<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Stacey's Buffet, Inc.
(Name of Issuer)
COMMON STOCK
(Title of Class of Securities)
852328103
(CUSIP Number)
Robert E. Wheaton
Chief Executive Officer and President
Star Buffet, Inc.
440 Lawndale Drive
Salt Lake City, Utah 84115-2917
(801) 463-5500
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
Copies to:
C. Craig Carlson, Esq.
J. Michael Vaughn, Esq.
Stradling, Yocca, Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660
Telephone: (714) 725-4000
October 31, 1997
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed on Schedule 13G to report the
acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box. [ ]
Check the following box if a fee is being paid with this statement [ ].
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*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 the
disclosures provided in a prior cover page.
The information required in 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 the Act but
shall be subject to all other provisions of the Act (however, see the Notes).
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SCHEDULE 13D
CUSIP No. Page 2 of 5 Pages
852328103
================================================================================
1 NAME OF REPORTING PERSON: Star Buffet, Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE
PERSON: IRS No. 84-1430786
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER
OF A GROUP (a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO TEMS 2(d) or 2(e)
[ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 1,342,422 (1)
--------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY -0-
--------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 1,342,422 (1)
--------------------------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
WITH -0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
1,342,422
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
34% (2)
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
================================================================================
(1) Represents warrants to purchase shares of common stock.
(2) Based upon 2,493,144 shares of Common Stock outstanding as of July 31,
1997 as reported by the Company in its 10-Q for the quarterly period ended June
18, 1997.
<PAGE> 3
Item 1. Security and Issuer
-------------------
The class of equity securities to which this Statement on Schedule 13D
(the "Statement") relates is the common stock, par value $0.01 per share (the
"Common Stock"), of Stacey's Buffet, Inc., a Florida corporation (the
"Company"). The principal executive offices of the Company are located at 801
West Bay Drive, Suite 704, Largo, Florida 33770.
Item 2. Identity and Background
-----------------------
This Statement is being filed by Star Buffet, Inc., a Delaware
corporation ("Star" or "the Reporting Person"). The principal executive offices
of Star are located at 440 Lawndale Drive, Salt Lake City, Utah 84115-2917. Star
is engaged in the business of owning and operating restaurants, the majority of
which are buffet style restaurants. Star's restaurants are located in nine
western states.
Information regarding the directors and executive officers of Star is
set forth on Schedule I attached hereto, which is hereby incorporated by
reference. All of the directors and executive officers of Star are citizens of
the United States.
During the last five years, neither Star nor, to the best knowledge of
Star, any person named in Schedule I attached hereto has 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.
Item 3. Source and Amount of Funds or Other Consideration
-------------------------------------------------
The obligation to file this Statement was triggered by Star's agreement
to make loans to the Company from time to time up to a maximum of $4,500,000
dollars pursuant to a credit agreement (the "Agreement") dated October 31, 1997,
on which date the Company issued to Star warrants to purchase a total of
1,342,422 shares of Common Stock of the Company as consideration for such loan.
The exercise price of the warrants is $1.00 per share, which is to be purchased
with general working capital funds.
Item 4. Purpose of Transaction
----------------------
Star acquired the Warrants to purchase shares of Common Stock of the
Company for the purpose of facilitating a significant investment in the Company
and to facilitate consummation of the transactions contemplated by the
Agreement. In connection with the transactions consummated pursuant to the
Agreement, Robert E. Wheaton, the President and Chief Executive Officer of Star,
and Theodore Abajian, the Chief Financial Officer of Star, were elected to the
Board of Directors of Stacey's. In addition, pursuant to the Agreement, the
Company granted Star an option to purchase six Stacey's Buffet restaurants,
which option was exercised by Star.
Star intends to work with Stacey's in an effort to improve the value of
the Common Stock and the financial condition and results of operations of
Stacey's and to that end may suggest changes in management, staffing levels or
sales of specific restaurant assets. Star intends to continuously review its
investment in the Company and may in the future change its present course of
action and decide to pursue an alternate course of action. Star may seek control
of the Company or may merely seek to increase its investment in the Company
without obtaining control. Star may determine to dispose all or a portion of the
shares of Common Stock which they may hereafter acquire. In reaching any
conclusions as to the foregoing, Star will take into consideration various
factors, such as the Company's business and prospects, other developments
concerning the Company including, but not limited to, the attitude of the Board
of Directors and management of the Company, other business opportunities
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available to Star and its affiliates, developments with respect to Star's
business and the businesses of its affiliates, general economic conditions, and
money and stock market conditions.
Other than as described above, Star has no present plans or proposals
which relate to or would result in:
(a) The acquisition by Star of additional securities of the
Company, or the disposition of securities of the Company;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of
its subsidiaries;
(c) A sale or transfer of a material amount of assets of the
Company or any of its subsidiaries;
(d) Any change in the present board of directors or management of
the Company, including any plans or proposals to change the
number or term of directors or to fill any existing vacancies
on the board;
(e) Any material change in the present capitalization or dividend
policy of the Company;
(f) Any other material change in the Company's business or
corporate structure;
(g) Changes in the Company's charter, bylaws or instruments
corresponding thereto or other actions which may impede the
acquisition of control of the Company by any person;
(h) Causing a class of securities of the Company to be delisted
from a national securities exchange or to cease to be
authorized to be quoted in an inter-dealer quotation system of
a registered national securities association;
(i) A class of equity securities of the Company becoming eligible
for termination of registration pursuant to Section 12(g)(4)
of the Act; or
(j) Any action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer
------------------------------------
(a) This information is hereby incorporated by reference as
described in points 7-13 of the cover page.
(b) The Reporting Person will have the sole power to vote, direct
the voting of and direct the disposition of any Common Stock
when acquired by it.
(c) The Reporting Person has not effected any transactions in the
shares of Common Stock since October 31, 1997.
(d) No person other than the Reporting Person has the right to
receive or the power to direct the receipt of dividends or the
proceeds of sale of such securities.
(e) Not applicable.
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Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Star is a party to the Agreement and the Warrant, copies of which are
attached hereto as Exhibits 99.1 and 99.2, respectively, and incorporated herein
by this reference.
Item 7. Material to Be Filed as Exhibits
99.1 Credit Agreement
99.2 Warrant to Purchase Common Stock of Stacey's Buffet, Inc.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
Date: November 10, 1997 Star Buffet, Inc.
By:
-----------------------------------------
Theodore Abajian, Chief Financial Officer
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE REPORTING PERSON
The names, present principal occupations and business addresses of the directors
and executive officers of Star are set forth below. If no address is given, the
director's or executive officer's business address is that of Star. Unless
otherwise indicated, each occupation set forth opposite an individual's name
refers to Star. Each of the named individuals is a citizen of the United States.
DIRECTORS OF STAR BUFFET, INC.:
- -------------------------------
William P. Foley II, Chairman of the Board, Star; Chairman of the Board and
Chief Executive Officer of CKE Restaurants, Inc., 1200 North Harbor Boulevard,
Anaheim, California 92861.
Robert E. Wheaton, Chief Executive Officer and President, Star.
C. Thomas Thompson, President and Chief Operating Officer, CKE Restaurants,
Inc., 1200 North Harbor Boulevard, Anaheim, California 92801.
Stuart W. Clifton, Chief Executive Officer, President and Director, DataWorks
Corporation, 5910 Pacific Center, Suite 300, San Diego, California 92121.
Jack M. Lloyd, Chairman of the Board, President and Chief Executive Officer,
DenAmerica Corp., 7373 North Scottsdale Road, Scottsdale, Arizona 85253.
Thomas G. Schadt, Chief Executive Officer, Bear Creek, L.L.C., 4757 East Valley
Vista Lane, Paradise Valley, Arizona 85253.
Norman N. Habermann, President, Scobrett Associates, Inc., 114 East De la
Guerra, #6, Santa Barbara, California 93101 .
John F. North, President, Co-Chairman of the Board of Directors, North's
Restaurants, Inc., 1005 North Riverside, #100, Medford, Oregon 97501 .
EXECUTIVE OFFICERS OF STAR BUFFET, INC.:
- ----------------------------------------
Robert E. Wheaton, Chief Executive Officer, President and Director.
Theodore Abajian, Chief Financial Officer.
6
<PAGE> 1
CREDIT AGREEMENT
dated as of
October __, 1997
between
STACEY'S BUFFET, INC.
and
STAR BUFFET, INC.
<PAGE> 2
ARTICLE I
DEFINITIONS
<TABLE>
<C> <S> <C>
Section 1.1. Definitions.......................................................................1
Section 1.2. Accounting Terms and Determinations...............................................8
Section 1.3. References........................................................................8
Section 1.4. Use of Defined Terms..............................................................8
Section 1.5. Terminology.......................................................................9
ARTICLE II
THE CREDIT
Section 2.1. Loans.............................................................................9
Section 2.2. Miscellaneous Matters.............................................................9
Section 2.3. Note; Maturity of Loan...........................................................10
Section 2.4. Interest.........................................................................10
Section 2.5. Optional Prepayments.............................................................10
Section 2.6. Prepayment at Election of Lender Upon Change of Control..........................10
Section 2.7. Use of Proceeds..................................................................11
Section 2.8. General Provisions as to Payments................................................11
Section 2.9. Collateral.......................................................................11
ARTICLE III
CONDITIONS TO CLOSING
Section 3.1. Conditions to Closing............................................................12
Section 3.2 Conditions to Make Loans.........................................................13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1. Corporate Existence and Power....................................................14
Section 4.2. Corporate and Governmental Authorization; No Contravention.......................14
Section 4.3. Binding Effect...................................................................14
Section 4.4. Financial Information............................................................14
Section 4.5. No Litigation....................................................................15
Section 4.6. Compliance with ERISA............................................................15
Section 4.7. Compliance with Laws; Payment of Taxes...........................................15
Section 4.8. No Subsidiaries..................................................................15
Section 4.9. Investment Company Act...........................................................15
Section 4.10. Public Utility Holding Company Act...............................................15
Section 4.11. Ownership of Property; Liens.....................................................15
Section 4.12. No Default.......................................................................16
Section 4.13. Full Disclosure..................................................................16
Section 4.14. Environmental Matters............................................................16
Section 4.15. Capital Stock....................................................................16
</TABLE>
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<TABLE>
<C> <S> <C>
Section 4.16. Margin Stock.....................................................................16
Section 4.17. Insolvency.......................................................................17
ARTICLE V
COVENANTS
Section 5.1. Information......................................................................17
Section 5.2. Inspection of Property, Books and Records........................................19
Section 5.3. Restricted Payments..............................................................19
Section 5.4. Limitation on Indebtedness.......................................................19
Section 5.5. Loans or Advances................................................................20
Section 5.6. Investments......................................................................20
Section 5.9. Negative Pledge..................................................................21
Section 5.8. Maintenance of Existence.........................................................21
Section 5.9. Dissolution......................................................................21
Section 5.10. Consolidations, Mergers and Sales of Assets......................................21
Section 5.11. Use of Proceeds..................................................................22
Section 5.12. Compliance with Laws; Payment of Taxes; SEC Filings..............................22
Section 5.13. Insurance........................................................................22
Section 5.14. Change in Fiscal Year............................................................22
Section 5.15. Maintenance of Property..........................................................22
Section 5.16. Environmental Notices............................................................22
Section 5.17. Environmental Matters............................................................22
Section 5.18. Environmental Release............................................................23
Section 5.19. Transactions with Affiliates.....................................................23
ARTICLE VI
DEFAULTS
Section 6.1. Events of Default................................................................23
ARTICLE VII
MISCELLANEOUS
Section 7.1. Notices..........................................................................25
Section 7.2. No Waivers.......................................................................26
Section 7.3. Expenses; Documentary Taxes......................................................26
Section 7.4. Indemnification..................................................................26
Section 7.5. Amendments and Waivers...........................................................26
Section 7.6. Successors and Assigns...........................................................26
Section 7.7. Confidentiality..................................................................28
Section 7.8. California Law...................................................................28
Section 7.9. Severability.....................................................................28
Section 7.10. Interest.........................................................................28
Section 7.11. Interpretation...................................................................29
Section 7.12. Waiver of Jury Trial; Consent to Jurisdiction....................................29
Section 7.13. Counterparts.....................................................................29
</TABLE>
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EXHIBITS
--------
EXHIBIT A Form of Promissory Note
- ---------
EXHIBIT B Form of Warrant
- ---------
EXHIBIT C Form of Registration Rights Agreement
- ---------
EXHIBIT D Form of Borrower Security Agreement
- ---------
EXHIBIT E Form of Opinion Borrower's Counsel
- ---------
EXHIBIT F Form of Option Agreement
- ---------
SCHEDULES
---------
Schedule 2.1 Notice of Borrowing
- ------------
Schedule 4.4 Material Adverse Effects
- ------------
Schedule 4.5 Litigation
- ------------
Schedule 4.15 Capital Stock
- -------------
Schedule 5.4 Indebtedness
- ------------
Schedule 5.5 Loans
- ------------
Schedule 5.7 Liens
- ------------
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement") is entered into as of this ___
day of October, 1997, by and between STACEY'S BUFFET, INC. a Florida corporation
(the "Borrower") and STAR BUFFET, INC., a Delaware corporation ("Lender").
WHEREAS, the Borrower has requested that Lender from time to time make
loans of up to Four Million Five Hundred Thousand Dollars ($4,500,000) to
Borrower, and Lender is willing to make such loans to Borrower, upon the terms
and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. The terms as defined in this Section 1.01
shall, for all purposes of this Agreement and any amendment hereto (except as
herein otherwise expressly provided or unless the context otherwise requires),
have the meanings set forth herein:
"Affiliate" means (i) any Person that directly, or indirectly through
one or more intermediaries, controls the Borrower (a "Controlling Person"), (ii)
any Person (other than the Borrower or a Subsidiary) which is controlled by or
is under common control with a Controlling Person, or (iii) any Person (other
than a Subsidiary) of which the Borrower owns, directly or indirectly, 20% or
more of the common stock or equivalent equity interests, excluding existing
joint ventures. As used herein, the term "control" means possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise. It is acknowledged and agreed that Lender is not an
Affiliate of Borrower.
"Agreement" means this Credit Agreement, together with all amendments
and supplements hereto and all exhibits and schedules hereto.
"Assignee" has the meaning set forth in Section 7.6(c).
"Assignment Agreement" means an Assignment Agreement executed in
accordance with Section 7.6(c).
"Base Rate" shall be (i) an interest rate per annum equal to the sum of
the Prime Rate from time to time in effect, plus four percent (4.0%) on any
outstanding principal amounts under the Loans up to $4,000,000, and (ii) an
interest rate per annum equal to the sum of the Prime Rate from time to time in
effect, plus 5% on any outstanding principal amounts under the Loans in excess
of $4,000,000, both of which shall change as and when the Prime Rate changes.
<PAGE> 6
"Borrower" means Stacey's Buffet, Inc., a Florida corporation, and its
successors and its permitted assigns.
"Borrower Security Agreement" shall mean the Security Agreement,
substantially in the form of Exhibit D hereto, executed and delivered by the
Borrower to the Lender, together with all amendments and modifications thereto.
"Capital Stock" means any nonredeemable capital stock of the Borrower or
any Consolidated Subsidiary (to the extent issued to a Person other than the
Borrower), whether common or preferred.
"CERCLA" means the Comprehensive Environmental Response Compensation and
Liability Act, 42 U.S.C. ss. 9601 et. seq. and its implementing regulations and
amendments.
"CERCLIS" means the Comprehensive Environmental Response Compensation
and Liability Inventory System established pursuant to CERCLA.
"Change of Control" means the occurrence of any of the following events:
(a) the acquisition after the Closing Date, in one or more transactions, of
"beneficial ownership" (within the meaning of Section 13(d) under the Exchange
Act and the rules and regulations promulgated thereunder) by (i) any Person or
entity, or (ii) any group of Persons or entities who constitute a group (within
the meaning of Section 13 of the Exchange Act), in either case, of any
securities of the Borrower such that, as a result of such acquisition, such
Person, entity or group either (A) "beneficially owns" (within the meaning of
Rule 13 under the Exchange Act), directly or indirectly 20% or more of the
Borrower's then outstanding voting securities entitled to vote on the election
of directors of the Borrower ("Voting Securities") (it being understood that
this clause (A) shall not apply if the Lender or its Affiliates acquire
beneficial ownership of 20% or more of Borrower's than outstanding Voting
Securities) or (B) otherwise has the ability to elect, directly or indirectly, a
majority of the members of the Borrower's Board of Directors; (b) during any
period of two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of the Borrower (together with any new
directors selected by such Board of Directors or whose nomination for election
by the stockholders of the Borrower was approved by a vote of 66-2/3 % of the
directors of the Borrower then still in office who are either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
members of the Board of Directors of the Borrower then in office; (c) the sale,
lease, transfer or other disposition of all or substantially all of the assets
of the Borrower as entirety or substantially as an entirety in one transaction
or a series of related transactions; (d) the liquidation or dissolution of the
Borrower; or (e) any transaction permitted under Section 5.10 which results in
any of the foregoing.
"Closing Certificate" has the meaning set forth in Section 3.1(f).
"Closing Date" means the date on which all matters set forth in Section
3.1 are satisfied.
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"Code" means the Internal Revenue Code of 1986, as amended, or any
successor Federal tax code.
"Collateral" has the meaning set forth in the Borrower Security
Agreement.
"Compliance Certificate" has the meaning set forth in Section
5.1(a)(iii).
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which, in accordance with GAAP, would be consolidated
with those of the Borrower in its consolidated financial statements as of such
date.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414 of the Code.
"Credit Commitment" has the meaning set forth in Section 2.1.
"Default" has the meaning set forth in Section 6.1.
"Default Rate" means a rate per annum equal to the sum of the then
applicable Base Rate plus two percent (2%).
"Dollars" or "$" means dollars in lawful currency of the United States
of America.
"Domestic Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in the State of California are authorized by law
to close.
"Environmental Authority" means any foreign, federal, state, local or
regional government that exercises any form of jurisdiction or authority under
any Environmental Requirement.
"Environmental Authorizations" means all licenses, permits, orders,
approvals, notices, registrations or other legal prerequisites for conducting
the business of the Borrower or any Wholly Owned Subsidiary required by any
Environmental Requirement.
"Environmental Judgments and Orders" means all judgments, decrees or
orders arising from or in any way associated with any Environmental
Requirements, whether or not entered upon consent or written agreements with an
Environmental Authority or other entity arising from or in any way associated
with any Environmental Requirement.
"Environmental Liabilities" means any liabilities, whether accrued,
contingent or otherwise, arising from and in any way associated with any
Environmental Requirements.
"Environmental Notices" means notice from any Environmental Authority,
of possible or alleged noncompliance with or liability under any Environmental
Requirement, including without limitation any complaints, citations, demands or
3
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requests from any Environmental Authority or from any other person or entity for
correction of any, violation of any Environmental Requirement or any
investigations concerning any violation of any Environmental Requirement.
"Environmental Proceedings" means any judicial or administrative
proceedings arising from or in any way associated with any Environmental
Requirement.
"Environmental Releases" means releases as defined in CERCLA or under
any applicable state or local environmental law or regulation.
"Environmental Requirements" means any legal requirement relating to
health, safety or the environment and applicable to the Borrower, any Wholly
Owned Subsidiary or the Properties, including but not limited to any such
requirement under CERCLA or similar state legislation and all federal, state and
local laws, ordinances, regulations, orders, writs, decrees and common law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor law. Any reference to any provision
of ERISA shall also be deemed to be a reference to any successor provision or
provisions thereof.
"Event of Default" has the meaning set forth in Section 6.1.
"Fiscal Quarter" means any fiscal quarter of the Borrower, it being
understood that each of the first, second and fourth fiscal quarters of each
Fiscal Year consists of three Reporting Periods and the third fiscal quarter
consists of four Reporting Periods.
"Fiscal Year" means any fiscal year of the Borrower consisting of the 52
or 53 week period generally ending on the Wednesday closest to December 31.
"GAAP" means generally accepted accounting principles applied on a basis
consistent with those which, in accordance with Section 1.2, are to be used in
making the calculations for purposes of determining compliance with the terms of
this Agreement.
"Hazardous Materials" includes, without limitation, (a) solid or
hazardous waste, as defined in the Resource Conservation and Recovery Act of
1980, 42 U.S.C. ss. 6901 et seq. and its implementing regulations and
amendments, or in any applicable state or local law or regulation, (b)
"hazardous substance", "pollutant", or "contaminant" as defined in CERCLA, or in
any applicable state or local law or regulation, (c) gasoline, or any other
petroleum product or by-product, including, crude oil or any fraction thereof or
(d) insecticides, fungicides, or rodenticides, as defined in the Federal
Insecticide, Fungicide, and Rodenticide Act of 1975, or in any applicable state
or local law or regulation, as each such Act, statute or regulation may be
amended from time to time.
"Indebtedness" shall have the meaning set forth in Section 5.4.
"Interest Period" means the period commencing on the first day of each
calendar month and ending on the last day of such calendar month; provided,
that:
4
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(a) any Interest Period (other than an Interest Period
determined pursuant to paragraph (b) below) which would otherwise end on
a day which is not a Domestic Business Day shall be extended to the next
succeeding Domestic Business Day;
(b) the first Interest Period shall commence on the date of this
Agreement and shall end on November 30, 1997; and
(c) any Interest Period which begins before the Termination Date
and would otherwise end after the Termination Date shall end on the
Termination Date.
"Investment" means any investment in any Person, whether by means of
purchase or acquisition of obligations or securities of such Person, capital
contribution to such Person, loan or advance to such Person, making of a time
deposit with such Person, Guarantee or assumption of any obligation of such
Person or otherwise.
"Lender" means Star Buffet, Inc., a Delaware corporation, and its
successors and assigns.
"Lending Office" means, as to Lender, its office located at its address
set forth on the signature pages hereof or identified on the signature pages
hereof as its Lending Office or such other office as such Lender may hereafter
designate as its Lending Office by notice to the Borrower.
"Lien" means, with respect to any asset, any mortgage, deed to secure
debt, deed of trust, lien, pledge, charge, security interest, security title, or
encumbrance or servitude of any kind in respect of such asset to secure or
assure payment of a Indebtedness or a Guarantee, whether by consensual agreement
or by operation of statute or other law, or by any agreement, contingent or
otherwise, to provide any of the foregoing. For the purposes of this Agreement,
a Person shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease (as determined under GAAP) or other
title retention agreement relating to such asset. Provided, however, an
operating lease (as determined under GAAP) shall not constitute a Lien.
"Loans" shall have the meaning set forth in Section 2.1 below.
"Loan Documents" means this Agreement, the Note, the Warrants, the
Borrower Security Agreement, the Post-Closing Collateral Documents, the
Registration Rights Agreement, the Mortgage Documents and any other document
evidencing, relating to or securing the obligations of the Borrower hereunder,
and any other document or instrument delivered from time to time in connection
with the foregoing documents, or the obligations of the Borrower hereunder, as
such documents and instruments may be amended, modified or supplemented from
time to time.
"Margin Stock" means "margin stock" as defined in Regulations G, T, U or
X.
"Material Adverse Effect" means, with respect to any event, act,
condition or occurrence, of whatever nature (including any adverse determination
in any litigation, arbitration, or governmental investigation or proceeding that
5
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is not a judgment giving rise to a Default), whether singly or in conjunction
with any other event or events, act or acts, condition or conditions, occurrence
or occurrences, whether or not related, a material adverse change in, or a
material adverse effect upon, any of (a) the financial condition, operations,
business, properties or prospects of the Borrower and its Consolidated
Subsidiaries taken as a whole, (b) the rights and remedies of the Lender under
the Loan Documents, or (c) the legality, validity or enforceability of any Loan
Document.
"Multiemployer Plan" shall have the meaning set forth in Section
4001(a)(3) of ERISA.
"Note" means the Promissory Note, in the form attached hereto as Exhibit
A, delivered to Lender to evidence the Loans together with all amendments,
consolidations, modifications, renewals and supplements thereto, and
replacements thereof.
"Option Agreement" means the Option Agreement, in the form attached
hereto as Exhibit F.
"Participant" has the meaning set forth in Section 7.6(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
unincorporated association, a trust or any other entity or organization,
including, but not limited to, a government or political subdivision or an
agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by a member of the
Controlled Group for employees of any member of the Controlled Group or (ii)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five (5) plan years made
contributions.
"Post-Closing Collateral" has the meaning set forth in Section 2.8(a).
"Post-Closing Collateral Documents" has the meaning set forth in Section
2.8(a).
"Prime Rate" shall mean, for any.day, a floating rate equal to the rate
publicly quoted from time to time by The Wall Street Journal as the "base rate
on corporate loans at large U.S. money center commercial banks" (or, if The Wall
Street Journal ceases quoting a base rate of the type described, the highest per
annum rate of interest published by the Federal Reserve Board in Federal Reserve
statistical release H.15 (519) entitled "Selected Interest Rates" as the Bank
prime loan rate or its equivalent). Each change in any interest rate provided
for in the Agreement based upon the Prime Rate shall take effect at the time of
such change in the Prime Rate.
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"Properties" means all real property owned, leased or otherwise used or
occupied by the Borrower or any Consolidated Subsidiary, wherever located.
"Registration Rights Agreement" means the Registration Rights Agreement,
in the form of Exhibit C hereto, executed and delivered by the Borrower and
Lenders.
"Regulation G" means Regulation G of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation T" means Regulation T of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Reporting Period" means, with respect to any Fiscal Year, each
consecutive 4 week period beginning on the first day of such Fiscal Year.
"Restricted Payment" means (i) any dividend or other distribution on any
shares of the Borrower's capital stock (except dividends payable solely in
shares of its capital stock) or (ii) any cash payment on account of the
purchase, redemption, retirement or acquisition (excluding therefrom any nominal
amount of cash paid in lieu of fractional shares of Capital Stock issued in the
ordinary course of business) of (a) any shares of the Borrower's capital stock
(except shares acquired upon the conversion thereof into other shares of its
capital stock) or (b) any option, warrant or other right to acquire shares of
the Borrower's capital stock.
"Retail Building" means any removable restaurant building owned by the
Borrower and operated under the "Stacey's" trade name and all related equipment
and moveable site improvements.
"Rights Agreement" shall mean that certain Rights Agreement dated
November 1, 1996 by and between Stacey's Buffet, Inc. and American Stock
Transfer and Trust Company.
"Stacey's Restaurant" shall mean any and all restaurants operated as a
Stacey's Buffet, whether owned or operated by the Borrower or any other Person.
"Subsidiary" means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
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the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by the Borrower, and any partnership in which
the Borrower or any Consolidated Subsidiary is a general partner.
"Termination Date" means the fifth (5th) anniversary of the date of this
Agreement.
"Transferee" has the meaning set forth in Section 7.6(d).
"Unfunded Vested Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all vested
nonforfeitable benefits under such Plan exceeds (ii) the fair market value of
all Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan, but only to the extent that such excess
represents a potential liability of a member of the Controlled Group to the PBGC
or the Plan under Title IV of ERISA.
"Warrants" mean the warrants to purchase shares of Borrower's Common
Stock in the form attached hereto as Exhibit B to be issued to the Lender on the
Closing Date pursuant to Section 2.1(a).
"Wholly Owned Subsidiary" means any Subsidiary all of the shares of
capital stock or other ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly owned by the Borrower.
Section 1.2. Accounting Terms and Determinations. Unless otherwise
specified herein, all terms of an accounting character used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared, in
accordance with GAAP, applied on a basis consistent (except for changes with
which the Borrower's independent public accountants concur or that are otherwise
required by a change in GAAP) with the most recent audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries delivered
to the Lenders except for any change in which the Borrower's independent public
accountants concur or is required by GAAP, in determining compliance with any of
the provisions of this Agreement or any of the other Loan Documents: (i) the
Borrower shall have objected to determining such compliance on such basis at the
time of delivery of such financial statements, or (ii) the Required Lenders
shall so object in writing within 30 days after the delivery of such financial
statements, in either of which events such calculations shall be made on a basis
consistent with those used in the preparation of the latest financial statements
as to which such objection shall not have been made (which, if objection is made
in respect of the first financial statements delivered under Section 5.1 hereof,
shall mean the financial statements referred to in Section 4.4).
Section 1.3. References. Unless otherwise indicated, references in this
Agreement to "Articles", "Exhibits", "Schedules", "Sections" and other
Subdivisions are references to articles, exhibits, schedules, sections and other
subdivisions hereof.
Section 1.4. Use of Defined Terms. All terms defined in this Agreement
shall have the same defined meanings when used in any of the other Loan
Documents, unless otherwise defined therein or unless the context shall require
otherwise.
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Section 1.5. Terminology. All personal pronouns used in this Agreement,
whether used in the masculine, feminine or neuter gender, shall include all
other genders; the singular shall include the plural, and the plural shall
include the singular. Titles of Articles and Sections in this Agreement are for
convenience only, and neither limit nor amplify the provisions of this
Agreement.
ARTICLE II
THE CREDIT
Section 2.1. Loans. Lender agrees, subject to the terms and conditions
set forth herein and based on the representations and warranties set forth
herein, from time to time on or after the Closing Date and through and including
the Termination Date, upon written request of the Borrower in the form of notice
attached hereto as Schedule 2.1 (the "Notice of Borrowing"), to make Loans to
the Borrower in an aggregate principal amount at any time not to exceed Four
Million Five Hundred Thousand Dollars ($4,500,000) (the "Credit Commitment")
through and including the Termination Date; provided, that the aggregate amount
of Loans to be disbursed (i) during the one month period beginning October 30,
1997 shall not exceed Four Hundred Thousand Dollars ($400,000) (the "First
Disbursement"), (ii) during the period beginning November 25, 1997 and ending
January 1, 1998, shall not exceed Three Hundred and Ten Thousand Dollars
($310,000) (the "Second Disbursement"), (iii) during the period beginning
January 2, 1998 and ending May 1, 1998, shall not exceed One Million One Hundred
Twenty Five Thousand Dollars ($1,125,000) (the "Third Disbursement"), (iv)
during the period beginning May 2, 1998 and ending July 31, 1998, shall not
exceed One Million Three Hundred Thousand ($1,300,000) (the "Fourth
Disbursement") and (v) during the period beginning August 1, 1998 and ending
October 31, 1998, shall not exceed One Million Three Hundred and Sixty-Five
Thousand Dollars ($1,365,000) (the "Fifth Disbursement"). In consideration for
making the Loans, on the Closing Date, (i) the Borrower shall grant to the
Lender Warrants for the purchase of an aggregate of 1,342,422 shares of the
Borrower's Common Stock at an exercise price of $1.00 each, which Warrants may
be exercised in accordance with and subject to the terms and conditions of the
Warrants and (ii) the Borrower shall grant to the Lender an option to purchase
certain restaurants from Borrower, which option may be exercised in accordance
with and subject to the terms and conditions of the Option Agreement.
Section 2.2. Miscellaneous Matters.
(a) Prior to the Closing Date, Borrower has amended, or will
amend prior to the Closing Date, the Borrower's Rights Agreement to provide that
neither the acquisition of shares of Borrower by Lender or any of its affiliates
nor the execution, delivery and performance of this Agreement and the Loan
Documents, including the Warrants, or the consummation of the transactions
contemplated thereby will (i) cause Lender or any of its affiliates to become an
Acquiring Person (as such term is defined in the Rights Agreement), or (ii)
otherwise affect the rights of the holders of Rights (as such term is defined in
the Rights Agreement), including by causing such Rights to separate from the
underlying shares or by giving such holders the right to acquire securities of
any party hereto.
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(b) Upon the closing, the Borrower shall take all corporate
actions necessary to (i) increase the size of Borrower's Board of Directors to
five (5) from three (3); and (ii) elect to the Board of Directors of the
Borrower two (2) designees of the Lender, and such Board of Directors shall
consist of five (5) Persons, of whom two (2) Persons shall have been designated
by the Lender. At each election of directors from and after the Closing Date,
the Borrower shall nominate for election to its Board of Directors and recommend
to its stockholders the election of two (2) designees of the Lender to the Board
of Directors. No change in the actual number of directors of the Borrower shall
be made without the prior written consent of the Lender.
Section 2.3. Note; Maturity of Loan. The obligation to pay the principal
of, and interest on, all the Loans made by Lender to Borrower shall be evidenced
by the Note duly executed and delivered by the Borrower. The Loans shall mature,
and the principal amount thereof, if any, together with all accrued but unpaid
interest thereon, if any, shall be due and payable on the Termination Date
without notice to or demand upon the Borrower.
Section 2.4. Interest. The Borrower agrees to pay interest in respect of
the principal amount of the Loans, for each day from the date such Loans are
made until such Loans shall be paid in full at a rate per annum equal to the
Base Rate from time to time in effect, such interest rate to change as and when
the Base Rate changes and to be computed on the basis of a 360-day year and paid
for the actual number of days elapsed. Interest on the Loans shall accrue from
and including the making of the Loans and shall be payable monthly in arrears,
for each Interest Period, on the 15th day of the calendar month immediately
following the end of such Interest Period. Any overdue principal of and, to the
extent permitted by applicable law, overdue interest on the Loans shall bear
interest, payable on demand, for each day until paid at a rate per annum equal
to the Default Rate. After the occurrence and during the continuance of a
Default, the principal amount of the Loans (and, to the extent permitted by
applicable law, all accrued interest thereon) shall, at the election of the
Lender, bear interest at the Default Rate.
Section 2.5. Optional Prepayments. The Borrower may, upon at least five
Domestic Business Day's notice to the Lender, prepay the Loan by an aggregate
amount of at least $100,000 or any larger multiple of $100,000, without premium
or penalty.
Section 2.6. Prepayment at Election of Lender Upon Change of Control.
(a) Upon the occurrence of a Change of Control, Lender shall
have the right to require the Borrower to prepay the then outstanding principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
prepayment. Within five Domestic Business Days following any Change of Control,
the Borrower will mail a notice thereof to Lender, (a "Change of Control
Notice"). Lender, by written notice to the Borrower within 30 days following
receipt of such Change of Control Notice, may elect prepayment of its Notes and
the Borrower shall prepay such Notes at the price specified above no later than
30 days thereafter.
(b) Upon the exercise of the option by Lender under the Option
Agreement, Lender shall have the right to require Borrower to prepay the then
outstanding principal amount thereof, plus accrued and unpaid interest, if any,
to the date of prepayment, through the cancellation of indebtedness by Lender in
payment of the Purchase Price (as defined in the Option Agreement) as
contemplated by the Option Agreement.
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Section 2.7. Use of Proceeds. The proceeds of the Loans shall be
utilized solely for the purposes set forth in this Section 2.7, and Loans shall
only be made upon satisfactory evidence to Lender that the Loan proceeds are so
required and will be used in compliance with this Section 2.7, and all laws,
rules and regulations. The proceeds of the First Disbursement shall be used
solely for the payment of November 1997 rent to landlords for certain locations
and premises and for the payment of certain trade payables to third party
vendors. The proceeds of the Second Disbursement shall be used solely for
December 1997 rent to landlords for certain locations and premises and for
payment of certain trade payables to third party vendors. The proceeds of the
Third Disbursement shall be used solely for remodeling three restaurants to be
identified by Borrower and Lender. The proceeds of the Fourth Disbursement shall
be used solely for the settlement of past due payments owed to third party
vendors. The Fifth Disbursement shall be used for negative cash flow purposes.
Borrower acknowledges and agrees that Lender shall make the Loan proceeds
available to Borrower by paying such proceeds on behalf of Borrower directly to
the third parties in accordance with the provisions of this Section 2.7, and
Borrower shall specifically identify the names and addresses of such third
parties, together with the amount of Loan proceeds to be paid to such third
parties, in the Notice of Borrowing.
Section 2.8. General Provisions as to Payments. The Borrower shall make
each payment of principal of, and interest on, the Loans not later than 11:00
A.M. (Pacific Time) on the date when due, in Federal or other funds immediately
available. Whenever any payment of principal of, or interest on, the Loans or of
fees hereunder shall be due on a day which is not a Domestic Business Day, the
date for payment thereof shall be extended to the next succeeding Domestic
Business Day.
Section 2.9. Collateral.
(a) In addition to the collateral security granted by the
Borrower and the Guarantors under the Security Agreements the Borrower shall, at
the sole cost and expense of the Borrower, grant to the Lender and do all things
requested to maintain, for the benefit of the Lender to secure all obligations
of the Borrower under the loan documents, a continuing, blanket and general lien
upon and security interest and title in and to all real property, equipment,
inventory, general intangibles, personal property and assets of the Borrower and
the Guarantors, or other assets as the Lenders shall designate in its reasonable
discretion (the "Post-Closing Collateral") and shall deliver (or cause to be
delivered) to the Lender such duly executed security agreements, security deeds,
mortgages, deeds of trust, estoppels, subordination agreements, pledge
agreements, stock powers, Uniform Commercial Code financing statements, title
certificates, affidavits, and other documents, as are reasonably necessary or
desirable in the judgment of the Lender to perfect first priority liens (as such
first priority may be available) against the Post-Closing Collateral
(collectively, the "Post-Closing Collateral Documents").
(b) The Borrower shall (and shall cause each of the Guarantors
to), after an Event of Default, at the sole cost and expense of the Borrower,
deliver (or cause to be delivered) to the Lender such appraisals, surveys, title
searches, title policies, environmental audits and other documents, all of which
shall be satisfactory to the Lender in all respects, as are deemed reasonably
necessary or desirable by the Lender in connection with the Collateral.
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(c) The Borrower agrees to pay all costs and expenses incurred
by the Lender in connection with the actions contemplated by this Section 2.9,
including, without limitation, all filing fees, lien search fees, intangible
taxes (whether incurred before or after payment in full of the Loan),
documentary stamp taxes (whether incurred before or after payment in full of the
Loan), surveys, environmental surveys, and title reports. All such documentation
shall be reasonable and customary and in form and substance satisfactory to the
Lender in its discretion. The Borrower hereby irrevocably appoints the Lender as
the Borrower's attorney-in-fact to (i) deliver and record in the appropriate
filing office any instrument contemplated or required hereby (including, without
limitation, the relevant security deeds, mortgages, deeds of trust, and Uniform
Commercial Code financing statements) and to pay the related recording expenses
and (ii) from time to time in the Lender's discretion, to take any other action
which the Lender may deem reasonably necessary or advisable to accomplish the
purposes of this Section 2.9 with respect to the Collateral. At each time Lender
exercises the foregoing power of attorney it shall provide notice thereof to
Borrower, including a copy of any documentation so executed.
ARTICLE III
CONDITIONS TO CLOSING
Section 3.1. Conditions to Closing. The obligation of Lender to make any
of the Loans is subject to the satisfaction of the conditions set forth below
and receipt by the Lender of the documents, instruments, agreements and
certificates set forth below:
(a) duly executed original of the Note;
(b) duly executed original of the Warrants;
(c) duly executed Registration Rights Agreement;
(d) duly executed Security Agreement;
(e) a certificate (the "Closing Certificate") dated as of the
Closing Date, signed by the chief executive officer and the chief financial
officer of the Borrower, to the effect that (i) the representations and
warranties of the Borrower contained in Article IV are true on and as of the
Closing Date; (ii) Borrower and each of its Subsidiaries has complied with or
performed with all covenants and agreements which is required to have performed
or complied with on or prior to the Closing Date; and (iii) except as disclosed
in Schedule 4.4 hereto, no event, act or condition has occurred after January 1,
1997 which has had or could have a Material Adverse Effect.
(f) an opinion letter (together with any opinions of local
counsel relied on therein) of, counsel for the Borrower, dated as of the Closing
Date, substantially in the form of Exhibit E and covering such additional
matters relating to the transactions contemplated hereby as the Lender may
reasonably request;
(g) all documents which the Lender may reasonably request
relating to the existence of the Borrower and the Guarantors, the corporate
authority for and the validity of this Agreement, the Note, the Warrants and the
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other Loan Documents and any other matters relevant hereto, or thereto, all in
form and substance reasonably satisfactory to the Lender, including, without
limitation, a certificate of incumbency of each of the Borrower and the
Guarantors, signed by the Secretary or an Assistant Secretary of the Borrower
and the Guarantors, certifying as to the names, true signatures and incumbency
of the officer or officers, respectively, of the Borrower and the Guarantors
authorized to execute and deliver the Loan Documents, and certified copies of
the following items, for the Borrower and each of the Guarantors, respectively:
(i) Certificate/Articles of Incorporation, (ii) Bylaws, (iii) a certificate of
the Secretary of State of the state of incorporation of each as to the good
standing of each as a corporation in that state, and (iv) the action taken by
the Board of Directors authorizing the execution, delivery and performance of
this Agreement, the Note, the Warrants and the other Loan Documents to which the
Borrower or any of the Guarantors is a party;
(h) a certificate of insurance evidencing, of all insurance
required by Section 5.13 showing the insurer, the face amount and the nature of
coverage, and the Lender as a loss payee (or beneficiary, as the case may be)
under each policy then in force;
(i) all mortgages and security interests securing the Borrower's
obligations hereunder shall be duly perfected and validly recorded; and
(j) a duly executed Option Agreement.
Section 3.2 Conditions to Make Loans. The obligation of Lender to make
a Loan on the occasion of each borrowing is subject to the satisfaction of the
following conditions:
(a) receipt by the Lender of a Notice of Borrowing;
(b) the fact that, immediately before and after such borrowing,
no Default shall have occurred and be continuing;
(c) the fact that the representations and warranties of the
Borrower contained in Article IV of this Agreement shall be true on and as of
the date of such borrowing;
(d) the fact that, immediately after such borrowing, the
aggregate outstanding principal amount of the Loans will not exceed the amount
of the Credit Commitment; and
(e) with respect to the Third Disbursement, Fourth Disbursement
and Fifth Disbursement, the Lender shall have the right to review and request,
in the sole judgment of Lender, that the Liens identified on Schedule 5.7 (other
than the liens listed on items 1 through 3) be released and that all of the
landlords for Borrower's real property leases consent to an encumbrance or
security interests in favor of Lender of the leasehold estate, the premises and
the improvements thereon.
Each borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to (i) the truth and accuracy of
the facts specified in paragraphs (b), (c) and (d) of this Section; provided
that such borrowing shall not be deemed to be such a representation and warranty
to the effect set forth in Section 4.4 as to any event, act or condition having
a Material Adverse Effect which has theretofore been disclosed in writing by the
Borrower to the Lender if the aggregate outstanding principal amount of the
Loans immediately after such Borrowing will not exceed the aggregate outstanding
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principal amount thereof immediately before such Borrowing; and (ii) that the
proceeds of each disbursement shall be used in accordance with Section 2.7
hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
Section 4.1. Corporate Existence and Power. The Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, is duly qualified to transact business
in every jurisdiction where, by the nature of its business, such qualification
is necessary, except where the failure to qualify could not reasonably be
expected to have or cause a Material Adverse Effect, and has all corporate
powers and all governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted, except where the failure to
have any license, authorization, consent or approval could not reasonably be
expected to have or cause a Material Adverse Effect.
Section 4.2. Corporate and Governmental Authorization; No Contravention.
The execution, delivery and performance by the Borrower of this Agreement, the
Note, the Warrants and the other Loan Documents delivered as of the Closing Date
(i) are within the Borrower's corporate powers, (ii) have been duly authorized
by all necessary corporate action, (iii) require no action by or in respect of
or filing with, any governmental body, agency or official, (iv) do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the certificate of incorporation or by-laws of the Borrower or
of any agreement, judgment, injunction, order, decree or other material
instrument binding upon the Borrower or any Guarantor, and (v) do not result in
the creation or imposition of any Lien on any asset of the Borrower or any
Guarantor other than Liens created or imposed pursuant to the Loan Documents.
Section 4.3. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Borrower enforceable in accordance with its terms, the
Note, the Warrants and the other Loan Documents, when executed and delivered in
accordance with this Agreement, will constitute valid and binding obligations of
the Borrower enforceable in accordance with their respective terms; provided
that the enforceability hereof and thereof is subject in each case to general
principles of equity and to bankruptcy, insolvency and similar laws affecting
the enforcement of creditors' rights generally.
Section 4.4. Financial Information. The consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries as of January 1, 1997, and the
related consolidated statements of operations, shareholders' equity and cash
flows for the Fiscal Year then ended, reported on by KPMG Peat Marwick, LLP and
the consolidated balance sheet of the Borrower and its Consolidated Subsidiaries
of March 26, 1997, and the related consolidated statements of operations and
cash flows for the Fiscal Quarter then ended, copies of which have been
delivered Lender, fairly present, in conformity with GAAP, the consolidated
financial position of the Borrower and its Consolidated Subsidiaries as of such
dates and their consolidated results of operations and cash flows for such
periods stated. Since January 1, 1997 and excepted as disclosed in Schedule 4.4
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attached hereto, there has been no event, act, condition or occurrence having a
Material Adverse Effect.
Section 4.5. No Litigation. Except as disclosed as Schedule 4.5, there
is no action, suit or proceeding pending, or to the knowledge of the Borrower
threatened, against or affecting the Borrower or any of its Subsidiaries before
any court or arbitrator or any governmental body, agency or official which could
reasonably be expected to have or cause a Material Adverse Effect.
Section 4.6. Compliance with ERISA. The Borrower and each member of the
Controlled Group have fulfilled their obligations in all material respects under
the minimum funding standards of ERISA and the Code with respect to each Plan
and are in compliance in all material respects with the presently applicable
provisions of ERISA and the Code, and have not incurred any liability to the
PBGC or a Plan under Title IV of ERISA. Neither the Borrower nor any member of
the Controlled Group is or ever has been obligated to contribute to any
Multiemployer Plan.
Section 4.7. Compliance with Laws; Payment of Taxes. The Borrower and
its Consolidated Subsidiaries are in compliance with all applicable laws,
regulations and similar requirements of governmental authorities, except where
such compliance is being contested in good faith through appropriate proceedings
and except where the failure to comply could not reasonably be expected to have
or cause a Material Adverse Effect. There have been filed on behalf of the
Borrower and its Consolidated Subsidiaries all Federal and state income, excise,
property and other tax returns which are required to be filed by them and all
taxes due pursuant to such returns or pursuant to any assessment received by or
on behalf of the Borrower or any Consolidated Subsidiary have been paid. There
have been filed on behalf of the Borrower and its Consolidated Subsidiaries all
local income, excise, property and other tax returns that are required to be
filed by them and all taxes due pursuant to the returns or any assessment
received by Borrower or any Consolidated Subsidiary have been paid. The charges,
accruals and reserves on the books of the Borrower and its Consolidated
Subsidiaries in respect of taxes or other governmental charges are, in the
opinion of the Borrower, adequate, except for any changes in taxes which are
imposed retroactively.
Section 4.8. No Subsidiaries. The Borrower has no Subsidiaries.
Section 4.9. Investment Company Act. Borrower is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
Section 4.10. Public Utility Holding Company Act. Neither the Borrower
nor any of its Consolidated Subsidiaries is a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended.
Section 4.11. Ownership of Property; Liens. Each of the Borrower and its
Consolidated Subsidiaries has title to its properties sufficient for the conduct
of its business, and none of such property is subject to any Lien except as
permitted in Section 5.7.
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Section 4.12. No Default. Borrower is not in default under or with
respect to any agreement, instrument or undertaking to which it is a party or by
which it or any of its property is bound which could have or cause a Material
Adverse Effect.
Section 4.13. Full Disclosure. All written information heretofore
furnished by the Borrower to the Lender for purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all such
information hereafter furnished by the Borrower to Lender will be, true,
accurate and complete in every material respect or based on reasonable estimates
on the date as of which such information is stated or certified. The Borrower
has disclosed to the Lenders in writing any and all facts which could have or
cause a Material Adverse Effect.
Section 4.14. Environmental Matters.
(a) Borrower is not subject to any Environmental Liability which
could have or cause a Material Adverse Effect as the Environmental Liability
becomes due and the Borrower has not been designated as a potentially
responsible party under CERCLA or under any state statute similar to CERCLA.
None of the Properties has been identified on any current or proposed (i)
National Priorities List under 40 C.F.R. ss. 300, (ii) CERCLIS list or (iii) any
list arising from a state statute similar to CERCLA.
(b) No Hazardous Materials are being used, produced,
manufactured, processed, treated, recycled, generated, stored, disposed of,
managed or otherwise handled at, or shipped or transported to or from the
Properties except in material compliance with Environmental Requirements. No
Hazardous Materials are present at, on, in or under the Properties, or, to the
best of the knowledge of the Borrower, at or from any adjacent site or facility
(except for Hazardous Materials, such as cleaning solvents, pesticides and other
materials used, produced, manufactured, processed, treated, recycled, generated,
stored, disposed of, managed, or otherwise handled in minimal amounts in the
ordinary course of business in compliance with all applicable Environmental
Requirements) in such quantities that the cost to monitor, investigate, and/or
remediate the Hazardous Materials in compliance with Environmental Requirements
could not reasonably be expected to have or cause a Material Adverse Effect.
(c) The Borrower in all material respects is in compliance with
all Environmental Requirements in connection with the operation of the
Properties and the Borrower's businesses.
Section 4.15. Capital Stock. All Capital Stock, debentures, bonds, notes
and all other securities of the Borrower presently issued and outstanding are
validly and properly issued in accordance with all applicable laws, including
but not limited to, the "Blue Sky" laws of all applicable states and the federal
securities laws. Except as set forth on Schedule 4.15, there are (a) no
outstanding subscriptions, warrants, options, calls, claims, commitments,
convertible securities or other agreements or arrangements under which the
Borrower is or may be obligated to issue shares of its capital stock, and (b) no
preemtive or similar rights to subscribe for or to purchase capital stock of the
Borrower.
Section 4.16. Margin Stock. The Borrower is not engaged principally, or
as one of its important activities, in the business of purchasing or carrying
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any Margin Stock, and no part of the proceeds of the Loan will be used to
purchase or carry any Margin Stock or to extend credit to others for the purpose
of purchasing or carrying any Margin Stock, or be used for any purpose which
violates, or which is inconsistent with, the provisions of Regulation X.
Section 4.17. Insolvency. After giving effect to the execution and
delivery of this Agreement, the Note and the other Loan Documents, the Borrower
will not be "insolvent," within the meaning of such term as defined in ss. 101
of Title 11 of the United States Code or Section 2 of the Uniform Fraudulent
Transfer Act, or any other applicable state law pertaining to fraudulent
transfers, as amended from time to time, or be unable to pay its debts generally
as such debts become due, or have an unreasonably small capital to engage in any
business or transaction, whether current or contemplated.
ARTICLE V
COVENANTS
The Borrower agrees that, so long as any amount payable hereunder
or under the Note remains unpaid:
Section 5.1. Information.
(a) The Borrower will deliver to the Lender:
(i) as soon as available and in any event within 120 days
after the end of each Fiscal Year, a consolidated balance sheet
of the Borrower and its Consolidated Subsidiaries as of the end
of such Fiscal Year and the related consolidated statements of
operations, stockholders' equity and cash flows for such Fiscal
Year, setting forth in each case in comparative form the figures
for the previous fiscal year, all certified by independent public
accountants of nationally recognized standing, with such
certification to be free of exceptions and qualifications not
acceptable to the Lender;
(ii) as soon as available and in any event within 45 days
after the end of each of the first three Fiscal Quarters of each
Fiscal Year, a consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such Fiscal Quarter
and the related statements of operations and statements of cash
flows for such Fiscal Quarter and for the portion of the Fiscal
Year ended at the end of such Fiscal Quarter, setting forth in
each case in comparative form the figures for the corresponding
Fiscal Quarter and the corresponding portion of the previous
Fiscal Year, all certified (subject to normal year-end
adjustments) as to fairness of presentation, GAAP and consistency
by the chief financial officer or the chief accounting officer of
the Borrower, except to the extent that interim financial
statements on Form 10-Q do not require footnotes and other
disclosures that would otherwise be required by GAAP;
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(iii) simultaneously with the delivery of each set of
financial statements referred to in paragraphs (i) and (ii)
above, a certificate (a "Compliance Certificate") of the chief
financial officer stating whether any Default exists on the date
of such certificate and, if any Default then exists, setting
forth the details thereof and the action which the Borrower is
taking or proposes to take with respect thereto;
(iv) within two (2) Domestic Business Days after the
Borrower has knowledge of the occurrence of any Default, a
certificate of the chief financial officer or the chief
accounting officer of the Borrower setting forth the details
thereof and the action which the Borrower is taking or proposes
to take with respect thereto;
(v) promptly upon the mailing thereof to the stockholders
of the Borrower generally, copies of all financial statements,
reports and proxy statements so mailed; and
(vi) promptly upon the filing thereof, copies of all
registration statements, proxy statements, and annual, quarterly
or other reports and other information and documents which the
Borrower shall have filed with the Securities and Exchange
Commission.
(b) Upon the request of the Lender, the Borrower will deliver to
the Lender:
(i) if and when any member of the Controlled Group (A)
gives or is required to give notice to the PBGC of any
"reportable event" (as defined in Section 4043 of ERISA) with
respect to any Plan which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that
the plan administrator of any Plan has given or is required to
give notice of any such reportable event, a copy of the notice of
such reportable event given or required to be given to the PBGC;
(B) receives notice of complete or partial withdrawal liability
under Title IV of ERISA, a copy of such notice; or (C) receives
notice from the PBGC under Title IV of ERISA of an intent to
terminate or appoint a trustee to administer any Plan, a copy of
such notice; and
(ii) as soon as available and in any event within 25 days
after the end of each of the first 12 Reporting Periods of each
Fiscal Year, a consolidated statement of income and balance sheet
of the Borrower and its Consolidated Subsidiaries as of the end
of such Reporting Period and for the portion of the Fiscal Year
ended at the end of such Reporting Period, setting forth in each
case in comparative form the figures for the corresponding
Reporting Period and the corresponding portion of the previous
Fiscal Year, all certified (subject to normal year-end
adjustments) as to fairness of presentation, GAAP and consistency
by the chief financial officer or the chief accounting officer of
the Borrower, except to the extent that interim financial
statements do not require footnotes and that such financial
statements are subject to normal year-end adjustments;
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(iii) promptly upon receipt or obtaining knowledge
thereof, any and all bona fide offers or expressions of interest
(whether verbal or written, solicited or unsolicited) to merge
with or to acquire all or any part of the assets or capital stock
of the Borrower;
(iv) within 25 days after the end of each Reporting
Period: (A) a variance report which reconciles the performance of
the Borrower for the immediately preceding Reporting Period to
the projected budget of the Borrower for such period; (B) an
accounts payable schedule for the Borrower; (C) a written
schedule of the revenues, profit contributions and other
operating and financial information with respect to each Stacey's
Restaurant, on an individual and regional basis; and (D) a
written summary of the Borrower's advertising and promotional
activities, including a summary of amounts expended in connection
therewith and a cost/benefit analysis of such expenditures
(v) within five days after the end of each calendar week,
written weekly sales reports with respect to each Stacey's
Restaurant, on an individual and regional basis; and
(vi) from time to time such additional information
regarding the financial position or business of the Borrower and
its Subsidiaries as may be reasonably requested.
Section 5.2. Inspection of Property, Books and Records. The Borrower
will (i) keep, and cause each Consolidated Subsidiary to keep, proper books of
record and account in which full, true and correct entries in conformity with
GAAP shall be made of all dealings and transactions in relation to its business
and activities; and (ii) permit, and cause each Wholly Owned Subsidiary to
permit, representatives of Lender, at the Borrower's expense, to visit and
inspect any of their respective properties, to examine and make abstracts from
any of their respective books and records and to discuss their respective
affairs, finances and accounts with their respective officers, employees and
independent public accountants. The Borrower agrees to cooperate and assist in
such visits and inspections, in each case at such reasonable times and as often
as may reasonably be desired.
Section 5.3. Restricted Payments. The Borrower will not declare or make
any Restricted Payments.
Section 5.4. Limitation on Indebtedness. Neither the Borrower nor any of
its Subsidiaries will create, incur, assume, or become, be or remain liable in
any manner in respect of, or allow to exist, any Indebtedness (which term shall
include: all indebtedness, obligations and liabilities which in accordance with
generally accepted accounting principles would be reflected on the balance sheet
of the Borrower as a liability; all indebtedness, obligations and liabilities,
whether or not assumed by Borrower or any Subsidiary, secured by any mortgage,
pledge or lien existing on property owned by the Borrower or any Subsidiary; and
all amounts representing rental payments which, in accordance with generally
accepted accounting principles, would be classified as a liability on its
balance sheet), except for:
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(a) the Note and any other obligations owed to the Lender under
this Agreement or otherwise;
(b) Indebtedness of the Borrower existing as of the date of this
Agreement which is specifically disclosed in Schedule 5.5 attached hereto;
(c) Indebtedness representing trade debt, wages, employee
benefits, advance payments on sales contracts and other indebtedness incurred in
the ordinary course of business;
(d) Indebtedness existing as of the date of this Agreement
secured by liens permitted by subsection (a) of Section 5.7;
(e) Liabilities for taxes, assessments, governmental charges,
liens or claims described in Section 5.12 hereof to the extent that payment
thereof is not required by such Section 5.12; and
(f) Indebtedness in respect of final judgments for the payment of
money not in excess of $10,000 in the aggregate at any time outstanding
(excluding sums covered by insurance) remaining unsatisfied and in effect for
any period of less than thirty (30) days or in respect of which a stay of
execution shall have been obtained pending an appeal or proceeding for review.
Section 5.5. Loans or Advances. Neither the Borrower nor any Guarantor
shall make loans or advances to any Person except (without duplication): (a)
loans or advances to employees not exceeding $5,000 in the aggregate principal
amount outstanding at any time, in each case made in the ordinary course of
business and consistent with practices existing on the Closing Date; (b)
deposits required by government agencies or public utilities; (c) loans,
advances or monetary capital contributions from the Borrower or a Guarantor to
any Guarantor, or from any Guarantor to the Borrower; (d) loans in existence on
the Closing Date not exceeding a total aggregate principal amount of outstanding
as described on Schedule 5.5 attached hereto, which are evidenced by legally
enforceable promissory notes and subject to the Lender's perfected Liens; and
(e) loans or advances consented to by the Lender in connection with asset sales
under Section 5.10 or loans or advances in connection with asset sales which do
not require the consent of the Lender; provided that after giving effect to the
making of any loans, advances or deposits permitted by this Section, the
Borrower will be in full compliance with all the provisions of this Agreement.
Section 5.6. Investments. Neither the Borrower nor any Guarantor shall
make Investments in any Person except as permitted by Section 5.5 and except
Investments (i) in direct obligations of the United States Government maturing
within one year, (ii) in certificates of deposit issued by a commercial bank
whose long-term certificates of deposit are rated at least AA or the equivalent
thereof by Standard & Poor's Corporation and Aa or the equivalent thereof by
Moody's Investors Service, Inc., (iii) in commercial paper rated A1 or the
equivalent thereof by Standard & Poor's Corporation or P1 or the equivalent
thereof by Moody's Investors Service, Inc. and in either case maturing within 6
months after the date of acquisition, and (iv) in tender bonds the payment of
the principal of and interest on which is fully supported by a letter of credit
issued by a United States bank whose long-term certificates of deposit are rated
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at least AA or the equivalent thereof by Standard & Poor's Corporation and Aa or
the equivalent thereof by Moody's Investors Service, Inc.
Section 5.7. Negative Pledge. Neither the Borrower nor any Wholly Owned
Subsidiary will create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except:
(a) Liens existing on the date of this Agreement and identified
on Schedule 5.7;
(b) any Lien on any asset securing Indebtedness incurred or
assumed for the purpose of financing all or any part of the cost of acquiring or
constructing such asset (so long as the asset so acquired or constructed
constitutes a capital expenditure permitted hereunder);
(c) Liens securing Indebtedness owing by any Subsidiary to the
Borrower;
(d) any Lien arising out of the refinancing, extension,
renewal or refunding of any Indebtedness secured by any Lien permitted by any of
the foregoing paragraphs of this Section, provided that (i) such Indebtedness is
not secured by any additional assets, and (ii) the amount of such Indebtedness
secured by any such Lien is not increased or, if increased, the excess of the
amount of the Indebtedness secured by any such lien over the amount of the
Indebtedness so refinanced extended, renewed, or refunded shall be tendered to
the Lender as a prepayment of the Loan;
(e) Liens incidental to the conduct of its business or the
ownership of its assets which (i) do not secure Indebtedness and (ii) do not in
the aggregate materially detract from the value of its assets or materially
impair the use thereof in the operation of its business;
(f) Liens in favor of the Lenders created under the Loan
Documents; and
(g) Liens incurred by Borrower in the ordinary course of business
for items not past due and payable, including mechanics' and materialmen's liens
and deposits and charges for workers' compensation and liens for taxes and
assessments not past due and payable.
Section 5.8. Maintenance of Existence. The Borrower shall, and shall
cause each Subsidiary to, maintain its corporate existence and carry on its
business in substantially the same manner and in substantially the same fields
as such business is now carried on and maintained.
Section 5.9. Dissolution. Neither the Borrower nor any of its Wholly
Owned Subsidiaries shall suffer or permit dissolution or liquidation either in
whole or in part or redeem or retire any shares of its own stock or that of any
Wholly Owned Subsidiary, except through corporate reorganization to the extent
permitted by Section 5.12.
Section 5.10. Consolidations, Mergers and Sales of Assets. The Borrower
will not, nor will it permit any Consolidated Subsidiary to, consolidate or
merge with or into, or sell, lease or otherwise transfer all or any substantial
part of its assets to, any other Person, or discontinue or eliminate any
business line or segment; provided, however, that if no Default has occurred and
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is continuing (i) the Borrower may merge with another Person if (A) such Person
was organized under the laws of the United States of America or one of its
states, (B) the Borrower is the corporation surviving such merger, and (C)
immediately after giving effect to such merger, no Default shall have occurred
and be continuing, and (ii) solvent Subsidiaries of the Borrower may merge with
one another or, if the Borrower is the surviving corporation, the Borrower.
Section 5.11. Intentionally Omitted.
Section 5.12. Compliance with Laws; Payment of Taxes; SEC Filings. The
Borrower will, and will cause each of its Wholly Owned Subsidiaries and each
member of the Controlled Group to, comply with applicable laws (including but
not limited to ERISA), regulations and similar requirements of governmental
authorities (including but not limited to PBGC) in all material respects, except
where the necessity of such compliance is being contested in good faith through
appropriate proceedings. The Borrower will, and will cause each of its Wholly
Owned Subsidiaries to, pay promptly before past due all taxes, assessments,
governmental charges, claims for labor, supplies, rent and other obligations
which, if unpaid, might become or remain a lien against the property of the
Borrower or any Wholly Owned Subsidiary, except liabilities being contested in
good faith and against which, if requested by the Lender, the Borrower will set
up reserves in accordance with GAAP. The Borrower will timely file all reports,
statements and other information and documents with the Securities and Exchange
Commission required to be filed under, and will otherwise comply in all respects
with, applicable securities laws.
Section 5.13. Insurance. The Borrower will maintain, and will cause each
of its Wholly Owned Subsidiaries to maintain (either in the name of the Borrower
or in such Subsidiary's own name), with financially sound and reputable
insurance companies, insurance on all its property in at least such amounts and
against at least such risks as are usually insured against in the same general
area by companies of established repute engaged in the same or similar business,
and as required by the other Loan Documents.
Section 5.14. Change in Fiscal Year. The Borrower will not change its
Fiscal Year.
Section 5.15. Maintenance of Property. The Borrower shall, and shall
cause each Wholly Owned Subsidiary to, maintain all of its properties and assets
in good condition, repair and working order, except for ordinary wear and tear
and loss by casualty.
Section 5.16. Environmental Notices. The Borrower shall furnish to the
Lender prompt written notice of all Environmental Liabilities, pending,
threatened or anticipated Environmental Proceedings, Environmental Notices,
Environmental Judgments and Orders, and Environmental Releases at, on, in, under
or in any way affecting the Properties or any adjacent property, and all facts,
events, or conditions that could lead to any of the foregoing.
Section 5.17. Environmental Matters. The Borrower and its Wholly Owned
Subsidiaries will not, and will not permit any Third Party to, use, produce,
manufacture, process, treat, recycle, generate, store, dispose of, manage at, or
otherwise handle, or ship or transport to or from the Properties any Hazardous
Materials except for Hazardous Materials such as cleaning solvents, pesticides
and other similar materials used, produced, manufactured, processed, treated,
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recycled, generated, stored, disposed, managed, or otherwise handled in minimal
amounts in the ordinary course of business in compliance with all applicable
Environmental Requirements.
Section 5.18. Environmental Release. The Borrower agrees that upon the
occurrence of an Environmental Release at or on any of the Properties it will
act immediately to investigate the extent of, and to take appropriate remedial
action to eliminate, such Environmental Release, whether or not ordered or
otherwise directed to do so by any Environmental Authority.
Section 5.19. Transactions with Affiliates. Neither the Borrower nor any
of its Consolidated Subsidiaries shall enter into, or be a party to (and the
Borrower shall use its best efforts to cause any other Subsidiary to not enter
into or be a party to), any transaction with any Affiliate of the Borrower or
such Subsidiary (which Affiliate is not the Borrower or a Subsidiary), except
(i) such transactions between and/or among the Borrower and its Consolidated
Subsidiaries which are permitted by law, consistent with its past practices, in
the ordinary course of business and pursuant to reasonable terms which are no
less favorable to Borrower or such Consolidated Subsidiary than would be
obtained in a comparable arm's length transaction with a Person which is not an
Affiliate or (ii) such transactions as are otherwise fully disclosed to the
Lender and consented to in writing in advance by the Lender.
ARTICLE VI
DEFAULTS
Section 6.1. Events of Default. If one or more of the following events
(each, a "Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of the
Loan or shall fail to pay any interest on the Loan within two (2) Domestic
Business Days after such interest shall become due; or
(b) the Borrower shall fail to observe or perform any covenant
contained in: (i) Section 5.1 and such failure shall continue for ten (10)
Business Days after the earlier to occur of (x) written notice thereof has been
given to the Borrower by the Lender or (y) the Borrower obtains knowledge of any
such failure; or (ii) Sections 5.2, 5.3 to 5.12, inclusive, Sections 5.14 or
5.19; or
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained or incorporated by reference in this Agreement (other than
those covered by paragraph (a) or (b) above) and such failure shall not have
been cured within 30 days after the earlier to occur of (i) written notice
thereof has been given to the Borrower by the Lender or (ii) the Borrower
otherwise becomes aware of any such failure; or
(d) any representation, warranty, certification or statement made
by the Borrower in Article IV of this Agreement or in any certificate, financial
statement or other document delivered pursuant to this Agreement shall prove to
have been incorrect or misleading in any material respect when made (or deemed
made); or
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(e) the Borrower or any Consolidated Subsidiary shall fail to
make any payment in respect of Indebtedness outstanding in an aggregate amount
in excess of $500,000 (other than the Notes) when due or within any applicable
grace period; or
(f) any event or condition shall occur which results in the
acceleration of the maturity of Indebtedness of the Borrower or any Consolidated
Subsidiary outstanding in an aggregate amount in excess of $500,000 (including,
without limitation, any required mandatory prepayment or "put" of such
Indebtedness to the Borrower or any Consolidated Subsidiary) or enables (or,
with the giving of notice or lapse of time or both, would enable) the holders of
such Indebtedness or any Person acting on such holders' behalf to accelerate the
maturity thereof (including, without limitation, any required mandatory
prepayment or "put" of such Indebtedness to the Borrower or any Consolidated
Subsidiary); or
(g) the Borrower or any Consolidated Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing; or
(h) an involuntary case or other proceeding shall be commenced
against the Borrower or any Consolidated Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of 60 days; or an order for relief shall be entered against the Borrower
or any Consolidated Subsidiary under the federal bankruptcy laws as now or
hereafter in effect; or
(i) the Borrower or any member of the Controlled Group shall fail
to pay when due any material amount which it shall have become liable to pay to
the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate
a Plan or Plans shall be filed under Title IV of ERISA by the Borrower, any
member of the Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to
terminate or to cause a trustee to be appointed to administer any such Plan or
Plans or a proceeding shall be instituted by a fiduciary of any such Plan or
Plans to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall
not have been dismissed within 30 days thereafter; or a condition shall exist by
reason of which the PBGC would be entitled to obtain a decree adjudicating that
any such Plan or Plans must be terminated; or the Borrower or any other member
of the Controlled Group shall enter into, contribute or be obligated to
contribute to, terminate or incur any withdrawal liability with respect to, a
Multiemployer Plan;
(j) one or more final, nonappealable judgments or orders for the
payment of money in an aggregate amount in excess of $250,000 shall be rendered
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against the Borrower or any Consolidated Subsidiary and such judgment or order
shall continue unsatisfied and unstayed for a period of 30 days; or
(k) a federal tax lien for a claimed amount in excess of $100,000
shall be filed against the Borrower or any Consolidated Subsidiary under Section
6323 of the Code or a lien of the PBGC shall be filed against the Borrower or
any Consolidated Subsidiary under Section 4068 of ERISA and in either case such
lien shall remain undischarged for a period of 25 days after the date of filing;
or
(l) except as a result of the election of designees of Lender to
Borrower's Board of Directors on the Closing Date pursuant to this Agreement, as
of any date a majority of the Board of Directors of the Borrower consists of
individuals who were not either (A) directors of the Borrower as of the
corresponding date of the previous year, (B) selected or nominated to become
directors by the Board of Directors of the Borrower of which a majority
consisted of individuals described in clause (A), or (C) selected or nominated
to become directors by the Board of Directors of the Borrower of which a
majority consisted of individuals described in clause (A) and individuals
described in clause (B); or
(m) (i) any default by the Borrower or any of the Guarantors
under any of the Loan Documents shall exist after the satisfaction of any
applicable grace, notice or cure periods, if any, (ii) any Loan Documents
(including, without limitation, the Guaranty) shall cease to be enforceable, or
(iii) any Guarantor or the Borrower shall assert that any Loan Document
(including, without limitation, the Guaranty) shall cease to be enforceable
then, and in every such event (an "Event of Default"), the Lender may by notice
to the Borrower declare the Note (together with accrued interest thereon) to be,
and the Note shall thereupon become, immediately due and payable without
presentment, demand, protest or additional notice of any kind, all of which are
hereby waived by the Borrower, together with interest at the Default Rate
accruing on the principal amount thereof from and after the date of such Event
of Default; provided that if any Event of Default specified in paragraph (g) or
(h) above occurs with respect to the Borrower, without any notice to the
Borrower or any other act by the Lender, the Notes (together with accrued
interest thereon) shall become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower together with interest thereon at the Default Rate accruing on the
principal amount thereof from and after the date of such Event of Default.
Notwithstanding the foregoing, the Lender shall have available to it all other
remedies at law or equity, and may any one or all of them.
ARTICLE VII
MISCELLANEOUS
Section 7.1. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, telecopier or
similar writing) and shall be given to such party at its address or telecopier
number set forth on the signature pages hereof or such other address or
telecopier number as such party may hereafter specify for the purpose by notice
to each other party. Each such notice, request or other communication shall be
effective (i) if given by mail, 72 hours after such communication is deposited
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in the mails with first class postage prepaid, addressed as aforesaid or (ii) if
given by any other means, when delivered at the address specified in this
Section.
Section 7.2. No Waivers. No failure or delay by the Lender in exercising
any right, power or privilege hereunder or under the Note or other Loan Document
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
Section 7.3. Expenses; Documentary Taxes. If a Default occurs, the
Borrower shall pay or reimburse lender, as the case may be, for all
out-of-pocket expenses incurred by the Lender, including fees and disbursements
of counsel, in connection with such Default and collection and other enforcement
proceedings resulting therefrom, including out-of-pocket expenses incurred in
enforcing this Agreement and the other Loan Documents. The Borrower shall
indemnify the Lender against any transfer taxes, documentary taxes, assessments
or charges made by any Authority by reason of the execution and delivery of this
Agreement or the other Loan Documents.
Section 7.4. Indemnification. The Borrower shall indemnify the Lender
and its directors, officers, partners, trustees, beneficiaries, controlling
persons, shareholders, employees and agents from, and hold each of them harmless
against, any and all losses, liabilities, claims or damages to which any of them
may become subject, insofar as such losses, liabilities, claims or damages arise
out of or result from (i) any actual or proposed use by the Borrower of the
proceeds of any extension of credit by Lender hereunder, or (ii) breach by the
Borrower of this Agreement (including, without limitation, representations,
warranties and covenants relating to environmental matters) or any other Loan
Document, or from any investigation, litigation (including, without limitation,
any actions taken by Lender to enforce this Agreement or any of the other Loan
Documents) or other proceeding (including, without limitation, any threatened
investigation or proceeding) relating to the foregoing, and the Borrower shall
reimburse Lender, and its directors, officers, employees and agents, upon demand
for any expenses (including, without limitation, legal fees) incurred in
connection with any such investigation or proceeding; but excluding any such
losses, liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified.
Section 7.5. Amendments and Waivers. Any provision of this Agreement,
the Note or any other Loan Documents may be amended or waived if, but only if,
such amendment or waiver is in writing and is signed by the Borrower and the
Lender. The Borrower will not solicit, request or negotiate for or with respect
to any proposed waiver or amendment of any of the provisions of this Agreement
unless Lender shall be informed thereof by the Borrower and shall be afforded an
opportunity of considering the same and shall be supplied by the Borrower with
sufficient information to enable it to make an informed decision with respect
thereto.
Section 7.6. Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided that the Borrower may not assign or otherwise transfer any of
its rights under this Agreement.
26
<PAGE> 31
(b) Lender (or successor or assignee of any Lender) may at any
time sell to one or more Affiliates (each a "Participant") participating
interests in Loan owing to such Lender, any Note held by such Lender, or any
other interest of such Lender hereunder. In the event of any such sale by the
Lender of a participating interest to a Participant, Lender's obligations under
this Agreement shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the holder of
any such Note for all purposes under this Agreement, and the Borrower shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement. In no event shall a Lender
that sells a participation be obligated to the Participant to take or refrain
from taking any action hereunder except that such Lender may agree that it will
not (except as provided below), without the consent of the Participant, agree to
(i) the change of any date fixed for the payment of principal of or interest on
the related loan or loans, (ii) the change of the amount of any principal,
interest or fees due on any date fixed for the payment thereof with respect to
the related loan or loans, (iii) the change of the principal of the related loan
or loans, (iv) any change in the rate at which either interest is payable
thereon or (if the Participant is entitled to any part thereof) fee is payable
hereunder from the rate at which the Participant is entitled to receive interest
or fee (as the case may be) in respect of such participation, (v) the release or
substitution of all or any substantial part of the collateral (if any) held as
security for the Borrower's obligations hereunder, or (vi) the release of any
Guarantee given to support payment of the Borrower's obligations hereunder. Each
Lender selling a participating interest in any Loan, Note, or other interest
under this Agreement shall provide the Borrower with written notification
stating that such sale has occurred and identifying the Participant and the
interest purchased by such Participant.
(c) Lender or assignee of any Lender (in either case, a
"Transferor") may at any time assign to one or more Affiliates of Lender (each
an "Assignee") all, or a proportionate part of all, of its rights and
obligations under this Agreement, the Note and the other Loan Documents and such
Assignee shall assume all rights and obligations of the Transferor hereunder
pursuant to an agreement executed by such Assignee and such Transferor in form
and substance satisfactory to the Transferor (an "Assignment Agreement"). Upon
(a) execution of the Assignment Agreement by and such Transferor, such Assignee
and (b) payment by such Assignee to and Transferor of an amount equal to the
purchase price agreed between such Transferor and such Assignee, and (c) payment
of a such Assignee shall for all purposes be a Lender party to this Agreement
and shall have all the rights and obligations of a Lender under this Agreement
to the same extent as if it were an original party hereto with a pro rata share
as set forth in the Assignment Agreement, and the Transferor shall be released
from its obligations hereunder to a corresponding extent, and no further consent
or action by the Borrower, or the Lender shall be required. Upon the
consummation of any transfer to an Assignee pursuant to this paragraph (c), the
Transferor, and the Borrower shall make appropriate arrangements so that, if
required, a new Note (or Notes) is (are) issued to such Assignee.
(d) Subject to the provisions of Section 7.7, the Borrower
authorizes each Lender to disclose to any Participant, Assignee or other
transferee (each a "Transferee") and any prospective Transferee who has agreed
in writing to be bound by Section 7.7 any and all financial information in such
Lender's possession concerning the Borrower which has been delivered to such
27
<PAGE> 32
Lender by the Borrower pursuant to this Agreement or which has been delivered to
such Lender by the Borrower in connection with such Lender's credit evaluation
prior to entering into this Agreement.
(e) Anything in this Section 7.6 to the contrary notwithstanding,
any Lender may assign and pledge all or any portion of the Loan and/or
obligations owing to it to as collateral security, provided that any payment in
respect of such assigned Loan and/or obligations made by the Borrower to the
assigning and/or pledging Lender in accordance with the terms of this Agreement
shall satisfy the Borrower's obligations hereunder in respect of such assigned
Loan and/or obligations to the extent of such payment. No such assignment shall
release the assigning and/or pledging Lender from its obligations hereunder.
Section 7.7. Confidentiality. Lender agrees to keep any information
delivered or made available by the Borrower to it which is clearly indicated to
be confidential information, confidential from anyone other than persons
employed or retained by Lender who are or are expected to become engaged in
evaluating, approving, structuring or administering the Borrower's obligations
hereunder provided, that, such individuals shall be subject to the agreement
contained in this Section 7.7; provided, however that nothing herein shall
prevent Lender from disclosing such information (i) to any other Lender, (ii)
upon the order of any court or administrative agency after notice to the
Borrower, (iii) upon the request or demand of any regulatory agency or authority
having jurisdiction over such Lender after notice to the Borrower, (iv) which
has been publicly disclosed by Borrower, (v) to the extent reasonably required
in connection with any litigation to which the Lender or its Affiliates may be a
party, (vi) to the extent reasonably required in connection with the exercise of
any remedy hereunder, (vii) to Lender's legal counsel and independent auditors
and (viii) to any actual or proposed Participant, Assignee or other Transferee
of all or part of its rights hereunder, provided that such proposed Participant,
Assignee or other Transferee agrees in writing to be bound by this Section.
Section 7.8. Utah Law. This Agreement and each of the loan documents
shall be construed in accordance with and governed by the law of the State of
Utah.
Section 7.9. Severability. In case any one or more of the provisions
contained in this Agreement, the Note or any of the other Loan Documents should
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby and shall be enforced to the
greatest extent permitted by law.
Section 7.10. Interest. Lender and Borrower intend to contract in
compliance with all state and federal usury laws governing the Loans made
hereunder. In no event shall the amount of interest due or payable hereunder or
under the Note exceed the maximum rate of interest allowed by applicable law,
and in the event any such payment is inadvertently made to Lender by the
Borrower or inadvertently received by Lender, then such excess sum shall be
credited as a payment of principal, unless the Borrower shall notify such Lender
in writing that it elects to have such excess sum returned forthwith. It is the
express intent hereof that the Borrower not pay and the Lender not receive,
directly or indirectly in any manner whatsoever, interest in excess of that
which may legally be paid by the Borrower under applicable law.
28
<PAGE> 33
Section 7.11. Interpretation. No provision of this Agreement or any of
the other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured or
dictated such provision.
Section 7.12. Waiver of Jury Trial; Consent to Jurisdiction. Each of the
Borrower and the Lender irrevocably (a) waives any and all right to trial by
jury in any legal proceeding arising out of this Agreement, any of the other
Loan Documents, or any of the transactions contemplated hereby or thereby, (b)
submits to the nonexclusive personal jurisdiction in the State of Utah, the
courts thereof and the United States District Courts sitting therein, for the
enforcement of this Agreement, the Note and the other Loan Documents, (c) waives
any and all personal rights under the law of any jurisdiction to object on any
basis (including, without limitation, inconvenience of forum) to jurisdiction or
venue within the State of Utah for the purpose of litigation to enforce this
Agreement, the Notes or the other Loan Documents, and (d) agrees that service of
process may be made upon it in the manner prescribed in Section 7.1 for the
giving of notice to the Borrower. Nothing herein contained, however, shall
prevent the Lender from bringing any action or exercising any rights against any
security and against the Borrower personally, and against any assets of the
Borrower, within any other state or jurisdiction.
Section 7.13. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
29
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
STACEY'S BUFFET, INC
By:
-----------------------------------
Name:
Title:
801 West Bay Drive
Suite 704
Largo, Florida 33770
Attention: President
Telecopier number: (813) 587-9644
Telephone number: (813) 581-4492
STAR BUFFET, INC.,
By:
-----------------------------------
Name:
Tile:
440 Lawndale Drive
Salt Lake City, Utah 84115-1917
Attention: Charlotte Miller
Telecopier No.: (801) 463-5585
Telephone No.: (801) 463-5500
30
<PAGE> 1
99.2
WARRANT TO PURCHASE COMMON STOCK
OF
STACEY'S BUFFET, INC.
<PAGE> 2
EXHIBIT 99.2
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), NOR QUALIFIED UNDER THE SECURITIES LAWS OF
ANY STATE. THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO,
OR FOR SALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF
THE SECURITIES ACT AND THE SECURITIES LAW. THIS WARRANT AND THE SHARES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND COMPLIANCE WITH
THE SECURITIES LAW OF ANY STATE OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY TO THE EFFECT THAT SUCH REGISTRATION AND COMPLIANCE ARE NOT REQUIRED.
Warrant to Purchase
1,342,422 Shares of
Common Stock
As Herein Described
WARRANT TO PURCHASE COMMON STOCK
OF
STACEY'S BUFFET, INC.
This is to certify that, for value received, STAR BUFFET, INC., or
registered assigns (in each case, the "Holder"), is entitled to purchase,
subject to the provisions of this Warrant, from Stacey's Buffet, Inc., a Florida
corporation (the "Company"), at any time during the period from the date hereof
(the "Commencement Date") to 5:00 p.m., California time, on October 31, 2002
(the "Expiration Date"), at which time this Warrant shall expire, 1,342,422
shares ("Warrant Shares") of the Company's Common Stock, par value $0.01 per
share (the "Common Stock"), for a purchase price per share (the "Exercise
Price") of One Dollar ($1.00). The number of shares of Common Stock to be
received upon exercise of this Warrant and the Exercise Price shall be adjusted
from time to time as set forth below. This Warrant also is subject to the
following terms and conditions:
1. Exercise of Warrant.
1.1 Exercise and Payment. This Warrant may be exercised in
whole or in part at any time from and after the date hereof and before the
Expiration Date, but if such date is a day on which federal or state chartered
banking institutions located in the State of California are authorized to close,
then on the next succeeding day which shall not be such a day. Exercise shall be
by presentation and surrender to the Company at its principal office, or at the
office of any transfer agent designated by the Company, of (i) this Warrant,
(ii) the attached exercise form properly executed, and (iii) either (A) a bank
check for the Exercise Price for the number of Warrant Shares specified in the
exercise form, or (B) cancellation of indebtedness of the Company to the Holder
in an amount equal to the Exercise Price for the number of Warrant Shares
specified in the exercise form, provided that such cancellation of indebtedness
shall be applied against the payments next due thereunder or (C) any combination
of the consideration specified in the foregoing clauses (A) and (B). If this
Warrant is exercised in part only, the Company or its transfer agent shall, upon
surrender of the Warrant, execute and deliver a new
<PAGE> 3
Warrant evidencing the rights of the Holder to purchase the remaining number of
Warrant Shares purchasable hereunder. Upon receipt by the Company of this
Warrant in proper form for exercise, accompanied by payment as aforesaid, the
Holder shall be deemed to be the holder of record of the Common Stock issuable
upon such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such Warrant Shares shall
not then be actually delivered to the Holder.
1.2 Net Issue Exercise. Notwithstanding any provisions in this
Warrant to the contrary, in lieu of exercising this Warrant for cash, the Holder
shall have the right, upon its written request delivered or transmitted to the
Company together with this Warrant, to exchange this Warrant, in whole or in
part at any time or from time to time on or prior to the Expiration Date, for
the number of shares of Common Stock designated by such Holder less the number
of shares having an aggregate fair market value (determined as set forth in
Section 3 hereof) on the date of such exchange equal to the aggregate Exercise
Price the Holder would have paid to the Company to purchase such designated
number of Warrant Shares, and, if a balance of purchasable Warrant Shares
remains after such exchange, the Company shall execute and deliver to the Holder
a new Warrant evidencing the right of the Holder to purchase such balance of
Warrant Shares. No payment of any cash or other consideration shall be required.
Such exchange shall be effective upon the date of receipt by the Company of the
original Warrant surrendered for cancellation and a written request from the
Holder that the exchange pursuant to this Subsection be made, or at such later
date as may be specified in such request.
2. Reservation of Shares. The Company shall, at all times until the
expiration of this Warrant, reserve for issuance and delivery upon exercise of
this Warrant the number of Warrant Shares which shall be required for issuance
and delivery upon exercise of this Warrant. The Company covenants that the
shares of Common Stock issuable on exercise of the Warrant shall be duly and
validly issued and fully paid and non-assessable and free of liens, charges and
all taxes with respect to the issue thereof, and that upon issuance, such shares
shall be listed on each national securities exchange, if any, on which the other
shares of outstanding Common Stock of the Company are then listed.
3. Fractional Interests. The Company shall not issue any fractional
shares or script representing fractional shares upon the exercise or exchange of
this Warrant. With respect to any fraction of a share resulting from the
exercise or exchange hereof, the Company shall pay to the Holder an amount in
cash equal to such fraction multiplied by the current fair market value per
share of Common Stock (herein, the "Market Price Per Share"), determined as
follows:
(a) If the Common Stock is listed on a national securities exchange
or admitted to unlisted trading privileges on such an exchange or is listed on
the National Association of Securities Dealers Automated Quotation System
("NASDAQ"), the current fair market value shall be the average of the per share
closing sales prices of the Common Stock on such exchange or NASDAQ for the 20
consecutive trading days ending on the last trading day prior to the date of
exercise of this Warrant;
(b) If the Common Stock is not so listed or admitted to unlisted
trading privileges or quoted on NASDAQ, the current fair market value shall be
the average of the mean of the bid and asked prices reported for the 20
consecutive trading days ending on the last trading day prior to
2
<PAGE> 4
the date of the exercise of this Warrant (i) by NASDAQ, or (ii) if reports are
unavailable under clause (i) above, by the National Quotation Bureau
Incorporated; or
(c) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the current
fair market value shall be an amount, not less than book value, determined in
such reasonable manner as may be prescribed by the Company's Board of Directors
in good faith.
4. No Rights as Stockholder. This Warrant shall not entitle the Holder
to any rights as a stockholder of the Company, either at law or in equity. The
rights of the Holder are limited to those expressed in this Warrant and are not
enforceable against the Company except to the extent set forth herein. Nothing
herein concerning the rights or privileges of the Holder hereof shall give rise
to any liability of such Holder for the purchase price of any Warrant Shares or
as a shareholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
5. Adjustments.
5.1 Subdivision or Combination of Shares. If the Company is
recapitalized through the subdivision or combination of its outstanding shares
of Common Stock into a larger or smaller number of shares, the number of Warrant
Shares shall be increased or reduced, as of the record date for such
recapitalization, in the same proportion as the increase or decrease in the
outstanding shares of Common Stock, and the Exercise Price shall be adjusted so
that the aggregate amount payable for the purchase of all of the Warrant Shares
issuable hereunder immediately after the record date for such recapitalization
shall equal the aggregate amount so payable immediately before such record date.
5.2 Dividends in Common Stock or Securities Convertible into
Common Stock. If the Company declares a dividend or distribution on Common Stock
payable in Common Stock or securities convertible into Common Stock, the number
of shares of Common Stock for which this Warrant may be exercised shall be
increased, as of the record date for determining which holders of Common Stock
shall be entitled to receive such dividend, in proportion to the increase in the
number of outstanding shares (and shares of Common Stock issuable upon
conversion of all such securities convertible into Common Stock) of Common Stock
as a result of such dividend, and the Exercise Price shall be adjusted so that
the aggregate amount payable for the purchase of all the Warrant Shares issuable
hereunder immediately after the record date for such dividend shall equal the
aggregate amount so payable immediately before such record date.
5.3 Distributions of Other Securities or Property.
(a) Other Securities. If the Company distributes to holders of
its Common Stock, other than as part of its dissolution or liquidation or the
winding up of its affairs, any of its securities (other than Common Stock or
securities convertible into Common Stock) or any evidence of indebtedness, then
in each case, the number of Warrant Shares thereafter purchasable upon exercise
of this Warrant shall be determined by multiplying the number of Warrant Shares
theretofore purchasable by a fraction, of which the numerator shall be the then
Market Price Per Share of Common Stock (as determined pursuant to Section 3) on
the record date mentioned below in this Section 5.3(a), and of which the
denominator shall be the then Market Price Per Share of Common Stock on such
record date, less the then fair value (as determined by the Board of Directors
of the Company in good faith) of the portion of the shares of the Company's
capital stock or evidences of indebtedness distributable with
3
<PAGE> 5
respect to each share of Common Stock. Such adjustment shall be made whenever
any such distribution is made, and shall become effective retroactively as of
the record date for the determination of shareholders entitled to receive such
distribution.
(b) Property. If the Company distributes to the holders of its
Common Stock, other than as a part of its dissolution or liquidation or the
winding up of its affairs, any of its assets (including cash), the Exercise
Price per Warrant Share shall be reduced, without any further action by the
parties hereto, by the Per Share Value (as hereinafter defined) of the dividend
or distribution. For the purposes of this Section 5.3(b), the "Per Share Value"
of any dividend or distribution other than cash shall be equal to the fair
market value of such non-cash distribution divided by the number of shares of
Common Stock outstanding and securities convertible into Common Stock as
determined in good faith by the Board of Directors of the Company; for dividends
or distributions of cash, the Per Share Value thereof shall be the cash
distributed per share of Common Stock.
5.4 Rights Offering. If the Company offers rights or warrants
to the holders of Common Stock which entitle them to subscribe to or purchase
additional Common Stock or securities convertible into Common Stock then:
(a) If the price per share (together with the value of the
consideration, if any, paid for such rights or warrants) is lower on the record
date referred to below than the then Market Price Per Share of Common Stock, the
number of Warrant Shares thereafter purchasable upon the exercise of the Warrant
shall be determined by multiplying the number of Warrant Shares immediately
theretofore purchasable upon exercise of the Warrant by a fraction, of which the
numerator shall be the number of shares of Common Stock outstanding on such
record date plus the number of additional shares of Common Stock offered for
subscription or purchase, and of which the denominator shall be the number of
shares of Common Stock outstanding on such record date plus the number of shares
which the aggregate offering price of the total number of shares of Common Stock
so offered would purchase at the then Market Price Per Share of Common Stock.
Such adjustment shall be made whenever such rights or warrants are issued, and
shall become effective retroactively as of the record date for the determination
of shareholders entitled to receive such rights or warrants.
(b) If, however, the price per share (together with the value
of the consideration, if any, paid for such rights or warrants) is not lower on
such record date than the then Market Price Per Share of Common Stock, the
Company shall give written notice of any such proposed offering to the Holder at
least fifteen days prior to the proposed record date in order to permit the
Holder to exercise this Warrant on or before such record date. There shall be no
adjustment in the number of shares of Common Stock for which this Warrant may be
exercised, or in the Exercise Price, by virtue of any such distribution.
5.5 Merger, Sale of Assets. If at any time while this Warrant,
or any portion thereof, is outstanding and unexpired there shall be (i) a
reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash, or
otherwise, or (iii) a sale or transfer of the Company's properties and assets
as, or substantially as, an entirety to any other
4
<PAGE> 6
person, then, as a part of such reorganization, merger, consolidation, sale or
transfer, lawful provision shall be made so that the holder of this Warrant
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the Exercise Price then in
effect, the number of shares of stock or other securities or property of the
successor corporation resulting from such reorganization, merger, consolidation,
sale or transfer that a holder of the shares deliverable upon exercise of this
Warrant would have been entitled to receive in such reorganization,
consolidation, merger, sale or transfer if this Warrant had been exercised
immediately before such reorganization, merger, consolidation, sale or transfer,
all subject to further adjustment as provided in this Section 5. The foregoing
provisions of this Section 5.5 shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the stock
or securities of any other corporation that are at the time receivable upon the
exercise of this Warrant. In all events, appropriate adjustment (as determined
in good faith by the Company's Board of Directors) shall be made in the
application of the provisions of this Warrant with respect to the rights and
interests of the Holder after the transaction, to the end that the provisions of
this Warrant shall be applicable after that event, as near as reasonably may be,
in relation to any shares or other property deliverable after that event upon
exercise of this Warrant.
5.6 Reclassification. If the Company, at any time while this Warrant,
or any portion thereof, remains outstanding and unexpired by reclassification of
securities or otherwise, shall change any of the securities as to which purchase
rights under this Warrant exist into the same or a different number of
securities of any other class or classes, this Warrant shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities that
were subject to the purchase rights under this Warrant immediately prior to such
reclassification or other change and the Exercise Price therefor shall be
appropriately adjusted, all subject to further adjustment as provided in this
Section 5.
5.7 Liquidation, etc. If the Company shall, at any time before the
expiration of this Warrant, dissolve, liquidate or wind up its affairs, or
otherwise declare a dividend, or make a distribution to the holders of its
Common Stock generally, whether in cash, property or assets of any kind,
including any dividend payable in stock or securities of any other issuer owned
by the Company (excluding regularly payable cash dividends declared from time to
time by the Company's Board of Directors or any dividend or distribution
referred to in Section 5.2 or Section 5.3), the Exercise Price shall be reduced,
without any further action by the parties hereto, by the Per Share Value (as
hereinafter defined) of the dividend. For purposes of this Section 5.7, the "Per
Share Value" of a cash dividend or other distribution shall be the dollar amount
of the distribution on each share of Common Stock and the "Per Share Value" of
any dividend or distribution other than cash shall be equal to the fair market
value of such non-cash distribution on each share of Common Stock as determined
in good faith by the Board of Directors of the Company.
5.8 Dilutive Issuances.
(a) Upon each issuance (or deemed issuance as provided below) by
the Company of any shares of Common Stock (the "Additional Stock") after the
date hereof, other than "Excluded Stock" (as defined below), for a consideration
per share less than the Exercise Price in effect immediately prior to the
issuance, the Exercise Price in effect immediately prior to each issuance shall
forthwith be adjusted to a price determined by multiplying the Exercise Price by
a fraction, (x) the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to
5
<PAGE> 7
the issuance of such Additional Stock plus the number of shares of Common Stock
which the aggregate consideration received by the Corporation for the total
number of shares of Additional Stock so issued would purchase at the Exercise
Price in effect immediately prior to such issuance, and (y) the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issuance of Additional Stock plus the number of shares of such
Additional Stock so issued. For the purpose of the above calculation, the number
of shares of Common Stock outstanding immediately prior to such issuance of
Additional Stock shall be calculated on a fully diluted basis, as if all
convertible securities had been fully converted into shares of Common Stock
immediately prior to such issuance, and any outstanding options, warrants or
other rights for the purchase of shares of stock or convertible securities had
been fully exercised immediately prior to such issuance (and the resulting
securities fully converted into shares of Common Stock if so convertible) as of
such date, but not including in such calculation any additional shares of Common
Stock issuable with respect to convertible securities, or outstanding options,
warrants or other rights for the purchase of shares of stock or convertible
securities, solely as a result of the adjustment of the respective conversion or
exercise prices (or other conversion ratios) resulting from the issuance of the
Additional Stock causing the adjustment in question.
(b) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable discounts, commissions or other expenses allowed, paid
or incurred by the Company for any underwriting or otherwise in connection with
the issuance and sale thereof.
(c) In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined in good faith by
the Board of Directors irrespective of any accounting treatment.
(d) In the case of the issuance of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities, the following provisions shall
apply for all purposes of this Section 5.8:
(i) The aggregate maximum number of shares of Common Stock
deliverable upon exercise (whether or not then exercisable) of such
options to purchase or rights to subscribe for Common Stock shall be
deemed to have been issued at the time such options or rights were
issued and for a consideration equal to the consideration, if any,
received by the Company upon the issuance of such options or rights
plus the minimum exercise price provided in such options or rights for
the Common Stock covered thereby.
(ii) The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange (whether or not then
convertible or exchangeable) for any such convertible or exchangeable
securities or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and
subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such options or
rights were issued and for a consideration equal to the consideration,
if any, received by the Company for any such securities and related
options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the minimum additional
consideration, if any, to be received by the Company
6
<PAGE> 8
upon the conversion or exchange of such securities or the exercise of
any related options or rights.
(iii) In the event of any change in the number of shares of
Common Stock deliverable or in the consideration payable to the Company
upon exercise of such options or rights or upon conversion of or in
exchange for such convertible or exchangeable securities, including,
but not limited to, a change resulting from the antidilution provisions
thereof, the Exercise Price, to the extent in any way affected by or
computed using such options, rights or securities, shall be recomputed
to reflect such change, but no further adjustment shall be made for the
actual issuance of Common Stock or any payment of such consideration
upon the exercise of any such options or rights or the conversion or
exchange of such securities.
(iv) Upon the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the expiration
of any options or rights related to such convertible or exchangeable
securities, the Exercise Price, to the extent in any way affected by or
computed using such options, rights or securities, shall be recomputed
to reflect the issuance of only the number of shares of Common Stock
(and convertible or exchangeable securities that remain in effect)
actually issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities or upon the exercise of the
options or rights related to such securities.
(v) The number of shares of Common Stock deemed issued and the
consideration deemed paid therefor pursuant to subparagraphs (i) and
(ii) above shall be appropriately adjusted to reflect any change,
termination or expiration of the type described in either subparagraphs
(iii) or (iv) above.
(e) The term "Excluded Stock" shall mean:
(i) shares of Common Stock issued or issuable upon exercise of
these Warrants;
(ii) shares of Common Stock issued or issuable in a public
offering registered under the Securities Act;
(iii) up to 639,175 shares of Common Stock or related options
exercisable for such Common Stock issued to employees, officers, and
directors of, and consultants, customers, and vendors to, the Company,
pursuant to an arrangement approved by the Board of Directors of the
Company; and
(iv) shares of Common Stock issued pursuant to a transaction
described in Sections 5.1, 5.2, 5.4 or 5.6 above.
5.9 Adjustment of Exercise Price. Whenever the number of Warrant Shares
purchasable upon the exercise of the Warrant is adjusted, the Exercise Price
with respect to the Warrant Shares shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Warrant Shares purchasable upon the exercise of
the Warrant immediately prior to such adjustment, and of which the denominator
shall be the number of Warrant Shares so purchasable immediately thereafter.
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<PAGE> 9
5.10 Notice of Adjustment. Whenever the number of Warrant Shares
purchasable upon the exercise of the Warrant or the Exercise Price of the
Warrant Shares is adjusted as provided herein, the Company shall mail to the
Holder a notice of such adjustment or adjustments, prepared and signed by the
Chief Financial Officer or Secretary of the Company, which sets forth the number
of Warrant Shares purchasable upon the exercise of the Warrant and the Exercise
Price of such Warrant Shares after such adjustment, a brief statement of the
facts requiring such adjustment, and the computation by which such adjustment
was made.
5.11 Limitation on Adjustments. No adjustment in the number of Warrant
Shares purchasable hereunder shall be required unless such adjustment would
require an increase or decrease of at least one percent in the number of Warrant
Shares purchasable upon the exercise of this Warrant; provided, however, that
any adjustments which by reason of this Section 5.11 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment or
in any subsequent exercise in whole or in part of the Warrant.
6. Notices to Holder. So long as this Warrant shall be outstanding (a)
if the Company shall pay any dividends or make any distribution upon the Common
Stock otherwise than in cash or (b) if the Company shall offer generally to the
holders of Common Stock the right to subscribe to or purchase any shares of any
class of Common Stock or securities convertible into Common Stock or any similar
rights or (c) if there shall be any capital reorganization of the Company in
which the Company is not the surviving entity, recapitalization of the capital
stock of the Company, consolidation or merger of the Company with or into
another corporation, sale, lease or other transfer of all or substantially all
of the property and assets of the Company, or voluntary or involuntary
dissolution, liquidation or winding up of the Company, then in such event, the
Company shall cause to be mailed to the Holder, at least twenty days prior to
the relevant date described below (or such shorter period as is reasonably
possible if twenty days is not reasonably possible), a notice containing a
description of the proposed action and stating the date or expected date on
which a record of the Company's stockholders is to be taken for the purpose of
any such dividend, distribution of rights, or such reclassification,
reorganization, consolidation, merger, conveyance, lease or transfer,
dissolution, liquidation or winding up is to take place, the effect of the
action, to the extent such effect may be known on the date of such notice on the
Exercise Price and the kind and amount of shares of stock or other securities or
property deliverable on the exercise of the Warrant, and the date or expected
date, if any is to be fixed, as of which the holders of Common Stock of record
shall be entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such event. All such notices shall be deemed to
have been received (i) in the case of personal delivery, on the date of such
delivery, and (ii) in the case of mailing, on the third business day following
the date of such mailing.
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<PAGE> 10
7. Transfer or Loss of Warrant.
7.1 Transfer. This Warrant may be transferred, exercised, exchanged or
assigned ("transferred"), in whole or in part, subject to the provisions of this
Section 7.1. The Holder shall have the right to transfer all or a part of this
Warrant and all or part of the Warrant Shares to its officers, directors or to
its parent or subsidiary corporations. The Company shall register on its books
any permitted transfer of the Warrant, upon surrender of same to the Company
with a written instrument of transfer duly executed by the registered Holder or
by a duly authorized attorney. Upon any such registration of a transfer, new
Warrant(s) shall be issued to the transferee(s) and the surrendered Warrant
shall be cancelled by the Company. A Warrant may also be exchanged, at the
option of the Holder, for one or more new Warrants representing the aggregate
number of Warrant Shares evidenced by the Warrant surrendered. This Warrant and
the Warrant Shares or any other securities ("Other Securities") received upon
exercise of this Warrant or the conversion of the Warrant Shares shall be
subject to restrictions on transferability unless registered under the
Securities Act of 1933, as amended (the "Securities Act"), or unless an
exemption from registration is available. Until this Warrant and the Warrant
Shares are so registered, this Warrant and any certificate for Warrant Shares
issued or issuable upon exercise of this Warrant shall contain a legend on the
face thereof, in form and substance satisfactory to counsel for the Company,
stating that this Warrant or the Warrant Shares may not be sold, transferred or
otherwise disposed of unless, in the opinion of counsel satisfactory to the
Company, which may be counsel to the Company, that the Warrant or the Warrant
Shares may be transferred without such registration. This Warrant and the
Warrant Shares may also be subject to restrictions on transferability under
applicable state securities or blue sky laws. Until the Warrant and the Warrant
Shares are registered under the Securities Act, the Holder shall reimburse the
Company for its expenses, including attorneys' fees, incurred in connection with
any transfer or assignment, in whole or in part, of this Warrant or any Warrant
Shares.
7.2 Compliance with Laws. Until this Warrant or the Warrant Shares are
registered under the Securities Act, the Company may require, as a condition of
transfer of this Warrant or the Warrant Shares that the transferee (who may be
the Holder in the case of an exchange) represent that the securities being
transferred are being acquired for investment purposes and for the transferee's
own account and not with a view to or for sale in connection with any
distribution of the security.
7.3 Loss of Warrant. Upon receipt by the Company of evidence reasonably
satisfactory to it of loss, theft, destruction or mutilation of this Warrant
and, in the case of loss, theft or destruction, of reasonable satisfactory
indemnification, or, in the case of mutilation, upon surrender of this Warrant,
the Company will execute and deliver, or instruct the Transfer Agent to execute
and deliver, a new Warrant of like tenor and date, any such lost, stolen or
destroyed Warrant thereupon shall become void.
8. No Impairment. The Company will not, by amendment of its Certificate
of Incorporation or otherwise, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times, in good
faith, take all such action as may be necessary or appropriate in order to
protect the rights of the Holder against impairment.
9
<PAGE> 11
9. Notices. Notices and other communications to be given to the Holder
shall be deemed sufficiently given if delivered by hand, or two business days
after mailing if mailed by registered or certified mail, postage prepaid,
addressed in the name and at the address of such Holder appearing on the records
of the Company. Notices or other communications to the Company shall be deemed
to have been sufficiently given if delivered by hand or two business days after
mailing if mailed by registered or certified mail, postage prepaid, to the
Company at:
801 West Bay Drive, Suite 704
Largo, Florida 33770
Either party may change the address to which notices shall be given by notice
pursuant to this Section 9.
10. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of California.
11. Registration Rights. Upon exercise of this Warrant, the Holder
shall have and be entitled to exercise rights of registration pursuant to that
certain Registration Rights Agreement dated of even date herewith.
12. Compliance with Securities Laws. The Holder of this Warrant, by
acceptance hereof, acknowledges that this Warrant and the shares of Common Stock
to be issued upon exercise hereof are being acquired solely for the Holder's own
account and not as a nominee for any other party, and for investment, and that
the Holder will not offer, sell or otherwise dispose of this Warrant or any
shares of Common Stock to be issued upon exercise hereof except under
circumstances that will not result in a violation of the Act or any state
securities laws. Upon exercise of this Warrant, the Holder shall, if requested
by the Company, confirm in writing, in a form satisfactory to the Company, that
the shares of Common Stock so purchased are being acquired solely for the
Holder's own account and not as a nominee for any other party, for investment,
and not with a view toward distribution or resale. All shares of Common Stock
issued upon exercise hereof shall be stamped or imprinted with a legend
substantially the same as the legend imprinted on the face of this Warrant.
13. Compliance with H-S-R Act. The Company covenants and agrees that it
will make any and all filings under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, and any and all rules promulgated thereunder, as from time to time
may be amended, that may be necessary or required for issuance and delivery of
the Warrant Shares upon exercise of this Warrant.
IN WITNESS WHEREOF, the Company has executed this Warrant as of
October __, 1997.
STACEY'S BUFFET, INC.
By:
-------------------------------
Its:
--------------------------
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Annex A
[FORM OF EXERCISE]
(To be executed upon exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase______ shares of Common
Stock and herewith tenders payment for such shares of Common Stock to the order
of Stacey's Buffet, Inc. in the amount of $__________. The undersigned requests
that a certificate for such shares of Common Stock be registered in the name of
, whose address is ____________________________. If such number of shares of
Common Stock is less than all of the shares of Common Stock purchasable
hereunder, the undersigned requests that a new Warrant Certificate representing
the remaining balance of the shares of Common Stock be registered in the name of
_______________________, whose address is _______________________, and that such
Warrant Certificate be delivered to _____________________, whose address is
______________________________.
Dated:
Signature:
------------------------------
(Signature must conform in all respects
to name of Holder as specified on the
face of the Warrant Certificate.)
- -----------------------------------
(Insert Social Security or Taxpayer
Identification Number of Holder.)
