<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15 (d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported) September 5, 1997
-----------------
STACEY'S BUFFET, INC.
----------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
FLORIDA
--------------------------------------------
(State or Other Jurisdiction of Incorporation)
000-16791 59-2736736
---------------------- -------------------------------
(Commission File Number) (IRS Employer Identification No.)
801 West Bay Drive, Suite #704, Largo, Florida 33770
---------------------------------------------- --------
(Address of Principal Executive Offices) (Zip Code)
(813) 581-4492
--------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
-----------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
INFORMATION TO BE INCLUDED IN FORM 8-K
Item 1. Change in Control of Registrant.
Not Applicable.
Item 2. Acquisition or Disposition of Assets.
Not Applicable.
Item 3. Bankruptcy or Receivership.
Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant.
Not Applicable.
Item 5. Other Events.
The Company has finalized the Definitive Agreements with Star Buffet, Inc.,
a wholly-owned subsidiary of CKE Restaurants, Inc. regarding the previously
announced "strategic alliance."
The Credit Agreement, (including that attached forms of Promissory Note,
Warrant, Registration Rights Agreement, and Security Agreement) and the
Business Services Agreement constitute the Definitive Agreements between the
parties. These agreements are attached as exhibits to Exhibit 2 - "Letter
dated September 5, 1997."
Exhibits:
1. Press release dated September 11, 1997 attached as "EXHIBIT 1 Press
Release 9/11/97" that announces Definitive Agreements are finalized related to
the formation of a strategic alliance with Star Buffet, Inc., a subsidiary of
CKE Restaurants, Inc.
2. Letter dated September 5, 1997 attached as "EXHIBIT 2 - Letter Dated
September 5, 1997" confirming agreement with Definitive Agreements with copies
of the Credit Agreement and the Business Services Agreement.
Item 6. Resignation of Registrant's Directors.
Not Applicable.
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Item 7. Financial Statements and Exhibits.
Not Applicable.
Item 8. Change in Fiscal Year.
Not Applicable.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
Stacey's Buffet, Inc., a Florida Corporation
Date: September 11, 1997 /s/ Daniel J. Sullivan
------------------------
Daniel J. Sullivan
Chief Financial Officer
<PAGE>
EXHIBIT 1 Press Release 9/11/97
=================================
FOR IMMEDIATE RELEASE SYMBOL: SBUF
SEPTEMBER 11, 1997 TRADED: NASDAQ
STACEY'S BUFFET FINALIZES
DEFINITIVE AGREEMENTS WITH CKE SUBSIDIARY
Largo, Florida, September 11, 1997 -- Stacey's Buffet, Inc. announced
today that it finalized the Definitive Agreements with Star Buffet, Inc., a
wholly owned subsidiary of CKE Restaurants, Inc., regarding their previously
announced "strategic alliance."
A closing is expected to take place by October 1, 1997.
Under the terms of their agreements, which are subject to Star Buffet's
due diligence, its initial public offering and approval of the Boards of
Directors of Stacey's Buffet and Star Buffet, Star Buffet will lend Stacey's
Buffet $2,000,000 at interest equal to prime plus 2%. In addition, Stacey's
Buffet will grant Star Buffet warrants priced at $1.00 per share equal to 30%
of the diluted outstanding shares of Stacey's Buffet, as adjusted. Star Buffet
will also provide Stacey's with certain administrative and managerial services,
including access to operations, marketing and human resource personnel. In
addition, Star Buffet will provide certain purchasing economies it now
receives. Star Buffet will appoint two new members to Stacey's Board of
Directors.
Stephen J. Marrier, Chairman and CEO of Stacey's Buffet, stated; "We
have agreed to terms regarding the Definitive Agreements and look forward to
our 'strategic alliance' with the people at Star Buffet. Star's resources
should enable Stacey's to improve its sales while reducing its costs."
Stacey's Buffet, Inc. currently owns and operates 24 family-style
buffet restaurants in Florida, New York, New Jersey and Pennsylvania and
licenses one store in the State of Florida.
For more information contact:
Maureen Jack
Stacey's Buffet, Inc.
(813) 581-4492, ext. #12
<PAGE>
EXHIBIT 2 Letter Dated September 5, 1997
==========================================
STACEY'S BUFFET, INC.
801 WEST BAY DRIVE
LARGO, FLORIDA 34640
813-581-4492 FAX: 813-586-3039
September 5, 1997
via TELEFAX
Robert E. Wheaton, President
Star Buffet, Inc.
440 Lawndale Drive
Salt Lake City, Utah 84115
Re: Definitive Agreements pursuant to that certain Letter of
Intent between Stacey's Buffet, Inc. ("SBI") and Star
Buffet, Inc. ("Star") dated July 18, 1997 (the "LOI")
Dear Mr. Wheaton:
This letter is to confirm our understanding that the:
1. Credit Agreement, including that attached forms of
Promissory Note, Warrant, Registration Rights Agreement, and
Security Agreement (together attached as Exhibit A to this
letter); and
2. Business Services Agreement (attached as Exhibit B
to this letter);
constitute the definitive agreements between the parties
negotiated pursuant to the LOI, and provided that: (a) Star's
due diligence investigation of SBI does not reveal materially
adverse circumstances, (b) Star has successfully consummated its
anticipated public offering, and (c) each of the Boards of
Directors of Star and SBI have approved the transactions; the
parties will execute the definitive agreements as contemplated by
the LOI.
If the foregoing is satisfactory, please acknowledge Star's
agreement in the space provided below.
Yours very truly,
/s/ Stephen J. Marrier
-----------------------------
Stephen J. Marrier, President
Acknowledged and agreed:
STAR BUFFET, INC.
By: /s/ Robert E. Wheaton
------------------------------
Robert E. Wheaton, President
<PAGE>
EXHIBIT A TO SEPTEMBER 5, 1997 LETTER
-------------------------------------
CREDIT AGREEMENT
dated as of
, 1997
--------------------
between
STACEY'S BUFFET, INC.
and
STAR BUFFET, INC.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
Section 1.1. Definitions................................................. 1
Section 1.2. Accounting Terms and Determinations......................... 8
Section 1.3. References.................................................. 9
Section 1.4. Use of Defined Terms........................................ 9
Section 1.5. Terminology................................................. 9
ARTICLE II
THE CREDIT
Section 2.1. Loan........................................................ 9
Section 2.2. Miscellaneous Matters....................................... 9
Section 2.3. 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. General Provisions as to Payments........................... 10
Section 2.8. Collateral.................................................. 11
ARTICLE III
CONDITIONS TO CLOSING
Section 3.1.Conditions to Closing........................................... 12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1. Corporate Existence and Power............................... 13
Section 4.2. Corporate and Governmental Authorization; No Contravention.. 13
Section 4.3. Binding Effect.............................................. 13
Section 4.4. Financial Information....................................... 13
Section 4.5. No Litigation............................................... 14
Section 4.6. Compliance with ERISA....................................... 14
Section 4.7. Compliance with Laws; Payment of Taxes...................... 14
Section 4.8. No Subsidiaries............................................. 14
Section 4.9. Investment Company Act...................................... 14
Section 4.10. Public Utility Holding Company Act.......................... 14
Section 4.11. Ownership of Property; Liens................................ 15
Section 4.12. No Default.................................................. 15
Section 4.13. Full Disclosure............................................. 15
Section 4.14. Environmental Matters....................................... 15
Section 4.15. Capital Stock............................................... 15
Section 4.16. Margin Stock................................................ 15
Section 4.17. Insolvency.................................................. 16
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ARTICLE V
COVENANTS
Section 5.1. Information................................................. 16
Section 5.2. Inspection of Property, Books and Records................... 18
Section 5.3. Restricted Payments......................................... 18
Section 5.4. Limitation on Indebtedness.................................. 18
Section 5.5. Loans or Advances........................................... 19
Section 5.6. Investments................................................. 19
Section 5.7. Negative Pledge............................................. 20
Section 5.8. Maintenance of Existence.................................... 20
Section 5.9. Dissolution................................................. 20
Section 5.10. Consolidations, Mergers and Sales of Assets................. 20
Section 5.11. Use of Proceeds............................................. 21
Section 5.12. Compliance with Laws; Payment of Taxes; SEC Filings......... 21
Section 5.13. Insurance................................................... 21
Section 5.14. Change in Fiscal Year....................................... 21
Section 5.15. Maintenance of Property..................................... 21
Section 5.16. Environmental Notices....................................... 21
Section 5.17. Environmental Matters....................................... 22
Section 5.18. Environmental Release....................................... 22
Section 5.19. Transactions with Affiliates................................ 22
ARTICLE VI
DEFAULTS
Section 6.1. Events of Default........................................... 22
ARTICLE VII
MISCELLANEOUS
Section 7.1. Notices..................................................... 24
Section 7.2 No Waivers.................................................. 25
Section 7.3 Expenses, Documentary Taxes................................. 25
Section 7.4. Indemnification............................................. 25
Section 7.5. Amendments and Waivers...................................... 25
Section 7.6. Successors and Assigns...................................... 26
Section 7.7. Confidentiality............................................. 27
Section 7.8. California Law.............................................. 27
Section 7.9. Severability................................................ 27
Section 7.10. Interest.................................................... 27
Section 7.11. Interpretation.............................................. 28
Section 7.12. Waiver of Jury Trial; Consent to Jurisdiction............... 28
Section 7.13. Counterparts................................................ 28
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
- ---------
SCHEDULES
---------
SCHEDULE 4.4 Material Adverse Effects
- ------------
SCHEDULE 4.5 Litigation
- ------------
SCHEDULE 5.4 Indebtedness
- ------------
SCHEDULE 5.5 Loans
- ------------
SCHEDULE 5.7 Liens
- ------------
iii
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement") is entered into as of this
___ day of __________, 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 make a loan of Two
Million Dollars ($2,000,000) to Borrower, and lender is willing to make
such loan 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 an interest rate per annum equal to the sum of
(i) the Prime Rate from time to time in effect, plus (ii) two percent
(2.0%), 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. Section 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.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor Federal tax code.
2
<PAGE>
"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.
"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 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.
3
<PAGE>
"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. Section 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:
(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 [September 30], 1997; and
4
<PAGE>
(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.
"Loan" 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 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.
5
<PAGE>
"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 Loan together with all
amendments, consolidations, modifications, renewals and supplements
thereto, and replacements thereof.
"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.
"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.
6
<PAGE>
"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 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
7
<PAGE>
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.
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.
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ARTICLE II
THE CREDIT
Section 2.1. LOAN. Lender agrees, subject to the terms and
conditions set forth herein and based on the representations and
warranties set forth herein, to loan to Borrower, and Borrower agrees to
borrow from Lender, the principal amount of Two Million Dollars
($2,000,000.00) on the Closing Date (the "Loan"). In consideration for
making the Loan, on the Closing Date, 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.
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.
(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. MATURITY OF LOAN. The Loan 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 applicable
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 Loan, for each day from the date
such Loan is made until such Loan 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 Loan shall accrue from and including the making of the
Loan 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 Loan shall bear interest, payable
on demand, for each day until paid at a rate per annum equal to the
Default Rate.
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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. 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.
Section 2.7. GENERAL PROVISIONS AS TO PAYMENTS. The Borrower shall
make each payment of principal of, and interest on, the Loan 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 2.8. 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 2.8, 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 2.8 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 the Loan 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 Agreements;
(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) 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 other Loan Documents and any other matters relevant
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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; and
(i) all mortgages and security interests securing the
Borrower's obligations hereunder shall be duly perfected and validly
recorded.
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
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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 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.
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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.
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. Section 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.
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(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.
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 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 Section 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.
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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;
(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;
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(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;
(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
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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:
(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;
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(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 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);
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(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 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. USE OF PROCEEDS. The proceeds of the Loan shall be
used by Borrower for the purpose of remodeling Stacey's Restaurants or for the
costs of converting Stacey's Restaurants to any regional buffet restaurant
concept which is approved by Lender, and for general working capital purposes.
No portion of the proceeds of the Loan will be used by the Borrower or any
Subsidiary (i) in connection with, whether directly or indirectly, any tender
offer for, or other acquisition of, stock of any corporation with a view
towards obtaining control of such other corporation, (ii) directly or
indirectly, for the purpose, whether immediate, incidental or ultimate,
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of purchasing or carrying any Margin Stock, or (iii) for any purpose in
violation of any applicable law or regulation.
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, 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
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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
(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
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(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 against the Borrower or any Consolidated Subsidiary and such
judgment or order shall continue unsatisfied and unstayed for a period of
30 days; or
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(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 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.
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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.
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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.
(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.
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(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 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. CALIFORNIA LAW. This Agreement and each of the loan
documents shall be construed in accordance with and governed by the law of
the State of California.
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. In no event shall the amount of interest
due or payable hereunder or under the Notes 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
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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.
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 California, 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 California 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.
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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:
--------------------
Telecopier number:
------------
Telephone number:
-------------
STAR BUFFET, INC.,
By:
-----------------------------------
Name:
Tile:
440 Lawndale Drive
Salt Lake City, Utah 84115-1917
Attention:
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Telecopier No.: (801) 463-5500
Telephone No.: (801) 463-5585
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EXHIBIT A
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PROMISSORY NOTE
Anaheim, California $2,000,000.00
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 Two Million Dollars
($2,000,000.00). 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 referred to below. 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 one of the Notes referred to in, and is issued pursuant
to, 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 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 California.
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IN WITNESS WHEREOF, the Borrower has caused this Promissory Note to
be duly executed, under seal, by its duly authorized officer as of
September , 1997.
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STACEY'S BUFFET, INC.
--------------------------------
By:
Title:
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EXHIBIT B
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THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), NOR QUALIFIED UNDER THE SECURITIES
LAWS OF ANY STATE. THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO, OR FOR SALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF
WITHIN THE MEANING OF THE SECURITIES ACT AND THE SECURITIES LAW. THIS WARRANT
AND THE SHARES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND COMPLIANCE WITH THE SECURITIES LAW OF ANY STATE OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION AND
COMPLIANCE ARE NOT REQUIRED.
Warrant to Purchase
Shares of
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Common Stock
As Herein Described
WARRANT TO PURCHASE COMMON STOCK
OF
STACEY'S BUFFET, INC.
This is to certify that, for value received, STAR BUFFET, INC., or
registered assigns (in each case, the "Holder"), is entitled to purchase,
subject to the provisions of this Warrant, from Stacey's Buffet, Inc., a
Florida corporation (the "Company"), at any time during the period from
the date hereof (the "Commencement Date") to 5:00 p.m., California time,
on July ____, 2002 (the "Expiration Date"), at which time this Warrant
shall expire, shares ("Warrant Shares") of the Company's Common
Stock, par value $0.01 per share (the "Common Stock"), for a purchase
price per share (the "Exercise Price") of One Dollar ($1.00). The number
of shares of Common Stock to be received upon exercise of this Warrant and
the Exercise Price shall be adjusted from time to time as set forth below.
This Warrant also is subject to the following terms and conditions:
1. EXERCISE OF WARRANT.
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1.1 EXERCISE AND PAYMENT. This Warrant may be exercised in
whole or in part at any time from and after the date hereof and before the
Expiration Date, but if such date is a day on which federal or state
chartered banking institutions located in the State of California are
authorized to close, then on the next succeeding day which shall not be
such a day. Exercise shall be by presentation and surrender to the
Company at its principal office, or at the office of any transfer agent
designated by the Company, of (i) this Warrant, (ii) the attached exercise
form properly executed, and (iii) either (A) a bank check for the Exercise
Price for the number of Warrant Shares specified in the exercise form, or
(B) cancellation of indebtedness of the Company to the Holder in an amount
equal to the Exercise Price for the number of Warrant Shares specified in
the exercise form, provided that such cancellation of indebtedness shall
be applied against the payments next due thereunder or (C) any combination
of the consideration specified in the foregoing clauses (A) and (B). If
this Warrant is exercised in part only, the Company or its transfer agent
shall, upon surrender of the Warrant, execute and deliver a new Warrant
evidencing the rights of the Holder to purchase the remaining number of
Warrant Shares
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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 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
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(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 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.
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(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 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
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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 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
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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 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
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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 shares of Common Stock or
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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.
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.
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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.
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
8
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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. 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
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<PAGE>
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
, 1997.
- -------------
STACEY'S BUFFET, INC.
By: ---------------------------
Its:
----------------------
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ANNEX A
-------
[FORM OF EXERCISE]
(To be executed upon exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase shares of
--------
Common Stock and herewith tenders payment for such shares of Common Stock
to the order of Stacey's Buffet, Inc. in the amount of $ . The
-----------
undersigned requests that a certificate for such shares of Common Stock be
registered in the name of , whose address is
--------------------------
. If such number of shares of Common Stock is
- ------------------------------
less than all of the shares of Common Stock purchasable hereunder, the
undersigned requests that a new Warrant Certificate representing the
remaining balance of the shares of Common Stock be registered in the name
of , whose address is , and
----------------------- ------------------------
that such Warrant Certificate be delivered to , whose
---------------------
address is .
--------------------------------
Dated:
Signature:
--------------------------------------
(Signature must conform in all respects to name of
Holder as specified on the face of the Warrant
Certificate.)
- ---------------------------------
(Insert Social Security or Taxpayer
Identification Number of Holder.)
<PAGE>
EXHIBIT C
---------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of
__________, 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).
"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.
<PAGE>
"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.
"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.
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<PAGE>
"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
September ____, 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.
(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
3
<PAGE>
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
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.
4
<PAGE>
(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
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.
5
<PAGE>
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.
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
6
<PAGE>
disposition by the Holders set forth in such Registration Statement or
supplement to the Prospectus;
(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 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
7
<PAGE>
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.
(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
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<PAGE>
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").
(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."
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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.
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
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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
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.
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<PAGE>
(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.
(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
12
<PAGE>
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.
(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.
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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.
14
<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.
(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.
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<PAGE>
(g) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California 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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
STACEY'S BUFFET, INC.
By:
--------------------------------
Name:
Title:
Notice Information:
801 West Bay Drive, Suite 704
Largo, Florida 33770
Telecopier No.: ( )
---- ----------------
Attn:
---------------------------------
with a copy to:
STAR BUFFET, INC.
By:
------------------------------------
Name:
Title:
440 Lawndale Drive
Salt Lake City, Utah 84115-2917
Telecopier No.: ( )
---- ----------------
Attn:
---------------------------------
17
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EXHIBIT D
---------
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT (this "Agreement") is made as of the ____ day
of __________, 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 has made 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
<PAGE>
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.
"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.
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"Franchise Agreements" means the franchise agreements of the
Borrower as franchisor, with the franchisees, all as described on Exhibit A
attached hereto and made a part hereof and any such additional franchise
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
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
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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 therefor 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 California 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:
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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.
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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
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
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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.
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.
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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.
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.
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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 California
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
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.
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(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 9.01 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.
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 California, 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
California 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 9.01 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.
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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
CALIFORNIA, AS IF THIS AGREEMENT HAD EACH BEEN EXECUTED, DELIVERED,
ADMINISTERED AND PERFORMED SOLELY WITHIN THE STATE OF CALIFORNIA.
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
to the Borrower. Unless otherwise defined herein, all terms used herein
which are defined by the California Uniform Commercial Code shall have the
same meanings as assigned to them by the California 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.
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IN WITNESS WHEREOF, the Borrower has executed and delivered this
Agreement under seal as of the day and year first written above.
STACEY'S BUFFET, INC.
By:
-----------------------------------
Name:
Title:
STAR BUFFET, INC.
By: (Seal)
----------------------------------
Name:
Title:
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EXHIBIT A
---------
Franchise Agreements
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EXHIBIT B
---------
The Borrower's chief executive office is located at
---------------------
.
- -------------
In addition to the Borrower's chief executive office listed above, the
Collateral is also located at the following addresses:
See Attached Schedule 1.
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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 agreements of the Debtor as
franchisor, with the franchisees, 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.
A-1
<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.
A-2
<PAGE>
EXHIBIT B TO SEPTEMBER 5, 1997 LETTER
-------------------------------------
BUSINESS SERVICES AGREEMENT
THIS BUSINESS SERVICES AGREEMENT (the "Agreement") is entered into
as of this ___ day of _______ 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 to make the Loan 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,
including, without limitation, lost profits arising from or relating to
the performance of services by Star hereunder absent a finding in a
<PAGE>
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 three and one-half percent (3.5%) of the total
revenues of such Restaurant (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 four (4) Accounting Periods as the
Company and Star conduct a transition from the Company's internal
services to the services provided hereunder), 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").
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.
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,
2
<PAGE>
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 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
3
<PAGE>
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
dislcosing 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.
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.
4
<PAGE>
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.
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:
--------------------------------
Its:
-------------------------------
STACEY'S BUFFET, INC.
By:
--------------------------------
Its:
-------------------------------
5
<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>
EXHIBIT B
LOCATIONS OF RESTAURANTS
B-1
<PAGE>
