<PAGE> 1
Page 1 of 68 Pages
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 4)*
California Beach Restaurants, Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock
- --------------------------------------------------------------------------------
(Title of Classes of Securities)
129903209
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(CUSIP Number)
Mel Ziontz, Esq.
Bryan Cave LLP
120 Broadway, Suite 300
Los Angeles, CA 90401-2305
(310) 576-2113
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(Name, Address, and Telephone Number of Person
Authorized to Receive Notices and Communications)
March 30, 1999
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(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box [ ].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7(b) for
other parties to whom copies are to be sent.
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* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
Exhibit Index is Page 6 of 68 Pages
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CUSIP NO. 129903209 SCHEDULE 13D Page 2 of 68 Pages
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1) NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
(Entities Only)
Eli Broad
###-##-####
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2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ X ]
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3) SEC USE ONLY
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4) SOURCE OF FUNDS*
PF
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5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
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6) CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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7 SOLE VOTING POWER
NUMBER OF SHARES 500,000 shares
--------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 228,345 shares, the voting power with respect to
which is shared with certain shareholders (see Item
5(b)).
REPORTING --------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
PERSON WITH
728,345 shares
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0 shares
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11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
728,345 shares
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12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
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13) Percent of Class Represented by Amount in Row (11)
18.67%
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14) Type of Reporting Person*
IN
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* SEE INSTRUCTIONS
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CUSIP NO. 129903209 SCHEDULE 13D Page 3 of 68 Pages
Item 1. Security and Issuer:
This Schedule 13D is filed with respect to the common stock, par value
$.01 per share ("Common Stock") of California Beach Restaurants, Inc., a
California corporation (the "Company"), whose principal executive offices are
located at 17383 Sunset Boulevard, Suite 140, Pacific Palisades, California
90272.
Item 2. Identity and Background:
(a) Eli Broad
(b) The principal address for the filing party is 1999 Avenue of the
Stars, Los Angeles, CA 90067
(c) Chairman of SunAmerica Inc.
(d)-(e) During the last five years, the filing party has not been (a)
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (b) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to federal or
state securities laws or finding any violation with respect to such laws.
(f) United States citizen.
Item 3. Source and Amount of Funds or Other Consideration:
The filing party acquired beneficial ownership of 500,000 shares of the
Company's Common Stock issuable upon conversion of a 5% Convertible Subordinated
Note purchased by him. The 5% Convertible Subordinated Note was issued in
consideration of payment to the Company by the filing party of $500,000 in cash,
from the filing party's personal funds. (See Item 4 below.)
Item 4. Purpose of Transaction:
Pursuant to a Note Purchase Agreement among the Company, the filing
party and certain other purchasers, dated as of March 30, 1999 (the "Note
Purchase Agreement"), the filing party purchased from the Company a 5%
Convertible Subordinated Note (the "Note"). The entire principal amount
outstanding under the Note, plus accrued and unpaid interest, may at any time
after March 30, 1999 be converted, in whole or in part, into shares of Common
Stock, par value $0.01 per share of the Company, at the rate of one share for
each $1.00 in principal amount of the Note plus accrued and unpaid interest
applicable to the principal amount so converted on the tenth business day
following the receipt by the Company of written notice of conversion as to all
or any part of the principal amount of the Note.
The filing party's purchase was part of a private financing consisting of
$1,800,000 of the Company's 5% Convertible Subordinated Notes Due March 30,
2003, which raised the funds necessary for the Company to retire approximately
$1,000,000 of indebtedness and to remodel a restaurant operated by a wholly
owned subsidiary of the Company. Certain existing shareholders of the Company
participated in the private placement.
Under the Note Purchase Agreement, the Company has afforded the filing
party and other purchasers thereunder certain incidental and demand registration
rights with respect to the securities of the Company acquired thereunder.
The filing party does not have any present plans to dispose of or to acquire
additional shares of Common Stock but reserves the right to do so.
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CUSIP NO. 129903209 SCHEDULE 13D Page 4 of 68 Pages
Item 5. Interest in Securities of the Issuer:
(a) The Company has outstanding 3,400,930 shares of Common Stock. The
filing party is the owner of 228,345 shares of Common Stock, which currently
represents 6.71% of the outstanding Common Stock. In addition, under Rule 13d-3
of the Securities Exchange Act of 1934, the filing party is deemed the
beneficial owner of an aggregate of 500,000 shares of Common Stock that are
subject to a currently convertible note. Accordingly, the filing party is deemed
the beneficial owner of 728,345 shares of Common Stock, representing 18.67% of
the then outstanding Common Stock.
(b) The filing party has shared voting power and sole dispositive power
regarding the shares of Common Stock he currently owns (228,345 shares). The
filing party shares with the shareholders set forth below the power to vote such
228,345 shares with respect to the election of directors, pursuant to (i) a
Shareholders Agreement among the Company, the filing party and certain other
shareholders, dated as of March 30, 1990 and (ii) an Amendment to Shareholders
Agreement among the Company, the filing party and certain other shareholders,
dated as of February 25, 1991.
The names and addresses of the shareholders with whom Mr. Broad shares
voting rights with respect to the election of directors are set forth below:
Sea Fair Partners
300 South Grand Avenue, 29th Floor
Los Angeles, California 90071
Sand and Sea Partners
300 South Grand Avenue, 29th Floor
Los Angeles, California 90071
J. Christopher Lewis
300 South Grand Avenue, 29th Floor
Los Angeles, California 90071
Cushman/Sea View Partners
333 South Grand Avenue, Suite 4000
Los Angeles, California 90071
Cushman K/Sea View Partners
333 South Grand Avenue, Suite 4000
Los Angeles, California 90071
The filing party anticipates having sole voting and dispositive power
regarding any shares of Common Stock (500,000 shares) acquired upon conversion
of the Note.
(c) Other than acquiring the Note described in Item 4 above, the filing
party has not engaged in any transactions in the capital stock of the Company
within the past 60 days.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to
Securities of the Issuer:
As discussed in Item 4 above, the filing party is a party to the Note
Purchase Agreement which is incorporated herein by reference.
Item 7. Material to be Filed as Exhibits:
The Index to Exhibits attached to this Schedule 13D is hereby
incorporated herein by reference in its entirety.
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CUSIP NO. 129903209 SCHEDULE 13D Page 5 of 68 Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth on this statement is true, complete and
correct.
April 19, 1999
----------------------------------------
(Date)
/s/ Eli Broad
----------------------------------------
(Signature)
Eli Broad
----------------------------------------
(Name/Title)
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Page 6 of 68 Pages
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Exhibit Page
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<S> <C> <C>
1 Shareholders Agreement among the Page 4 of 68 pages
Company, the filing party and certain
other shareholders, dated as of
March 30, 1990(1)
2 Amendment to Shareholders Agreement Page 4 of 68 pages
among the Company, the filing party and
certain other shareholders, dated as of
February 25, 1991(2)
3 Note Purchase Agreement among the Page 7 of 68 pages
Company, the filing party and certain
other purchasers, dated as of March 30,
1999, including Exhibit A thereto,
the 5% Convertible Subordinated Note
Due March 30, 2003
</TABLE>
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(1) Incorporated by reference to the Company's Form 8-K filed with the
Commission on April 27, 1990.
(2) Incorporated by reference to the Company's Form 10-Q for the Quarter ended
January 31, 1991 and filed with the Commission on March 18, 1991.
<PAGE> 1
EXHIBIT 3
NOTE PURCHASE AGREEMENT
BETWEEN
CALIFORNIA BEACH RESTAURANTS, INC.
AND
THE PURCHASERS LISTED ON SCHEDULE 1.1
March 30, 1999
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TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C> <C>
1. AUTHORIZATION OF NOTES.........................................................................................1
1.1 Sale and Purchase of Notes...........................................................................1
1.2 Contemporaneous Transaction..........................................................................1
1.3 Subordination........................................................................................1
2. CLOSING........................................................................................................2
2.1 Payment and Delivery.................................................................................2
2.2 Restrictive Legends on Certificates Evidencing the Securities; Stop Transfer Orders
to Transfer Agent..................................................................................2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................................................3
3.1 Organization and Qualification.......................................................................3
3.2 Capitalization.......................................................................................3
3.3 Authorization........................................................................................4
3.4 Absence of Certain Changes...........................................................................4
3.5 Financial Statements and Reports.....................................................................6
3.6 No Undisclosed Liabilities...........................................................................6
3.7 Consents and Approvals...............................................................................6
3.8 No Violations........................................................................................7
3.9 Subsidiaries.........................................................................................7
3.10 Brokerage Fees and Commissions......................................................................8
3.11 Litigation, etc.....................................................................................8
3.12 Title to Properties; Encumbrances...................................................................8
3.13 Lease/Concession Agreements.........................................................................8
3.14 Taxes...............................................................................................9
3.15 Employee Benefit Plans..............................................................................9
3.16 Contracts...........................................................................................9
3.17 Licenses, Permits and Authorizations...............................................................10
3.18 Intangible Property................................................................................10
3.19 Insurance..........................................................................................10
3.20 Registration Rights................................................................................10
3.21 Offering...........................................................................................10
3.22 Disclosure.........................................................................................11
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS..............................................................11
4.1 Experience..........................................................................................11
4.2 Investment..........................................................................................11
4.3 Rule 144............................................................................................11
4.4 Access to Data......................................................................................11
4.5 Investor Questionnaire..............................................................................11
</TABLE>
i
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<TABLE>
<S> <C> <C>
5. PURCHASERS' CONDITIONS TO CLOSING.............................................................................12
5.1 Representations and Warranties......................................................................12
5.2 Performance.........................................................................................12
5.3 Opinion of Company's Counsel........................................................................12
5.4 Legal Investment....................................................................................12
5.5 Note Repayment......................................................................................12
5.6 Loan Agreement......................................................................................12
5.7 Conduct of Business; No Material Adverse Change.....................................................12
5.8 Sale of Securities..................................................................................12
5.9 Proceedings and Documents...........................................................................13
5.10 Qualification......................................................................................13
6. THE COMPANY'S CONDITIONS TO CLOSING...........................................................................13
6.1 Representations and Warranties......................................................................13
6.2 Performance.........................................................................................13
6.3 Legal Investment....................................................................................13
7. COVENANTS OF THE COMPANY AND THE PURCHASERS...................................................................13
7.1 Conduct of Business of the Company and Subsidiaries Pending Closing.................................13
7.2 Access to Information...............................................................................14
7.3 Best Efforts........................................................................................15
7.4 Consents............................................................................................15
7.5 Notification of Certain Matters.....................................................................16
8. POST-CLOSING COVENANTS OF THE COMPANY.........................................................................16
8.1 Annual and Quarterly Financial Information..........................................................16
8.2 Other Reports and Statements........................................................................17
8.3 Reimbursement of Fees...............................................................................17
8.4 Termination of Letter of Credit.....................................................................17
8.5 Limitation on Indebtedness..........................................................................17
9. REGISTRATION RIGHTS...........................................................................................17
9.1 Piggy Back Rights...................................................................................18
9.2 Demand Registration Rights..........................................................................19
9.3 Registration Not Required...........................................................................20
9.4 Registration Procedures.............................................................................21
9.5 Indemnification.....................................................................................23
9.6 Rule 144............................................................................................26
9.7 Mergers, etc........................................................................................26
9.8 Transfer of Certain Rights..........................................................................26
9.9 Amendments..........................................................................................27
</TABLE>
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<TABLE>
<S> <C> <C>
10. INDEMNIFICATION..............................................................................................27
10.1 Losses.............................................................................................27
10.2 Claims for Indemnification; Disputes...............................................................28
11. TERMINATION..................................................................................................30
11.1 Effect of Termination..............................................................................30
12. MISCELLANEOUS................................................................................................30
12.1 Amendment..........................................................................................30
12.2 Survival of Representations and Warranties.........................................................30
12.3 Entire Agreement; Assignment.......................................................................31
12.4 Enforcement of the Agreement.......................................................................31
12.5 Validity...........................................................................................31
12.6 Notices............................................................................................31
12.7 Governing Law......................................................................................31
12.8 Descriptive Headings...............................................................................32
12.9 Parties in Interest................................................................................32
12.10 Counterparts......................................................................................32
13. CERTAIN PRE-EXISTING RIGHTS OF FIRST REFUSAL; NEW RIGHTS OF FIRST REFUSAL....................................32
13.1 Pre-Existing Rights................................................................................32
13.2 New Rights.........................................................................................32
</TABLE>
iii
<PAGE> 5
LIST OF EXHIBITS AND SCHEDULES
Exhibits:
A -- Form of 5% Convertible Subordinated Note Due March 25, 2003
Schedules:
1.1 -- List of Purchasers, Principal Amount of Notes
3.2 -- Options, Warrants
3.8 -- Law Violations
3.9 -- Subsidiaries
3.11 -- Pending Litigation
3.12 -- Liens
3.16(b) -- Breach of Agreements
3.17 -- Licenses
3.20 -- Registration Rights
iv
<PAGE> 6
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT (the "Agreement") is entered into as of the
30th day of March, 1999, by and between California Beach Restaurants, Inc., a
California corporation (the "Company") and the Purchasers listed on Schedule 1.1
(collectively, the "Purchasers" or "Noteholders" and each individually a
"Purchaser" or "Noteholder").
The Company and the Purchasers agree as follows:
1. AUTHORIZATION OF NOTES. The Company has authorized the issuance
and sale of $1,800,000 in principal amount of its 5% Convertible Subordinated
Notes Due March 25, 2003 (the "Notes"). The Notes are convertible into an
aggregate of 1,800,000 shares of Common Stock, par value $.01 per share
("Shares") of the Company on the terms and conditions hereinafter set forth. The
Notes and Shares are sometimes collectively referred to hereinafter as the
"Securities."
1.1 Sale and Purchase of Notes. At the Closing (as
hereinafter defined) and subject to the terms and conditions hereof and in
reliance upon the representations, warranties and agreements contained herein,
the Company will issue and sell to each Purchaser, and each Purchaser will buy
from the Company, the respective number of Notes set forth opposite such
Purchaser's name on Schedule 1.1 hereto for the aggregate consideration set
forth on such Schedule. The Notes shall be delivered by the Company upon Closing
(as hereinafter defined) to each Purchaser in accordance with Schedule 1.1
hereto.
1.2 Contemporaneous Transaction. Concurrent with the
Closing, the Company is retiring approximately $1,000,000 of indebtedness
pursuant to a Line of Credit Agreement entered into on November 24, 1997 and is
borrowing funds from Lyon Credit Corporation (a subsidiary of Credit Lyonnais)
("LCC") for and secured by tenant improvements and equipment to be constructed
and installed at the Gladstone's 4 Fish Restaurant operated by Sea View
Restaurants, Inc., a wholly owned subsidiary of the Company, pursuant to a
Security Agreement by and between the Company and LLC dated as of March 15, 1999
(the "Security Agreement"), all as set forth and described in that certain
Confidential Private Offering Memorandum dated as of March 11, 1999 (the "POM").
The transaction referred to above is sometimes hereinafter collectively referred
to as the "LCC Loan."
1.3 Subordination. The payment of the principal of, and
interest on the Notes and any amendments or replacements thereof and any other
security interest, lien, claim or right now or hereafter asserted by the
Noteholder with respect to any indebtedness of the Company to the Noteholder,
shall be subject, junior and subordinate, in all respects, to the prior payment
in full of all indebtedness of the Company to LCC ("Indebtedness to LCC"), and
to any security interest, lien, claim or right now or hereafter asserted by LCC
or its successors and assigns with respect to such Indebtedness to LCC or with
respect to any collateral therefor. Indebtedness to LCC shall include, but shall
not be limited to, all principal, unpaid interest, penalties, costs, fees,
1
<PAGE> 7
premiums and other amounts due LCC, or its successors or assigns, pursuant to
the Security Agreement, any related loan, security, financing and other
agreement, documents or loan instruments and any amendments to or replacements
of any of the foregoing. The Noteholder further agrees, that upon the occurrence
of an Event of Default (as such term is defined in the documentation for any
Indebtedness to LCC) and without notice of such Event of Default to the
Noteholder (x) LCC, or its successors or assigns, are entitled to be paid all
Indebtedness to LCC before the Noteholder is entitled to receive any payments in
respect of the Notes, (y) the Company may not make any payments to the
Noteholder or with respect to the Notes until such payment of all outstanding
Indebtedness to LCC has been made in full in cash and (z) for a period not to
exceed one hundred eighty (180) days following such Event of Default the
Noteholder may not pursue any enforcement action against the Company. Any
payments made to the Noteholder in violation of this Section 1.3 shall be held
in trust for the benefit of LCC (or its successors or assigns) and turned over
upon the demand of LCC. The Noteholder further agrees that so long as any
Indebtedness to LCC is outstanding, that the Notes will not be modified in any
manner without LCC's prior written consent. The Noteholder hereby acknowledges
and agrees that LCC has relied on the representations, warranties, covenants and
agreements contained herein, in the Note and in the POM in connection with LCC's
consent to the issuance of the Note and LCC's extension of the Indebtedness to
LCC and that LCC and any holders of any LCC Indebtedness shall be deemed third
party beneficiaries hereunder and thereunder.
2. CLOSING. The closing of the purchase and sale of the Notes (the
"Closing") shall be held at 10:00 a.m. on March 30, 1999 or on such other date
as to which the Company and the Purchasers may agree (the date of such Closing
being herein referred to as the "Closing Date"). The Closing shall be held at
the offices of Bryan Cave LLP, 120 Broadway, Suite 300, Santa Monica, California
90401, or at such other place as to which the Company and the Purchasers may
agree.
2.1 Payment and Delivery. Upon the Closing, (i) subject to
satisfaction of the conditions set forth in Section 5 hereof, each Purchaser
will deliver to the Company the dollar amount set forth opposite the Purchaser's
name on Schedule 1.1 hereto and the documents contemplated under Section 4
hereof, and (ii) subject to satisfaction of the conditions set forth in Section
6 hereof, the Company will deliver to each Purchaser in accordance with Section
1 hereof a Note in the form of Exhibit A attached hereto in the principal amount
each Purchaser is investing and will deliver to counsel for the Purchasers,
Munger, Tolles & Olson ("Purchasers' Counsel"), the other documents and
certificates contemplated under Section 5 hereof to be delivered by the Company.
2.2 Restrictive Legends on Certificates Evidencing the
Securities; Stop Transfer Orders to Transfer Agent. Each Note sold to the
Purchasers hereunder and each certificate representing Shares issued upon
conversion of Notes when issued to the Purchasers or to any transferee of the
Purchasers shall be stamped or otherwise imprinted with a legend in
substantially the following form:
2
<PAGE> 8
THE SECURITIES REPRESENTED BY THIS NOTE (AND THE COMMON STOCK
INTO WHICH IT MAY BE CONVERTED) HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED OR REGISTERED OR
QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT, OR EXEMPTION, REGISTRATION
OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.
FURTHERMORE, THE SECURITIES PRESENTED BY THIS NOTE MAY BE SOLD
OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN THE NOTE PURCHASE AGREEMENT, A COMPLETE AND CORRECT
COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL
OFFICE OF THE COMPANY AND WILL BE FURNISHED WITHOUT CHARGE TO
THE HOLDER OF THIS NOTE UPON WRITTEN REQUEST.
The Company shall instruct its transfer agent to stop the transfer of
any Securities evidenced by a certificate or certificates bearing the above
legend until the conditions set forth in such legend have been satisfied.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Purchasers that:
3.1 Organization and Qualification. The Company and each of
its Subsidiaries (as hereinafter defined) is, and as of the Closing Date will
be, a corporation duly organized, validly existing and in good standing under
the laws of the state of its incorporation and has the requisite corporate power
to carry on its business as it is now being conducted, and to own the properties
and assets it now owns. The Company and each of its subsidiaries is, and on the
Closing Date will be, duly qualified, licensed or domesticated, and in good
standing as a foreign corporation authorized to do business in each state or
jurisdiction wherein the nature of its activities or its properties owned or
leased makes such qualification, licensing or domestication necessary, except
where the failure to so qualify, be licensed, domesticated or in good standing
would not have a material adverse effect on the Company and its Subsidiaries,
considered as a whole. The Company has delivered to Purchasers' Counsel complete
and accurate copies of its Articles of Incorporation and Bylaws and those of
each Subsidiary, which owns assets constituting in excess of 5% of the total
assets of the Company and its Subsidiaries on a consolidated basis, together
with all amendments thereto.
3.2 Capitalization. The authorized capital stock of the
Company consists of (i) 25,000,000 shares of common stock, par value $0.01 per
share ("Common Stock"), and (ii) 5,000,000 shares of preferred stock, no par
value per share ("Preferred Stock"). All of the outstanding shares of capital
stock of the Company have been duly authorized and validly issued,
3
<PAGE> 9
and are fully paid, nonassessable and free of preemptive rights. A total of
3,400,930 shares of Common Stock and no shares of Preferred Stock are
outstanding. Other than the LCC Loan, the Registration Rights Agreement (as
defined herein) and, as set forth in Schedule 3.2 hereto, there are no
outstanding or authorized subscriptions, options, warrants, calls, rights,
commitments or any other agreements of any character obligating the Company to
issue or register any shares of capital stock of the Company or any Subsidiary
or any other securities convertible into or evidencing the right to subscribe
for any shares of capital stock of the Company or of any Subsidiary (each such
subscription, option, warrant, call, right commitment or other agreement is
herein referred to as an "Option"). Schedule 3.2 hereto accurately sets forth
both before and after giving effect to the sale of Securities contemplated by
this Agreement and the LCC Loan: (i) the number and class of shares of the
Company's capital stock issuable with respect to or upon exercise of each
Option, (ii) the exercise price of each Option, (iii) the grant date of each
Option and (iv) the date or dates after which each Option is exercisable and the
number of shares of the Company's capital stock issuable upon exercise of such
Option after each such date.
3.3 Authorization. All corporate action on the part of the
Company, its directors and shareholders necessary for the authorization,
execution, delivery and performance by the Company of this Agreement and for the
consummation of the transactions contemplated herein, and otherwise for the
authorization, issuance and delivery of the Securities, has been taken. This
Agreement, upon execution and delivery by the Company, will be a valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms. Assuming the Notes and the Shares issuable upon conversion
thereof are issued at consideration no less than the fair market value thereof,
no security holder of the Company or any other person or entity has any
preemptive rights or rights of first refusal with respect to the issuance of the
Securities. The Shares, when issued pursuant to this Agreement, will be validly
issued, fully paid and nonassessable, and will be free of any liens or
encumbrances created by the Company, and the Notes, when issued pursuant to this
Agreement, will be valid and binding obligations of the Company.
3.4 Absence of Certain Changes. Since January 31, 1999, the
Company and each of its Subsidiaries has conducted its business only in the
ordinary course and has not, except as fairly described in the POM, the LCC
Loan, and as set forth on Schedule 3.4 hereto, or pursuant to the Loan
Agreement:
(a) suffered any material adverse change in its
operations, properties or financial condition or prospects;
(b) incurred any increase in indebtedness for
borrowed money over the level thereof reflected on its unaudited consolidated
balance sheet as of January 31, 1999 (the "Company Balance Sheet"), except for
borrowings made in the ordinary course of business;
(c) discharged or paid any obligation or liability
material to it, other than current liabilities shown on the Company Balance
Sheet and current liabilities incurred since the date of the Company Balance
Sheet discharged or paid in the ordinary course of business or consistent with
past practice;
4
<PAGE> 10
(d) permitted any of its assets to be subject to any
material security interest, restriction or charge of any kind other than
purchase money security interests;
(e) received any notice of termination of, or
default under, any contract, lease or other agreement, or suffered any material
damage, destruction or loss (whether or not covered by insurance);
(f) issued or sold any of its securities, or issued
or sold any options, rights or warrants with respect thereto, or acquired any
capital stock or other securities of any corporation or any interest in any
business enterprise, or otherwise made any loan or advance to or investment in
any person, firm or corporation, except for normal business advances to
employees consistent with past practice;
(g) written off as uncollectible any accounts
receivable, except for write-offs in the ordinary course of business or
consistent with past practice, or in any event in excess of an aggregate of
$25,000;
(h) canceled or compromised any debts or waived or
permitted to lapse any claims or rights of substantial value, or sold, leased,
transferred or otherwise disposed of any of its properties or assets (real,
personal or mixed, tangible or intangible) except in the ordinary course of
business or consistent with past practice;
(i) granted any general increase in the compensation
of officers or employees (including any such increase pursuant to any bonus,
pension, profit sharing or other plan or commitment) or any increase in the
compensation payable or to become payable to any officer or employee, except for
increases in the ordinary course of business or consistent with past practice;
(j) made any material capital expenditure or
commitment for any addition to property, plant or equipment not in the ordinary
course of business, or in any event in excess of an aggregate of $50,000;
(k) declared, paid or set aside for payment any
dividend or other distribution in respect of its capital stock, or directly or
indirectly, redeemed, purchased or otherwise acquired any shares of its capital
stock or other securities of the Company or any of its Subsidiaries;
(l) paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets to, or entered into any agreement
or arrangement with, any of its officers, directors or "affiliates," as such
term is defined in the rules and regulations of the Securities and Exchange
Commission (the "SEC"), except for normal business advances to employees
consistent with past practice, directors' fees, compensation to officers and
compensation increases permitted by clause (i) of this Subsection 3.4;
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(m) settled any claim, action or proceeding pending
or threatened against or relating to the Company or any of its Subsidiaries
before any court or governmental or regulatory authority or body for an amount
in excess of an aggregate of $25,000; or
(n) agreed, whether in writing or otherwise, to take
any action described in this Subsection 3.4.
3.5 Financial Statements and Reports. The Company has timely
filed all required forms, reports, statements and documents with the SEC, all of
which have complied in all material respects with all applicable requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and the
Securities Exchange Act of 1934 (the "Exchange Act"). The Company has delivered
to Purchasers' Counsel true and complete copies of the Company's (i) Annual
Report on Form 10-K for the fiscal years ended April 30, 1997 and 1998, (ii)
Proxy Statements relating to all meetings of the Company's shareholders (whether
annual or special) held since April 30, 1990, (iii) all other forms, reports,
statements and documents filed by the Company with the SEC since April 30, 1998,
and (iv) all reports, statements, documents and other information provided by
the Company to public security holders since April 30, 1998 (collectively, the
items referred to in clauses (i) through (iv) are hereinafter referred to as the
"Company Reports"). As of their respective dates, the Company Reports did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Company and its Subsidiaries included or
incorporated by reference in the Company Reports were prepared in accordance
with generally accepted accounting principles applied on a consistent basis and
present fairly the financial position, results of operations and changes in
financial position of the Company and its Subsidiaries as of the dates and for
the periods indicated, except that the unaudited interim financial statements
may not contain all of the footnotes required by generally accepted accounting
principles and may be subject to year-end adjustment.
3.6 No Undisclosed Liabilities. Except as and to the extent
reflected on the Company Balance Sheet and the footnotes thereto, as of January
31, 1999, neither the Company nor any of its Subsidiaries had any liabilities or
obligations (absolute, accrued, contingent or otherwise) material to the Company
and its Subsidiaries taken as a whole of a nature required by generally accepted
accounting principles to be reflected on a consolidated balance sheet of the
Company and its Subsidiaries ("Liabilities"). Since January 31, 1999, neither
the Company nor any of its Subsidiaries has incurred any Liabilities material to
the Company and its Subsidiaries taken as a whole, except Liabilities incurred
in the ordinary course of business, and pursuant to the Other Agreements.
3.7 Consents and Approvals. No notice to or filing with, and
no authorization, consent or approval of, any domestic or foreign court or any
public or governmental body or authority is necessary for the consummation by
the Company and its Subsidiaries of the transactions contemplated by this
Agreement and the LCC Loan, except for notices or filings the failure to give or
make, and authorizations, consents and approvals the failure to obtain, would
not, individually or in the aggregate, have a material adverse effect on the
financial condition,
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business or results of operations of the Company and its Subsidiaries taken as a
whole (a "Material Adverse Effect") or effect the ability of the Company or its
Subsidiaries to consummate the transactions contemplated by this Agreement, or
the LCC Agreement.
3.8 No Violations. Except as described in the POM or as set
forth on Schedule 3.8 hereto, the schedules thereto or the related agreements
which are to be executed in connection therewith as the same are in effect or
have been prepared through the date hereof, the execution and delivery of this
Agreement does not and the execution and delivery of the agreements for the LCC
Loan and the documents and agreements required to be executed in connection
herewith and therewith and the performance by the Company and its Subsidiaries
of their obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby will not, violate, conflict with or
result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company or any of the Subsidiaries (other than liens
created pursuant to the terms of the Loan Agreement) under any of the terms,
conditions or provisions of (i) the respective charters or bylaws of the Company
or the Subsidiaries, (ii) subject to compliance with the statutes and
regulations referred to in Subsection 3.7 above, any statute, law, ordinance,
rule, regulation, judgment, decree, order, injunction or writ applicable to the
Company or any of the Subsidiaries or any properties or assets of the Company or
any of the Subsidiaries, or (iii) any note, bond, mortgage, indenture, license,
franchise, permit, concession, contract, agreement, lease or other instrument or
agreement of any kind to which the Company or any of the Subsidiaries is now a
party or by which the Company or any of the Subsidiaries or any of their
respective properties or assets may be bound, excluding from the foregoing
clauses (ii) and (iii) violations, conflicts, breaches, defaults, terminations,
accelerations or creations of liens, security interests, charges or encumbrances
which would not, individually or in the aggregate, have a Material Adverse
Effect or materially and adversely affect the ability of the Company to
consummate the transactions contemplated by this Agreement, the POM or the LCC
Agreement. The businesses of the Company and its Subsidiaries are not being
conducted in violation of any law, ordinance or regulation of any governmental
entity ("Violations"), except for Violations which either individually or in the
aggregate will not have a Material Adverse Effect. Set forth on Schedule 3.8
hereto is a list of all Violations of which the Company has knowledge which
could, individually or in the aggregate, have a Material Adverse Effect.
3.9 Subsidiaries. Set forth on Schedule 3.9 hereto is a list
of those corporations, associates or other business entities of which more than
fifty percent (50%) of the total voting securities are held or controlled,
directly or indirectly, by the Company or any Subsidiary (such entities are
herein referred to individually as a "Subsidiary" and collectively as
"Subsidiaries"). Except for its interest in the Subsidiaries, the Company has no
direct or indirect equity or voting interest in any corporation, association or
other business entity. All of the equity securities of each of the Subsidiaries
are owned directly or indirectly by the Company or one or more of the Company's
Subsidiaries and are owned by the Company or a Subsidiary free and
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clear of any claim, lien, encumbrance or agreement with respect thereto, and all
of such shares are validly issued, fully paid and nonassessable.
3.10 Brokerage Fees and Commissions. No person or entity is
entitled to receive from the Company or any of its Subsidiaries any investment
banking, brokerage or finder's fee in connection with this Agreement, or the LCC
Agreement or the transactions contemplated hereby or thereby.
3.11 Litigation, etc. Except as described in the POM or
disclosed on Schedule 3.11 hereto, there is no claim, action or proceeding
pending or, to the best knowledge of the Company, threatened against or relating
to the Company or any of its Subsidiaries before any court or governmental or
regulatory authority or body acting in an adjudicative capacity which
individually or in the aggregate, if adversely determined, would have a Material
Adverse Effect or a materially adverse effect on the ability of the Company to
consummate the transactions contemplated by this Agreement, the POM or the Loan
Agreement. Neither the Company nor any of its Subsidiaries is subject to any
outstanding order, writ, injunction or decree which individually or in the
aggregate would have a Material Adverse Effect or a material adverse effect on
the ability of the Company to consummate the transactions contemplated by this
Agreement, the POM or the Loan Agreement.
3.12 Title to Properties; Encumbrances. The Company and each
of its Subsidiaries owns or has leasehold interests in all of its properties and
assets shown as owned or leased by it and as reflected on the Company Balance
Sheet and all properties and assets purchased by it since the date of the
Company Balance Sheet, except for properties and assets disposed of since the
date of the Company Balance Sheet (all of which were disposed of in the ordinary
course of business). Except as disclosed on the Company Balance Sheet, the POM
or on Schedule 3.12 hereto, none of the properties or assets of the Company or
any of its Subsidiaries reflected on the Company Balance Sheet or purchased
since the date of the Company Balance Sheet is subject to any mortgage, security
interest, encumbrance, claim or charge of any kind except (i) statutory liens
not yet delinquent; (ii) liens for taxes not yet delinquent or the validity of
which are being contested in good faith by appropriate actions; (iii) leases
accounted for as capitalized leases; (iv) mortgages, security interests,
encumbrances, claims or charges which are not material, individually or in the
aggregate, to the financial condition, business or results of operation of the
Company and its Subsidiaries taken as a whole; or (v) liens, mortgages and
security interests in favor of LCC, which will continue after the Closing.
3.13 Lease/Concession Agreements. All leases and concession
agreements pursuant to which the Company and each of its Subsidiaries leases
real property and improvements material to the conduct of its business and
operations (collectively, the "Leases") are in full force and effect and
constitute legal, valid and binding obligations of the parties thereto,
enforceable in accordance with their respective terms, except as the same may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
now or hereafter in effect relating to or limiting creditors' rights or by legal
principles of general applicability governing the availability of equitable
remedies. Neither the Company nor any of its Subsidiaries has
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assigned its rights and interests under the Leases. Nothing has come to the
attention of the Company which (whether with or without notice, lapse of time or
both) would constitute a material breach or default by any party other than the
Company under the Leases.
3.14 Taxes. All tax returns required to be filed by the
Company and its Subsidiaries have been duly and timely filed, and all taxes,
interest, penalties, assessments and/or deficiencies shown to be due on such tax
returns or for which the Company has received tax notices have in all respects
been paid or adequate provision for the payment thereof has been made. The
Company and its Subsidiaries have no material tax deficiency or claim
outstanding, assessed or, to the best of knowledge of the Company, proposed
against the Company and its Subsidiaries.
3.15 Employee Benefit Plans. Neither the Company nor any of
its Subsidiaries is a party to or bound by any pension, retirement or profit
sharing trust or plan with respect to its employees or others, other than the
Company's Section 125 Plan.
3.16 Contracts.
(a) The Company and its Subsidiaries have made
available to Purchasers' Counsel for inspection originals or true and accurate
copies of:
(i) each material contract, lease, sublease,
license or any other instrument under which the Company or any
Subsidiary holds an interest;
(ii) all insurance policies maintained by the
Company or any Subsidiary with respect to its business, operations and
properties;
(iii) all loan agreements, indentures,
mortgages and guaranties under which the outstanding indebtedness or
maximum obligation of this Company and any Subsidiary is greater than
$100,000 (including capitalized lease and installment purchase
obligations); and
(iv) all contracts, agreements and
commitments, whether or not fully performed, pursuant to which the
Company or any Subsidiary has acquired or disposed of any material
portion of its business or assets taken as a whole, including all
purchase money or indemnification obligations associated with any of the
foregoing owed by others to the Company or any Subsidiary.
(b) Except as described in the POM or set forth on
Schedule 3.16(b) hereto, neither the Company nor any Subsidiary is in breach of
or default under, nor has an event occurred which (whether with or without
notice, lapse of time or both) would constitute a default by the Company or the
Subsidiary under, any of the contracts, agreements, leases, licenses and
commitments referred to above (collectively, the "Company Contracts"). Except as
set forth on Schedule 3.16(b) hereto, neither the Company nor any Subsidiary has
received any notice from, or given any notice to, any other party indicating
that the Company or any Subsidiary or such other party, as the case may be, is
presently in default under or in breach or violation of any of
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the Company Contracts. Nothing has come to the attention of the Company which
(whether with or without notice, lapse of time or both) would constitute a
material breach or default by any other party under the Company Contracts.
3.17 Licenses, Permits and Authorizations. The Company and
its Subsidiaries have all approvals, licenses or other permits of all
governmental or regulatory agencies, whether federal, state or local, the
absence of which would materially impair the operations of their businesses
taken as a whole as they are presently being conducted. Set forth on Schedule
3.17 hereto is a list of all California Department of Alcoholic Beverage Control
("ABC") licenses and permits issued to the Company and its Subsidiaries and in
effect on the date hereof or which will be in effect on the Closing Date.
3.18 Intangible Property. The Company and each of its
Subsidiaries is the licensee or the sole and exclusive owner of all trade names,
unregistered trademarks and service marks, brand names, patents, copyrights,
registered trademarks and service marks, and all applications for any of the
foregoing, and all permits, grants and licenses or other rights with respect
thereto used in its business ("Company Intangible Property"), the absence of
which would have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries uses any of such Company Intangible Property by consent of any
other person or is required to make any payments to others with respect thereto.
All such Company Intangible Property is fully assignable free and clear of any
attachments, liens, encumbrances, restrictions or claims of others. Neither the
Company nor any of its Subsidiaries has been charged with any infringement of
any intangible property of the character described above and none of the Company
or any of its Subsidiaries have been notified or advised of any claim of any
other person relating to any of the Company Intangible Property. There is no
reason to believe that any person is in violation of any of the Company
Intangible Property.
3.19 Insurance. The Company and its Subsidiaries presently
have in full force such insurance coverage of their respective properties,
assets and businesses as is usual and customary for corporations engaged in
lines of business similar to those in which the Company and its Subsidiaries are
currently engaged.
3.20 Registration Rights. Except as set forth in the
Registration Rights Agreement or on Schedule 3.20 hereto and pursuant to the
registration rights provided in Section 9 hereof, the Company is not presently
under any obligation to register any of its currently outstanding securities, or
any of its securities which may hereafter be issued, under the Securities Act.
3.21 Offering. Subject in part to the truth and accuracy of
the Purchasers' representations set forth in this Agreement, the offer, issuance
and sale of the Securities as contemplated by this Agreement will be exempt from
the registration requirements of the Securities Act and from the registration or
qualification requirements of all applicable state securities laws. Neither the
Company nor anyone acting on its behalf will take any action hereafter that
would cause the loss of such exemptions.
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3.22 Disclosure. As of their respective dates, none of the
information or documents furnished or to be furnished by the Company and its
Subsidiaries to the Purchasers pursuant to this Agreement or the POM, and no
representation or warranty of the Company in this Agreement or the POM, contain
or will contain any untrue statement of a material fact or omitted or will omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each of the
Purchasers severally represents and warrants to the Company with respect to
itself as follows:
4.1 Experience. The Purchaser has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of investment in the Company, and it is able to bear the
economic risk of that investment.
4.2 Investment. The Purchaser is acquiring the Securities
for investment for its own account and not with the view to, or for resale in
connection with, any distribution thereof. It understands that the Notes (and
the Common Stock of the Company into which they may be converted) have not been
registered under the Securities Act nor qualified under state securities laws by
reason of specified exemptions therefrom which depend upon, among other things,
the bona fide nature of its investment intent as expressed herein.
4.3 Rule 144. The Purchaser acknowledges that the Notes (and
the Common Stock of the Company into which they may be converted) must be held
indefinitely unless they are subsequently registered under the Securities Act or
an exemption from such registration is available. The Purchaser has been advised
or is aware of the provisions of Rule 144 promulgated under the Securities Act,
which generally permit limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions, including, among other
things: the resale occurring not less than one year after a party has purchased
and paid for the security to be sold and, unless such resale occurs at least two
years after such purchase and payment and the seller is not (and has not been
during the three months preceding such resale) an "affiliate" of the Company,
the availability of certain current public information about the Company, the
sale being through a "broker's transaction" and the number of shares being sold
during any three-month period not exceeding specified limitations.
4.4 Access to Data. The Purchaser has had an opportunity to
discuss the Company's business, management and financial affairs with the
Company's management and has been afforded access to all requested information
about the Company and its business activities.
4.5 Investor Questionnaire. The Purchaser has completed that
certain Purchaser Questionnaire (the "Questionnaire") distributed to each
Purchaser as an exhibit to the POM. The Purchaser acknowledges that the Company
will be relying on the Purchaser's answers to the questions contained in the
Questionnaire in determining whether or not the Securities can be sold to the
Purchaser without registration under the Securities Act or qualification under
applicable state securities laws. The Purchaser has carefully completed the
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Questionnaire and all of the information furnished by the Purchaser in response
to the Questionnaire is true and correct.
5. PURCHASERS' CONDITIONS TO CLOSING. The obligation of the
Purchasers to purchase the Securities at the Closing is subject to the
fulfillment on or prior to the Closing Date of each of the following conditions:
5.1 Representations and Warranties. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct in
all material respects when made, and shall, except as specifically permitted
pursuant to Subsection 7.5 hereof, be true and correct in all material respects
on the Closing Date with the same force and effect as if they had been made on
and as of the Closing Date.
5.2 Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Company on
or prior to the Closing Date shall have been performed or complied with in all
respects.
5.3 Opinion of Company's Counsel. The Purchasers shall have
received from Bryan Cave LLP, counsel to the Company, an opinion addressed to
them, dated the Closing Date, in form and substance reasonably satisfactory to
Purchasers' Counsel.
5.4 Legal Investment. At the time of the Closing, the
purchase of the Securities hereunder shall be legally permitted by all laws and
regulations to which the Purchasers and the Company are subject.
5.5 Note Repayment. The full principal amount and accrued
interest outstanding to Outside, LLC pursuant to the Line of Credit Agreement
dated November 24, 1997, with Sea View Restaurants, Inc., shall have been paid
concurrent with the Closing.
5.6 The Security Agreement. The Security Agreement shall be
in full force and effect concurrent with the Closing.
5.7 Conduct of Business; No Material Adverse Change. During
the period from the date hereof to the Closing, (i) the business of the Company
and its Subsidiaries shall have been conducted only in, and the Company and its
Subsidiaries shall not have taken any action except in, the ordinary course of
business and in a manner consistent with past practice; and (ii) no material
adverse change shall have occurred in the condition (financial or otherwise),
properties, assets, liabilities, business or operations of the Company and its
Subsidiaries, considered as a whole.
5.8 Sale of Securities. As described in the POM and pursuant
to the LCC Loan, an aggregate of $1,800,000 worth of Notes shall be sold by the
Company by or at the Closing pursuant hereto and the Loan Agreement shall
provide for loans to the Company of not less than the difference between the
amount of the aggregate sale of Notes and $3,000,000.
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5.9 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated hereby and all
documents and instruments incident to such transactions shall be satisfactory in
form and substance to the Purchasers and Purchasers' Counsel.
5.10 Qualification. All authorizations, approvals or permits
of any governmental authority or regulatory body that are required in connection
with the lawful issuance and sale of the Securities shall have been duly
obtained and shall be effective on and as of the Closing.
6. THE COMPANY'S CONDITIONS TO CLOSING. The Company's obligation to
sell the Securities at the Closing is subject to the fulfillment to its
satisfaction on or prior to the Closing Date of each of the following
conditions:
6.1 Representations and Warranties. The representations and
warranties made by the Purchasers in Section 4 hereof shall be true and correct
in all material respects when made and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been
made on and as of the Closing Date.
6.2 Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Purchasers
on or prior to the Closing Date shall have been performed or complied with in
all respects.
6.3 Legal Investment. At the time of the Closing, the
purchase of the Securities shall be legally permitted by all laws and
regulations to which each Purchaser and the Company are subject.
7. COVENANTS OF THE COMPANY AND THE PURCHASERS.
7.1 Conduct of Business of the Company and Subsidiaries
Pending Closing. Except as provided in this Agreement, contemplated by the POM
and the Loan Agreement, during the period from the date of this Agreement to the
Closing, the Company and its Subsidiaries will conduct their respective
operations according to their respective ordinary and usual courses of business
and consistent with past practice. Without limiting the generality of the
foregoing, prior to the Closing, neither the Company nor any of its
Subsidiaries, as the case may be, will, and the Company will not and will not
permit its Subsidiaries to, without the prior written consent of the Purchasers
(except as is contemplated by this Agreement, the POM, and the Loan Agreement):
(a) issue, sell or pledge, or authorize or propose
the issuance, sale or pledge of (i) additional shares of capital stock of any
class or securities convertible into any such shares, or any rights, warrants or
options to acquire any such shares or other convertible securities, or grant or
accelerate any right to convert or exchange any securities of the Company for
any such shares or (ii) any other securities in respect of, in lieu of or in
substitution for shares outstanding on the date hereof;
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(b) purchase or otherwise acquire, or propose to
purchase or otherwise acquire, any of its outstanding securities;
(c) declare or pay any dividend or distribution on
any shares of capital stock of the Company;
(d) subject to the fiduciary duties of the Board of
Directors of the Company or the Subsidiary, as applicable, make any acquisition
of assets or securities, any disposition of assets or securities or any change
in its capitalization, or enter into any contract or any release or
relinquishment of any contract rights, except, in each case, in the ordinary
course of business;
(e) incur any long-term or short-term debt for
borrowed money in an aggregate amount in excess of $50,000, except for debt
incurred in the ordinary course of business;
(f) propose or adopt any amendments to the Articles
of Incorporation or Bylaws of the Company other than as contemplated or
permitted by this Agreement;
(g) enter into any new employment agreements with
any officers, directors or key employees or grant any increases in the
compensation or benefits (including employee benefit plans) to officers,
directors and key employees other than increases in the ordinary course of
business and consistent with past practice:
(h) assume, guarantee, endorse or otherwise become
responsible for the obligations of any other individual, firm or corporation or
make any loans or advances to any individual, firm or corporation except in the
ordinary course of business;
(i) create, assume or incur any mortgage, lien,
pledge or other encumbrance of any kind in respect of any property of the
Company or any Subsidiary;
(j) make any investments of a capital nature except
in the ordinary course of business;
(k) agree in writing or otherwise to take any of the
foregoing actions or any action which would make any representation or warranty
in this Agreement untrue or incorrect; or
(l) commence any public offering of its securities
or otherwise issue, offer to issue or agree to issue any securities thereof, or
solicit, initiate or encourage any proposal for a merger or other business
combination involving the Company or any of its Subsidiaries or for the
acquisition of a substantial equity interest in, or a substantial portion of the
assets of, the Company or any of its Subsidiaries other than the transactions
contemplated hereunder.
7.2 Access to Information. Between the date of this
Agreement and the Closing, the Company will:
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(a) give the Purchasers and their authorized
representatives access during regular business hours upon reasonable notice to
all plants, offices and other facilities and to books, records, contracts and
commitments of the Company and each of its Subsidiaries;
(b) request the Company's accountants to provide the
Purchasers access during regular business hours upon reasonable notice to the
books, records and work papers of such accountants pertaining to the Company;
(c) permit the Purchasers and their authorized
representatives to make such inspections as they may reasonably require; and
(d) cause its officers and those of its Subsidiaries
to furnish the Purchasers with such financial and operating data and other
information with respect to the business and properties of the Company and its
Subsidiaries as the Purchasers may from time to time reasonably request.
(e) The Purchasers agree, in connection with their
review of the financial and other information concerning the Company and its
business and operations, to keep confidential any information obtained in
connection therewith and, in the event the purchase of the Securities is not
consummated, to destroy or return to the Company any records or copies thereof
that they may have obtained in connection with their review.
7.3 Best Efforts. Subject to the terms and conditions herein
provided, and to the fiduciary duties of the Board of Directors of the Company
under applicable laws, each of the parties hereto agrees to use its best efforts
to take, or cause to be taken, all appropriate action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement. Each Purchaser who holds 10% or more of the Company's
outstanding stock agrees to fully cooperate with the Company for purposes of
signing such applications and complying with such other requirements as may be
established by the ABC relating to the Company's liquor licenses. In case at any
time after the Closing any further action is necessary or desirable to carry out
the purposes of this Agreement, the proper officers and directors of each party
to this Agreement shall take all such necessary action. Each of the parties to
this Agreement acknowledge that several agreements and transactions which are
conditions precedent to the consummation of the transactions contemplated by
this Agreement are still being negotiated, including without limitation the POM
and the Loan Agreement, and that in considering such transactions and
agreements, the Board of Directors of the Company will have a fiduciary duty
under applicable laws to consider the facts then known to it in deciding whether
or not to approve such agreements and consummate such transactions. Nothing in
this Subsection 7.3 shall obligate the Board of Directors of the Company to act
in violation of its fiduciary duties.
7.4 Consents. The Company and the Purchasers each will use
its best efforts to obtain consents of all third parties and governmental
authorities necessary for the consummation of the transactions contemplated by
this Agreement.
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7.5 Notification of Certain Matters. The Company and the
Purchasers will give prompt notice to each other of (i) the occurrence, or
failure to occur, of any event which occurrence or failure would or would be
likely to cause any of their respective representations or warranties contained
in this Agreement to be untrue or incorrect at any time from the date hereof to
the Closing, and (ii) any failure on its part or on the part of any of their
respective officers, directors, employees, representatives or agents to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by them under this Agreement; provided, however, that no such
notification will alter or otherwise affect such representations, warranties,
covenants, conditions or agreements.
8. POST-CLOSING COVENANTS OF THE COMPANY. The Company hereby
covenants and agrees as follows:
8.1 Annual and Quarterly Financial Information. The Company
will furnish the following reports to each Purchaser for so long as such
Purchaser is a holder of any Securities purchased by such person pursuant to
this Agreement:
(a) As soon as practicable after the end of each
fiscal year, and in any event within 120 days after the end of each fiscal year,
consolidated balance sheets of the Company and its Subsidiaries, as of the end
of such fiscal year, and consolidated statements of income and consolidated
statements of changes in financial position of the Company and its Subsidiaries
for such year, prepared in accordance with generally accepted accounting
principles and setting forth in each case in comparative form the figures for
the previous fiscal year, all in reasonable detail and certified by independent
public accountants of reputable standing selected by the Company.
Notwithstanding the foregoing, at any time the Company is required to file
reports pursuant to the Exchange Act, the obligation contained in this clause
(a) shall be satisfied by delivery of a copy of the Company's annual report on
Form 10-K for each fiscal year within fifteen business days of filing thereof
with the SEC.
(b) As soon as practicable after the end of the
first, second and third quarterly accounting periods in each fiscal year of the
Company, and in any event within 45 days thereafter, a consolidated balance
sheet of the Company and its Subsidiaries as of the end of each such quarterly
period, and consolidated statements of income and consolidated cash flow
statements of the Company and its Subsidiaries for such period and for the
current fiscal year to date, prepared in accordance with generally accepted
accounting principles (subject to normal audit adjustment and except that no
supporting statements, schedules, footnotes or other such disclosure required by
generally accepted accounting principles need be included), all in reasonable
detail and signed, subject to changes resulting from year-end audit adjustments,
by the Chief Financial Officer of the Company. Notwithstanding the foregoing, at
any time the Company is required to file reports pursuant to the Exchange Act,
the obligation contained in this clause (b) shall be satisfied by delivery of a
copy of the Company's quarterly report on Form 10-Q for each quarterly
accounting period within fifteen business days of filing thereof with the SEC.
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8.2 Other Reports and Statements. The Company will furnish
to each Purchaser for so long as such Purchaser is the holder of Shares
constituting more than one percent (1%) of the combined voting power of all
shares of capital stock of the Company then outstanding, purchased by such
person pursuant to this Agreement, promptly (but in any event within fifteen
business days) after the mailing to its stockholders generally of each annual
report, proxy statement or other report or communication, a copy of each such
report, proxy statement or other report or communication and promptly (but in
any event within fifteen business days) after any filing by the Company with the
SEC or any governmental agency or agencies substituted for such commission, or
with any national securities exchanges of any annual or periodic or special
report or registration statement, a copy of such report or statement and copies
of all press releases and other statements made available generally by the
Company to the public concerning material developments in the Company's
business.
8.3 Reimbursement of Fees. The Company shall pay all
reasonable fees and expenses of Purchasers' Counsel.
8.4 Termination of Letter of Credit. The Company shall use
its best efforts and take all action within its power to terminate that certain
Letter of Credit Agreement between Sea View Restaurants, Inc. ("Sea View") and
Overhead Partners, L.P. dated July 22, 1998 ("LOC Agreement"), as amended March
1, 1999, providing credit enhancement to support the $2,000,000 letter of credit
required pursuant to the Concession Agreement between Sea View and the County of
Los Angeles, dated November 1, 1997, as amended (the "Concession Agreement"),
upon completion of the remodeling of Gladstone's 4 Fish Restaurant in accordance
with the terms of the Concession Agreement.
8.5 Limitation on Indebtedness. Until the Notes are fully
paid and/or converted into Shares and no Notes are outstanding, the Company will
not incur indebtedness for borrowed money, excluding the Notes, in excess of
$4,000,000, without the prior written consent of the holders of a majority in
principal amount of Notes then outstanding.
9. REGISTRATION RIGHTS. Certain of the Purchasers are parties to
that certain Registration Rights Agreement dated March 30, 1990, and to that
certain Securities Purchase Agreement dated December 22, 1994 (collectively, the
"Registration Rights Agreement") providing for registration rights with respect
to common stock substantially similar to the rights provided in this Section 9.
Such Purchasers agree that the provisions of this Section 9 supersede the
Registration Rights Agreement, and it shall be terminated with respect to such
Purchasers upon the Closing. Bank of America National Trust and Savings
Association (the "Bank") has been afforded registration rights identical to
those provided to Purchasers in this Section 9 pursuant to a Stock Purchase
Agreement with the Company dated December 22, 1994 ("Bank Agreement"). Parties
to the Registration Rights Agreement who are not Purchasers under this Agreement
and the Bank shall continue to be afforded the rights provided thereunder, and
the rights provided in this Section 9 shall be subject to the Registration
Rights Agreement and the Bank Agreement to the extent therein provided.
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9.1 Piggy Back Rights.
(a) If the Company at any time after the Closing
Date proposes to register any class of equity security on any form for the
general registration of securities under the Securities Act (other than a
registration form relating to (i) a registration of a stock option, stock
purchase or compensation or incentive plan or of stock issued or issuable
pursuant to any such plan, or a dividend investment plan, (ii) a registration of
stock proposed to be issued in exchange for securities or assets of, or in
connection with a merger or consolidation with, another corporation, (iii) a
registration of stock proposed to be issued in exchange for other securities of
the Company or (iv) a rights or similar offering to existing shareholders), then
the Company will at such time give prompt written notice to Purchasers of its
intention to do so and of such Purchasers' rights under this Subsection 9.1.
Upon the written request of any such Purchaser or Purchasers who individually or
in the aggregate request registration of at least 100,000 shares of Common Stock
made within 20 days after the effectiveness of any such notice (which request
shall specify the shares intended to be disposed of by such Purchaser and the
intended method of disposition thereof), the Company will use its best efforts
to cause the shares of Common Stock issued upon conversion of the Notes eligible
for registration under Section 9 ("Registrable Securities") which the Company
has been so requested to register by the Purchasers thereof to be registered
under the Securities Act, provided that (i) if, at any time after giving written
notice of its intention to register any securities but prior to the
effectiveness date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register such
securities, the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon, shall be
relieved of its obligation to register any Registrable Securities and (ii) if
such registration involves any underwritten offering, all holders of Registrable
Securities requesting to be included in such registration must sell their
Registrable Securities to the underwriters of such offering on the same terms
and conditions as apply to the Company or the holder for whose account
securities are to be sold, as the case may be. If a registration requested
pursuant to this Section 9.1 involves an underwritten public offering, any
holder of Registrable Securities requesting to be included in such registration
may elect in writing, not later than three days prior to the effectiveness of
the registration statement filed in connection with such registration, not to
sell such securities in connection with such registration. The Company will pay
all Registration Expenses (as defined in clause (d) below) in connection with
each registration of Registrable Securities requested pursuant to this
Subsection 9.1.
(b) In connection with any registration pursuant to
this Subsection 9.1 involving an underwritten offering, if the managing
underwriter or underwriters advise the Company in writing that, in its or their
opinion, the number of securities requested to be included in such registration
would have a material adverse effect on such offering (including, without
limitation, a material decrease in the price at which such securities can be
sold), then the amount of the Registrable Securities to be included in the
offering shall be reduced and the Registrable Securities and the other shares to
be offered shall participate in such offering as follows: (i) shares to be sold
by the Company ("Company Common Stock") shall have priority over all shares to
be offered by stockholders of the Company, including the Purchasers, (ii) if
shares in excess of the Company Common Stock can, in the good faith judgment of
such managing underwriter or underwriters, successfully be marketed in such
offering, the Registrable Securities and the other shares of Common Stock to be
included in such offering shall be included in such
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<PAGE> 24
offering, subject to reduction pro rata in proportion to the number of shares of
Common Stock proposed to be included in such offering by each holder of such
shares.
(c) Any particular shares of Common Stock shall
cease to be Registrable Securities when: (i) a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (ii) they shall have been distributed to the
public pursuant to Rule 144 (or any successor provision) under the Securities
Act, (iii) they shall have been otherwise transferred, new certificates for them
not bearing a legend restricting further transfer shall have been delivered by
the Company and subsequent disposition of them shall not require registration or
qualification of them under the Securities Act or any similar state law then in
force, or (iv) they shall have ceased to be outstanding.
(d) "Registration Expenses" as used herein shall
mean any and all expenses incident to performance of or compliance with this
Section 9, including without limitation: (i) all SEC and stock exchange or
National Association of Securities Dealers registration and filing fees, (ii)
all fees and expenses of complying with securities or blue sky laws (including
reasonable fees and disbursement of counsel for the underwriters in connection
with blue sky qualifications of the Registrable Securities), (iii) all printing,
messenger and delivery expenses, (iv) the fees and disbursements of counsel for
the Company and of its independent public accountants, including the expenses of
any special audits and/or "cold comfort" letters required by or incident to such
performance and compliance, (v) the reasonable fees and disbursements of one
counsel retained in connection with each such registration by the Purchaser or
Purchasers holding a majority (by number of shares) of Registrable Securities
being registered, (vi) any fees and disbursements of underwriters customarily
paid by issuers or seller of securities, including liability insurance if the
Company so desires, the reasonable fees and expenses of any special experts
retained by the Company in connection with the requested registration, but
excluding underwriting discounts and commissions and transfer taxes, if any.
9.2 Demand Registration Rights.
(a) Any Purchaser or Purchasers who hold, in the
aggregate, 30% or more of the Registrable Securities then outstanding may make a
total of two written requests for the registration under the Securities Act of
all or part of its or their Registrable Securities (a "Demand Registration") and
the Company shall use its best efforts to effect such Demand Registration, so
long as such request relates to 30% or more of the Registrable Securities issued
upon conversion of the Notes which are then outstanding, provided, that the
Company may delay such Demand Registration for a period not to exceed two months
if the Board of Directors of the Company determines that such Demand
Registration would have a material adverse effect on the business of the
Company. The Company shall not be obligated to effect any Demand Registration
within six months after the effective date of a registration statement under the
Securities Act with respect to Common Stock. Any request for a Demand
Registration shall specify the aggregate number of the Registrable Securities
proposed to be sold and shall also specify the intended method of disposition
thereof. Within ten days after receipt of such a request, the Company will give
written notice of such registration request to all Purchasers, and
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<PAGE> 25
the Company will include in such registration (to the extent permitted under
Subject 9.2(b)) all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within 20 business days after
the receipt by the applicable Purchaser of the Company's notice. Each such
request shall also specify the aggregate number of Registrable Securities to be
registered and the intended method of disposition thereof. In any registration
initiated as a Demand Registration, the Company will pay all Registration
Expenses in connection therewith. A Demand Registration shall not be counted as
a Demand Registration toward the limit of two (2) hereunder until such Demand
Registration has been declared effective by the SEC and maintained continuously
effective for a period of at least six months or such shorter period when, all
Registrable Securities included therein have been sold in accordance with such
Demand Registration, provided that a Demand Registration shall be counted as a
Demand Registration hereunder if the Company ceases its efforts in respect of
such Demand Registration at the request of the Purchaser for a reason other than
a material and adverse change in the business, financial condition or prospects
of the Company and its Subsidiaries taken as a whole or in general economic or
market conditions.
(b) If in any Demand Registration the managing
underwriter or underwriters (or in the case of a Demand Registration not being
underwritten, in the opinion of the Purchasers holding a majority of the
Registrable Securities held by all Purchasers and included therein), advise the
Company in writing that in their reasonable opinion the number of Registrable
Securities requested to be included in such offering is sufficiently large to
materially and adversely affect the success of such offering (including by a
material decrease in the proposed offering price), the Company will include in
such registration a number of Registrable Securities and other securities equal
to the total number which in the opinion of such managing underwriter or
underwriters or holders of Registrable Securities can be sold without any such
material adverse effect, as follows: (i) first, the Registrable Securities
requested to be included in such Demand Registration pro rata among the holders
of such Registrable Securities requesting to be included in such registration on
the basis of the number of shares requested to be included, (ii) second, shares
to be issued and sold by the Company and shares other than Registrable
Securities pro rata in proportion to the number of shares proposed to be
included in such registration by each holder of such shares and by the Company.
No other holder of securities of the Company may include securities in any
Demand Registration without the prior written consent of the holders of at least
51% of the Registrable Securities requested to be included in such offering,
unless such other holder has a legal right to have such securities included in
the Demand Registration pursuant to the Registration Rights Agreement.
(c) If any Demand Registration is in the form of an
underwritten offering, the holders of a majority in aggregate amount of the
Registrable Securities to be registered will select and obtain the investment
banker or investment bankers and manager or managers that will administer the
offering, provided that such selection will be subject to the Company's
approval, which shall not be unreasonably withheld.
9.3 Registration Not Required. Notwithstanding the
provisions of Subsections 9.1 and 9.2, the Company shall not be required to
effect or cause the registration of Registrable Securities pursuant to
Subsections 9.1 or 9.2 hereof if, within 25 days after its receipt
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of a request to register such Registrable Securities: (i) counsel for the
Company delivers an opinion to the Purchaser requesting registration of such
Registrable Securities, in form and substance satisfactory to counsel to such
Purchaser, that the entire number of shares of Registrable Securities proposed
to be sold by such Purchaser may be sold by him, in the manner proposed by him,
pursuant to Rule 144 under the Securities Act (or any successor rule) within a
period of not more than 90 days of such opinion (based on the number of shares
of Common Stock outstanding on the date of such opinion and the average weekly
trading volume for such Common Stock for the four weeks preceding the date of
such opinion), (ii) counsel for the Company delivers an opinion to the Purchaser
requesting registration of such Registrable Securities, in form and substance
satisfactory to counsel for such holder, that the entire number of Registrable
Securities proposed to be sold by such holder may otherwise be sold by him, in
the manner proposed by him, without registration under the Securities Act, or
(iii) the SEC shall have issued a no-action position, in form and substance
satisfactory to counsel for the holder requesting registration of such
Registrable Securities, that the entire number of Registrable Securities
proposed to be sold by such holder may be sold by him, in the manner proposed by
him, without registration under the Securities Act.
9.4 Registration Procedures. If and whenever the Company is
required to or is required to use its best efforts to effect or cause the
registration of any Registrable Securities under the Securities Act as provided
in this Section 9 the Company will, as expeditiously as possible:
(a) prepare and, if any event within ninety (90)
days after the end of the period within which requests for registration may be
given to the Company, file with the SEC a registration statement with respect to
such Registrable Securities and use its best effects to cause such registration
statement to become effective as soon thereafter as possible. The Company will
promptly notify each seller of such Registrable Securities and confirm such
advice in writing, (i) when such registration statement becomes effective, (ii)
when any post-effective amendment to such registration statement becomes
effective and (iii) of any request by the SEC for any amendment or supplement to
such registration statement or any prospectus relating thereto or for additional
information;
(b) prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for at least six months and to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the intended
methods of disposition by the seller or sellers of Registrable Securities set
forth in such registration statement. If at any time the SEC should institute or
threaten to institute any proceedings for the purpose of issuing a stop order
suspending the effectiveness of any such registration statement, then the
Company shall promptly notify each seller of such Registrable Securities and
will use all reasonable efforts to prevent the issuance of any such stop order
or to obtain the withdrawal thereof as soon as possible;
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(c) furnish to each seller of such Registrable
Securities such number of copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits), such
number of copies of the prospectus included in such registration statement
(including each preliminary prospectus and summary prospectus), in conformity
with the requirements of the Securities Act, and such other documents as such
seller may reasonably request in order to facilitate the disposition of the
Registrable Securities by such seller;
(d) use its best efforts to register or qualify such
Registrable Securities covered by such registration statement under such
securities or blue sky laws of any State of the United States as the managing
underwriter, if any, shall reasonably request, and do any and all other acts and
things which may be reasonably necessary or advisable to enable each seller and
underwriter, if any, to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller, except that the Company shall not
for any such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction where, but for the requirements of this
clause (d), it would not be obligated to be so qualified, to subject itself to
taxation in any such jurisdiction, or to consent to general service of process
in any such jurisdiction;
(e) use its best efforts to cause such Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities of the United States
or any State thereof as may be necessary to enable the seller or sellers thereof
to consummate the disposition of such Registrable Securities;
(f) promptly notify each seller of any such
Registrable Securities covered by such registration statement, at any time when
a prospectus relating thereto is required to be delivered under the Securities
Act within the appropriate period mentioned in clause (b) of this Subsection
9.4, of the Company becoming aware that 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; and at the request of any such seller promptly
prepare and furnish to such seller a reasonable number of copies of an amended
or supplemental prospectus as may be necessary so that, as thereafter delivered
to the purchasers of such Registrable Securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
(g) otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC, and make available to its
securities holders, as soon as reasonably practicable, an earnings statement
covering the period of at least 12 months, beginning with the first month after
the effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act;
(h) use its best efforts to list such Registrable
Securities on any securities exchange on which the Common Stock is then listed,
if such Registrable Securities are
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not already so listed and if such listing is then permitted under the rules of
such exchange, and to provide a transfer agent and registrar for such
Registrable Securities covered by such registration statement not later than the
effective date of such registration statement;
(i) use all reasonable efforts to obtain a "cold
comfort" letter or letters from the Company's independent public accountants in
customary form and covering matters of the type customarily covered by "cold
comfort" letters as the underwriters or the seller or sellers of 51% of the
Registrable Securities covered by such registration statement shall reasonably
request; and
(j) make available for inspection by any seller of
such Registrable Securities covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant to such
registration statement and by any attorney, accountant, or other agent retained
by any such seller or any such underwriter, in each case upon receipt of an
appropriate confidentiality agreement, all financial and other records,
corporate documents and properties of the Company and its Subsidiaries, and
cause all of the Company's officers, directors and employees to supply all
information, as may be reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement.
The Company may require each seller of Registrable Securities as
to which any registration is being effected to furnish the Company in writing
such information and documents regarding such seller and the distribution of
such securities as may be required to be disclosed in the registration statement
in question by the rules and regulations under the Securities Act or under any
other applicable securities or blue sky laws of the jurisdictions referred to in
clause (d) of this Subsection 9.4.
Each Purchaser of Registrable Securities agrees by acquisition
of such Registrable Securities that, upon receipt of any notice from the Company
of the happening of any event of the kind described in clause (f) of this
Subsection 9.4, such Purchaser will forthwith discontinue disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such Purchaser's receipt of the copies of the
supplemented or amended prospectus contemplated by clause (f) of this Subsection
9.4, and, if so directed by the Company, such Purchaser will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such Purchaser's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice. In the event the
Company shall give any such notice, the period mentioned in clause (b) of this
Subsection 9.4 shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to clause (f) of
this Subsection 9.4 to and including the date when each seller of Registrable
Securities receives covered by such registration statement shall have received
the copies of the supplemented or amended prospectus contemplated by clause (f)
of this Subsection 9.4.
9.5 Indemnification.
(a) Indemnification by the Company. In the event of
any registration of any securities of the Company under the Securities Act
pursuant to this Agreement, the
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Company will, and it hereby does, indemnify and hold harmless, to the extent
permitted by law, the seller of any Registrable Securities covered by such
registration statement, its directors and officers or general and limited
partners (any directors and officers thereof), each other person who
participates as an underwriter in the offering or sale of such securities and
each person, if any, who controls such seller or any such underwriter within the
meaning of the Securities Act, against any and all losses, claims, damages or
liabilities, joint or several, and expenses (including any amounts paid in any
settlement effected with the Company's written consent) to which such seller,
any such director or officers or general or limited partner or such underwriter
or controlling person may become subject under the Securities Act, common law or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act, any preliminary, final or summary prospectus contained therein,
or any amendment or supplement thereto, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Company will reimburse such
seller and each such director, officer, general or limited partner, underwriter
and controlling person for any legal or any other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
liability, action or proceeding, provided, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon any breach by the indemnified person of its obligations under the last
clause of Subsection 9.4 or any untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement or amendment or
supplement thereto or in any such preliminary, final or summary prospectus or
amendment or supplement thereto, in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of such seller
or underwriter for use in the preparation thereof; and provided, further, that
the Company will not be liable to any person who participates as an underwriter
in the offering or sale of Registrable Securities, or to any other person who
controls such underwriter, within the meaning of the Securities Act, under the
indemnity agreement in this Subsection 9.5(a) with respect to any preliminary
prospectus or the final prospectus, or the final prospectus as amended or
supplemented, as the case may be, to the extent that any such loss, claim,
damage or liability of such underwriter or controlling person results from the
fact that such underwriter sold Registrable Securities to a person to whom there
was not sent or given, at or prior to the written confirmation of such sale, a
copy of the final prospectus (including any documents incorporated by reference
therein) or of the final prospectus as then amended or supplemented (including
any documents incorporated by reference therein), whichever is most recent, if
the Company has previously furnished copies thereof to such underwriter and such
final prospectus, as then amended or supplemented, has corrected any such
misstatement or omission. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any such
director, officer, general or limited partner, underwriter or controlling person
and shall survive the transfer of such securities by such seller.
(b) Indemnification by the Sellers. The Company may
require, as a condition to including any Registrable Securities in any
registration statement filed in accordance with this Section 9, that the Company
shall have received an undertaking reasonably satisfactory
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to it from the prospective seller of such Registrable Securities to indemnify
and hold harmless (in the same manner and to the same extent as set forth in
clause (a) of this Subsection 9.5) the Company, each director of the Company,
each officer of the Company who shall sign the registration statement and its
controlling person, if any, and all other prospective sellers and their
respective directors, officers and controlling persons with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary, final or summary prospectus contained
therein, or any amendment or supplement, if such statement or alleged statement
or omission or alleged omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of such seller for use in
the preparation of such registration statement, preliminary, final or summary
prospectus or amendment or supplement. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the Company.
(c) Notices of Claims, etc. Promptly after receipt
by an indemnified party hereunder of written notice of the commencement of any
action or proceeding with respect to which a claim for indemnification may be
made pursuant to this Subsection 9.5, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action, provided that the failure of
any indemnified party to give notice as provided herein shall not relieve the
indemnified party of its obligations under the preceding subdivisions of this
Subsection 9.5, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, the indemnifying party will be
entitled to participate in and to assume the defense thereof, jointly with
another indemnifying party similarly notified to the extent that it may wish,
with counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof. No indemnifying party will
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation.
(d) Other Indemnification. Indemnification similar
to that specified n the preceding subdivisions of this Subsection 9.5 (with
appropriate modifications) shall be given by the Company to each seller and any
underwriter of Registrable Securities with respect to any required registration
or other qualification of securities under any federal or state law or
regulation other than the Securities Act.
(e) Contribution. If the indemnification provided
for in Subsections 9.5(a), 9.5(b) or 9.5(d) is unavailable to a party that would
have been an indemnified party under any such section in respect of any and all
losses, claims, damages or liabilities, joint or several (or actions in respect
thereof), referred to therein, then each party that would have been an
indemnifying party thereunder shall, in lieu of indemnifying such indemnified
party, contribute to the amount paid or payable by such indemnified party as a
result of such losses,
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claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and such indemnified party on the other in connection with
the statement or omissions which resulted in such losses, claims, damages or
liabilities, joint or several (or actions in respect thereof). The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statements of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
indemnifying party or such indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company agrees that it would not be just and
equitable if contribution pursuant to this Subsection 9.5(e) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Subsection
9.5(e). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this Subsection 9.5(e) shall include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defendant any such action or claim (which shall be limited as provided in
Subsection 9.5(c) hereof if the indemnifying party has assumed the defense of
any such action in accordance with the provisions thereof). No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
9.6 Rule 144. The Company covenants that it will use its
best efforts under the circumstances to file the reports required to be filed by
it under the Securities Act and the Exchange Act and the rules and regulations
adopted by the SEC thereunder to the extent required from time to time to enable
the Purchasers to sell shares of Registrable Securities without registration
under the Securities Act within the limitations of the exemption provided by (i)
Rule 144 under the Securities Act, as such Rule may be amended from time to
time, or (ii) any similar rule or regulation hereafter adopted by the SEC.
9.7 Mergers, etc. The Company shall not, directly or
indirectly, enter into any merger, consolidation or reorganization in which the
Company shall not be the surviving corporation unless the surviving corporation
shall, prior to such merger, consolidation or reorganization agree in writing to
assume the obligations of the Company under this Agreement, and for that purpose
references hereunder to "Registrable Securities" shall be deemed to include the
securities which the Purchasers would be entitled to receive in exchange for the
Shares or Common Stock under any such merger, consolidation or reorganization,
provided that to the extent such securities to be received are convertible into
shares of common stock of the issuer thereof, then any such shares of common
stock as are issued or issuable upon conversion of such convertible securities
shall also be included within the definition of "Registrable Securities."
9.8 Transfer of Certain Rights. The rights granted to the
Purchasers under this Section 9 may be transferred only to a transferee who
holds 100,000 or more of the Registrable Securities and who delivers to the
Company, within a reasonable time after such transfer, a written instrument by
which such transferee agrees to be bound by the applicable terms of this
Agreement. The rights granted to the Purchasers pursuant to this Agreement may
not otherwise be transferred. Notwithstanding the foregoing, nothing herein
shall prohibit: (i) any Purchaser
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<PAGE> 32
from transferring any of its rights under this Section 9 to any wholly-owned
subsidiary of such Purchaser or to any entity which merges or consolidates with
or acquires all or substantially all of the equity securities or assets of such
Purchasers, (ii) any Purchaser which is a partnership from transferring any of
its rights under this Section 9 to a partner of such partnership where such
partner receives Registrable Securities in a distribution from such partnership,
or (iii) any entity under common control or ownership of such Purchaser.
9.9 Amendments. Except as otherwise provided in this Section
9, the terms and provisions of this Section 9 may not be modified or amended
except in a writing executed by the Company and the holders of at least 80% of
the Registrable Securities, provided that this Agreement may be amended with the
consent of the Purchaser of less than all Registrable Securities only in a
manner which effects all Registrable Securities in the same fashion. Waivers and
exceptions to the requirements and limitations of the covenants hereof may be
given, and shall be effective if given, in writing by the holders of at least
80% of the Registrable Securities. Notice of any waiver or amendment shall be
promptly provided to any Purchaser not consenting to such waiver or amendment.
No waivers of or exceptions to any term, condition or provisions of this
Agreement, in any one or more instances, shall be deemed to be or construed as,
a further or continuing waiver of any such term, condition or provision.
10. INDEMNIFICATION.
10.1 Losses. The Company shall indemnify and hold harmless
the Purchasers and the officers, directors, agents, attorneys, and
representatives of the Purchasers or any of them (the "Indemnitees") from and
against, and shall reimburse the Indemnitees on demand, in cash, for any loss,
liability, damages or expense, including reasonable attorneys' fees and costs of
investigation incurred as a result thereof, that the Indemnitees shall incur or
suffer, but subject at all times to Subsections 12.2 and 12.3 hereof
(collectively, the "Recoverable Losses," and each a "Recoverable Loss"),
resulting from: (i) any breach of any representation or warranty on the part of
the Company under or pursuant to this Agreement or under or pursuant to any
document, certificate, schedule or instrument delivered in connection herewith
which gives rise to a claim for Recoverable Losses during the General Liability
Period or Tax Liability Period (each as hereinafter defined), as applicable;
(ii) any breach of any covenant or agreement on the part of the Company under or
pursuant to this Agreement or under or pursuant to any document, certificate,
schedule or instrument delivered in connection herewith which give rise to a
claim for Recoverable Losses; and (iii) any Recoverable Losses arising out of or
in connection with this Agreement (or any other document or instrument executed
herewith or pursuant hereto) or the purchase of the Securities hereunder, any
violation or alleged violation by the Company or its officers or directors of
the Securities Act or the Exchange Act, any rule or regulation promulgated by
the SEC thereunder or any other state or federal securities law violation
arising from facts or circumstances existing prior to the Closing. Purchasers
shall be entitled to recover Recoverable losses resulting from (i), (ii) and
(iii) above notwithstanding any investigation or knowledge by or on behalf of
Purchasers.
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<PAGE> 33
10.2 Claims for Indemnification; Disputes.
(a) Claims for Indemnification. The Indemnitees
shall give the Company reasonable notice (the "Claim Notice") of any claim, the
commencement of any action with respect to which indemnity may be sought by the
Indemnitees or the existence of any unmatured claims which the Indemnitees have
a reasonable basis to conclude will mature into claims for which indemnification
may be sought (individually, a "Claim" and collectively, the "Claims");
provided, however, that failure to give such Claim Notice shall not limit the
right of the Indemnitees to such indemnification, except to the extent that the
failure to give such Claim Notice materially prejudices the Company's ability to
defend against a Third Party Claim (as hereinafter defined). The Claim Notice
shall state (i) the anticipated aggregate amount of the Recoverable Losses as to
which indemnification is being sought (which amount may be estimated and updated
from time to time); (ii) the anticipated components of the amount of Recoverable
Losses for which indemnification is being sought (which components may be
estimated and updated from time to time); and (iii) the nature of the grounds
upon which the Claim for indemnification is being made.
(b) Control of Litigation; Mutual Cooperation. If
there is a claim asserted by a third party against the Indemnitees or any of
them (a "Third Party Claim"), the Company shall assume the defense thereof,
including, without limitation, the employment of counsel reasonably satisfactory
to the Indemnitees and the payment of all reasonable fees and expenses in
connection thereof; provided, however, that if in the reasonable judgment of the
Indemnitees, based on advice of counsel, a conflict of interest may exist
between the Indemnitees, or any of them, and the Company with respect to the
Third Party Claim, the Indemnitees shall have the right to participate in (but
not assume) the defense of the Third Party Claim through counsel of the
Indemnitees own choosing and at the Indemnitees' expense. An Indemnitee shall
have the right to employ separate counsel in any such Third Party Claim and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be the expense of such Indemnitee unless (a) the Company agreed in writing
to pay such fees and expenses or (b) the Company shall have failed to assume the
defense of such Third Party Claim and employ counsel reasonably satisfactory to
an Indemnitee in any such Third Party Claim or (c) the named parties to any such
Third Party Claim (including any impleaded parties) include both (i) an
Indemnitee and (ii) the Company, and an Indemnitee shall have been advised in
writing by counsel that there may be one or more legal defenses available to it
which are different from or additional to those available to the Company ) in
which case, if such Indemnitee notifies the Company in writing that it elects to
employ separate counsel at the expense of the Company, the Company shall not
have the right to assume the defense of such Third Party Claim on behalf of such
Indemnitee, it being understood, however, that the Company shall not, in
connection with any one such Third Party Claim or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys at any time for
all Indemnitees. The Company shall not be liable for any settlement of any claim
effected without its written consent, but if settled with its written consent,
which consent shall not be unreasonably withheld, the Company agrees to
indemnify and hold harmless an Indemnitee from and against any loss or liability
by reason of such settlement.
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<PAGE> 34
(c) Resolution of Disputes; Arbitration. The Company
and the Indemnitees shall undertake in good faith to promptly meet and attempt
to resolve all disputes regarding indemnification. If the Company and the
Indemnitees are unable to resolve such disputes within twenty days, the
exclusive method for resolving any dispute, controversy or claim concerning or
arising out of or related to this Agreement (other than the obtaining of any
injunctive or non-monetary equitable relief), including the interpretation
thereof or any alleged breach thereof, shall be by arbitration in Los Angeles,
California, upon the initiation of any party by a written notice to the other
party demanding arbitration and specifying the controversy or claim to be
arbitrated. Any controversy or claim shall be settled and finally determined by
a single arbitrator selected in accordance with the following procedure. Within
five (5) business days of the date of delivery of the foregoing notice, the
parties shall each provide the other with a list of ten (10) retired judges from
the Los Angeles County Superior Court in order of preference, and if one or more
judges appears on each of such lists, the parties shall designate the duplicated
judge who is highest in order of preference on both lists to settle and finally
determine the controversy or dispute arising hereunder. If no judge is named on
both of such lists, then the parties shall have a period of two (2) business
days to agree to the designation of any retired judge, and if such parties are
unable to agree on the selection of a judge, a retired judge from the Los
Angeles County Superior Court (who shall not have any conflicts of interest with
respect to the subject matter of, or the parties to, such dispute), shall be
chosen by the Presiding Judge of the Superior Court of the County of Los
Angeles, State of California. The judge ultimately selected to hear the
controversy or dispute hereunder is herein referred to as the "arbitrator." The
parties shall each bear one-half of the cost of appointing the arbitrator and of
paying the arbitrator's fee; however, the arbitrator shall award the prevailing
party reimbursement of all expenses of the arbitration (including reasonable
attorneys' fees) incurred by him. The arbitrator shall have the power to award
any and all remedies and relief whatsoever that is deemed appropriate under the
circumstances, including without limitation, money damages and equitable relief.
The procedure whereby the evidence (oral and/or written) relating to the
controversy or claim is presented in the arbitration shall be agreed to by the
parties, and in the absence of such agreement, shall be as determined by the
arbitrator. The written decision of the arbitrator shall be rendered within (30)
business days following his appointment. The written decision of the arbitrator
shall be binding and conclusive on the parties thereto and enforceable as
provided by the laws of the State of California, and judgment on such
arbitration decision may be entered by any courts having jurisdiction thereof.
(d) Payment in Stock. In the event the Company is
obligated to indemnify the Indemnified Parties pursuant to this Section 10 but
does not have cash available to make such indemnification and if the Indemnified
Parties agree, the Company may issue shares of Common Stock in payment of such
indemnification obligation to the Indemnified Parties in accordance with the
terms hereof. The number of shares issued to each Indemnified Party pursuant to
this Subsection 10(d) in payment of the Company's indemnification obligation
shall be equal to the dollar amount of the Company's indemnification obligation
to such Indemnified Party divided by the fair market value of the Common Stock
determined in good faith by the Board of Directors of the Company.
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<PAGE> 35
11. TERMINATION. This Agreement may be terminated at any time prior
to the Closing:
(a) by mutual written consent duly authorized by the
Board of Directors of the Company and the Purchasers;
(b) by the Purchasers or the Company if the Closing
shall not have occurred on or before March 31, 1999;
(c) by the Purchasers if the representations and
warranties of the Company shall not be true and correct in all material respects
at and as of the date of termination by the Purchasers, except for changes
permitted or contemplated by this Agreement, or if the Company fails to comply
in any material respect with any of its covenants or agreements contained
herein; or
(d) by the Company if the representations and
warranties of the Purchasers shall not be true and correct in all material
respects at and as of the date of termination by the Company, except for changes
permitted or contemplated by this Agreement, or if the Purchasers fail to comply
in any material respect with any of their covenants or agreements contained
herein.
11.1 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 11 hereof, notice thereof shall be
promptly given by the terminating party to the other party and thereafter this
Agreement shall forthwith become void and have no effect, without any liability
on the part of any party or their respective directors, officers or shareholder,
except that noting in this Subsection 11.1 shall relieve any party to this
Agreement from liability for breach of this Agreement or any misrepresentation
hereof.
12. MISCELLANEOUS.
12.1 Amendment. Neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated other than by a written
instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge or termination is sought. Notwithstanding the foregoing, any
provision of this Agreement may be waived or amended to the extent that such
waiver or amendment affects the rights of the Purchasers hereunder on behalf of
all Purchasers by: (i) prior to the Closing, the written consent of those
persons obligated to purchase 51% of the Securities to be sold pursuant hereto
and (ii) after the Closing, by the written consent of holders of an aggregate of
51% of the Shares (or shares of Common Stock into which they have been
converted) and the Notes not previously resold to the public pursuant to Rule
144 or a registration statement under the Securities Act.
12.2 Survival of Representations and Warranties. Except as
provided hereinafter, all of the warranties and representations made by the
Company and the Purchasers in this Agreement or any document, certificate,
schedule or instrument delivered in connection herewith shall survive the
Closing and shall continue in effect, notwithstanding any investigation by or on
behalf of the Purchasers, for a period ending on the third anniversary of the
Closing
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<PAGE> 36
Date (the "General Liability Period"), except with respect to any Claim Notice
received within the General Liability Period. The representations and warranties
with respect to taxes under Subsection 3.14 hereof shall survive the Closing and
shall continue in effect, notwithstanding any investigation by or on behalf of
the Purchasers, for a period ending with the expiration of all applicable
statutes of limitations including, without limitation, the statute of
limitations under Section 6501(a) of the Internal Revenue Code of 1986, as
amended, including any extensions, waivers or tollings thereof, for the
assessment of all possible additional tax liabilities (the "Tax Liability
Period"). The representations and warranties with respect to the matters in
Subsection 3.3 hereof and all of other the terms, covenants and agreements made
by the Company and the Purchaser in this Agreement (other than representations
and warranties contained in Sections 3 and 4 hereof (other than Subsection 3.3))
shall survive the Closing and shall continue in effect, notwithstanding any
investigation by or on behalf of the Purchaser, indefinitely.
12.3 Entire Agreement; Assignment. This Agreement (i)
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, among the parties or any of them with respect to the subject
matter hereof and (ii) shall not be assigned by operation of law or otherwise.
12.4 Enforcement of the Agreement. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any federal or
state court located in the State of California (as to which the parties agree to
submit to jurisdiction for the purposes of such action), this being in addition
to any other remedy to which they are entitled at law or in equity.
12.5 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
12.6 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered in person, by cable, telegram or telex, or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the address set forth opposite each such party's name on
the signature page or to such other address as the person to whom notice is
given may have previously furnished to the others in writing in the manner set
forth above (provided that notice of any change of address shall be effective
only upon receipt thereof).
12.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California regardless of
the laws that might otherwise govern under principles of conflicts of laws
applicable thereto.
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<PAGE> 37
12.8 Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference only and are not interpreted to be a
part of or to effect the meaning or interpretation of this Agreement.
12.9 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
12.10 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
13. CERTAIN PRE-EXISTING RIGHTS OF FIRST REFUSAL; NEW RIGHTS OF
FIRST REFUSAL.
13.1 Pre-Existing Rights. Certain of the Purchasers
("Affected Purchasers") are parties to that certain Securities Purchase
Agreement dated as of March 26, 1990, among I.H.V. Corporation (now the
Company), Robert J. Morris, Richard S. Stevens, California Beach Capital, Inc.
and the "Purchasers" listed on Schedule 1.2 thereto (the "Rights Agreement"),
who, pursuant to Section 10 of the Rights Agreement, have "rights of first
refusal" to purchase "Equity Securities" (as defined in the Rights Agreement)
that the Company may propose to sell and issue at a price less than "Fair Market
Value" (as defined in the Rights Agreement). Without taking a position as to
whether the "Proposed Transactions" (as hereinafter defined) would give rise to
the rights of first refusal set forth in Section 10 of the Rights Agreement the
Affected Purchasers waive any and all rights which any of them may have pursuant
to Section 10 of the Rights Agreement, including, without limitation, the "Right
of First Refusal Notice" as defined and provided in Subsection 10.2 of the
Agreement, to the following proposed transactions: (i) The sale and issuance of
Notes pursuant to this Agreement; and (ii) the issuance of shares of Common
Stock of the Company upon conversion of the Notes.
13.2 New Rights. Each Purchaser shall have the right of first
refusal to purchase, pro rata, all (or any part) of all Equity Securities (as
hereinafter defined) that the Company may, from time to time, propose to sell
and issue after the Closing Date. Each Purchaser's pro rata share of Equity
Securities is the ratio of the number of Shares purchased by such Purchaser upon
conversion of the Notes divided by 1,800,000.
(a) Exercise of Rights. If the Company proposes to
issue any Equity Securities, it shall give Purchaser written notice (the "Right
of First Refusal Notice") of its intention, describing the Equity Securities,
the price and the general terms and conditions upon which the Company proposes
to issue the same. Each Purchaser shall have ten (10) days from the giving of
the Right of First Refusal Notice to agree to purchase its pro rata share of the
Equity Securities for the price and upon the terms and conditions specified in
the Right of First Refusal Notice by giving notice to the Company and stating
therein the quantity of Equity Securities to be purchased. Each Purchaser shall
have the right of Over-Allotment such that, if any Purchaser fails to exercise
its rights hereunder to purchase its pro rata portion of the Equity
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<PAGE> 38
Securities, the other Purchasers may purchase the non-purchasing Purchasers'
portion on a pro rata basis. The Company will give each Purchaser written notice
(the "Right of Over-Allotment Notice") within ten (10) days of the time that any
non-purchasing Purchaser waives its rights hereunder to purchase its full pro
rata portion of Equity Securities, describing a number of Shares with respect to
which any and all Purchasers have failed to exercise their rights hereunder. The
other Purchasers may purchase such remaining Shares on a pro rata basis within
ten (10) days of receiving the Right of Over-Allotment Notice.
(b) Issuance of Equity Securities To Other Persons.
If the Purchasers fail to exercise in full the Rights of First Refusal within
ten (10) days of receiving the Right of Over-Allotment Notice, the Company shall
have one hundred and eighty (180) days thereafter to sell the Equity Securities
in respect of which the Purchasers rights were not exercised, at a price and
upon general terms and conditions no more favorable to the purchasers thereof
than specified in the Company's notice to the Purchaser pursuant to Subsection
(b) hereof. If the Company has not sold the Equity Securities within such one
hundred and eighty (180) days, the Company shall not thereafter issue or sell
any Equity Securities, without first offering such securities to the Purchasers
in the manner provided above.
(c) Equity Securities. For purposes of this Section
13.2, "Equity Securities" shall mean the Common Stock, rights or options for the
purchase of Common Stock, any stock or securities convertible into or
exchangeable for Common Stock or options or rights for the purchase of any such
stock or securities convertible into or exchangeable for Common Stock other
than: (i) shares of Common Stock sold pursuant to Options described on Schedule
3.2 hereof, (ii) securities issued for a consideration other than cash pursuant
to a merger, consolidation, acquisition or similar business combination, (iii)
securities issued by the Company as part of an underwritten public offering,
(iv) shares of Common Stock issued in connection with any stock split, stock
dividend or recapitalization by the Company and (v) securities issued from time
to time to employees, directors and consultants of the Company and its
Subsidiaries.
(d) Waiver of Rights. The rights of first refusal
established by this Section 13.2 may be waived, either generally or limited with
respect to a specific transaction, in writing by Purchasers in the aggregate
having a pro rata share (determined pursuant to Section 3.2) of at least 51% at
the time such waiver is executed.
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<PAGE> 39
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
CALIFORNIA BEACH RESTAURANTS, INC.
By:
--------------------------------------
Address: 17383 Sunset Boulevard, Suite 140
Pacific Palisades, CA 90272
Attention: President
SAND AND SEA PARTNERS, A
CALIFORNIA LIMITED PARTNERSHIP
By:
--------------------------------------
J. Christopher Lewis
General Partner
Address: c/o Sand and Sea Partners
300 S. Grand Avenue, 29th Floor
Los Angeles, California 90071
Attention: J. Christopher Lewis
THE SECURITIES REPRESENTED BY THIS NOTE (AND THE COMMON STOCK
INTO WHICH IT MAY BE CONVERTED) HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED OR REGISTERED OR
QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT, OR EXEMPTION, REGISTRATION
OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.
FURTHERMORE, THE SECURITIES PRESENTED BY THIS NOTE MAY BE SOLD
OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN THE NOTE PURCHASE AGREEMENT, A COMPLETE AND CORRECT
COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL
OFFICE OF THE COMPANY AND WILL BE FURNISHED WITHOUT CHARGE TO
THE HOLDER OF THIS NOTE UPON WRITTEN REQUEST.
34
<PAGE> 40
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
CALIFORNIA BEACH RESTAURANTS, INC.
By:
--------------------------------------
Address: 17383 Sunset Boulevard, Suite 140
Pacific Palisades, CA 90272
Attention: President
--------------------------------------
ALAN REDHEAD
Address: 17383 Sunset Boulevard, Suite 140
Pacific Palisades, California 90272
THE SECURITIES REPRESENTED BY THIS NOTE (AND THE COMMON STOCK
INTO WHICH IT MAY BE CONVERTED) HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED OR REGISTERED OR
QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT, OR EXEMPTION, REGISTRATION
OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.
FURTHERMORE, THE SECURITIES PRESENTED BY THIS NOTE MAY BE SOLD
OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN THE NOTE PURCHASE AGREEMENT, A COMPLETE AND CORRECT
COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL
OFFICE OF THE COMPANY AND WILL BE FURNISHED WITHOUT CHARGE TO
THE HOLDER OF THIS NOTE UPON WRITTEN REQUEST.
34
<PAGE> 41
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
CALIFORNIA BEACH RESTAURANTS, INC.
By:
-----------------------------------
Address: 17383 Sunset Boulevard, Suite 140
Pacific Palisades, CA 90272
Attention: President
--------------------------------------
ELI BROAD
Address: 1999 Avenue of the Stars, Suite 3170
Los Angeles, California 90067
THE SECURITIES REPRESENTED BY THIS NOTE (AND THE COMMON STOCK
INTO WHICH IT MAY BE CONVERTED) HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED OR REGISTERED OR
QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT, OR EXEMPTION, REGISTRATION
OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.
FURTHERMORE, THE SECURITIES PRESENTED BY THIS NOTE MAY BE SOLD
OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN THE NOTE PURCHASE AGREEMENT, A COMPLETE AND CORRECT
COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL
OFFICE OF THE COMPANY AND WILL BE FURNISHED WITHOUT CHARGE TO
THE HOLDER OF THIS NOTE UPON WRITTEN REQUEST.
34
<PAGE> 42
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
CALIFORNIA BEACH RESTAURANTS, INC.
By:
--------------------------------------
Address: 17383 Sunset Boulevard, Suite 140
Pacific Palisades, CA 90272
Attention: President
--------------------------------------
JEFFERSON ASHER, JR.,
Trustee of Trust A under
the Asher Family Trust
dated 8-5-82
Address: 4118 Stansbury Avenue
Sherman Oaks, CA 91423
THE SECURITIES REPRESENTED BY THIS NOTE (AND THE COMMON STOCK
INTO WHICH IT MAY BE CONVERTED) HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED OR REGISTERED OR
QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT, OR EXEMPTION, REGISTRATION
OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.
FURTHERMORE, THE SECURITIES PRESENTED BY THIS NOTE MAY BE SOLD
OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN THE NOTE PURCHASE AGREEMENT, A COMPLETE AND CORRECT
COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL
OFFICE OF THE COMPANY AND WILL BE FURNISHED WITHOUT CHARGE TO
THE HOLDER OF THIS NOTE UPON WRITTEN REQUEST.
34
<PAGE> 43
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
CALIFORNIA BEACH RESTAURANTS, INC.
By:
-----------------------------------
Address: 17383 Sunset Boulevard, Suite 140
Pacific Palisades, CA 90272
Attention: President
--------------------------------------
JOHN C. CUSHMAN, III, Trustee
of the Cushman Family Trust
Address: c/o John C. Cushman III
President and CEO of
Cushman Realty
601 S. Figueroa Street
Los Angeles, California 90017
THE SECURITIES REPRESENTED BY THIS NOTE (AND THE COMMON STOCK
INTO WHICH IT MAY BE CONVERTED) HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED OR REGISTERED OR
QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT, OR EXEMPTION, REGISTRATION
OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.
FURTHERMORE, THE SECURITIES PRESENTED BY THIS NOTE MAY BE SOLD
OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN THE NOTE PURCHASE AGREEMENT, A COMPLETE AND CORRECT
COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL
OFFICE OF THE COMPANY AND WILL BE FURNISHED WITHOUT CHARGE TO
THE HOLDER OF THIS NOTE UPON WRITTEN REQUEST.
34
<PAGE> 44
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
CALIFORNIA BEACH RESTAURANTS, INC.
By:
-----------------------------------
Address: 17383 Sunset Boulevard, Suite 140
Pacific Palisades, CA 90272
Attention: President
--------------------------------------
WILLIAM LUTHER, Trustee of the
Luther Trust
--------------------------------------
JOAN LUTHER, Trustee of the
Luther Trust
Address: 339 North Palm Drive, #204
Beverly Hills, California 90210
THE SECURITIES REPRESENTED BY THIS NOTE (AND THE COMMON STOCK
INTO WHICH IT MAY BE CONVERTED) HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED OR REGISTERED OR
QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT, OR EXEMPTION, REGISTRATION
OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.
FURTHERMORE, THE SECURITIES PRESENTED BY THIS NOTE MAY BE SOLD
OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN THE NOTE PURCHASE AGREEMENT, A COMPLETE AND CORRECT
COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL
OFFICE OF THE COMPANY AND WILL BE FURNISHED WITHOUT CHARGE TO
THE HOLDER OF THIS NOTE UPON WRITTEN REQUEST.
34
<PAGE> 45
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
CALIFORNIA BEACH RESTAURANTS, INC.
By:
-----------------------------------
Address: 17383 Sunset Boulevard, Suite 140
Pacific Palisades, CA 90272
Attention: President
--------------------------------------
JOAN LUTHER
Address: 339 North Palm Drive, #204
Beverly Hills, California 90210
THE SECURITIES REPRESENTED BY THIS NOTE (AND THE COMMON STOCK
INTO WHICH IT MAY BE CONVERTED) HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED OR REGISTERED OR
QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT, OR EXEMPTION, REGISTRATION
OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.
FURTHERMORE, THE SECURITIES PRESENTED BY THIS NOTE MAY BE SOLD
OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN THE NOTE PURCHASE AGREEMENT, A COMPLETE AND CORRECT
COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL
OFFICE OF THE COMPANY AND WILL BE FURNISHED WITHOUT CHARGE TO
THE HOLDER OF THIS NOTE UPON WRITTEN REQUEST.
34
<PAGE> 46
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
CALIFORNIA BEACH RESTAURANTS, INC.
By:
-----------------------------------
Address: 17383 Sunset Boulevard, Suite 140
Pacific Palisades, CA 90272
Attention: President
--------------------------------------
HOWARD HIGHOLT, M.D.
Address:4 Possum Ridge Road
Rolling Hills, California 90274
THE SECURITIES REPRESENTED BY THIS NOTE (AND THE COMMON STOCK
INTO WHICH IT MAY BE CONVERTED) HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED OR REGISTERED OR
QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT, OR EXEMPTION, REGISTRATION
OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.
FURTHERMORE, THE SECURITIES PRESENTED BY THIS NOTE MAY BE SOLD
OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN THE NOTE PURCHASE AGREEMENT, A COMPLETE AND CORRECT
COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL
OFFICE OF THE COMPANY AND WILL BE FURNISHED WITHOUT CHARGE TO
THE HOLDER OF THIS NOTE UPON WRITTEN REQUEST.
34
<PAGE> 47
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
CALIFORNIA BEACH RESTAURANTS, INC.
By:
-----------------------------------
Address: 17383 Sunset Boulevard, Suite 140
Pacific Palisades, CA 90272
Attention: President
--------------------------------------
RON LIEBERMAN, Trustee of
the Marital Trust, under
Declaration of the
Lieberman Family Trust,
dated August 2, 1989
--------------------------------------
CORINNE M. LIEBERMAN, Trustee
of the Marital Trust, under
Declaration of the Lieberman
Family Trust, dated August 2, 1989
Address: 6047 Tampa, Suite 305
Tarzana, California 91356
THE SECURITIES REPRESENTED BY THIS NOTE (AND THE COMMON STOCK
INTO WHICH IT MAY BE CONVERTED) HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED OR REGISTERED OR
QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT, OR EXEMPTION, REGISTRATION
OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.
FURTHERMORE, THE SECURITIES PRESENTED BY THIS NOTE MAY BE SOLD
OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN THE NOTE PURCHASE AGREEMENT, A COMPLETE AND CORRECT
COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL
OFFICE OF THE COMPANY AND WILL BE FURNISHED WITHOUT CHARGE TO
THE HOLDER OF THIS NOTE UPON WRITTEN REQUEST.
34
<PAGE> 48
EXHIBIT A
CALIFORNIA BEACH RESTAURANTS, INC.
5% CONVERTIBLE SUBORDINATED NOTE DUE MARCH 30, 2003
March 30, 2003 $_____________
Los Angeles, California
FOR VALUE RECEIVED, CALIFORNIA BEACH RESTAURANTS, INC., a
California corporation (the "Company"), promises to pay in lawful money of the
United States of America to , or order, the principal sum of Thousand Dollars
($_____________), on March 30, 2003, subject to the following terms and
conditions:
1. Interest or "Pay-In-Kind" ("PIK").
1.1 Interest. If the Company elects to pay interest in cash
as provided in Section 1.2 hereof, it shall pay interest on the principal amount
of this 5% Convertible Subordinated Note ("Note") at five percent (5%) per
annum, but in no event shall such rate exceed the maximum lawful interest rate
permitted by the laws of the State of California. If, for any circumstances
whatsoever, fulfillment of any provision hereof, at the time performance of such
provision shall be due, shall involve transcending the limit of validity
prescribed by law, then, ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity; and if, for any circumstance, the
Noteholder shall ever receive as interest an amount which would be excessive
interest, such amount shall be applied to the reduction of the unpaid balance
due hereunder and not to the payment of interest. This provision shall control
every other provision of all agreements between the Company and the holders of
Notes (the "Noteholders"). The Company will pay interest in cash (or in a PIK
Note as provided in Section 1.2 hereof) on each anniversary date hereafter (the
"Payment Date") until this Note has been fully paid or converted as hereafter
provided. Interest on the Notes will accrue from March 30, 1999. Interest will
be computed on the basis of a 365-day year.
1.2 Method of Payment; Cash or PIK. Subject to Section 2
hereof, the Company may, at its option, pay interest in cash, or "In-Kind," by
issuing and delivering a Note identical in all respects to this Note, except in
an amount equal to all accrued but unpaid interest due through the Payment Date
(hereafter referred to as a "PIK Note"), on the Notes to the persons who are
registered Noteholders at the close of business on the Payment Date. If the
Company elects to pay cash interest, it shall be in money of the United States
that at the time of payment is legal tender for payment of public and private
debts. However, the Company may pay interest by check payable in such money. It
may mail an interest check to a Noteholder's registered address.
2. Maturity. This Note may not be voluntarily prepaid by the
Company as to principal and interest without the consent of Noteholder and will
mature as to principal and accrued interest on the fourth (4th) anniversary date
of issuance (the "Maturity Date"); provided that, at the option of the
Noteholder, the Note shall mature with respect to up to fifty percent
<PAGE> 49
(50%) of the principal amount plus accrued interest applicable to such principal
on the third (3rd) anniversary date of issuance (the "Early Maturity Date"), by
written notice to the Company given not later than ten (10) business days prior
to the Early Maturity Date. Upon the Early Maturity Date, if there is one, the
Noteholder may elect, at the sole option of such Noteholder, to receive in cash
all accrued but unpaid interest on the principal amount of the Note due on such
date, by written notice to the Company not later than ten (10) business days
prior to the Early Maturity Date. If no such election is made by the Noteholder,
the accrued but unpaid interest due on the Early Maturity Date shall be paid by
issuance of a PIK Note instead of cash in the principal amount of the accrued
interest then due. The Company will give thirty (30) days prior written notice
to each Noteholder of the Maturity Date and the Early Maturity Date.
3. Conversion.
3.1 At Any Time Prior to Maturity. Unless and to the extent
theretofore retired in part pursuant to Section 2 hereof, the entire principal
amount outstanding under this Note, plus accrued and unpaid interest, may at any
time after the date hereof be converted, in whole or in part, into shares of
Common Stock, par value $0.01 per share ("Common Stock" or "Shares") of the
Company, at the rate of one share for each $1.00 (the "Conversion Price") in
principal amount of this Note plus accrued and unpaid interest applicable to the
principal amount so converted on the tenth (10th) business day following the
receipt by the Company of written notice of conversion as to all or any part of
the principal amount of this Note ("Conversion Date").
3.2 No Payments; Fractional Shares. On conversion, no
payment or adjustment for interest or principal will be made. The Company, in
lieu of any fractional shares, will make a cash payment in an amount equal to
the fair value of such fractional interest as determined by the Board of
Directors of the Company as of the close of business on the business day
immediately preceding the Conversion Date.
3.3 Adjustment to Conversion Price. The Conversion Price
will be adjusted as follows:
3.3.1 Adjustment for Combinations, Consolidations,
Subdivisions or Stock Dividends of common Stock. In case at any time the shares
of Common Stock then outstanding shall be combined into a lesser number of
shares, whether by reclassification, recapitalization, reduction of capital
stock, or otherwise, then the Conversion Price shall be proportionately
increased. In case at any time any shares of Common Stock shall be issued as a
dividend on outstanding shares of Common Stock or shall be issued upon
subdivision, reclassification, recapitalization, or otherwise of outstanding
shares of Common Stock, the Conversion Price shall be proportionately adjusted.
3.3.2 Adjustment for Merger or Reorganization etc.
Subject to Section 3.4 hereof, in the case of the consolidation or merger of the
Company with or into another corporation or the conveyance of all or
substantially all of the assets of the Company to another corporation, each Note
shall thereafter be convertible into the number of shares of stock or other
securities or property to which a holder of the number of shares of Common Stock
deliverable
2
<PAGE> 50
upon conversion of such Note would have been entitled upon such reorganization,
reclassification, consolidation, merger or conveyance.
3.3.3 Certificate as to Adjustment. Any Conversion
Price determined or adjusted as herein provided shall remain in effect until
further adjustments as required herein are made. Upon each adjustment of the
Conversion Price, a written instrument signed by an officer of the Company
setting forth such adjustment and the computation and a summary of the facts
upon which it is based and the resolutions, if any, of the Board of Directors
passed in connection therewith shall forthwith be prepared and maintained at the
principal office of the Company for inspection by the Noteholders and any
adjustments so evidenced, made in good faith, shall be binding upon all
Noteholders and upon the Company.
3.4 Merger. The Company may not consolidate or merge into,
or transfer or lease (other than in the ordinary course of business) all or
substantially all of its assets to another entity (except a transfer to a wholly
owned subsidiary) unless that entity is a domestic corporation, the entity
assumes all of the Company's obligations under the Notes, and the transaction
will not result in an event of default under the Notes. If the Company engages
in such a transaction, or enters into any other merger which reclassifies or
changes the terms of the outstanding Common Stock, the person obligated to
deliver securities, cash, or other assets upon conversion of the Notes must
enter into a supplemental note, and thereafter the Company shall be relieved of
all obligations and covenants under the Notes. The supplemental note must
provide that the Noteholders will receive securities, cash or assets equivalent
to those which the Noteholders would have received had they converted Notes
immediately prior to the effective date of the transaction, with adjustments
equivalent to those otherwise provided for in the Note.
4. Subordination. The payment of the principal of, and interest on
the Notes and any amendments or replacements thereof and any other security
interest, lien, claim or right now or hereafter asserted by the Noteholder with
respect to any indebtedness of the Company to the Noteholder, shall be subject,
junior and subordinate, in all respects, to the prior payment in full of all
indebtedness of the Company to Lyon Credit Corporation ("Indebtedness to Lyon
Credit"), and to any security interest, lien, claim or right now or hereafter
asserted by Lyon Credit Corporation or its successors and assigns with respect
to such Indebtedness to Lyon Credit or with respect to any collateral therefor.
Indebtedness to Lyon Credit shall include, but shall not be limited to, all
principal, unpaid interest, penalties, costs, fees, premiums and other amounts
due Lyon Credit Corporation, or its successors or assigns, pursuant to that
certain Security Agreement, by and between Lyon Credit Corporation and the
Company dated as of March 15, 1999, any related loan, security, financing and
other agreement, documents or loan instruments and any amendments to or
replacements of any of the foregoing. The Noteholder further agrees, that upon
the occurrence of an Event of Default (as such term is defined in the
documentation for any Indebtedness to Lyon Credit) and without notice of such
Event of Default to the Noteholder, (x) Lyon Credit Corporation, or its
successors or assigns, are entitled to be paid all Indebtedness to Lyon Credit
Corporation before the Noteholder is entitled to receive any payments in respect
of the Notes, (y) the Company may not make any payments to the Noteholder or
with respect to the Notes until such payment of all outstanding Indebtedness to
Lyon Credit Corporation has been made in full in cash and (z) for a period not
to exceed one hundred and eighty (180) days
3
<PAGE> 51
following such Event of Default the Noteholder may not pursue any enforcement
action against the Company. Any payments made to the Noteholder in violation of
this Section 4 shall be held in trust for the benefit of Lyon Credit Corporation
(or its successors or assigns) and turned over upon the demand of Lyon Credit
Corporation. The Noteholder hereby acknowledges and agrees that Lyon Credit
Corporation has relied on the representations, warranties, covenants and
agreements contained herein, in the Private Offering Memorandum of the Company
relating to the Notes and in the Agreement (as defined in Section 5 hereof) in
connection with Lyon Credit Corporation's consent to the issuance of this Note
and extension of credit to the Company and that Lyon Credit Corporation and the
holders of any Indebtedness to Lyon Credit Corporation shall be deemed third
party beneficiaries hereunder and thereunder.
5. Note Purchase Agreement. This Note is one of several Notes
issued pursuant to that certain Note Purchase Agreement dated as of March 30,
1999 (the "Agreement"), by and between the Company and the Noteholder, who are
both subject to, and entitled to the benefits of, the Agreement. Notwithstanding
any provisions to the contrary contained herein, this Note is subject and
entitled to certain terms, conditions, covenants and agreements contained in the
Agreement. Reference to the Agreement shall in no way impair the absolute and
unconditional obligation of the Company to pay both principal and interest
hereon as provided herein.
6. Unsecured. The Notes are unsecured subordinated general
obligations of the Company.
7. Transfer. The Notes may not be transferred.
8. Persons Deemed Owners. The registered Noteholder of a Note may
be treated as its owner for all purposes.
9. Amendments. Without the consent of the Noteholder, the Note may
not be amended.
10. Defaults and Remedies. The occurrence of any one or more of the
following shall constitute an event of default hereunder ("Event of Default"):
10.1 The Company fails to pay any interest on this Note
within thirty (30) days after the date when the same shall become due, according
to the terms hereof; or
10.2 Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Company, or any
order, judgment or dissolution or division; provided, however, with respect to
an involuntary petition in bankruptcy, such petition shall not have been
dismissed within sixty (60) days after the filing of such petition.
11. Waiver of Default. Any Event of Default may be waived only with
the consent of Noteholder. Any Event of Default so waived shall be deemed to
have been cured and not to be continuing; but no such waiver shall be deemed a
continuing waiver or shall extend to or affect any subsequent like default or
impair any rights arising therefrom.
4
<PAGE> 52
12. Remedies. Upon the occurrence and continuance of any Event of
Default, Noteholder may, at its option, exercise all rights available at law or
in equity.
13. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability to the Company
under the Notes or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Noteholder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
14. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by cable, telegram or telex, or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the address set forth opposite each such party's name on
the signature page or to such other address as the person to whom notice is
given may have previously furnished to the others in writing in the manner set
forth above (provided that notice of any change of address shall be effective
only upon receipt thereof).
THE SECURITIES REPRESENTED BY THIS NOTE (AND THE COMMON STOCK
INTO WHICH IT MAY BE CONVERTED) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED OR REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF
ANY STATE OR OTHER JURISDICTION, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION OR AN EXEMPTION THEREFROM
UNDER SUCH ACT, OR EXEMPTION, REGISTRATION OR QUALIFICATION UNDER APPLICABLE
STATE SECURITIES LAWS. FURTHERMORE, THE SECURITIES PRESENTED BY THIS NOTE MAY BE
SOLD OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS SPECIFIED
IN THE NOTE PURCHASE AGREEMENT, A COMPLETE AND CORRECT COPY OF WHICH IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE
FURNISHED WITHOUT CHARGE TO THE HOLDER OF THIS NOTE UPON WRITTEN REQUEST.
Dated: March 30, 1999
CALIFORNIA BEACH RESTAURANTS, INC.
17383 Sunset Boulevard, Suite 140
Pacific Palisades, California 90272
Ph: (310) 459-9676
Fax: (310) 459-9356
(SEAL)
5
<PAGE> 53
By:_______________________________________________
Alan Redhead, President
By:_______________________________________________
Samuel E. Chilakos, Vice President
Noteholder: _________________________________________
Address: _________________________________________
Fax: (_______)________________________________
6
<PAGE> 54
SCHEDULE 1.1
LIST OF PURCHASERS, PRINCIPAL AMOUNT OF NOTES
<TABLE>
<CAPTION>
Principal Amount
Name of Notes
---- ----------------
<S> <C>
Jefferson W. Asher, Trustee of Trust A under the Asher Family Trust dated 8-5-82........... $ 25,000.00
Eli Broad.................................................................................. $ 500,000.00
John C. Cushman III, Trustee of the Cushman Family Trust................................... $ 150,000.00
Howard W. Higholt, M.D..................................................................... $ 100,000.00
Arnold Phillip Lieberman and Corinne M. Lieberman, Trustees of the Marital Trust, under
Declaration of the Lieberman Family Trust, dated August 2, 1989............................ $ 100,000.00
Charles W. Luther and Joan B. Luther, Trustees of the Luther Trust......................... $ 50,000.00
Alan Redhead............................................................................... $ 100,000.00
Sand and Sea Partners...................................................................... $ 775,000.00
-------------
$1,800,000.00
</TABLE>
<PAGE> 55
SCHEDULE 3.2
OPTIONS, WARRANTS
<TABLE>
<CAPTION>
NAME OF OPTIONEE DATE OF GRANT AMOUNT ISSUED OPTION PRICE AMOUNT VESTED
<S> <C> <C> <C> <C>
Alan Redhead July 28, 1992 335,000 0.83 335,000
Steve Herbert March 13, 1995 42,000 0.83 42,000
June 20, 1997 8,000 0.83 3,500
Jefferson W. Asher, Jr. March 13, 1995 32,000 0.83 32,000
DeAnna Corbit June 20, 1997 10,000 0.83 4,250
Fabian Grijalva June 20, 1997 10,000 0.83 4,250
</TABLE>
<PAGE> 56
SCHEDULE 3.8
LAW VIOLATIONS
None
<PAGE> 57
SCHEDULE 3.9
SUBSIDIARIES
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORPORATION
<S> <C>
Sea View Restaurants, Inc. California
California Beach Entertainment(1) California
</TABLE>
(1) - Subsidiary currently has no operations.
<PAGE> 58
SCHEDULE 3.11
PENDING LITIGATION
None
<PAGE> 59
SCHEDULE 3.12
LIENS
None
<PAGE> 60
SCHEDULE 3.16(b)
BREACH OF AGREEMENTS
None
<PAGE> 61
SCHEDULE 3.17
LICENSES
Liquor Licenses
__ License Number 47-239083 (Type 47 On-Sale General and Type 58 Caterer's
Permit) -- issued to Sea View Restaurants, Inc.
__ License Number 47-239084 (Type 47 On-Sale General and Type 47 On-Sale
General Duplicate) -- issued to Sea View Restaurants, Inc.
Business Licenses
__ City of Beverly Hills -- 1999 Certificate Number B0094912 (RJ's The Rib
Joint).
__ City of Beverly Hills -- 1999 Certificate Number F0000935 (RJ's The Rib
Joint).
__ City of Los Angeles -- 1999 Account Number 775647-30 (Gladstone's)
<PAGE> 62
SCHEDULE 3.20
REGISTRATION RIGHTS
Securities Purchase Agreement dated December 22, 1994
Stock Purchase Agreement with Bank of America dated December 22, 1994
Registration Rights Agreement dated March 30, 1990
