<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended June 18, 1997.
/ / Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from __________to ___________
Commission File Number 000-16791
STACEY'S BUFFET, INC.
---------------------
(Exact Name of Registrant as specified in its Charter)
Florida 59-2736736
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12812 60th Street North, Suite #200, Clearwatero, FL 33760
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 507-0335
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes /X/ No / /
The number of shares outstanding of registrant's common stock as of November
19, 1997 was 2,493,144 shares.
<PAGE>
STACEY'S BUFFET, INC.
INDEX
----- PAGE #
------
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets as of June 18, 1997 and January 1, 1997 .................3
Statements of Operations for the Twelve Weeks and Twenty-
four Weeks Ended June 18, 1997 and June 19, 1996 ...................4
Statements of Stockholders' Equity for the Twenty-four
Weeks Ended June 18, 1997 and June 19, 1996 ........................5
Statements of Cash Flows for the Twenty-four Weeks
Ended June 18, 1997 and June 19, 1996 ..............................6
Notes to Financial Statements ..........................................7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ..........................8
PART II: OTHER INFORMATION
Item 1. Legal Proceedings ............................................11
Item 2. Changes in Securities ........................................11
Item 3. Defaults Upon Senior Securities ..............................11
Item 4. Submission of Matters to a Vote of Security Holders ..........11
Item 5. Other Information ............................................12
Item 6. Exhibits and Reports on Form 8-K .............................12
Signatures .......................................................13
<PAGE>
STACEY'S BUFFET, INC.
Balance Sheets
October 8, 1997 and January 1, 1997
(Unaudited)
<TABLE>
<CAPTION>
October 8, January 1,
Assets 1997 1997
------ ------ ------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 136,572 252,991
Short-term investments 259,469 806,194
Receivables 114,749 162,993
Inventory 273,754 309,013
Prepaid expenses and other 17,250 35,352
---------- ----------
Total current assets 801,794 1,566,543
"Property and equipment, less accumulated depreciation 6,094,865 6,939,536
Deposits and other assets 157,019 162,588
"Goodwill, less accumulated amortization" 7,744,988 8,109,988
---------- ----------
$ 14,798,666 16,778,655
========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 3,923,443 2,638,948
Line of credit - 340,000
Current portion of obligations under capital leases 12,890 16,168
Accrued expenses 1,403,689 2,052,122
Accrued rent 381,849 607,818
Reserve for restaurant closings 1,776,211 2,174,623
---------- ----------
Total current liabilities 7,498,082 7,829,679
Obligations under capital leases, excluding
current portion 16,534 8,840
---------- ----------
Total liabilities 7,514,616 7,838,519
Stockholders' equity:
Common stock, $.01 par value. Authorized
25,000,000 shares; issued 2,493,144 shares
at October 8, 1997 and January 1, 1997 24,931 24,931
Additional paid in capital 42,787,602 42,787,602
Accumulated deficit (35,528,483)(33,872,397)
---------- ----------
Net stockholders' equity 7,284,050 8,940,136
Commitments and contingencies
---------- ----------
$ 14,798,666 16,778,655
========== ==========
3
See accompanying notes to financial statements.
</TABLE>
<PAGE>
STACEY'S BUFFET, INC.
Statements of Operations
<TABLE>
For the Sixteen Weeks and Forty Weeks Ended
October 8, 1997 and October 9, 1996
(Unaudited)
<CAPTION>
Third Quarter Ended Year to Date Ended
--------------------- --------------------
October 8, October 9, October 8, October 9,
1997 1996 1997 1996
------ ------ -------- ------
<S> <C> <C> <C> <C>
Restaurant sales $ 8,786,653 10,240,110 26,801,602 30,755,810
Cost of restaurant sales:
Food cost 3,544,609 4,160,126 10,375,211 11,892,810
Labor cost 3,156,684 3,386,652 8,524,764 9,292,085
Operating cost 1,694,830 1,938,601 4,488,932 5,067,450
Occupancy cost 933,201 1,071,969 2,283,443 2,632,519
Depreciation and amortization 314,919 324,913 787,647 740,249
---------- ----------- ----------- -----------
Total restaurant costs 9,644,243 10,882,261 26,459,997 29,625,113
---------- ----------- ----------- -----------
Restaurant (loss) profit (857,590) (642,151) 341,605 1,130,698
General and administrative expenses 659,612 668,847 1,728,732 1,733,407
Amortization of goodwill 146,000 146,000 365,000 365,000
---------- ----------- ----------- -----------
Operating loss (1,663,202) (1,456,998) (1,752,127) (967,710)
Other income 6,582 74,712 96,041 248,021
---------- ----------- ----------- -----------
Loss before income taxes (1,656,620) (1,382,286) (1,656,086) (719,689)
Income taxes - - - -
---------- ----------- ----------- -----------
Net loss $ (1,656,620) (1,382,286) (1,656,086) (719,689)
========== =========== =========== ===========
Net loss per share of common stock $ (0.66) (0.55) (0.66) (0.29)
========== =========== =========== ===========
Weighted average number of
common shares outstanding 2,493,144 2,493,144 2,493,144 2,493,144
========== =========== =========== ===========
4
See accompanying notes to financial statements.
</TABLE>
<PAGE>
STACEY'S BUFFET, INC.
Statements of Stockholders' Equity
For the Forty Weeks Ended October 8, 1997
and October 9, 1996
(Unaudited)
<TABLE>
<CAPTION>
Common stock Additional Net
----------------- paid-in Accumulated stockholders'
Shares Amount capital deficit equity
-------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1997 2,493,144 $ 24,931 42,787,602 (33,872,397) 8,940,136
Net loss - - - (1,656,086) (1,656,086)
---------- -------- ----------- ------------ -----------
Balances at October 8, 1997 2,493,144 $ 24,931 42,787,602 (35,528,483) 7,284,050
========== ======== =========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
Common stock Additional Net
----------------- paid-in Accumulated stockholders'
Shares Amount capital deficit equity
-------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Balances at January 3, 1996 2,493,144 $ 24,931 42,787,602 (32,307,142) 10,505,391
Net loss - - - (719,689) (719,689)
---------- -------- ----------- ------------ -----------
Balances at October 9, 1996 2,493,144 $ 24,931 42,787,602 (33,026,831) 9,785,702
========== ======== =========== ============ ===========
5
See accompanying notes to financial statements.
</TABLE>
<PAGE>
STACEY'S BUFFET, INC.
Statements of Cash Flows
For the Forty Weeks Ended October 8, 1997
and October 9, 1996
(Unaudited)
<TABLE>
<CAPTION>
Second Quarter Ended
---------------------
October 8, October 9,
1997 1996
------ ------
<S> <C> <C>
Cash flow from operating activities:
Net loss $ (1,656,086) (719,689)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,290,907 1,313,638
Change in assets and liabilities:
(Increase) decrease in assets:
Short-term investments 546,725 (29,383)
Receivables 48,244 (21,439)
Inventory 35,259 62,217
Prepaid expenses and other 18,102 45,306
Deposits and other assets 5,569 (3,717)
Increase (decrease) in liabilities:
Accounts payable 1,284,495 51,759
Line of credit (340,000) (67,659)
Accrued expenses (874,402) (381,598)
Other liabilities - (27,578)
Reserve for restaurant closings (398,412) (319,725)
----------- ----------
(39,599) (97,868)
Cash flows from investing activities:
Capital expenditures (81,236) (309,062)
----------- ----------
Net cash used in investing activities (81,236) (309,062)
Cash flows from financing activities:
Proceeds from notes payable 18,178 -
Payments on capital lease obligations (13,762) (83,264)
----------- ----------
Net cash provided by (used in)
financing activities 4,416 (83,264)
----------- ----------
Net decrease in cash (116,419) (490,194)
Cash and cash equivalents at beginning of period 252,991 548,791
----------- ----------
Cash and cash equivalents at end of period $ 136,572 58,597
=========== ==========
Supplemental disclosure of cash flow information:
Cash payments during the period for:
Interest paid $ 3,852 27,319
=========== ==========
6
See accompanying notes to financial statements.
</TABLE>
<PAGE>
STACEY'S BUFFET, INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------
1. The financial statements are unaudited and reflect all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
financial position and operating results for the interim period. The
financial statements should be read in conjunction with the financial
statements and notes thereto contained in the Company's Annual Report to
Stockholders for the fiscal year ended January 1, 1997. The results of
operations for the sixteen and forty weeks ended October 8, 1997 are not
necessarily indicative of the results for the entire fiscal year ending
December 31, 1997.
2. On October 31, 1997, the Company entered into certain agreements with
Star Buffet, Inc., a Delaware corporation described in Item 5 below.
3. Earnings per share is based on the weighted average number of common
shares and common share equivalents outstanding in each period.
<PAGE>
STACEY'S BUFFET, INC.
Item 2 : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- ----------------------------------------------------------------------------
RESULTS OF OPERATIONS
Results of operations for the sixteen weeks ("third quarter") and forty weeks
ended October 8, 1997, as compared to the same periods last year.
RESTAURANT SALES of $8,786,653 for the third quarter ended October 8, 1997
represents a decrease of $1,453,457 or 16.5% from the same quarter in 1996
and net sales of $26,801,602 for the year-to-date represents a decrease of
$3,954,208 or 12.9%. The decrease in sales reflects the fewer number of
restaurants operating in 1997 compared to 1996 along with same store sales
decline of 12.2% for the third quarter of 1997 compared to the third quarter
of 1996. Same store sales for the year-to-date period through the third
quarter in 1997 compared to 1996 represents a decline of 8.3%.
Management has determined that its restaurants need to be remodeled and
certain locations need to be rebranded to reduce the decline in same store
sales. Plans to remodel and rebrand certain locations on a test basis are
being finalized as part of the Business Services Agreement with Star Buffet,
Inc. discussed in Item 5 below.
COST OF RESTAURANT SALES includes food, labor, operating, occupancy and
depreciation and amortization expenses. Operating costs consist primarily of
costs of supplies, utilities, maintenance, personal property taxes, and
insurance.
Cost of food and labor as a percentage of sales for the sixteen weeks ended
October 8, 1997 increased to 76.2% compared to 73.7% for the comparable period
in 1996. The increase in these costs for the quarter ended October 8, 1997,
were attributable to higher labor costs as a percentage of sales. The increase
in labor costs were due to the mandatory increase in the minimum wage. Cost of
food and labor as a percentage of sales for the forty weeks ended October 9,
1996 increased to 70.5% compared to 68.9% for the comparable period in 1996.
This increase was due to higher labor costs as a percentage of sales while food
costs as a percentage of sales for the same period in 1996 remained the same.
The increase in labor costs were due to the mandatory increase in the minimum
wage.
Operating costs and occupancy costs increased as a percentage of sales for
the sixteen and forty weeks ended October 8, 1997 to 29.9% and 25.2%
respectively compared to 29.4% and 25.1% for the same periods in 1996. The
increase as a percentage of sales is a result of these costs
<PAGE>
STACEY'S BUFFET, INC.
Item 2 : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------------------------------------
(continued)
being relatively fixed despite the lower sales levels per store.
Depreciation and amortization expense increased as a percentage of sales for
the sixteen and forty weeks ended October 8, 1997 to 3.6% and 2.9%,
respectively, compared to 3.2% and 2.4% for the same periods in 1996. The
increase as a percentage of sales is a result of these costs being relatively
fixed despite the lower sales levels per store.
GENERAL AND ADMINISTRATIVE COSTS decreased by $9,235, or 1.4% for the third
quarter, 1997 and by $4,675, or .3% for the first three quarters of 1997 as
compared to the same periods in the previous year due to continued efforts
by management to reduce variable overhead costs.
Amortization of goodwill was the same for the first three quarters of 1997
and 1996. This non-cash expense is the result of the 1993 merger.
OTHER INCOME for the quarter and year-to-date ended October 8, 1997 was
$6,582 and $96,041, respectively, compared to $74,712 and $248,021 for the
same periods in 1996. Most of the other income was from royalty fees from
licensing the Stacey's name and buffet concept. The reduction in other
income is primarily due to the reduction in the number of restaurants
operating under licensing agreements.
INFLATIONARY FACTORS had minimal impact on the operating results of the
Company. Wholesale food costs have remained stable during the third quarter
of 1997, and there have not been any noticeable increases in supplies and
other costs. The Company expects the increase in the minimum wage that went
into effect at the end of the third quarter of 1997 will result in an
additional increase in direct labor costs.
<PAGE>
STACEY'S BUFFET, INC.
Item 2 : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- ----------------------------------------------------------------------------
(continued)
LIQUIDITY AND CAPITAL RESOURCES
The principal changes in the Company's financial condition from January 1,
1997 were decreases in accounts payable, short-term investments, the line of
credit, the reserve for store closings and accrued expenses. As of October
8, 1997, the Company's ratio of current assets to current liabilities was
.11, as compared to .20 at January 1, 1997. Current liabilities as of
October 8, 1997, include $1,776,211 for the reserve for restaurant closings.
On January 5, 1997, the line of credit facility expired and all amounts
outstanding under the line were repaid. Approximately $581,000 of the short-
term investments were released from the security agreement and converted to
cash for operating working capital.
The Company's capital has been obtained through cash from operations,
credit from trade suppliers, and the sale of common stock related to the
merger in December 1993, with the Stacey Lynn Group. The remodeling and
conversion program undertaken during 1994 and the operational losses
incurred in recent years utilized most of the Company's cash reserves.
In connection with entering into the Credit Agreement with Star Buffet,
Inc. as described in Item 5, the Company entered into agreements with
certain of its creditors (that represent currently due obligations of
approximately $2,165,000) to forgo collection efforts for a period up to 60
days provided that the Company make payments representing current purchases
or rent payments on weekly or monthly basis.
Based on current operating results and management's projected operating
results for fiscal 1997 of the Company's twenty-two restaurants, using
actual fiscal 1996 results as the basis of these projections, and assuming
the Company's receipt of the proceeds of the credit facility which it has
entered into as of October 31, 1997, with Star Buffet, Inc., the Company
expects cash flows will be adequate to pay debts if its creditors continue
to advance extended terms to the Company.
<PAGE>
STACEY'S BUFFET, INC.
PART II: OTHER INFORMATION
- -----------------------------------------------------------------------------
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matter to a Vote of Security Holders
Not Applicable
Item 5. Other Information
On October 31, 1997, Star Buffet, Inc., a Delaware corporation
("Star"), entered into a Business Services Agreement pursuant to which Star
agreed to provide certain management, administrative and purchasing services
for the Company's restaurants for a period of five years.
Additionally, on October 31, 1997, Star agreed, subject to certain
conditions, to make loans from time to time up to a maximum principal amount
of $4.5 million to the Company, pursuant to a credit agreement dated October
31, 1997 (the "Credit Agreement"). In connection with the Credit Agreement,
the Company granted to Star warrants to purchase 1,342,422 shares of the
Company's common stock at a price of $1.00 per share, and entered into a
security agreement, a promissory note, and an option granting to Star the
right to purchase up to six of the Company's restaurants located in Florida.
Star also received registration rights with respect to shares of the
Company's common stock issuable upon exercise of the warrants. On October
31, 1997, Star advanced $400,000 to the Company pursuant to the Credit
Agreement.
<PAGE>
STACEY'S BUFFET, INC.
PART II: OTHER INFORMATION
- ----------------------------------------------------------------------------
(continued)
On October 31, 1997, Star exercised its option in full to acquire the
six restaurants with a closing of the sale anticipated to occur in December,
1997. The purchase price for the restaurants will be paid primarily by the
cancellation of outstanding indebtedness under the credit agreement.
In connection with the transactions contemplated by the Credit
Agreement, Daniel J. Sullivan and Maureen A. Jack resigned from the Board of
Directors of the Company. Stephen J. Marrier resigned as President, Chief
Executive Officer and Chairman of the Board of Directors pursuant to a
Severance and Noncompetition Agreement with the Company. In addition,
Robert E. Wheaton, the President and Chief Executive Officer of Star, was
elected Chairman of the Board of Directors of the Company, and Theodore
Abajian, the Chief Financial Officer of Star, was elected to the Board of
Directors of the Company.
As discussed in Note 2 to the financial statements and in Item 5 above,
the Company entered into several agreements with Star Buffet, Inc. on October
31, 1997. The Business Services Agreement provides on a fee basis for Star
Buffet, Inc. to provide certain management, administrative and purchasing
services for the Company and should permit the Company to reduce expenses by
terminating most of its operational, administrative and purchasing
personnel.
<PAGE>
STACEY'S BUFFET, INC.
PART II: OTHER INFORMATION
- ----------------------------------------------------------------------------
(continued)
Item 6. Exhibits and Reports on Form 8K
(a) Exhibits:
Exhibit
Number
99.1 Business Services Agreement, dated as of October 31, 1997, between the
Registrant and Star Buffet, Inc.
99.2 Credit Agreement, dated as of October 31, 1997, between the Registrant
and Star Buffet, Inc.
99.3 Promissory Note, dated as of October 31, 1997, between the Registrant
and Star Buffet, Inc.
99.4 Security Agreement, dated as of October 31, 1997, between the Registrant
and Star Buffet, Inc.
99.5 Warrant to Purchase Common Stock of Registrant, dated as of October 31,
1997, between the Registrant and Star Buffet, Inc.
99.6 Registration Rights Agreement, dated as of October 31, 1997, between
the Registrant and Star Buffet, Inc.
99.7 Option Agreement, dated as of October 31, 1997, between the Registrant
and Star Buffet, Inc.
99.8 Severance and Noncompetition Agreement, dated as of October 30, 1997,
between the Registrant and The Marrier Group, Inc.
99.9 Press Release dated November 3, 1997
(b) Reports on Form 8K.
None
<PAGE>
Signatures
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
STACEY'S BUFFET, INC.
------------------------------
(Registrant)
By /s/ Daniel J. Sullivan
------------------------------
Chief Financial Officer
<PAGE>
BUSINESS SERVICES AGREEMENT
THIS BUSINESS SERVICES AGREEMENT (the "Agreement") is entered into as
of this 31st day of October 1997, by and between STACEY'S BUFFET, INC., a
Florida corporation (the "Company"), and STAR BUFFET, INC., a Delaware
corporation ("Star").
RECITALS
A. The Company and Star are parties to that certain Credit
Agreement, dated as of a date even herewith (the "Credit Agreement")
whereby Star agreed from time to time to make Loans to the Company. Unless
otherwise defined herein, capitalized terms used herein shall have the same
meanings set forth in the Credit Agreement.
B. As a condition of the Credit Agreement, the parties agreed to
enter into this Agreement whereby Star shall provide (i) the services
described on Exhibit A attached hereto and incorporated herein by this
reference (the "Services") for the Company's restaurants located at the
addresses listed on Exhibit B attached hereto and incorporated herein by
reference (the "Restaurants"), and (ii) certain purchasing services for the
Restaurants.
NOW, THEREFORE, in consideration of the mutual covenants and promises
expressed herein, and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereby agree
as follows:
AGREEMENT
1. SERVICES. During the term of this Agreement, Star shall
provide to the Company the Services for the Restaurants, subject to the
terms and conditions specified in this Agreement. Star shall also provide
corporate purchasing services (the "Purchasing Services") to the
Restaurants pursuant to which Star shall use reasonable commercial efforts
to allow the Restaurants to purchase food and paper products, small wares
and equipment on substantially the same terms that such products may be
purchased by Star for its restaurants. Star is expressly authorized to
provide the Services (including the Purchasing Services) in any reasonable
manner it deems appropriate to meet the day-to-day requirements of the
business and administrative aspects of the Company's operation of the
Restaurants. Notwithstanding anything herein to the contrary, (i) Star
shall have no obligation to provide Services or Purchasing Services to any
restaurants owned, operated or franchised by the Company other than the
Restaurants, (ii) Star shall not be obligated to perform the Services or
the Purchasing Services for the Restaurants that Star does not perform for
its own restaurants or in a manner different from the manner which Star
provides for its own restaurants, (iii) except as expressly provided
herein, Star shall not be obligated to (A) provide the Company with any
legal services or representation, whether in-house or outside counsel, and
shall not be obligated to supervise any such legal services, or (B) provide
any services with respect to which Star would be required by applicable law
to hold a professional license or permit to provide, or (C) perform
functions usually and customarily performed or provided by any executive
officer, general counsel or other officer of a publicly held company, and
(iv) Star shall not be liable for any direct, indirect or consequential
damages suffered or incurred by the Company or to any third party,
<PAGE>
including, without limitation, lost profits arising from or relating to the
performance of services by Star hereunder absent a finding in a final
judgment of a court of competent jurisdiction that such damages proximately
resulted from the bad faith, gross negligence or willful misconduct of Star
or its agents.
2. TERM. The term of this Agreement shall commence on the Closing
Date and, unless this Agreement is sooner terminated as provided herein,
shall continue for a period of five years from the Closing Date. Star
shall have the right to terminate this Agreement, upon notice to the
Company, upon (a) the occurrence of any Event of Default, (b) a breach of
any material provision of this Agreement by the Company which is not cured
by the Company to the satisfaction of Star within 30 days of receipt of
notice from Star; or (c) the entry of any judgment, order, injunction or
decree of any court, arbitrator or governmental agency which would cause
the provision of the Services or the Purchasing Services to be in conflict
with or in violation of any such judgment, order, injunction or decree.
This agreement may also be terminated by the mutual consent of the parties.
3. COMPENSATION.
3.1 In consideration for the Services provided hereunder, the
Company agrees to pay to Star (a) an administrative management fee for each
Restaurant equal to four and one-half percent (4.5%) of the first $35.0
million of total revenues of the Restaurants and three and one-half percent
(3.5%) of the total revenues in excess of $35.0 million for the Restaurants
(the "Administrative Fee") for each regular one-week accounting period
(each, an "Accounting Period"), and for any portion of an Accounting Period
occurring during the term of this Agreement (but excluding the initial 8
Accounting Periods (the "Deferred Fees")), and (b) to the extent requested
by the Company, an amount reasonably estimated from time to time by Star to
represent its actual cost (including labor, overhead and third-party
expenses and the allocated cost of employees or officers of Star or any
entity which has agreed to perform similar services to Star) of providing
Services to the Company relating to corporate financial reporting,
preparation of tax returns and compliance by the Company with its reporting
and disclosure obligations under applicable securities laws (the "Reporting
Fees" and, collectively with the Administrative Fees, the "Management
Fees"). The Company promises to pay the Deferred Fees on May 1, 1998.
3.2 In addition to the payment of the Management Fees, the
Company shall be responsible for the payment of any and all actual out of
pocket costs and expenses incurred by or on behalf of Star in connection
with the Services and Purchasing Services to be provided hereunder and
shall reimburse Star for such costs and expenses incurred by or on behalf
of Star or its affiliates or third party service providers in connection
with the Services and Purchasing Services rendered hereunder, including,
without limitation, costs and expenses relating to marketing programs and
services, costs of replacement equipment, travel expenses, year-end
employee/accounting reporting matters (for example, Form 1099's, W-2's,
etc.), and legal and accounting and other professional fees and expenses.
<PAGE>
3.3 Star shall calculate all expense reimbursements due to Star
for each Accounting Period hereunder, which shall be paid by the Company
within seven (7) days after receipt of Star's invoice. The Company shall
report its total revenues to Star for each Accounting Period and pay the
Management Fee to Star based upon such report within seven (7) days of the
end of each such Accounting Period.
4. INDEMNIFICATION.
4.1 The Company shall indemnify, hold harmless and defend Star
and its affiliates, and any other entity which performs similar services
for Star, and their respective officers, directors, stockholders and
employees (collectively, the "Star Indemnified Parties"), from and against
any and all liabilities, losses, judgments, damages, demands, claims,
causes of action or any other legal or government proceedings, or any
settlement thereof, and any and all costs and expenses (including
reasonable attorneys' fees), whether or not covered by insurance, caused or
asserted to have been caused, directly or indirectly, by or as a result of
the performance of Services or Purchasing Services or any intentional or
willful misconduct or negligent acts or omissions by the Company and/or its
agents, employees and/or subcontractors (other than Star, its affiliates
and agents) during the term hereof.
Star shall indemnify, hold harmless and defend Company and its
employees, from and against any and all liabilities, losses, damages,
demands, claims, causes of action or any other legal or government
proceedings, or any settlement thereof, and any and all costs and expenses
(including reasonable attorneys' fees), whether or not covered by
insurance, caused or asserted to have been caused, directly or indirectly,
by or as a result of any intentional or willful misconduct, or the gross
negligence, of Star or any of its officers or management employees in
connection with Star's performance of its material covenants hereunder.
4.2 Promptly after being informed or learning thereof, any party
entitled to indemnification hereunder (an "Indemnified Party"), from the
other party hereto (an "Indemnifying Party"), shall give written notice to
the Indemnifying Party of any demand, claim, cause of action or other
proceeding (a "Third-Party Claim") which might give rise to a claim by an
Indemnified Party for indemnification against the Indemnifying Party under
Section 5.1, stating the nature and basis of said claims and the amounts
thereof, to the extent known by the Indemnified Party; provided, however,
that the failure to give such notice shall not relieve the Indemnifying
Party of its obligations, except if and to the extent it is materially
prejudiced by such failure. The Indemnifying Party shall have the right,
at its option, to defend, at its own expense and by counsel reasonably
acceptable to the Indemnified Party, against any such Third Party Claim;
provided that if the Indemnifying Party fails to do so within ten (10) days
after being notified or otherwise learning of any such Third Party Claim,
the Indemnified Party shall be entitled (i) to defend such Third Party
Claim with counsel of its own choosing, at the expense of the Indemnifying
Party (who shall pay such expenses, including the reasonable fees and
expenses of such counsel, as and when they are incurred by the Indemnified
Party); and (ii) to settle or compromise such Third Party Claim without the
consent of the Indemnifying Party. In no event shall any Indemnifying
Party compromise or settle any Third Party Claim without the consent of the
Indemnified Party, unless the terms of the settlement or compromise provide
for a general and unconditional release of the Indemnified Party from such
<PAGE>
Third Party Claim and does not require the payment of any sums by, does not
place any restrictions or impose any covenants on, and does not require or
provide for any admission of any liability on the part of, the Indemnified
Party.
5. CONFIDENTIAL AND PROPRIETARY INFORMATION.
5.1 Each of the parties hereto shall (a) maintain in strict
confidence and not disclose any Confidential Information of the other party
without the other party's express written authorization; (b) not use any
Confidential Information in any way to the direct or indirect detriment of
the disclosing party; and (c) ensure that its affiliates and advisors who
have access to any of such Confidential Information shall comply with these
nondisclosure obligations and use restrictions; provided, however, that
each party may disclose Confidential Information to those of its
representatives who need to know Confidential Information for the purposes
of this Agreement, subject to the following conditions: (a) it being
understood and agreed to by each party that such representatives shall be
informed of the confidential nature of the Confidential Information,
(b) such Representative shall agree to be bound by this Section and shall
be directed by each party not to disclose to any other person any
Confidential Information and (c) each party shall be responsible for any
breach of this Section by any of its representatives.
5.2 If either party is requested or required (by oral questions,
interrogatories, requests for information or documents, subpoenas, civil
investigative demands, or similar processes) to disclose or produce any
Confidential Information of the other party or its advisors or
representatives, the receiving party shall (a) provide the disclosing party
with prompt notice thereof and copies, if possible, and, if not, a
description, of the Confidential Information requested or required to be
produced so that the disclosing party may seek an appropriate protective
order or waive compliance with the provisions of this Section and
(b) consult with the disclosing party as to the advisability of the
disclosing party's taking of legally available steps to quash or narrow
such request. Each party further agrees that, if in the absence of a
protective order or the receipt of a waiver hereunder, the receiving party
is nonetheless, in the written opinion of its legal counsel, compelled to
disclose or produce Confidential Information of the other party to any
tribunal legally authorized to request and entitled to receive such
Confidential Information or to stand liable for contempt or suffer other
censure or penalty, the receiving party may disclose or produce such
Confidential Information to such tribunal without liability hereunder,
provided, however, that the receiving party shall give the disclosing party
written notice of the Confidential Information to be so disclosed or
produced as far in advance of its disclosure or production as is
practicable and shall use its best efforts to obtain, to the greatest
extent practicable, an order or other reliable assurance that confidential
treatment will be accorded to such Confidential Information so required to
be disclosed or produced.
<PAGE>
For purposes of this Section 5, the term "Confidential
Information" shall mean any information of the disclosing party (whether
written or oral), including all notes, studies, information, forms,
business or management methods, formulae, recipes, marketing data, or trade
secrets or know-how, whether or not such Confidential Information is
disclosed or otherwise made available to one party by the other party
pursuant to this Agreement or otherwise. If the information is disclosed
in writing, it must be clearly labeled as confidential and, if the
information is disclosed orally, the disclosing party must summarize it in
writing and confirm that it is confidential within thirty days after its
oral disclosure to the receiving party. Confidential Information does not
include, however, any information that (i) is or becomes generally
available to and known by the public (other than as a result of the
disclosure directly or indirectly by the receiving party or its affiliates,
advisors or representatives that is not permitted by this Agreement or the
consent of the furnishing party); (ii) has already been or is hereafter
independently acquired or developed by the receiving party without
violating any confidentiality agreement with or other obligation of secrecy
to the furnishing party or (iii) information which a party has determined,
after consultation with its legal counsel, that it is required to disclose
by laws or government regulations applicable to it. The parties
acknowledge and agree that this Agreement may be filed with the Securities
and Exchange Commission by either or both of the parties in accordance with
the informational requirements of the Securities Exchange Act of 1934, as
amended.
6. ASSIGNMENT. This Agreement may not be assigned by the Company
without the prior written consent of Star. It is acknowledged that a
Change of Control shall constitute an assignment for purposes of this
Agreement, for which the consent of Star is required.
7. RELATIONSHIP OF THE PARTIES. Except as specifically provided
herein, none of the parties shall act or represent or hold itself out as
having the authority to act as an agent or partner of the other parties, or
in any way bind or commit the other party to any obligations. Nothing
contained in this Agreement shall be construed as creating a partnership,
joint venture, agency trust or other association of any kind, each party
being individually responsible only for its obligations as set forth in
this Agreement.
8. FORCE MAJEURE. If Star is prevented from complying, either
totally or in part, with any of the terms or provisions of this Agreement by
reason of fire, flood, storm, strike, lockout or other labor trouble, riot,
war, rebellion or other causes beyond the reasonable control of Star or other
acts of God, then upon written notice to Star, the affected provisions and/or
other requirements of this Agreement shall be suspended during the period of
such disability and Star shall have no liability to the Company in connection
therewith. Star shall make all reasonable efforts to remove such disability
as soon as reasonably practicable but in no event later than thirty days
after the occurrence of such disability.
9. MISCELLANEOUS TERMS INCORPORATED BY REFERENCE. The miscellaneous
provisions of the Credit Agreement contained in Sections 7.1 through 7.5,
inclusive, and Sections 7.8, 7.9 and 7.11 through 7.13, inclusive, thereof
are hereby incorporated by reference herein and made a part hereof, and for
purposes of this Agreement all references to the Lender or the Borrower in
such Sections of the Credit Agreement shall be deemed to refer to Star or
the Company, respectively.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Business Services
Agreement to be executed by officers thereunto duly authorized as of the
date first above stated.
STAR BUFFET, INC.
By: /s/ Theodore Abajian
---------------------------
Its: V.P. CFO
---------------------------
STACEY'S BUFFET, INC.
By: /s/ Stephen J. Marrier
---------------------------
Its: CEO
---------------------------
<PAGE>
EXHIBIT A
SERVICES TO BE PROVIDED
Star Buffet shall provide to the restaurants currently operated by
Stacey's Buffet all management and administrative services for the
operation of the restaurants including all of the following:
A. Accounting
B. Human resources
C. Product development
D. Marketing
E. Purchasing
F. Operations supervisory management above store level
G. Information systems management
H. Risk management/insurance administration
Accounting services shall include all of the following:
1. Payroll services
2. Payroll tax reporting
3. Financial reporting
4. Accounts payable
5. Accounts receivable
6. Maintaining accounting records as required by law or custom
A-1
<PAGE>
STACEY'S BUFFET, INC.
EXHIBIT B - RESTAURANT LOCATIONS
<TABLE>
<CAPTION>
Store
# Name Street Address City State Zip Code
- --- ------------ ---------------------------- ------ ----- --------
<S> <C> <C> <C> <C> <C>
102 Orlando 198 South Semoran Boulevard Orlando FL 32807
103 Sunrise 4121 Northwest 88th Avenue Sunrise FL 33351
107 Winter Park 5566 Lake Howell Road Winter Park FL 32792
108 St. Petersburg 1030 58th Street North St. Petersburg FL 33710
109 West Palm Beach 7817 South Dixie Highway West Palm Beach FL 33405
110 Clearwater 21820 U.S. Highway 19 North Clearwater FL 34625
120 Port Richey 10069 U.S. Highway 19 North Port Richey FL 34668
121 Lancaster 101 Rohrerstown Road Lancaster PA 17603
129 Brick 74 Brick Plaza Brick NJ 08723
133 Utica Center Street New Hartford NY 13413
134 Moorestown Rt. 38 & Lenola Road Moorestown NJ 08057
137 Altamonte Springs 945 West Highway 436 Altamonte Springs FL 32714
138 Ft. Lauderdale 3220 Davie Blvd. Ft. Lauderdale FL 33312
139 Ft. Myers 15551 McGregor Blvd. Ft. Myers FL 33908
140 Holiday 1150 U.S. Highway 19 Holiday FL 34691
141 Lakeland 4320 U.S. Highway 98 North Lakeland FL 33809
142 Largo 1451 North Missouri Avenue Largo FL 33770
143 Melbourne 1439 South Babcock Street Melbourne FL 32901
145 Stuart 2313 Southeast Federal Highway Stuart FL 34994
146 Pinellas Park 7610 49th Street North Pinellas Park FL 34665
148 Seffner 790 Martin Luther King Blvd. W. Seffner FL 33584
150 North Ft. Myers 60 Pine Island Road North Ft. Myers FL 33903
151 Port Charlotte 2200 Tamiami Trail Port Charlotte FL 33952
152 Mount Dora 2600 W. Old US Highway 441 Mount Dora FL 32757
</TABLE>
B-1
<PAGE>
CREDIT AGREEMENT
dated as of
October __, 1997
between
STACEY'S BUFFET, INC.
and
STAR BUFFET, INC.
<PAGE>
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>
i
<PAGE>
<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>
ii
<PAGE>
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
- ------------
iv
<PAGE>
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>
"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.
2
<PAGE>
"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
<PAGE>
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
<PAGE>
(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
<PAGE>
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.
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(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>
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>
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>
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>
Schedule 4.4 Material Adverse Effects
- ------------ ------------------------
1. As disclosed in the Borrower's Form 10-Q for the second quarter ended
June 18, 1997, the current year's operating statements reflect a loss
that is approximately $573,000 more than the loss for the same period
in the previous year. Additionally, the third quarter operating results
for the Borrower have historically been unprofitable which has resulted
in the Borrower's inability to pay all vendors invoices according to
agreed upon terms.
Page 1 of 1
<PAGE>
Schedule 4.5 Litigation
- ------------ ----------
1. Rivera, McHale, Brandes & Livingston v. Stacey's Buffet, Inc.
2. Group Four Equities II v. Stacey'e Buffet, Inc.
3. Boulevard Plaza Associates v. Stacey's Buffet, Inc.
4. Wendy Craythorn v. Stacey's Buffet, Inc.
5. Frank Delello v. Stacey's Buffet, Inc.
6. Harvey Gurst v. Stacey's Buffet, Inc.
7. Kevin Jainlett v. Stacey's Buffet, Inc.
8. Ray Kosyla v. Stacey's Buffet, Inc.
9. Jill Leidy v. Stacey's Buffet, Inc.
10. Vincenza Massaro v. Stacey's Buffet, Inc.
11. Henry Mitchell v. Stacey's Buffet, Inc.
12. Daniel Paulley v. Stacey's Buffet, Inc.
13. Frank Tomaino v. Stacey's Buffet, Inc.
14. Ruby Warfield v. Stacey's Buffet, Inc.
15. Veronica Otten v. Stacey's Buffet, Inc.
16. Bess Seggio v. Stacey's Buffet, Inc.
17. Thomas Morris v. Stacey's Buffet, Inc.
18. Florence Wilkins v. Stacey's Buffet, Inc.
19. Ashley Buggs v. Stacey's Buffet, Inc.
20. John W. Bitterman, Jr. et al v. Stacey's Buffet, Inc.
21. Federal Realty Investment Trust v. Stacey's Buffet, Inc.
22. JH Holdings, Ltd. v. Stacey's Buffet, Inc.
23. Twin Oaks Plaza Associates, Limited Paertnership v. Stacey's Buffet, Inc.
Note: #4-#19 are slip and fall related law suits; #20-#23
are landlord related law suites.
Page 1 of 1
<PAGE>
Schedule 4.15 Capital Stock
- ------------- -------------
Options and Warrants Outstanding:
--------------------------------
<TABLE>
<CAPTION> Shares Shares
Date Share to be Shares Shares Not
Awarded Name Price issued Cancelled Exercised Exercised
- -------- -------------------------------------- ------- ------ ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C>
01/19/93 Stephen J. Marrier/Marrier Group, Inc. $10.000 2,000 - - 2,000
05/27/93 Stephen J. Marrier/Marrier Group, Inc. $10.000 2,000 - - 2,000
08/03/93 Stephen J. Marrier/Marrier Group, Inc. $10.000 7,000 - - 7,000
01/02/97 Stephen J. Marrier/Marrier Group, Inc. $ 0.375 320,000 - - 320,000
01/19/93 Robert Stetson $10.000 10,000 - - 10,000
05/27/93 Robert Stetson $10.000 2,000 - - 2,000
08/03/93 Robert Stetson $10.000 9,000 - - 9,000
01/19/93 Edward Grace $10.000 20,000 - - 20,000
05/27/93 Edward Grace $10.000 2,000 - - 2,000
08/03/93 Edward Grace $10.000 17,000 - - 17,000
08/03/93 Thomas Frank $10.000 4,000 - - 4,000
04/06/95 Westview Mall Associates $ 4.700 5,000 - - 5,000
10/26/89 Mark H. Rowland (UW-2) $22.500 5,500 - - 5,500
10/26/89 Richard E. Kelly or Mary C. Kelly (UW-3) $22.500 5,500 - - 5,500
02/14/90 PRN Investments (UW-4) $22.500 6,000 - - 6,000
05/01/97 Harrison Hurley & Company $ 0.470 200,000 - - 200,000
IPO Public warrants-traded under "SBUFW"
2,112,500 warrants - it takes 5 warrants
per share @ $4.50 per warrant $22.500 422,500 - - 422,500
12/13/93 Homer Duff $10.000 20,000 - - 20,000
12/13/93 Amos Money $10.000 20,000 - - 20,000
04/12/95 Amos Money $ 3.750 10,000 - - 10,000
12/13/93 Sonja Money $10.000 12,000 - - 12,000
04/12/95 Sonja Money $ 3.750 8,000 - - 8,000
04/12/95 Les Spang $ 3.750 8,000 - - 8,000
12/13/93 Carlos Young $10.000 3,000 - - 3,000
12/13/93 Mary Young $10.000 3,000 - - 3,000
01/02/97 Daniel J. Sullivan $ 0.375 20,000 - - 20,000
8/21/90 Kevin Cook $39.375 400 - - 400
07/09/91 Kevin Cook $16.250 100 - - 100
05/13/92 Thomas Frank* $13.125 2,000 - - 2,000
09/17/92 Kevin Cook $ 9.375 100 - - 100
11/12/92 Thomas Matlock $10.000 500 - - 500
12/30/93 Chris McLaughlin $15.000 400 - - 400
12/30/93 Jeff Peschek $15.000 400 - - 400
12/30/93 Thomas Matlock $15.000 100 - - 100
12/30/93 Marlene Sayig $15.000 400 - - 400
12/30/93 Janet Davis $15.000 1,600 - - 1,600
12/30/93 Phyllis Surace $15.000 200 - - 200
12/30/93 Irene Rodas $15.000 200 - - 200
12/30/93 Lori Albano $15.000 200 - - 200
12/30/93 Maureen Jack $15.000 200 - - 200
12/30/93 *Leslie Spang $15.000 6,000 - - 6,000
12/30/93 Don Barnhill $15.000 2,400 - - 2,400
12/30/93 Doug Money $15.000 1,200 - - 1,200
<PAGE>
12/30/93 Laura Herron $15.000 100 - - 100
12/30/93 Laura Pitts $15.000 100 - - 100
12/30/93 Betzaida Centino $15.000 100 - - 100
12/30/93 Dwain Glegg $15.000 100 - - 100
12/30/93 Victoria Browder $15.000 100 - - 100
12/30/93 Thomas Alfano $15.000 100 - - 100
12/30/93 James Wells $15.000 100 - - 100
12/30/93 Anna Carroll $15.000 100 - - 100
12/30/93 Sara Irish $15.000 100 - - 100
12/30/93 Chris Pelfrey $15.000 100 - - 100
12/30/93 Micheline Brutus $15.000 100 - - 100
12/30/93 Roosevelt Harris $15.000 100 - - 100
12/30/93 Laurie Placek $15.000 100 - - 100
12/30/93 Layne Newmann $15.000 100 - - 100
12/30/93 Pat Buttimer $15.000 400 - - 400
12/30/93 Tony Afsarmanesh $15.000 400 - - 400
12/30/93 Larry Vanlue $15.000 400 - - 400
12/30/93 Heather Leatherbarrow $15.000 400 - - 400
12/30/93 Lillie Wells $15.000 400 - - 400
12/30/93 Grady Andrews $15.000 400 - - 400
12/30/93 Allen Bomerger $15.000 400 - - 400
12/30/93 Terry Hankins $15.000 400 - - 400
05/24/94 Kevin Cook $11.550 100 - - 100
05/24/94 Lori Morel $11.550 400 - - 400
05/24/94 Joyce Peoples $11.550 100 - - 100
05/24/94 Charles Argust $11.550 100 - - 100
10/05/94 Karen Gaugh $ 7.800 100 - - 100
10/05/94 Victoria Browder $ 7.800 400 - - 400
10/05/94 Michael McLaughlin $ 7.800 400 - - 400
12/28/94 Chris McLaughlin $ 5.200 100 - - 100
12/28/94 Jeff Peschek $ 5.200 100 - - 100
12/28/94 Tom Matlock $ 5.200 100 - - 100
12/28/94 Marlene Sayig $ 5.200 100 - - 100
12/28/94 Pat Buttimer $ 5.200 100 - - 100
12/28/94 Tony Afsarmanesh $ 5.200 100 - - 100
12/28/94 Larry VanLue $ 5.200 100 - - 100
12/28/94 Harry Leatherbarrow $ 5.200 100 - - 100
12/28/94 Lillie Wells $ 5.200 100 - - 100
12/28/94 Grady Andrews $ 5.200 100 - - 100
12/28/94 Allen Bomberger $ 5.200 100 - - 100
12/28/94 Terry Hankins $ 5.200 100 - - 100
12/28/94 Doug Money $ 5.200 300 - - 300
12/28/94 Don Barnhill $ 5.200 200 - - 200
12/28/94 Janet Davis $ 5.200 400 - - 400
12/28/94 Alan Krakowiak $ 5.200 400 - - 400
12/28/94 Wendell Peters $ 5.200 100 - - 100
05/25/95 John Rogers $ 7.500 400 - - 400
05/25/95 Micheline Brutus $ 7.500 400 - - 400
05/25/95 Chris Pelfrey $ 7.500 400 - - 400
05/25/95 Kevin Cook $ 7.500 100 - - 100
05/25/95 Lori Morel $ 7.500 100 - - 100
05/25/95 Mike McCudy $ 7.500 100 - - 100
05/25/95 James Sawyer $ 7.500 100 - - 100
11/13/95 Dan Forlasto* $ 3.125 5,000 3,750 - 1,250
11/13/95 Linda Lovell $ 3.125 100 - - 100
11/13/95 Charles Jefferson $ 3.125 400 - - 400
11/13/95 Victoria Browder $ 3.125 100 - - 100
11/13/95 Doug Money $ 3.125 600 - - 600
11/13/95 Garrett B. Hunter* $ 3.125 2,000 - - 2,000
<PAGE>
3/20/96 Jim Lovell $ 3.600 400 - - 400
3/20/96 Duane Ames $ 3.600 100 - - 100
3/20/96 Patricia Hoff $ 3.600 100 - - 100
3/20/96 Joseph Pampena $ 3.600 400 - - 400
3/20/96 Janie Irish $ 3.600 400 - - 400
3/20/96 Christine McLaughlin $ 3.600 100 - - 100
3/20/96 Tom Matlock $ 3.600 100 - - 100
3/20/96 Pat Buttimer $ 3.600 100 - - 100
3/20/96 Tony Afsarmanesh $ 3.600 100 - - 100
3/20/96 Larry VanLue $ 3.600 100 - - 100
3/20/96 Harry Leatherbarrow $ 3.600 100 - - 100
3/20/96 Lillie Wells $ 3.600 100 - - 100
3/20/96 Grady Andrews $ 3.600 100 - - 100
3/20/96 Allen Bomberger $ 3.600 100 - - 100
3/20/96 Terry Hankins $ 3.600 100 - - 100
3/20/96 Don Barnhill $ 3.600 200 - - 200
3/20/96 Janet Davis $ 3.600 400 - - 400
3/20/96 Scott McKinney $ 3.600 400 - - 400
3/20/96 Trudy Elmore $ 3.600 800 - - 800
3/20/96 Viki Browder $ 3.600 400 - - 400
3/20/96 Chris McLaughlin $ 3.600 400 - - 400
3/20/96 Tony Afsarmanesh $ 3.600 400 - - 400
3/20/96 *Maureen Jack $ 3.600 2,000 - - 2,000
3/20/96 *Peter Hurley $ 3.600 2,000 - - 2,000
3/20/96 * Doug Money $ 3.600 2,400 - - 2,400
1/22/96 Dan Sullivan* $ 2.350 10,000 - - 10,000
1/22/96 Amos Money* $ 2.350 20,000 - - 20,000
06/21/96 Charles Argust $ 2.650 400 - - 400
06/21/96 David Scheschowitz $ 2.650 100 - - 100
06/21/96 David Minette $ 2.650 100 - - 100
06/21/96 John Rogers $ 2.650 100 - - 100
06/21/96 Micheline Brutus $ 2.650 100 - - 100
06/21/96 Kevin Cook $ 2.650 100 - - 100
06/21/96 Chris Pelfrey $ 2.650 100 - - 100
06/21/96 Lori Morel $ 2.650 100 - - 100
06/21/96 Karen Gaugh $ 2.650 400 - - 400
06/21/96 Carmen Castro $ 2.650 100 75 - 25
06/21/96 Lucy Ferreau $ 2.650 100 - - 100
06/21/96 Garrett Hunter* $ 2.650 500 - - 500
06/21/96 Peter Hurley* $ 2.650 500 - - 500
08/01/97 James Sawyer $ 1.375 400 - - 400
08/01/97 Allen Bomberger $ 1.375 400 - - 400
08/01/97 Larry VanLue $ 1.375 100 - - 100
08/01/97 Charles Argust $ 1.375 100 - - 100
08/01/97 John Rogers $ 1.375 100 - - 100
08/01/97 Micheline Brutus $ 1.375 100 - - 100
08/01/97 Kevin Cook $ 1.375 100 - - 100
08/01/97 Chris Pelfrey $ 1.375 100 - - 100
08/01/97 Chris McLaughlin $ 1.375 100 - - 100
08/01/97 Vicki Browder $ 1.375 100 - - 100
08/01/97 Terry Hankins $ 1.375 100 - - 100
08/01/97 Danny Andrews $ 1.375 100 - - 100
08/01/97 Lillie Wells $ 1.375 100 - - 100
08/01/97 Harry Leatherbarrow $ 1.375 100 - - 100
08/01/97 Pat Buttimer $ 1.375 100 - - 100
08/01/97 Tom Matlock $ 1.375 100 - - 100
08/01/97 Jeff Peschek $ 1.375 100 - - 100
08/01/97 Joe Pampena $ 1.375 100 - - 100
08/01/97 Janie Irish $ 1.375 100 - - 100
<PAGE>
08/01/97 Jim Lovell $ 1.375 100 - - 100
08/01/97 Charles Jefferson $ 1.375 100 - - 100
08/01/97 Karen Gaugh $ 1.375 100 - - 100
08/01/97 Barbara Pugh $ 1.375 400 - - 400
08/01/97 Pat Redmond $ 1.375 400 - - 400
08/01/97 Tony Afsarmanesh $ 1.375 100 - - 100
08/01/97 Don Barnhill $ 1.375 100 - - 100
08/01/97 Doug Money $ 1.375 1,000 - - 1,000
08/01/97 Janet Davis $ 1.375 400 - - 400
08/01/97 Jamal Jones $ 1.375 100 - - 100
08/01/97 Ralph Pugh $ 1.375 100 - - 100
08/01/97 Jay Rios $ 1.375 100 - - 100
08/01/97 Laurie Placek $ 1.375 100 - - 100
08/01/97 Mary Argust $ 1.375 100 - - 100
08/01/97 Charlene Polburn $ 1.375 100 - - 100
08/01/97 Ron Higham $ 1.375 100 - - 100
08/01/97 Margaret Bourgeois $ 1.375 100 - - 100
08/01/97 Trudy Elmore $ 1.375 200 - - 200
08/01/97 Maureen Jack* $ 1.375 3,500 - - 3,500
08/01/97 Garrett Hunter* $ 1.375 3,000 - - 3,000
08/01/97 Peter Hurely* $ 1.375 3,000 - - 3,000
08/01/97 Dan Sullivan* $ 1.375 3,000 - - 3,000
---------
Totals 1,238,475
=========
* Indicates Officer or Director
</TABLE>
<PAGE>
Schedule 5.4 Indebtedness
- ------------ ------------
1. Note payable to Ford Motor Credit dated April 7, 1997, with an original
principle amount of $18,178.05, secured by a 1996 Windstar van.
2. Note payable to Ford Motor Credit dated in February, 1993, with an
original principle amount of $20,321.34 secured by a 1994 Ford van.
3. Agree Limited Partnership Lease Termination Agreement dated March 29,
1995.
4. Benderson Development Company, Inc. Lease Termination Agreement dated
March 28, 1995.
5. Governor Plaza Associates/Federal Realty Investment Trust Lease
Termination Agreement dated May 22, 1995.
6. Shillington Shopping Center/Federal Realty Investment Trust Lease
Termination Agreement dated May 22, 1995.
7. Upper New York Realty/Stipulation Lease Termination Agreement and
Affidavit for Judgment by Confession dated October 15, 1996.
8. Westview Mall Associates Lease Termination Agreement dated May 1, 1995.
9. Capital lease dated April 6, 1993 with Mita Financial Services for the
acquisition of a copy machine.
10. Capital lease dated April 6, 1995 with Sonitrol Leasing for the
acquisition of a security system.
11. Capital lease dated August 4, 1994 with AT&T (Eaton Finacial Corporation)
for the acquisition of a soft serve freezer.
12. Capital lease dated October 29, 1995 with Unicyn Funding Group for the
acquisition of ice machines.
Note - also have operating leases for land and buildings, ice machines
and security systems.
<PAGE>
Schedule 5.5 Loans
- ------------ -----
None
<PAGE>
Schedule 5.7 Liens
- ------------ -----
1. Landlords in Florida and possible in other states have a first lien on all
leasehold improvements, restaurant equipment, furniture and fixtures,
unless specifically subordinated.
2. Ford Motor Credit has a lien and is holding the title to the 1997 Windstar
van driven by Doug Money pursuant to a note payable to Ford Motor Credit.
3. Ford Motor Credit has a lien and is holding the title to the 1994
Econoline van driven by the maintenance department pursant to a note
payable to Ford Motor Credit.
4. UCC 1 filings per UCC search listed below:
<TABLE>
<CAPTION> Filing Filing
Secured Party Filing # State Date
------------- -------------- --- --------
<S> <C> <C> <C>
Alan Acceptance Corp/CFX Funding Inc. 94 0000247851 FL 12/09/94
Alan Acceptance Corp/CFX Funding Inc.
Alan Acceptance Corp/CFX Funding Inc.
Alan Acceptance Corp/CFX Funding Inc. 94 0000247853 FL 12/09/94
Alan Acceptance Corp/CFX Funding Inc. 94 0000222779 FL 11/01/94
CFX Funding LLC 108977 NY 05/30/95
Harbor Leasing Assoc. II 94 0000219837 FL 10/28/94
Harbor Leasing Assoc. II 94 0000219837 FL 10/28/94
Harbor Leasing Assoc. II 94 0000219837 FL 10/28/94
Harbor Leasing Assoc. II 94 0000219837 FL 10/28/94
Harbor Leasing Assoc. II 94 0000219837 FL 10/28/94
Harbor Leasing Assoc. II 94 0000244646 FL 12/05/94
Harbor Leasing Assoc. II 94 0000244646 FL 12/05/94
Harbor Leasing Assoc. II 94 0000244646 FL 12/05/94
Ecolab, Inc. 94 0000207725 FL 10/11/94
Ecolab, Inc. 94 0000207727 FL 10/11/94
Ecolab, Inc. 94 0000222819 FL 11/02/94
Ecolab, Inc. 95 0000000400 FL 01/03/95
Ecolab, Inc. 95 0000087568 FL 05/01/95
Ecolab, Inc. 95 0000144422 FL 07/21/95
Ecolab, Inc. 95 0000248358 FL 12/12/95
Ecolab, Inc. 95 0000248166 FL 12/12/95
Ecolab, Inc. 95 0000258466 FL 12/27/95
Shandrall Associates (Moorestown landlord) 1502717 NJ 03/25/93
Sun Financial Group Inc 91 0000273164 NY 12/30/91
Sun Financial Group Inc 92 0000000127 FL 01/02/92
Sun Financial Group Inc 003052 NY 01/06/92
<PAGE>
Filing Filing
Secured Party Filing # State Date
------------- -------------- --- --------
Colonial Pacific Leasing Co 91 0000185061 FL 08/26/91
Colonial Pacific Leasing Co 94 0000129991 FL 06/27/94
Colonial Pacific Leasing Co 94 0000129983 FL 06/27/94
Colonial Pacific Leasing Co 1581528 NJ 07/14/94
Colonial Pacific Leasing Co 1583648 NJ 07/22/94
Colonial Pacific Leasing Co 94 0000162530 FL 08/10/94
Colonial Pacific Leasing Co 171501 NY 08/22/94
Colonial Pacific Leasing Co 94 000016527 FL 08/10/94
First Concord Acceptance Corp 91 0000137524 FL 06/24/91
First Concord Acceptance Corp 91 0000152891 FL 07/15/91
First Concord Acceptance Corp 94 0000053021 FL 03/15/94
First Concord Acceptance Corp 053767 NY 03/21/94
First Concord Acceptance Corp 94 000087992 FL 05/02/94
First Concord Acceptance Corp 94 000087992 FL 05/02/94
First Concord Acceptance Corp 94 000088087 FL 05/02/94
First Concord Acceptance Corp 94 000088087 FL 05/02/94
First Concord Acceptance Corp 86830 NY 05/02/94
First Concord Acceptance Corp 86285 NY 05/02/94
First Concord Acceptance Corp 23191246 PA 06/06/94
First Concord Acceptance Corp 23191247 PA 06/06/94
First Concord Acceptance Corp 23191249 PA 06/06/94
First Concord Acceptance Corp 94 0000116742 FL 06/08/94
First Concord Acceptance Corp 94 0000116038 FL 06/08/94
First Concord Acceptance Corp 94 0000116034 FL 06/08/94
First Concord Acceptance Corp 1575652 NJ 06/13/94
First Concord Acceptance Corp 94 0000129807 FL 06/27/94
First Concord Acceptance Corp 95 0000097454 FL 05/15/95
Food Service Equipment Co PYA Monarch Inc 040235 NY 02/28/92
City Gas Co of Florida 91 0000211532 FL 10/01/91
Westview Mall - Baltimore landlord 140768168 MD 03/15/94
Industrial Leasing Corp 91 0000064980 FL 03/25/91
Industrial Leasing Corp/PLC
Lease Receivables 1993-A Trust 93 0000112340 FL 05/28/93
Ultra Funding / Execulease Corp. 90 0000068885 FL 01/19/90
Ambassador Group Inc. 92 0000087906 FL 05/04/92
Walnut Equipment Leasing Co. Inc. 96 0000005281 FL 01/08/96
Sysco Corp 93 0419 7708 VA 04/19/93
Sysco Corp 21851649 PA 04/19/93
Sysco Corp 084480 NY 04/20/93
Sysco Corp 93 0000083337 FL 04/21/93
Pitney Bowes Credit Corp 91 0000217562 FL 10/10/91
<PAGE>
Filing Filing
Secured Party Filing # State Date
------------- -------------- --- --------
FORMER STACEY'S BUFFET FRANCHISEE'S FILINGS
-------------------------------------------
Ecolab, Inc 961-019138 TN 06/27/96
Ecolab, Inc 95 0000086186 FL 05/01/95
Ultra Funding 89 307969 FL 11/21/89
Mid States Leasing Inc. 9328 KY 07/31/91
Mid States Leasing Inc. 9328 KY 07/31/91
Bar Way Industies 91 0000253561 FL 12/02/91
Bar Way Industies 91 0000253561 FL 12/02/91
Barway Automatic Beverage 94 0000254492 FL 12/19/94
APPEARS TO BE ANOTHER ENTITY NAMED HOMESTYLE BUFFET, INC.
---------------------------------------------------------
Hoffman Heights Shopping Center Ltd. 92 2078107 CO 10/29/92
Young Electric Sign Company 92 2088837 CO 12/14/92
Nobel/Sysco Foods Services Co. 93 2009191 CO 02/03/93
Employment Development Department 95 01160852 CA 12/27/94
Board of Equalization 95 22960686 CA 08/16/95
Employment Development Department 95 25060597 CA 09/01/95
</TABLE>
<PAGE>
<PAGE>
PROMISSORY NOTE
Salt Lake City, Utah $4,500,000.00
For value received, STACEY'S BUFFET, INC., a Florida corporation (the
"Borrower"), promises to pay to the order of STAR BUFFET, INC., a Delaware
corporation (the "Lender"), the principal sum of Four Million Five Hundred
Thousand Dollars ($4,500,000.00) or such lesser amount as shall equal the
aggregate unpaid principal amount of the Loans made by Lender to Borrower
under the Credit Agreement referred to below. As of the date of this Note,
the aggregate unpaid principal amount of the Loans made pursuant to the
Credit Agreement equals Four Hundred Thousand Dollars ($400,000) disbursed
as of the date of this Note. The Borrower promises to pay interest on the
unpaid principal amount of this Note on the dates and at the rate or rates
provided for in the Credit Agreement. The Borrower promises to pay the
principal sum evidenced hereby as provided in the Credit Agreement.
Interest on any overdue principal of and, to the extent permitted by law,
overdue interest on the principal amount hereof shall bear interest at the
Default Rate, as provided in the Credit Agreement. All such payments of
principal and interest shall be made in lawful money of the United States
in Federal or other immediately available funds at the address of the
Lender as specified from time to time under the Credit Agreement.
This Note is the Note referred to in, and is issued pursuant to, the
Credit Agreement, dated as of even date herewith, between the Borrower and
the Lender (as the same may be amended and modified from time to time, the
"Credit Agreement"). Terms defined in the Credit Agreement are used herein
with the same meanings. Reference is made to the Credit Agreement for
provisions for the optional and mandatory prepayment and the repayment
hereof and the acceleration of the maturity hereof.
Except as otherwise specifically provided in the Credit Agreement, the
Borrower, to the extent permitted by applicable law, waives presentment for
payment, protest and demand, and notice of protest, demand and/or dishonor
and nonpayment of this Note, notice of any Event of Default under the
Credit Agreement by Borrower, and all other notices or demands otherwise
required by law that the Borrower may lawfully waive.
All agreements between the Borrower and the Lender are hereby
expressly limited so that in no contingency or event whatsoever, whether by
reason of acceleration of maturity of the indebtedness evidenced hereby or
otherwise, shall the amount paid or agreed to be paid to the Lender for the
use, forbearance or detention of the indebtedness evidenced hereby exceed
the maximum permissible under applicable law. As used herein, the term
"applicable law" shall mean the law in effect as of the date hereof,
provided, however, that in the event there is a change in the law which
results in a higher permissible rate of interest than the highest
permissible rate under applicable law in effect as of the date hereof, then
this Note shall be governed by such new law as of its effective date. If,
from any circumstance whatsoever, fulfillment of any provision hereof or
the Credit Agreement at the time performance of such provision shall be
due, shall involve transcending the limit of validity prescribed by law,
then the obligation to be fulfilled shall automatically be reduced to the
limit of such validity, and if from any circumstances the Lender should
ever receive as interest an amount which would exceed the highest lawful
rate, such amount which would be excessive interest shall be applied to the
reduction of the principal balance evidenced hereby and not to the payment
of interest, and if the principal amount of this Note has been paid in
<PAGE>
full, shall be refunded to the Borrower. This provision shall control
every other provision of all agreements between the Borrower and the
Lender.
The rights and obligations of the Borrower and all provisions hereof
shall be governed by and construed in accordance with the laws of the State
of Utah.
IN WITNESS WHEREOF, the Borrower has caused this Promissory Note to be
duly executed, under seal, by its duly authorized officer as of October 31,
1997.
STACEY'S BUFFET, INC.
By: /s/Stephen J. Marrier
------------------------------
Title: C.E.O.
------------------------------
2
<PAGE>
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT (this "Agreement") is made as of the 31st day
of October, 1997, by and between STACEY'S BUFFET, INC., a Florida corporation
(the "Borrower") and STAR BUFFET, INC., a Delaware corporation ("Lender").
Terms defined in the Credit Agreement shall have the same meaning under this
assignment except as otherwise provided.
RECITALS:
--------
A. Concurrently herewith, the Borrower and the Lender executed and
delivered that certain Credit Agreement, dated as of even date herewith (as
amended, supplemented or otherwise modified from time to time hereafter,
the "Credit Agreement") pursuant to which the Lender from time to time will
make certain loans to Borrower.
B. As a condition, among others, to the Lender executing and
delivering the Credit Agreement, the Borrower has agreed to execute and
deliver this Agreement in order to secure its obligations to Lender.
AGREEMENTS:
----------
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration, the receipt and sufficiency of which the
parties hereto acknowledge, the parties hereto agree as follows:
DEFINITIONS
-----------
As used in this Agreement, the terms defined in the Preamble and
Recitals hereto shall have the respective meanings specified therein, and
the following terms shall have the following meanings (capitalized terms
not otherwise defined herein shall have the meaning set forth therefor in
the Credit Agreement):
"Account" individually and "Accounts" collectively mean all of
the Borrower's right, title and interest in and to all presently existing
or hereafter acquired or created accounts, accounts receivable, contract
rights, documents of title, notes, drafts, instruments, acceptances,
chattel paper, securities, leases and writings evidencing a monetary
obligation or a security interest in or a lease of goods; all rights to
receive the payment of money or other consideration under present or future
contracts (including, without limitation, all rights to receive payments
under presently existing or hereafter acquired or created letters of
credit), or by virtue of merchandise sold or leased, services rendered,
loans and advances made or other considerations given, by or set forth in
or arising out of any present or future chattel paper, note, draft, lease,
acceptance, writing, bond, insurance policy, instrument, document or
general intangible, and all extensions and renewals of any thereof; all
rights under or arising out of present or future contracts, agreements or
general interests in merchandise which gave rise to any or all of the
foregoing, including all goods; all claims or causes of action now existing
<PAGE>
or hereafter arising in connection with or under any agreement or document
or by operation of law or otherwise; all collateral security of any kind
(including real property) given by any person with respect to any of the
foregoing; all returned, rejected or repossessed goods, the sale or lease
of which shall have given or shall give rise to an any of the foregoing and
all cash and non-cash proceeds and products of all such goods; and all
proceeds (cash and non-cash) of the foregoing.
"Collateral" shall mean all of the Borrower's Accounts,
Equipment, General Intangibles, Inventory and other personal property, all
whether now owned or existing or hereafter acquired or created, together
with any and all cash and non-cash proceeds (including, without limitation,
insurance proceeds) and products thereof.
"Default Rate" has the meaning set forth therefor in the Credit
Agreement.
"Enforcement Costs" mean all reasonable expenses, charges, costs
and fees whatsoever (including, without limitation, reasonable attorney's
fees and expenses) of any nature whatsoever paid or incurred by or on
behalf of the Agent in connection with (a) the collection or enforcement of
any or all of the Obligations or this Agreement (including, without
limitation, attorneys fees incurred prior to the institution of any suit or
other proceeding), (b) the creation, perfection, collection, maintenance,
preservation, defense, protection, realization upon, disposition, sale or
enforcement of all or any part of the Collateral, (c) the monitoring,
inspection, administration, processing, servicing of any or all of the
Obligations and/or the Collateral, (d) the preparation of this Agreement
and the preparation and review of lien and record searches, reports,
certificates, appraisals, environmental surveys, and/or other documents or
information relating from time to time to the taking, perfection,
inspection, preservation, protection and/or release of a Lien on the
Collateral, the value of the Collateral, or otherwise relating to the
Agent's rights and remedies under this Agreement or with respect to the
Collateral, and (e) all filing and/or recording taxes or fees and all stamp
and other taxes and fees payable or determined to be payable in connection
with the execution and delivery of this Agreement and any and all
liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes or fees, the Borrower hereby agreeing to
indemnify and save the Agent harmless from and against such liabilities.
"Equipment" shall mean all of the Borrower's right, title and
interest in and to all equipment, machinery, computers, chattels, tools,
parts, machine tools, moveable restaurant buildings and all related
equipment and moveable site improvements, furniture, furnishings, fixtures
and supplies of every nature, presently existing or hereafter acquired or
created and wherever located, together with all accessions, additions,
fittings, accessories, special tools, and improvements thereto and
substitutions therefor and all parts and equipment which may be attached to
or which are necessary for the operation and use of such personal property,
whether or not the same shall be deemed to be affixed to real property, and
all rights under or arising out of present or future contracts relating to
the foregoing and all proceeds (cash and non-cash) of the foregoing.
"Event of Default" has the meaning described in Article 4.
<PAGE>
"Franchise Agreements" means the license agreements and the
franchise agreements of the Borrower as licensor or franchisor (as the case
may be), with the licensees or franchisees (as the case may be), all as
described on Exhibit A attached hereto and made a part hereof and any such
additional franchise or license agreements executed from time to time.
"Franchise Rights of Payment" means all rights of payment the
Borrower may have from time to time under all of its Franchise Agreements
in effect from time to time.
"General Intangibles" shall mean all of the Borrower's right,
title and interest in and to all general intangibles, of every nature,
whether presently existing or hereafter acquired or created, including,
without limitation, all of the Franchise Agreements, all of the Franchise
Rights of Payment, all books, correspondence, credit files, records,
computer programs, computer tapes, cards and other papers and documents in
the possession or control of the Borrower, claims (including without
limitation all claims for income tax and other refunds), choses in action,
judgments, patents, patent licenses, trademarks, trademark licenses,
licensing agreements, rights in intellectual property, goodwill (including
all goodwill of the Borrower's business symbolized by and associated with
any and all trademarks, trademark licenses, copyrights and/or service
marks), franchises, royalty payments, contractual rights, literary rights,
copyrights, service names, service marks, logos, trade secrets, all amounts
received as an award in or settlement of a suit in damages, deposit
accounts, interests in joint ventures or general or limited partnerships,
and all proceeds (cash and non-cash) of the foregoing.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"Inventory" means all of the Borrower's right, title and interest
in and to all now owned and hereafter acquired inventory, goods,
merchandise and other personal property furnished under any contract of
service or intended for sale or lease, including, without limitation, all
raw materials, work-in-progress, finished goods and materials and supplies
of any kind, nature or description which are used or consumed in the
Borrower's business or are or might be used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such
goods, merchandise and other personal property and all documents of title
or documents representing the same and all proceeds, (cash and non-cash) of
the foregoing.
"Laws" means all ordinances, statutes, rules, regulations,
orders, injunctions, writs, or decrees of any Governmental Authority or
political subdivision or agency thereof, or any court or similar entity
established by any thereof.
"Lien" means any mortgage, deed of trust, deed to secure debt,
grant, pledge, security interest, assignment, encumbrance, judgment,
financing statement, lien or charge of any kind, whether perfected or
unperfected, avoidable or unavoidable, consensual or non-consensual
including, without limitation, any conditional sale or other title
retention agreement, filed or unfiled tax liens, any lease in the nature
thereof, and the filing of or agreement to give any financing statement
under the Uniform Commercial Code of any jurisdiction, excluding the
<PAGE>
precautionary filing of any financing statement by any lessor in a true
lease transaction, by any bailor in a true bailment transaction or by any
consignor in a true consignment transaction under the Uniform Commercial
Code of any jurisdiction or the agreement to give any financing statement
by any lessee in a true lease transaction, by any bailee in a true bailment
transaction or by any consignee in a true consignment transaction.
"Loan Documents" has the meaning set forth in the Credit
Agreement and, as used herein, shall include the Credit Agreement.
"Obligations" means all debts, obligations, and liabilities of
the Borrower to the Lender of any nature whatsoever and whenever arising
(whether now or hereafter existing and whether before or after the
commencement of a proceeding under the Bankruptcy Code) relating to the
Loan and pursuant to the Loan Documents, regardless of whether such debts,
obligations and liabilities be direct, indirect, primary, secondary, joint,
several, joint and several, fixed or contingent; and any and all renewals,
restatements, amendments, replacements, extensions and rearrangements of
any such debts, obligations and liabilities including, without limitation,
the principal of, and interest on, loans and advances and on the Note.
"Person" shall mean and include an individual, a corporation, a
partnership, a joint venture, a trust, an unincorporated association, a
government or political subdivision or agency thereof or any other entity.
ARTICLE I
COLLATERAL
Section 1.1. GRANT OF SECURITY INTEREST. As security for the
Obligations, the Borrower hereby assigns, pledges and grants to the Lender,
and agrees that the Lender shall have a perfected and continuing security
interest in, all of the Borrower's Collateral, whether now owned or
existing or hereafter acquired or arising, together with any and all cash
and non-cash proceeds and products thereof. The Borrower further agrees
that the Lender shall have in respect thereof all of the rights and
remedies of a secured party under the Uniform Commercial Code of the State
of Utah as well as those provided in this Agreement.
Section 1.2. RELEASE. The Lender shall have no obligation to
release and/or terminate this Agreement, except upon both the performance
of this Agreement and the payment and/or performance of all Obligations and
the expiration and termination of any and all commitments or obligations
(whether or not conditional) of the Lender, to re-advance amounts or
otherwise allow Obligations which would be secured thereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. REPRESENTATIONS AND WARRANTIES. The Borrower
represents and warrants to the Lender, and shall be deemed to represent and
warrant at the time each of the Obligations not existing on the date of
this Agreement is requested and again at the time each of those Obligations
is incurred, as follows:
<PAGE>
2.1.1 PLACE(S) OF BUSINESS AND LOCATION OF COLLATERAL.
The Borrower warrants that the address of the Borrower's chief executive
offices and the address of all other locations of the Collateral are set
forth on Exhibit B attached hereto and made a part hereof.
2.1.2 BUSINESS NAMES AND ADDRESSES. The Borrower has
not conducted business under any name other than "STACEY'S BUFFET, INC".
2.1.3 GOOD STANDING. The Borrower is a corporation,
duly organized and existing, in good standing, under the laws of the
jurisdiction of its incorporation, and has the corporate power to own its
property and to carry on its business as now being conducted and is duly
qualified to do business and is in good standing in each jurisdiction in
which the character of the properties owned or leased by it therein or in
which the transaction of its business makes such qualification necessary,
except where the failure to so qualify would not have a material adverse
effect on Borrower.
2.1.4 CORPORATE AUTHORITY. The Borrower has full power
and authority to enter into and to perform its obligations under this
Agreement, all of which have been duly authorized by all proper and
necessary corporate action. No consent or approval of shareholders of, or
lenders to, the Borrower and no consent, approval, filing or registration
with or notice to any Governmental Authority on the part of the Borrower is
required as a condition to the validity of this Agreement or the
performance by the Borrower of its obligations under this Agreement.
2.1.5 BINDING AGREEMENTS. This Agreement constitutes
the valid and legally binding agreement of the Borrower and is enforceable
against the Borrower in accordance with its terms, PROVIDED that the
enforceability hereof is subject to general principles of equity and to
bankruptcy, insolvency and similar laws affecting the enforcement of
creditors' rights generally, and to standards of good faith and commercial
reasonableness.
2.1.6 NO CONFLICTS. There is no statute, regulation,
rule, order or judgment, no charter, by-law or preference stock provision
of the Borrower, and except for permitted liens under the Credit Agreement,
no provision of any mortgage, indenture, contract or other agreement
binding on the Borrower or affecting its properties, which would prohibit,
or cause a default under or in any way prevent the execution, delivery, or
carrying out of the terms of this Agreement.
2.1.7 TITLE TO COLLATERAL. The Borrower has good and
marketable title to its properties and assets which are included among the
Collateral. Such properties and assets are subject to no Lien of any kind,
except for the Liens in existence as of the date of this Agreement, Liens
of the Lender pursuant to this Agreement or as may be permitted otherwise
by the Credit Agreement, and the Borrower has legal, enforceable and
uncontested rights to use freely such property and assets.
Section 2.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in or made under or in connection
with this Agreement shall survive the execution of this Agreement and the
incurring of any particular Obligation.
<PAGE>
ARTICLE III
COVENANTS AND AGREEMENTS OF THE BORROWER
Section 3.1. COVENANTS. So long as any of the Obligations (or
commitments therefor) shall be outstanding hereunder, the Borrower agrees
with the Lender as follows:
3.1.1 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE,
COMPLIANCE WITH LAWS, ETC. The Borrower will (i) do or cause to be done
all things necessary to preserve and to keep in full force and effect its
corporate existence and material rights and its franchises, trade names,
patents, trademarks and permits which are necessary for the continuance of
its business, and (ii) comply with all applicable Laws and observe the
valid requirements of Governmental Authorities, the noncompliance with or
the nonobservance of which might materially interfere with the performance
of its obligations hereunder, or with the Lender's interest in the
Collateral.
3.1.2 CERTAIN NOTICES. The Borrower will notify the
Lender not less than thirty (30) days PRIOR to (i) any change in the name
or corporate structure under which the Borrower conducts its business the
opening of any new place of business or the closing of any existing place
of business; and (ii) any change in the location of the places where the
Collateral, or any part thereof, or the books and records concerning the
Collateral, or any part thereof, are kept.
3.1.3 MAINTENANCE OF THE COLLATERAL; INSURANCE. The
Borrower will maintain the Collateral in good working order, saving and
excepting ordinary wear and tear, and will not permit anything to be done
to the Collateral which may materially impair the value thereof. The
Lender or agents designated by Lender, shall be permitted to enter the
premises of the Borrower and examine, audit and inspect the Collateral at
any reasonable time and from time to time without notice. The Borrower
will promptly furnish to the Lender all such additional information
regarding the Collateral as the Lender may from time to time request in the
exercise of its discretion. With respect to the insurance required to be
obtained by the Borrower under the Credit Agreement, the Borrower will
obtain from such insurers a certificate confirming that the Lender, is an
additional insured with loss payable to the Lender as its respective
interest may appear on the Collateral and with a specific endorsement to
each such insurance policy pursuant to which the insurer agrees to give the
Lender at least thirty (30) days written notice before any alteration or
cancellation of such insurance policy.
3.1.4 DEFENSE OF TITLE AND FURTHER ASSURANCES. At its
expense the Borrower will defend the title to the Collateral (or any part
thereof), and promptly upon request execute, acknowledge and deliver any
financing statement, renewal, affidavit, deed, assignment, continuation
statement, security agreement, certificate, notice to financial
intermediary, or other document the Lender may require in order to perfect,
preserve, maintain, continue, protect and/or extend the Lien or security
interest granted to the Lender under this Agreement and its priority. The
Borrower will from time to time do whatever the Lender may request by way
of obtaining, executing, delivering, and/or filing financing statements,
landlord's or mortgagee's waivers, and other notices and amendments and
renewals thereof and the Borrower will take any and all steps and observe
<PAGE>
such formalities as the Lender may request, in order to create and maintain
a valid Lien upon, pledge of, or security interest in, the Collateral
subject to no other liens or claims. The Borrower agrees that a copy of a
fully executed financing statement shall be sufficient to satisfy for all
purposes the requirements of a financing statement as set forth in Article
9 of the applicable Uniform Commercial Code.
3.1.5 SECURITY, ETC. The Borrower agrees that the
Lender may at any time take such steps as the Lender deems reasonably
necessary to protect the Lender's interest in, and to preserve the
Collateral, whether at the business premises of the Borrower or elsewhere.
3.1.6 OTHER LIENS. The Borrower will not permit any
Liens on or with respect to all or any part of the Collateral, other than
those Liens in favor of the Lender, Liens for taxes not yet delinquent, and
Liens permitted by the Credit Agreement.
3.1.7 LOCATION OF COLLATERAL. Except as expressly
permitted elsewhere in this Agreement or except as permitted by the Credit
Agreement, without the prior written consent of the Lender, the Borrower
will not transfer, or permit the transfer, to another location of any of
the Collateral or the books and records related to any of the Collateral.
3.1.8 DISPOSITION OF COLLATERAL. Without the prior
written consent of the Lender or except as permitted by the Credit
Agreement, the Borrower will not sell, discount, allow credits or
allowances, transfer, assign, extend the time for payment on, convey,
lease, assign, transfer or otherwise dispose of the Collateral. Unless,
with respect to any of the foregoing actions which are not permitted (and
not prohibited) by the Credit Agreement, such action is in the ordinary
course of business consistent with past practices.
3.1.9 FRANCHISE AGREEMENTS. Without the prior written
consent of the Lender, the Borrower will not amend or otherwise modify the
Franchise Agreements, other than amendments or modifications made in the
ordinary course of business which would not have a material adverse effect
on the Borrower. The Borrower shall enforce its rights and remedies against
its franchisees in accordance with the terms of the Franchise Agreements in
the ordinary course of business. The Borrower shall maintain at all times
all of its franchises, Franchise Agreements and other General Intangibles
relating thereto in full force and effect.
ARTICLE IV
DEFAULT AND RIGHTS AND REMEDIES
Section 4.1. EVENTS OF DEFAULT. The occurrence of one or more of
the following events shall be "Events of Default" under this Agreement, and
the terms "Event of Default" or "default" shall mean, whenever they are
used in this Agreement, any one or more of the following events:
4.1.1 The Borrower shall fail to make any payment when
due and such failure shall continue beyond any applicable grace period
under any of the Obligations.
<PAGE>
4.1.2 Any representation or warranty made herein or in
any report, certificate, opinion (including any opinion of counsel for the
Borrower), financial statement or other instrument furnished in connection
with the Loan Documents or the Obligations, shall prove to have been false
or misleading when made in any material respect.
4.1.3 Other than failure to pay the Obligations as set
forth in 4.1.1 above, the Borrower shall fail to duly and promptly perform,
comply with or observe the terms, covenants, conditions and agreements set
forth in this Agreement (and such failure shall continue uncured for 30
days after notice thereof) or in any of the other Loan Documents, or an
"Event of Default" shall occur under any of the Loan Documents, and such
"Event of Default" is not cured within any applicable grace period provided
therein.
Section 4.2. RIGHTS AND REMEDIES, ETC.
4.2.1 GENERAL RIGHTS AND REMEDIES. If any Event of
Default shall occur hereunder, then in each and every such case, the Lender
may, at its option exercised from time to time, at any time thereafter
while such Event of Default is continuing do any one or more of the
following:
(1) declare without notice to the Borrower the unpaid
principal amount of all or any of the Obligations (with accrued interest
thereon) to be immediately due and payable, whereupon the same shall
forthwith become due and payable, without presentment, demand, protest or
notice of any kind, all of which the Borrower hereby expressly waives;
and/or
(2) exercise any rights and remedies available to the
Lender under this Agreement and applicable Laws.
4.2.2 ENFORCEMENT COSTS; APPLICATION OF PROCEEDS.
Borrower agrees to pay to the Lender all Enforcement Costs paid or incurred
by the Lender. All Enforcement Costs which are required to be paid by the
Borrower, together with interest thereon from the date incurred or advanced
until paid in full at a per annum rate of interest equal at all times to
the Default Rate and shall be paid by the Borrower to the Lender whenever
demanded by the Lender.
Any proceeds of the collection of the Obligations or of the sale or
other disposition of the Collateral will be applied by the Lender first to
the payment of the Enforcement Costs, second to the payment of the Loan,
and any balance of such proceeds (if any) will be applied by the Lender to
the payment of the remaining Obligations (whether then due or not), if any,
at such time or times and in such order and manner of application as the
Lender may from time to time in its sole discretion determine. If the sale
or other disposition of the Collateral fails to satisfy all of the
Obligations, the Borrower shall remain liable to the Lender for any
deficiency. Any surplus from the sale or disposition of the Collateral
shall be paid to the Borrower or to any other party entitled thereto or
shall otherwise be paid over in a manner permitted by law, less all
Enforcement Costs related to any such payment.
<PAGE>
4.2.3 SPECIFIC RIGHTS WITH REGARD TO COLLATERAL. In
addition to all other rights and remedies provided hereunder or as shall
exist at law or in equity from time to time, during the continuance of an
Event of Default the Lender may without notice to the Borrower (except to
the extent required by applicable Laws) endorse the name of the Borrower
upon any items of payment relating to the Collateral or on any proof of
claim in any bankruptcy proceeding against an account debtor and any other
obligor with respect to the Collateral.
4.2.4 UNIFORM COMMERCIAL CODE AND OTHER REMEDIES. Upon
the occurrence of an Event of Default (and in addition to all of its
rights, powers and remedies under this Agreement), the Lender shall have
all of the rights and remedies of a secured party under the Utah Uniform
Commercial Code and other applicable laws. Upon demand by the Lender, the
Borrower shall assemble the Collateral and make it available to the Lender,
at a place reasonably convenient for such purpose as designated by the
Lender. The Lender or its Lenders may enter upon the Borrower's premises
to take possession of the Collateral, to remove it, to render it unusable,
or to sell or otherwise dispose of it.
Any written notice of the sale, disposition or other intended action
by the Lender with respect to the Collateral which is sent by regular mail,
postage prepaid, to the Borrower at the address set forth for notices
herein, or such other address of the Borrower which may from time to time
be shown on the Lender's records, at least ten (10) days prior to such
sale, disposition or other action, shall constitute reasonable notice to
the Borrower.
ARTICLE V
MISCELLANEOUS
Section 5.1. COURSE OF DEALING; AMENDMENT. No course of dealing
between the Borrower and the Lender shall be effective to amend, modify or
change any provision of this Agreement and this Agreement may not be
amended, modified, or changed in any respect except by an agreement in
writing signed by the Lender and the Borrower. The Lender shall have the
right at all times to enforce the provisions of this Agreement in strict
accordance with the terms hereof and thereof, notwithstanding any conduct
or custom on the part of the Lender in refraining from so doing at any time
or times. The failure or delay of the Lender at any time or times to
enforce its rights under such provisions, strictly in accordance with the
same, shall not be construed as having created a custom in any way or
manner contrary to specific provisions of this Agreement or as having in
any way or manner modified or waived the same.
Section 5.2. WAIVER, CUMULATIVE REMEDIES. The Lender may:
(1) at any time and from time to time, execute and deliver
to the Borrower a written instrument waiving, on such terms and conditions
as the Lender, may specify in such written instrument, any of the
requirements of this Agreement or any Event of Default and its
consequences, provided, that any such waiver shall be for such period and
subject and limited to such conditions as shall be specified in any such
instrument and to the instance for which the waiver is given. In the case
of any such waiver, the Borrower and the Lender, shall be restored to their
<PAGE>
former positions prior to such Event of Default and shall have the same
rights as they had hereunder. The rights, powers and remedies provided in
this Agreement are cumulative, may be exercised concurrently or separately,
may be exercised from time to time and in such order as the Lender shall
determine, and are in addition to, and not exclusive of, rights, powers and
remedies provided by applicable Laws.
(2) after an Event of Default proceed against the Borrower
and/or the Collateral with or without proceeding against any Person
obligated under any of the Obligations.
(3) after an Event of Default proceed against the Borrower
with or without proceeding under any of the Loan Documents or any other
agreement.
(4) without reducing or impairing the obligation of the
Borrower and without notice, release or compromise with any guarantor or
other Person liable for all or any part of the Obligations.
(5) without reducing or impairing the obligations of the
Borrower and without notice thereof: (i) fail to perfect the Lien in any
or all Collateral or to release any or all of the Collateral or to accept
substitute Collateral, (ii) allow all or any Obligations to arise after the
date of this Agreement, (iii) waive any provision of this Agreement, (iv)
exercise or fail to exercise rights of set-off or other rights, (v) accept
partial payments or extend from time to time the maturity of all or any
part of the Obligations, and (vi) take or fail to take any action under
this Agreement or against any one or more Persons obligated under the
Obligations.
The Borrower hereby waives and releases all claims and defenses
against the Lender with respect to the payment of the or enforcement of the
Obligations and the Lender's rights in the Collateral on account of any of
the foregoing.
Section 5.3. NOTICES. All notices, requests and demands to or upon
the parties to this Agreement shall be deemed to have been given or made
when so given or made in accordance with Section 7.1 of the Credit
Agreement.
Section 5.4. MANAGEMENT AND ADMINISTRATION BY LENDER. The Lender
shall not have any duty to the Borrower to pay for insurance, taxes, or
other charges incurred in the custody, preservation, use or operation of,
or in connection with the management of, any Collateral on which a Lien is
granted in connection with this Agreement; provided, however, that the
Lender may (in its sole discretion) pay such expenses. All such payments
shall part of the Obligations and shall bear interest payable on demand by
the Borrower from the date paid or incurred until paid in full at the
Default Rate.
<PAGE>
Section 5.5. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION. The
Borrower (a) and each of the Lenders and the Lender irrevocably waives any
and all right to trial by jury in any legal proceeding arising out of this
Agreement to the extent permitted by law, (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, (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, and (d) agrees
that service of process may be made upon it in the manner prescribed in
Section 7.1 of the Credit Agreement 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 5.6. SEVERABILITY. In case one or more provisions contained
in this Agreement shall be invalid, illegal or unenforceable in any respect
under any law, the validity, legality and enforceability of the remaining
provisions contained herein shall remain effective and binding on the
parties thereto and shall not be affected or impaired thereby.
Section 5.7. ASSIGNMENT, ETC. The Lender shall have the right to
divulge to any actual or potential purchaser, assignee, transferee or
participant of the Collateral and/or the Obligations, or any part thereof
all information, reports, financial statements and documents obtained in
connection with this Agreement or otherwise as the same may be permitted
under the Amended and Restated Credit Agreement.
Section 5.8. BINDING EFFECT. This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Lender and their
respective successors and assigns, except that the Borrower shall not have
the right to assign its rights hereunder or any interest herein without the
prior written consent of the Lender.
Section 5.9. APPLICABLE LAW. THE BORROWER ACKNOWLEDGES AND AGREES
THAT THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF UTAH, AS
IF THIS AGREEMENT HAD EACH BEEN EXECUTED, DELIVERED, ADMINISTERED AND
PERFORMED SOLELY WITHIN THE STATE OF UTAH.
Section 5.10. DEFINITIONAL PROVISIONS. Unless otherwise defined
herein, as used in this Agreement and in any certificate, report or other
document made or delivered pursuant hereto, accounting terms not otherwise
defined herein, and accounting terms only partly defined herein, to the
extent not defined, shall have the respective meanings given to them under
generally accepted United States accounting principles consistently applied
<PAGE>
to the Borrower. Unless otherwise defined herein, all terms used herein
which are defined by the Utah Uniform Commercial Code shall have the same
meanings as assigned to them by the Utah Uniform Commercial Code unless and
to the extent varied by this Agreement. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of
this Agreement, and article, section, subsection, schedule and exhibit
references are references to articles, sections or subsections of, or
schedules or exhibits to, as the case may be, this Agreement unless
otherwise specified. The captions, headings and titles to this Agreement
and its sections, subsections and other parts are only for the convenience
of the parties and are not part of this Agreement. As used herein, the
singular number shall include the plural, the plural the singular and the
use of the masculine, feminine or neuter gender shall include all genders,
as the context may require. Reference to this Agreement or to any one or
more of the instrument, agreement or document previously, simultaneously or
hereafter executed and delivered by the Borrower, any guarantor and/or any
other Person, singly or jointly with another Person or Persons, evidencing,
securing, guarantying or otherwise in connection with any of the
Obligations and/or in connection with this Agreement shall mean the same as
the foregoing may from time to time be amended, restated, substituted,
extended, renewed, supplemented or otherwise modified.
IN WITNESS WHEREOF, the Borrower has executed and delivered this
Agreement under seal as of the day and year first written above.
STAR BUFFET, INC.
By: /s/ Theodore Abajian
-------------------------------
Name: Theodore Abajian
Title: V.P. CFO
-------------------------------
STACEY'S BUFFET, INC.
By: /s/ Stehpen J. Marrier
------------------------------
Name: Stephen J. Marrier
Title: CEO
------------------------------
<PAGE>
EXHIBIT A
---------
Franchise Agreements
13
<PAGE>
EXHIBIT B
---------
The Borrower's chief executive office is located at 801 West Bay
Drive, Suite 704, Largo, Florida 33770.
In addition to the Borrower's chief executive office listed above, the
Collateral is also located at the following addresses:
See Attached Schedule 1.
<PAGE>
EXHIBIT A TO FINANCING STATEMENT
Description of Collateral
This Financing Statement covers the following types (or items) of
property of the Debtor, including, without limitation, all proceeds of any
insurance policies covering all or any part of such property (as such terms
are defined below): all of the Debtor's Accounts, Equipment, General
Intangibles, and Inventory, all whether now owned or existing or hereafter
acquired or created, together with any and all cash and non-cash proceeds
(including, without limitation, insurance proceeds) and products thereof.
"Account" individually and "Accounts" collectively mean all of the
Debtor's right, title and interest in and to all presently existing or
hereafter acquired or created accounts, accounts receivable, contract
rights, documents of title, notes, drafts, instruments, acceptances,
chattel paper, securities, leases and writings evidencing a monetary
obligation or a security interest in or a lease of goods; all rights to
receive the payment of money or other consideration under present or future
contracts (including, without limitation, all rights to receive payments
under presently existing or hereafter acquired or created letters of
credit), or by virtue of merchandise sold or leased, services rendered,
loans and advances made or other considerations given, by or set forth in
or arising out of any present or future chattel paper, note, draft, lease,
acceptance, writing, bond, insurance policy, instrument, document or
general intangible, and all extensions and renewals of any thereof; all
rights under or arising out of present or future contracts, agreements or
general interests in merchandise which gave rise to any or all of the
foregoing, including all goods; all claims or causes of action now existing
or hereafter arising in connection with or under any agreement or document
or by operation of law or otherwise; all collateral security of any kind
(including real property) given by any person with respect to any of the
foregoing; all returned, rejected or repossessed goods, the sale or lease
of which shall have given or shall give rise to an any of the foregoing and
all cash and non-cash proceeds and products of all such goods; and all
proceeds (cash and non-cash) of the foregoing.
"Equipment" shall mean all of the Debtor's right, title and interest
in and to all equipment, machinery, computers, chattels, tools, parts,
machine tools, moveable restaurant buildings and all related equipment and
moveable site improvements, furniture, furnishings, fixtures and supplies
of every nature, presently existing or hereafter acquired or created and
wherever located, together with all accessions, additions, fittings,
accessories, special tools, and improvements thereto and substitutions
therefor and all parts and equipment which may be attached to or which are
necessary for the operation and use of such personal property, whether or
not the same shall be deemed to be affixed to real property, and all rights
under or arising out of present or future contracts relating to the
foregoing and all proceeds (cash and non-cash) of the foregoing.
"Franchise Agreements" means all franchise or license agreements of
the Debtor as franchisor or licensor, as the case may be, with the
franchisees or licensees, as the case may be, executed from time to time.
"Franchise Rights of Payment" means all rights of payment the Debtor
may have from time to time under all of its Franchise Agreements in effect
from time to time.
<PAGE>
"General Intangibles" shall mean all of the Debtor's right, title and
interest in and to all general intangibles, of every nature, whether
presently existing or hereafter acquired or created, including, without
limitation, all of the Franchise Agreements, all of the Franchise Rights of
Payment, all books, correspondence, credit files, records, computer
programs, computer tapes, cards and other papers and documents in the
possession or control of the Debtor, claims (including without limitation
all claims for income tax and other refunds), choses in action, judgments,
patents, patent licenses, trademarks, trademark licenses, licensing
agreements, rights in intellectual property, goodwill (including all
goodwill of the Debtor's business symbolized by and associated with any and
all trademarks, trademark licenses, copyrights and/or service marks),
franchises, royalty payments, contractual rights, literary rights,
copyrights, service names, service marks, logos, trade secrets, all amounts
received as an award in or settlement of a suit in damages, deposit
accounts, interests in joint ventures or general or limited partnerships,
and all proceeds (cash and non-cash) of the foregoing.
"Inventory" means all of the Debtor's right, title and interest in and
to all now owned and hereafter acquired inventory, goods, merchandise and
other personal property furnished under any contract of service or intended
for sale or lease, including, without limitation, all raw materials,
work-in-progress, finished goods and materials and supplies of any kind,
nature or description which are used or consumed in the Debtor's business
or are or might be used in connection with the manufacture, packing,
shipping, advertising, selling or finishing of such goods, merchandise and
other personal property and all documents of title or documents
representing the same and all proceeds, (cash and non-cash) of the
foregoing.
15
<PAGE>
<PAGE> 99.5
WARRANT TO PURCHASE COMMON STOCK
OF
STACEY'S BUFFET, INC.
<PAGE>
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE
UPON
EXERCISE THEROF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), NOR QUALIFIED UNDER THE SECURITIES LAWS
OF ANT STATE. THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEROF 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 SECURITRIES
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 "Compny"), at ant time during the period from the
date hereof (the "Commencement Date") to 5:00p.m., California time, on
October 31, 2002 (the "Expiration Date"), at which time this Warrant shall
expire, 1,342,422 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 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 designed 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, exercise and deliver a new
<PAGE>
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>
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>
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>
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>
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>
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.
7
<PAGE>
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.
8
<PAGE>
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>
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:
--------------------------
10
<PAGE>
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.)
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of October
31, 1997 by and between STACEY'S BUFFET, INC, a Florida corporation (the
"Company"), and STAR BUFFET, INC. a Delaware corporation (the "Holders").
This Agreement is made pursuant to that certain Credit Agreement,
dated as of the date hereof, as subsequently amended or modified from time
to time, by and between the Company and the Holder (the "Credit
Agreement"). In order to induce the Holder to enter into the Credit
Agreement, the Company has agreed to provide the registration rights set
forth in this Agreement. The execution of this Agreement is a condition to
the closing of the transactions contemplated by the Credit Agreement.
In consideration of the foregoing, the parties hereby agree as
follows:
Section 1. DEFINITIONS. As used in this Agreement, the following
terms shall have the following meanings:
"ADVICE" shall have the meaning set forth in Section 5.
"AFFILIATE" means, with respect to any specified Person, any other
Person who, directly or indirectly, controls, is controlled by, or is under
common control with such specified Person.
"BUSINESS DAY" means any day other than a day on which banks are
authorized or required to be closed in the State of California.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock, par value $0.01 per share, of
the Company.
"COMPANY" shall have the meaning set forth in the preamble and shall
include the Company's successors by merger, acquisition, reorganization or
otherwise.
"CONTROLLING PERSONS" shall have the meaning set forth in Section
7(a).
"CREDIT AGREEMENT" shall have the meaning set forth in the preamble.
"DEMAND REGISTRATION EFFECTIVE DATE" means the date 60 days after the
earlier of (i) the applicable Demand Registration Filing Date or (ii) the
date on which the applicable Demand Registration Statement is filed with
the Commission.
"DEMAND REGISTRATION EFFECTIVE PERIOD" shall have the meaning set
forth in Section 3(a).
"DEMAND REGISTRATION FILING DATE" shall have the meaning set forth in
Section 3(a).
"DEMAND REGISTRATION STATEMENT" shall have the meaning set forth in
Section 3(a).
<PAGE>
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute, and the rules and regulations
of the Commission promulgated thereunder.
"HOLDER" means (i) Star Buffet, Inc., a Delaware corporation, and
(ii) each Person (other than the Company or its Affiliates) to whom a
Holder transfers Shares if such Person acquires such Shares as Registrable
Shares.
"HOLDER'S COUNSEL" means Stradling Yocca Carlson & Rauth or any
successor counsel selected by the holders of a majority in interest of the
Registrable Shares.
"INSPECTORS" shall have the meaning set forth in Section 5(m).
"NASD" shall have the meaning set forth in Section 5(q).
"OBJECTION NOTICE" shall have the meaning set forth in Section 5(a).
"OBJECTING PARTY" shall have the meaning set forth in Section 5(a).
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, limited liability
company, unincorporated organization or government or other agency or
political subdivision thereof.
"PIGGY-BACK REGISTRATION" shall have the meaning set forth in Section
4(a).
"PROSPECTUS" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective Registration Statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Shares covered by such Registration Statement, and all other
amendments and supplements to the prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
"RECORDS" shall have the meaning set forth in Section 5(m).
"REGISTRABLE SHARES" means the Shares; PROVIDED, HOWEVER, that any
Shares shall cease to be Registrable Shares when (i) a Registration
Statement covering such Registrable Shares has been declared effective and
such Registrable Shares have been disposed of pursuant to such effective
Registration Statement or (ii) such Registrable Shares are transferred to
any Person other than a Holder pursuant to Rule 144 (or any similar
provision then in force, but not Rule 144A) under the Securities Act,
including a sale pursuant to the provisions of Rule 144(k).
"REGISTRATION EXPENSES" shall have the meaning set forth in Section 6.
<PAGE>
"REGISTRATION STATEMENT" means any registration statement of the
Company that covers any of the Registrable Shares pursuant to the
provisions of this Agreement (including any Shelf Registration Statement),
and all amendments and supplements to any such registration statement,
including post-effective amendments, in each case including the Prospectus,
all exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"SHARES" means shares of Common Stock which may be issued to any
Holder upon exercise of any or all of the Warrants held by such Holder.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time, or any successor statute, and the rules and regulations of
the Commission promulgated thereunder.
"SHELF REGISTRATION STATEMENT" shall have the meaning set forth in
Section 2(a).
"SUSPENSION NOTICE" has the meaning set forth in Section 5.
"SUSPENSION PERIOD" has the meaning set forth in Section 5.
"TARGET EFFECTIVE DATE" means the date 60 days after the earlier of
(i) the Target Filing Date or (ii) the date on which the Shelf Registration
Statement is filed with the Commission.
"TARGET EFFECTIVE PERIOD" shall have the meaning set forth in
Section 2(a).
"TARGET FILING DATE" means the date which is 180 days after the date
of this Agreement
"WARRANTS" means the Warrants to Purchase Shares of Common Stock of
the Company, dated as of even date hereof, together with all amendments,
consolidations, modifications, renewals, and supplements thereto and
replacements and substitutions thereof.
Section 2. SHELF REGISTRATION.
(a) FILING; EFFECTIVENESS. As soon as practicable but not later
than the Target Filing Date, the Company shall prepare and file with the
Commission a "shelf" registration statement (the "Shelf Registration
Statement") on the appropriate form for an offering to be made on a
continuous basis pursuant to Rule 415 under the Securities Act (or such
successor rule or similar provision then in effect) covering all of the
Registrable Shares. The Company shall use its best efforts to have the
Shelf Registration Statement declared effective on or before the Target
Effective Date and to keep such Shelf Registration Statement continuously
effective for the period (the "Target Effective Period") beginning on the
Target Effective Date or the date on which such Shelf Registration
Statement is declared effective, if later, and ending on the later of the
date on which the Holders no longer hold any Registrable Shares or October
31, 2002. The Holders shall be permitted to withdraw all or any part of
the Registrable Shares from a Shelf Registration Statement at any time
prior to the effective date of such Shelf Registration Statement.
<PAGE>
(b) SUPPLEMENTS; AMENDMENTS. The Company agrees, if necessary,
to supplement or amend the Shelf Registration Statement, as required by the
rules, regulations or instructions applicable to the registration form used
by the Company for such Shelf Registration Statement or by the Securities
Act or as requested (which request shall result in the filing of a
supplement or amendment) by any Holder of Registrable Shares to which such
Shelf Registration Statement relates, and the Company agrees to furnish to
the Holders, Holders' Counsel and any managing underwriter copies of any
such supplement or amendment prior to its being used and/or filed with the
Commission.
(c) EFFECTIVE REGISTRATION. A registration will not be deemed
to have been effected as a Shelf Registration Statement unless the Shelf
Registration Statement with respect thereto has been declared effective by
the Commission and the Company has complied in all material respects with
its obligations under this Agreement with respect thereto; PROVIDED,
HOWEVER, that if after it has been declared effective, the offering of
Registrable Shares pursuant to a Shelf Registration Statement is interfered
with by any stop order, injunction or other order or requirement of the
Commission or any other governmental agency or court, such Shelf
Registration Statement will be deemed not to have become effective during
the period of such interference until the offering of Registrable Shares
pursuant to such Shelf Registration Statement may legally resume. If a
registration requested pursuant to this Section 2 is deemed not to have
been effected, then the Company shall continue to be obligated to effect a
registration pursuant to this Section 2.
(d) SELECTION OF UNDERWRITER. If the Holders so elect, the
offering of Registrable Shares pursuant to a Shelf Registration Statement
shall be in the form of an underwritten offering. If they so elect, the
Holders participating in such Shelf Registration Statement shall select one
or more nationally recognized firms of investment bankers to act as the
managing underwriter or underwriters in connection with such offering and
shall select any additional investment bankers and managers to be used in
connection with the offering.
Section 3. DEMAND REGISTRATION
(a) REQUEST FOR REGISTRATION. From time to time either
(i) before a date (not before the initial Target Filing Date) on which the
Shelf Registration Statement becomes effective, or (ii) after a date on
which the Shelf Registration Statement ceases to be effective, any Holder
of the issued and outstanding Registrable Securities may make a written
request that the Company file a registration statement under the Securities
Act with the Commission to register such number of shares of Registrable
Shares as each such Holder may request (which request shall specify the
number of Registrable Shares intended to be disposed of by such Holder and
the intended method of distribution thereof) (a "Demand Registration
<PAGE>
Statement"). Within 10 days after receipt of such request, the Company
shall give written notice of such registration request to all other Holders
and thereupon the shall effect the filing of such Demand Registration
Statement and shall include in such Demand Registration Statement all
Registrable Shares with respect to which the Company has received written
requests for inclusion therein (which request shall specify the number of
Registrable Shares intended to be disposed of by such Holder and the
intended method of distribution thereof) within 15 business days after the
receipt by the applicable Holders of the notice from the Company of a
request for Demand Registration Statement. The Company shall use its best
efforts to have the Demand Registration Statement declared effective on or
before the date which is 60 days after receipt by the Company of the
applicable request for the filing of a Demand Registration Statement (a
"Demand Registration Filing Date") and to keep such Demand Registration
Statement continuously effective for a period (the "Demand Registration
Effective Period") of at least six (6) months following the Demand
Registration Effective Date or the date on which such Demand Registration
Statement is declared effective, if later.
(b) EFFECTIVE REGISTRATION. The Company's obligations with
respect to a Demand Registration Statement will not be deemed to have been
satisfied unless the applicable Demand Registration Statement has been
declared effective by the Commission and the Company has complied in all
material respects with its obligations under this Agreement with respect
thereto; PROVIDED, HOWEVER, that if after it has been declared effective,
the offering of Registrable Shares pursuant to a Demand Registration
Statement is interfered with by any stop order, injunction or other order
or requirement of the Commission or any other governmental agency or court,
such Demand Registration Statement will be deemed not to have become
effective during the period of such interference until the offering of
Registrable Shares pursuant to such Demand Registration Statement may
legally resume. If a registration requested pursuant to this Section 3 is
deemed not to have been effected, then the Company shall continue to be
obligated to effect a registration pursuant to this Section 3.
(c) SELECTION OF UNDERWRITER. If the Holders so elect, the
offering of Registrable Shares pursuant to a Demand Registration Statement
shall be in the form of an underwritten offering. If they so elect, the
Holders participating in such Demand Registration Statement shall select
one or more nationally recognized firms of investment bankers to act as the
managing underwriter or underwriters in connection with such offering and
shall select any additional investment bankers and managers to be used in
connection with the offering.
Section 4. PIGGY-BACK REGISTRATION.
(a) REQUEST FOR REGISTRATION. Each time the Company proposes to
file a registration statement under the Securities Act with respect to an
offering by the Company for its own account or for the account of any of
its securityholders of any class of equity security (other than (i) a
registration statement on Form S-4 or S-8 (or any substitute form that is
adopted by the Commission) or (ii) a registration statement filed in
connection with an exchange offer or offering of securities solely to the
Company's existing securityholders), then the Company shall give written
notice of such proposed filing to the Holders of Registrable Shares as soon
as practicable (but in no event less than 30 days before the anticipated
filing date), and such notice shall offer such Holders the opportunity to
<PAGE>
register such number of shares of Registrable Shares as each such Holder
may request (which request shall specify the Registrable Shares intended to
be disposed of by such Holder and the intended method of distribution
thereof) (a "Piggy-Back Registration"). The Company shall use its best
efforts to cause the managing underwriter or underwriters of a proposed
underwritten offering to permit the Registrable Shares requested to be
included in a Piggy-Back Registration to be included on the same terms and
conditions as any similar securities of the Company or any other
securityholder included therein and to permit the sale or other disposition
of such Registrable Shares in accordance with the intended method of
distribution thereof. Any Holder shall have the right to withdraw its
request for inclusion of its Registrable Shares in any registration
statement pursuant to this Section 4 by giving written notice to the
Company of such withdrawal. The Company may withdraw a Piggy-Back
Registration at any time prior to the time it becomes effective, provided
that the Company shall give immediate notice of such withdrawal to the
Holders of Registrable Shares requested to be included in such Piggy-Back
Registration and shall reimburse such Holders for all reasonable
out-of-pocket expenses (including counsel fees and expenses) incurred prior
to such withdrawal.
(b) REDUCTION OF OFFERING. In connection with an underwritten
offering where Piggy-Back Registration has been requested as provided in
Section 4(a), the Company shall use its best efforts to cause all
Registrable Shares requested to be included in such Piggy-Back Registration
to be included as provided in Section 4(a). If the managing underwriter or
underwriters of any such underwritten offering have informed, in writing,
the Holders of the Registrable Shares requesting inclusion in such offering
that it is their opinion that the total number of shares which the Company,
Holders of Registrable Shares and any other Persons participating in such
registration intend to include in such offering is such as to materially
and adversely affect the success of such offering, then the number of
shares to be offered for the account of all Persons (other than the
Holders) participating in such registration other than pursuant to demand
registration rights shall be reduced or limited (to zero if necessary) pro
rata in proportion to the respective number of shares requested to be
registered by such Persons to the extent necessary to reduce the total
number of shares requested to be included in such offering to the number of
shares, if any, recommended by such managing underwriter or underwriters.
No registration effected under this Section 4, and no failure to
effect a registration under this Section 4 shall relieve the Company of its
obligation to effect a registration upon the request of Holders pursuant to
Sections 2 or 3. No failure to effect a registration under this Section 4
and to complete the sale of Registrable Shares in connection therewith
shall relieve the Company of any other obligation under this Agreement,
including without limitation, the Company's obligations under Sections 6
and 7.
<PAGE>
Section 5. REGISTRATION PROCEDURES.
In connection with the obligations of the Company to effect or cause
the registration of any Registrable Shares pursuant to the terms and
conditions of this Agreement, the Company shall use its best efforts to
effect the registration and sale of such Registrable Shares in accordance
with the intended method of distribution thereof as quickly as practicable,
and in connection therewith:
(a) The Company shall prepare and file with the Commission a
Registration Statement on the appropriate form under the Securities
Act, which form shall comply as to form in all material respects with
the requirements of the applicable form and include all financial
statements required by the Commission to be filed therewith, and use
its best efforts to cause such Registration Statement to become
effective and remain effective in accordance with the provisions of
this Agreement; PROVIDED that, at least ten Business Days prior to
filing a Registration Statement or Prospectus or any amendments or
supplements thereto, including documents incorporated by reference
after the initial filing of the Registration Statement, the Company
shall furnish to the Holders of the Registrable Shares covered by such
Registration Statement, Holders' Counsel and the underwriters, if any,
draft copies of all such documents proposed to be filed, which
documents will be subject to the review of Holders' Counsel and the
underwriters, if any, and the Company will not, unless required by
law, file any Registration Statement or amendment thereto or any
Prospectus or any supplement thereto to which Holders holding a
majority in interest of the Registrable Shares covered by such
Registration Statement or the underwriters with respect to such
Shares, if any, shall object; PROVIDED, HOWEVER, that any such
objection to the filing of any Registration Statement or amendment
thereto or any Prospectus or supplement thereto shall be made by
written notice (the "Objection Notice") delivered to the Company no
later than ten Business Days after the party or parties asserting such
objection (the "Objecting Party") receives draft copies of the
documents that the Company proposes to file. The Objection Notice
shall set forth the objections and the specific areas in the draft
documents where such objections arise. The Company shall have five
(5) Business Days after receipt of the Objection Notice to correct
such deficiencies to the satisfaction of the Objecting Party, and will
notify each Holder of any stop order issued or threatened by the
Commission in connection therewith and shall use its best efforts to
prevent the entry of such stop order or to remove it if entered at the
earliest possible moment.
(b) The Company shall promptly prepare and file with the
Commission such amendments and post-effective amendments to the
Registration Statement as may be necessary to keep such Registration
Statement effective for as long as such registration is required to
remain effective pursuant to the terms hereof; shall cause the
Prospectus to be supplemented by any required Prospectus supplement,
and, as so supplemented, to be filed pursuant to Rule 424 under the
Securities Act; and shall comply with the provisions of the Securities
Act applicable to it with respect to the disposition of all
Registrable Shares covered by such Registration Statement during the
applicable period in accordance with the intended methods of
disposition by the Holders set forth in such Registration Statement or
supplement to the Prospectus;
<PAGE>
(c) The Company shall promptly furnish to any Holder and the
underwriters, if any, without charge, such number of conformed copies
of such Registration Statement and any post-effective amendment
thereto and such number of copies of the Prospectus (including each
preliminary Prospectus) and any amendments or supplements thereto, any
documents incorporated by reference therein and such other documents
as such Holder or underwriter may request in order to facilitate the
public sale or other disposition of the Registrable Shares being sold
by such Holder.
(d) The Company shall, on or prior to the date on which a
Registration Statement is declared effective, (i) use its best efforts
to register or qualify the Registrable Shares covered by such
Registration Statement under the securities or "blue sky" laws of each
of the fifty states of the United States; (ii) do any and all other
acts and things which may be necessary or advisable to enable such
Holder to consummate the disposition of such Registrable Shares owned
by such Holder; (iii) use its best efforts to keep each such
registration or qualification (or exemption therefrom) effective
during the period in which the Registration Statement is required to
be kept effective; and (iv) use its best efforts to do any and all
other acts or things necessary or advisable to enable the disposition
in such jurisdictions of such Registrable Shares; PROVIDED, HOWEVER,
that the Company shall not be required to: (x) qualify generally to
do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 5(d); or (y) file any general
consent to service of process.
(e) The Company shall use its best efforts to cause the
Registrable Shares covered by a Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and
operations of the Company to enable the Holders to consummate the
disposition of such Registrable Shares.
(f) The Company shall promptly notify each Holder, Holders'
Counsel and any underwriter and (if requested by any such Person)
confirm such notice in writing, (i) when a Prospectus or any
Prospectus supplement or post-effective amendment has been filed and,
with respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any request by
the Commission or any state securities authority for amendments and
supplements to a Registration Statement and Prospectus or for
additional information after the Registration Statement has become
effective, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of a Registration Statement or the
initiation or threatening of any proceedings for that purpose, (iv) of
the issuance by any state securities commission or other regulatory
authority of any order suspending the qualification or exemption from
qualification of any of the Registrable Shares under state securities
or "blue sky" laws or the initiation of any proceedings for that
purpose, (v) if, between the effective date of a Registration
Statement and the closing of any sale of Registrable Shares covered
thereby, the representations and warranties of the Company contained
in any underwriting agreement, placement agreement or other similar
agreement, if any, relating to the offering cease to be true and
<PAGE>
correct in all material respects, and (vi) of the happening of any
event which makes any statement made in a Registration Statement or
related Prospectus untrue or which requires the making of any changes
in such Registration Statement or Prospectus so that they will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances under which they were
made not misleading; and, as promptly as practicable thereafter,
prepare and file with the Commission and furnish a supplement or
amendment to such Prospectus so that, as thereafter deliverable to the
purchasers of such Registrable Shares, such Prospectus will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(g) The Company shall make generally available to the Holders an
earnings statement satisfying the provisions of Section 11(a) of the
Securities Act no later than 30 days after the end of the 12-month
period beginning with the first day of the Company's first fiscal
quarter commencing after the effective date of a Registration
Statement, which earnings statement shall cover said 12-month period,
and which requirement will be deemed to be satisfied if the Company
timely files complete and accurate information on forms 10-Q, 10-K and
8-K under the Exchange Act and otherwise complies with Rule 158 under
the Securities Act.
(h) The Company shall promptly use its best efforts to prevent
the issuance of any order suspending the effectiveness of a
Registration Statement, and if one is issued use its best efforts to
obtain the withdrawal of any order suspending the effectiveness of a
Registration Statement at the earliest possible moment.
(i) The Company shall, if requested by the managing underwriter
or underwriters, if any, Holders' Counsel, or any Holder promptly
incorporate in a Prospectus supplement or post-effective amendment
such information as such managing underwriter or underwriters
requests, or Holders' Counsel requests, to be included therein,
including, without limitation, with respect to the Registrable Shares
being sold by such Holder to such underwriter or underwriters, the
purchase price being paid therefor by such underwriter or underwriters
and with respect to any other terms of an underwritten offering of the
Registrable Shares to be sold in such offering, and promptly make all
required filings of such Prospectus supplement or post-effective
amendment.
(j) The Company shall, as promptly as practicable after filing
with the Commission of any document which is incorporated by reference
into a Registration Statement (in the form in which it was
incorporated), deliver a copy of each such document to each of the
Holders and to Holders' Counsel.
<PAGE>
(k) The Company shall cooperate with the Holders and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates (which shall not bear any
restrictive legends unless required under applicable law) representing
securities sold under a Registration Statement, and enable such
securities to be in such denominations and registered in such names as
the managing underwriter or underwriters, if any, or such Holders may
request and keep available and make available to the Company's
transfer agent prior to the effectiveness of such Registration
Statement a supply of such certificates.
(l) The Company shall enter into such customary agreements
(including, if applicable, underwriting agreements or placement
agreements in customary form) and take such other actions as the
Holders or the underwriters retained by the Holders may request in
order to expedite or facilitate the disposition of Registrable Shares
(the Holders may, at their option, require that any or all of the
representations, warranties and covenants of the Company to or for the
benefit of any underwriters or placement agents also be made to and
for the benefit of the Holders).
(m) The Company shall promptly make available to each Holder,
any underwriter or placement agent participating in any disposition,
and any attorney, accountant or other agent or representative retained
by any such Holder, underwriter or placement agent (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records"),
as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers, directors
and employees to supply all information requested by any such
Inspector in connection with such Registration Statement.
(n) The Company shall furnish to each Holder and to each
underwriter or placement agent, if any, a signed counterpart,
addressed to such Holder, underwriter or placement agent, of (i) an
opinion or opinions of counsel to the Company and (ii) a comfort
letter or comfort letters from the Company's independent public
accountants, each in customary form and covering such matters of the
type customarily covered by opinions or comfort letters, as the case
may be, as the Holders of Registrable Shares included in such offering
or the managing underwriter or placement agent therefor reasonably
requests.
(o) The Company shall use its best efforts to cause the
Registrable Shares included in a Registration Statement to be (i)
listed on each securities exchange, if any, on which similar
securities issued by the Company are then listed or (ii) authorized to
be quoted and/or listed, as applicable, on the Nasdaq Stock Market if
the Registrable Shares so qualify.
(p) The Company shall provide a CUSIP number for all Registrable
Shares covered by a Registration Statement not later than the
effective date of such Registration Statement.
(q) The Company shall cooperate with each Holder and each
underwriter or placement agent participating in the disposition of
Registrable Shares and their respective counsel in connection with any
filings required to be made with the National Association of
Securities Dealers, Inc. ("NASD").
<PAGE>
(r) The Company shall, during the period when the Prospectus is
required to be delivered under the Securities Act, promptly file all
documents required to be filed with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act.
(s) The Company shall appoint a transfer agent and registrar for
all Registrable Shares covered by a Registration Statement not later
than the effective date of such Registration Statement.
(t) In connection with an underwritten offering, the Company
will participate, to the extent reasonably requested by the managing
underwriter for the offering or the Holders, in customary efforts to
sell the securities under the offering, including without limitation,
participating in "road shows."
In the case of a Shelf Registration Statement, each Holder, upon
receipt of any notice (a "Suspension Notice") from the Company of the
happening of any event of the kind described in Section 5(f)(vi), shall
forthwith discontinue disposition of the Registrable Shares pursuant to the
Shelf Registration Statement covering such Registrable Shares until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(f) or until it is advised in writing (the
"Advice") by the Company that the use of the Prospectus may be resumed, and
has received copies of any additional or supplemental filings which are
incorporated by reference in the Prospectus, and, if so directed by the
Company, such Holder will, or will request the managing underwriter or
underwriters, if any, to, deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Registrable Shares current at
the time of receipt of such notice; PROVIDED, HOWEVER, that the Company
shall not give a Suspension Notice until after the Shelf Registration
Statement has been declared effective and in no event shall the period from
the date on which any Holder receives a Suspension Notice to the date on
which any Holder receives either the Advice or copies of the supplemented
or amended Prospectus contemplated by Section 5(f) (the "Suspension
Period") exceed 30 days. In the event that the Company shall give any
Suspension Notice, (i) the Company shall use its best efforts and take such
actions as are reasonably necessary to render the Advice and end the
Suspension Period as promptly as practicable and (ii) the time periods for
which a Shelf Registration Statement is required to be kept effective
pursuant to Section 2 hereof shall be extended by the number of days during
the Suspension Period.
If any Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder
shall have the right to require (i) the insertion therein of language, in
form and substance reasonably satisfactory to such Holder, to the effect
that the holding by such Holder of such securities is not to be construed
as a recommendation by such Holder of the investment quality of the
Company's securities covered thereby and that such holding does not imply
that such Holder will assist in meeting any future financial requirements
of the Company or (ii) in the event that such reference to such Holder by
name or otherwise is not required by the Securities Act or any similar
Federal or state "blue sky" statute and the rules and regulations
thereunder then in force, the deletion of the reference to such Holder.
<PAGE>
Section 6. REGISTRATION EXPENSES. Any and all expenses incident
to the Company's performance of or compliance with this Agreement,
including without limitation, all Commission and securities exchange,
Nasdaq Stock Market or NASD registration and filing fees, all fees and
expenses incurred in connection with compliance with state securities or
"blue sky" laws (including reasonable fees and disbursements of counsel for
any underwriters, placement agents or Holders in connection with "blue sky"
qualifications of the Registrable Shares), printing expenses, messenger and
delivery expenses, internal expenses (including, without limitation, all
salaries and expenses of the Company's officers and employees performing
legal or accounting duties), all expenses for word processing, printing and
distributing any Registration Statement, any Prospectus, any amendments or
supplements thereto, any underwriting agreements, placement agreements and
other documents relating to the performance of and compliance with this
Agreement, the fees and expenses incurred in connection with the listing of
the Registrable Shares, the fees and disbursements of counsel for the
Company and of the independent certified public accountants of the Company
(including the expenses of any comfort letters or costs associated with the
delivery by independent certified public accountants of a comfort letter or
comfort letter requested pursuant to Section 5(n), Securities Act liability
insurance (if the Company elects to obtain such insurance), the reasonable
fees and expenses of any special experts or other Persons retained by the
Company in connection with any registration, the reasonable fees and
disbursements of Holders' Counsel and any reasonable out-of-pocket expenses
of the Holders and their agents, including any reasonable travel costs, but
excluding underwriting discounts and commissions and transfer taxes, if
any, relating to the sale or disposition of Registrable Shares (all such
expenses being herein called "Registration Expenses"), will be borne by the
Company whether or not the Shelf Registration Statement, the Demand
Registration Statement or the Piggy-Back Registration to which such
expenses relate becomes effective.
Section 7. INDEMNIFICATION AND CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless, to the full extent permitted by law, each
Holder, its partners, officers, directors, trustees, beneficiaries,
stockholders, employees, agents and investment advisers, and each Person
who controls such Holder within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, or is under common
control with, or is controlled by, such Holder, together with the partners,
officers, directors, trustees, beneficiaries, stockholders, employees,
agents and investment advisors of such controlling Person (collectively,
the "Controlling Persons"), from and against all losses, claims, damages,
liabilities and expenses (including without limitation any legal or other
fees and expenses incurred by any Holder or any such Controlling Person in
connection with defending or investigating any action or claim in respect
thereof) (collectively, the "Damages") to which such Holder, its partners,
officers, directors, trustees, stockholders, employees, agents and
investment advisers, and any such Controlling Person may become subject
under the Securities Act or otherwise, insofar as such Damages (or
proceedings in respect thereof) arise out of or are based upon any untrue
or alleged untrue statement of material fact contained in any Registration
Statement (or any amendment thereto) pursuant to which Registrable Shares
were registered under the Securities Act, including all documents
incorporated therein by reference, or caused by any omission or alleged
<PAGE>
omission to state therein a material fact necessary to make the statements
therein in light of the circumstances under which they were made not
misleading, or caused by any untrue statement or alleged untrue statement
of a material fact contained in any Prospectus (as amended or supplemented
if the Company shall have furnished any amendments or supplements thereto),
or caused by any omission or alleged omission to state therein a material
fact necessary to make the statements therein in light of the circumstances
under which they were made not misleading, except insofar as such Damages
arise out of or are based upon any such untrue statement or omission based
upon information relating to such Holder furnished in writing to the
Company by such Holder expressly for use therein; PROVIDED, HOWEVER, that
the Company shall not be liable to any Holder under this Section 7(a) to
the extent that any such Damages were caused by the fact that such Holder
sold Shares to a Person as to whom it shall be established that there was
not sent or given, or deemed sent or given pursuant to Rule 153 under the
Securities Act, at or prior to the written confirmation of such sale, a
copy of the Prospectus as then amended or supplemented if, and only if, (i)
the Company has previously furnished copies of such amended or supplemented
Prospectus to such Holder and (ii) such Damages were caused by any untrue
statement or omission or alleged untrue statement or omission contained in
the Prospectus so delivered which was corrected in such amended or
supplemented Prospectus. The Company will indemnify the underwriters or
placement agents, if any, participating in any disposition of Registrable
Shares, their officers and directors and each Person who controls such
underwriters or placement agents (within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act) to the same extent
as provided above with respect to the indemnification of the Holders of
Registrable Shares except with respect to information provided by the
underwriter or placement agent specifically for inclusion therein.
(b) INDEMNIFICATION BY THE HOLDERS. Each Holder agrees,
severally and not jointly, to indemnify and hold harmless the Company, its
directors, officers and each Person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act to the same extent as the foregoing indemnity from the
Company to such Holder, but only with reference to information relating to
such Holder furnished to the Company in writing by such Holder expressly
for use in any Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto); PROVIDED, HOWEVER,
that such Holder shall not be obligated to provide such indemnity to the
extent that such Damages result from the failure of the Company to promptly
amend or take action to correct or supplement any such Registration
Statement or Prospectus on the basis of corrected or supplemental
information provided in writing by such Holder to the Company expressly for
such purpose. In no event shall the liability of any Holder of Registrable
Shares hereunder be greater in amount than the amount of the proceeds
received by such Holder upon the sale of the Registrable Shares giving rise
to such indemnification obligation.
<PAGE>
(c) INDEMNIFICATION PROCEDURES. In case any proceeding
(including any governmental investigation) shall be instituted involving
any Person in respect of which indemnity may be sought pursuant to either
paragraph (a) or (b) above, such Person (the "indemnified party") shall
promptly notify the Person against whom such indemnity may be sought (the
"indemnifying party") in writing and the indemnifying party, upon request
of the indemnified party, shall retain counsel reasonably satisfactory to
the indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceedings and shall pay the fees
and disbursements of such counsel relating to such proceeding. The failure
of an indemnified party to notify an indemnifying party with respect to a
particular proceeding shall not relieve the indemnifying party from any
obligation or liability (i) which it may have pursuant to this Agreement if
the indemnifying party is not substantially prejudiced by the failure to
notify or (ii) which it may have otherwise than pursuant to this Agreement.
In any such proceeding, any indemnified party shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be
at the expense of such indemnified party unless (A) the indemnifying party
and the indemnified party shall have mutually agreed to the retention of
such counsel or (B) the indemnifying party fails promptly to assume the
defense of such proceeding or fails to employ counsel reasonably
satisfactory to such indemnified party or parties or (C) (I) the named
parties to any such proceeding (including any impleaded parties) include
both such indemnified party or parties and any indemnifying party or an
Affiliate of such indemnified party or parties or of any indemnifying
party, (II) there may be one or more defenses available to such indemnified
party or parties or such Affiliate of such indemnified party or parties
that are different from or additional to those available to any
indemnifying party or such Affiliate of any indemnifying party and
(III) such indemnified party or parties shall have been advised by such
counsel that there may exist a conflict of interest between or among such
indemnified party or parties or such Affiliate of such indemnified party or
parties and any indemnifying party or such Affiliate of any indemnifying
party, in which case, if such indemnified party or parties notifies the
indemnifying party or parties in writing that it elects to employ separate
counsel of its choice at the expense of the indemnifying parties, the
indemnifying parties shall not have the right to assume the defense thereof
and such counsel shall be at the expense of the indemnifying parties, it
being understood, however, that unless there exists a conflict among
indemnified parties, the indemnifying parties shall not, in connection with
any one such proceeding or separate but substantially similar or related
proceedings in the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more
than one separate firm of attorneys (together with appropriate local
counsel) at any time for such indemnified party or parties. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but, if settled with such consent or
if there be a final judgment for the plaintiff, the indemnifying party
agrees to indemnify the indemnified party or parties from and against any
loss or liability by reason of such settlement or judgment. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which such indemnified party is a party, and
indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter
of such proceeding.
<PAGE>
(d) CONTRIBUTION. To the extent that the indemnification
provided for in paragraph (a) or (b) of this Section 7 is unavailable to an
indemnified party or insufficient in respect of any Damages, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or
payable by such indemnified party as a result of such Damages (i) in such
proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Holders on the other hand from the
offering of such Registrable Shares, or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company on the one hand
and the Holders on the other hand in connection with the statements or
omissions that resulted in such Damages, as well as any other relevant
equitable considerations. The relative fault of the Company on the one
hand and of the Holders on the other hand shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Holders and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
Notwithstanding the provisions of this Section 7(d), no Holder shall
be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Shares of such Holder were offered to
the public (less any underwriting discounts and commissions) exceeds the
amount of any damages which such Holder has otherwise been required to pay
by reason of such untrue statement or omission. Each Holder's obligation
to contribute pursuant to this Section 7(d) is several in the proportion
that the proceeds of the offering received by such Holder bears to the
total proceeds of the offering received by all the Holders and not joint.
If indemnification is available under paragraph (a) or (b) of this
Section 7, the indemnifying parties shall indemnify each indemnified party
to the full extent provided in such paragraphs without regard to the
relative fault of said indemnifying party or indemnified party or any other
equitable consideration provided for in this Section 7(d).
The Company and each Holder agrees that it would not be just or
equitable if contribution pursuant to this Section 7(d) were determined by
PRO RATA allocation or by any other method of allocation that does not take
account of the equitable considerations referred to herein. The amount
paid or payable by an indemnified party as a result of the Damages referred
to in this Section 7 shall be deemed to include, subject to the limitations
set forth above, any legal or other expenses reasonably incurred (and not
otherwise reimbursed) by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The remedies provided for
in this Section 7 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any indemnified party at law
or in equity.
<PAGE>
Section 8. RULE 144. The Company covenants that it will file any
reports required to be filed by it under the Securities Act and the
Exchange Act (or, if the Company is not required to file such reports, it
will, upon the request of any Holder, make publicly available other
information so long as necessary to permit sales under Rule 144 under the
Securities Act), and it will take such further action as any Holder may
request, all to the extent required from time to time to enable such Holder
to sell Registrable Shares without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon the
request of any Holder, the Company will deliver to such Holder a written
statement as to whether it has complied with such requirements.
Section 9. RULE 144A. The Company covenants that it will file all
reports required to be filed by it under the Securities Act and the
Exchange Act, and the rules and regulations adopted by the Commission
thereunder (or if the Company is not required to file such reports, it
will, upon the request of any Holder, make available other information so
long as necessary to permit sales of the Registrable Shares pursuant to
Rule 144A under the Securities Act), all to the extent as may be required
from time to time to enable such Holder to sell Registrable Shares without
registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144A, as such rule may be amended from time
to time, or (b) any similar rule or regulation hereafter adopted by the
Commission.
Section 10. RESTRICTIONS ON SALE BY THE COMPANY AND OTHERS. The
Company agrees and it shall use its best efforts to cause its Affiliates to
agree (i) not to effect any public sale or distribution of any securities
similar to those being registered in accordance with Sections 2 or 3
hereof, or any securities convertible into or exchangeable into or
exchangeable or exercisable for such securities, during the 14 days prior
to, and during the 180-day period beginning on, the effective date of any
Registration Statement (except as part of such Registration Statement) if,
and to the extent, requested by the managing underwriter or underwriters in
the case of an underwritten public offering or the initial purchasers or
placement agent; and (ii) to use their best efforts to ensure that any
agreement entered into after the date of this Agreement pursuant to which
the Company issues or agrees to issue any privately placed securities
(other than to officers or employees) shall contain a provision under which
holders of such securities agree not to effect any sale or distribution of
any such securities during the periods described in (i) above, in each case
including a sale pursuant to Rule 144 or Rule 144A under the Securities Act
(except as part of any such registration, if permitted); provided, however,
that the provisions of this Section 10 shall not prevent the conversion or
exchange of any securities pursuant to their terms into or for other
securities.
<PAGE>
Section 11. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. Except with respect to the
Warrants, the Company has not entered into nor will the Company on or after
the date of this Agreement enter into any agreement which is inconsistent
with the rights granted to the Holders of Registrable Shares in this
Agreement or otherwise conflicts with the provisions hereof. In the event
of any inconsistency or discrepancy between the provisions of this
Agreement and the provisions of the Warrants, the terms of this Agreement
shall control. The rights granted to the Holders hereunder do not in any
way conflict with and are not inconsistent with the rights granted to the
holders of the Company's other issued and outstanding securities under any
such agreements.
(b) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given unless the Company has obtained the written consent
of Holders of at least 2/3 of the outstanding Registrable Shares affected
by such amendment, modification, supplement, waiver or consent; PROVIDED,
HOWEVER, that, no amendment, modification, supplement, waiver or consent to
any departure from the provisions of Section 5 hereof (other than any
immaterial amendment, modification, supplement, waiver or consent) shall be
effective as against any Holder of Registrable Shares unless consented to
in writing by such Holder.
(c) NOTICES. All notices and other communications provided for
or permitted hereunder shall be in writing and shall be deemed to have been
duly given if delivered personally or sent by telecopier, registered or
certified mail (return receipt requested), postage prepaid or by a
nationally recognized overnight courier, postage prepaid, to the parties at
their respective addresses set forth on the signature pages hereof (or at
such other address for any party as shall be specified by like notice,
provided that notices of a change of address shall be effective only upon
receipt thereof).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if
mailed; by confirmed receipt of transmission, if telecopied; and on the
next Business Day if timely delivered to a courier guaranteeing overnight
delivery.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of
each of the parties, including, without limitation and without the need for
an express assignment, subsequent Holders. If any transferee of any Holder
shall acquire Registrable Shares in any manner, whether by operation of law
or otherwise, such Registrable Shares shall be held subject to all of the
terms of this Agreement, and by taking and holding such Registrable Shares
such person shall be conclusively deemed to have agreed to be bound by and
to perform all of the terms and provisions of this Agreement and such
person shall be entitled to receive the benefits hereof.
<PAGE>
(e) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(f) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Utah without regard
to principles of conflicts of law.
(h) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect for
any reason, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein
shall not be in any way impaired thereby, it being intended that all of the
rights and privileges of the Holders shall be enforceable to the fullest
extent permitted by law.
(i) ENTIRE AGREEMENT. This Agreement is intended by the parties
as a final expression of their agreement and is intended to be the complete
and exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such
subject matter.
(j) ATTORNEYS' FEES. In any action or proceeding brought to
enforce any provision of this Agreement or where any provision hereof is
validly asserted as a defense, the successful party shall, to the extent
permitted by applicable law, be entitled to recover reasonable attorneys'
fees in addition to any other available remedy.
(k) FURTHER ASSURANCES. Each party shall cooperate and take
such action as may be reasonably requested by another party in order to
carry out the provisions and purposes of this Agreement and the
transactions contemplated hereby.
(l) REMEDIES. In the event of a breach or a threatened breach
by any party to this Agreement of its obligations under this Agreement, any
party injured or to be injured by such breach will be entitled to specific
performance of its rights under this Agreement or to injunctive relief, in
addition to being entitled to exercise all rights provided in this
Agreement and granted by law. The parties agree that the provisions of
this Agreement shall be specifically enforceable, it being agreed by the
parties that remedies at law for violations hereof (including monetary
damages) are inadequate and that the right to object in any action for
specific performance or injunctive relief hereunder on the basis that a
remedy at law would be adequate is waived.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
STACEY'S BUFFET, INC.
By: /s/ Stephen J. Marrier
--------------------------------
Name: Stehen J. Marrier
Title: C.E.O.
--------------------------------
Notice Information:
801 West Bay Drive, Suite 704
Largo, Florida 33770
Telecopier No.: (813) 587-9644
Attn: President
with a copy to:
STAR BUFFET, INC.
By: /s/ Theodore Abajian
--------------------------------
Name: Theodore Abajian
Title: V.P. CFO
--------------------------------
440 Lawndale Drive
Salt Lake City, Utah 84115-2917
Telecopier No.: (801) 463-5585
Attn: Charlotte Miller
17
<PAGE>
<PAGE>
OPTION AGREEMENT
THIS OPTION AGREEMENT (the "Agreement") is entered into as of this
31st day of October, 1997, by and between STACEY'S BUFFET, INC., a Florida
corporation (the "Seller"), and STAR BUFFET, INC., a Delaware corporation
(the "Buyer).
RECITALS
WHEREAS, Seller is engaged in the business of owning, operating and
licensing Stacey's Buffet restaurants; and
WHEREAS, Seller and Buyer are parties to that certain Credit Agreement
dated as of the date hereof (the "Credit Agreement") whereby Buyer will
from time to time make loans to Seller; and
WHEREAS, as a condition of the Credit Agreement, the parties agreed to
enter into this Option Agreement for the Buyer's option to purchase any or
all of the Stacey's Buffet restaurants set forth on Exhibit A hereto (the
"Restaurants").
NOW, THEREFORE, in consideration of the mutual covenants and promises
expressed herein, it is agreed by and between Seller and Buyer that:
AGREEMENT
1. OPTION TO PURCHASE. Seller hereby grants to Buyer an option (the
"Option") to purchase, concurrently in their entirety at one Closing or
separately at one or more Closings, all right, title and interest of Seller
in and to substantially all of the assets related to the ownership and
operation of any or all of the Restaurants, on substantially the terms and
conditions set forth in the form of Asset Purchase Agreement attached
hereto as Exhibit B (the "Purchase Agreement"). This Option is granted for
good and valuable consideration as identified in the Credit Agreement, the
receipt and sufficiency of which is hereby acknowledged. In the event that
Seller is unable to obtain the consents of the landlords of the leased real
property for any particular Restaurant, Buyer shall have the right to
substitute with Seller's approval additional and similar Stacey's Buffet
restaurant(s) in lieu of a Restaurant for which consent cannot be obtained.
2. TERM OF OPTION; EXPIRATION OF OPTION. As long as there is any
outstanding indebtedness owed by Borrower to Lender under the Credit
Agreement, Buyer shall have the right to exercise its Option (the "Option
Period"). Time is of the essence with respect to all of the express
conditions contained herein, thus, the Option shall automatically expire
and Buyer shall have no further right to exercise the Option to purchase
any or all of the Restaurants after the Option Period; provided, however,
that the closing on a Restaurant may take place after expiration of the
Option Period so long as Buyer has given notice to the Seller during the
Option Period.
<PAGE>
3. EXERCISE OF OPTION. At any time during the Option Period Buyer
may exercise this Option by delivering to Seller (a) written notice of
election to do so and (b) a draft of the Purchase Agreement with specified
information relating to the identification of Restaurants to be purchased,
the purchase price, and the approximate date of closing. Upon receipt of
the notice and a draft of the Purchase Agreement, the Seller shall provide
all information requested by Buyer which is reasonably necessary to Buyer's
purchase decision, including, without limitation, the completion of
Seller's Disclosure Schedules (as defined in the Purchase Agreement).
Subject to Seller's prompt delivery to Buyer of Seller's Disclosure
Schedules and related documents and information required by Buyer, Buyer
shall use its commercially reasonable efforts to close a transaction
relating to the purchase of any of the Restaurants within thirty days of
the election to purchase.
4. PURCHASE PRICE.
4.1 PURCHASE PRICE. The purchase price (the "Purchase Price")
for each of the Restaurants shall be the amounts set forth opposite each of
the Restaurants on Exhibit A hereto.
4.2 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid
by Buyer to Seller by (i) the cancellation of any outstanding principal and
accrued and unpaid interest owed by Seller to Buyer under the Credit
Agreement (the "Seller Indebtedness") and (ii) the set-off of any earned
and unpaid fees owed from Seller to Buyer under the Business Services
Agreement (as defined in the Credit Agreement) through December 1998 (the
"Management Fees"). In the event that the aggregate amount of the Seller
Indebtedness and Management Fees (the "Total Offset") is insufficient to
cover the Purchase Price, the Buyer shall pay to Seller on January 1, 1999,
cash in an amount equal to Purchase Price less the Total Offset.
5. REPURCHASE OPTION. In the event that Buyer exercises its Option
to purchase any or all of the Restaurants, Seller shall have the option to
repurchase (the "Repurchase Option") all, but not less than all, of the
Restaurants purchased by Buyer pursuant to the Option Agreement for cash at
a purchase price equal to the greater of (i) the cumulative Purchase Price
paid by Buyer for all of the Restaurants, plus any and all capital
expenditures made by Buyer for such Restaurants or (ii) three times
trailing earnings before interest, income taxes, depreciation and
amortization ("EBITDA") for the prior 12 month period for all of the
Restaurants, plus capital expenditures made by Buyer for such Restaurants,
reduced by 2.0% of revenues for the prior 12 month period for all of such
Restaurants. Seller shall exercise its Repurchase Option by giving written
notice to Buyer, and the closing of the sale of such Restaurants pursuant
to the Repurchase Option shall occur no less than fifteen (15) and no more
than thirty (30) days following the giving of written notice. All other
terms of the repurchase shall be consistent with the form of the Purchase
Agreement.
6. MISCELLANEOUS TERMS INCORPORATED BY REFERENCE. The miscellaneous
provisions of the Credit Agreement contained in Subsections 7.1 and 7.8 are
hereby incorporated by reference herein and made a part hereof except that
Lender shall mean Buyer and Borrower shall mean Seller.
7. ASSIGNMENT. This Agreement may not be assigned by Seller.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Option Agreement
to be executed by officers thereunto duly authorized as of the date first
above stated.
BUYER
STAR BUFFET, INC.
By: /s/ Theodore Abajian
-------------------------------
Theodore Abajian
Chief Financial Officer
SELLER
STACEY'S BUFFET, INC.
By: /s/ Stephen J. Marrier
--------------------------------
CEO
--------------------------------
<PAGE>
EXHIBIT A
LISTING OF LOCATIONS OF RESTAURANTS AND PURCHASE PRICE
Purchase Price
($ in 000s)
-----------
1. North Ft. Meyers $ 102
2. Ft. Meyers $ 126
3. Port Charlotte $ 1
4. Holiday $ 240
5. St. Petersburg $ 443
6. Port Richey $ 153
------
TOTAL $1,065
Exhibit A
<PAGE>
<PAGE>
STACEY'S Buffet, Inc.
- -------------------------------------------------------------------------
FOR IMMEDIATE RELEASE SYMBOL: SBUF
Monday, November 3, 1997 TRADED: NASDAQ/SMALLCAP
STACEY'S BUFFET, INC. ANNOUNCES STRATEGIC ALLIANCE
WITH STAR BUFFET, INC. AND THE SALE OF
SIX STACEY'S BUFFET RESTAURANTS
LARGO, FLORIDA, October 31, --Stacey's Buffet, Inc. (Nasdaq: SBUF)
announced today that it finalized a strategic alliance with Star Buffet,
Inc. (Nasdaq: STRZ) for the purpose of improving the operating performance
of Stacey's Buffet, Inc. Under the revised terms of the previously
announced strategic alliance, Star has agreed to lend up to $4.5 million
over the next year and provide certain management services in exchange for
warrants to acquire Stacey's stock and agreed upon fees. Additionally,
Robert E. Wheaton, President and CEO of Star, has been appointed Chairman
of the board of directors of Stacey's Buffet, Inc.
As part of the strategic alliance, Star has agreed, subject to certain
conditions, to provide capital for the refurbishment of certain Stacey's
restaurants in Florida. Also, Stacey's has agreed to sell to Star six of
Stacey's restaurants in Florida. The sale, which will be paid by the
cancellation of outstanding indebtedness, is expected to close in the next
sixty days, although Stacey's retains the right to repurchase those
restaurants.
Stephen J. Marrier, who has stepped down as Stacey's Chairman, CEO and
President, but will remain a director, stated, "I'm excited about our
strategic alliance with Star. This alliance represents a continuation of
management's efforts to return Stacey's to profitability. We expect to
take full advantage of the significant operating synergies, including
increased buying power and the proven efficient operating procedures now
employed by Star and CKE Restaurants. Their vast resources should be a
tremendous benefit to Stacey's."
Robert E. Wheaton, President and CEO of Star stated that " Stacey's
represents an exciting but challenging opportunity. We believe that with
the continued support of Stacey's board, employees and business partners,
the company can re-emerge as a profitable buffet operator in Florida. We
plan to aggressively address Stacey's operational and financial challenges
immediately."
Stacey's Buffet currently operates 23 family-style buffet restaurants
in Florida, New York, New Jersey, Pennsylvania, and licenses one additional
store in the State of Florida.
<PAGE>
For additional information, please contact:
Maureen Jack
Stacey's Buffet, Inc.
(813) 581-4492 ext. 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF STACEY'S BUFFET, INC. FOR THE FORTY WEEKS
ENDED OCTOBER 8, 1997, AND IS QUALIFIED IN ITS ENTRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> OCT-08-1997
<CASH> 136,572
<SECURITIES> 259,469
<RECEIVABLES> 114,749
<ALLOWANCES> 10,000
<INVENTORY> 273,754
<CURRENT-ASSETS> 801,794
<PP&E> 15,875,746
<DEPRECIATION> 9,780,881
<TOTAL-ASSETS> 14,798,666
<CURRENT-LIABILITIES> 7,498,082
<BONDS> 0
<COMMON> 24,931
0
0
<OTHER-SE> 7,259,119
<TOTAL-LIABILITY-AND-EQUITY> 14,798,666
<SALES> 26,801,602
<TOTAL-REVENUES> 26,801,602
<CGS> 26,459,997
<TOTAL-COSTS> 26,459,997
<OTHER-EXPENSES> 2,093,732
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,852
<INCOME-PRETAX> (1,656,086)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,656,086)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,656,086)
<EPS-PRIMARY> (.66)
<EPS-DILUTED> (.66)
</TABLE>
