to ____________ shares of the Common Stock ("Total
Purchasable Shares") under the Corporation's 1993 Stock Option/Stock Issuance
Plan (the "Plan") at an option price of $__________ per share ("Option Price").
1.2 PAYMENT. Concurrently with the delivery of this Agreement to the
Corporate Secretary of the Corporation, Optionee shall pay the Option Price for
the Purchased Shares in accordance with the provisions of the agreement between
the Corporation and Optionee evidencing the Option (the "Option Agreement") and
shall deliver whatever additional documents may be required by the Option
Agreement as a condition for exercise, together with a duly-executed blank
Assignment Separate from Certificate (in the form attached hereto as Exhibit I)
with respect to the Purchased Shares.
1.3 DELIVERY OF CERTIFICATES. The certificates representing the
Purchased Shares hereunder shall be held in escrow by the Corporate Secretary of
the Corporation in accordance with the provisions of Article VII.
1.4 SHAREHOLDER RIGHTS. Until such time as the Corporation actually
exercises its repurchase right, rights of first refusal or special purchase
right under this Agreement, Optionee (or any successor in interest) shall have
all the rights of a shareholder (including voting and dividend rights) with
respect to the Purchased Shares, including the Purchased Shares held in escrow
under Article VII, subject, however, to the transfer restrictions of Article IV.
<PAGE>
II. SECURITIES LAW COMPLIANCE
2.1 EXEMPTION FROM REGISTRATION. The Purchased Shares have not been
registered under the Securities Act of 1933, as amended (the "1933 Act"), and
are accordingly being issued to Optionee in reliance upon the exemption from
such registration provided by Rule 701 of the Securities and Exchange Commission
for stock issuances under compensatory benefit plans such as the Plan. Optionee
hereby acknowledges previous receipt of a copy of the documentation for such
Plan in the form of Exhibit C to the Notice of Grant of Stock Option (the "Grant
Notice") accompanying the Option Agreement.
2.2 RESTRICTED SECURITIES.
A. Optionee hereby confirms that Optionee has been informed that the
Purchased Shares are restricted securities under the 1933 Act and may not be
resold or transferred unless the Purchased Shares are first registered under the
Federal securities laws or unless an exemption from such registration is
available. Accordingly, Optionee hereby acknowledges that Optionee is prepared
to hold the Purchased Shares for an indefinite period and that Optionee is aware
that Rule 144 of the Securities and Exchange Commission issued under the 1933
Act is not presently available to exempt the sale of the Purchased Shares from
the registration requirements of the 1933 Act.
B. Upon the expiration of the ninety (90)-day period immediately
following the date on which the Corporation first becomes subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Purchased Shares, to the extent vested under Article V, may
be sold (without registration) pursuant to the applicable requirements of Rule
144. If Optionee is at the time of such sale an affiliate of the Corporation
for purposes of Rule 144 or was such an affiliate during the preceding three (3)
months, then the sale must comply with all the requirements of Rule 144
(including the volume limitation on the number of shares sold, the
broker/market-maker sale requirement and the requisite notice to the Securities
and Exchange Commission); however, the two (2)-year holding period requirement
of the Rule will not be applicable. If Optionee is not at the time of the sale
an affiliate of the Corporation nor was such an affiliate during the preceding
three (3) months, then none of the requirements of Rule 144 (other than the
broker/market-maker sale requirement for Purchased Shares held for less than
three (3) years following payment in cash of the Option Price therefor) will be
applicable to the sale.
C. Should the Corporation not become subject to the reporting
requirements of the Exchange Act, then Optionee may,
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<PAGE>
provided he/she is not at the time an affiliate of the Corporation (nor was
such an affiliate during the preceding three (3) months), sell the Purchased
Shares (without registration) pursuant to paragraph (k) of Rule 144 after the
Purchased Shares have been held for a period of three (3) years following the
payment in cash of the Option Price for such shares.
D. Optionee hereby represents that the Purchased Shares are being
acquired for Optionee's own account and not with a view to or for the sale in
connection with any distribution of the shares of the Company.
2.3 DISPOSITION OF SHARES. Optionee hereby agrees that Optionee
shall make no disposition of the Purchased Shares (other than a permitted
transfer under paragraph 4.1) unless and until there is compliance with all of
the following requirements:
(a) Optionee shall have notified the Corporation of the proposed
disposition and provided a written summary of the terms and conditions of
the proposed disposition.
(b) Optionee shall have complied with all requirements of this
Agreement applicable to the disposition of the Purchased Shares.
(c) Optionee shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that
(i) the proposed disposition does not require registration of the Purchased
Shares under the 1933 Act or (ii) all appropriate action necessary for
compliance with the registration requirements of the 1933 Act or of any
exemption from registration available under the 1933 Act (including
Rule 144) has been taken.
(d) Optionee shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that
the proposed disposition will not result in the contravention of any
transfer restrictions applicable to the Purchased Shares pursuant to the
provisions of the Commissioner Rules identified in paragraph 2.5.
The Corporation shall NOT be required (i) to transfer on its books any
Purchased Shares which have been sold or transferred in violation of the
provisions of this Article II NOR (ii) to treat as the owner of the Purchased
Shares, or otherwise to accord voting or dividend rights to, any transferee to
whom the Purchased Shares have been transferred in contravention of this
Agreement.
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<PAGE>
2.4 RESTRICTIVE LEGENDS. In order to reflect the restrictions on
disposition of the Purchased Shares, the stock certificates for the Purchased
Shares will be endorsed with restrictive legends, including one or more of the
following legends:
(i) "The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be sold or
offered for sale in the absence of (a) an effective registration statement for
the shares under such Act, (b) a 'no action' letter of the Securities and
Exchange Commission with respect to such sale or offer, or (c) satisfactory
assurances to the Corporation that registration under such Act is not required
with respect to such sale or offer."
(ii) "It is unlawful to consummate a sale or transfer of this
security, or any interest therein, or to receive any consideration therefor,
without the prior written consent of the Commissioner of Corporations of the
State of California, except as permitted in the Commissioner's Rules."
(iii) "The shares represented by this certificate are unvested and
accordingly may not be sold, assigned, transferred, encumbered, or in any manner
disposed of except in conformity with the terms of a written agreement dated
__________, 19___ between the Corporation and the registered holder of the
shares (or the predecessor in interest to the shares). Such agreement grants
certain repurchase rights and rights of first refusal to the Corporation (or its
assignees) upon the sale, assignment, transfer, encumbrance or other disposition
of the Corporation's shares or upon termination of service with the Corporation.
The Corporation will upon written request furnish a copy of such agreement to
the holder hereof without charge."
III. SPECIAL TAX ELECTION
3.1 SECTION 83(b) ELECTION APPLICABLE TO THE EXERCISE OF A
NON-STATUTORY STOCK OPTION. If the Purchased Shares are acquired hereunder
pursuant to the exercise of a NON-STATUTORY STOCK OPTION, as specified in the
Grant Notice, then the Optionee understands that under Section 83 of the
Internal Revenue Code of 1986, as amended (the "Code"), the excess of the
fair market value of the Purchased Shares on the date any forfeiture
restrictions applicable to such shares lapse over the Option Price paid for
such shares will be reportable as ordinary income on such lapse date. For
this purpose, the term "forfeiture restrictions" includes the right of the
Corporation to repurchase the Purchased Shares pursuant to the Repurchase
Right provided
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<PAGE>
under Article V of this Agreement. Optionee understands that he/she may
elect under Section 83(b) of the Code to be taxed at the time the Purchased
Shares are acquired hereunder, rather than when and as such Purchased Shares
cease to be subject to such forfeiture restrictions. Such election must be
filed with the Internal Revenue Service within thirty (30) days after the
date of this Agreement. Even if the fair market value of the Purchased
Shares at the date of this Agreement equals the Option Price paid (and thus
no tax is payable), the election must be made to avoid adverse tax
consequences in the future. THE FORM FOR MAKING THIS ELECTION IS ATTACHED AS
EXHIBIT III HERETO. OPTIONEE UNDERSTANDS THAT FAILURE TO MAKE THIS FILING
WITHIN THE THIRTY (30)-DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY
INCOME BY THE OPTIONEE AS THE FORFEITURE RESTRICTIONS LAPSE.
3.2 CONDITIONAL SECTION 83(b) ELECTION APPLICABLE TO THE EXERCISE OF
AN INCENTIVE STOCK OPTION. If the Purchased Shares are acquired hereunder
pursuant to the exercise of an INCENTIVE STOCK OPTION under the Federal tax
laws, as specified in the Grant Notice, then the following tax principles shall
be applicable to the Purchased Shares:
A. For regular tax purposes, no taxable income will be
recognized at the time the Option is exercised.
B. The excess of (i) the fair market value of the
Purchased Shares on the date the Option is exercised or (if later) on
the date any forfeiture restrictions applicable to the Purchased
Shares lapse over (ii) the Option Price paid for the Purchased Shares
will be includible in the Optionee's taxable income for alternative
minimum tax purposes.
C. If the Optionee makes a disqualifying disposition of
the Purchased Shares, then the Optionee will recognize ordinary income
in the year of such disposition equal in amount to the excess of (i)
the fair market value of the Purchased Shares on the date the Option
is exercised or (if later) on the date any forfeiture restrictions
applicable to the Purchased Shares lapse over (ii) the Option Price
paid for the Purchased Shares. Any additional gain recognized upon
the disqualifying disposition will be either short-term or long-term
capital gain depending upon the period for which the Purchased Shares
are held prior to the disposition.
D. For purposes of the foregoing, the term "forfeiture
restrictions" will include the right of the Corporation to repurchase
the Purchased Shares pursuant
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to the Repurchase Right provided under Article V of this Agreement. The
term "disqualifying disposition" means any sale or other disposition (1)
of the Purchased Shares within two (2) years after the Grant Date or
within one (1) year after the execution date of this Agreement.
E. In the absence of final Treasury Regulations relating
to incentive stock options, it is not certain whether the Optionee
may, in connection with the exercise of the Option for any Purchased
Shares at the time subject to forfeiture restrictions, file a
protective election under Section 83(b) of the Code which would limit
(I) the Optionee's alternative minimum taxable income upon exercise
and (II) the Optionee's ordinary income upon a disqualifying
disposition, to the excess of (i) the fair market value of the
Purchased Shares on the date the Option is exercised over (ii) the
Option Price paid for the Purchased Shares. THE APPROPRIATE FORM FOR
MAKING SUCH A PROTECTIVE ELECTION IS ATTACHED AS EXHIBIT III TO THIS
AGREEMENT AND MUST BE FILED WITH THE INTERNAL REVENUE SERVICE WITHIN
THIRTY (30) DAYS AFTER THE DATE OF THIS AGREEMENT. HOWEVER, SUCH
ELECTION IF PROPERLY FILED WILL ONLY BE ALLOWED TO THE EXTENT THE
FINAL TREASURY REGULATIONS PERMIT SUCH A PROTECTIVE ELECTION.
3.3 OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY,
AND NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER SECTION 83(b), EVEN
IF OPTIONEE REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING
ON HIS/HER BEHALF. This filing should be made by registered or certified mail,
return receipt requested, and Optionee must retain two (2) copies of the
completed form for filing with his or her State and Federal tax returns for the
current tax year and an additional copy for his or her records.
IV. TRANSFER RESTRICTIONS
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(1) Generally, a disposition of shares purchased under an incentive stock
option includes any transfer of legal title, including a transfer by sale,
exchange or gift, but does not include a transfer to the Optionee's spouse, a
transfer into joint ownership with right of survivorship if Optionee remains one
of the joint owners, a pledge, a transfer by bequest or inheritance or certain
tax free exchanges permitted under the Code.
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4.1 RESTRICTION ON TRANSFER. Optionee shall not transfer, assign,
encumber or otherwise dispose of any of the Purchased Shares which are subject
to the Corporation's Repurchase Right under Article V. In addition, Purchased
Shares which are released from the Repurchase Right shall not be transferred,
assigned, encumbered or otherwise made the subject of disposition in
contravention of the Corporation's First Refusal Right under Article VI. Such
restrictions on transfer, however, shall NOT be applicable to (i) a gratuitous
transfer of the Purchased Shares made to the Optionee's spouse or issue,
including adopted children, or to a trust for the exclusive benefit of the
Optionee or the Optionee's spouse or issue, PROVIDED AND ONLY IF the Optionee
obtains the Corporation's prior written consent to such transfer, (ii) a
transfer of title to the Purchased Shares effected pursuant to the Optionee's
will or the laws of intestate succession or (iii) a transfer to the Corporation
in pledge as security for any purchase-money indebtedness incurred by the
Optionee in connection with the acquisition of the Purchased Shares.
4.2 TRANSFEREE OBLIGATIONS. Each person (other than the Corporation)
to whom the Purchased Shares are transferred by means of one of the permitted
transfers specified in paragraph 4.1 must, as a condition precedent to the
validity of such transfer, acknowledge in writing to the Corporation that such
person is bound by the provisions of this Agreement and that the transferred
shares are subject to (i) both the Corporation's Repurchase Right and the
Corporation's First Refusal Right granted hereunder and (ii) the market
stand-off provisions of paragraph 4.4, to the same extent such shares would
be so subject if retained by the Optionee.
4.3 DEFINITION OF OWNER. For purposes of Articles IV, V, VI and VII
of this Agreement, the term "Owner" shall include the Optionee and all
subsequent holders of the Purchased Shares who derive their chain of ownership
through a permitted transfer from the Optionee in accordance with paragraph 4.1.
4.4 MARKET STAND-OFF PROVISIONS.
A. In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any Purchased Shares without the prior written consent of the
Corporation or its underwriters. Such limitations shall be in effect for such
period of time from and after the effective date of such
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registration statement as may be requested by the Corporation or such
underwriters; PROVIDED, however, that in no event shall such period exceed
one hundred-eighty (180) days. The limitations of this paragraph 4.4 shall
remain in effect for the two-year period immediately following the effective
date of the Corporation's initial public offering and shall thereafter
terminate and cease to have any force or effect.
B. Owner shall be subject to the market stand-off provisions of this
paragraph 4.4 PROVIDED AND ONLY IF the officers and directors of the Corporation
are also subject to similar arrangements.
C. In the event of any stock dividend, stock split, recapitalization
or other change affecting the Corporation's outstanding Common Stock effected as
a class without receipt of consideration, then any new, substituted or
additional securities distributed with respect to the Purchased Shares shall be
immediately subject to the provisions of this paragraph 4.4, to the same extent
the Purchased Shares are at such time covered by such provisions.
D. In order to enforce the limitations of this paragraph 4.4, the
Corporation may impose stop-transfer instructions with respect to the Purchased
Shares until the end of the applicable stand-off period.
V. REPURCHASE RIGHT
5.1 GRANT. The Corporation is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the sixty (60)-day period
following the date the Optionee ceases for any reason to remain in Service or
(if later) during the sixty (60)-day period following the execution date of this
Agreement, to repurchase at the Option Price all or (at the discretion of the
Corporation and with the consent of the Optionee) any portion of the Purchased
Shares in which the Optionee has not acquired a vested interest in accordance
with the vesting provisions of paragraph 5.3 (such shares to be hereinafter
called the "Unvested Shares"). For purposes of this Agreement, the Optionee
shall be deemed to remain in Service for so long as the Optionee continues to
render periodic services to the Corporation or any parent or subsidiary
corporation, whether as an employee, a non-employee member of the board of
directors, or an independent contractor or consultant.
5.2 EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall be
exercisable by written notice delivered to the Owner of the Unvested Shares
prior to the expiration of the applicable sixty (60)-day period specified in
paragraph 5.1. The notice shall indicate the number of Unvested Shares to be
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repurchased and the date on which the repurchase is to be effected, such date to
be not more than thirty (30) days after the date of notice. To the extent one
or more certificates representing Unvested Shares may have been previously
delivered out of escrow to the Owner, then Owner shall, prior to the close of
business on the date specified for the repurchase, deliver to the Secretary of
the Corporation the certificates representing the Unvested Shares to be
repurchased, each certificate to be properly endorsed for transfer. The
Corporation shall, concurrently with the receipt of such stock certificates
(either from escrow in accordance with paragraph 7.3 or from Owner as herein
provided), pay to Owner in cash or cash equivalents (including the cancellation
of any purchase-money indebtedness), an amount equal to the Option Price
previously paid for the Unvested Shares which are to be repurchased.
5.3 TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right shall
terminate with respect to any Unvested Shares for which it is not timely
exercised under paragraph 5.2. In addition, the Repurchase Right shall
terminate, and cease to be exercisable, with respect to any and all Purchased
Shares in which the Optionee vests in accordance with the vesting schedule
specified in the Grant Notice. All Purchased Shares as to which the Repurchase
Right lapses shall, however, continue to be subject to (i) the First Refusal
Right of the Corporation and its assignees under Article VI, (ii) the market
stand-off provisions of paragraph 4.4 and (iii) the Special Purchase Right under
Article VIII.
5.4 AGGREGATE VESTING LIMITATION. If the Option is exercised in more
than one increment so that the Optionee is a party to one or more other Stock
Purchase Agreements ("Prior Purchase Agreements") which are executed prior to
the date of this Agreement, then the total number of Purchased Shares as to
which the Optionee shall be deemed to have a fully-vested interest under this
Agreement and all Prior Purchase Agreements shall not exceed in the aggregate
the number of Purchased Shares in which the Optionee would otherwise at the time
be vested, in accordance with the vesting provisions of paragraph 5.3, had all
the Purchased Shares been acquired exclusively under this Agreement.
5.5 FRACTIONAL SHARES. No fractional shares shall be repurchased by
the Corporation. Accordingly, should the Repurchase Right extend to a
fractional share (in accordance with the vesting provisions of paragraph 5.3) at
the time the Optionee ceases Service, then such fractional share shall be added
to any fractional share in which the Optionee is at such time vested in order to
make one whole vested share no longer subject to the Repurchase Right.
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5.6 ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event of any
stock dividend, stock split, recapitalization or other change affecting the
Corporation's outstanding Common Stock as a class effected without receipt of
consideration, then any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which is
by reason of any such transaction distributed with respect to the Purchased
Shares shall be immediately subject to the Repurchase Right, but only to the
extent the Purchased Shares are at the time covered by such right. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number of Purchased Shares and Total Purchasable Shares hereunder
and to the price per share to be paid upon the exercise of the Repurchase Right
in order to reflect the effect of any such transaction upon the Corporation's
capital structure; PROVIDED, however, that the aggregate purchase price shall
remain the same.
5.7 CORPORATE TRANSACTION.
A. Immediately prior to the consummation of any of the following
shareholder-approved transactions (a "Corporate Transaction"):
(i) a merger or consolidation in which more than fifty percent
(50%) of the Corporation's outstanding voting stock is transferred to a
person or persons different from those who held the stock immediately prior
to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation,
the Repurchase Right shall automatically lapse in its entirety
except to the extent the Repurchase Right is to be assigned to the successor
corporation (or its parent company) in connection with such Corporate
Transaction.
B. To the extent the Repurchase Right remains in effect following
such Corporate Transaction, such right shall apply to the new capital stock or
other property (including cash) received in exchange for the Purchased Shares in
consummation of the Corporate Transaction, but only to the extent the Purchased
Shares are at the time covered by such right. Appropriate adjustments shall be
made to the price per share payable upon exercise of the Repurchase Right to
reflect the effect of the Corporate Transaction upon the Corporation's capital
structure; PROVIDED, however, that the aggregate purchase price shall remain the
same.
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VI. RIGHT OF FIRST REFUSAL
6.1 GRANT. The Corporation is hereby granted the right of first
refusal (the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares in which the Optionee has vested in accordance
with the vesting provisions of Article V. For purposes of this Article VI, the
term "transfer" shall include any sale, assignment, pledge, encumbrance or other
disposition for value of the Purchased Shares intended to be made by the Owner,
but shall not include any of the permitted transfers under paragraph 4.1.
6.2 NOTICE OF INTENDED DISPOSITION. In the event the Owner desires
to accept a bona fide third-party offer for the transfer of any or all of the
Purchased Shares (the shares subject to such offer to be hereinafter called the
"Target Shares"), Owner shall promptly (i) deliver to the Corporate Secretary of
the Corporation written notice (the "Disposition Notice") of the terms and
conditions of the offer, including the purchase price and the identity of the
third-party offeror, and (ii) provide satisfactory proof that the disposition of
the Target Shares to such third-party offeror would not be in contravention of
the provisions set forth in Articles II and IV of this Agreement.
6.3 EXERCISE OF RIGHT. The Corporation (or its assignees) shall, for
a period of twenty-five (25) days following receipt of the Disposition Notice,
have the right to repurchase any or all of the Target Shares specified in the
Disposition Notice upon the same terms and conditions specified therein or upon
terms and conditions which do not materially vary from those specified therein.
Such right shall be exercisable by delivery of written notice (the "Exercise
Notice") to Owner prior to the expiration of the twenty-five (25)-day exercise
period. If such right is exercised with respect to all the Target Shares
specified in the Disposition Notice, then the Corporation (or its assignees)
shall effect the repurchase of the Target Shares, including payment of the
purchase price, not more than five (5) business days after delivery of the
Exercise Notice; and at such time Owner shall deliver to the Corporation the
certificates representing the Target Shares to be repurchased, each certificate
to be properly endorsed for transfer. To the extent any of the Target Shares
are at the time held in escrow under Article VII, the certificates for such
shares shall automatically be released from escrow and delivered to the
Corporation for purchase.
Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the
Corporation (or its assignees) shall have the right to pay the purchase price in
the form of cash equal in
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amount to the value of such property. If the Owner and the Corporation (or
its assignees) cannot agree on such cash value within ten (10) days after the
Corporation's receipt of the Disposition Notice, the valuation shall be made
by an appraiser of recognized standing selected by the Owner and the
Corporation (or its assignees) or, if they cannot agree on an appraiser
within twenty (20) days after the Corporation's receipt of the Disposition
Notice, each shall select an appraiser of recognized standing and the two
appraisers shall designate a third appraiser of recognized standing, whose
appraisal shall be determinative of such value. The cost of such appraisal
shall be shared equally by the Owner and the Corporation. The closing shall
then be held on the LATER of (i) the fifth business day following delivery of
the Exercise Notice or (ii) the fifth business day after such cash valuation
shall have been made.
6.4 NON-EXERCISE OF RIGHT. In the event the Exercise Notice is not
given to Owner within twenty-five (25) days following the date of the
Corporation's receipt of the Disposition Notice, Owner shall have a period of
thirty (30) days thereafter in which to sell or otherwise dispose of the Target
Shares to the third-party offeror identified in the Disposition Notice upon
terms and conditions (including the purchase price) no more favorable to such
third-party offeror than those specified in the Disposition Notice; PROVIDED,
however, that any such sale or disposition must not be effected in contravention
of the provisions of Article II of this Agreement. To the extent any of the
Target Shares are at the time held in escrow under Article VII, the certificates
for such shares shall automatically be released from escrow and surrendered to
the Owner. The third-party offeror shall acquire the Target Shares free and
clear of the Corporation's Repurchase Right under Article V and the
Corporation's First Refusal Right hereunder, but the acquired shares shall
remain subject to (i) the securities law restrictions of paragraph 2.2(a) and
(ii) the market stand-off provisions of paragraph 4.4. In the event Owner does
not effect such sale or disposition of the Target Shares within the specified
thirty (30)-day period, the Corporation's First Refusal Right shall continue to
be applicable to any subsequent disposition of the Target Shares by Owner until
such right lapses in accordance with paragraph 6.7.
6.5 PARTIAL EXERCISE OF RIGHT. In the event the Corporation (or its
assignees) makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
Owner shall have the option, exercisable by written notice to the Corporation
delivered within thirty (30) days after the date of the Disposition Notice, to
effect the sale of the Target Shares pursuant to one of the following
alternatives:
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(i) sale or other disposition of all the Target Shares to the
third-party offeror identified in the Disposition Notice, but in full
compliance with the requirements of paragraph 6.4, as if the Corporation did
not exercise the First Refusal Right hereunder; or
(ii) sale to the Corporation (or its assignees) of the portion of
the Target Shares which the Corporation (or its assignees) has elected to
purchase, such sale to be effected in substantial conformity with the
provisions of paragraph 6.3.
Failure of Owner to deliver timely notification to the Corporation
under this paragraph 6.5 shall be deemed to be an election by Owner to sell the
Target Shares pursuant to alternative (i) above.
6.6 RECAPITALIZATION/MERGER.
(a) In the event of any stock dividend, stock split, recapitalization
or other transaction affecting the Corporation's outstanding Common Stock as a
class effected without receipt of consideration, then any new, substituted or
additional securities or other property which is by reason of such transaction
distributed with respect to the Purchased Shares shall be immediately subject to
the Corporation's First Refusal Right hereunder, but only to the extent the
Purchased Shares are at the time covered by such right.
(b) In the event of either of the following shareholder-approved
transactions:
(i) a merger or consolidation in which the Corporation is not
the surviving entity,
(ii) a sale, transfer or other disposition of all or
substantially all of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the surviving
entity but in which the Corporation's outstanding voting securities are
transferred in whole or in part to person or persons other than those who
held such securities immediately prior to the merger, or
(iv) any transaction effected primarily to change the State in
which the Corporation is incorporated, or to create a holding company
structure,
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the Corporation's First Refusal Right shall remain in full force and
effect and shall apply to the new capital stock or other property received in
exchange for the Purchased Shares in consummation of the transaction, but only
to the extent the Purchased Shares are at the time covered by such right.
6.7 LAPSE. The First Refusal Right under this Article VI shall lapse
and cease to have effect upon the EARLIEST to occur of (i) the first date on
which shares of the Corporation's Common Stock are held of record by more than
five hundred (500) persons, (ii) a determination is made by the Corporation's
Board of Directors that a public market exists for the outstanding shares of the
Corporation's Common Stock or (iii) a firm commitment underwritten public
offering, pursuant to an effective registration statement under the 1933 Act,
covering the offer and sale of the Corporation's Common Stock in the aggregate
amount of at least $5,000,000. However, the market stand-off provisions of
paragraph 4.4 shall continue to remain in full force and effect following the
lapse of the First Refusal Right hereunder.
VII. ESCROW
7.1 DEPOSIT. Upon issuance, the certificates for any Unvested Shares
purchased hereunder shall be deposited in escrow with the Corporate Secretary of
the Corporation to be held in accordance with the provisions of this Article
VII. Each deposited certificate shall be accompanied by a duly-executed
Assignment Separate from Certificate in the form of Exhibit I. The deposited
certificates, together with any other assets or securities from time to time
deposited with the Corporate Secretary pursuant to the requirements of this
Agreement, shall remain in escrow until such time or times as the certificates
(or other assets and securities) are to be released or otherwise surrendered for
cancellation in accordance with paragraph 7.3. Upon delivery of the
certificates (or other assets and securities) to the Corporate Secretary of the
Corporation, the Owner shall be issued an instrument of deposit acknowledging
the number of Unvested Shares (or other assets and securities) delivered in
escrow.
7.2 RECAPITALIZATION. All regular cash dividends on the Unvested
Shares (or other securities at the time held in escrow) shall be paid directly
to the Owner and shall not be held in escrow. However, in the event of any
stock dividend, stock split, recapitalization or other change affecting the
Corporation's outstanding Common Stock as a class effected without receipt of
consideration or in the event of a Corporate Transaction, any new, substituted
or additional securities or other property which is by reason of such
transaction distributed with respect to the Unvested Shares shall be immediately
delivered to the Corporate Secretary to be held in escrow under
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this Article VII, but only to the extent the Unvested Shares are at the time
subject to the escrow requirements of paragraph 7.1.
7.3 RELEASE/SURRENDER. The Unvested Shares, together with any other
assets or securities held in escrow hereunder, shall be subject to the following
terms and conditions relating to their release from escrow or their surrender to
the Corporation for repurchase and cancellation:
(i) Should the Corporation (or its assignees) elect to exercise
the Repurchase Right under Article V with respect to any Unvested Shares,
then the escrowed certificates for such Unvested Shares (together with any
other assets or securities issued with respect thereto) shall be delivered
to the Corporation concurrently with the payment to the Owner, in cash or
cash equivalent (including the cancellation of any purchase-money
indebtedness), of an amount equal to the aggregate Option Price for such
Unvested Shares, and the Owner shall cease to have any further rights or
claims with respect to such Unvested Shares (or other assets or securities
attributable to such Unvested Shares).
(ii) Should the Corporation (or its assignees) elect to exercise
its First Refusal Right under Article VI with respect to any vested Target
Shares held at the time in escrow hereunder, then the escrowed
certificates for such Target Shares (together with any other assets or
securities attributable thereto) shall, concurrently with the payment of
the paragraph 6.3 purchase price for such Target Shares to the Owner, be
surrendered to the Corporation, and the Owner shall cease to have any
further rights or claims with respect to such Target Shares (or other
assets or securities).
(iii) Should the Corporation (or its assignees) elect NOT to
exercise its First Refusal Right under Article VI with respect to any
Target Shares held at the time in escrow hereunder, then the escrowed
certificates for such Target Shares (together with any other assets or
securities attributable thereto) shall be surrendered to the Owner for
disposition in accordance with provisions of paragraph 6.4.
(iv) As the interest of the Optionee in the Unvested Shares (or
any other assets or securities attributable thereto) vests in accordance
with the provisions of Article V, the certificates for such
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vested shares (as well as all other vested assets and securities) shall be
released from escrow and delivered to the Owner in accordance with the
following schedule:
a. The initial release of vested shares (or other vested
assets and securities) from escrow shall be effected within thirty
(30) days following the expiration of the initial twelve (12)-month
period measured from the Grant Date.
b. Subsequent releases of vested shares (or other vested
assets and securities) from escrow shall be effected at semi-annual
intervals thereafter, with the first such semi-annual release to occur
eighteen (18) months after the Grant Date.
c. Upon the Optionee's cessation of Service, any escrowed
Purchased Shares (or other assets or securities) in which the Optionee
is at the time vested shall be promptly released from escrow.
d. Upon any earlier termination of the Corporation's
Repurchase Right in accordance with the applicable provisions of
Article V, any Purchased Shares (or other assets or securities) at the
time held in escrow hereunder shall promptly be released to the Owner
as fully-vested shares or other property.
(v) All Purchased Shares (or other assets or securities)
released from escrow in accordance with the provisions of subparagraph
(iv) above shall nevertheless remain subject to (I) the Corporation's
First Refusal Right under Article VI until such right lapses pursuant to
paragraph 6.7, (II) the market stand-off provisions of paragraph 4.4 until
such provisions terminate in accordance therewith and (III) the Special
Purchase Right under Article VIII.
VIII. MARITAL DISSOLUTION OR LEGAL SEPARATION
8.1 GRANT. In connection with the dissolution of the Optionee's
marriage or the legal separation of the Optionee and the Optionee's spouse, the
Corporation shall have the right (the "Special Purchase Right"), exercisable at
any time during the thirty (30)-day period following the Corporation's receipt
of the required Dissolution Notice under paragraph 8.2, to purchase from
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the Optionee's spouse, in accordance with the provisions of paragraph 8.3,
all or any portion of the Purchased Shares which would otherwise be
awarded to such spouse in settlement of any community property or other
marital property rights such spouse may have in such shares.
8.2 NOTICE OF DECREE OR AGREEMENT. The Optionee shall promptly
provide the Secretary of the Corporation with written notice (the "Dissolution
Notice") of (i) the entry of any judicial decree or order resolving the property
rights of the Optionee and the Optionee's spouse in connection with their
marital dissolution or legal separation or (ii) the execution of any contract or
agreement relating to the distribution or division of such property rights. The
Dissolution Notice shall be accompanied by a copy of the actual decree of
dissolution or settlement agreement between the Optionee and the Optionee's
spouse which provides for the award to the spouse of one or more Purchased
Shares in settlement of any community property or other marital property rights
such spouse may have in such shares.
8.3 EXERCISE OF SPECIAL PURCHASE RIGHT. The Special Purchase Right
shall be exercisable by delivery of written notice (the "Purchase Notice") to
the Optionee and the Optionee's spouse within thirty (30) days after the
Corporation's receipt of the Dissolution Notice. The Purchase Notice shall
indicate the number of shares to be purchased by the Corporation, the date such
purchase is to be effected (such date to be not less than five (5) business
days, nor more than ten (10) business days, after the date of the Purchase
Notice), and the fair market value to be paid for such Purchased Shares. The
Optionee (or the Optionee's spouse, to the extent such spouse has physical
possession of the Purchased Shares) shall, prior to the close of business on the
date specified for the purchase, deliver to the Corporate Secretary of the
Corporation the certificates representing the shares to be purchased, each
certificate to be properly endorsed for transfer. To the extent any of the
shares to be purchased by the Corporation are at the time held in escrow under
Article VII, the certificates for such shares shall be promptly delivered out of
escrow to the Corporation. The Corporation shall, concurrently with the receipt
of the stock certificates, pay to the Optionee's spouse (in cash or cash
equivalents) an amount equal to the fair market value specified for such shares
in the Purchase Notice.
If the Optionee's spouse does not agree with the fair market value
specified for the shares in the Purchase Notice, then the spouse shall promptly
notify the Corporation in writing of such disagreement and the fair market value
of such shares shall thereupon be determined by an appraiser of recognized
standing selected by the Corporation and the spouse. If they cannot agree on an
appraiser within twenty (20) days after the
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date of the Purchase Notice, each shall select an appraiser of recognized
standing, and the two appraisers shall designate a third appraiser of
recognized standing whose appraisal shall be determinative of such value.
The cost of the appraisal shall be shared equally by the Corporation and
the Optionee's spouse. The closing shall then be held on the fifth
business day following the completion of such appraisal; PROVIDED,
however, that if the appraised value is more than fifteen percent (15%)
greater than the fair market value specified for the shares in the
Purchase Notice, the Corporation shall have the right, exercisable prior
to the expiration of such five (5)-business-day period, to rescind the
exercise of the Special Purchase Right and thereby revoke its election to
purchase the shares awarded to the spouse.
8.4 LAPSE. The Special Purchase Right under this Article VIII shall
lapse and cease to have effect upon the EARLIER to occur of (i) the first date
on which the First Refusal Right under Article VI lapses or (ii) the expiration
of the thirty (30)-day exercise period specified in paragraph 8.3, to the extent
the Special Purchase Right is not timely exercised in accordance with such
paragraph.
IX. GENERAL PROVISIONS
9.1 ASSIGNMENT. The Corporation may assign its Repurchase Right
under Article V, its First Refusal Right under Article VI and/or its Special
Purchase Right under Article VIII to any person or entity selected by the
Corporation's Board of Directors, including (without limitation) one or more
shareholders of the Corporation.
If the assignee of the Repurchase Right is other than a one hundred
percent (100%) owned subsidiary corporation of the Corporation or the parent
corporation owning one hundred percent (100%) of the Corporation, then such
assignee must make a cash payment to the Corporation, upon the assignment of the
Repurchase Right, in an amount equal to the excess (if any) of (i) the fair
market value of the Unvested Shares at the time subject to the assigned
Repurchase Right over (ii) the aggregate repurchase price payable for the
Unvested Shares thereunder.
9.2 DEFINITIONS. For purposes of this Agreement, the following
provisions shall be applicable in determining the parent and subsidiary
corporations of the Corporation:
(i) Any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation shall be
considered to be a parent corporation of the Corporation, provided each
such corporation in the unbroken chain (other than the Corporation) owns,
at the time of the determination,
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stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
(ii) Each corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation shall be considered
to be a subsidiary of the Corporation, provided each such corporation
(other than the last corporation) in the unbroken chain owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
9.3 NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or
in the Plan shall confer upon the Optionee any right to continue in the Service
of the Corporation (or any parent or subsidiary corporation of the Corporation
employing or retaining Optionee) for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any parent or subsidiary corporation of the Corporation employing or
retaining Optionee) or the Optionee, which rights are hereby expressly reserved
by each, to terminate the Optionee's Service at any time for any reason
whatsoever, with or without cause.
9.4 NOTICES. Any notice required in connection with (i) the
Repurchase Right, the Special Purchase Right or the First Refusal Right or (ii)
the disposition of any Purchased Shares covered thereby shall be given in
writing and shall be deemed effective upon personal delivery or upon deposit in
the United States mail, registered or certified, postage prepaid and addressed
to the party entitled to such notice at the address indicated below such party's
signature line on this Agreement or at such other address as such party may
designate by ten (10) days advance written notice under this paragraph 9.4 to
all other parties to this Agreement.
9.5 NO WAIVER. The failure of the Corporation (or its assignees) in
any instance to exercise the Repurchase Right granted under Article V, or the
failure of the Corporation (or its assignees) in any instance to exercise the
First Refusal Right granted under Article VI, or the failure of the Corporation
(or its assignees) in any instance to exercise the Special Purchase Right
granted under Article VIII shall not constitute a waiver of any other repurchase
rights and/or rights of first refusal that may subsequently arise under the
provisions of this Agreement or any other agreement between the Corporation and
the Optionee or the Optionee's spouse. No waiver of any breach or condition of
this Agreement shall be deemed to be a waiver of any
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<PAGE>
other or subsequent breach or condition, whether of like or different nature.
9.6 CANCELLATION OF SHARES. If the Corporation (or its assignees)
shall make available, at the time and place and in the amount and form provided
in this Agreement, the consideration for the Purchased Shares to be repurchased
in accordance with the provisions of this Agreement, then from and after such
time, the person from whom such shares are to be repurchased shall no longer
have any rights as a holder of such shares (other than the right to receive
payment of such consideration in accordance with this Agreement), and such
shares shall be deemed purchased in accordance with the applicable provisions
hereof and the Corporation (or its assignees) shall be deemed the owner and
holder of such shares, whether or not the certificates therefor have been
delivered as required by this Agreement.
X. MISCELLANEOUS PROVISIONS
10.1 OPTIONEE UNDERTAKING. Optionee hereby agrees to take whatever
additional action and execute whatever additional documents the Corporation may
in its judgment deem necessary or advisable in order to carry out or effect one
or more of the obligations or restrictions imposed on either the Optionee or the
Purchased Shares pursuant to the express provisions of this Agreement.
10.2 AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the
entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the express terms and provisions
of the Plan.
10.3 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, as such laws
are applied to contracts entered into and performed in such State without resort
to that State's conflict-of-laws rules.
10.4 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
10.5 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and the Optionee and the Optionee's legal representatives, heirs,
legatees, distributees, assigns and transferees by operation of law, whether or
not any such person shall have become a party to this
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<PAGE>
Agreement and have agreed in writing to join herein and be bound by the terms
and conditions hereof.
10.6 POWER OF ATTORNEY. Optionee's spouse hereby appoints Optionee
his or her true and lawful attorney in fact, for him or her and in his or her
name, place and stead, and for his or her use and benefit, to agree to any
amendment or modification of this Agreement and to execute such further
instruments and take such further actions as may reasonably be necessary to
carry out the intent of this Agreement. Optionee's spouse further gives and
grants unto Optionee as his or her attorney in fact full power and authority to
do and perform every act necessary and proper to be done in the exercise of any
of the foregoing powers as fully as he or she might or could do if personally
present, with full power of substitution and revocation, hereby ratifying and
confirming all that Optionee shall lawfully do and cause to be done by virtue of
this power of attorney.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
RUBIO'S RESTAURANTS, INC.
By:________________________________
Title:_____________________________
Address: ___________________________________
___________________________________
___________________________________
Optionee *
Address: ___________________________________
___________________________________
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consideration of the Corporation's
granting the Optionee the right to acquire the Purchased Shares in accordance
with the terms of such Agreement, the undersigned hereby agrees to be
irrevocably bound by all the terms and provisions of such Agreement, including
(specifically) the right of the Corporation (or its assignees) to purchase any
and all interest or right the undersigned may otherwise have in such shares
pursuant to community property laws or other marital property rights.
___________________________________
Optionee's Spouse
Address: ___________________________________
___________________________________
- ---------------
* I have executed the Section 83(b) election that was attached hereto as an
Exhibit. As set forth in Article III, I understand that I, and NOT the
Corporation, will be responsible for completing the form and filing the election
with the appropriate office of the Federal and State tax authorities and that if
such filing is not completed within thirty (30) days after the date of this
Agreement, I will not be entitled to the tax benefits provided by Section 83(b).
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<PAGE>
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED ______________________ hereby sell(s), assign(s)
and transfer(s) unto Rubio's Restaurants, Inc. (the "Corporation"), __________
__________ (___________) shares of the Common Stock of the Corporation standing
in his\her name on the books of the Corporation represented by Certificate
No. _______ herewith and do hereby irrevocably constitute and appoint _______
________________ Attorney to transfer the said stock on the books of the
Corporation with full power of substitution in the premises.
Dated:______________________
Signature ___________________________
INSTRUCTION: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Corporation to exercise its
Repurchase Right set forth in the Agreement without requiring additional
signatures on the part of the Optionee.
<PAGE>
EXHIBIT II
SECTION 260.141.11
TITLE 10, CALIFORNIA ADMINISTRATIVE CODE
260.141.11 Restriction on Transfer. (a) The issuer of any security
upon which a restriction on transfer has been imposed pursuant to Sections
260.102.6, 260.141.10 or 260.534 shall cause a copy of this section to be
delivered to each issuee or transferee of such security at the time the
certificate evidencing the security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate
a sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of
the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants or
spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on
death;
(7) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state, territory or
country who is neither domiciled in this state to the knowledge of the
broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
EXHIBIT II-1
<PAGE>
(9) if the interest sold or transferred is a pledge or other lien
given by the purchaser to the seller upon a sale of the security for which the
Commissioner's written consent is obtained or under this rule not required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113 or
25121 of the Code, of the securities to be transferred, provided that no order
under Section 25140 or Subdivision (a) of Section 25143 is in effect with
respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or
25113 of the Code, provided that no order under Section 25140 or Subdivision (a)
of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or countries who
are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or
to the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property Law or
by the administrator of the unclaimed property law of another state if, in
either such case, such person (i) discloses to potential purchasers at the sale
that transfer of the securities is restricted under this rule, (ii) delivers to
each purchaser a copy of this rule, and (iii) advises the Commissioner of the
name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of Section
25110 of the Code but exempt from that qualification requirement by subdivision
(f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
EXHIBIT II-2
<PAGE>
(c) The certificates representing all such securities subject to such
a restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
EXHIBIT II-3
<PAGE>
REPURCHASE RIGHTS
EXHIBIT III
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is ________
shares of the common stock of Rubio's Restaurants, Inc.
(3) The property was issued on _______________, 19___.
(4) The taxable year in which the election is being made is the calendar year
19___.
(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's employment with the issuer is terminated. The
issuer's repurchase right lapses in a series of annual and monthly
installments over a four year period ending on _______________, 19___.
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $________ per share.
(7) The amount paid for such property is $________ per share.
(8) A copy of this statement was furnished to Rubio's Restaurants, Inc. for
whom taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed as of: _____________________________.
__________________________________ ___________________________________
Spouse (if any) Taxpayer
This form must be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Stock Purchase Agreement.
EXHIBIT III-1
<PAGE>
SPECIAL PROTECTIVE ELECTION PURSUANT TO SECTION 83(b) OF THE INTERNAL
REVENUE CODE WITH RESPECT TO PROPERTY ACQUIRED UPON EXERCISE OF AN
INCENTIVE STOCK OPTION
The property described in the above Section 83(b) election is comprised of
shares of common stock acquired pursuant to the exercise of an incentive stock
option under Section 422 of the Code. Accordingly, it is the intent of the
Taxpayer to utilize this election to achieve the following tax results:
1. The purpose of this election is to have the alternative minimum
taxable income attributable to the purchased shares measured by the amount by
which the fair market value of such shares at the time of their transfer to the
Taxpayer exceeds the purchase price paid for the shares. In the absence of this
election, such alternative minimum taxable income would be measured by the
spread between the fair market value of the purchased shares and the purchase
price which exists on the various lapse dates in effect for the forfeiture
restrictions applicable to such shares. The election is to be effective to the
full extent permitted under the Internal Revenue Code.
2. Section 421(a)(1) of the Code expressly excludes from income any
excess of the fair market value of the purchased shares over the amount paid for
such shares. Accordingly, this election is also intended to be effective in the
event there is a "disqualifying disposition" of the shares, within the meaning
of Section 421(b) of the Code, which would otherwise render the provisions of
Section 83(a) of the Code applicable at that time. Consequently, the Taxpayer
hereby elects to have the amount of disqualifying disposition income measured by
the excess of the fair market value of the purchased shares on the date of
transfer to the Taxpayer over the amount paid for such shares. Since Section
421(a) presently applies to the shares which are the subject of this Section
83(b) election, no taxable income is actually recognized for regular tax
purposes at this time, and no income taxes are payable, by the Taxpayer as a
result of this election.
This form should be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Stock Purchase Agreement.
NOTE: PAGE 2 SHOULD BE ATTACHED ONLY IF YOU ARE EXERCISING AN
INCENTIVE STOCK OPTION.
<PAGE>
EXHIBIT 10.31
RUBIO'S RESTAURANTS, INC.
RESTRICTED STOCK ISSUANCE AGREEMENT
AGREEMENT made as of this ____ day of _____________, 199__, by
and among Rubio's Restaurants, Inc., a California corporation (the
"Corporation"), ____________________________, a participant ("Participant") in
the Corporation's 1993 Stock Option/Stock Issuance Plan (the "Plan") and
____________________________, the Participant's spouse.
I. PURCHASE OF SHARES
1.1 PURCHASE. The Participant hereby purchases, and the
Corporation hereby sells to Participant, __________ shares (the "Shares") of the
Corporation's common stock ("Common Stock") at a purchase price of $_________
per share (the "Purchase Price") pursuant to the provisions of the Plan.
1.2 PAYMENT. Concurrently with the execution of this
Agreement, the Participant shall deliver to the Corporate Secretary of the
Corporation (i) the aggregate Purchase Price payable for the Shares in cash or
cash equivalent and (ii) a duly-executed blank Assignment Separate from
Certificate (in the form attached hereto as Exhibit A).
1.3 DELIVERY OF CERTIFICATES. The certificates representing
the Shares hereunder shall be held in escrow by the Secretary of the Corporation
as provided in Article VII hereof.
1.4 SHAREHOLDER RIGHTS. Until such time as the Corporation
actually exercises its repurchase right, rights of first refusal or special
purchase right under this Agreement, Participant (or any successor in interest)
shall have all the rights of a shareholder (including voting and dividend
rights) with respect to the Shares, including the Shares held in escrow under
Article VII, subject, however, to the transfer restrictions of Article IV.
II. SECURITIES LAW COMPLIANCE
2.1 EXEMPTION FROM REGISTRATION. The Shares have not been
registered under the Securities Act of 1933, as amended (the "1933 Act"), and
are accordingly being issued to Participant in reliance upon the exemption from
such registration provided by Rule 701 of the Securities and Exchange Commission
for stock issuances under compensatory benefit plans such as the Plan.
Participant hereby acknowledges receipt of a copy of the documentation for such
Plan in the form of Exhibit B attached hereto.
<PAGE>
2.2 RESTRICTED SECURITIES.
A. Participant hereby confirms that Participant has
been informed that the Shares are restricted securities under the 1933 Act and
may not be resold or transferred unless the Shares are first registered under
the Federal securities laws or unless an exemption from such registration is
available. Accordingly, Participant hereby acknowledges that Participant is
prepared to hold the Shares for an indefinite period and that Participant is
aware that Rule 144 of the Securities and Exchange Commission issued under the
1933 Act is not presently available to exempt the sale of the Shares from the
registration requirements of the 1933 Act.
B. Upon the expiration of the ninety (90)-day period
immediately following the date on which the Corporation first becomes subject to
the reporting requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Shares, to the extent vested under Article V, may be
sold (without registration) pursuant to the applicable requirements of Rule 144.
If Participant is at the time of such sale an affiliate of the Corporation for
purposes of Rule 144 or was such an affiliate during the preceding three (3)
months, then the sale must comply with all the requirements of Rule 144
(including the volume limitation on the number of shares sold, the
broker/market-maker sale requirement and the requisite notice to the Securities
and Exchange Commission); however, the two-year holding period requirement of
the Rule will not be applicable. If Participant is not at the time of the sale
an affiliate of the Corporation nor was such an affiliate during the preceding
three (3) months, then none of the requirements of Rule 144 (other than the
broker/market-maker sale requirement for Shares held for less than three (3)
years following payment in cash of the Purchase Price therefor) will be
applicable to the sale.
C. Should the Corporation not become subject to the
reporting requirements of the Exchange Act, then Participant may, provided
he/she is not at the time an affiliate of the Corporation (nor was such an
affiliate during the preceding three (3) months), sell the Shares (without
registration) pursuant to paragraph (k) of Rule 144 after the Shares have been
held for a period of three (3) years following the payment in cash of the
Purchase Price for such shares.
2.3 DISPOSITION OF SHARES. Participant hereby agrees that
Participant shall make no disposition of the Shares (other than a permitted
transfer under paragraph 4.1) unless and until there is compliance with all of
the following requirements:
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<PAGE>
(a) Participant shall have notified the Corporation of the
proposed disposition and provided a written summary of the terms and
conditions of the proposed disposition.
(b) Participant shall have complied with all requirements of
this Agreement applicable to the disposition of the Shares.
(c) Participant shall have provided the Corporation with
written assurances, in form and substance satisfactory to the
Corporation, that (i) the proposed disposition does not require
registration of the Shares under the 1933 Act or (ii) all appropriate
action necessary for compliance with the registration requirements of the
1933 Act or of any exemption from registration available under the 1933
Act (including Rule 144) has been taken.
(d) Participant shall have provided the Corporation with
written assurances, in form and substance satisfactory to the
Corporation, that the proposed disposition will not result in the
contravention of any transfer restrictions applicable to the Shares
pursuant to the provisions of the Commissioner Rules identified in
paragraph 2.5.
The Corporation shall NOT be required (i) to transfer on its books
any Shares which have been sold or transferred in violation of the provisions of
this Article II NOR (ii) to treat as the owner of the Shares, or otherwise to
accord voting or dividend rights to, any transferee to whom the Shares have been
transferred in contravention of this Agreement.
2.4 RESTRICTIVE LEGENDS. In order to reflect the restrictions
on disposition of the Shares, the stock certificates for the Shares will be
endorsed with restrictive legends, including one or more of the following
legends:
(i) "The shares represented by this certificate have not
been registered under the Securities Act of 1933. The shares may not be
sold or offered for sale in the absence of (a) an effective registration
statement for the shares under such Act, (b) a 'no action' letter of the
Securities and Exchange Commission with respect to such sale or offer, or
(c) satisfactory assurances to the Corporation that registration under
such Act is not required with respect to such sale or offer."
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<PAGE>
(ii) "It is unlawful to consummate a sale or transfer of
this security, or any interest therein, or to receive any consideration
therefor, without the prior written consent of the Commissioner of
Corporations of the State of California, except as permitted in the
Commissioner's Rules."
(iii) "The shares represented by this certificate are
unvested and accordingly may not be sold, assigned, transferred,
encumbered, or in any manner disposed of except in conformity with the
terms of a written agreement dated ____________, 19__, between the
Corporation and the registered holder of the shares (or the predecessor
in interest to the shares). Such agreement grants certain repurchase
rights and rights of first refusal to the Corporation (or its assignees)
upon the sale, assignment, transfer, encumbrance or other disposition of
the Corporation's shares or upon termination of service with the
Corporation. The Corporation will upon written request furnish a copy of
such agreement to the holder hereof without charge."
2.5 RECEIPT OF COMMISSIONER RULES. Participant hereby
acknowledges receipt of a copy of Section 260.141.11 of the Rules of the
California Corporations Commissioner, a copy of which is attached as Exhibit C
to this Agreement.
III. SPECIAL TAX PROVISIONS
3.1 SECTION 83(B) ELECTION. The Participant understands that
under Section 83 of the Code, the excess of the fair market value of the Shares
on the date any forfeiture restrictions applicable to such shares lapse over the
Purchase Price for such Shares will be reportable as ordinary income on such
lapse date. For this purpose, the term "forfeiture restrictions" includes the
right of the Corporation to repurchase the Shares pursuant to the Repurchase
Right provided under Article V of this Agreement. Participant understands that
he/she may elect under Section 83(b) of the Internal Revenue Code of 1986, as
amended (the "Code") to be taxed at the time the Shares are acquired hereunder,
rather than when and as such Shares cease to be subject to such forfeiture
restrictions. Such election must be filed with the Internal Revenue Service
within thirty (30) days after the date of this Agreement. Even if the fair
market value of the Shares on the date of this Agreement equals the Purchase
Price paid (and thus no tax is payable), the election must be made to avoid
adverse tax consequences in the future. The form for making this election is
attached as Exhibit D hereto. Participant understands that failure to make this
filing within the thirty (30)-day period will result in the
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<PAGE>
recognition of ordinary income by the Participant as the forfeiture
restrictions lapse.
3.2 PARTICIPANT ACKNOWLEDGES THAT IT IS PARTICIPANT'S SOLE
RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER
SECTION 83(b), EVEN IF PARTICIPANT REQUESTS THE CORPORATION OR ITS
REPRESENTATIVES TO MAKE THIS FILING ON HIS/HER BEHALF. This filing should be
made by registered or certified mail, return receipt requested, and Participant
must retain two (2) copies of the completed form for filing with his/her State
and Federal tax returns for the current tax year and an additional copy for
his/her personal records.
IV. TRANSFER RESTRICTIONS
4.1 RESTRICTION ON TRANSFER. Participant shall not
transfer, assign, encumber or otherwise dispose of any of the Shares which
are subject to the Corporation's Repurchase Right under Article V. In
addition, Shares which are released from the Repurchase Right shall not be
transferred, assigned, encumbered or otherwise made the subject of
disposition in contravention of the Corporation's First Refusal Right under
Article VI. Such restrictions on transfer, however, shall NOT be applicable
to (i) a gratuitous transfer of the Shares made to the Participant's spouse
or issue, including adopted children, or to a trust for the exclusive benefit
of the Participant or the Participant's spouse or issue, PROVIDED AND ONLY IF
the Participant obtains the Corporation's prior written consent to such
transfer, (ii) a transfer of title to the Shares effected pursuant to the
Participant's will or the laws of intestate succession or (iii) a transfer to
the Corporation in pledge as security for any purchase-money indebtedness
incurred by the Participant in connection with the acquisition of the Shares.
4.2 TRANSFEREE OBLIGATIONS. Each person (other than the
Corporation) to whom the Shares are transferred by means of one of the
permitted transfers specified in paragraph 4.1 must, as a condition precedent
to the validity of such transfer, acknowledge in writing to the Corporation
that such person is bound by the provisions of this Agreement and that the
transferred shares are subject to (i) both the Corporation's Repurchase Right
and the Corporation's First Refusal Right granted hereunder and (ii) the
market stand-off provisions of paragraph 4.4, to the same extent such Shares
would be so subject if retained by the Participant.
4.3 DEFINITION OF OWNER. For purposes of Articles IV, V, VI
and VII of this Agreement, the term "Owner" shall include the Participant and
all subsequent holders of the Shares who derive their chain of ownership through
a permitted transfer from the Participant in accordance with paragraph 4.1.
-5-
<PAGE>
4.4 MARKET STAND-OFF PROVISIONS.
A. In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any Shares without the prior written consent of the Corporation or
its underwriters. Such limitations shall be in effect for such period of time
from and after the effective date of such registration statement as may be
requested by the Corporation or such underwriters; PROVIDED, however, that in no
event shall such period exceed one hundred-eighty (180) days. The limitations
of this paragraph 4.4 shall remain in effect for the two-year period immediately
following the effective date of the Corporation's initial public offering and
shall thereafter terminate and cease to have any force or effect.
B. Owner shall be subject to the market stand-off provisions
of this paragraph 4.4 PROVIDED AND ONLY IF the officers and directors of the
Corporation are also subject to similar arrangements.
C. In the event of any stock dividend, stock split,
recapitalization or other change affecting the Corporation's outstanding Common
Stock effected without receipt of consideration, then any new, substituted or
additional securities distributed with respect to the Shares shall be
immediately subject to the provisions of this paragraph 4.4, to the same extent
the Shares are at such time covered by such provisions.
D. In order to enforce the limitations of this paragraph 4.4,
the Corporation may impose stop-transfer instructions with respect to the Shares
until the end of the applicable stand-off period.
V. REPURCHASE RIGHT
5.1 GRANT. The Corporation is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the sixty (60)-day period
following the date the Participant ceases for any reason to remain in Service or
(if later) during the sixty (60)-day period following the execution date of this
Agreement, to repurchase at the Purchase Price all or (at the discretion of the
Corporation and with the consent of the Participant) any portion of the Shares
in which the Participant has not acquired a vested interest in accordance with
the vesting provisions of paragraph 5.3 below (such shares to be hereinafter
-6-
<PAGE>
called the "Unvested Shares"). For purposes of this Agreement, the Participant
shall be deemed to remain in Service for so long as the Participant continues to
render periodic services to the Corporation or any parent or subsidiary
corporation, whether as an employee, a non-employee member of the board of
directors, or an independent contractor or consultant.
5.2 EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right
shall be exercisable by written notice delivered to the Owner of the Unvested
Shares prior to the expiration of the applicable sixty (60)-day period specified
in paragraph 5.1. The notice shall indicate the number of Unvested Shares to be
repurchased and the date on which the repurchase is to be effected, such date to
be not more than thirty (30) days after the date of notice. To the extent one
or more certificates representing Unvested Shares may have been previously
delivered out of escrow to the Owner, then Owner shall, prior to the close of
business on the date specified for the repurchase, deliver to the Secretary of
the Corporation the certificates representing the Unvested Shares to be
repurchased, each certificate to be properly endorsed for transfer. The
Corporation shall, concurrently with the receipt of such stock certificates
(either from escrow in accordance with paragraph 7.3 or from Owner as herein
provided), pay to Owner in cash or cash equivalents (including the cancellation
of any purchase-money indebtedness), an amount equal to the Purchase Price
previously paid for the Unvested Shares which are to be repurchased.
5.3 TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right
shall terminate with respect to any Unvested Shares for which it is not timely
exercised under paragraph 5.2. In addition, the Repurchase Right shall
terminate, and cease to be exercisable, with respect to any and all Shares in
which the Participant vests in accordance with the schedule below. Accordingly,
as the Participant continues in Service, the Participant shall acquire a vested
interest in, and the Repurchase Right shall lapse with respect to, the Shares in
installments in accordance with the following provisions:
(i) The Participant shall not acquire any vested
interest in, nor shall the Repurchase Right lapse with respect to, any
Shares unless and until the Participant has completed twelve (12)
months of Service measured from _________________, 199__.
(ii) Upon the completion of the twelve (12) month
Service period specified in subparagraph (i) above, the Participant
shall acquire a vested interest in, and the Repurchase Right shall
lapse with respect to, 25% of the Shares.
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(iii) The Participant shall acquire a vested interest
in, and the Repurchase Right shall lapse with respect to, the
remaining Shares in a series of successive equal monthly installments
over each of the next thirty-six (36) months of Service completed by
the Participant after the initial vesting date under subparagraph
(ii) above.
All Shares as to which the Repurchase Right lapses shall,
however, continue to be subject to (i) the First Refusal Right and (ii) the
market stand-off provisions of paragraph 4.4.
5.4 FRACTIONAL SHARES. No fractional shares shall be
repurchased by the Corporation. Accordingly should the Repurchase Right extend
to a fractional share (in accordance with the vesting computation provisions of
paragraph 5.3) at the time the Participant ceases Service, then such fractional
share shall be added to any fractional share in which the Participant is at such
time vested in order to make one whole vested share no longer subject to the
Repurchase Right.
5.5 ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event
of any stock dividend, stock split, recapitalization or other change affecting
the Corporation's outstanding Common Stock as a class effected without receipt
of consideration, then any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which is
by reason of any such transaction distributed with respect to the Shares shall
be immediately subject to the Repurchase Right, but only to the extent the
Shares are at the time covered by such right. Appropriate adjustments to
reflect the distribution of such securities or property shall be made to the
number of Shares at the time subject to the Repurchase Right hereunder and to
the price per share to be paid upon the exercise of the Repurchase Right in
order to reflect the effect of any such transaction upon the Corporation's
capital structure; PROVIDED, however, that the aggregate Purchase Price shall
remain the same.
5.6 CORPORATE TRANSACTION.
A. Immediately prior to the consummation of any of the
following shareholder-approved transactions (a "Corporate Transaction"):
(i) a merger or consolidation in which more than fifty
percent (50%) of the Corporation's outstanding voting stock is
transferred to a person or persons different from those who held the
stock immediately prior to such transaction, or
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(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation,
the Repurchase Right shall automatically lapse in its
entirety, except to the extent the Repurchase Right is to be assigned to the
successor corporation (or its parent company) in connection with such Corporate
Transaction.
B. To the extent the Repurchase Right remains in effect
following such Corporate Transaction, it shall apply to the new capital stock or
other property (including cash) received in exchange for the Shares in
consummation of the Corporate Transaction, but only to the extent the Shares are
at the time covered by such right. Appropriate adjustments shall be made to the
price per share payable upon exercise of the Repurchase Right to reflect the
effect of the Corporate Transaction upon the Corporation's capital structure;
PROVIDED, however, that the aggregate Purchase Price shall remain the same.
VI. RIGHT OF FIRST REFUSAL
6.1 GRANT. The Corporation is hereby granted the right of
first refusal (the "First Refusal Right"), exercisable in connection with any
proposed transfer of the Shares in which the Participant has vested in
accordance with the vesting provisions of Article V. For purposes of this
Article VI, the term "transfer" shall include any sale, assignment, pledge,
encumbrance or other disposition for value of the Shares intended to be made by
the Owner, but shall not include any of the permitted transfers under paragraph
4.1.
6.2 NOTICE OF INTENDED DISPOSITION. In the event the Owner
desires to accept a bona fide third-party offer for any or all of the Shares
(the shares subject to such offer to be hereinafter called the "Target Shares"),
Owner shall promptly (i) deliver to the Corporate Secretary of the Corporation
written notice (the "Disposition Notice") of the terms and conditions of the
offer, including the purchase price and the identity of the third-party offeror
and (ii) provide satisfactory proof that the disposition of the Target Shares to
such third-party offeror would not be in contravention of the provisions set
forth in Articles II and IV of this Agreement.
6.3 EXERCISE OF RIGHT. The Corporation (or its assignees)
shall, for a period of twenty-five (25) days following receipt of the
Disposition Notice, have the right to repurchase any or all of the Target Shares
specified in the Disposition Notice upon substantially the same terms and
conditions specified therein or upon terms and conditions which do not
materially vary
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from those specified therein. Such right shall be exercisable by delivery of
written notice (the "Exercise Notice") to Owner prior to the expiration of
the twenty-five (25)-day exercise period. If such right is exercised with
respect to all the Target Shares specified in the Disposition Notice, then
the Corporation (or its assignees) shall effect the repurchase of the Target
Shares, including payment of the purchase price, not more than five (5)
business days after delivery of the Exercise Notice; and at such time Owner
shall deliver to the Corporation the certificates representing the Target
Shares to be repurchased, each certificate to be properly endorsed for
transfer. To the extent any of the Target Shares are at the time held in
escrow under Article VII, the certificates for such shares shall
automatically be released from escrow and delivered to the Corporation for
purchase.
6.4 NON-EXERCISE OF RIGHT. In the event the Exercise Notice is
not given to Owner within twenty-five (25) days following the date of the
Corporation's receipt of the Disposition Notice, Owner shall have a period of
thirty (30) days thereafter in which to sell or otherwise dispose of the Target
Shares to the third-party offeror identified in the Disposition Notice upon
terms and conditions (including the purchase price) no more favorable to such
third-party offeror than those specified in the Disposition Notice; PROVIDED,
however, that any such sale or disposition must not be effected in contravention
of the provisions of Article II of this Agreement. To the extent any of the
Target Shares are at the time held in escrow under Article VII, the certificates
for such shares shall automatically be released from escrow and surrendered to
the Owner. The third-party offeror shall acquire the Target Shares free and
clear of the Corporation's Repurchase Right under Article V and the
Corporation's First Refusal Right hereunder, but the acquired shares shall
remain subject to (i) the securities law restrictions of paragraph 2.2(a) and
(ii) the market stand-off provisions of paragraph 4.4. In the event Owner does
not effect such sale or disposition of the Target Shares within the specified
thirty (30) day period, the Corporation's First Refusal Right shall continue to
be applicable to any subsequent disposition of the Target Shares by Owner until
such right lapses in accordance with paragraph 6.7.
6.5 PARTIAL EXERCISE OF RIGHT. In the event the Corporation
(or its assignees) makes a timely exercise of the First Refusal Right with
respect to a portion, but not all, of the Target Shares specified in the
Disposition Notice, Owner shall have the option, exercisable by written notice
to the Corporation delivered within thirty (30) days after the date of the
Disposition Notice, to effect the sale of the Target Shares pursuant to one of
the following alternatives:
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(i) sale or other disposition of all the Target Shares
to the third-party offeror identified in the Disposition Notice, but
in full compliance with the requirements of paragraph 6.4, as if the
Corporation did not exercise the First Refusal Right hereunder; or
(ii) sale to the Corporation (or its assignees) of the
portion of the Target Shares which the Corporation (or its assignees)
has elected to purchase, such sale to be effected in substantial
conformity with the provisions of paragraph 6.3.
Failure of Owner to deliver timely notification to the Corporation
under this paragraph 6.5 shall be deemed to be an election by Owner to sell the
Target Shares pursuant to alternative (i) above.
6.6 RECAPITALIZATION/MERGER.
(a) In the event of any stock dividend, stock split,
recapitalization or other transaction affecting the Corporation's outstanding
Common Stock as a class effected without receipt of consideration, then any new,
substituted or additional securities or other property which is by reason of
such transaction distributed with respect to the Purchased Shares shall be
immediately subject to the Corporation's First Refusal Right hereunder, but only
to the extent the Purchased Shares are at the time covered by such right.
(b) In the event of any of the following transactions:
(i) a merger or consolidation in which the
Corporation is not the surviving entity,
(ii) a sale, transfer or other disposition of all
or substantially all of the Corporation's assets,
(iii) a reverse merger in which the Corporation is
the surviving entity but in which the Corporation's outstanding voting
securities are transferred in whole or in part to person or persons other
than those who held such securities immediately prior to the merger, or
(iv) any transaction effected primarily to change
the State in which the Corporation is incorporated, or to create a
holding company structure,
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the Corporation's First Refusal Right shall remain in full
force and effect and shall apply to the new capital stock or other property
received in exchange for the Purchased Shares in consummation of the transaction
but only to the extent the Purchased Shares are at the time covered by such
right.
6.7 LAPSE. The First Refusal Right under this Article VI shall
lapse and cease to have effect upon the EARLIEST to occur of (i) the first date
on which shares of the Corporation's Common Stock are held of record by more
than five hundred (500) persons, (ii) a determination is made by the
Corporation's Board of Directors that a public market exists for the outstanding
shares of the Corporation's Common Stock, or (iii) a firm commitment
underwritten public offering pursuant to an effective registration statement
under the 1933 Act, covering the offer and sale of the Corporation's Common
Stock in the aggregate amount of at least $5,000,000. However, the market
stand-off provisions of paragraph 4.4 shall continue to remain in full force and
effect following the lapse of the First Refusal Right hereunder.
VII. ESCROW
7.1 DEPOSIT. Upon issuance, the certificates for any Unvested
Shares purchased hereunder shall be deposited in escrow with the Corporation to
be held in accordance with the provisions of this Article VII. Each deposited
certificate shall be accompanied by a duly executed Assignment Separate from
Certificate in the form of Exhibit A. The deposited certificates, together with
any other assets or securities from time to time deposited with the Corporation
pursuant to the requirements of this Agreement, shall remain in escrow until
such time or times as the certificates (or other assets and securities) are to
be released or otherwise surrendered for cancellation in accordance with
paragraph 7.3. Upon delivery of the certificates (or other assets and
securities) to the Corporation, the Owner shall be issued an instrument of
deposit acknowledging the number of Unvested Shares (or other assets and
securities) delivered in escrow to the Corporation.
7.2 RECAPITALIZATION. All regular cash dividends on the
Unvested Shares (or other securities at the time held in escrow) shall be paid
directly to the Owner and shall not be held in escrow. However, in the event of
any stock dividend, stock split, recapitalization or other change affecting the
Corporation's outstanding Common Stock as a class effected without receipt of
consideration or in the event of a Corporate Transaction, any new, substituted
or additional securities or other property which is by reason of such
transaction distributed with respect to the Unvested Shares shall be immediately
delivered to the Corporation to be held in escrow under this
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Article VII, but only to the extent the Unvested Shares are at the time subject
to the escrow requirements of paragraph 7.1.
7.3 RELEASE/SURRENDER. The Unvested Shares, together with any
other assets or securities held in escrow hereunder, shall be subject to the
following terms and conditions relating to their release from escrow or their
surrender to the Corporation for repurchase and cancellation:
(i) Should the Corporation (or its assignees) elect to
exercise the Repurchase Right under Article V with respect to any
Unvested Shares, then the escrowed certificates for such Unvested Shares
(together with any other assets or securities issued with respect
thereto) shall be delivered to the Corporation, concurrently with the
payment to the Owner, in cash or cash equivalent (including the
cancellation of any purchase-money indebtedness), of an amount equal to
the aggregate Purchase Price for such Unvested Shares, and the Owner
shall cease to have any further rights or claims with respect to such
Unvested Shares (or other assets or securities attributable to such
Unvested Shares).
(ii) Should the Corporation (or its assignees) elect to
exercise its First Refusal Right under Article VI with respect to any
vested Target Shares held at the time in escrow hereunder, then the
escrowed certificates for such Target Shares (together with any other
assets or securities attributable thereto) shall, concurrently with the
payment of the paragraph 6.3 purchase price for such Target Shares to the
Owner, be surrendered to the Corporation, and the Owner shall cease to
have any further rights or claims with respect to such Target Shares (or
other assets or securities).
(iii) Should the Corporation (or its assignees) elect NOT
to exercise its First Refusal Right under Article VI with respect to any
Target Shares held at the time in escrow hereunder, then the escrowed
certificates for such Target Shares (together with any other assets or
securities attributable thereto) shall be surrendered to the Owner for
disposition in accordance with the provisions of paragraph 6.4.
(iv) As the interest of the Participant in the Unvested
Shares (or any other assets or securities attributable thereto) vests in
accordance with the provisions of Article V, the certificates for such
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vested shares (as well as all other vested assets and securities) shall
be released from escrow and delivered to the Owner in accordance with the
following schedule:
a. The initial release of vested shares (or
other vested assets and securities) from escrow shall be
effected within thirty (30) days following the expiration
of the initial twelve (12)-month period measured from the
initial vesting date under paragraph 5.3.
b. Subsequent releases of vested shares (or
other vested assets and securities) from escrow shall be
effected at semi-annual intervals thereafter, with the
first such semi-annual release to occur six (6) months
after the initial paragraph 5.3 vesting date.
c. Upon the Participant's cessation of Service,
any escrowed Shares (or other assets or securities) in
which the Participant is at the time vested shall be
promptly released from escrow.
d. Upon any earlier termination of the
Corporation's Repurchase Right in accordance with the
applicable provisions of Article V, the Shares (or other
assets or securities) at the time held in escrow hereunder
shall promptly be released to the Owner as fully-vested
shares or other property.
(v) All Shares (or other assets or securities) released
from escrow in accordance with the provisions of subparagraph (iv) above
shall nevertheless remain subject to (I) the Corporation's First Refusal
Right under Article VI until such right lapses pursuant to paragraph 6.7,
(II) the market stand-off provisions of paragraph 4.4 until such
provisions terminate in accordance therewith and (III) the Special
Purchase Right under Article VIII.
VIII. MARITAL DISSOLUTION OR LEGAL SEPARATION
8.1 GRANT. In connection with the dissolution of the
Participant's marriage or the legal separation of the Participant and the
Participant's spouse, the Corporation shall have the right (the "Special
Purchase Right"), exercisable at any time
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during the thirty (30)-day period following the Corporation's receipt of the
required Dissolution Notice under paragraph 8.2, to purchase from the
Participant's spouse, in accordance with the provisions of paragraph 8.3, all
or any portion of the Shares which would otherwise be awarded to such spouse
in settlement of any community property or other marital property rights such
spouse may have in such shares.
8.2 NOTICE OF DECREE OR AGREEMENT. The Participant shall
promptly provide the Secretary of the Corporation with written notice (the
"Dissolution Notice") of (i) the entry of any judicial decree or order resolving
the property rights of the Participant and the Participant's spouse in
connection with their marital dissolution or legal separation or (ii) the
execution of any contract or agreement relating to the distribution or division
of such property rights. The Dissolution Notice shall be accompanied by a copy
of the actual decree of dissolution or settlement agreement between the
Participant and the Participant's spouse which provides for the award to the
spouse of one or more Shares in settlement of any community property or other
marital property rights such spouse may have in such shares.
8.3 EXERCISE OF SPECIAL PURCHASE RIGHT. The Special Purchase
Right shall be exercisable by delivery of the Purchase Notice to the Participant
and the Participant's spouse within thirty (30) days after the Corporation's
receipt of the Dissolution Notice. The Purchase Notice shall indicate the
number of shares to be purchased by the Corporation, the date such purchase is
to be effected (such date to be not less than five (5) business days, nor more
than ten (10) business days, after the date of the Purchase Notice), and the
fair market value to be paid for such Shares. The Participant (or the
Participant's spouse, to the extent such spouse has physical possession of the
Shares) shall, prior to the close of business on the date specified for the
purchase, deliver to the Corporate Secretary of the Corporation the certificates
representing the shares to be purchased, each certificate to be properly
endorsed for transfer. To the extent any of the shares to be purchased by the
Corporation are at the time held in escrow under Article VII, the certificates
for such shares shall be promptly delivered out of escrow to the Corporation.
The Corporation shall, concurrently with the receipt of the stock certificates,
pay to the Participant's spouse (in cash or cash equivalents) an amount equal to
the fair market value specified for such shares in the Purchase Notice.
If the Participant's spouse does not agree with the fair market
value specified for the shares in the Purchase Notice, then the spouse shall
promptly notify the Corporation in writing of such disagreement and the fair
market value of such
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shares shall thereupon be determined by an appraiser of recognized standing
selected by the Corporation and the spouse. If they cannot agree on an
appraiser within twenty (20) days after the date of the Purchase Notice, each
shall select an appraiser of recognized standing, and the two appraisers
shall designate a third appraiser of recognized standing whose appraisal
shall be determinative of such value. The cost of the appraisal shall be
shared equally by the Corporation and the Participant's spouse. The closing
shall then be held on the fifth business day following the completion of such
appraisal; PROVIDED, however, that if the appraised value is more than
fifteen percent (15%) greater than the fair market value specified for the
shares in the Purchase Notice, the Corporation shall have the right,
exercisable prior to the expiration of such five (5) business-day period, to
rescind the exercise of the Special Purchase Right and thereby revoke its
election to purchase the shares awarded to the spouse.
8.4 LAPSE. The Special Purchase Right under this Article VIII
shall lapse and cease to have effect upon the EARLIER to occur of (i) the first
date on which the First Refusal Right under Article VI lapses or (ii) the
expiration of the thirty (30)-day exercise period specified in paragraph 8.3, to
the extent the Special Purchase Right is not timely exercised in accordance with
such paragraph.
IX. GENERAL PROVISIONS
9.1 ASSIGNMENT. The Corporation may assign its Repurchase
Right under Article V, its First Refusal Right under Article VI and/or its
Special Purchase Right under Article VIII to any person or entity selected by
the Corporation's Board of Directors, including (without limitation) one or more
shareholders of the Corporation.
If the assignee of the Repurchase Right is other than a one
hundred percent (100%) owned subsidiary corporation of the Corporation or the
parent corporation owning one hundred percent (100%) of the Corporation, then
such assignee must make a cash payment to the Corporation, upon the assignment
of the Repurchase Right, in an amount equal to the excess (if any) of (i) the
fair market value of the Unvested Shares at the time subject to the assigned
Repurchase Right over (ii) the aggregate repurchase price payable for Unvested
Shares thereunder.
9.2 DEFINITIONS. For purposes of this Agreement, the following
provisions shall be applicable in determining the parent and subsidiary
corporations of the Corporation:
(i) Any corporation (other than the Corporation) in an
unbroken chain of corporations
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ending with the Corporation shall be considered to be a PARENT
corporation of the Corporation, provided each such corporation in the
unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the
other corporations in such chain.
(ii) Each corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation shall be
considered to be a SUBSIDIARY of the Corporation, provided each such
corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
9.3 NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this
Agreement or in the Plan shall confer upon the Participant any right to continue
in the Service of the Corporation (or any parent or subsidiary corporation
employing or retaining Participant) for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any parent or subsidiary corporation employing or retaining Participant) or
the Participant, which rights are hereby expressly reserved by each, to
terminate the Participant's Service at any time for any reason whatsoever, with
or without cause.
9.4 NOTICES. Any notice required in connection with (i) the
Repurchase Right, the Special Purchase Right or the First Refusal Right or (ii)
the disposition of any Shares covered thereby shall be given in writing and
shall be deemed effective upon personal delivery or upon deposit in the United
States mail, registered or certified, postage prepaid and addressed to the party
entitled to such notice at the address indicated below such party's signature
line on this Agreement or at such other address as such party may designate by
ten (10) days advance written notice under this paragraph 9.4 to all other
parties to this Agreement.
9.5 NO WAIVER. The failure of the Corporation (or its
assignees) in any instance to exercise the Repurchase Right granted under
Article V, or the failure of the Corporation (or its assignees) in any instance
to exercise the First Refusal Right granted under Article VI, or the failure of
the Corporation (or its assignees) in any instance to exercise the Special
Purchase Right granted under Article VIII shall not constitute a waiver of any
other repurchase rights and/or rights of first refusal that may subsequently
arise under the provisions of this
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Agreement or any other agreement between the Corporation and the Participant
or the Participant's spouse. No waiver of any breach or condition of this
Agreement shall be deemed to be a waiver of any other or subsequent breach or
condition, whether of like or different nature.
9.6 CANCELLATION OF SHARES. If the Corporation (or its
assignees) shall make available, at the time and place and in the amount and
form provided in this Agreement, the consideration for the Shares to be
repurchased in accordance with the provisions of this Agreement, then from and
after such time, the person from whom such shares are to be repurchased shall no
longer have any rights as a holder of such shares (other than the right to
receive payment of such consideration in accordance with this Agreement), and
such shares shall be deemed purchased in accordance with the applicable
provisions hereof and the Corporation (or its assignees) shall be deemed the
owner and holder of such shares, whether or not the certificates therefor have
been delivered as required by this Agreement.
X. MISCELLANEOUS PROVISIONS
10.1 PARTICIPANT UNDERTAKING. Participant hereby agrees to take
whatever additional action and execute whatever additional documents the
Corporation may in its judgment deem necessary or advisable in order to carry
out or effect one or more of the obligations or restrictions imposed on either
the Participant or the Shares pursuant to the express provisions of this
Agreement.
10.2 AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes
the entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the express terms and provisions
of the Plan.
10.3 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, as such laws
are applied to contracts entered into and performed in such State without resort
to that State's conflict-of-laws rules.
10.4 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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10.5 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall inure to the benefit of, and be binding upon, the Corporation and its
successors and assigns and the Participant and the Participant's legal
representatives, heirs, legatees, distributees, assigns and transferees by
operation of law, whether or not any such person shall have become a party to
this Agreement and have agreed in writing to join herein and be bound by the
terms and conditions hereof.
10.6 POWER OF ATTORNEY. Participant's spouse hereby appoints
Participant his or her true and lawful attorney in fact, for him or her and in
his or her name, place and stead, and for his or her use and benefit, to agree
to any amendment or modification of this Agreement and to execute such further
instruments and take such further actions as may reasonably be necessary to
carry out the intent of this Agreement. Participant's spouse further gives and
grants unto Participant as his or her attorney in fact full power and authority
to do and perform every act necessary and proper to be done in the exercise of
any of the foregoing powers as fully as he or she might or could do if
personally present, with full power of substitution and revocation, hereby
ratifying and confirming all that Participant shall lawfully do and cause to be
done by virtue of this power of attorney.
[Remainder of this page is left intentionally blank.]
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IN WITNESS WHEREOF, the parties have executed this Agreement on
the day and year first indicated above.
RUBIO'S RESTAURANTS, INC.
By ________________________________
Title _____________________________
Address: ___________________________________
___________________________________
___________________________________
Participant 1
Address: ___________________________________
___________________________________
The undersigned spouse of Participant has read and hereby approves
the foregoing Restricted Stock Purchase Agreement. In consideration of the
Corporation's granting the Participant the right to acquire the Shares in
accordance with the terms of such Agreement, the undersigned hereby agrees to be
irrevocably bound by all the terms and provisions of such Agreement, including,
(specifically) the right of the Corporation (or its assignees) to purchase any
and all interest or right the undersigned may otherwise have in such shares
pursuant to community property laws or other marital property rights.
___________________________________
Participant's Spouse
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(1) I have executed the Section 83(b) election that was attached hereto
as Exhibit D. As set forth in Article III, I understand that I, and NOT the
Corporation, will be responsible for completing the form and filing the election
with the appropriate offices of the federal and state tax authorities and that
if such filing is not completed within thirty (30) days after the date of this
Agreement, I will not be entitled to the tax benefits provided by Section 83(b).
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EXHIBIT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, ________________ hereby sell(s), assign(s) and
transfer(s) unto Rubio's Restaurants, Inc. (the "Corporation") _________________
__________________ (____________) shares of the Common Stock of the Corporation
standing in his\her name on the books of the Corporation represented by
Certificate No. __________ herewith and do hereby irrevocably constitute and
appoint ____________________ Attorney to transfer the said stock on the books of
the Corporation with full power of substitution in the premises.
Dated: ___________________
Signature ________________________________
INSTRUCTION: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Corporation to exercise the
Repurchase Right set forth in the Agreement without requiring additional
signatures on the part of the Participant.
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EXHIBIT B
1993 STOCK OPTION\STOCK ISSUANCE PLAN
(See Exhibit 10.27 to Registration Statement on Form S-1)
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EXHIBIT C
SECTION 260.141.11
TITLE 10, CALIFORNIA ADMINISTRATIVE CODE
260.141.11 Restriction on Transfer. (a) The issuer of any
security upon which a restriction on transfer has been imposed pursuant to
Sections 260.102.6, 260.141.10 or 260.534 shall cause a copy of this section to
be delivered to each issuee or transferee of such security at the time the
certificate evidencing the security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to
consummate a sale or transfer of such security, or any interest therein,
without the prior written consent of the Commissioner (until this condition is
removed pursuant to Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102
of the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or
any custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants or
spouse;
(5) to holders of securities of the same class of the same
issuer;
(6) by way of gift or donation inter vivos or on
death;
(7) by or through a broker-dealer licensed under the Code
(either acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the knowledge of
the broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
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(9) if the interest sold or transferred is a pledge or other
lien given by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this rule not required;
(10) by way of a sale qualified under Sections 25111, 25112,
25113 or 25121 of the Code, of the securities to be transferred, provided that
no order under Section 25140 or Subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112
or 25113 of the Code, provided that no order under Section 25140 or Subdivision
(a) of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or
countries who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property
Law or to the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property
Law or by the administrator of the unclaimed property law of another state if,
in either such case, such person (i) discloses to potential purchasers at the
sale that transfer of the securities is restricted under this rule, (ii)
delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does
not involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of Section
25110 of the Code but exempt from that qualification requirement by subdivision
(f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
C-2
<PAGE>
(c) The certificates representing all such securities subject
to such a restriction on transfer, whether upon initial issuance or upon any
transfer thereof, shall bear on their face a legend, prominently stamped or
printed thereon in capital letters of not less than 10-point size, reading as
follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
C-3
<PAGE>
REPURCHASE RIGHTS
EXHIBIT D
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name: ________________
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is
________________ shares of the common stock of Rubio's Restaurants, Inc.
(3) The property was issued on ______________________, 19__.
(4) The taxable year in which the election is being made is the calendar year
19__.
(5) The property is subject to a repurchase right pursuant to which the
issuer has the right to acquire the property at the original purchase
price if for any reason taxpayer's employment with the issuer is
terminated. The issuer's repurchase right lapses in a series of annual
and monthly installments over a four (4) year period ending on
____________________________.
(6) The fair market value at the time of transfer (determined without regard
to any restriction other than a restriction which by its terms will never
lapse) is $________ per share.
(7) The amount paid for such property is $________ per share.
(8) A copy of this statement was furnished to Rubio's Restaurants, Inc. for
whom taxpayer rendered the service underlying the transfer of property.
(9) This statement is executed as of: ______________________, 19__.
- -------------------------------- ----------------------------------------
Spouse (if any) Taxpayer
This form must be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Restricted Stock Issuance
Agreement.
D-1
<PAGE>
EXHIBIT 10.32
RUBIO'S RESTAURANTS, INC.
1995 STOCK OPTION/STOCK ISSUANCE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1995 Stock Option/Stock Issuance Plan is intended to promote
the interests of Rubio's Restaurants, Inc., a California corporation, by
providing eligible persons with the opportunity to acquire a proprietary
interest, or otherwise increase their proprietary interest, in the
Corporation as an incentive for them to remain in the service of the
Corporation.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Board. However, any or all
administrative functions otherwise exercisable by the Board may be delegated
to the Committee. Members of the Committee shall serve for such period of
time as the Board may determine and shall be subject to removal by the Board
at any time. The Board may also at any time terminate the functions of the
Committee and reassume all powers and authority previously delegated to the
Committee.
B. The Plan Administrator shall have full power and authority
(subject to the provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for proper administration of the Plan
and to make such determinations under, and issue such interpretations of, the
Plan and any outstanding options as it may deem necessary or advisable.
Decisions of the Plan Administrator shall be final and binding on all parties
who have an interest in the Plan or any option or shares issued thereunder.
III. ELIGIBILITY
A. The persons eligible to receive option grants under the Plan
are as follows:
(i) Employees,
(ii) non-employee members of the Board or the non-employee
members of the board of directors of any Parent or Subsidiary, and
<PAGE>
(iii) consultants who provide services to the Corporation
(or any Parent or Subsidiary).
B. The Plan Administrator shall have full authority to determine
which eligible persons are to receive option grants under the Plan, the time
or times when such option grants are to be made, the number of shares to be
covered by each such grant, the status of the granted option as either an
Incentive Option or a Non-Statutory Option, the time or times at which each
option is to become exercisable, the vesting schedule (if any) applicable to
the option shares and the maximum term for which the option is to remain
outstanding.
IV. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock. The maximum number of shares of
Common Stock which may be issued over the term of the Plan shall not exceed
225,000 shares.
B. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the
options expire or terminate for any reason prior to exercise in full or (ii)
the options are cancelled in accordance with the cancellation-regrant
provisions of Article Two. All shares issued under the Plan, whether or not
those shares are subsequently repurchased by the Corporation pursuant to its
repurchase rights under the Plan, shall reduce on a share-for-share basis the
number of shares of Common Stock available for subsequent issuance under the
Plan.
C. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as
a class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan and (ii) the number and/or class of
securities and the exercise price per share in effect under each outstanding
option in order to prevent the dilution or enlargement of benefits
thereunder. The adjustments determined by the Plan Administrator shall be
final, binding and conclusive. In no event shall any such adjustments be
made in connection with the conversion of one or more outstanding shares of
the Corporation's preferred stock into shares of Common Stock.
ARTICLE TWO
OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; PROVIDED, however, that each such
document shall comply with the
2.
<PAGE>
terms specified below. Each document evidencing an Incentive Option shall,
in addition, be subject to the provisions of the Plan applicable to such
options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator in accordance with the following provisions:
(i) The exercise price per share shall not be less than
eighty-five percent (85%) of the Fair Market Value per share of Common
Stock on the option grant date.
(ii) If the person to whom the option is granted is a 10%
Shareholder, then the exercise price per share shall not be less than
one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Three and the documents evidencing the option, be payable in cash or
check made payable to the Corporation. Should the Common Stock be registered
under Section 12(g) of the 1934 Act at the time the option is exercised, then
the exercise price may also be paid as follows:
(i) in shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(ii) to the extent the option is exercised for vested shares,
through a special sale and remittance procedure pursuant to which
the Optionee shall concurrently provide irrevocable written
instructions (a) to a Corporation-designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate exercise price
payable for the purchased shares plus all applicable Federal, state
and local income and employment taxes required to be withheld by
the Corporation by reason of such exercise and (b) to the
Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable
at such time or times, during such period and for such number of shares as
shall be determined by the
3.
<PAGE>
Plan Administrator and set forth in the documents evidencing the option
grant. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.
C. EFFECT OF TERMINATION OF SERVICE. The following provisions
shall govern the exercise of any options held by the Optionee at the time of
cessation of Service or death:
(i) Should the Optionee cease to remain in Service for any
reason other than Disability or death, then the Optionee shall have
a period of three (3) months following the date of such cessation
of Service during which to exercise each outstanding option held by
such Optionee.
(ii) Should such Service terminate by reason of Disability,
then the Optionee shall have a period of six (6) months following
the date of such cessation of Service during which to exercise each
outstanding option held by such Optionee. However, should such
Disability be deemed to constitute Permanent Disability, then the
period during which each outstanding option held by the Optionee is
to remain exercisable shall be extended by an additional six (6)
months so that the exercise period shall be the twelve (12)-month
period following the date of the Optionee's cessation of Service by
reason of such Permanent Disability.
(iii) Should the Optionee die while holding one or more
outstanding options, then the personal representative of the
Optionee's estate or the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance with
the laws of descent and distribution shall have a period of twelve
(12) months following the date of the Optionee's death during which
to exercise each such option.
(iv) Under no circumstances, however, shall any such option
be exercisable after the specified expiration of the option term.
(v) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the
number of vested shares for which the option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration
of the applicable exercise period or (if earlier) upon the
expiration of the option term, the option shall terminate and cease
to be outstanding for any vested shares for which the option has
not been exercised. However, the option shall, immediately upon
the Optionee's cessation of Service, terminate and cease to be
outstanding to the extent it is not exercisable for vested shares
on the date of such cessation of Service.
D. SHAREHOLDER RIGHTS. The holder of an option shall have no
shareholder rights with respect to the shares subject to the option until
such person shall have exercised the option, paid the exercise price and
become a holder of record of the purchased shares.
4.
<PAGE>
E. UNVESTED SHARES. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of
Common Stock under the Plan. Should the Optionee cease Service while holding
such unvested shares, the Corporation shall have the right to repurchase, at
the exercise price paid per share, all or (at the discretion of the
Corporation and with the consent of the Optionee) any of those unvested
shares. The terms upon which such repurchase right shall be exercisable
(including the period and procedure for exercise and the appropriate vesting
schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase right.
The Plan Administrator may not impose a vesting schedule upon any option
grant or any shares of Common Stock subject to the option which is more
restrictive than twenty-five percent (25%) per year vesting.
F. FIRST REFUSAL RIGHTS. Until such time as the Common Stock is
first registered under Section 12(g) of the 1934 Act, the Corporation shall
have the right of first refusal with respect to any proposed disposition by
the Optionee (or any successor in interest) of any shares of Common Stock
issued under the Plan. Such right of first refusal shall be exercisable in
accordance with the terms established by the Plan Administrator and set forth
in the document evidencing such right.
G. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, the option shall be exercisable only by the Optionee and shall not
be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, a Non-Statutory
Option may be assigned in accordance with the terms of a Qualified Domestic
Relations Order. The assigned option may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to such
Qualified Domestic Relations Order. The terms applicable to the assigned
option (or portion thereof) shall be the same as those in effect for the
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may deem
appropriate.
H. WITHHOLDING. The Corporation's obligation to deliver shares of
Common Stock upon the exercise of any options granted under the Plan shall be
subject to the satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of the Plan shall be applicable to Incentive Options. Options
which are specifically designated as Non-Statutory Options shall NOT be
subject to the terms specified in this Section II.
A. ELIGIBILITY. Incentive Options may only be granted to
Employees.
5.
<PAGE>
B. EXERCISE PRICE. The exercise price per share shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the
shares of Common Stock (determined as of the respective date or dates of
grant) for which one or more options granted to any Employee under the Plan
(or any other option plan of the Corporation or any Parent or Subsidiary) may
for the first time become exercisable as Incentive Options during any one (1)
calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) or more such options
which become exercisable for the first time in the same calendar year, the
foregoing limitation on the exercisability of such options as Incentive
Options shall be applied on the basis of the order in which such options are
granted.
D. 10% SHAREHOLDER. If any Employee to whom an Incentive Option
is granted is a 10% Shareholder, then the option term shall not exceed five
(5) years measured from the option grant date.
III. CORPORATE TRANSACTION
A. In the event of any Corporate Transaction, each outstanding
option shall terminate and cease to be outstanding, except to the extent
assumed by the successor corporation (or parent thereof) in connection with
such Corporate Transaction. In addition, all outstanding repurchase rights
under the Plan shall terminate automatically in the event of any Corporate
Transaction, except to the extent the repurchase rights are assigned to the
successor corporation (or parent thereof) in connection with such Corporate
Transaction.
B. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in the consummation of such Corporate
Transaction, had the option been exercised immediately prior to such
Corporate Transaction. Appropriate adjustments shall also be made to (i) the
number and class of securities available for issuance under the Plan
following the consummation of such Corporate Transaction and (ii) the
exercise price payable per share under each outstanding option, PROVIDED the
aggregate exercise price payable for such securities shall remain the same.
C. The grant of options under the Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
6.
<PAGE>
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any
time and from time to time, with the consent of the affected option holders,
the cancellation of any or all outstanding options under the Plan and to
grant in substitution therefor new options covering the same or different
number of shares of Common Stock but with an exercise price per share based
on the Fair Market Value per share of Common Stock on the new option grant
date.
ARTICLE THREE
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee to pay the option
exercise price by delivering a promissory note payable in one or more
installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan
Administrator in its sole discretion. Promissory notes may be authorized with
or without security or collateral. However, any promissory notes delivered by
a consultant must be secured by property other than the purchased shares of
Common Stock. In all events, the maximum credit available to each Optionee
may not exceed the SUM of (i) the aggregate option exercise price payable for
the purchased shares plus (ii) any Federal, state and local income and
employment tax liability incurred by the Optionee in connection with the
option exercise.
II. ADDITIONAL AUTHORITY
A. The Plan Administrator shall have the discretion, exercisable
either at the time an option is granted or at any time while the option
remains outstanding:
(i) to extend the period of time for which the option is
to remain exercisable following the Optionee's cessation of Service or
death from the limited period otherwise in effect for that option to
such greater period of time as the Plan Administrator shall deem
appropriate; PROVIDED, that in no event shall such option be exercisable
after the specified expiration of the option term, and/or
(ii) to permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service or death
but also with respect to one or more additional installments in which
the Optionee would have vested under the option had the Optionee
continued in Service.
7.
<PAGE>
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective when adopted by the Board, but
no option granted under the Plan may be exercised until the Plan is approved
by the Corporation's shareholders. If such shareholder approval is not
obtained within twelve (12) months after the date of the Board's adoption of
the Plan, then all options previously granted under the Plan shall terminate
and cease to be outstanding, and no further options shall be granted.
Subject to such limitation, the Plan Administrator may grant options under
the Plan at any time after the effective date of the Plan and before the date
fixed herein for termination of the Plan.
B. The Plan shall terminate upon the EARLIEST of (i) the
expiration of the ten (10)-year period measured from the date the Plan is
adopted by the Board, (ii) the date on which all shares available for
issuance under the Plan shall have been issued or (iii) the termination of
all outstanding options in connection with a Corporate Transaction. Upon
such Plan termination, all options and unvested stock issuances outstanding
under the Plan shall continue to have full force and effect in accordance
with the provisions of the documents evidencing such options or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall, without the consent of the Optionees,
adversely affect their rights and obligations under their outstanding
options. In addition, the Board shall not, without the approval of the
Corporation's shareholders, (i) increase the maximum number of shares
issuable under the Plan, except for permissible adjustments in the event of
certain changes in the Corporation's capitalization, (ii) materially modify
the eligibility requirements for Plan participation or (iii) materially
increase the benefits accruing to Plan participants.
B. Options may be granted under the Plan to purchase shares of
Common Stock in excess of the number of shares then available for issuance
under the Plan, provided any such options actually granted may not be
exercised until there is obtained shareholder approval of an amendment
sufficiently increasing the number of shares of Common Stock available for
issuance under the Plan. If such shareholder approval is not obtained
within twelve (12) months after the date the excess grants are first made,
then any options granted on the basis of such excess shares shall terminate
and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
VI. REGULATORY APPROVALS
8.
<PAGE>
The implementation of the Plan, the granting of any option hereunder
and the issuance of any shares of Common Stock upon the exercise of any
option shall be subject to the Corporation's procurement of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan,
the options granted under it and the shares of Common Stock issued pursuant
to it.
VII. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of the Optionee, which rights
are hereby expressly reserved by each, to terminate the Optionee's Service at
any time for any reason, with or without cause.
VIII. FINANCIAL REPORTS
The Corporation shall deliver a balance sheet and an income
statement at least annually to each individual holding an outstanding option
under the Plan, unless such individual is a key Employee whose duties in
connection with the Corporation (or any Parent or Subsidiary) assure such
individual access to equivalent information.
9.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CODE shall mean the Internal Revenue Code of 1986, as amended.
C. COMMITTEE shall mean a committee of two (2) or more Board members
appointed by the Board to exercise one or more administrative functions under
the Plan.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. CORPORATION shall mean Nanogen, Inc., a California corporation.
G. DISABILITY shall mean the inability of an individual to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment and shall be determined by the Plan
Administrator on the basis of such medical evidence as the Plan Administrator
deems warranted under the circumstances. Disability shall be deemed to
constitute PERMANENT DISABILITY in the event that such Disability is expected
to result in death or has lasted or can be expected to last for a continuous
period of twelve (12) months or more.
H. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or order
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
A-1.
<PAGE>
I. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and
direction of the employer entity as to both the work to be performed and the
manner and method of performance.
J. EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price
is reported by the National Association of Securities Dealers on the
Nasdaq National Market or any successor system. If there is no closing
selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape
of transactions on such exchange. If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for which
such quotation exists.
(iii) If the Common Stock is at the time neither listed on any
Stock Exchange nor traded on the Nasdaq National Market, then the Fair
Market Value shall be determined by the Plan Administrator in accordance
with Section 260.140.50 of Title 10 of the California Code of
Regulations.
L. HIGHLY-COMPENSATED EMPLOYEE shall mean an Employee whose earnings
per calendar year from the Corporation (or any Parent or Subsidiary) exceed
Sixty Thousand Dollars ($60,000) in the aggregate.
M. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
N. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
O. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
A-2.
<PAGE>
P. OPTIONEE shall mean any person to whom an option is granted under
the Plan.
Q. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
R. PLAN shall mean the Corporation's 1995 Stock Option Plan, as set
forth in this document.
S. PLAN ADMINISTRATOR shall mean either the Board or the Committee, to
the extent the Committee is at the time responsible for the administration of
the Plan.
T. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic Relations
Order which substantially complies with the requirements of Code Section
414(p). The Plan Administrator shall have the sole discretion to determine
whether a Domestic Relations Order is a Qualified Domestic Relations Order.
U. SERVICE shall mean the provision of services to the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant.
V. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
W. SUBSIDIARY shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain
owns, at the time of the determination, stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
X. 10% SHAREHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing ten percent (10%) or more of the total
combined voting power of all classes of stock of the Corporation (or any
Parent or Subsidiary).
A-3.
<PAGE>
EXHIBIT 10.33
RUBIO'S RESTAURANTS, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following stock option grant (the
"Option") pursuant to the 1995 STOCK OPTION/STOCK ISSUANCE PLAN (the "Plan")
to purchase shares of the Common Stock of Rubio's Restaurants, Inc. (the
"Corporation"):
OPTIONEE: __________________________________________________
GRANT DATE: ________________________________________________
GRANT NUMBER: ________ OPTION PRICE: $ ________ per share
VESTING COMMENCEMENT DATE: _________________________________
NUMBER OF OPTION SHARES: ___________________________ shares
EXPIRATION DATE: ___________________________________________
TYPE OF OPTION: ________ Incentive Stock Option
________ Non-Statutory Stock Option
DATE EXERCISABLE:
This Option may be exercised at any time for all or any portion of
the vested Option Shares.
VESTING SCHEDULE
The Option Shares shall vest in accordance with the following vesting
schedule:
(i) No Option Shares shall vest unless and until the
Optionee has completed twelve (12) months of Service (as defined
in the Plan) measured from the Vesting Commencement Date.
(ii) Upon the completion of the twelve (12) month service
period specified in subparagraph (i) above, 20% of the Option Shares
shall become vested.
(iii) The Remaining Option Shares shall vest in a series
of successive equal monthly installments over each of the next
forty-eight (48) months of Service completed by the Optionee
after the initial twelve (12) month service period specified
in subparagraph (i) above.
Optionee understands that the Option is granted pursuant to the
Corporation's Plan. By signing below, optionee agrees to be bound by the
terms and conditions of the Plan and the terms and conditions of the Option
as set forth in the Stock Option Agreement attached hereto as Exhibit A.
Optionee understands that any Option Shares purchased under the Option will
be subject to the terms and conditions set forth in the Stock Purchase
Agreement attached hereto as Exhibit B.
<PAGE>
Optionee hereby acknowledges receipt of a copy of the Plan in the
form attached hereto as Exhibit C.
REPURCHASE RIGHTS. THE OPTIONEE HEREBY AGREES THAT ALL OPTION SHARES
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO REPURCHASE
RIGHTS AND RIGHTS OF FIRST REFUSAL EXERCISABLE BY THE CORPORATION AND ITS
ASSIGNS UPON ANY PROPOSED SALE, ASSIGNMENT, TRANSFER, ENCUMBRANCE OR OTHER
DISPOSITION OF THE CORPORATION'S SHARES. THE TERMS AND CONDITIONS OF SUCH
RIGHTS ARE SPECIFIED IN THE STOCK PURCHASE AGREEMENT.
NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or in
the Plan shall confer upon the Optionee any right to continue in the Service
of the Corporation for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation or the Optionee,
which rights are hereby expressly reserved by each, to terminate Optionee's
Service at any time for any reason whatsoever, with or without cause.
__________________________, 199__
Date
Rubio's Restaurants, Inc.
By ______________________________
Title: __________________________
________________________________
Optionee
Address:
________________________________
________________________________
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<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
(See Exhibit 10.34 to Registration Statement Form S-1)
A-1
<PAGE>
EXHIBIT B
STOCK PURCHASE AGREEMENT
(See Exhibit 10.35 to Registration Statement Form S-1)
B-1
<PAGE>
EXHIBIT C
1995 STOCK OPTION/STOCK ISSUANCE PLAN
(See Exhibit 10.32 to Registration Statement Form S-1)
C-1
<PAGE>
EXHIBIT 10.34
RUBIO'S RESTAURANTS, INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board of Directors of the Corporation has adopted the Rubio's
Restaurants Inc. 1995 Stock Option/Stock Issuance Plan (the "Plan") for the
purpose of attracting and retaining the services of persons who contribute to
the growth and financial success of the Corporation.
B. Optionee is a person who the Plan Administrator believes has and
will contribute to the growth and financial success of the Corporation and
this Agreement is executed pursuant to and is intended to carry out the
purposes of the Plan.
AGREEMENT
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and conditions
set forth in this Agreement, the Corporation hereby grants to Optionee, as of
the grant date (the "Grant Date") specified in the accompanying Notice of
Grant of Stock Option (the "Grant Notice"), a stock option to purchase up to
that number of shares of the Corporation's Common Stock (the "Option Shares")
as is specified in the Grant Notice. The Option Shares shall be purchasable
from time to time during the option term at the option price per share (the
"Option Price") specified in the Grant Notice.
2. OPTION TERM. This option shall have a maximum term of ten (10)
years measured from the Grant Date and shall expire at the close of business
on the expiration date (the "Expiration Date") specified in the Grant Notice,
unless sooner terminated in accordance with Paragraph 5, 6 or 17.
3. LIMITED TRANSFERABILITY. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised,
during Optionee's lifetime, only by Optionee.
4. DATES OF EXERCISE. This option may not be exercised in whole or
in part at any time prior to the time the Plan is approved by the
Corporation's shareholders in accordance with Paragraph 17. Provided such
shareholder approval is obtained, this option shall thereupon become
exercisable for the Option Shares in one or more installments as is specified
in the Grant Notice. As the option becomes exercisable in one or more
installments, the installments shall accumulate and the option shall remain
exercisable for such installments until the Expiration Date or the sooner
termination of the option term under Paragraph 5 or Paragraph 6 of this
Agreement.
<PAGE>
5. ACCELERATED TERMINATION OF OPTION TERM. The option term
specified in Paragraph 2 shall terminate (and this option shall cease to be
exercisable) prior to the Expiration Date should any of the following
provisions become applicable:
(i) Except as otherwise provided in subparagraph (ii) or (iii)
below, should Optionee cease to remain in Service while this option is
outstanding, then the period for exercising this option shall be reduced
to a three (3)-month period commencing with the date of such cessation of
Service, but in no event shall this option be exercisable at any time
after the Expiration Date. Upon the expiration of such three (3)-month
period or (if earlier) upon the Expiration Date, this option shall
terminate and cease to be outstanding.
(ii) Should Optionee die while this option is outstanding, then
the personal representative of the Optionee's estate or the person or
persons to whom the option is transferred pursuant to the Optionee's
will or in accordance with the law of descent and distribution shall
have the right to exercise this option. Such right shall lapse and this
option shall cease to be exercisable upon the EARLIER of (A) the
expiration of the twelve (12) month period measured from the date of
Optionee's death or (B) the Expiration Date. Upon the expiration of
such twelve (12) month period or (if earlier) upon the Expiration Date,
this option shall terminate and cease to be outstanding.
(iii) Should Optionee become permanently disabled and cease by
reason thereof to remain in Service while this option is outstanding,
then the Optionee shall have a period of twelve (12) months (commencing
with the date of such cessation of Service) during which to exercise
this option, but in no event shall this option be exercisable at any
time after the Expiration Date. Optionee shall be deemed to be
permanently disabled if Optionee is unable to engage in any substantial
gainful activity for the Corporation or the parent or subsidiary
corporation retaining his/her services by reason of any medically
determinable physical or mental impairment, which can be expected to
result in death or which has lasted or can be expected to last for a
continuous period of not less than twelve (12) months. Upon the
expiration of such limited period of exercisability or (if earlier) upon
the Expiration Date, this option shall terminate and cease to be
outstanding.
(iv) During the limited period of exercisability applicable under
subparagraph (i), (ii) or (iii) above, this option may be exercised for
any or all of the Option Shares for which this option is, at the time of
the Optionee's cessation of Service, exercisable in accordance with the
exercise schedule specified in the Grant Notice and the provisions of
Paragraph 6 of this Agreement.
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<PAGE>
(v) For purposes of this Paragraph 5 and for all other purposes
under this Agreement:
A. The Optionee shall be deemed to remain in SERVICE for so long as
the Optionee continues to render periodic services to the Corporation or any
parent or subsidiary corporation, whether as an Employee, a non-employee
member of the board of directors, or an independent contractor or consultant.
B. The Optionee shall be deemed to be an EMPLOYEE of the Corporation
and to continue in the Corporation's employ for so long as the Optionee
remains in the employ of the Corporation or one or more of its parent or
subsidiary corporations, subject to the control and direction of the employer
entity as to both the work to be performed and the manner and method of
performance.
C. A corporation shall be considered to be a SUBSIDIARY corporation
of the Corporation if it is a member of an unbroken chain of corporations
beginning with the Corporation, provided each such corporation in the chain
(other than the last corporation) owns, at the time of determination, stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
D. A corporation shall be considered to be a PARENT corporation of
the Corporation if it is a member of an unbroken chain ending with the
Corporation, provided each such corporation in the chain (other than the
Corporation) owns, at the time of determination, stock possessing 50% or more
of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
6. SPECIAL TERMINATION OF OPTION.
A. This Option, to the extent not previously exercised, shall
terminate and cease to be exercisable upon the consummation of one or more of
the following shareholder-approved transactions (a "Corporate Transaction")
unless this Option is expressly assumed by the successor corporation or
parent thereof:
(i) a merger or consolidation in which the Corporation is
not the surviving entity,
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets, or
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<PAGE>
(iii) any transaction (other than an issuance of shares by the
Corporation for cash) in or by means of which one or more persons
acting in concert acquire, in the aggregate, more than 50% of the
outstanding shares of the stock of the Corporation.
B. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction
had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to (i) the number
and class of securities available for issuance under the Plan on both an
aggregate and per Optionee basis following the consummation of such Corporate
Transaction and (ii) the exercise price payable per share under each
outstanding option, PROVIDED the aggregate exercise price payable for such
securities shall remain the same.
C. This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise make changes in
its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES.
A. In the event any change is made to the Corporation's outstanding
Common Stock by reason of any stock split, stock dividend, combination of
shares, exchange of shares, or other change affecting the outstanding Common
Stock as a class without receipt of consideration, then appropriate
adjustments shall be made to (i) the total number of Option Shares subject to
this option, (ii) the number of Option Shares for which this option is to be
exercisable from and after each installment date specified in the Grant
Notice and (iii) the Option Price payable per share in order to reflect such
change and thereby preclude a dilution or enlargement of benefits hereunder,
provided that no adjustment shall be made to the option or the shares
available under any option in connection with any exchange of common stock
issued to investors for Series A Preferred stock.
B. If this option is to be assumed in connection with a Corporate
Transaction described in Paragraph 6 or is otherwise to remain outstanding,
then this option shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply and pertain to the number and class of
securities which would have been issuable to the Optionee in the consummation
of such Corporate Transaction had the option been exercised immediately prior
to such Corporate Transaction, and appropriate adjustments shall also be made
to the Option Price payable per share, PROVIDED the aggregate Option Price
payable hereunder shall remain the same.
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<PAGE>
8. PRIVILEGE OF STOCK OWNERSHIP. The holder of this option shall
not have any of the rights of a shareholder with respect to the Option Shares
until such individual shall have exercised the option and paid the Option Price.
9. MANNER OF EXERCISING OPTION.
A. In order to exercise this option with respect to all or any part
of the Option Shares for which this option is at the time exercisable, Optionee
(or in the case of exercise after Optionee's death, the Optionee's executor,
administrator, heir or legatee, as the case may be) must take the following
actions: (i) Execute and deliver to the Secretary of the Corporation a stock
purchase agreement (the "Purchase Agreement") in substantially the form of
EXHIBIT B to the Grant Notice; (ii) pay the aggregate Option Price for the
purchased shares in one or more forms approved under the Plan; and (iii) furnish
to the Corporation appropriate documentation that the person or persons
exercising the option, if other than Optionee, have the right to exercise this
option.
B. Should the Corporation's outstanding Common Stock be registered
under Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"1934 Act") at the time the option is exercised, then the Option Price may also
be paid as follows:
(i) in shares of Common Stock held by the Optionee for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at fair market value on the
Exercise Date; or
(ii) through a special sale and remittance procedure pursuant to which
the Optionee is to provide irrevocable written instructions (a) to a
designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate Option Price
payable for the purchased shares plus all applicable Federal and State
income and employment taxes required to be withheld by the Corporation by
reason of such purchase and (b) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm in
order to effect the sale transaction.
C. For purposes of this Agreement, the Exercise Date shall be the
date on which the executed Purchase Agreement shall have been delivered to the
Corporation, and the fair market value of a share of Common Stock on any
relevant date shall be determined in accordance with subparagraphs (i) through
(iii) below:
(i) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded on the Nasdaq National Market,
the fair market value shall be the closing selling price of one share of
Common
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<PAGE>
Stock on the date in question, as such price is reported by the
National Association of Securities Dealers through its Nasdaq National
Market system or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the closing
selling price on the last preceding date for which such quotation exists
shall be determinative of fair market value.
(ii) If the Common Stock is at the time listed or admitted to trading
on any stock exchange, then the fair market value shall be the closing
selling price per share of Common Stock on the date in question on the
stock exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no reported
sale of Common Stock on such exchange on the date in question, then the
fair market value shall be the closing selling price on the exchange on the
last preceding date for which such quotation exists.
(iii) If the Common Stock at the time is neither listed nor admitted to
trading on any stock exchange nor traded in the over-the-counter market, or
if the Plan Administrator determines that the value determined pursuant to
subparagraphs (i) and (ii) above does not accurately reflect the fair
market value of the Common Stock, then such fair market value shall be
determined in accordance with Section 260.140.50 of Title 10 of the
California Code of Regulations.
D. As soon after the Exercise Date as practical, the Corporation
shall mail or deliver to Optionee or to the other person or persons exercising
this option a certificate or certificates representing the shares so purchased
and paid for, with the appropriate legends affixed thereto.
E. In no event may this option be exercised for any fractional
shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
A. The exercise of this option and the issuance of Option Shares
upon such exercise shall be subject to compliance by the Corporation and the
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange on which shares of the
Corporation's Common Stock may be listed at the time of such exercise and
issuance.
B. In connection with the exercise of this option, Optionee shall
execute and deliver to the Corporation such representations in writing as may be
requested by the
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<PAGE>
Corporation in order for it to comply with the applicable requirements of
Federal and State securities laws.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraph 3 or 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the successors, administrators, heirs, legal
representatives and assigns of Optionee and the successors and assigns of the
Corporation.
12. LIABILITY OF CORPORATION.
A. If the Option Shares covered by this Agreement exceed, as of the
Grant Date, the number of shares of Common Stock which may without shareholder
approval be issued under the Plan, then this option shall be void with respect
to such excess shares, unless shareholder approval of an amendment sufficiently
increasing the number of shares of Common Stock issuable under the Plan is
obtained in accordance with the provisions of Article IV, Section 3, of the
Plan.
B. The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option
shall relieve the Corporation of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall not
have been obtained. The Corporation, however, shall use its best efforts to
obtain all such approvals.
13. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation in care of the Corporate Secretary at its principal corporate
offices. Any notice required to be given or delivered to Optionee shall be in
writing and addressed to Optionee at the address indicated below Optionee's
signature line on the Grant Notice. All notices shall be deemed to have been
given or delivered upon personal delivery or upon deposit in the U.S. mail,
postage prepaid and properly addressed to the party to be notified.
14. LOANS. The Plan Administrator may, in its absolute discretion
and without any obligation to do so, assist the Optionee in the exercise of this
option by (i) authorizing the extension of a loan to the Optionee from the
Corporation or (ii) permitting the Optionee to pay the option price for the
purchased Common Stock in installments over a period of years. The terms of any
such loan or installment method of payment (including the interest rate, the
requirements for collateral and the terms of repayment) shall be established by
the Plan Administrator in its sole discretion.
15. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the express terms and provisions of the Plan. All decisions of the
Plan Administrator with respect
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<PAGE>
to any question or issue arising under the Plan or this Agreement shall be
conclusive and binding on all persons having an interest in this option.
16. GOVERNING LAW. The interpretation, performance, and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
17. SHAREHOLDER APPROVAL. The grant of this option is subject to
approval of the Plan by the Corporation's shareholders within twelve (12) months
after the adoption of the Plan by the Board of Directors. NOTWITHSTANDING ANY
PROVISION OF THIS AGREEMENT TO THE CONTRARY, THIS OPTION MAY NOT BE EXERCISED IN
WHOLE OR IN PART UNTIL SUCH SHAREHOLDER APPROVAL IS OBTAINED. In the event that
such shareholder approval is not obtained, then this option shall thereupon
terminate in its entirety and the Optionee shall have no further rights to
acquire any Option Shares hereunder.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE STOCK OPTION. In
the event this option is designated an incentive stock option in the Grant
Notice, the following terms and conditions shall also apply to the grant:
A. This option shall cease to qualify for favorable tax treatment as
an incentive stock option under the Federal tax laws if (and to the extent) this
option is exercised for one or more Option Shares: (i) more than three (3)
months after the date the Optionee ceases to be an Employee for any reason other
than death or permanent disability (as defined in Paragraph 5) or (ii) more than
one (1) year after the date the Optionee ceases to be an Employee by reason of
permanent disability.
B. Should this option be designated as immediately exercisable in
the Grant Notice, then this option shall not become exercisable in the calendar
year in which granted if (and to the extent) the aggregate fair market value
(determined at the Grant Date) of the Corporation's Common Stock for which this
option would otherwise first become exercisable in such calendar year would,
when added to the aggregate fair market value (determined as of the respective
date or dates of grant) of the Corporation's Common Stock for which this option
or one or more other incentive stock options granted to the Optionee prior to
the Grant Date (whether under the Plan or any other option plan of the
Corporation or its parent or subsidiary corporations) first become exercisable
during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in
the aggregate. To the extent the exercisability of this option is deferred by
reason of the foregoing limitation, the deferred portion will first become
exercisable in the first calendar year or years thereafter in which the One
Hundred Thousand Dollar ($100,000) limitation of this Paragraph 18.B would not
be contravened.
C. Should this option be designated as exercisable in installments
in the Grant Notice, then no installment under this option (whether annual or
monthly) shall qualify for favorable tax treatment as an incentive stock option
under the Federal tax laws if (and to
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<PAGE>
the extent) the aggregate fair market value (determined at the Grant Date) of
the Corporation's Common Stock for which such installment first becomes
exercisable hereunder will, when added to the aggregate fair market value
(determined as of the respective date or dates of grant) of the Corporation's
Common Stock for which one or more other incentive stock options granted to
the Optionee prior to the Grant Date (whether under the Plan or any other
option plan of the Corporation or any parent or subsidiary corporation) first
become exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000) in the aggregate.
19. WITHHOLDING. Optionee hereby agrees to make appropriate
arrangements with the Corporation or parent or subsidiary corporation employing
Optionee for the satisfaction of all Federal, State or local income tax
withholding requirements and Federal social security employee tax requirements
applicable to the exercise of this option.
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<PAGE>
EXHIBIT 10.35
REPURCHASE RIGHT
RIGHT OF FIRST REFUSAL
RUBIO'S RESTAURANTS, INC.
STOCK PURCHASE AGREEMENT
AGREEMENT made as of this ____ day of _________, 19__, by and
among Rubio's Restaurants, Inc. (the "Corporation"), __________________, the
holder of a stock option (the "Optionee") under the Corporation's 1995 Stock
Option/Stock Issuance Plan and ______________________, the Optionee's spouse.
I. EXERCISE OF OPTION
1.1 EXERCISE. Optionee hereby purchases _______ shares
("Purchased Shares") of the Corporation's common stock ("Common Stock") pursuant
to that certain option ("Option") granted Optionee on _____________, 19___
("Grant Date") to purchase up to ____________ shares of the Common Stock ("Total
Purchasable Shares") under the Corporation's 1995 Stock Option/Stock Issuance
Plan (the "Plan") at an option price of $__________ per share ("Option Price").
1.2 PAYMENT. Concurrently with the delivery of this Agreement
to the Corporate Secretary of the Corporation, Optionee shall pay the Option
Price for the Purchased Shares in accordance with the provisions of the
agreement between the Corporation and Optionee evidencing the Option (the
"Option Agreement") and shall deliver whatever additional documents may be
required by the Option Agreement as a condition for exercise, together with a
duly-executed blank Assignment Separate from Certificate (in the form attached
hereto as Exhibit I) with respect to the Purchased Shares.
1.3 DELIVERY OF CERTIFICATES. The certificates representing
the Purchased Shares hereunder shall be held in escrow by the Corporate
Secretary of the Corporation in accordance with the provisions of Article VII.
1.4 SHAREHOLDER RIGHTS. Until such time as the Corporation
actually exercises its repurchase right, rights of first refusal or special
purchase right under this Agreement, Optionee (or any successor in interest)
shall have all the rights of a shareholder (including voting and dividend
rights) with respect to the Purchased Shares, including the Purchased Shares
held in escrow under Article VII, subject, however, to the transfer restrictions
of Article IV.
<PAGE>
II. SECURITIES LAW COMPLIANCE
2.1 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made
with Participant in reliance upon Participant's representation to the Company,
which by Participant's execution of this Agreement Participant hereby confirms,
that the Shares are being acquired for investment for Participant's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that Participant has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, Participant further represents that Participant does not have
any contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Shares. Participant represents that he has full power and
authority to enter into this Agreement.
2.2 EXEMPTION FROM REGISTRATION. The Purchased Shares have not
been registered under the Securities Act of 1933, as amended (the "1933 Act"),
and are accordingly being issued to Optionee in reliance upon the exemption from
such registration provided by Rule 701 of the Securities and Exchange Commission
for stock issuances under compensatory benefit plans such as the Plan. Optionee
hereby acknowledges previous receipt of a copy of the documentation for such
Plan in the form of Exhibit C to the Notice of Grant of Stock Option (the "Grant
Notice") accompanying the Option Agreement.
2.3 RESTRICTED SECURITIES.
A. Optionee hereby confirms that Optionee has been informed
that the Purchased Shares are restricted securities under the 1933 Act and may
not be resold or transferred unless the Purchased Shares are first registered
under the Federal securities laws or unless an exemption from such registration
is available. Accordingly, Optionee hereby acknowledges that Optionee is
prepared to hold the Purchased Shares for an indefinite period and that Optionee
is aware that Rule 144 of the Securities and Exchange Commission issued under
the 1933 Act is not presently available to exempt the sale of the Purchased
Shares from the registration requirements of the 1933 Act.
B. Upon the expiration of the ninety (90)-day period
immediately following the date on which the Corporation first becomes subject
to the reporting requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Purchased Shares, to the extent vested
under Article V, may be sold (without registration) pursuant to the
applicable requirements of Rule 144. If Optionee is at the time of such sale
an affiliate of the Corporation for purposes of Rule 144 or was such an
affiliate during the preceding three (3) months, then the sale must comply
with all the requirements of Rule 144 (including the volume limitation on the
number of shares sold, the broker/market-maker sale requirement and the
requisite notice to the Securities and Exchange Commission); however, the two
(2)-year holding period requirement of the Rule will not be applicable. If
Optionee is not at the time of the sale an affiliate of the Corporation nor
was such an affiliate during the preceding three
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<PAGE>
(3) months, then none of the requirements of Rule 144 (other than the
broker/market-maker sale requirement for Purchased Shares held for less than
three (3) years following payment in cash of the Option Price therefor) will
be applicable to the sale.
C. Should the Corporation not become subject to the reporting
requirements of the Exchange Act, then Optionee may, provided he/she is not at
the time an affiliate of the Corporation (nor was such an affiliate during the
preceding three (3) months), sell the Purchased Shares (without registration)
pursuant to paragraph (k) of Rule 144 after the Purchased Shares have been held
for a period of three (3) years following the payment in cash of the Option
Price for such shares.
2.4 DISPOSITION OF SHARES. Optionee hereby agrees that
Optionee shall make no disposition of the Purchased Shares (other than a
permitted transfer under paragraph 4.1) unless and until there is compliance
with all of the following requirements:
(a) Optionee shall have notified the Corporation of the
proposed disposition and provided a summary of the terms and conditions
of the proposed disposition.
(b) Optionee shall have complied with all requirements
of this Agreement applicable to the disposition of the Purchased Shares.
(c) Optionee shall have provided the Corporation with
a written statement, on a form to be prepared and provided by the
Corporation at the Corporation's sole cost, that, to the best of
Optionee's knowledge and belief, (i) the proposed disposition does not
require registration of the Purchased Shares under the 1933 Act or (ii)
all appropriate action necessary for compliance with the registration
requirements of the 1933 Act or of any exemption from registration
available under the 1933 Act (including Rule 144) has been taken.
The Corporation shall NOT be required (i) to transfer on its books
any Purchased Shares which have been sold or transferred in violation of the
provisions of this Article II NOR (ii) to treat as the owner of the Purchased
Shares, or otherwise to accord voting or dividend rights to, any transferee to
whom the Purchased Shares have been transferred in contravention of this
Agreement.
2.5 RESTRICTIVE LEGENDS. In order to reflect the restrictions
on disposition of the Purchased Shares, the stock certificates for the Purchased
Shares will be endorsed with restrictive legends, including one or more of the
following legends:
(i) "The shares represented by this certificate have not
been registered under the Securities Act of 1933. The shares may not be sold or
offered for sale in
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the absence of (a) an effective registration statement for the shares under
such Act, (b) a 'no action' letter of the Securities and Exchange Commission
with respect to such sale or offer, or (c) satisfactory assurances to the
Corporation that registration under such Act is not required with respect to
such sale or offer."
(ii) "The shares represented by this certificate are
unvested and accordingly may not be sold, assigned, transferred, encumbered, or
in any manner disposed of except in conformity with the terms of a written
agreement dated ____________, 19__ between the Corporation and the registered
holder of the shares (or the predecessor in interest to the shares). Such
agreement grants certain repurchase rights and rights of first refusal to the
Corporation (or its assignees) upon the sale, assignment, transfer, encumbrance
or other disposition of the Corporation's shares or upon termination of service
with the Corporation. The Corporation will upon written request furnish a copy
of such agreement to the holder hereof without charge."
(iii) "It is unlawful to consummate a sale or transfer of
this security, or any interest therein, or to receive any consideration
therefor, without the prior written consent of the Commissioner of Corporations
of the State of California, except as permitted in the Commissioner's Rules."
2.6 RECEIPT OF COMMISSIONER RULES. Optionee hereby
acknowledges receipt of a copy of Section 260.141.11 of the Rules of the
California Corporations Commissioner, a copy of which is attached as Exhibit II
to this Agreement.
III. SPECIAL TAX ELECTION
3.1 SECTION 83(b) ELECTION APPLICABLE TO THE EXERCISE OF A
NON-STATUTORY STOCK OPTION. If the Purchased Shares are unvested and are
acquired hereunder pursuant to the exercise of a NON-STATUTORY STOCK OPTION,
as specified in the Grant Notice, then the Optionee understands that under
Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), the
excess of the fair market value of the Purchased Shares on the date any
forfeiture restrictions applicable to such shares lapse over the Option Price
paid for such shares will be reportable as ordinary income on such lapse
date. For this purpose, the term "forfeiture restrictions" includes the
right of the Corporation to repurchase the Purchased Shares pursuant to the
Repurchase Right provided under Article V of this Agreement. Optionee
understands that he/she may elect under Section 83(b) of the Code to be taxed
at the time the Purchased Shares are acquired hereunder, rather than when and
as such Purchased Shares cease to be subject to such forfeiture restrictions.
Such election must be filed with the Internal Revenue Service within thirty
(30) days after the date of this Agreement. Even if the fair market value of
the Purchased Shares at the date of this Agreement equals the Option Price
paid (and thus no tax is payable), the election must be made to avoid adverse
tax consequences in the future. THE FORM FOR MAKING THIS ELECTION IS
ATTACHED AS EXHIBIT III HERETO. OPTIONEE UNDERSTANDS THAT
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FAILURE TO MAKE THIS FILING WITHIN THE THIRTY (30)-DAY PERIOD WILL RESULT IN
THE RECOGNITION OF ORDINARY INCOME BY THE OPTIONEE AS THE FORFEITURE
RESTRICTIONS LAPSE.
3.2 CONDITIONAL SECTION 83(b) ELECTION APPLICABLE TO THE
EXERCISE OF AN INCENTIVE STOCK OPTION. If the Purchased Shares are unvested and
are acquired hereunder pursuant to the exercise of an INCENTIVE STOCK OPTION
under the Federal tax laws, as specified in the Grant Notice, then the following
tax principles shall be applicable to the Purchased Shares:
A. For regular tax purposes, no taxable income
will be recognized at the time the Option is exercised.
B. The excess of (i) the fair market value of
the Purchased Shares on the date the Option is exercised or (if
later) on the date any forfeiture restrictions applicable to the
Purchased Shares lapse over (ii) the Option Price paid for the
Purchased Shares will be includible in the Optionee's taxable
income for alternative minimum tax purposes.
C. If the Optionee makes a disqualifying
disposition of the Purchased Shares, then the Optionee will
recognize ordinary income in the year of such disposition equal in
amount to the excess of (i) the fair market value of the Purchased
Shares on the date the Option is exercised or (if later) on the
date any forfeiture restrictions applicable to the Purchased
Shares lapse over (ii) the Option Price paid for the Purchased
Shares. Any additional gain recognized upon the disqualifying
disposition will be either short-term or long-term capital gain
depending upon the period for which the Purchased Shares are held
prior to the disposition.
D. For purposes of the foregoing, the term
"forfeiture restrictions" will include the right of the
Corporation to repurchase the Purchased Shares pursuant to the
Repurchase Right provided under Article V of this Agreement. The
term "disqualifying disposition" means any sale or other
disposition (1) of the Purchased Shares within two (2) years after
the Grant Date or within one (1) year after the execution date of
this Agreement.
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(1) Generally, a disposition of shares purchased under an incentive
stock option includes any transfer of legal title, including a transfer by sale,
exchange or gift, but does not include a transfer to the Optionee's spouse, a
transfer into joint ownership with right of survivorship if Optionee remains one
of the joint owners, a pledge, a transfer by bequest or inheritance or certain
tax free exchanges permitted under the Code.
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E. In the absence of final Treasury Regulations
relating to incentive stock options, it is not certain whether the
Optionee may, in connection with the exercise of the Option for
any Purchased Shares at the time subject to forfeiture
restrictions, file a protective election under Section 83(b) of
the Code which would limit (I) the Optionee's alternative minimum
taxable income upon exercise and (II) the Optionee's ordinary
income upon a disqualifying disposition, to the excess of (i) the
fair market value of the Purchased Shares on the date the Option
is exercised over (ii) the Option Price paid for the Purchased
Shares. THE APPROPRIATE FORM FOR MAKING SUCH A PROTECTIVE
ELECTION IS ATTACHED AS EXHIBIT III TO THIS AGREEMENT AND MUST BE
FILED WITH THE INTERNAL REVENUE SERVICE WITHIN THIRTY (30) DAYS
AFTER THE DATE OF THIS AGREEMENT. HOWEVER, SUCH ELECTION IF
PROPERLY FILED WILL ONLY BE ALLOWED TO THE EXTENT THE FINAL
TREASURY REGULATIONS PERMIT SUCH A PROTECTIVE ELECTION.
3.3 OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE
RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER
SECTION 83(b), EVEN IF OPTIONEE REQUESTS THE CORPORATION OR ITS REPRESENTATIVES
TO MAKE THIS FILING ON HIS/HER BEHALF. This filing should be made by registered
or certified mail, return receipt requested, and Optionee must retain two (2)
copies of the completed form for filing with his or her State and Federal tax
returns for the current tax year and an additional copy for his or her records.
IV. TRANSFER RESTRICTIONS
4.1 RESTRICTION ON TRANSFER. Optionee shall not transfer,
assign, encumber or otherwise dispose of any of the Purchased Shares which are
subject to the Corporation's Repurchase Right under Article V. In addition,
Purchased Shares which are released from the Repurchase Right shall not be
transferred, assigned, encumbered or otherwise made the subject of disposition
in contravention of the Corporation's First Refusal Right under Article VI.
Such restrictions on transfer, however, shall NOT be applicable to (i) a
gratuitous transfer of the Purchased Shares made to the Optionee's spouse or
issue, including adopted children, or to a trust for the exclusive benefit of
the Optionee or the Optionee's spouse or issue, PROVIDED AND ONLY IF the
Optionee obtains the Corporation's prior written consent to such transfer, (ii)
a transfer of title to the Purchased Shares effected pursuant to the Optionee's
will or the laws of intestate succession or (iii) a transfer to the Corporation
in pledge as security for any purchase-money indebtedness incurred by the
Optionee in connection with the acquisition of the Purchased Shares.
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4.2 TRANSFEREE OBLIGATIONS. Each person (other than the
Corporation) to whom the Purchased Shares are transferred by means of one of the
permitted transfers specified in paragraph 4.1 must, as a condition precedent to
the validity of such transfer, acknowledge in writing to the Corporation that
such person is bound by the provisions of this Agreement and that the
transferred shares are subject to (i) both the Corporation's Repurchase Right
and the Corporation's First Refusal Right granted hereunder and (ii) the market
stand-off provisions of paragraph 4.4, to the same extent such shares would be
so subject if retained by the Optionee.
4.3 DEFINITION OF OWNER. For purposes of Articles IV, V, VI
and VII of this Agreement, the term "Owner" shall include the Optionee and all
subsequent holders of the Purchased Shares who derive their chain of ownership
through a permitted transfer from the Optionee in accordance with paragraph 4.1.
4.4 MARKET STAND-OFF PROVISIONS.
A. In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any Purchased Shares without the prior written consent of the
Corporation or its underwriters. Such limitations shall be in effect for such
period of time from and after the effective date of such registration statement
as may be requested by the Corporation or such underwriters; PROVIDED, however,
that in no event shall such period exceed one hundred-eighty (180) days. The
limitations of this paragraph 4.4 shall remain in effect for the two-year period
immediately following the effective date of the Corporation's initial public
offering and shall thereafter terminate and cease to have any force or effect.
B. Owner shall be subject to the market stand-off provisions
of this paragraph 4.4 PROVIDED AND ONLY IF the officers and directors of the
Corporation are also subject to similar arrangements.
C. In the event of any stock dividend, stock split,
recapitalization or other change affecting the Corporation's outstanding Common
Stock effected as a class without receipt of consideration, then any new,
substituted or additional securities distributed with respect to the Purchased
Shares shall be immediately subject to the provisions of this paragraph 4.4, to
the same extent the Purchased Shares are at such time covered by such
provisions.
D. In order to enforce the limitations of this paragraph 4.4,
the Corporation may impose stop-transfer instructions with respect to the
Purchased Shares until the end of the applicable stand-off period.
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V. REPURCHASE RIGHT
5.1 GRANT. The Corporation is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the sixty (60)-day period
following the date the Optionee ceases for any reason to remain in Service or
(if later) during the sixty (60)-day period following the execution date of this
Agreement, to repurchase at the Option Price all or (at the discretion of the
Corporation and with the consent of the Optionee) any portion of the Purchased
Shares in which the Optionee has not acquired a vested interest, if any, in
accordance with the vesting provisions of paragraph 5.3 (such shares to be
hereinafter called the "Unvested Shares"). For purposes of this Agreement, the
Optionee shall be deemed to remain in Service for so long as the Optionee
continues to render periodic services to the Corporation or any parent or
subsidiary corporation, whether as an employee, a non-employee member of the
board of directors, or an independent contractor or consultant.
5.2 EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right
shall be exercisable by written notice delivered to the Owner of the Unvested
Shares prior to the expiration of the applicable sixty (60)-day period specified
in paragraph 5.1. The notice shall indicate the number of Unvested Shares to be
repurchased and the date on which the repurchase is to be effected, such date to
be not more than thirty (30) days after the date of notice. To the extent one
or more certificates representing Unvested Shares may have been previously
delivered out of escrow to the Owner, then Owner shall, prior to the close of
business on the date specified for the repurchase, deliver to the Secretary of
the Corporation the certificates representing the Unvested Shares to be
repurchased, each certificate to be properly endorsed for transfer. The
Corporation shall, concurrently with the receipt of such stock certificates
(either from escrow in accordance with paragraph 7.3 or from Owner as herein
provided), pay to Owner in cash or cash equivalents (including the cancellation
of any purchase-money indebtedness), an amount equal to the Option Price
previously paid for the Unvested Shares which are to be repurchased.
5.3 TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right
shall terminate with respect to any Unvested Shares for which it is not timely
exercised under paragraph 5.2. In addition, the Repurchase Right shall
terminate, and cease to be exercisable, with respect to any and all Purchased
Shares in which the Optionee vests in accordance with the vesting schedule
specified in the Grant Notice. All Purchased Shares as to which the Repurchase
Right lapses shall, however, continue to be subject to (i) the First Refusal
Right of the Corporation and its assignees under Article VI, (ii) the market
stand-off provisions of paragraph 4.4 and (iii) the Special Purchase Right under
Article VIII.
5.4 AGGREGATE VESTING LIMITATION. If the Option is exercised
in more than one increment so that the Optionee is a party to one or more other
Stock Purchase Agreements ("Prior Purchase Agreements") which are executed prior
to the date of this Agreement, then the total number of Purchased Shares as to
which the Optionee shall be deemed to have a fully-vested interest under this
Agreement and all Prior Purchase
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Agreements shall not exceed in the aggregate the number of Purchased Shares
in which the Optionee would otherwise at the time be vested, in accordance
with the vesting provisions of paragraph 5.3, had all the Purchased Shares
been acquired exclusively under this Agreement.
5.5 FRACTIONAL SHARES. No fractional shares shall be
repurchased by the Corporation. Accordingly, should the Repurchase Right extend
to a fractional share (in accordance with the vesting provisions of paragraph
5.3) at the time the Optionee ceases Service, then such fractional share shall
be added to any fractional share in which the Optionee is at such time vested in
order to make one whole vested share no longer subject to the Repurchase Right.
5.6 ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event
of any stock dividend, stock split, recapitalization or other change affecting
the Corporation's outstanding Common Stock as a class effected without receipt
of consideration, then any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which is
by reason of any such transaction distributed with respect to the Purchased
Shares shall be immediately subject to the Repurchase Right, but only to the
extent the Purchased Shares are at the time covered by such right. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number of Purchased Shares and Total Purchasable Shares hereunder
and to the price per share to be paid upon the exercise of the Repurchase Right
in order to reflect the effect of any such transaction upon the Corporation's
capital structure; PROVIDED, however, that the aggregate purchase price shall
remain the same.
5.7 CORPORATE TRANSACTION.
A. Immediately prior to the consummation of any of the
following shareholder-approved transactions (a "Corporate Transaction"):
(i) a merger or consolidation in which the Corporation is
not the surviving entity,
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets, or
(iii) any transaction (other than an issuance of shares by
the Corporation for cash) in or by means of which one or more persons
acting in concert acquire, in the aggregate, more than 50% of the
outstanding shares of the stock of the Corporation,
the Repurchase Right shall automatically lapse in its
entirety except to the extent the Repurchase Right is to be assigned to the
successor corporation (or its parent company) in connection with such Corporate
Transaction.
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B. To the extent the Repurchase Right remains in effect
following such Corporate Transaction, such right shall apply to the new capital
stock or other property (including cash) received in exchange for the Purchased
Shares in consummation of the Corporate Transaction, but only to the extent the
Purchased Shares are at the time covered by such right. Appropriate adjustments
shall be made to the price per share payable upon exercise of the Repurchase
Right to reflect the effect of the Corporate Transaction upon the Corporation's
capital structure; PROVIDED, however, that the aggregate purchase price shall
remain the same.
C. This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise make changes in its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
VI. RIGHT OF FIRST REFUSAL
6.1 GRANT. The Corporation is hereby granted rights of first
refusal (the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares in which the Optionee has vested in accordance
with the vesting provisions of Article V. For purposes of this Article VI, the
term "transfer" shall include any sale, assignment, pledge, encumbrance or other
disposition for value of the Purchased Shares intended to be made by the Owner,
but shall not include any of the permitted transfers under paragraph 4.1.
6.2 NOTICE OF INTENDED DISPOSITION. In the event the Owner
desires to accept a bona fide third-party offer for the transfer of any or all
of the Purchased Shares (the shares subject to such offer to be hereinafter
called the "Target Shares"), Owner shall promptly (i) deliver to the Corporate
Secretary of the Corporation written notice (the "Disposition Notice") of the
terms and conditions of the offer, including the purchase price and the identity
of the third-party offeror, and (ii) provide satisfactory proof that the
disposition of the Target Shares to such third-party offeror would not be in
contravention of the provisions set forth in Articles II and IV of this
Agreement.
6.3 EXERCISE OF RIGHT. The Corporation shall, for a period of
forty-five (45) days following receipt of the Disposition Notice, have the right
to repurchase any or all of the Target Shares specified in the Disposition
Notice upon the same terms and conditions specified therein or upon terms and
conditions which do not materially vary from those specified therein. Such
right shall be exercisable by delivery of written notice (the "Exercise Notice")
to Owner prior to the expiration of the forty-five (45)-day exercise period. If
such right is exercised with respect to all the Target Shares specified in the
Disposition Notice, then the Corporation (or its assignees) shall effect the
repurchase of the Target Shares, including payment of the purchase price, not
more than ten (10) business days after delivery of the Exercise Notice; and at
such time Owner shall deliver to the Corporation the
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certificates representing the Target Shares to be repurchased, each
certificate to be properly endorsed for transfer. To the extent any of the
Target Shares are at the time held in escrow under Article VII, the
certificates for such shares shall automatically be released from escrow and
delivered to the Corporation for purchase. Should the purchase price
specified in the Disposition Notice be payable in property other than cash or
evidences of indebtedness, the Corporation (or its assignees) shall have the
right to pay the purchase price in the form of cash equal in amount to the
value of such property. If the Owner and the Corporation (or its assignees)
cannot agree on such cash value within ten (10) days after the Corporation's
receipt of the Disposition Notice, the valuation shall be made by an
appraiser of recognized standing selected by the Corporation (or its
assignees) within twenty (20) days after the Corporation's receipt of the
Disposition Notice, whose appraisal shall be determinative of such value.
The cost of such appraisal shall be paid entirely by the Corporation. The
closing shall then be held on the LATER of (i) the tenth business day
following delivery of the Exercise Notice or (ii) the tenth business day
after such cash valuation shall have been made.
6.4 NON-EXERCISE OF RIGHT. In the event the Exercise Notice is
not given to Owner within forty-five (45) days following the date of the
Corporation's receipt of the Disposition Notice, Owner shall have a period of
thirty (30) days thereafter in which to sell or otherwise dispose of the Target
Shares to the third-party offeror identified in the Disposition Notice upon
terms and conditions (including the purchase price) no more favorable to such
third-party offeror than those specified in the Disposition Notice; PROVIDED,
however, that any such sale or disposition must not be effected in contravention
of the provisions of Article II of this Agreement. To the extent any of the
Target Shares are at the time held in escrow under Article VII, the certificates
for such shares shall automatically be released from escrow and surrendered to
the Owner. The third-party offeror shall acquire the Target Shares free and
clear of the Corporation's Repurchase Right under Article V and the
Corporation's First Refusal Right hereunder, but the acquired shares shall
remain subject to (i) the securities law restrictions of Article II and (ii) the
market stand-off provisions of paragraph 4.4. In the event Owner does not
effect such sale or disposition of the Target Shares within the specified thirty
(30)-day period, the Corporation's First Refusal Right shall continue to be
applicable to any subsequent disposition of the Target Shares by Owner until
such right lapses in accordance with paragraph 6.7.
6.5 PARTIAL EXERCISE OF RIGHT. In the event the Corporation
(or its assignees) makes a timely exercise of the First Refusal Right with
respect to a portion, but not all, of the Target Shares specified in the
Disposition Notice, Owner shall have the option, exercisable by written notice
to the Corporation delivered within thirty (30) days after the date of the
Disposition Notice, to effect the sale of the Target Shares pursuant to one of
the following alternatives:
(i) to elect not to sell any shares to the Corporation
pursuant to the First Refusal Right, but to instead sell all the Target
Shares to the third-party offeror identified in the Disposition Notice,
which sale shall otherwise be
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in full compliance with the requirements of paragraph 6.4 as if the
Corporation did not offer to exercise the First Refusal Right with
respect to any of the Target Shares; or
(ii) sale to the Corporation (or its assignees) of the
portion of the Target Shares which the Corporation (or its assignees) has
elected to purchase, such sale to be effected in substantial conformity
with the provisions of paragraph 6.3.
Failure of Owner to deliver timely notification to the Corporation
under this paragraph 6.5 shall be deemed to be an election by Owner to sell the
Target Shares pursuant to alternative (i) above.
6.6 RECAPITALIZATION/MERGER.
(a) In the event of any stock dividend, stock split,
recapitalization or other transaction affecting the Corporation's outstanding
Common Stock as a class effected without receipt of consideration, then any new,
substituted or additional securities or other property which is by reason of
such transaction distributed with respect to the Purchased Shares shall be
immediately subject to the Corporation's First Refusal Right hereunder, but only
to the extent the Purchased Shares are at the time covered by such right.
(b) In the event of any of the following transactions:
(i) a merger or consolidation in which the
Corporation is not the surviving entity,
(ii) a sale, transfer or other disposition of
all or substantially all of the Corporation's assets,
(iii) a reverse merger in which the Corporation
is the surviving entity but in which the Corporation's outstanding voting
securities are transferred in whole or in part to person or persons other
than those who held such securities immediately prior to the merger, or
(iv) any transaction effected primarily to change
the State in which the Corporation is incorporated, or to create a
holding company structure,
the Corporation's First Refusal Right shall remain in full
force and effect and shall apply to the new capital stock or other property
received in exchange for the Purchased Shares in consummation of the transaction
but only to the extent the Purchased Shares are at the time covered by such
right.
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6.7 LAPSE. The First Refusal Right under this Article VI shall
lapse and cease to have effect upon the EARLIEST to occur of (i) the first date
on which shares of the Corporation's Common Stock are held of record by more
than five hundred (500) persons, (ii) a determination is made by the
Corporation's Board of Directors that a public market exists for the outstanding
shares of the Corporation's Common Stock, or (iii) a firm commitment
underwritten public offering pursuant to an effective registration statement
under the 1933 Act, covering the offer and sale of the Corporation's Common
Stock in the aggregate amount of at least $5,000,000. However, the market
stand-off provisions of paragraph 4.4 shall continue to remain in full force and
effect following the lapse of the First Refusal Right hereunder.
VII. ESCROW
7.1 DEPOSIT. Upon issuance, the certificates for any
Unvested Shares purchased hereunder shall be deposited in escrow with the
Corporate Secretary of the Corporation to be held in accordance with the
provisions of this Article VII. Each deposited certificate shall be
accompanied by a duly-executed Assignment Separate from Certificate in the
form of Exhibit I. The deposited certificates, together with any other
assets or securities from time to time deposited with the Corporate Secretary
pursuant to the requirements of this Agreement, shall remain in escrow until
such time or times as the certificates (or other assets and securities) are
to be released or otherwise surrendered for cancellation in accordance with
paragraph 7.3. Upon delivery of the certificates (or other assets and
securities) to the Corporate Secretary of the Corporation, the Owner shall be
issued an instrument of deposit acknowledging the number of Unvested Shares
(or other assets and securities) delivered in escrow.
7.2 RECAPITALIZATION. All regular cash dividends on the
Unvested Shares (or other securities at the time held in escrow) shall be paid
directly to the Owner and shall not be held in escrow. However, in the event of
any stock dividend, stock split, recapitalization or other change affecting the
Corporation's outstanding Common Stock as a class effected without receipt of
consideration or in the event of a Corporate Transaction, any new, substituted
or additional securities or other property which is by reason of such
transaction distributed with respect to the Unvested Shares shall be immediately
delivered to the Corporate Secretary to be held in escrow under this Article
VII, but only to the extent the Unvested Shares are at the time subject to the
escrow requirements of paragraph 7.1.
7.3 RELEASE/SURRENDER. The Unvested Shares, together with any
other assets or securities held in escrow hereunder, shall be subject to the
following terms and conditions relating to their release from escrow or their
surrender to the Corporation for repurchase and cancellation:
(i) Should the Corporation (or its assignees) elect to exercise
the Repurchase Right under Article V with respect to any Unvested Shares,
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then the escrowed certificates for such Unvested Shares (together with
any other assets or securities issued with respect thereto) shall be
delivered to the Corporation concurrently with the payment to the Owner,
in cash or cash equivalent (including the cancellation of any purchase-
money indebtedness), of an amount equal to the aggregate Option Price for
such Unvested Shares, and the Owner shall cease to have any further
rights or claims with respect to such Unvested Shares (or other assets or
securities attributable to such Unvested Shares).
(ii) Should the Corporation (or its assignees) elect to exercise
its First Refusal Right under Article VI with respect to any vested
Target Shares held at the time in escrow hereunder, then the escrowed
certificates for such Target Shares (together with any other assets or
securities attributable thereto) shall, concurrently with the payment of
the paragraph 6.3 purchase price for such Target Shares to the Owner, be
surrendered to the Corporation, and the Owner shall cease to have any
further rights or claims with respect to such Target Shares (or other
assets or securities).
(iii) Should the Corporation (or its assignees) elect NOT to
exercise its First Refusal Right under Article VI with respect to any
Target Shares held at the time in escrow hereunder, then the escrowed
certificates for such Target Shares (together with any other assets or
securities attributable thereto) shall be surrendered to the Owner for
disposition in accordance with provisions of paragraph 6.4.
(iv) As the interest of the Optionee in the Unvested Shares (or
any other assets or securities attributable thereto) vests in accordance with
the provisions of Article V, the certificates for such vested shares (as well as
all other vested assets and securities) shall be released from escrow and
delivered to the Owner in accordance with the following schedule:
a. The initial release of vested shares (or
other vested assets and securities) from escrow shall be effected
within thirty (30) days following the expiration of the initial
twelve (12)-month period measured from the Grant Date.
b. Subsequent releases of vested shares (or
other vested assets and securities) from escrow shall be effected
at semi-annual intervals thereafter, with the first such semi-annual
release to occur eighteen (18) months after the Grant Date.
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c. Upon the Optionee's cessation of Service, any
escrowed Purchased Shares (or other assets or securities) in which
the Optionee is at the time vested shall be promptly released from
escrow.
d. Upon any earlier termination of the
Corporation's Repurchase Right in accordance with the applicable
provisions of Article V, any Purchased Shares (or other assets or
securities) at the time held in escrow hereunder shall promptly be
released to the Owner as fully-vested shares or other property.
(v) All Purchased Shares (or other assets or securities)
released from escrow in accordance with the provisions of subparagraph
(iv) above shall nevertheless remain subject to (I) the Corporation's
First Refusal Right under Article VI until such right lapses pursuant to
paragraph 6.7, (II) the market stand-off provisions of paragraph 4.4
until such provisions terminate in accordance therewith and (III) the
Special Purchase Right under Article VIII.
VIII. MARITAL DISSOLUTION OR LEGAL SEPARATION
8.1 GRANT. In connection with the dissolution of the
Optionee's marriage or the legal separation of the Optionee and the Optionee's
spouse, the Corporation shall have the right (the "Special Purchase Right"),
exercisable at any time during the thirty (30)-day period following the
Corporation's receipt of the required Dissolution Notice under paragraph 8.2, to
purchase from the Optionee's spouse, in accordance with the provisions of
paragraph 8.3, all or any portion of the Purchased Shares which would otherwise
be awarded to such spouse in settlement of any community property or other
marital property rights such spouse may have in such shares.
8.2 NOTICE OF DECREE OR AGREEMENT. The Optionee shall promptly
provide the Secretary of the Corporation with written notice (the "Dissolution
Notice") of (i) the entry of any judicial decree or order resolving the property
rights of the Optionee and the Optionee's spouse in connection with their
marital dissolution or legal separation or (ii) the execution of any contract or
agreement relating to the distribution or division of such property rights. The
Dissolution Notice shall be accompanied by a copy of the actual decree of
dissolution or settlement agreement between the Optionee and the Optionee's
spouse which provides for the award to the spouse of one or more Purchased
Shares in settlement of any community property or other marital property rights
such spouse may have in such shares.
8.3 EXERCISE OF SPECIAL PURCHASE RIGHT. The price at which
the Special Purchase Right shall be exercisable by the Company will be the
higher of the Option Price as set forth in Section 1.1 hereof or the fair market
value of the shares as of the date the Special
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Purchase Right is exercised. The right shall be exercised by delivery of
written notice (the "Purchase Notice") to the Optionee and the Optionee's
spouse within thirty (30) days after the Corporation's receipt of the
Dissolution Notice. The Purchase Notice shall indicate the number of shares
to be purchased by the Corporation, the date such purchase is to be effected
(such date to be not less than five (5) business days, nor more than ten (10)
business days, after the date of the Purchase Notice), and the price to be
paid for such Purchased Shares. The Optionee (or the Optionee's spouse, to
the extent such spouse has physical possession of the Purchased Shares)
shall, prior to the close of business on the date specified for the purchase,
deliver to the Corporate Secretary of the Corporation the certificates
representing the shares to be purchased, each certificate to be properly
endorsed for transfer. To the extent any of the shares to be purchased by
the Corporation are at the time held in escrow under Article VII, the
certificates for such shares shall be promptly delivered out of escrow to the
Corporation. The Corporation shall, concurrently with the receipt of the
stock certificates, pay to the Optionee's spouse (in cash or cash
equivalents) an amount equal to the price to be paid for such shares as
specified in the Purchase Notice.
If the Optionee's spouse does not agree with the Corporation's
determination of the fair market value of the shares then the spouse shall
promptly notify the Corporation in writing of such disagreement and the fair
market value of such shares shall thereupon be determined by an appraiser of
recognized standing selected by the Corporation whose appraisal shall be
determinative of such value. The cost of the appraisal shall be borne
entirely by the Corporation. The closing shall then be held on the fifth
business day following the completion of such appraisal; PROVIDED, however,
that if the appraised value is more than fifteen percent (15%) greater than
the fair market value specified for the shares in the Purchase Notice, the
Corporation shall have the right, exercisable prior to the expiration of such
five (5)-business-day period, to rescind the exercise of the Special Purchase
Right and thereby revoke its election to purchase the shares awarded to the
spouse.
8.4 LAPSE. The Special Purchase Right under this Article VIII
shall lapse and cease to have effect upon the EARLIER to occur of (i) the first
date on which the First Refusal Right under Article VI lapses or (ii) the
expiration of the thirty (30)-day exercise period specified in paragraph 8.3, to
the extent the Special Purchase Right is not timely exercised in accordance with
such paragraph.
IX. GENERAL PROVISIONS
9.1 ASSIGNMENT. The Corporation may assign its Repurchase
Right under Article V, its First Refusal Right under Article VI and/or its
Special Purchase Right under Article VIII to any person or entity selected by
the Corporation's Board of Directors, including (without limitation) one or more
shareholders of the Corporation.
If the assignee of the Repurchase Right is other than a one
hundred percent (100%) owned subsidiary corporation of the Corporation or the
parent corporation owning one
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<PAGE>
hundred percent (100%) of the Corporation, then such assignee must make a
cash payment to the Corporation, upon the assignment of the Repurchase Right,
in an amount equal to the excess (if any) of (i) the fair market value of the
Unvested Shares at the time subject to the assigned Repurchase Right over
(ii) the aggregate repurchase price payable for the Unvested Shares
thereunder.
9.2 DEFINITIONS. For purposes of this Agreement, the following
provisions shall be applicable in determining the parent and subsidiary
corporations of the Corporation:
(i) Any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation shall be
considered to be a parent corporation of the Corporation, provided each
such corporation in the unbroken chain (other than the Corporation) owns,
at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
(ii) Each corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation shall be
considered to be a subsidiary of the Corporation, provided each such
corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
9.3 NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this
Agreement or in the Plan shall confer upon the Optionee any right to continue in
the Service of the Corporation (or any parent or subsidiary corporation of the
Corporation employing or retaining Optionee) for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any parent or subsidiary corporation of the Corporation employing or
retaining Optionee) or the Optionee, which rights are hereby expressly reserved
by each, to terminate the Optionee's Service at any time for any reason
whatsoever, with or without cause.
9.4 NOTICES. Any notice required in connection with (i) the
Repurchase Right, the Special Purchase Right or the First Refusal Right or (ii)
the disposition of any Purchased Shares covered thereby shall be given in
writing and shall be deemed effective upon personal delivery or upon deposit in
the United States mail, registered or certified, postage prepaid and addressed
to the party entitled to such notice at the address indicated below such party's
signature line on this Agreement or at such other address as such party may
designate by ten (10) days advance written notice under this paragraph 9.4 to
all other parties to this Agreement.
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<PAGE>
9.5 NO WAIVER. The failure of the Corporation (or its
assignees) in any instance to exercise the Repurchase Right granted under
Article V, or the failure of the Corporation (or its assignees) in any
instance to exercise the First Refusal Right granted under Article VI, or the
failure of the Corporation (or its assignees) in any instance to exercise the
Special Purchase Right granted under Article VIII shall not constitute a
waiver of any other repurchase rights and/or rights of first refusal that may
subsequently arise under the provisions of this Agreement or any other
agreement between the Corporation and the Optionee or the Optionee's spouse.
No waiver of any breach or condition of this Agreement shall be deemed to be
a waiver of any other or subsequent breach or condition, whether of like or
different nature.
9.6 CANCELLATION OF SHARES. If the Corporation (or its
assignees) shall make available, at the time and place and in the amount and
form provided in this Agreement, the consideration for the Purchased Shares
to be repurchased in accordance with the provisions of this Agreement, then
from and after such time, the person from whom such shares are to be
repurchased shall no longer have any rights as a holder of such shares (other
than the right to receive payment of such consideration in accordance with
this Agreement), and such shares shall be deemed purchased in accordance with
the applicable provisions hereof and the Corporation (or its assignees) shall
be deemed the owner and holder of such shares, whether or not the
certificates therefor have been delivered as required by this Agreement.
X. MISCELLANEOUS PROVISIONS
10.1 OPTIONEE UNDERTAKING. Optionee hereby agrees to take
whatever additional action and execute whatever additional documents the
Corporation may in its judgment deem necessary or advisable in order to carry
out or effect one or more of the obligations or restrictions imposed on
either the Optionee or the Purchased Shares pursuant to the express
provisions of this Agreement.
10.2 AGREEMENT IS ENTIRE CONTRACT. This Agreement
constitutes the entire contract between the parties hereto with regard to the
subject matter hereof. This Agreement is made pursuant to the provisions of
the Plan and shall in all respects be construed in conformity with the
express terms and provisions of the Plan.
10.3 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, as such
laws are applied to contracts entered into and performed in such State
without resort to that State's conflict-of-laws rules.
10.4 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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<PAGE>
10.5 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall inure to the benefit of, and be binding upon, the Corporation and its
successors and assigns and the Optionee and the Optionee's legal
representatives, heirs, legatees, distributees, assigns and transferees by
operation of law, whether or not any such person shall have become a party to
this Agreement and have agreed in writing to join herein and be bound by the
terms and conditions hereof.
10.6 POWER OF ATTORNEY. Optionee's spouse hereby appoints
Optionee his or her true and lawful attorney in fact, for him or her and in his
or her name, place and stead, and for his or her use and benefit, to agree to
any amendment or modification of this Agreement and to execute such further
instruments and take such further actions as may reasonably be necessary to
carry out the intent of this Agreement. Optionee's spouse further gives and
grants unto Optionee as his or her attorney in fact full power and authority to
do and perform every act necessary and proper to be done in the exercise of any
of the foregoing powers as fully as he or she might or could do if personally
present, with full power of substitution and revocation, hereby ratifying and
confirming all that Optionee shall lawfully do and cause to be done by virtue of
this power of attorney.
[Remainder of This Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on
the day and year first indicated above.
Rubio's Restaurants, Inc.
By:
--------------------------------
Title:
-----------------------------
Address:
------------------------------------
------------------------------------
------------------------------------
Optionee (*)
Address:
------------------------------------
------------------------------------
The undersigned spouse of Optionee has read and hereby approves
the foregoing Stock Purchase Agreement. In consideration of the
Corporation's granting the Optionee the right to acquire the Purchased Shares
in accordance with the terms of such Agreement, the undersigned hereby agrees
to be irrevocably bound by all the terms and provisions of such Agreement,
including (specifically) the right of the Corporation (or its assignees) to
purchase any and all interest or right the undersigned may otherwise have in
such shares pursuant to community property laws or other marital property
rights.
------------------------------------
Optionee's Spouse
Address:
------------------------------------
------------------------------------
- -------------------------
(*) I have executed the Section 83(b) election that was attached hereto as an
Exhibit. As set forth in Article III, I understand that I, and not the
Corporation, will be responsible for completing the form and filing the election
with the appropriate office of the Federal and State tax authorities and that if
such filing is not completed within thirty (30) days after the date of this
Agreement, I will not be entitled to the tax benefits provided by Section 83(b).
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<PAGE>
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED _________________________ hereby sell(s),
assign(s) and transfer(s) unto Rubio's Restaurants, Inc. (the "Corporation"),
_____________________ (________) shares of the Common Stock of the Corporation
standing in his\her name on the books of the Corporation represented by
Certificate No. _________________ and do hereby irrevocably constitute and
appoint __________________________________ as Attorney to transfer the said
stock on the books of the Corporation with full power of substitution in
the premises.
Dated: ___________________________
Signature
---------------------------
INSTRUCTION: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Corporation to exercise its
Repurchase Right set forth in the Agreement without requiring additional
signatures on the part of the Optionee.
<PAGE>
EXHIBIT II
SECTION 260.141.11
TITLE 10, CALIFORNIA ADMINISTRATIVE CODE
260.141.11 Restriction on Transfer. (a) The issuer of any
security upon which a restriction on transfer has been imposed pursuant to
Sections 260.102.6, 260.141.10 or 260.534 shall cause a copy of this section to
be delivered to each issuee or transferee of such security at the time the
certificate evidencing the security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to
consummate a sale or transfer of such security, or any interest therein, without
the prior written consent of the Commissioner (until this condition is removed
pursuant to Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102
of the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or
any custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants or
spouse;
(5) to holders of securities of the same class of the same
issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code
(either acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the knowledge of
the broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
EXHIBIT II-1
<PAGE>
(9) if the interest sold or transferred is a pledge or other
lien given by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this rule not required;
(10) by way of a sale qualified under Sections 25111, 25112,
25113 or 25121 of the Code, of the securities to be transferred, provided that
no order under Section 25140 or Subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112
or 25113 of the Code, provided that no order under Section 25140 or Subdivision
(a) of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or
countries who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property
Law or to the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property
Law or by the administrator of the unclaimed property law of another state if,
in either such case, such person (i) discloses to potential purchasers at the
sale that transfer of the securities is restricted under this rule, (ii)
delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does
not involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of Section
25110 of the Code but exempt from that qualification requirement by subdivision
(f) of Section 25102; provided that any such transfer is on the condition that
any certificate evidencing the security issued to such transferee shall contain
the legend required by this section.
(c) The certificates representing all such securities subject
to such a restriction on transfer, whether upon initial issuance or upon any
transfer thereof, shall bear on their face a legend, prominently stamped or
printed thereon in capital letters of not less than 10-point size, reading as
follows:
EXHIBIT II-2
<PAGE>
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
EXHIBIT II-3
<PAGE>
EXHIBIT III
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name: _________________________________________________________
Address: ______________________________________________________
Taxpayer Ident. No.: __________________________________________
(2) The property with respect to which the election is being made is
____________ shares of the common stock of Rubio's Restaurants, Inc.
(3) The property was issued on __________________, 19__.
(4) The taxable year in which the election is being made is the calendar year
19__.
(5) The property is subject to a repurchase right pursuant to which the
issuer has the right to acquire the property at the original purchase
price if for any reason taxpayer's employment with the issuer is
terminated. The issuer's repurchase right lapses in a series of annual
and monthly installments over a four (4) year period ending on ________
___________________________________.
(6) The fair market value at the time of transfer (determined without regard
to any restriction other than a restriction which by its terms will never
lapse) is $______ per share.
(7) The amount paid for such property is $______ per share.
(8) A copy of this statement was furnished to Rubio's Restaurants, Inc. for
whom taxpayer rendered the service underlying the transfer of property.
(9) This statement is executed as of: _________________, 19__.
- ----------------------------------- ------------------------------------
Spouse (if any) Taxpayer
This form must be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Restricted Stock Issuance
Agreement.
III-1
<PAGE>
SPECIAL PROTECTIVE ELECTION PURSUANT TO SECTION 83(b) OF THE
INTERNAL REVENUE CODE WITH RESPECT TO PROPERTY ACQUIRED UPON
EXERCISE OF AN INCENTIVE STOCK OPTION
The property described in the above Section 83(b) election is comprised of
shares of common stock acquired pursuant to the exercise of an incentive stock
option under Section 422 of the Code. Accordingly, it is the intent of the
Taxpayer to utilize this election to achieve the following tax results:
1. The purpose of this election is to have the alternative
minimum taxable income attributable to the purchased shares measured by the
amount by which the fair market value of such shares at the time of their
transfer to the Taxpayer exceeds the purchase price paid for the shares. In the
absence of this election, such alternative minimum taxable income would be
measured by the spread between the fair market value of the purchased shares and
the purchase price which exists on the various lapse dates in effect for the
forfeiture restrictions applicable to such shares. The election is to be
effective to the full extent permitted under the Internal Revenue Code.
2. Section 421(a)(1) of the Code expressly excludes from
income any excess of the fair market value of the purchased shares over the
amount paid for such shares. Accordingly, this election is also intended to be
effective in the event there is a "disqualifying disposition" of the shares,
within the meaning of Section 421(b) of the Code, which would otherwise render
the provisions of Section 83(a) of the Code applicable at that time.
Consequently, the Taxpayer hereby elects to have the amount of disqualifying
disposition income measured by the excess of the fair market value of the
purchased shares on the date of transfer to the Taxpayer over the amount paid
for such shares. Since Section 421(a) presently applies to the shares which are
the subject of this Section 83(b) election, no taxable income is actually
recognized for regular tax purposes at this time, and no income taxes are
payable, by the Taxpayer as a result of this election.
This form should be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Stock Purchase Agreement.
NOTE: PAGE 2 SHOULD BE ATTACHED ONLY IF YOU ARE EXERCISING AN
INCENTIVE STOCK OPTION.
<PAGE>
EXHIBIT 10.37
RUBIO'S RESTAURANTS, INC.
1998 STOCK OPTION/STOCK ISSUANCE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1998 Stock Option/Stock Issuance Plan is intended to promote
the interests of Rubio's Restaurants, Inc., a Delaware corporation, by
providing eligible persons in the Corporation's employ or service with the
opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Corporation as an incentive for them to continue
in such employ or service.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two (2) separate equity programs:
(i) the Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be granted
options to purchase shares of Common Stock, and
(ii) the Stock Issuance Program under which eligible
persons may, at the discretion of the Plan Administrator, be issued
shares of Common Stock directly, either through the immediate purchase
of such shares or as a bonus for services rendered the Corporation (or
any Parent or Subsidiary).
B. The provisions of Articles One and Four shall apply to both equity
programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Board. However, any or all
administrative functions otherwise exercisable by the Board may be delegated
to the Committee. Members of the Committee shall serve for such period of
time as the Board may determine and shall be subject to removal by the Board
at any time. The Board may also at any time terminate the functions of the
Committee and reassume all powers and authority previously delegated to the
Committee.
<PAGE>
B. The Plan Administrator shall have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it
may deem appropriate for proper administration of the Plan and to make such
determinations under, and issue such interpretations of, the Plan and any
outstanding options or stock issuances thereunder as it may deem necessary or
advisable. Decisions of the Plan Administrator shall be final and binding on
all parties who have an interest in the Plan or any option or stock issuance
thereunder.
IV. ELIGIBILITY
A. The persons eligible to participate in the Plan are as follows:
(i) Employees,
(ii) non-employee members of the Board or the non-employee
members of the board of directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or Subsidiary).
B. The Plan Administrator shall have full authority to determine, (i)
with respect to the grants made under the Option Grant Program, which
eligible persons are to receive the option grants, the time or times when
those grants are to be made, the number of shares to be covered by each such
grant, the status of the granted option as either an Incentive Option or a
Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares
and the maximum term for which the option is to remain outstanding, and (ii)
with respect to stock issuances made under the Stock Issuance Program, which
eligible persons are to receive such stock issuances, the time or times when
those issuances are to be made, the number of shares to be issued to each
Participant, the vesting schedule (if any) applicable to the issued shares
and the consideration to be paid by the Participant for such shares.
C. The Plan Administrator shall have the absolute discretion either to
grant options in accordance with the Option Grant Program or to effect stock
issuances in accordance with the Stock Issuance Program.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock. The maximum number of shares of Common
Stock which may be issued over the term of the Plan shall not exceed 168,853
shares.
B. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
expire or terminate for any reason prior to exercise in full or (ii) the options
are cancelled in accordance with the cancellation-
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<PAGE>
regrant provisions of Article Two. Unvested shares issued under the Plan and
subsequently repurchased by the Corporation, at the option exercise or direct
issue price paid per share, pursuant to the Corporation's repurchase rights
under the Plan shall be added back to the number of shares of Common Stock
reserved for issuance under the Plan and shall accordingly be available for
reissuance through one or more subsequent option grants or direct stock
issuances under the Plan.
C. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as
a class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan and (ii) the number and/or class of
securities and the exercise price per share in effect under each outstanding
option in order to prevent the dilution or enlargement of benefits
thereunder. The adjustments determined by the Plan Administrator shall be
final, binding and conclusive. In no event shall any such adjustments be
made in connection with the conversion of one or more outstanding shares of
the Corporation's preferred stock into shares of Common Stock.
ARTICLE TWO
OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; PROVIDED, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator in accordance with the following provisions:
(i) The exercise price per share shall not be less
than eighty-five percent (85%) of the Fair Market Value per share of
Common Stock on the option grant date.
(ii) If the person to whom the option is granted is a
10% Stockholder, then the exercise price per share shall not be less
than one hundred ten percent (110%) of the Fair Market Value per share
of Common Stock on the option grant date.
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<PAGE>
2. The exercise price shall become immediately due upon exercise
of the option and shall, subject to the provisions of Section I of Article
Four and the documents evidencing the option, be payable in cash or check
made payable to the Corporation. Should the Common Stock be registered under
Section 12 of the 1934 Act at the time the option is exercised, then the
exercise price may also be paid as follows:
(i) in shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(ii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable instructions
(A) to a Corporation-designated brokerage firm to effect the immediate
sale of the purchased shares and remit to the Corporation, out of the
sale proceeds available on the settlement date, sufficient funds to
cover the aggregate exercise price payable for the purchased shares
plus all applicable Federal, state and local income and employment
taxes required to be withheld by the Corporation by reason of such
exercise and (B) to the Corporation to deliver the certificates for
the purchased shares directly to such brokerage firm in order to
complete the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at
such time or times, during such period and for such number of shares as shall
be determined by the Plan Administrator and set forth in the documents
evidencing the option grant. However, no option shall have a term in excess
of ten (10) years measured from the option grant date.
C. EFFECT OF TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:
(i) Should the Optionee cease to remain in Service for
any reason other than death, Disability or Misconduct, then the
Optionee shall have a period of three (3) months following the date of
such cessation of Service during which to exercise each outstanding
option held by such Optionee.
(ii) Should Optionee's Service terminate by reason of
Disability, then the Optionee shall have a period of twelve (12)
months following the date of such cessation of Service during which to
exercise each outstanding option held by such Optionee.
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<PAGE>
(iii) If the Optionee dies while holding an outstanding
option, then the personal representative of his or her estate or the
person or persons to whom the option is transferred pursuant to the
Optionee's will or the laws of inheritance shall have a twelve
(12)-month period following the date of the Optionee's death to exercise
such option.
(iv) Under no circumstances, however, shall any such
option be exercisable after the specified expiration of the option
term.
(v) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more than
the number of vested shares for which the option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration of
the applicable exercise period or (if earlier) upon the expiration of
the option term, the option shall terminate and cease to be
outstanding for any vested shares for which the option has not been
exercised. However, the option shall, immediately upon the Optionee's
cessation of Service, terminate and cease to be outstanding with
respect to any and all option shares for which the option is not
otherwise at the time exercisable or in which the Optionee is not
otherwise at that time vested.
(vi) Should Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to remain outstanding.
2. The Plan Administrator shall have the discretion, exercisable
either at the time an option is granted or at any time while the option remains
outstanding, to:
(i) extend the period of time for which the option is
to remain exercisable following Optionee's cessation of Service or
death from the limited period otherwise in effect for that option to
such greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option term,
and/or
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service but
also with respect to one or more additional installments in which the
Optionee would have vested under the option had the Optionee continued
in Service.
D. STOCKHOLDER RIGHTS. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until
such person shall have exercised the option, paid the exercise price and
become the recordholder of the purchased shares.
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E. UNVESTED SHARES. The Plan Administrator shall have the discretion
to grant options which are exercisable for unvested shares of Common Stock.
Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid
per share, any or all of those unvested shares. The terms upon which such
repurchase right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased shares) shall
be established by the Plan Administrator and set forth in the document
evidencing such repurchase right. The Plan Administrator may not impose a
vesting schedule upon any option grant or the shares of Common Stock subject
to that option which is more restrictive than twenty percent (20%) per year
vesting, with the initial vesting to occur not later than one (1) year after
the option grant date. However, such limitation shall not be applicable to
any option grants made to individuals who are officers of the Corporation,
non-employee Board members or independent consultants.
F. FIRST REFUSAL RIGHTS. Until such time as the Common Stock is first
registered under Section 12 of the 1934 Act, the Corporation shall have the
right of first refusal with respect to any proposed disposition by the
Optionee (or any successor in interest) of any shares of Common Stock issued
under the Plan. Such right of first refusal shall be exercisable in
accordance with the terms established by the Plan Administrator and set forth
in the document evidencing such right.
G. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, the option shall be exercisable only by the Optionee and shall not
be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death.
H. WITHHOLDING. The Corporation's obligation to deliver shares of Common
Stock upon the exercise of any options granted under the Plan shall be subject
to the satisfaction of all applicable Federal, state and local income and
employment tax withholding requirements.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
Articles One, Two and Four shall be applicable to Incentive Options. Options
which are specifically designated as Non-Statutory Options shall NOT be subject
to the terms of this Section II.
A. ELIGIBILITY. Incentive Options may only be granted to Employees.
B. EXERCISE PRICE. The exercise price per share shall not be less than
one hundred percent (100%) of the Fair Market Value per share of Common Stock on
the option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares of
Common Stock (determined as of the respective date or dates of grant) for which
one or more options granted to any Employee under the Plan (or any other option
plan of the Corporation or any Parent or Subsidiary) may for the first time
become exercisable as Incentive Options during any
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<PAGE>
one (1) calendar year shall not exceed the sum of One Hundred Thousand
Dollars ($100,000). To the extent the Employee holds two (2) or more such
options which become exercisable for the first time in the same calendar
year, the foregoing limitation on the exercisability of such options as
Incentive Options shall be applied on the basis of the order in which such
options are granted.
D. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the option term shall not exceed five (5)
years measured from the option grant date.
III. CORPORATE TRANSACTION
A. The shares subject to each option outstanding under the Plan at the
time of a Corporate Transaction shall automatically vest in full so that each
such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for all of the shares of Common Stock
at the time subject to that option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock. However, the shares
subject to an outstanding option shall NOT vest on such an accelerated basis
if and to the extent: (i) such option is assumed by the successor
corporation (or parent thereof) in the Corporate Transaction and any
repurchase rights of the Corporation with respect to the unvested option
shares are concurrently assigned to such successor corporation (or parent
thereof) or (ii) such option is to be replaced with a cash incentive program
of the successor corporation which preserves the spread existing on the
unvested option shares at the time of the Corporate Transaction and provides
for subsequent payout in accordance with the same vesting schedule applicable
to those unvested option shares or (iii) the acceleration of such option is
subject to other limitations imposed by the Plan Administrator at the time of
the option grant.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated
rights shall immediately vest in full, in the event of any Corporate
Transaction, except to the extent: (i) those repurchase rights are assigned
to the successor corporation (or parent thereof) in connection with such
Corporate Transaction or (ii) such accelerated vesting is precluded by other
limitations imposed by the Plan Administrator at the time the repurchase
right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction,
had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to (i) the number and
class of securities available for issuance under the Plan following the
consummation of such Corporate Transaction
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<PAGE>
and (ii) the exercise price payable per share under each outstanding option,
PROVIDED the aggregate exercise price payable for such securities shall
remain the same.
E. The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option
remains outstanding, to structure one or more options so that those options
shall automatically accelerate and vest in full (and any repurchase rights of
the Corporation with respect to the unvested shares subject to those options
shall immediately terminate) upon the occurrence of a Corporate Transaction,
whether or not those options are to be assumed in the Corporate Transaction.
F. The Plan Administrator shall also have full power and authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to structure such option so that the shares
subject to that option will automatically vest on an accelerated basis should
the Optionee's Service terminate by reason of an Involuntary Termination
within a designated period (not to exceed eighteen (18) months) following the
effective date of any Corporate Transaction in which the option is assumed
and the repurchase rights applicable to those shares do not otherwise
terminate. Any option so accelerated shall remain exercisable for the
fully-vested option shares until the expiration or sooner termination of the
option term. In addition, the Plan Administrator may provide that one or
more of the Corporation's outstanding repurchase rights with respect to
shares held by the Optionee at the time of such Involuntary Termination shall
immediately terminate on an accelerated basis, and the shares subject to
those terminated rights shall accordingly vest at that time.
G. The portion of any Incentive Option accelerated in connection with
a Corporate Transaction shall remain exercisable as an Incentive Option only
to the extent the applicable One Hundred Thousand Dollar limitation is not
exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of such option shall be exercisable as a Non-Statutory Option under
the Federal tax laws.
H. The grant of options under the Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any
time and from time to time, with the consent of the affected option holders,
the cancellation of any or all outstanding options under the Plan and to
grant in substitution therefor new options covering the same or different
number of shares of Common Stock but with an exercise price per share based
on the Fair Market Value per share of Common Stock on the new option grant
date.
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ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below.
A. PURCHASE PRICE.
1. The purchase price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the
Fair Market Value per share of Common Stock on the issue date. However, the
purchase price per share of Common Stock issued to a 10% Stockholder shall
not be less than one hundred and ten percent (110%) of such Fair Market
Value.
2. Subject to the provisions of Section I of Article Four,
shares of Common Stock may be issued under the Stock Issuance Program for any
of the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:
(i) cash or check made payable to the
Corporation, or
(ii) past services rendered to the Corporation (or
any Parent or Subsidiary).
B. VESTING PROVISIONS.
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified
performance objectives. However, the Plan Administrator may not impose a
vesting schedule upon any stock issuance effected under the Stock Issuance
Program which is more restrictive than twenty percent (20%) per year vesting,
with initial vesting to occur not later than one (1) year after the issuance
date. Such limitation shall not apply to any Common Stock issuances made to
the officers of the Corporation, non-employee Board members or independent
consultants.
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<PAGE>
2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which
the Participant may have the right to receive with respect to the
Participant's unvested shares of Common Stock by reason of any stock
dividend, stock split, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration shall be issued subject to
(i) the same vesting requirements applicable to the Participant's unvested
shares of Common Stock and (ii) such escrow arrangements as the Plan
Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the
Stock Issuance Program, whether or not the Participant's interest in those
shares is vested. Accordingly, the Participant shall have the right to vote
such shares and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those
shares shall be immediately surrendered to the Corporation for cancellation,
and the Participant shall have no further stockholder rights with respect to
those shares. To the extent the surrendered shares were previously issued to
the Participant for consideration paid in cash or cash equivalent (including
the Participant's purchase-money indebtedness), the Corporation shall repay
to the Participant the cash consideration paid for the surrendered shares and
shall cancel the unpaid principal balance of any outstanding purchase-money
note of the Participant attributable to such surrendered shares.
5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock (or
other assets attributable thereto) which would otherwise occur upon the
non-completion of the vesting schedule applicable to those shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares of Common Stock as to which the waiver applies. Such waiver may
be effected at any time, whether before or after the Participant's cessation
of Service or the attainment or non-attainment of the applicable performance
objectives.
C. FIRST REFUSAL RIGHTS. Until such time as the Common Stock is first
registered under Section 12 of the 1934 Act, the Corporation shall have the
right of first refusal with respect to any proposed disposition by the
Participant (or any successor in interest) of any shares of Common Stock
issued under the Stock Issuance Program. Such right of first refusal shall
be exercisable in accordance with the terms established by the Plan
Administrator and set forth in the document evidencing such right.
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<PAGE>
II. CORPORATE TRANSACTION
A. Upon the occurrence of a Corporate Transaction, all outstanding
repurchase rights under the Stock Issuance Program shall terminate
automatically, and the shares of Common Stock subject to those terminated
rights shall immediately vest in full, except to the extent: (i) those
repurchase rights are assigned to the successor corporation (or parent
thereof) in connection with such Corporate Transaction or (ii) such
accelerated vesting is precluded by other limitations imposed by the Plan
Administrator at the time the repurchase right is issued.
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time
while the Corporation's repurchase rights with respect to those shares remain
outstanding, to provide that those rights shall automatically terminate on an
accelerated basis, and the shares of Common Stock subject to those terminated
rights shall immediately vest, in the event the Participant's Service should
subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the
effective date of any Corporate Transaction in which those repurchase rights
are assigned to the successor corporation (or parent thereof).
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be
held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing those unvested shares.
ARTICLE FOUR
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to
pay the option exercise price under the Option Grant Program or the purchase
price for shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments and secured by the purchased shares. The terms of any such
promissory note (including the interest rate and the terms of repayment)
shall be established by the Plan Administrator in its sole discretion. In no
event may the maximum credit available to the Optionee or Participant exceed
the sum of (i) the aggregate option exercise price or purchase price payable
for the purchased shares (less the par value of those shares) plus (ii) any
Federal, state and local income and employment tax liability incurred by the
Optionee or the Participant in connection with the option exercise or share
purchase.
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II. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan shall become effective when adopted by the Board, but no
option granted under the Plan may be exercised, and no shares shall be issued
under the Plan, until the Plan is approved by the Corporation's stockholders.
If such stockholder approval is not obtained within twelve (12) months after
the date of the Board's adoption of the Plan, then all options previously
granted under the Plan shall terminate and cease to be outstanding, and no
further options shall be granted and no shares shall be issued under the
Plan. Subject to such limitation, the Plan Administrator may grant options
and issue shares under the Plan at any time after the effective date of the
Plan and before the date fixed herein for termination of the Plan.
B. The Plan shall terminate upon the EARLIEST of (i) the expiration of
the ten (10)-year period measured from the date the Plan is adopted by the
Board, (ii) the date on which all shares available for issuance under the
Plan shall have been issued as vested shares or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. All options
and unvested stock issuances outstanding at the time of a clause (i)
termination event shall continue to have full force and effect in accordance
with the provisions of the documents evidencing those options or issuances.
III. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment
or modification shall adversely affect the rights and obligations with
respect to options or unvested stock issuances at the time outstanding under
the Plan unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder
approval pursuant to applicable laws and regulations.
B. Options may be granted under the Option Grant Program and shares
may be issued under the Stock Issuance Program which are in each instance in
excess of the number of shares of Common Stock then available for issuance
under the Plan, provided any excess shares actually issued under those
programs shall be held in escrow until there is obtained stockholder approval
of an amendment sufficiently increasing the number of shares of Common Stock
available for issuance under the Plan. If such stockholder approval is not
obtained within twelve (12) months after the date the first such excess
grants or issuances are made, then (i) any unexercised options granted on the
basis of such excess shares shall terminate and cease to be outstanding and
(ii) the Corporation shall promptly refund to the Optionees and the
Participants the exercise or purchase price paid for any excess shares issued
under the Plan and held in escrow, together with interest (at the applicable
Short Term Federal Rate) for the period the shares were held in escrow, and
such shares shall thereupon be automatically cancelled and cease to be
outstanding.
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IV. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
V. WITHHOLDING
The Corporation's obligation to deliver shares of Common Stock upon
the exercise of any options or upon the issuance or vesting of any shares
issued under the Plan shall be subject to the satisfaction of all applicable
Federal, state and local income and employment tax withholding requirements.
VI. REGULATORY APPROVALS
The implementation of the Plan, the granting of any options under
the Plan and the issuance of any shares of Common Stock (i) upon the exercise
of any option or (ii) under the Stock Issuance Program shall be subject to
the Corporation's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the options granted
under it and the shares of Common Stock issued pursuant to it.
VII. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific
duration or interfere with or otherwise restrict in any way the rights of the
Corporation (or any Parent or Subsidiary employing or retaining such person)
or of the Optionee or the Participant, which rights are hereby expressly
reserved by each, to terminate such person's Service at any time for any
reason, with or without cause.
VIII. FINANCIAL REPORTS
The Corporation shall deliver a balance sheet and an income
statement at least annually to each individual holding an outstanding option
under the Plan, unless such individual is a key Employee whose duties in
connection with the Corporation (or any Parent or Subsidiary) assure such
individual access to equivalent information.
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APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CODE shall mean the Internal Revenue Code of 1986, as amended.
C. COMMITTEE shall mean a committee of two (2) or more Board members
appointed by the Board to exercise one or more administrative functions under
the Plan.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
F. CORPORATION shall mean Rubio's Restaurants, Inc., a Delaware
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of Rubio's Restaurants, Inc. which shall by appropriate
action adopt the Plan.
G. DISABILITY shall mean the inability of the Optionee or the
Participant to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment and shall be determined by
the Plan Administrator on the basis of such medical evidence as the Plan
Administrator deems warranted under the circumstances.
H. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
I. EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.
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J. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market. If there is no closing selling
price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding
date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no
closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
(iii) If the Common Stock is at the time neither listed on
any Stock Exchange nor traded on the Nasdaq National Market, then the
Fair Market Value shall be determined by the Plan Administrator after
taking into account such factors as the Plan Administrator shall deem
appropriate.
K. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.
L. INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by
the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a
change in his or her position with the Corporation which materially
reduces his or her duties and responsibilities or the level of
management to which he or she reports, (B) a reduction in his or her
level of compensation (including base salary, fringe benefits and
target bonuses under any corporate-performance based bonus or
incentive programs) by more than fifteen percent (15%) or (C) a
relocation of such individual's place of employment by more than
fifty (50) miles, provided and only if such change, reduction or
relocation is effected without the individual's consent.
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<PAGE>
M. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or discharge
of any Optionee, Participant or other person in the Service of the Corporation
(or any Parent or Subsidiary).
N. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
O. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
P. OPTION GRANT PROGRAM shall mean the option grant program in effect
under the Plan.
Q. OPTIONEE shall mean any person to whom an option is granted under the
Plan.
R. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
S. PARTICIPANT shall mean any person who is issued shares of Common Stock
under the Stock Issuance Program.
T. PLAN shall mean the Corporation's 1998 Stock Option/Stock Issuance
Plan, as set forth in this document.
U. PLAN ADMINISTRATOR shall mean either the Board or the Committee acting
in its capacity as administrator of the Plan.
V. SERVICE shall mean the provision of services to the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant.
W. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
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<PAGE>
X. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by the
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
Y. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect
under the Plan.
Z. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
AA. 10% STOCKHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
A-4
<PAGE>
EXHIBIT 10.38
RUBIO'S RESTAURANTS, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the "Option")
to purchase shares of the Common Stock of Rubio's Restaurants, Inc. (the
"Corporation"):
OPTIONEE: __________________________________________________________
GRANT DATE: ________________________________________________________
VESTING COMMENCEMENT DATE: _________________________________________
EXERCISE PRICE: $ _____________________ per share
NUMBER OF OPTION SHARES: ________________ shares of Common Stock
EXPIRATION DATE: ___________________________________________________
TYPE OF OPTION: ________ Incentive Stock Option
________ Non-Statutory Stock Option
DATE EXERCISABLE: Immediately Exercisable
VESTING SCHEDULE: The Option Shares shall initially be unvested
and subject to repurchase by the Corporation at the Exercise Price
paid per share. Optionee shall acquire a vested interest in, and
the Corporation's repurchase right shall accordingly lapse with
respect to, (i) twenty-five percent (25%) of the Option Shares upon
Optionee's completion of one (1) year of Service measured from the
Vesting Commencement Date and (ii) the balance of the Option Shares
in a series of thirty-six (36) successive equal monthly
installments upon Optionee's completion of each additional month of
Service over the thirty-six (36)-month period measured from the
first anniversary of the Vesting Commencement Date. In no event
shall any additional Option Shares vest after Optionee's cessation
of Service.
Optionee understands and agrees that the Option is granted subject
to and in accordance with the terms of the Rubio's Restaurants, Inc. 1998
Stock Option/Stock Issuance Plan (the "Plan"). Optionee further agrees to be
bound by the terms of the Plan and the terms of the Option as set forth in
the Stock Option Agreement attached hereto as Exhibit A.
Optionee understands that any Option Shares purchased under the
Option will be subject to the terms set forth in the Stock Purchase Agreement
attached hereto as Exhibit B.
<PAGE>
Optionee hereby acknowledges receipt of a copy of the Plan in the form
attached hereto as Exhibit C.
REPURCHASE RIGHTS. OPTIONEE HEREBY AGREES THAT ALL OPTION SHARES
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO CERTAIN
REPURCHASE RIGHTS AND RIGHTS OF FIRST REFUSAL EXERCISABLE BY THE CORPORATION
AND ITS ASSIGNS. THE TERMS OF SUCH RIGHTS ARE SPECIFIED IN THE ATTACHED
STOCK PURCHASE AGREEMENT.
NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Notice or in
the attached Stock Option Agreement or Plan shall confer upon Optionee any
right to continue in Service for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Corporation (or any
Parent or Subsidiary employing or retaining Optionee) or of Optionee, which
rights are hereby expressly reserved by each, to terminate Optionee's Service
at any time for any reason, with or without cause.
DEFINITIONS. All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the attached Stock Option
Agreement.
DATED: _____________, 199__
RUBIO'S RESTAURANTS, INC.
By: _________________________________
Title: _________________________________
_________________________________
OPTIONEE
Address: _________________________________
_________________________________
ATTACHMENTS:
EXHIBIT A - STOCK OPTION AGREEMENT
EXHIBIT B - STOCK PURCHASE AGREEMENT
EXHIBIT C - 1998 STOCK OPTION/STOCK ISSUANCE PLAN
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EXHIBIT A
STOCK OPTION AGREEMENT
(See Exhibit 10.39 to Registration Statement of Form S-1)
<PAGE>
EXHIBIT B
STOCK PURCHASE AGREEMENT
(See Exhibit 10.41 to Registration Statement on Form S-1)<PAGE>
<PAGE>
EXHIBIT C
1998 STOCK OPTION/STOCK ISSUANCE PLAN
(See Exhibit 10.37 to Registration Statement on Form S-1)
<PAGE>
Exhibit 10.39
RUBIO'S RESTAURANTS, INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or the
board of directors of any Parent or Subsidiary and consultants and other
independent advisors in the service of the Corporation (or any Parent or
Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. OPTION TERM. This option shall have a term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY. During Optionee's lifetime, this option
shall be exercisable only by Optionee and shall not be assignable or
transferable other than by will or by the laws of descent and distribution
following Optionee's death.
4. DATES OF EXERCISE. This option shall become exercisable for the
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes exercisable for such installments, those installments shall
accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.
5. CESSATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
<PAGE>
(a) Should Optionee cease to remain in Service for any reason
(other than death, Disability or Misconduct) while this option is outstanding,
then Optionee shall have a period of three (3) months (commencing with the date
of such cessation of Service) during which to exercise this option, but in no
event shall this option be exercisable at any time after the Expiration Date.
(b) Should Optionee die while this option is outstanding, then
the personal representative of Optionee's estate or the person or persons to
whom the option is transferred pursuant to Optionee's will or in accordance with
the laws of inheritance shall have the right to exercise this option. Such
right shall lapse, and this option shall cease to be outstanding, upon the
EARLIER of (i) the expiration of the twelve (12)-month period measured from the
date of Optionee's death or (ii) the Expiration Date.
(c) Should Optionee cease Service by reason of Disability while
this option is outstanding, then Optionee shall have a period of twelve (12)
months (commencing with the date of such cessation of Service) during which to
exercise this option. In no event shall this option be exercisable at any time
after the Expiration Date.
NOTE: Exercise of this option on a date later than three (3)
months following cessation of Service due to Disability will
result in loss of favorable Incentive Option treatment, UNLESS
such Disability constitutes Permanent Disability. In the event
that Incentive Option treatment is not available, this option
will be taxed as a Non-Statutory Option upon exercise.
(d) During the limited period of post-Service exercisability,
this option may not be exercised in the aggregate for more than the number of
Option Shares in which Optionee is, at the time of Optionee's cessation of
Service, vested pursuant to the Vesting Schedule specified in the Grant Notice
or the special vesting acceleration provisions of Paragraph 6. Upon the
expiration of such limited exercise period or (if earlier) upon the Expiration
Date, this option shall terminate and cease to be outstanding for any vested
Option Shares for which the option has not been exercised. To the extent
Optionee is not vested in the Option Shares at the time of Optionee's cessation
of Service, this option shall immediately terminate and cease to be outstanding
with respect to those shares.
(e) Should Optionee's Service be terminated for Misconduct, then
this option shall terminate immediately and cease to remain outstanding.
6. ACCELERATED VESTING.
(a) In the event of any Corporate Transaction while Optionee
remains in Service, the Option Shares at the time subject to this option but not
otherwise vested shall automatically vest in full so that this option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the Option Shares as fully-vested
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shares and may be exercised for any or all of those vested shares. However,
the Option Shares shall NOT vest on such an accelerated basis if and to the
extent: (i) this option is assumed by the successor corporation (or parent
thereof) in the Corporate Transaction and the Corporation's repurchase rights
with respect to the unvested Option Shares are assigned to such successor
corporation (or parent thereof) or (ii) this option is to be replaced with a
cash incentive program of the successor corporation which preserves the
spread existing on the unvested Option Shares at the time of the Corporate
Transaction (the excess of the Fair Market Value of those Option Shares over
the Exercise Price payable for such shares) and provides for subsequent
payout in accordance with the same Vesting Schedule applicable to those
unvested Option Shares as set forth in the Grant Notice.
(b) Immediately following the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) in connection with the Corporate
Transaction.
(c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, PROVIDED the aggregate Exercise Price shall remain the same.
(d) The Option Shares may also vest upon an accelerated basis in
accordance with the terms and conditions of any special addendum attached to
this Agreement.
(e) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
8. STOCKHOLDER RIGHTS. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become the record holder
of the purchased shares.
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<PAGE>
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:
(i) Execute and deliver to the Corporation a
Purchase Agreement for the Option Shares for which the option is
exercised.
(ii) Pay the aggregate Exercise Price for the
purchased shares in one or more of the following forms:
(A) cash or check made payable to the
Corporation; or
(B) a promissory note payable to the Corporation,
but only to the extent authorized by the Plan Administrator in
accordance with Paragraph 14.
Should the Common Stock be registered under Section 12 of
the 1934 Act at the time the option is exercised, then the
Exercise Price may also be paid as follows:
(C) in shares of Common Stock held by Optionee
(or any other person or persons exercising the option) for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date; or
(D) to the extent the option is exercised for
vested Option Shares, through a special sale and remittance
procedure pursuant to which Optionee (or any other person or
persons exercising the option) shall concurrently provide
irrevocable instructions (a) to a Corporation-designated
brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the
aggregate Exercise Price payable for the purchased shares plus
all applicable Federal, state and local income and employment
taxes required to be withheld by the Corporation by reason of
such exercise and (b) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage
firm in order to complete the sale.
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Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Purchase Agreement delivered to
the Corporation in connection with the option exercise.
(iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if
other than Optionee) have the right to exercise this option.
(iv) Execute and deliver to the Corporation such
written representations as may be requested by the Corporation in
order for it to comply with the applicable requirements of Federal and
state securities laws.
(v) Make appropriate arrangements with the
Corporation (or Parent or Subsidiary employing or retaining Optionee)
for the satisfaction of all Federal, state and local income and
employment tax withholding requirements applicable to the option
exercise.
(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
10. REPURCHASE RIGHTS. ALL OPTION SHARES ACQUIRED UPON THE EXERCISE
OF THIS OPTION SHALL BE SUBJECT TO CERTAIN RIGHTS OF THE CORPORATION AND ITS
ASSIGNS TO REPURCHASE THOSE SHARES IN ACCORDANCE WITH THE TERMS SPECIFIED IN THE
PURCHASE AGREEMENT.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from
any regulatory body having authority deemed by the Corporation to be
necessary to the lawful issuance and sale of any Common Stock pursuant to
this option shall relieve the Corporation of any liability with respect to
the non-issuance or sale of the Common Stock as to which such approval shall
not have been obtained. The Corporation, however, shall use its best efforts
to obtain all such approvals.
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<PAGE>
12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns and the legal representatives, heirs and
legatees of Optionee's estate.
13. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to
be given or delivered to Optionee shall be in writing and addressed to Optionee
at the address indicated below Optionee's signature line on the Grant Notice.
All notices shall be deemed effective upon personal delivery or upon deposit in
the U.S. mail, postage prepaid and properly addressed to the party to be
notified.
14. FINANCING. The Plan Administrator may, in its absolute
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a full-recourse,
interest-bearing promissory note secured by those Option Shares. The payment
schedule in effect for any such promissory note shall be established by the Plan
Administrator in its sole discretion.
15. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
16. GOVERNING LAW. The interpretation, performance and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
17. STOCKHOLDER APPROVAL. If the Option Shares covered by this
Agreement exceed, as of the Grant Date, the number of shares of Common Stock
which may be issued under the Plan as last approved by the stockholders, then
this option shall be void with respect to such excess shares, unless stockholder
approval of an amendment sufficiently increasing the number of shares of Common
Stock issuable under the Plan is obtained in accordance with the provisions of
the Plan.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:
(a) This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is exercised
for one or more Option Shares: (i) more than three (3) months after the date
Optionee ceases to be an Employee for any reason other than death or Permanent
Disability or (ii) more than twelve (12) months after the date Optionee ceases
to be an Employee by reason of Permanent Disability.
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<PAGE>
(b) This option shall not become exercisable in the calendar
year in which granted if (and to the extent) the aggregate Fair Market Value
(determined at the Grant Date) of the Common Stock for which this option would
otherwise first become exercisable in such calendar year would, when added to
the aggregate value (determined as of the respective date or dates of grant) of
the Common Stock and any other securities for which one or more other Incentive
Options granted to Optionee prior to the Grant Date (whether under the Plan or
any other option plan of the Corporation or any Parent or Subsidiary) first
become exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000) in the aggregate. To the extent the exercisability of this
option is deferred by reason of the foregoing limitation, the deferred portion
shall become exercisable in the first calendar year or years thereafter in which
the One Hundred Thousand Dollar ($100,000) limitation of this Paragraph 18(b)
would not be contravened, but such deferral shall in all events end immediately
prior to the effective date of a Corporate Transaction in which this option is
not to be assumed, whereupon the option shall become immediately exercisable as
a Non-Statutory Option for the deferred portion of the Option Shares.
(c) Should Optionee hold, in addition to this option, one or
more other options to purchase Common Stock which become exercisable for the
first time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.
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<PAGE>
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
F. CORPORATION shall mean Rubio's Restaurants, Inc., a Delaware
corporation.
G. DISABILITY shall mean the inability of Optionee to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be determined by the Plan Administrator on the basis
of such medical evidence as the Plan Administrator deems warranted under the
circumstances. Disability shall be deemed to constitute PERMANENT DISABILITY in
the event that such Disability is expected to result in death or has lasted or
can be expected to last for a continuous period of twelve (12) months or more.
H. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
I. EXERCISE DATE shall mean the date on which the option shall have been
exercised in accordance with Paragraph 9 of the Agreement.
J. EXERCISE PRICE shall mean the exercise price payable per Option Share
as specified in the Grant Notice.
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K. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.
L. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
the price is reported by the National Association of Securities
Dealers on the Nasdaq National Market. If there is no closing selling
price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding
date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no
closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
(iii) If the Common Stock is at the time neither listed on
any Stock Exchange nor traded on the Nasdaq National Market, then the
Fair Market Value shall be determined by the Plan Administrator after
taking into account such factors as the Plan Administrator shall deem
appropriate.
M. GRANT DATE shall mean the date of grant of the option as specified in
the Grant Notice.
N. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
O. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.
P. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by Optionee, any unauthorized use or disclosure by Optionee of
confidential information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by Optionee adversely affecting
the business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner. The foregoing definition shall not be deemed to be inclusive
of all the acts or omissions which the Corporation (or any Parent or Subsidiary)
A-2
<PAGE>
may consider as grounds for the dismissal or discharge of Optionee or any other
individual in the Service of the Corporation (or any Parent or Subsidiary).
Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
R. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
S. OPTION SHARES shall mean the number of shares of Common Stock subject
to the option.
T. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
U. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
V. PLAN shall mean the Corporation's 1998 Stock Option/Stock Issuance
Plan.
W. PLAN ADMINISTRATOR shall mean either the Board or a committee of the
Board acting in its capacity as administrator of the Plan.
X. PURCHASE AGREEMENT shall mean the stock purchase agreement in
substantially the form of Exhibit B to the Grant Notice.
Y. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or an independent consultant.
Z. STOCK EXCHANGE shall mean the American Stock Exchange or the New York
Stock Exchange.
AA. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
AB. VESTING SCHEDULE shall mean the vesting schedule specified in the
Grant Notice pursuant to which the Optionee is to vest in the Option Shares in a
series of installments over his or her period of Service.
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EXHIBIT 10.40
ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are
hereby made a part of, that certain Stock Option Agreement dated
______________, 199_ (the "Option Agreement") by and between Rubio's
Restaurants, Inc. (the "Corporation") and __________________________________
("Optionee") evidencing the stock option (the "Option") granted on such date
to Optionee under the terms of the Corporation's 1998 Stock Option/Stock
Issuance Plan, and such provisions shall be effective immediately. All
capitalized terms in this Addendum, to the extent not otherwise defined
herein, shall have the meanings assigned to them in the Option Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION
1. To the extent the Option is, in connection with a Corporate
Transaction, to be assumed in accordance with Paragraph 6 of the Option
Agreement, none of the Option Shares shall vest on an accelerated basis upon
the occurrence of that Corporate Transaction, and Optionee shall accordingly
continue, over his or her period of Service following the Corporate
Transaction, to vest in the Option Shares in one or more installments in
accordance with the provisions of the Option Agreement. However, upon an
Involuntary Termination of Optionee's Service within eighteen (18) months
following such Corporate Transaction, all the Option Shares at the time
subject to the Option shall automatically vest in full on an accelerated
basis so that the Option shall immediately become exercisable for all the
Option Shares as fully-vested shares and may be exercised for any or all of
those Option Shares as vested shares. The Option shall remain so exercisable
until the EARLIER of (i) the Expiration Date or (ii) the expiration of the
one (1)-year period measured from the date of the Involuntary Termination.
2. For purposes of this Addendum, an INVOLUNTARY TERMINATION
shall mean the termination of Optionee's Service by reason of:
(i) Optionee's involuntary dismissal or discharge by the
Corporation for reasons other than for Misconduct, or
(ii) Optionee's voluntary resignation following (A) a change
in Optionee's position with the Corporation (or Parent or Subsidiary
employing Optionee) which materially reduces Optionee's duties and
responsibilities or the level of management to which he or she
reports, (B) a reduction in Optionee's level of compensation
(including base salary, fringe benefits and target bonuses under any
corporate-performance based incentive programs) by more than fifteen
percent (15%) or (C) a relocation of Optionee's place of employment by
more than fifty (50) miles, provided and only if such change,
reduction or relocation is effected by the Corporation without
Optionee's consent.
<PAGE>
3. The provisions of Paragraph 1 of this Addendum shall govern
the period for which the Option is to remain exercisable following the
Involuntary Termination of Optionee's Service within eighteen (18) months
after the Corporate Transaction and shall supersede any provisions to the
contrary in Paragraph 5 of the Option Agreement. The provisions of this
Addendum shall also supersede any provisions to the contrary in Paragraph 18
of the Option Agreement concerning the deferred exercisability of the Option.
IN WITNESS WHEREOF, Rubio's Restaurants, Inc. has caused this
Addendum to be executed by its duly-authorized officer as of the Effective
Date specified below.
RUBIO'S RESTAURANTS, INC.
By:
----------------------------------------
Title:
----------------------------------------
EFFECTIVE DATE:______________________, 199_
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<PAGE>
EXHIBIT 10.41
RUBIO'S RESTAURANT'S, INC.
STOCK PURCHASE AGREEMENT
AGREEMENT made this ____ day of _______________ 199_, by and
between Rubio's Restaurant's, Inc., a Delaware corporation, and
__________________, Optionee under the Corporation's 1998 Stock Option/Stock
Issuance Plan.
All capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix.
A. EXERCISE OF OPTION
1. EXERCISE. Optionee hereby purchases _________ shares of
Common Stock (the "Purchased Shares") pursuant to that certain option (the
"Option") granted Optionee on ____________________, 199__ (the "Grant Date")
to purchase up to _______________ shares of Common Stock (the "Option
Shares") under the Plan at the exercise price of $___________ per share (the
"Exercise Price").
2. PAYMENT. Concurrently with the delivery of this Agreement to
the Corporation, Optionee shall pay the Exercise Price for the Purchased
Shares in accordance with the provisions of the Option Agreement and shall
deliver whatever additional documents may be required by the Option Agreement
as a condition for exercise, together with a duly-executed blank Assignment
Separate from Certificate (in the form attached hereto as Exhibit I) with
respect to the Purchased Shares.
3. STOCKHOLDER RIGHTS. Until such time as the Corporation
exercises the Repurchase Right or the First Refusal Right, Optionee (or any
successor in interest) shall have all the rights of a stockholder (including
voting, dividend and liquidation rights) with respect to the Purchased
Shares, subject, however, to the transfer restrictions of Articles B and C.
B. SECURITIES LAW COMPLIANCE
1. RESTRICTED SECURITIES. The Purchased Shares have not been
registered under the 1933 Act and are being issued to Optionee in reliance upon
the exemption from such registration provided by SEC Rule 701 for stock
issuances under compensatory benefit plans such as the Plan. Optionee hereby
confirms that Optionee has been informed that the Purchased Shares are
restricted securities under the 1933 Act and may not be resold or transferred
unless the Purchased Shares are first registered under the Federal securities
laws or unless an exemption from such registration is available. Accordingly,
Optionee hereby acknowledges that Optionee is prepared to hold the Purchased
Shares for an indefinite period and that Optionee is aware that SEC Rule 144
issued under the 1933 Act which exempts certain resales of unrestricted
securities
<PAGE>
is not presently available to exempt the resale of the Purchased Shares from
the registration requirements of the 1933 Act.
2. RESTRICTIONS ON DISPOSITION OF PURCHASED SHARES. Optionee
shall make no disposition of the Purchased Shares (other than a Permitted
Transfer) unless and until there is compliance with all of the following
requirements:
(i) Optionee shall have provided the Corporation with
a written summary of the terms and conditions of the proposed
disposition.
(ii) Optionee shall have complied with all requirements
of this Agreement applicable to the disposition of the Purchased
Shares.
(iii) Optionee shall have provided the Corporation with
written assurances, in form and substance satisfactory to the
Corporation, that (a) the proposed disposition does not require
registration of the Purchased Shares under the 1933 Act or (b) all
appropriate action necessary for compliance with the registration
requirements of the 1933 Act or any exemption from registration
available under the 1933 Act (including Rule 144) has been taken.
The Corporation shall NOT be required (i) to transfer on its books
any Purchased Shares which have been sold or transferred in violation of the
provisions of this Agreement OR (ii) to treat as the owner of the Purchased
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Purchased Shares have been transferred in
contravention of this Agreement.
3. RESTRICTIVE LEGENDS. The stock certificates for the Purchased
Shares shall be endorsed with one or more of the following restrictive
legends:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be
sold or offered for sale in the absence of (a) an effective
registration statement for the shares under such Act, (b) a "no
action" letter of the Securities and Exchange Commission with respect
to such sale or offer or (c) satisfactory assurances to the
Corporation that registration under such Act is not required with
respect to such sale or offer."
"The shares represented by this certificate are subject to
certain repurchase rights and rights of first refusal granted to the
Corporation and accordingly may not be sold, assigned, transferred,
encumbered, or in any manner disposed of except in conformity with the
terms of a written agreement dated __________________, 199_ between
the Corporation and the registered holder of the shares (or the
predecessor in interest to the shares). A copy of such agreement is
maintained at the Corporation's principal corporate offices."
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C. TRANSFER RESTRICTIONS
1. RESTRICTION ON TRANSFER. Except for any Permitted Transfer,
Optionee shall not transfer, assign, encumber or otherwise dispose of any of
the Purchased Shares which are subject to the Repurchase Right. In addition,
Purchased Shares which are released from the Repurchase Right shall not be
transferred, assigned, encumbered or otherwise disposed of in contravention
of the First Refusal Right or the Market Stand-Off.
2. TRANSFEREE OBLIGATIONS. Each person (other than the
Corporation) to whom the Purchased Shares are transferred by means of a
Permitted Transfer must, as a condition precedent to the validity of such
transfer, acknowledge in writing to the Corporation that such person is bound
by the provisions of this Agreement and that the transferred shares are
subject to (i) the Repurchase Right, (ii) the First Refusal Right and (iii)
the Market Stand-Off, to the same extent such shares would be so subject if
retained by Optionee.
3. MARKET STAND-OFF.
(a) In connection with any underwritten public offering by
the Corporation of its equity securities pursuant to an effective
registration statement filed under the 1933 Act, including the Corporation's
initial public offering, Owner shall not sell, make any short sale of, loan,
hypothecate, pledge, grant any option for the purchase of, or otherwise
dispose or transfer for value or otherwise agree to engage in any of the
foregoing transactions with respect to, any Purchased Shares without the
prior written consent of the Corporation or its underwriters. Such
restriction (the "Market Stand-Off") shall be in effect for such period of
time from and after the effective date of the final prospectus for the
offering as may be requested by the Corporation or such underwriters. In no
event, however, shall such period exceed one hundred eighty (180) days and
the Market Stand-Off shall in all events terminate two (2) years after the
effective date of the Corporation's initial public offering.
(b) Owner shall be subject to the Market Stand-Off PROVIDED
AND ONLY IF the officers and directors of the Corporation are also subject to
similar restrictions.
(c) Any new, substituted or additional securities which are
by reason of any Recapitalization or Reorganization distributed with respect
to the Purchased Shares shall be immediately subject to the Market Stand-Off,
to the same extent the Purchased Shares are at such time covered by such
provisions.
(d) In order to enforce the Market Stand-Off, the Corporation
may impose stop-transfer instructions with respect to the Purchased Shares
until the end of the applicable stand-off period.
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D. REPURCHASE RIGHT
1. GRANT. The Corporation is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the sixty (60)-day period
following the date Optionee ceases for any reason to remain in Service or (if
later) during the sixty (60)-day period following the execution date of this
Agreement, to repurchase at the Exercise Price any or all of the Purchased
Shares in which Optionee is not, at the time of his or her cessation of
Service, vested in accordance with the Vesting Schedule applicable to those
shares or the special vesting acceleration provisions of Paragraph D.6 of
this Agreement (such shares to be hereinafter referred to as the "Unvested
Shares").
2. EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall
be exercisable by written notice delivered to each Owner of the Unvested
Shares prior to the expiration of the sixty (60)-day exercise period. The
notice shall indicate the number of Unvested Shares to be repurchased and the
date on which the repurchase is to be effected, such date to be not more than
thirty (30) days after the date of such notice. The certificates
representing the Unvested Shares to be repurchased shall be delivered to the
Corporation on or before the close of business on the date specified for the
repurchase. Concurrently with the receipt of such stock certificates, the
Corporation shall pay to Owner, in cash or cash equivalents (including the
cancellation of any purchase-money indebtedness), an amount equal to the
Exercise Price previously paid for the Unvested Shares which are to be
repurchased from Owner.
3. TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right
shall terminate with respect to any Unvested Shares for which it is not
timely exercised under Paragraph D.2. In addition, the Repurchase Right
shall terminate and cease to be exercisable with respect to any and all
Purchased Shares in which Optionee vests in accordance with the Vesting
Schedule. All Purchased Shares as to which the Repurchase Right lapses
shall, however, remain subject to (i) the First Refusal Right and (ii) the
Market Stand-Off.
4. AGGREGATE VESTING LIMITATION. If the Option is exercised in
more than one increment so that Optionee is a party to one or more other
Stock Purchase Agreements (the "Prior Purchase Agreements") which are
executed prior to the date of this Agreement, then the total number of
Purchased Shares as to which Optionee shall be deemed to have a fully-vested
interest under this Agreement and all Prior Purchase Agreements shall not
exceed in the aggregate the number of Purchased Shares in which Optionee
would otherwise at the time be vested, in accordance with the Vesting
Schedule, had all the Purchased Shares (including those acquired under the
Prior Purchase Agreements) been acquired exclusively under this Agreement.
5. RECAPITALIZATION. Any new, substituted or additional
securities or other property (including cash paid other than as a regular
cash dividend) which is by reason of any Recapitalization distributed with
respect to the Purchased Shares shall be immediately subject to the
Repurchase Right and any escrow requirements hereunder, but only to the
extent the Purchased Shares are at the time covered by such right or escrow
requirements. Appropriate adjustments to reflect such distribution shall be
made to the number and/or class of Purchased
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Shares subject to this Agreement and to the price per share to be paid upon
the exercise of the Repurchase Right in order to reflect the effect of any
such Recapitalization upon the Corporation's capital structure; PROVIDED,
however, that the aggregate purchase price shall remain the same.
6. CORPORATE TRANSACTION.
(a) The Repurchase Right shall automatically terminate in its
entirety, and all the Purchased Shares shall vest in full, immediately prior
to the consummation of any Corporate Transaction while Optionee remains in
Service, except to the extent the Repurchase Right is to be assigned to the
successor entity in such Corporate Transaction.
(b) To the extent the Repurchase Right remains in effect
following a Corporate Transaction, such right shall apply to any new
securities or other property (including any cash payments) received in
exchange for the Purchased Shares in consummation of the Corporate
Transaction, but only to the extent the Purchased Shares are at the time
covered by such right. Appropriate adjustments shall be made to the price
per share payable upon exercise of the Repurchase Right to reflect the effect
of the Corporate Transaction upon the Corporation's capital structure;
PROVIDED, however, that the aggregate purchase price shall remain the same.
The new securities or other property (including any cash payments) issued or
distributed with respect to the Purchased Shares in consummation of the
Corporate Transaction shall be immediately deposited in escrow with the
Corporation (or the successor entity) and shall not be released from escrow
until Optionee vests in such securities or other property in accordance with
the same Vesting Schedule in effect for the Purchased Shares.
(c) The Repurchase Right may also terminate on an accelerated
basis, and the Purchased Shares shall immediately vest in full, in accordance
with the terms and conditions of any special addendum attached to this
Agreement.
E. RIGHT OF FIRST REFUSAL
1. GRANT. The Corporation is hereby granted the right of first
refusal (the "First Refusal Right"), exercisable in connection with any
proposed transfer of the Purchased Shares in which Optionee has vested in
accordance with the provisions of Article D. For purposes of this Article E,
the term "transfer" shall include any sale, assignment, pledge, encumbrance
or other disposition of the Purchased Shares intended to be made by Owner,
but shall not include any Permitted Transfer.
2. NOTICE OF INTENDED DISPOSITION. In the event any Owner of
Purchased Shares in which Optionee has vested desires to accept a bona fide
third-party offer for the transfer of any or all of such shares (the
Purchased Shares subject to such offer to be hereinafter referred to as the
"Target Shares"), Owner shall promptly (i) deliver to the Corporation written
notice (the "Disposition Notice") of the terms of the offer, including the
purchase price and the identity of the third-party offeror, and (ii) provide
satisfactory proof that the disposition of the Target Shares
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<PAGE>
to such third-party offeror would not be in contravention of the provisions
set forth in Articles B and C.
3. EXERCISE OF THE FIRST REFUSAL RIGHT. The Corporation shall,
for a period of twenty-five (25) days following receipt of the Disposition
Notice, have the right to repurchase any or all of the Target Shares subject
to the Disposition Notice upon the same terms as those specified therein or
upon such other terms (not materially different from those specified in the
Disposition Notice) to which Owner consents. Such right shall be exercisable
by delivery of written notice (the "Exercise Notice") to Owner prior to the
expiration of the twenty-five (25)-day exercise period. If such right is
exercised with respect to all the Target Shares, then the Corporation shall
effect the repurchase of such shares, including payment of the purchase
price, not more than five (5) business days after delivery of the Exercise
Notice; and at such time the certificates representing the Target Shares
shall be delivered to the Corporation.
Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the
Corporation shall have the right to pay the purchase price in the form of
cash equal in amount to the value of such property. If Owner and the
Corporation cannot agree on such cash value within ten (10) days after the
Corporation's receipt of the Disposition Notice, the valuation shall be made
by an appraiser of recognized standing selected by Owner and the Corporation
or, if they cannot agree on an appraiser within twenty (20) days after the
Corporation's receipt of the Disposition Notice, each shall select an
appraiser of recognized standing and the two (2) appraisers shall designate a
third appraiser of recognized standing, whose appraisal shall be
determinative of such value. The cost of such appraisal shall be shared
equally by Owner and the Corporation. The closing shall then be held on the
LATER of (i) the fifth (5th) business day following delivery of the Exercise
Notice or (ii) the fifth (5th) business day after such valuation shall have
been made.
4. NON-EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the
Exercise Notice is not given to Owner prior to the expiration of the
twenty-five (25)-day exercise period, Owner shall have a period of thirty
(30) days thereafter in which to sell or otherwise dispose of the Target
Shares to the third-party offeror identified in the Disposition Notice upon
terms (including the purchase price) no more favorable to such third-party
offeror than those specified in the Disposition Notice; PROVIDED, however,
that any such sale or disposition must not be effected in contravention of
the provisions of Articles B and C. The third-party offeror shall acquire
the Target Shares free and clear of the First Refusal Right, but the acquired
shares shall remain subject to the provisions of Article B and Paragraph C.3.
In the event Owner does not effect such sale or disposition of the Target
Shares within the specified thirty (30)-day period, the First Refusal Right
shall continue to be applicable to any subsequent disposition of the Target
Shares by Owner until such right lapses.
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<PAGE>
5. PARTIAL EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the
Corporation makes a timely exercise of the First Refusal Right with respect
to a portion, but not all, of the Target Shares specified in the Disposition
Notice, Owner shall have the option, exercisable by written notice to the
Corporation delivered within five (5) business days after Owner's receipt of
the Exercise Notice, to effect the sale of the Target Shares pursuant to
either of the following alternatives:
(i) sale or other disposition of all the Target Shares to
the third-party offeror identified in the Disposition Notice, but in
full compliance with the requirements of Paragraph E.4, as if the
Corporation did not exercise the First Refusal Right; or
(ii) sale to the Corporation of the portion of the Target
Shares which the Corporation has elected to purchase, such sale to be
effected in substantial conformity with the provisions of Paragraph
E.3. The First Refusal Right shall continue to be applicable to any
subsequent disposition of the remaining Target Shares until such right
lapses.
Owner's failure to deliver timely notification to the Corporation
shall be deemed to be an election by Owner to sell the Target Shares pursuant
to alternative (i) above.
6. RECAPITALIZATION/REORGANIZATION.
(a) Any new, substituted or additional securities or other
property which is by reason of any Recapitalization distributed with respect
to the Purchased Shares shall be immediately subject to the First Refusal
Right, but only to the extent the Purchased Shares are at the time covered by
such right.
(b) In the event of a Reorganization, the First Refusal Right
shall remain in full force and effect and shall apply to the new capital
stock or other property received in exchange for the Purchased Shares in
consummation of the Reorganization, but only to the extent the Purchased
Shares are at the time covered by such right.
7. LAPSE. The First Refusal Right shall lapse upon the EARLIEST
to occur of (i) the first date on which shares of the Common Stock are held
of record by more than five hundred (500) persons, (ii) a determination is
made by the Board that a public market exists for the outstanding shares of
Common Stock or (iii) a firm commitment underwritten public offering,
pursuant to an effective registration statement under the 1933 Act, covering
the offer and sale of the Common Stock in the aggregate amount of at least
ten million dollars ($10,000,000). However, the Market Stand-Off shall
continue to remain in full force and effect following the lapse of the First
Refusal Right.
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F. SPECIAL TAX ELECTION
The acquisition of the Purchased Shares may result in adverse tax
consequences which may be avoided or mitigated by filing an election under
Code Section 83(b). Such election must be filed within thirty (30) days
after the date of this Agreement. A description of the tax consequences
applicable to the acquisition of the Purchased Shares and the form for making
the Code Section 83(b) election are set forth in Exhibit II. OPTIONEE SHOULD
CONSULT WITH HIS OR HER TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF
ACQUIRING THE PURCHASED SHARES AND THE ADVANTAGES AND DISADVANTAGES OF FILING
THE CODE SECTION 83(b) ELECTION. OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S
SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION
UNDER CODE SECTION 83(b), EVEN IF OPTIONEE REQUESTS THE CORPORATION OR ITS
REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
G. GENERAL PROVISIONS
1. ASSIGNMENT. The Corporation may assign the Repurchase Right
and/or the First Refusal Right to any person or entity selected by the Board,
including (without limitation) one or more stockholders of the Corporation.
2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement
or in the Plan shall confer upon Optionee any right to continue in Service
for any period of specific duration or interfere with or otherwise restrict
in any way the rights of the Corporation (or any Parent or Subsidiary
employing or retaining Optionee) or of Optionee, which rights are hereby
expressly reserved by each, to terminate Optionee's Service at any time for
any reason, with or without cause.
3. NOTICES. Any notice required to be given under this Agreement
shall be in writing and shall be deemed effective upon personal delivery or
upon deposit in the U.S. mail, registered or certified, postage prepaid and
properly addressed to the party entitled to such notice at the address
indicated below such party's signature line on this Agreement or at such
other address as such party may designate by ten (10) days advance written
notice under this paragraph to all other parties to this Agreement.
4. NO WAIVER. The failure of the Corporation in any instance to
exercise the Repurchase Right or the First Refusal Right shall not constitute
a waiver of any other repurchase rights and/or rights of first refusal that
may subsequently arise under the provisions of this Agreement or any other
agreement between the Corporation and Optionee. No waiver of any breach or
condition of this Agreement shall be deemed to be a waiver of any other or
subsequent breach or condition, whether of like or different nature.
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<PAGE>
5. CANCELLATION OF SHARES. If the Corporation shall make
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Purchased Shares to be repurchased in
accordance with the provisions of this Agreement, then from and after such
time, the person from whom such shares are to be repurchased shall no longer
have any rights as a holder of such shares (other than the right to receive
payment of such consideration in accordance with this Agreement). Such
shares shall be deemed purchased in accordance with the applicable provisions
hereof, and the Corporation shall be deemed the owner and holder of such
shares, whether or not the certificates therefor have been delivered as
required by this Agreement.
H. MISCELLANEOUS PROVISIONS
1. OPTIONEE UNDERTAKING. Optionee hereby agrees to take whatever
additional action and execute whatever additional documents the Corporation
may deem necessary or advisable in order to carry out or effect one or more
of the obligations or restrictions imposed on either Optionee or the
Purchased Shares pursuant to the provisions of this Agreement.
2. AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the
entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and
shall in all respects be construed in conformity with the terms of the Plan.
3. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California without
resort to that State's conflict-of-laws rules.
4. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together
shall constitute one and the same instrument.
5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall inure to the benefit of, and be binding upon, the Corporation and its
successors and assigns and upon Optionee, Optionee's permitted assigns and
the legal representatives, heirs and legatees of Optionee's estate, whether
or not any such person shall have become a party to this Agreement and have
agreed in writing to join herein and be bound by the terms hereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
RUBIO'S RESTAURANT'S, INC.
By:
-----------------------------------------
Title:
-----------------------------------------
Address:
------------------------------------
------------------------------------
-----------------------------------------
OPTIONEE
Address:
------------------------------------
------------------------------------
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SPOUSAL ACKNOWLEDGMENT
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consideration of the Corporation's
granting Optionee the right to acquire the Purchased Shares in accordance
with the terms of such Agreement, the undersigned hereby agrees to be
irrevocably bound by all the terms of such Agreement, including (without
limitation) the right of the Corporation (or its assigns) to purchase any
Purchased Shares in which Optionee is not vested at time of his or her
cessation of Service.
-----------------------------------------
OPTIONEE'S SPOUSE
Address:
---------------------------------
-----------------------------------------
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EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED _____________________ hereby sell(s), assign(s)
and transfer(s) unto Rubio's Restaurant's, Inc. (the "Corporation"),
_________________ (____________) shares of the Common Stock of the
Corporation standing in his or her name on the books of the Corporation
represented by Certificate No. _____________ herewith and do(es) hereby
irrevocably constitute and appoint _________________________ Attorney to
transfer the said stock on the books of the Corporation with full power of
substitution in the premises.
Dated: ________________
Signature
---------------------------------------
INSTRUCTION: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Optionee.
<PAGE>
EXHIBIT II
FEDERAL INCOME TAX CONSEQUENCES AND
SECTION 83(b) TAX ELECTION
I. FEDERAL INCOME TAX CONSEQUENCES AND SECTION 83(b) ELECTION FOR
EXERCISE OF NON-STATUTORY OPTION. If the Purchased Shares are acquired
pursuant to the exercise of a Non-Statutory Option, as specified in the Grant
Notice, then under Code Section 83, the excess of the Fair Market Value of
the Purchased Shares on the date any forfeiture restrictions applicable to
such shares lapse over the Exercise Price paid for such shares will be
reportable as ordinary income on the lapse date. For this purpose, the term
"forfeiture restrictions" includes the right of the Corporation to repurchase
the Purchased Shares pursuant to the Repurchase Right. However, Optionee may
elect under Code Section 83(b) to be taxed at the time the Purchased Shares
are acquired, rather than when and as such Purchased Shares cease to be
subject to such forfeiture restrictions. Such election must be filed with
the Internal Revenue Service within thirty (30) days after the date of the
Agreement. Even if the Fair Market Value of the Purchased Shares on the date
of the Agreement equals the Exercise Price paid (and thus no tax is payable),
the election must be made to avoid adverse tax consequences in the future.
The form for making this election is attached as part of this exhibit.
FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30)-DAY PERIOD WILL
RESULT IN THE RECOGNITION OF ORDINARY INCOME BY OPTIONEE AS THE FORFEITURE
RESTRICTIONS LAPSE.
II. FEDERAL INCOME TAX CONSEQUENCES AND CONDITIONAL SECTION 83(b)
ELECTION FOR EXERCISE OF INCENTIVE OPTION. If the Purchased Shares are
acquired pursuant to the exercise of an Incentive Option, as specified in the
Grant Notice, then the following tax principles shall be applicable to the
Purchased Shares:
(i) For regular tax purposes, no taxable income will be
recognized at the time the Option is exercised.
(ii) The excess of (a) the Fair Market Value of the
Purchased Shares on the date the Option is exercised or (if later) on
the date any forfeiture restrictions applicable to the Purchased
Shares lapse over (b) the Exercise Price paid for the Purchased Shares
will be includible in Optionee's taxable income for alternative
minimum tax purposes.
(iii) If Optionee makes a disqualifying disposition of the
Purchased Shares, then Optionee will recognize ordinary income in the
year of such disposition equal in amount to the excess of (a) the Fair
Market Value of the Purchased Shares on the date the Option is
exercised or (if later) on the date any forfeiture restrictions
applicable to the Purchased Shares lapse over (b) the Exercise Price
paid for the Purchased Shares. Any additional gain recognized upon
the disqualifying disposition will be either short-term or long-term
capital
II-1
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gain depending upon the period for which the Purchased Shares are held
prior to the disposition.
(iv) For purposes of the foregoing, the term "forfeiture
restrictions" will include the right of the Corporation to repurchase
the Purchased Shares pursuant to the Repurchase Right. The term
"disqualifying disposition" means any sale or other disposition (1)
of the Purchased Shares within two (2) years after the Grant Date or
within one (1) year after the exercise date of the Option.
(v) In the absence of final Treasury Regulations
relating to Incentive Options, it is not certain whether Optionee may,
in connection with the exercise of the Option for any Purchased Shares
at the time subject to forfeiture restrictions, file a protective
election under Code Section 83(b) which would limit (a) Optionee's
alternative minimum taxable income upon exercise and (b) Optionee's
ordinary income upon a disqualifying disposition to the excess of the
Fair Market Value of the Purchased Shares on the date the Option is
exercised over the Exercise Price paid for the Purchased Shares.
Accordingly, such election if properly filed will only be allowed to
the extent the final Treasury Regulations permit such a protective
election. Page 2 of the attached form for making the election should
be filed with any election made in connection with the exercise of an
Incentive Option.
- -------------------------
(1)/ Generally, a disposition of shares purchased under an Incentive Option
includes any transfer of legal title, including a transfer by sale, exchange or
gift, but does not include a transfer to the Optionee's spouse, a transfer into
joint ownership with right of survivorship if Optionee remains one of the joint
owners, a pledge, a transfer by bequest or inheritance or certain tax free
exchanges permitted under the Code.
II-2
<PAGE>
SECTION 83(b) ELECTION
This statement is being made under Section 83(b) of the Internal
Revenue Code, pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is ________
shares of the common stock of Rubio's Restaurant's, Inc.
(3) The property was issued on ______________, 199_.
(4) The taxable year in which the election is being made is the calendar year
199_.
(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's service with the issuer terminates. The issuer's
repurchase right lapses in a series of annual and monthly installments over
a four (4)-year period ending on ____________, 200_.
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $________ per share.
(7) The amount paid for such property is $__________ per share.
(8) A copy of this statement was furnished to Rubio's Restaurant's, Inc. for
whom taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed on _______________, 199__.
- --------------------------- -------------------------------------------
Spouse (if any) Taxpayer
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE CENTER WITH
WHICH TAXPAYER FILES HIS OR HER FEDERAL INCOME TAX RETURNS AND MUST BE MADE
WITHIN THIRTY (30) DAYS AFTER THE EXECUTION DATE OF THE STOCK PURCHASE
AGREEMENT. THIS FILING SHOULD BE MADE BY REGISTERED OR CERTIFIED MAIL,
RETURN RECEIPT REQUESTED. OPTIONEE MUST RETAIN TWO (2) COPIES OF THE
COMPLETED FORM FOR FILING WITH HIS OR HER FEDERAL AND STATE TAX RETURNS FOR
THE CURRENT TAX YEAR AND AN ADDITIONAL COPY FOR HIS OR HER RECORDS.
The property described in the above Section 83(b) election is
comprised of shares of common stock acquired pursuant to the exercise of an
incentive stock option under Section 422
<PAGE>
of the Internal Revenue Code (the "Code"). Accordingly, it is the intent of
the Taxpayer to utilize this election to achieve the following tax results:
1. The purpose of this election is to have the alternative
minimum taxable income attributable to the purchased shares measured by the
amount by which the fair market value of such shares at the time of their
transfer to the Taxpayer exceeds the purchase price paid for the shares. In
the absence of this election, such alternative minimum taxable income would
be measured by the spread between the fair market value of the purchased
shares and the purchase price which exists on the various lapse dates in
effect for the forfeiture restrictions applicable to such shares. The
election is to be effective to the full extent permitted under the Code.
2. Section 421(a)(1) of the Code expressly excludes from income
any excess of the fair market value of the purchased shares over the amount
paid for such shares. Accordingly, this election is also intended to be
effective in the event there is a "disqualifying disposition" of the shares,
within the meaning of Section 421(b) of the Code, which would otherwise
render the provisions of Section 83(a) of the Code applicable at that time.
Consequently, the Taxpayer hereby elects to have the amount of disqualifying
disposition income measured by the excess of the fair market value of the
purchased shares on the date of transfer to the Taxpayer over the amount paid
for such shares. Since Section 421(a) presently applies to the shares which
are the subject of this Section 83(b) election, no taxable income is actually
recognized for regular tax purposes at this time, and no income taxes are
payable, by the Taxpayer as a result of this election.
THIS PAGE 2 IS TO BE ATTACHED TO ANY SECTION 83(b) ELECTION FILED IN
CONNECTION WITH THE EXERCISE OF AN INCENTIVE STOCK OPTION UNDER THE FEDERAL
TAX LAWS.
2
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APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Purchase Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
F. CORPORATION shall mean Rubio's Restaurant's, Inc., a Delaware
corporation.
G. DISPOSITION NOTICE shall have the meaning assigned to such term in
Paragraph E.2.
H. EXERCISE NOTICE shall have the meaning assigned to such term in
Paragraph E.3.
I. EXERCISE PRICE shall have the meaning assigned to such term in
Paragraph A.1.
J. FAIR MARKET VALUE of a share of Common Stock on any relevant date,
prior to the initial public offering of the Common Stock, shall be determined
by the Plan Administrator after taking into account such factors as it shall
deem appropriate.
K. FIRST REFUSAL RIGHT shall mean the right granted to the Corporation
in accordance with Article E.
L. GRANT DATE shall have the meaning assigned to such term in
Paragraph A.1.
A-1
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M. GRANT NOTICE shall mean the Notice of Grant of Stock Option
pursuant to which Optionee has been informed of the basic terms of the Option.
N. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
O. MARKET STAND-OFF shall mean the market stand-off restriction
specified in Paragraph C.3.
P. 1933 ACT shall mean the Securities Act of 1933, as amended.
Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
R. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
S. OPTION shall have the meaning assigned to such term in Paragraph
A.1.
T. OPTION AGREEMENT shall mean all agreements and other documents
evidencing the Option.
U. OPTIONEE shall mean the person to whom the Option is granted under
the Plan.
V. OWNER shall mean Optionee and all subsequent holders of the
Purchased Shares who derive their chain of ownership through a Permitted
Transfer from Optionee.
W. PARENT shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
X. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the
Purchased Shares, provided and only if Optionee obtains the Corporation's
prior written consent to such transfer, (ii) a transfer of title to the
Purchased Shares effected pursuant to Optionee's will or the laws of
intestate succession following Optionee's death or (iii) a transfer to the
Corporation in pledge as security for any purchase-money indebtedness
incurred by Optionee in connection with the acquisition of the Purchased
Shares.
Y. PLAN shall mean the Corporation's 1998 Stock Option/Stock Issuance
Plan.
Z. PLAN ADMINISTRATOR shall mean either the Board or a committee of
the Board acting in its capacity as administrator of the Plan.
A-2
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AA. PRIOR PURCHASE AGREEMENT shall have the meaning assigned to such
term in Paragraph D.4.
AB. PURCHASED SHARES shall have the meaning assigned to such term in
Paragraph A.1.
AC. RECAPITALIZATION shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.
AD. REORGANIZATION shall mean any of the following transactions:
(i) a merger or consolidation in which the Corporation is
not the surviving entity,
(ii) a sale, transfer or other disposition of all or
substantially all of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the
surviving entity but in which the Corporation's outstanding voting
securities are transferred in whole or in part to a person or persons
different from the persons holding those securities immediately prior
to the merger, or
(iv) any transaction effected primarily to change the state
in which the Corporation is incorporated or to create a holding
company structure.
AE. REPURCHASE RIGHT shall mean the right granted to the Corporation in
accordance with Article D.
AF. SEC shall mean the Securities and Exchange Commission.
AG. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an employee,
subject to the control and direction of the employer entity as to both the
work to be performed and the manner and method of performance, a non-employee
member of the board of directors or an independent consultant.
AH. SUBSIDIARY shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain
owns, at the time of the determination, stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
AI. TARGET SHARES shall have the meaning assigned to such term in
Paragraph E.2.
A-3
<PAGE>
AJ. VESTING SCHEDULE shall mean the vesting schedule specified in the
Grant Notice pursuant to which the Optionee is to vest in the Option Shares
in a series of installments over his or her period of Service.
AK. UNVESTED SHARES shall have the meaning assigned to such term in
Paragraph D.1.
A-4
<PAGE>
EXHIBIT 10.42
ADDENDUM
TO
STOCK PURCHASE AGREEMENT
The following provisions are hereby incorporated into, and are
hereby made a part of, that certain Stock Purchase Agreement dated __________
(the "Purchase Agreement") by and between Rubio's Restaurants, Inc. (the
"Corporation") and ________________________________ ("Optionee") evidencing
the shares of Common Stock purchased on such date by Optionee pursuant to the
option granted to him or her under the Corporation's 1998 Stock Option/Stock
Issuance Plan, and such provisions shall be effective immediately. All
capitalized terms in this Addendum, to the extent not otherwise defined
herein, shall have the meanings assigned to such terms in the Purchase
Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION
1. To the extent the Repurchase Right is assigned to the
successor corporation (or parent thereof) in connection with a Corporate
Transaction, no accelerated vesting of the Purchased Shares shall occur upon
such Corporate Transaction, and the Repurchase Right shall continue to remain
in full force and effect in accordance with the provisions of the Purchase
Agreement. Optionee shall, over his or her period of Service following the
Corporate Transaction, continue to vest in the Purchased Shares in one or
more installments in accordance with the provisions of the Purchase
Agreement. However, upon an Involuntary Termination of Optionee's Service
within eighteen (18) months following the Corporate Transaction, the
Repurchase Right shall terminate automatically, and all the Purchased Shares
shall immediately vest in full at that time.
2. For purposes of this Addendum, the following definitions shall
be in effect:
An INVOLUNTARY TERMINATION shall mean the termination of
Optionee's Service by reason of:
(i) Optionee's involuntary dismissal or discharge by
the Corporation for reasons other than for Misconduct, or
(ii) Optionee's voluntary resignation following (A) a
change in his or her position with the Corporation (or Parent or
Subsidiary employing Optionee) which materially reduces his or her
duties and responsibilities or the level of management to which he or
she reports, (B) a reduction in Optionee's level of compensation
(including base salary, fringe benefits and target bonuses under any
corporate-performance based incentive programs) by more than fifteen
percent (15%) or (C) a relocation of Optionee's place of employment by
more than fifty (50) miles, provided and only if such
<PAGE>
change, reduction or relocation is effected by the Corporation without
Optionee's consent.
MISCONDUCT shall mean the termination of Optionee's Service by
reason of Optionee's commission of any act of fraud, embezzlement or
dishonesty, any unauthorized use or disclosure by Optionee of confidential
information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by Optionee adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be
deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or
discharge of Optionee or any other individual in the Service of the
Corporation (or any Parent or Subsidiary).
IN WITNESS WHEREOF, Rubio's Restaurants, Inc. has caused this
Addendum to be executed by its duly-authorized officer as of the Effective
Date specified below.
RUBIO'S RESTAURANTS, INC.
By:
-----------------------------------------
Title:
--------------------------------------
EFFECTIVE DATE: __________________, 199__
2
<PAGE>
EXHIBIT 10.43
RUBIO'S RESTAURANTS, INC.
STOCK ISSUANCE AGREEMENT
AGREEMENT made as of this ____ day of _____________ 199__, by and
between Rubio's Restaurants, Inc., a Delaware corporation, and ____________
__________________________, Participant in the Corporation's
1998 Stock Option/Stock Issuance Plan.
All capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix.
A. PURCHASE OF SHARES
1. PURCHASE. Participant hereby purchases ________________
shares of Common Stock (the "Purchased Shares") pursuant to the provisions
of the Stock Issuance Program at the purchase price of $_____________ per
share (the "Purchase Price").
2. PAYMENT. Concurrently with the delivery of this Agreement to the
Corporation, Participant shall pay the Purchase Price for the Purchased Shares
in cash or cash equivalent and shall deliver a duly-executed blank Assignment
Separate from Certificate (in the form attached hereto as Exhibit I) with
respect to the Purchased Shares.
3. STOCKHOLDER RIGHTS. Until such time as the Corporation exercises
the Repurchase Right or the First Refusal Right, Participant (or any successor
in interest) shall have all stockholder rights (including voting, dividend and
liquidation rights) with respect to the Purchased Shares, subject, however, to
the transfer restrictions of Articles B and C.
B. SECURITIES LAW COMPLIANCE
1. RESTRICTED SECURITIES. The Purchased Shares have not been
registered under the 1933 Act and are being issued to Participant in reliance
upon the exemption from such registration provided by SEC Rule 701 for stock
issuances under compensatory benefit plans such as the Plan. Participant hereby
confirms that Participant has been informed that the Purchased Shares are
restricted securities under the 1933 Act and may not be resold or transferred
unless the Purchased Shares are first registered under the Federal securities
laws or unless an exemption from such registration is available. Accordingly,
Participant hereby acknowledges that Participant is prepared to hold the
Purchased Shares for an indefinite period and that Participant is aware that SEC
Rule 144 issued under the 1933 Act which exempts certain resales of unrestricted
securities is not presently available to exempt the resale of the Purchased
Shares from the registration requirements of the 1933 Act.
<PAGE>
2. DISPOSITION OF PURCHASED SHARES. Participant shall make no
disposition of the Purchased Shares (other than a Permitted Transfer) unless and
until there is compliance with all of the following requirements:
(i) Participant shall have provided the Corporation with a
written summary of the terms and conditions of the proposed
disposition.
(ii) Participant shall have complied with all requirements
of this Agreement applicable to the disposition of the Purchased
Shares.
(iii) Participant shall have provided the Corporation with
written assurances, in form and substance satisfactory to the
Corporation, that (a) the proposed disposition does not require
registration of the Purchased Shares under the 1933 Act or (b) all
appropriate action necessary for compliance with the registration
requirements of the 1933 Act or any exemption from registration
available under the 1933 Act (including Rule 144) has been taken.
The Corporation shall NOT be required (i) to transfer on its books any
Purchased Shares which have been sold or transferred in violation of the
provisions of this Agreement OR (ii) to treat as the owner of the Purchased
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.
3. RESTRICTIVE LEGENDS. The stock certificates for the Purchased
Shares shall be endorsed with one or more of the following restrictive legends:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be sold or
offered for sale in the absence of (a) an effective registration statement for
the shares under such Act, (b) a "no action" letter of the Securities and
Exchange Commission with respect to such sale or offer or (c) satisfactory
assurances to the Corporation that registration under such Act is not required
with respect to such sale or offer."
"The shares represented by this certificate are subject to
certain repurchase rights and rights of first refusal granted to the Corporation
and accordingly may not be sold, assigned, transferred, encumbered, or in any
manner disposed of except in conformity with the terms of a written agreement
dated _____________, 199_ between the Corporation and the registered holder
of the shares (or the predecessor in interest to the shares). A copy of such
agreement is maintained at the Corporation's principal corporate offices."
2
<PAGE>
C. TRANSFER RESTRICTIONS
1. RESTRICTION ON TRANSFER. Except for any Permitted Transfer,
Participant shall not transfer, assign, encumber or otherwise dispose of any of
the Purchased Shares which are subject to the Repurchase Right. In addition,
Purchased Shares which are released from the Repurchase Right shall not be
transferred, assigned, encumbered or otherwise disposed of in contravention of
the First Refusal Right or the Market Stand-Off.
2. TRANSFEREE OBLIGATIONS. Each person (other than the Corporation)
to whom the Purchased Shares are transferred by means of a Permitted Transfer
must, as a condition precedent to the validity of such transfer, acknowledge in
writing to the Corporation that such person is bound by the provisions of this
Agreement and that the transferred shares are subject to (i) the Repurchase
Right, (ii) the First Refusal Right and (iii) the Market Stand-Off, to the same
extent such shares would be so subject if retained by Participant.
3. MARKET STAND-OFF.
(a) In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any Purchased Shares without the prior written consent of the
Corporation or its underwriters. Such restriction (the "Market Stand-Off")
shall be in effect for such period of time from and after the effective date of
the final prospectus for the offering as may be requested by the Corporation or
such underwriters. In no event, however, shall such period exceed one hundred
eighty (180) days and the Market Stand-Off shall in all events terminate two (2)
years after the effective date of the Corporation's initial public offering.
(b) Owner shall be subject to the Market Stand-Off PROVIDED AND
ONLY IF the officers and directors of the Corporation are also subject to
similar restrictions.
(c) Any new, substituted or additional securities which are by
reason of any Recapitalization or Reorganization distributed with respect to the
Purchased Shares shall be immediately subject to the Market Stand-Off, to the
same extent the Purchased Shares are at such time covered by such provisions.
(d) In order to enforce the Market Stand-Off, the Corporation
may impose stop-transfer instructions with respect to the Purchased Shares until
the end of the applicable stand-off period.
3
<PAGE>
D. REPURCHASE RIGHT
1. GRANT. The Corporation is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the sixty (60)-day period
following the date Participant ceases for any reason to remain in Service, to
repurchase at the Purchase Price any or all of the Purchased Shares in which
Participant is not, at the time of his or her cessation of Service, vested in
accordance with the provisions of the Vesting Schedule set forth in Paragraph
D.3 or the special vesting acceleration provisions of Paragraph D.5 (such shares
to be hereinafter referred to as the "Unvested Shares").
2. EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall be
exercisable by written notice delivered to each Owner of the Unvested Shares
prior to the expiration of the sixty (60)-day exercise period. The notice shall
indicate the number of Unvested Shares to be repurchased and the date on which
the repurchase is to be effected, such date to be not more than thirty (30) days
after the date of such notice. The certificates representing the Unvested
Shares to be repurchased shall be delivered to the Corporation on or before the
close of business on the date specified for the repurchase. Concurrently with
the receipt of such stock certificates, the Corporation shall pay to Owner, in
cash or cash equivalents (including the cancellation of any purchase-money
indebtedness), an amount equal to the Purchase Price previously paid for the
Unvested Shares which are to be repurchased from Owner.
3. TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right shall
terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph D.2. In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to any and all Purchased
Shares in which Participant vests in accordance with the following Vesting
Schedule:
Participant shall vest in twenty-five percent (25%) of the
Purchased Shares, and the Repurchase Right shall concurrently lapse
with respect to those Purchased Shares, upon Participant's completion
of one (1) year of Service measured from ________________, 199_.
Participant shall vest in the remaining seventy-five percent
(75%) of the Purchased Shares, and the Repurchase Right shall
concurrently lapse with respect to those Purchased Shares, in a series
of thirty-six (36) successive equal monthly installments upon
Participant's completion of each additional month of Service over the
thirty-six (36)-month period measured from the date on which the first
twenty-five percent (25%) of the Purchased Shares vests hereunder.
All Purchased Shares as to which the Repurchase Right lapses shall,
however, remain subject to (i) the First Refusal Right and (ii) the Market
Stand-Off.
4
<PAGE>
4. RECAPITALIZATION. Any new, substituted or additional securities
or other property (including cash paid other than as a regular cash dividend)
which is by reason of any Recapitalization distributed with respect to the
Purchased Shares shall be immediately subject to the Repurchase Right and any
escrow requirements hereunder, but only to the extent the Purchased Shares are
at the time covered by such right or escrow requirements. Appropriate
adjustments to reflect such distribution shall be made to the number and/or
class of Purchased Shares subject to this Agreement and to the price per share
to be paid upon the exercise of the Repurchase Right in order to reflect the
effect of any such Recapitalization upon the Corporation's capital structure;
PROVIDED, however, that the aggregate purchase price shall remain the same.
5. CORPORATE TRANSACTION.
(a) The Repurchase Right shall automatically terminate in its
entirety, and all the Purchased Shares shall vest in full, immediately prior to
the consummation of any Corporate Transaction, except to the extent the
Repurchase Right is to be assigned to the successor entity in such Corporate
Transaction.
(b) To the extent the Repurchase Right remains in effect
following a Corporate Transaction, such right shall apply to any new securities
or other property (including any cash payments) received in exchange for the
Purchased Shares in consummation of the Corporate Transaction, but only to the
extent the Purchased Shares are at the time covered by such right. Appropriate
adjustments shall be made to the price per share payable upon exercise of the
Repurchase Right to reflect the effect of the Corporate Transaction upon the
Corporation's capital structure; PROVIDED, however, that the aggregate purchase
price shall remain the same. The new securities or other property (including
any cash payments) issued or distributed with respect to the Purchased Shares in
consummation of the Corporate Transaction shall be immediately deposited in
escrow with the Corporation (or the successor entity) and shall not be released
from escrow until Participant vests in such securities or other property in
accordance with the same Vesting Schedule in effect for the Purchased Shares.
(c) The Repurchase Right may also terminate on an accelerated
basis, and the Purchased Shares shall immediately vest in full, in accordance
with the terms and conditions of any special addendum attached to this
Agreement.
E. RIGHT OF FIRST REFUSAL
1. GRANT. The Corporation is hereby granted the right of first
refusal (the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares in which Participant has vested in accordance
with the provisions of Article D. For purposes of this Article E, the term
"transfer" shall include any sale, assignment, pledge, encumbrance or other
disposition of the Purchased Shares intended to be made by Owner, but shall not
include any Permitted Transfer.
5
<PAGE>
2. NOTICE OF INTENDED DISPOSITION. In the event any Owner of
Purchased Shares in which Participant has vested desires to accept a bona
fide third-party offer for the transfer of any or all of such shares (the
Purchased Shares subject to such offer to be hereinafter referred to as the
"Target Shares"), Owner shall promptly (i) deliver to the Corporation written
notice (the "Disposition Notice") of the terms of the offer, including the
purchase price and the identity of the third-party offeror, and (ii) provide
satisfactory proof that the disposition of the Target Shares to such
third-party offeror would not be in contravention of the provisions set forth
in Articles B and C.
3. EXERCISE OF THE FIRST REFUSAL RIGHT. The Corporation shall,
for a period of twenty-five (25) days following receipt of the Disposition
Notice, have the right to repurchase any or all of the Target Shares subject
to the Disposition Notice upon the same terms as those specified therein or
upon such other terms (not materially different from those specified in the
Disposition Notice) to which Owner consents. Such right shall be exercisable
by delivery of written notice (the "Exercise Notice") to Owner prior to the
expiration of the twenty-five (25)-day exercise period. If such right is
exercised with respect to all the Target Shares, then the Corporation shall
effect the repurchase of such shares, including payment of the purchase
price, not more than five (5) business days after delivery of the Exercise
Notice; and at such time the certificates representing the Target Shares
shall be delivered to the Corporation.
Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the
Corporation shall have the right to pay the purchase price in the form of
cash equal in amount to the value of such property. If Owner and the
Corporation cannot agree on such cash value within ten (10) days after the
Corporation's receipt of the Disposition Notice, the valuation shall be made
by an appraiser of recognized standing selected by Owner and the Corporation
or, if they cannot agree on an appraiser within twenty (20) days after the
Corporation's receipt of the Disposition Notice, each shall select an
appraiser of recognized standing and the two (2) appraisers shall designate a
third appraiser of recognized standing, whose appraisal shall be
determinative of such value. The cost of such appraisal shall be shared
equally by Owner and the Corporation. The closing shall then be held on the
LATER of (i) the fifth (5th) business day following delivery of the Exercise
Notice or (ii) the fifth (5th) business day after such valuation shall have
been made.
4. NON-EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the
Exercise Notice is not given to Owner prior to the expiration of the
twenty-five (25)-day exercise period, Owner shall have a period of thirty
(30) days thereafter in which to sell or otherwise dispose of the Target
Shares to the third-party offeror identified in the Disposition Notice upon
terms (including the purchase price) no more favorable to such third-party
offeror than those specified in the Disposition Notice; PROVIDED, however,
that any such sale or disposition must not be effected in contravention of
the provisions of Articles B and C. The third-party offeror shall acquire
the Target Shares free and clear of the First Refusal Right, but the acquired
shares shall remain subject to the provisions of Article B and Paragraph C.3.
In the event Owner does not effect such sale or disposition of the Target
Shares within the specified thirty (30)-day period, the First
6
<PAGE>
Refusal Right shall continue to be applicable to any subsequent disposition
of the Target Shares by Owner until such right lapses.
5. PARTIAL EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the
Corporation makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
Owner shall have the option, exercisable by written notice to the Corporation
delivered within five (5) business days after Owner's receipt of the Exercise
Notice, to effect the sale of the Target Shares pursuant to either of the
following alternatives:
(i) sale or other disposition of all the Target Shares
to the third-party offeror identified in the Disposition Notice, but
in full compliance with the requirements of Paragraph E.4, as if the
Corporation did not exercise the First Refusal Right; or
(ii) sale to the Corporation of the portion of the
Target Shares which the Corporation has elected to purchase, such sale
to be effected in substantial conformity with the provisions of
Paragraph E.3. The First Refusal Right shall continue to be
applicable to any subsequent disposition of the remaining Target
Shares until such right lapses.
Owner's failure to deliver timely notification to the Corporation
shall be deemed to be an election by Owner to sell the Target Shares pursuant to
alternative (i) above.
6. RECAPITALIZATION/REORGANIZATION.
(a) Any new, substituted or additional securities or other
property which is by reason of any Recapitalization distributed with respect to
the Purchased Shares shall be immediately subject to the First Refusal Right,
but only to the extent the Purchased Shares are at the time covered by such
right.
(b) In the event of a Reorganization, the First Refusal Right
shall remain in full force and effect and shall apply to the new capital stock
or other property received in exchange for the Purchased Shares in consummation
of the Reorganization, but only to the extent the Purchased Shares are at the
time covered by such right.
7. LAPSE. The First Refusal Right shall lapse upon the EARLIEST to
occur of (i) the first date on which shares of the Common Stock are held of
record by more than five hundred (500) persons, (ii) a determination is made by
the Board that a public market exists for the outstanding shares of Common Stock
or (iii) a firm commitment underwritten public offering, pursuant to an
effective registration statement under the 1933 Act, covering the offer and sale
of the Common Stock in the aggregate amount of at least ten million dollars
($10,000,000). However, the Market Stand-Off shall continue to remain in full
force and effect following the lapse of the First Refusal Right.
7
<PAGE>
F. SPECIAL TAX ELECTION
1. SECTION 83(B) ELECTION . Under Code Section 83, the excess of
the Fair Market Value of the Purchased Shares on the date any forfeiture
restrictions applicable to such shares lapse over the Purchase Price paid for
such shares will be reportable as ordinary income on the lapse date. For
this purpose, the term "forfeiture restrictions" includes the right of the
Corporation to repurchase the Purchased Shares pursuant to the Repurchase
Right. Participant may elect under Code Section 83(b) to be taxed at the time
the Purchased Shares are acquired, rather than when and as such Purchased
Shares cease to be subject to such forfeiture restrictions. Such election
must be filed with the Internal Revenue Service within thirty (30) days after
the date of this Agreement. Even if the Fair Market Value of the Purchased
Shares on the date of this Agreement equals the Purchase Price paid (and thus
no tax is payable), the election must be made to avoid adverse tax
consequences in the future. THE FORM FOR MAKING THIS ELECTION IS ATTACHED AS
EXHIBIT II HERETO. PARTICIPANT UNDERSTANDS THAT FAILURE TO MAKE THIS FILING
WITHIN THE APPLICABLE THIRTY (30)-DAY PERIOD WILL RESULT IN THE RECOGNITION
OF ORDINARY INCOME AS THE FORFEITURE RESTRICTIONS LAPSE.
2. FILING RESPONSIBILITY. PARTICIPANT ACKNOWLEDGES THAT IT IS
PARTICIPANT'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A
TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN IF PARTICIPANT REQUESTS THE
CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
G. GENERAL PROVISIONS
1. ASSIGNMENT. The Corporation may assign the Repurchase Right
and/or the First Refusal Right to any person or entity selected by the Board,
including (without limitation) one or more stockholders of the Corporation.
2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement
or in the Plan shall confer upon Participant any right to continue in Service
for any period of specific duration or interfere with or otherwise restrict
in any way the rights of the Corporation (or any Parent or Subsidiary
employing or retaining Participant) or of Participant, which rights are
hereby expressly reserved by each, to terminate Participant's Service at any
time for any reason, with or without cause.
3. NOTICES. Any notice required to be given under this Agreement
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this paragraph
to all other parties to this Agreement.
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<PAGE>
4. NO WAIVER. The failure of the Corporation in any instance to
exercise the Repurchase Right or the First Refusal Right shall not constitute a
waiver of any other repurchase rights and/or rights of first refusal that may
subsequently arise under the provisions of this Agreement or any other agreement
between the Corporation and Participant. No waiver of any breach or condition
of this Agreement shall be deemed to be a waiver of any other or subsequent
breach or condition, whether of like or different nature.
5. CANCELLATION OF SHARES. If the Corporation shall make available,
at the time and place and in the amount and form provided in this Agreement, the
consideration for the Purchased Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such shares shall be deemed
purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.
H. MISCELLANEOUS PROVISIONS
1. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California without resort
to that State's conflict-of-laws rules.
2. PARTICIPANT UNDERTAKING. Participant hereby agrees to take
whatever additional action and execute whatever additional documents the
Corporation may deem necessary or advisable in order to carry out or effect one
or more of the obligations or restrictions imposed on either Participant or the
Purchased Shares pursuant to the provisions of this Agreement.
3. AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the
entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the terms of the Plan.
4. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and upon Participant, Participant's assigns and the legal
representatives, heirs and legatees of Participant's estate, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
RUBIO'S RESTAURANTS, INC.
By:
---------------------------------------
Title:
------------------------------------
Address:
---------------------------------
---------------------------------
------------------------------------
PARTICIPANT
Address:
---------------------------------
---------------------------------
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<PAGE>
SPOUSAL ACKNOWLEDGMENT
The undersigned spouse of Participant has read and hereby approves
the foregoing Stock Issuance Agreement. In consideration of the
Corporation's granting Participant the right to acquire the Purchased Shares
in accordance with the terms of such Agreement, the undersigned hereby agrees
to be irrevocably bound by all the terms of such Agreement, including
(without limitation) the right of the Corporation (or its assigns) to
purchase any Purchased Shares in which Participant is not vested at the time
of his or her cessation of Service.
-----------------------------------------
PARTICIPANT'S SPOUSE
Address:
--------------------------------
-----------------------------------------
11.
<PAGE>
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED 1~ hereby sell(s), assign(s) and transfer(s) unto
Rubio's Restaurants, Inc. (the "Corporation"), _____________________ (________)
shares of the Common Stock of the Corporation standing in his or her name on the
books of the Corporation represented by Certificate No. ______________________
herewith and do(es) hereby irrevocably constitute and appoint _________________
____________ Attorney to transfer the said stock on the books of the Corporation
with full power of substitution in the premises.
Dated: _______________
Signature
-----------------------------------------
INSTRUCTION: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Participant.
<PAGE>
EXHIBIT II
SECTION 83(b) TAX ELECTION
<PAGE>
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is _________
shares of the common stock of Rubio's Restaurants, Inc.
(3) The property was issued on __________________, 199__.
(4) The taxable year in which the election is being made is the calendar year
1998.
(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's service with the issuer terminates. The issuer's
repurchase right lapses in a series of annual and monthly installments over
a four (4)-year period ending on __________________, 200__.
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $______ per share.
(7) The amount paid for such property is $_______ per share.
(8) A copy of this statement was furnished to Rubio's Restaurants, Inc. for
whom taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed on _________________, 199__.
- ---------------------------- -----------------------------------------
Spouse (if any) Taxpayer
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE CENTER WITH WHICH
TAXPAYER FILES HIS OR HER FEDERAL INCOME TAX RETURNS AND MUST BE MADE WITHIN
THIRTY (30) DAYS AFTER THE EXECUTION DATE OF THE STOCK ISSUANCE AGREEMENT. THIS
FILING SHOULD BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED.
PARTICIPANT MUST RETAIN TWO (2) COPIES OF THE COMPLETED FORM FOR FILING WITH HIS
OR HER FEDERAL AND STATE TAX RETURNS FOR THE CURRENT TAX YEAR AND AN ADDITIONAL
COPY FOR HIS OR HER RECORDS.
<PAGE>
EXHIBIT III
1998 STOCK OPTION/STOCK ISSUANCE PLAN
(See Exhibit 10.37 to Registration Statement on Form S-1)
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Issuance Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
F. CORPORATION shall mean Rubio's Restaurants, Inc., a Delaware
corporation.
G. DISPOSITION NOTICE shall have the meaning assigned to such term in
Paragraph E.2.
H. EXERCISE NOTICE shall have the meaning assigned to such term in
Paragraph E.3.
I. FAIR MARKET VALUE of a share of Common Stock on any relevant date,
prior to the initial public offering of the Common Stock, shall be determined by
the Plan Administrator after taking into account such factors as it shall deem
appropriate.
J. FIRST REFUSAL RIGHT shall mean the right granted to the Corporation in
accordance with Article E.
K. MARKET STAND-OFF shall mean the market stand-off restriction specified
in Paragraph C.3.
L. 1933 ACT shall mean the Securities Act of 1933, as amended.
A-1.
<PAGE>
M. OWNER shall mean Participant and all subsequent holders of the
Purchased Shares who derive their chain of ownership through a Permitted
Transfer from Participant.
N. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
O. PARTICIPANT shall mean the person to whom shares are issued under the
Stock Issuance Program.
P. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the
Purchased Shares, PROVIDED AND ONLY IF Participant obtains the Corporation's
prior written consent to such transfer, (ii) a transfer of title to the
Purchased Shares effected pursuant to Participant's will or the laws of
intestate succession following Participant's death or (iii) a transfer to the
Corporation in pledge as security for any purchase-money indebtedness incurred
by Participant in connection with the acquisition of the Purchased Shares.
Q. PLAN shall mean the Corporation's 1998 Stock Option/Stock Issuance
Plan attached hereto as Exhibit III.
R. PLAN ADMINISTRATOR shall mean either the Board or a committee of the
Board acting in its capacity as administrator of the Plan.
S. PURCHASE PRICE shall have the meaning assigned to such term in
Paragraph A.1.
T. PURCHASED SHARES shall have the meaning assigned to such term in
Paragraph A.1.
U. RECAPITALIZATION shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.
V. REORGANIZATION shall mean any of the following transactions:
(i) a merger or consolidation in which the Corporation is
not the surviving entity,
(ii) a sale, transfer or other disposition of all or
substantially all of the Corporation's assets,
A-2.
<PAGE>
(iii) a reverse merger in which the Corporation is the
surviving entity but in which the Corporation's outstanding voting
securities are transferred in whole or in part to a person or persons
different from the persons holding those securities immediately prior
to the merger, or
(iv) any transaction effected primarily to change the state
in which the Corporation is incorporated or to create a holding
company structure.
W. REPURCHASE RIGHT shall mean the right granted to the Corporation in
accordance with Article D.
X. SEC shall mean the Securities and Exchange Commission.
Y. SERVICE shall mean the Participant's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an employee,
subject to the control and direction of the employer entity as to both the work
to be performed and the manner and method of performance, a non-employee member
of the board of directors or an independent consultant.
Z. STOCK ISSUANCE PROGRAM shall mean the Stock Issuance Program under the
Plan.
AA. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
AB. TARGET SHARES shall have the meaning assigned to such term in
Paragraph E.2.
AC. VESTING SCHEDULE shall mean the vesting schedule specified in
Paragraph D.3 pursuant to which Participant is to vest in the Purchased Shares
in a series of installments over the Participant's period of Service.
AD. UNVESTED SHARES shall have the meaning assigned to such term in
Paragraph D.1.
A-3.
<PAGE>
EXHIBIT 10.44
ADDENDUM
TO
STOCK ISSUANCE AGREEMENT
The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Issuance Agreement dated __________________,
199__ (the "Issuance Agreement") by and between Rubio's Restaurants, Inc. (the
"Corporation") and ______________________________ ("Participant") evidencing the
shares of Common Stock purchased on such date by Participant pursuant to the
shares granted to him or her under the Corporation's 1998 Stock Option/Stock
Issuance Plan, and such provisions shall be effective immediately. All
capitalized terms in this Addendum, to the extent not otherwise defined herein,
shall have the meanings assigned to such terms in the Issuance Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION
1. To the extent the Repurchase Right is assigned to the successor
corporation (or parent thereof) in connection with a Corporate Transaction, no
accelerated vesting of the Purchased Shares shall occur upon such Corporate
Transaction, and the Repurchase Right shall continue to remain in full force and
effect in accordance with the provisions of the Issuance Agreement. Participant
shall, over his or her period of Service following the Corporate Transaction,
continue to vest in the Purchased Shares in one or more installments in
accordance with the provisions of the Issuance Agreement. However, upon an
Involuntary Termination of Participant's Service within eighteen (18) months
following the Corporate Transaction, the Repurchase Right shall terminate
automatically and all the Purchased Shares shall immediately vest in full.
2. For purposes of this Addendum, the following definitions shall be
in effect:
An INVOLUNTARY TERMINATION shall mean the termination of
Participant's Service by reason of:
a. Participant's involuntary dismissal or discharge
by the Corporation for reasons other than for Misconduct, or
b. Participant's voluntary resignation following (A)
a change in his or her position with the Corporation (or Parent or
Subsidiary employing Participant) which materially reduces his or her
duties and responsibilities or the level of management to which he or
she reports, (B) a reduction in Participant's level of compensation
(including base salary, fringe benefits and target bonuses under any
corporate-performance based incentive programs) by more than fifteen
percent (15%) or (C) a relocation of Participant's place of employment
by more than fifty (50) miles, provided and only if such
<PAGE>
change, reduction or relocation is effected by the Corporation without
Participant's consent.
MISCONDUCT shall include the termination of Participant's Service by
reason or Participant's commission of any act of fraud, embezzlement or
dishonesty, any unauthorized use or disclosure by Participant of confidential
information or trade secrets of the Corporation (or any Parent or Subsidiary),
or any other intentional misconduct by Participant adversely affecting the
business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner. The foregoing definition shall not be deemed to be inclusive
of all the acts or omissions which the Corporation (or any Parent or Subsidiary)
may consider as grounds for the dismissal or discharge of the Participant or any
other individual in the Service of the Corporation (or any Parent or
Subsidiary).
IN WITNESS WHEREOF, Rubio's Restaurants, Inc. has caused this Addendum
to be executed by its duly-authorized officer as of the Effective Date specified
below.
RUBIO'S RESTAURANTS, INC.
By:
-----------------------------------------
Title:
--------------------------------------
EFFECTIVE DATE: _________________, 199__
<PAGE>
Exhibit 21.1
Subsidiary List
---------------
Rubio's Restaurants of Nevada, Inc., a Nevada corporation
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Rubio's Restaurants,
Inc. on Form S-1 of our report dated March 25, 1999 appearing in the
Prospectus, which is a part of this Registration Statement.
We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
San Diego, California
March 26, 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF NOMINEE
I, the undersigned, consent to be referred to as a nominee to the Board
of Directors of Rubio's Restaurants, Inc. in the Registration Statement on
Form S-1 of Rubio's Restaurants, Inc., the Prospectus constituting a part
thereof and any further amendments thereto.
/s/ Timothy J. Ryan
-----------------------------
Timothy J. Ryan
Irvine, California
March 26, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 27, 1998 AND THE RELATED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 27, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-27-1998
<PERIOD-START> DEC-29-1997
<PERIOD-END> DEC-27-1998
<CASH> 786,493
<SECURITIES> 2,721,894
<RECEIVABLES> 169,688
<ALLOWANCES> 0
<INVENTORY> 359,755
<CURRENT-ASSETS> 4,485,936
<PP&E> 22,588,230
<DEPRECIATION> 5,454,838
<TOTAL-ASSETS> 25,751,497
<CURRENT-LIABILITIES> 5,941,202
<BONDS> 0
17,695,325
1,925
<COMMON> 1,049
<OTHER-SE> 193,082
<TOTAL-LIABILITY-AND-EQUITY> 25,751,497
<SALES> 44,698,531
<TOTAL-REVENUES> 44,698,531
<CGS> 13,073,417
<TOTAL-COSTS> 44,102,036
<OTHER-EXPENSES> 15,018
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 253,575
<INCOME-PRETAX> 849,012
<INCOME-TAX> (66,276)
<INCOME-CONTINUING> 849,012
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 915,288
<EPS-PRIMARY> .55
<EPS-DILUTED> .14
</TABLE>
