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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2)*
Watermarc Food Management Co.
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(Name of Issuer)
Common Stock, $.05 par value
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(Title of Class of Securities)
941832 10 7
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(CUSIP Number)
Thomas J. Buckley, CFO, Watermarc Food Management Co.
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11111 Wilcrest Green, Suite 350, Houston, Texas 77042; (713) 783-0500
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(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
May 15, 1997
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-l(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement [ ]. (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-l(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
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SCHEDULE 13D
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CUSIP No. 941832 10 7 Page 2 of 6 Pages
----------------------------------- --------- --------
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1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Ghulam M. Bombaywala
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
Not Applicable
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3. SEC USE ONLY
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4. SOURCE OF FUNDS*
00
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(E)
None
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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7. SOLE VOTING POWER
14,008,889 shares of common stock.
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NUMBER OF 8. SHARED VOTING POWER
SHARES
BENEFICIALLY Not applicable
OWNED BY --------------------------------------------------------------
EACH 9. SOLE DISPOSITIVE POWER
REPORTING
PERSON WITH 14,008,889 shares of common stock.
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10. SHARED DISPOSITIVE POWER
Not applicable
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
14,008,889 shares of common stock including the right to
acquire an additional 7,722,222 shares of common stock.
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
No
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
63% of the beneficially owned shares, which includes the right
to acquire 7,722,222 additional shares.
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14. TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
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ITEM 1. SECURITY AND ISSUER
This statement relates to the common stock, $.05 par value (the "Common
Stock"), of Watermarc Food Management Co., a Texas corporation ("Watermarc").
The principal executive office of Watermarc is 11111 Wilcrest Green, Suite 350,
Houston, Texas 77042, and its phone number is (713) 783-0500. The names
and addresses of the principal executive officers of Watermarc are:
<TABLE>
<CAPTION>
Name: Office: Address:
<S> <C> <C>
Ghulam M. Bombaywala Chairman of the Board of Directors 11111 Wilcrest Green
and Chief Executive Officer Suite 350
Houston, Texas 77042
Angelo Pitillo President, Chief Operating Officer 11111 Wilcrest Green
Suite 350
Houston, Texas 77042
Thomas J. Buckley Vice President-Finance, Chief Financial 11111 Wilcrest Green
Officer, Secretary Suite 350
Houston, Texas 77042
</TABLE>
ITEM 2. IDENTITY AND BACKGROUND
a. Name: Ghulam M. Bombaywala
b. Residence or Business Address: 11111 Wilcrest Green, Suite 350,
Houston, Texas 77042
c. Principal Business: CEO and Chairman of the Board of Directors of
Watermarc whose address is 11111 Wilcrest Green, Suite 350, Houston,
Texas 77042. Watermarc is engaged in the restaurant business.
d. Mr. Bombaywala has not, during the last five (5) years, been convicted
in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
e. Mr. Bombaywala has not, during the last five (5) years, been a party to
any civil proceeding of a judicial or administrative body of competent
jurisdiction resulting in a judgment, decree, or final order against him
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws.
f. Citizenship: U.S.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Mr. Bombaywala was the beneficial owner and holder of all the issued and
outstanding common stock of Marco's Mexican Restaurants, Inc., a
private Texas corporation ("Marco's"). Pursuant to the terms of a Stock
Exchange Agreement (the "Agreement") between Billy Blues Food Corporation n/k/a
Watermarc Food Management Co., Mr. Bombaywala and Marco's, Mr. Bombaywala
exchanged 48,500 shares of the common stock of Marco's, representing
all of the issued and outstanding common stock of that corporation, for
4,550,000 shares of Common Stock, par value $.05 per share, of Watermarc. The
terms of the Agreement were subsequently modified to provide for the issuance
of an additional 50,000 shares of Common Stock to Mr. Bombaywala on September
1, 1994.
Since that time, Mr. Bombaywala has acquired an additional 20,000 shares of
Watermarc's Common Stock in open market transactions.
In December 1994 Mr. Bombaywala purchased $500,000 in principal amount of
Watermarc's 12% Subordinated Notes. As a holder of the Subordinated Notes, he
received warrants to purchase 222,222 shares of Watermarc's Common Stock at a
purchase price of $2.25 per share until December 31, 1999.
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On June 23, 1995, Watermarc entered into a Sale and Option Agreement with The
Original Pasta Co. ("Pasta Co.") pursuant to which Watermarc was granted an
option to purchase Pasta Co. which was solely owned by Mr. Bombaywala. On
September 14, 1995, Watermarc, Mr. Bombaywala and Pasta Co. entered into an
Agreement and Plan of Merger (the "Merger Agreement") which provided for the
merger of Pasta Co. with and into a wholly owned subsidiary of Watermarc. The
Merger Agreement was subject to majority approval by Watermarc's stockholders
other than Mr. Bombaywala. Such approval was obtained at Watermarc's Annual
Meeting of Shareholders held in January of 1996. The purchase was consummated
on January 26, 1996.
In consideration for the acquisition of all of Mr. Bombaywala's shares of Pasta
Co., Mr. Bombaywala received 1,666,667 shares of Watermarc's Common Stock (the
"Merger Shares") and a subsidiary of Watermarc executed Promissory Notes (the
"Notes") in the principal amounts of $2,750,000 and $1,000,000 in favor of Mr.
Bombaywala, which Notes were guaranteed by Watermarc.
The Merger Shares are restricted securities but have demand and incidental
registration rights. A total of 350,000 Merger Shares were subject to a
Development Escrow Agreement which provided for the earnout and release of such
shares based upon the opening of five additional Pasta Co. Restaurants on or
before December 31, 1996 at an average cost not to exceed $400,000 per
restaurant, the terms of which have been met.
On May 15, 1997 Mr. Bombaywala and Watermarc entered into a Conversion and
Offset Agreement (attached hereto as Exhibit 1 and incorporated herein by
reference) whereby the parties to the Notes agreed to convert the $3,750,000 of
debt evidenced by the Notes to 7,500,000 Common Stock Rights (the "Rights").
Each of the Rights can be converted to one share of Watermarc's Common Stock at
a later date assuming that Watermarc has a sufficient number of shares
authorized and freely issuable. In exchange for the Rights, Mr. Bombaywala
forgave the Notes. Watermarc also agreed with Mr. Bombaywala to offset
$819,202 in additional notes payable to, against notes receivable from, Mr.
Bombaywala.
ITEM 4. PURPOSE OF TRANSACTION
As described above, Mr. Bombaywala acquired 4,600,000 shares of common stock in
connection with the acquisition of Marco's in 1994 and 1,666,667 shares of
common stock from the sale of Pasta Co. in 1995. Since 1994, Mr. Bombaywala has
acquired 20,000 shares of Watermarc's common stock in open market transactions
and the warrants described above to purchase 222,222 shares. In addition, Mr.
Bombaywala received the Rights to acquire 7,500,000 shares of Watermarc's
Common Stock in exchange for forgiving the $3,750,000 principal amount of Notes
owed to Mr. Bombaywala by Watermarc's subsidiary and guaranteed by Watermarc.
Mr. Bombaywala agreed to forgive the Notes in exchange for the Rights in order
to improve Watermarc's consolidated financial position. A value of $.50 per
share was determined by the Board of Directors in connection with the
conversion. The Board believed the transaction was in the best interests of
Watermarc and its shareholders. See Item 3.
Mr. Bombaywala has no present intentions, plans or proposals which relate to or
would result in:
(a) The acquisition by any person of additional securities of
Watermarc, or the disposition of securities of Watermarc, except
as described above;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving Watermarc or any of its
subsidiaries;
(c) A sale or transfer of a material amount of assets of Watermarc or
any of its subsidiaries;
(d) Any change in the present board of directors or management of
Watermarc, including any plans or proposals to change the number
of or term of directors or to fill any existing vacancies on the
board;
(e) Any material change in the present capitalization or dividend
policy of Watermarc, however, Mr. Bombaywala intends to vote to
increase authorized capital or for a reverse stock split so that
his rights may be exercised;
(f) Any other material change in Watermarc's business or corporate
structure;
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(g) Changes in Watermarc's charter, bylaws or instruments
corresponding thereto or other actions which may impede the
acquisition or control of Watermarc by any person;
(h) Causing a class of securities of Watermarc to be delisted from a
national securities exchange or to cease to be authorized to be
quoted in an inter-dealer quotation system of a registered
national securities association;
(i) A class of equity securities of Watermarc becoming eligible for
termination of registration to Section 12(g)(4) of the Securities
Exchange Act of 1934, as amended; or
(j) Any action similar to any of those enumerated above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) Mr. Bombaywala owns 14,008,889 shares which includes the Rights and
Warrants to acquire an additional 7,722,222 shares of Common Stock of Watermarc.
Based on Watermarc's form 10-Q filed with the Securities and Exchange Commission
on May 19, 1997, Watermarc disclosed that as of March 30, 1997, it had
13,670,847 issued and outstanding shares of Common Stock. To the best of Mr.
Bombaywala's knowledge at this time, Mr. Bombaywala's ownership percentage is
63% of the beneficially owned shares of Common Stock of Watermarc, which
includes the 7,722,222 shares.
(b) Mr. Bombaywala has the sole power to vote or to direct the vote and the
sole power to dispose of or to direct the disposition of the Shares.
(c) Mr. Bombaywala has not engaged in any transactions with respect to the
Common Stock of Watermarc during the sixty (60) day period preceding the date
of this filing.
(d) No other person is known by Mr. Bombaywala to have the right to receive
or the power to direct the receipt of dividends from, or the proceeds from the
sale of, the Shares owned by Mr. Bombaywala.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Except for the Conversion and Offset Agreement and the Warrant Agreement
(attached hereto as Exhibit 2) referred to in Item 3 above whereby Mr.
Bombaywala received the Rights to acquire 7,722,222 shares of Watermarc's Common
Stock, there are no contracts, arrangements, understandings, or relationships
(legal or otherwise) among the persons named in Item 2 hereof and between such
persons and any person with respect to any securities of Watermarc.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
There are no written agreements relating to the filing of joint acquisition
statements as required by Rule 13d-1(f) or agreements of Mr. Bombaywala
relating to (i) the borrowing of funds to finance any acquisitions, required to
be disclosed in Item 3; (ii) the acquisition of issuer control, liquidation,
sale of assets, merger, or change in business or corporate structure or any
other matter required to be disclosed in Item 4; and (iii) the transfer or
voting of the securities, finders fees, joint ventures, options, puts, calls,
guarantees of loans, guarantees against loss or of profit, or the giving or
withholding of any proxy required to be disclosed in Item 6.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Date: May 23, 1997 /s/ Ghulam M. Bombaywala
------------------------------
Ghulam M. Bombaywala
Page 6
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EXHIBIT INDEX
99.1 -- Conversion and Offset Agreement.
99.2 -- Warrant to Purchase Common Stock of Billy Blues Food Corporation.
<PAGE> 1
EXHIBIT 99.1
CONVERSION AND OFFSET AGREEMENT
This Agreement is made effective as of the 15th day of May, 1997, by
and between The Original Pasta Co., a Texas corporation f/k/a Pasta Acquisition
Co. ("Pasta Co."), Marco's Mexican Restaurants, Inc., a Texas corporation
("Marco's"), both wholly owned subsidiaries of Watermarc Food Management Co.,
Watermarc Food Management Co., a Texas corporation ("Watermarc"), and Ghulam
M. Bombaywala, (hereafter jointly referred to as "the Parties").
WHEREAS, on the 14th day of September 1995, Pasta Co. executed a note
in the principal amount of Two Million Seven Hundred Fifty Thousand Dollars
($2,750,000.00) in favor of Ghulam M. Bombaywala; and
WHEREAS, on the 14th day of September 1995, Pasta Co. executed a note
in the principal amount of One Million Dollars ($1,000,000.00) in favor of
Ghulam M. Bombaywala (both notes hereafter jointly referred to as the "Notes");
and
WHEREAS, the Notes were guaranteed by Watermarc pursuant to a Guaranty
Agreement dated September 14, 1995, in favor of Mr. Bombaywala; and
WHEREAS, the Parties wish to convert the Notes payable by Pasta Co. to
Mr. Bombaywala in the total principal amount of Three Million Seven Hundred
Fifty Thousand Dollars ($3,750,000.00) for Seven Million Five Hundred Thousand
(7,500,000) shares (the "Shares") of the common stock of Watermarc, $.05 par
value (the "Common Stock") and/or the right to receive the Shares at a later
date as hereinafter described in Section 2 hereof (the "Rights"); and
WHEREAS, on the 26th day of January 1996, Pasta Co. executed notes in
the principal amounts of Two Hundred Twenty Four Thousand Two Hundred Two
Dollars ($224,202.00) and Five Hundred Ninety Five Thousand Dollars
($595,000.00) in favor of Ghulam M. Bombaywala (hereafter jointly referred to as
the "Exchange Notes"); and
WHEREAS, on the 31st day of July 1994, Ghulam M. Bombaywala executed a
note in the principal amount of Two Million One Hundred Seventy Five Thousand
Three Hundred Ten Dollars and Forty Cents ($2,175,310.40) in favor of Marco's
(the "Marco's Note"); and
WHEREAS, the Parties wish to offset the Exchange Notes so that the
collective principal amount of Eight Hundred Nineteen Thousand Two Hundred Two
Dollars ($819,202.00) due to Mr. Bombaywala shall be offset against the Marco's
Note due to Marco's; and
<PAGE> 2
NOW, THEREFORE, for and in consideration of the premises hereunder,
the Parties agree as follows:
1. Ghulam M. Bombaywala forgives and forever discharges the
following Notes owed to him by Pasta Co. in the total principal sum of Three
Million Seven Hundred Fifty Thousand Dollars ($3,750,000.00), together with all
interest, accrued and unaccrued, and forever releases and discharges Watermarc
from its corporate guarantee of such obligations:
That certain Promissory Note dated September 14, 1995 by and
between Pasta Acquisition Co., as Maker, and Ghulam M.
Bombaywala, as Payee, in the amount of Two Million Seven
Hundred Fifty Thousand Dollars ($2,750,000.00) attached
hereto as Exhibit A ; and
That certain Promissory Note dated September 14, 1995 by and
between Pasta Acquisition Co., as Maker, and Ghulam M.
Bombaywala, as Payee, in the amount of One Million Dollars
($1,000,000.00) attached hereto as Exhibit B; and
2. Mr. Bombaywala shall have the right to receive Seven Million
Five Hundred Thousand (7,500,000) Shares of Watermarc's Common Stock based upon
a value of Fifty Cents ($.50) per share (hereinafter referred to as "Rights").
The Parties acknowledge and agree that the Shares cannot be issued immediately
due to insufficient authorized shares of Common Stock of Watermarc and
Watermarc's obligation to reserve shares of Common Stock for future issuances
pursuant to outstanding obligations, including those related to its outstanding
Series A Warrants, its 9% Cumulative Convertible Preferred Stock and other
warrant or option agreements. In addition, Watermarc desires to retain a portion
of its authorized but unissued Common Stock for general corporate purposes.
Accordingly, the Parties agree that Watermarc may issue some portion of the
Shares prior to the shareholder's meeting (the "Meeting") referred to below as
determined by the Board of Directors of Watermarc in its sole discretion. All
Shares not approved and issued by the Board of Directors prior to the Meeting
shall be issued if and only if Watermarc receives shareholder approval at the
Meeting of an increase in Watermarc's authorized shares of Common Stock or a
reverse stock split (which would have the effect of increasing Watermarc's
authorized but unissued shares of Common Stock), which Watermarc shall
diligently seek at the next annual or other Meeting of shareholders.
<PAGE> 3
3. The Rights of Mr. Bombaywala to receive the Shares (or any
unissued portion of the Shares) shall be proportionately adjusted to reflect
any share combinations, divisions, stock splits, reverse stock splits, stock
dividends or other increases or decreases in Common Stock that proportionately
affect all holders of the Common Stock and he shall have, with respect to the
Rights, the right to receive a proportionate share of any consideration or
securities as a result of any exchange, reclassification, reorganization,
merger, business combination or other transaction on the same basis as any
holders of the outstanding shares of Common Stock.
4. Ghulam M. Bombaywala forgives and forever discharges the
Exchange Notes owed to him by Pasta Co. in the total principal sum of Eight
Hundred Nineteen Thousand Two Hundred Two Dollars ($819,202.00), together with
all interest, accrued and unaccrued, specifically:
That certain Promissory Note dated January 26, 1996, by and
between Pasta Acquisition Co., as Maker, and Ghulam M.
Bombaywala, as Payee, in the amount of Two Hundred Twenty
Four Thousand Two Hundred Two Dollars ($224,202.00) attached
hereto as Exhibit C; and
That certain Promissory Note dated January 26, 1996, by and
between Pasta Acquisition Co., as Maker, and Ghulam M.
Bombaywala, as Payee, in the amount of Five Hundred Ninety
Five Thousand Dollars ($595,000.00) attached hereto as
Exhibit D.
5. Watermarc and Marco's agree that the principal amount due
under the Marco's Note, attached hereto as Exhibit E, shall be reduced by the
sum of Eight Hundred Nineteen Thousand Two Hundred Two Dollars ($819,202.00).
6. This Agreement shall be construed according to and be
governed by the laws of the State of Texas. The Parties agree that venue for
any litigation arising out of this Agreement shall lie in Houston, Harris
County, Texas.
7. This Agreement contains the entire agreement of the Parties
with respect to the matters covered by its terms. No other agreement,
statement, or promise made by any party, or to any employee, officer, or agent
of any party, that is not contained in this Agreement shall be of any force or
effect.
<PAGE> 4
This Agreement is executed by the Parties on the day and year first
above written.
/s/ GHULAM M. BOMBAYWALA
-----------------------------------
Ghulam M. Bombaywala, Individually
Watermarc Food Management Co.
/s/ ANGELO PITILLO
------------------------------------
By: Angelo Pitillo
President and Chief Operating Officer
The Original Pasta Co.
/s/ ANGELO PITILLO
------------------------------------
By: Angelo Pitillo
President
Marco's Mexican Restaurants, Inc.
/s/ ANGELO PITILLO
--------------------------------------
By: Angelo Pitillo
President
<PAGE> 5
EXHIBIT A
PROMISSORY NOTE
$2,750,000.00 HOUSTON, TEXAS SEPTEMBER 14, 1995
PASTA ACQUISITION CO., a Texas corporation (hereinafter called
"Maker"), for value received, promises and agrees to pay in installments and
as herein provided unto the order of GHULAM M. BOMBAYWALA, a resident of Fort
Bend County, Texas, whose business address is 10777 Westheimer, Suite 1030,
Houston, Texas 77042 or at such other address as Payee shall designate, in
lawful currency of the United States of America, the principal sum of TWO
MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($2,750,000.00), together with
interest thereon from and after the date hereof at the rate of ten percent
(10%) per annum until maturity. All past due principal and interest shall bear
interest until paid at twelve percent (12%) per annum (but in no event to
exceed the maximum rate of nonusurious interest allowed by law). All sums paid
hereon shall apply first to the satisfaction of accrued interest and the
balance to the unpaid principal.
INTEREST AND PRINCIPAL ON THIS NOTE is payable as follows: interest on
the outstanding principal hereof shall be payable quarterly on the 15th day of
December, March, June and September of each year in which any principal remains
outstanding hereunder; provided, however, commencing September 15, 2000, on
each quarterly interest payment date, Maker shall make quarterly payments of
principal in amount sufficient to amortize and pay all then remaining principal
in pro rata quarterly installments by September 15, 2002. Notwithstanding
anything herein to the contrary, this Note shall not accrue or bear interest
during the "Pre Effective Period" as such term is defined in the Merger
agreement (as herein after defined).
IT IS ESPECIALLY agreed between the parties hereto that time is of the
essence with respect to the payment of this Note and, if an "Event of Default"
(as defined below) occurs, the owner and holder of this Note may, at its
option, declare all sums owing hereon at once due and payable. If default is
made in the payment of this Note at maturity (regardless of how its maturity
may be brought about) and the same is placed in the hands of an attorney for
collection, or suit is filed hereon, or proceedings are had in bankruptcy,
probate, receivership, reorganization, arrangement, or other judicial
proceedings for the establishment or collection of any amount called for
hereunder, or any amount payable or to be payable hereunder is collected
through any such proceedings, Maker agrees and is also to pay to the owner and
holder of this Note all reasonable attorney's or collection fees incurred.
IT IS the intention of Maker and Payee to conform strictly to
applicable usury laws. Accordingly, if the transactions contemplated hereby
would be usurious under any applicable law (including the laws of the State of
Texas and the laws of the United States of America), then, in that event,
notwithstanding anything to the contrary in any agreement entered into in
connection with or as security for this Note, it is agreed as follow: (i) the
aggregate of all consideration which constitutes interest under applicable law
that is taken, reserved, contracted for, charged or received under this Note or
under any of the other aforesaid agreements or otherwise in connection with this
Note shall under no circumstances exceed the maximum amount of interest allowed
by applicable law, and any excess shall be credited on this Note by the holder
hereof (or,
--------
Page 1 of 5 INITIALS
<PAGE> 6
$2,750,000.00 HOUSTON, TEXAS SEPTEMBER 14, 1995
if this Note shall have been paid in full, refunded to Maker); (ii) in the
event that maturity of the Note is accelerated by reason of an election by the
holder hereof resulting from any default hereunder or otherwise, or in the
event of any required or permitted prepayment, then such consideration that
constitutes interest may never include more than the maximum amount allowed by
applicable law, and excess interest, if any, provided for in this Note or
otherwise shall be canceled automatically as of the date of such acceleration
or prepayment and, if theretofore prepaid, shall be credited on this Note (or
if this Note shall have been paid in full, refunded to Maker); and (iii) it is
further agreed, without limitation of the foregoing, that all calculations of
the rate of interest contracted for, charged, or received on this Note that are
made for the purpose of determining whether such rate exceeds the maximum
amount of interest allowed by applicable law, shall be made, to the extent
permitted by applicable law, by amortizing, prorating, allocating, and
spreading throughout the full stated term of this Note so that such rate of
interest on account of this Note, as so calculated, is uniform throughout the
term thereof; and (iv) that the Maker and Payee agree that for the purposes of
this paragraph, the applicable interest ceiling is the Highest Lawful Rate
under the laws of any jurisdiction which may be held to apply to this Note.
EVENT OF DEFAULT OR DEFAULT shall mean the occurrence of any of the
following events:
1. Maker's failure to pay principal of, or interest on, this Note as
and when due and payable or the failure of Maker or the Guarantor,
as defined below, to pay when due any installment or payment of
principal or interest owed by Maker or Guarantor to Payee under the
Notes as defined in Section 2.02 of the Merger Agreement;
2. Maker or Guarantor fails to perform or observe any material term,
covenant or agreement contained in the Guaranty Agreement or the
Security Documents referred to below;
3. Maker, Guarantor or any of their material subsidiaries shall
individually or collectively: (a) make an assignment for the
benefit of creditors or petition or apply to any tribunal for the
appointment of a custodian, receiver or trustee for it or for a
substantial part of its assets; (b) commence any proceeding under
any bankruptcy, reorganization, rearrangement, readjustment of
debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; (c) have had any
such petition or application filed or any such proceeding commenced
against it in which an order for relief is entered or an
adjudication or appointment is made, and which remains undismissed
for a period of thirty (30) days or more; (d) take any board or
shareholder action approving any such petition, application,
proceeding, or order for relief or the appointment of a custodian.
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Page 2 of 5 INITIALS
<PAGE> 7
$2,750,000 HOUSTON, TEXAS SEPTEMBER 14, 1995
receiver or trustee for all or any substantial part of its properties; or
(e) suffer any such custodianship, receivership or trusteeship to continue
undischarged for a period of thirty (30) days or more; or
4. The Guaranty Agreement or Security Documents shall at any time after
execution and delivery thereof and for any reason cease to be in full force
and effect or shall be declared null and void, or the validity or
enforceability thereof shall be contested by the Guarantor or Maker or if
Guarantor or Maker shall deny that it or they have any liability or
obligation under, or shall fail to perform their respective obligations
under, the Guaranty Agreement or Security Agreements.
IF ANY EVENT OF DEFAULT shall occur and be continuing under this Note,
Payee or any owner and holder of this Note agrees to provide Maker and the
Guarantor hereof thirty (30) days prior written notice specifying such default
and providing Maker an opportunity to cure such default within such period
prior to any acceleration of this Note; provided, however, no notice shall be
required upon the occurrence of the Events of Default set forth in clauses (a),
(b) or (d) of number subparagraph 3 of this Note above and sixty (60) days
prior written notice shall be provided upon the occurrence of the Events of
Default set forth in numbered subparagraphs 2 and 4 above. Following such
written notice, if required, and the failure of Maker to cure such default in
every respect all indebtedness represented by this Note shall be immediately
due and payable without further action or notice by Payee or any holder hereof
to Maker. If Maker cures such default after receiving notice thereof, Maker
shall provide written notice to Payee or the owner and holder hereof stating
the steps taken to cure such default and stating that the default is cured
within the specified notice period.
MAKER reserves the option of prepaying the principal of this Note, in
whole or in part, at any time after the date hereof without penalty. Accrued
and unpaid interest with respect to such principal amount prepaid is due and
payable on the date of such prepayment. Maker shall be required to prepay the
Note to the extent and in the circumstances set forth in Section 2.02 of the
Plan and Agreement of Merger by and among Maker, Guarantor, Payee and The
Original Pasta Company dated effective as of September 14, 1995 (the "Merger
Agreement"). Payment of this Note is subordinated in the circumstances set
forth in Section 2.02 of the Merger Agreement.
THIS NOTE is entitled to the benefits of and the security afforded by (i)
that certain Security Agreement between Maker and Payee dated September 14,
1995; (ii) Pledge and Security Agreement dated September 14, 1995 between
Watermarc Food Management Co. ("Guarantor") and Payee dated September 14, 1995;
(iii) the Guaranty Agreement executed by the Guarantor in favor of the Payee
dated September 14, 1995; and (iv) any other agreements, instruments or filings
intended to provide security for this Note as provided for in Section 2.02 of
the Merger Agreement (collectively, the "Security Documents").
--------
Page 3 of 5 INITIALS
<PAGE> 8
$2,750,000.00 HOUSTON, TEXAS SEPTEMBER 14, 1995
IN THE EVENT OF ANY DISPUTE or litigation between the Payee and the
Maker or Guarantor or any other person or party with respect to this Note, the
Merger Agreement or the Security Documents or with respect to any other matter,
thing, event or occurrence, whether past, present or arising in the future, the
Maker waives all rights of set off, offset and the right to interpose make any
legal claims or counterclaims, the effect of which would be to delay, reduce,
deny, limit or offset its obligations under this Note.
IF THE EVENT OF ANY CONFLICT between the terms and provisions of this
Note, the Security Documents or the Merger Agreement or any other agreement
relating hereto or thereto, the terms and provisions of this Note shall control.
EXCEPT AS EXPRESSLY SET FORTH TO THE CONTRARY HEREIN, Maker and any
endorsers or guarantors of this Note severally waive notice, grace,
presentment and demand for payment, notice of dishonor, notice of intent to
accelerate maturity, notice of acceleration of maturity, protest and notice of
protest and non-payment, bringing of suit, and diligence in taking any action
to collect any sums owing under Note or in proceeding against any of the rights
and properties securing payment of this Note, and indulgences of every kind.
Maker and any endorsers or guarantors of this Note agree that, from time to
time, both before and after the maturity date of this Note and without notice,
Payee may renew the indebtedness evidenced by this Note, extend the time for
any payments on the Note, consent to the substitution of security, accept
additional security, or release any existing security for this Note and accept
partial payments of this Note without in any manner effecting the liability of
maker or any endorser or guarantor under or with respect to this Note, even
though Maker or such endorser or guarantor is not a party to any agreement
regarding such actions.
NEITHER THE Payee's acceptance of partial or delinquent performance or
payment nor any forbearance, failure or delay by Payee or any holder hereof in
exercising any right, power or remedy shall be deemed a waiver of any
obligation of the Maker or any endorser, guarantor or other party liable for
payment of this Note or of any right, power or remedy of the Payee or any
holder hereof or preclude any other or further exercise thereof; and no single
or partial exercise of any right, power or remedy shall preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
THE PROVISIONS OF THIS NOTE may not be changed, modified or terminated
orally, but only by an agreement in writing, signed by the Maker and Payee or
any holder hereof. If any term or provision of this Note shall be held invalid,
illegal or unenforceability, the validity of all other terms and provisions
shall in no way be effected thereby. Any waiver or forbearance must be in
writing to be effective against the Payee or any holder hereof and shall only
be applicable in the specific instance for which it is given.
THIS NOTE has been executed and delivered in and shall be construed in
accordance with and governed by the laws of the State of Texas and of the
United States of America.
--------
Page 4 or 5 INITIALS
<PAGE> 9
$2,750,000.00 HOUSTON, TEXAS SEPTEMBER 14, 1995
PASTA ACQUISITION CO.
By: /s/ ANGELO PITILLO
___________________________
Angelo Pitillo, President
--------
Page 5 of 5 INITIALS
<PAGE> 10
EXHIBIT B
PROMISSORY NOTE
$1,000,000.00 HOUSTON, TEXAS SEPTEMBER 14, 1995
PASTA ACQUISITION CO., a Texas corporation (hereinafter called
"Maker"), for value received, promises and agrees to pay in installments and as
herein provided unto the order of GHULAM M. BOMBAYWALA, a resident of Fort Bend
County, Texas, whose business address is 10777 Westheimer, Suite 1030, Houston,
Texas 77042 or at such other address as Payee shall designate, in lawful
currency of the United States of America, the principal sum of ONE MILLION AND
NO/100 DOLLARS ($1,000,000.00), together with interest thereon from and after
the date hereof at the rate of ten percent (10%) per annum until maturity. All
past due principal and interest shall bear interest until paid at twelve
percent (12%) per annum (but in no event to exceed the maximum rate of
nonusurious interest allowed by law). All sums paid hereon shall apply first to
the satisfaction of accrued interest and the balance to the unpaid principal.
INTEREST AND PRINCIPAL ON THIS NOTE is payable as follows: interest on
the outstanding principal hereof shall be payable quarterly on the 15th day of
December, March, June and September of each year in which any principal remains
outstanding hereunder; $500,000.00 of the principal hereof is due December 31,
1996 and all remaining principal and any interest remaining unpaid on this Note
is due and payable on December 31, 1997. Notwithstanding anything to the
contrary, this Note shall not accrue or bear interest during the "Pre Effective
Period" as such term is defined in the Merger Agreement (as hereinafter
defined).
IT IS ESPECIALLY agreed between the parties hereto that time is of the
essence with respect to the payment of this Note and, if an "Event of Default"
(as defined below) occurs, the owner and holder of this Note may, at its
option, declare all sums owing hereon at once due and payable. If default is
made in the payment of this Note at maturity (regardless of how its maturity
may be brought about) and the same is placed in the hands of an attorney for
collection, or suit is filed hereon, or proceedings are had in bankruptcy,
probate, receivership, reorganization, arrangement, or other judicial
proceedings for the establishment or collection of any amount called for
hereunder, or any amount payable or to be payable hereunder is collected
through any such proceedings, Maker agrees and is also to pay to the owner and
holder of this Note all reasonable attorney's or collection fees incurred.
IT IS the intention of Maker and Payee to conform strictly to
applicable usury laws. Accordingly, if the transactions contemplated hereby
would be usurious under any applicable law (including the laws of the State of
Texas and the laws of the United States of America), then, in that event,
notwithstanding anything to the contrary in any agreement entered into in
connection with or as security for this Note, it is agreed as follows: (i) the
aggregate of all consideration which constitutes interest under applicable law
that is taken, reserved, contracted for, charged or received under this Note or
under any of the other aforesaid agreements or otherwise in connection with
this Note shall under no circumstances exceed the maximum amount of interest
allowed by applicable law, and any excess shall be credited on this Note by the
holder hereof (or, if this Note shall have been paid in full, refunded to
Maker); (ii) in the event that maturity of the Note is accelerated by reason of
an election by the holder hereof resulting from any default
________
Page 1 of 5 INITIALS
<PAGE> 11
$1,000,000.00 HOUSTON, TEXAS SEPTEMBER 14, 1995
hereunder or otherwise, or in the event of any required or permitted
prepayment, then such consideration that constitutes interest may never include
more than the maximum amount allowed by applicable law, and excess interest, if
any, provided for in this Note or otherwise shall be canceled automatically as
of the date of such acceleration or prepayment and, if theretofore prepaid,
shall be credited on this Note (or if this Note shall have been paid in full,
refunded to Maker); and (iii) it is further agreed, without limitation of the
foregoing, that all calculations of the rate of interest contracted for,
charged, or received on this Note that are made for the purpose of determining
whether such rate exceeds the maximum amount of interest allowed by applicable
law, shall be made, to the extent permitted by applicable law, by amortizing,
prorating, allocating, and spreading throughout the full stated term of this
Note so that such rate of interest on account of this Note, as so calculated,
is uniform throughout the term thereof; and (iv) that the Maker and Payee agree
that for the purposes of this paragraph, the applicable interest ceiling is the
Highest Lawful Rate under the laws of any jurisdiction which may be held to
apply to this Note.
EVENT OF DEFAULT OR DEFAULT shall mean the occurrence of any of the
following events:
1. Maker's failure to pay the principal of, or interest on, this Note
as and when due and payable or the failure of Maker or the
Guarantor, as defined below, to pay when due any installment or
payment of principal or interest owed by Maker or Guarantor to Payee
under the Notes as defined in Section 2.02 of the Merger Agreement;
2. Maker or Guarantor fails to perform or observe any material term,
covenant or agreement contained in the Guaranty Agreement or the
Security Documents referred to below;
3. Maker, Guarantor or any of their material subsidiaries shall
individually or collectively: (a) make an assignment for the
benefit of creditors or petition or apply to any tribunal for the
appointment of a custodian, receiver or trustee for it or for a
substantial part of its assets; (b) commence any proceeding under
any bankruptcy, reorganization, rearrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction,
whether now or hereafter in effect; (c) have had any such petition
or application filed or any such proceeding commenced against it in
which an order for relief is entered or an adjudication or
appointment is made, and which remains undismissed for a period of
thirty (30) days or more; (d) take any board or shareholder action
approving any such petition, application, proceeding, or order for
relief or the appointment of a custodian, receiver or trustee for
all or any substantial part of its properties; or (e)
________
Page 2 of 5 INITIALS
<PAGE> 12
$1,000,000.00 HOUSTON, TEXAS SEPTEMBER 14, 1995
suffer any such custodianship, receivership or trusteeship to
continue undischarged for a period of thirty (30) days or more;
or
4. The Guaranty Agreement or Security Documents shall at any time
after execution and delivery thereof and for any reason cease
to be in full force and effect or shall be declared null and
void, or the validity or enforceability thereof shall be
contested by the Guarantor or Maker or if Guarantor or Maker
shall deny that it or they have any liability or obligation
under, or shall fail to perform their respective obligations
under, the Guaranty Agreement or Security Agreements.
IF ANY EVENT OF DEFAULT shall occur and be continuing under this Note,
Payee or any owner and holder of this Note agrees to provide Maker and the
Guarantor hereof thirty (30) days prior written notice specifying such default
and providing Maker an opportunity to cure such default within such period prior
to any acceleration of this Note; provided, however, no notice shall be required
upon the occurrence of the Events of Default set forth in clauses (a), (b) or
(d) of numbered subparagraph 3 of this Note above and sixty (60) days prior
written notice shall be provided upon the occurrence of the Events of Default
set forth in numbered subparagraphs 2 and 4 above. Following such written
notice, if required, and the failure of Maker to cure such default in every
respect all indebtedness represented by this Note shall be immediately due and
payable without further action or notice by Payee or any holder hereof to Maker.
If Maker cures such default after receiving notice thereof, Maker shall provide
written notice to Payee or the owner and holder hereof stating the steps taken
to cure such default and stating that the default is cured within the specified
notice period.
MAKER reserves the option of prepaying the principal of this Note, in
whole or in part, at any time after the date hereof without penalty. Accrued
and unpaid interest with respect to such principal amount prepaid is due and
payable on the date of such prepayment. Maker shall be required to prepay the
Note to the extent and in the circumstances set forth in Section 2.02 of the
Plan and Agreement of Merger by and among Maker, Guarantor, Payee and The
Original Pasta Company dated effective as of September 14, 1995 (the "Merger
Agreement"). Payment of this Note is subordinated in the circumstances set
forth in Section 2.02 of the Merger Agreement.
THIS NOTE is entitled to the benefits of and the security afforded by
(i) that certain Security Agreement between Maker and Payee dated September 14,
1995; (ii) the Pledge and Security Agreement dated September 14, 1995 between
Watermarc Food Management Co. ("Guarantor") and Payee dated September 14, 1995;
(iii) the Guaranty Agreement executed by the Guarantor in favor of the Payee
dated September 14, 1995; and (iv) any other agreements, instruments or filings
intended to provide security for this Note as provided for in Section 2.02 of
the Merger Agreement (collectively the "Security Documents").
--------
Page 3 of 5 INITIALS
<PAGE> 13
$1,000,000.00 HOUSTON, TEXAS SEPTEMBER 14, 1995
IN THE EVENT OF ANY DISPUTE or litigation between the Payee and the Maker
or Guarantor or any other person or party with respect to this Note, the Merger
Agreement or the Security Documents or with respect to any other matter, thing,
event or occurrence, whether past, present or arising in the future, the Maker
waives all rights of set off, offset and the right to interpose make any legal
claims or counterclaims, the effect of which would be to delay, reduce, deny,
limit or offset its obligations under this Note.
IN THE EVENT OF ANY CONFLICT between the terms and provisions of this
Note, the Security Documents or the Merger Agreement or any other agreement
relating hereto or thereto, the terms and provisions of this Note shall control.
EXCEPT AS EXPRESSLY SET FORTH TO THE CONTRARY HEREIN, Maker and any
endorsers or guarantors of this Note severally waive notice, grace, presentment
and demand for payment, notice of dishonor, notice of intent to accelerate
maturity, notice of acceleration of maturity, protest and notice of protest and
non-payment, bringing of suit, and diligence in taking any action to collect
any sums owing under this Note or in proceeding against any of the rights and
properties securing payment of this Note, and indulgences of every kind. Maker
and any endorsers or guarantors of this Note agree that, from time to time,
both before and after the maturity date of this Note and without notice, Payee
may renew the indebtedness evidenced by this Note, extend the time for any
payments on the Note, consent to the substitution of security, accept
additional security, or release any existing security for this Note and accept
partial payments of this Note without in any manner effecting the liability of
Maker or any endorser or guarantor under or with respect to this Note, even
though Maker or such endorser or guarantor is not a party to any agreement
regarding such actions.
NEITHER THE Payee's acceptance of partial or delinquent performance or
payment nor any forebearance, failure or delay by Payee or any holder hereof in
exercising any right, power or remedy shall be deemed a waiver of any
obligation of the Maker or any endorser, guarantor or other party liable for
payment of this Note or of any right, power or remedy of the Payee or any
holder hereof or preclude any other or further exercise thereof; and no single
or partial exercise of any right, power or remedy shall preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
THE PROVISIONS OF THIS NOTE may not be changed, modified or terminated
orally, but only by an agreement in writing, signed by the Maker and Payee or
any holder hereof. If any term or provision of this Note shall be held
invalid, illegal or unenforceability, the validity of all other terms and
provisions shall in no way be effected thereby. Any waiver or forbearance must
be in writing to be effective against the Payee or any holder hereof and shall
only be applicable in the specific instance for which it is given.
--------
Page 4 of 5 INITIALS
<PAGE> 14
$1,000,000.00 HOUSTON, TEXAS SEPTEMBER 14, 1995
THIS NOTE has been executed and delivered in and shall be construed in
accordance with and governed by the laws of the State of Texas and of the
United States of America.
PASTA ACQUISITION CO.
By: /s/ ANGELO PITILLO
___________________________
Angelo Pitillo, President
________
Page 5 of 5 INITIALS
<PAGE> 15
EXHIBIT C
PROMISSORY NOTE
$224,202.00 HOUSTON, TEXAS January 26, 1995
PASTA ACQUISITION CO., a Texas corporation (hereinafter called "Maker"),
for value received, promises and agrees to pay in installments and as herein
provided unto the order of GHULAM M. BOMBAYWALA, a resident of Fort Bend County,
Texas, whose business address is 10777 Westheimer, Suite 1030, Houston, Texas
77042 or at such other address as Payee shall designate, in lawful currency of
the United States of America, the principal sum of TWO HUNDRED TWENTY FOUR
THOUSAND TWO HUNDRED TWO AND NO/100 DOLLARS ($224,202.00), together with
interest thereon from and after the date hereof at the rate of six percent (6%)
per annum until maturity. All past due principal and interest shall bear
interest until paid at twelve percent (12%) per annum (but in no event to exceed
the maximum rate of nonusurious interest allowed by law). All sums paid hereon
shall apply first to the satisfaction of accrued interest and the balance to the
unpaid principal.
INTEREST AND PRINCIPAL ON THIS NOTE is payable one (1) year from the
date hereof.
IT IS ESPECIALLY agreed between the parties hereto that time is of the
essence with respect to the payment of this Note and, if an "Event of Default"
(as defined below) occurs, the owner and holder of this Note may, at its
option, declare all sums owing hereon at once due and payable. If default is
made in the payment of this Note at maturity (regardless of how its maturity
may be brought about) and the same is placed in the hands of an attorney for
collection, or suit is filed hereon, or proceedings are had in bankruptcy,
probate, receivership, reorganization, arrangement, or other judicial
proceedings for the establishment or collection of any amount called for
hereunder, or any amount payable or to be payable hereunder is collected
through any such proceedings, Maker agrees and is also to pay to the owner and
holder of this Note all reasonable attorney's or collection fees incurred.
IT IS the intention of Maker and Payee to conform strictly to applicable
usury laws. Accordingly, if the transactions contemplated hereby would be
usurious under any applicable law (including the laws of the State of Texas and
the laws of the United States of America), then, in that event, notwithstanding
anything to the contrary in any agreement entered into in connection with or as
security for this Note, it is agreed as follow: (i) the aggregate of all
consideration which constitutes interest under applicable law that is taken,
reserved, contracted for, charged or received under this Note or under any of
the other aforesaid agreements or otherwise in connection with this Note shall
under no circumstances exceed the maximum amount of interest allowed by
applicable law, and any excess shall be credited on this Note by the holder
hereof (or, if this Note shall have been paid in full, refunded to Maker); (ii)
in the event that maturity of the Note is accelerated by reason of an election
by the holder hereof resulting from any default hereunder or otherwise, or in
the event of any required or permitted prepayment, then such consideration that
constitutes interest may never include more than the maximum amount allowed by
applicable law, and excess interest, if any, provided for in this Note or
otherwise shall be canceled automatically as of the date of such
--------
Page 1 of 5 INITIALS
<PAGE> 16
$224,202.00 HOUSTON, TEXAS JANUARY 26, 1996
acceleration or prepayment and, if theretofore prepaid, shall be credited on
this Note (or if this Note shall have been paid in full, refunded to Maker);
and (iii) it is further agreed, without limitation of the foregoing, that all
calculations of the rate of interest contracted for, charged, or received on
this Note that are made for the purpose of determining whether such rate
exceeds the maximum amount of interest allowed by applicable law, shall be
made, to the extent permitted by applicable law, by amortizing, prorating,
allocating, and spreading throughout the full stated term of this Note so that
such rate of interest on account of this Note, as so calculated, is uniform
throughout the term thereof; and (iv) that the Maker and Payee agree that for
the purposes of this paragraph, the applicable interest ceiling is the Highest
Lawful Rate under the laws of any jurisdiction which may be held to apply to
this Note.
EVENT OF DEFAULT OR DEFAULT shall mean the occurrence of any of the
following events:
1. Maker's failure to pay principal of, or interest on, this Note as
and when due and payable or the failure of Maker or the Guarantor,
as defined below, to pay when due any installment or payment of
principal or interest owed by Maker or Guarantor to Payee under the
Notes as defined in Section 2.02 of the Merger Agreement;
2. Maker or Guarantor fails to perform or observe any material term,
covenant or agreement contained in the Guaranty Agreement or the
Security Documents referred to below;
3. Maker, Guarantor or any of their material subsidiaries shall
individually or collectively: (a) make an assignment for the
benefit of creditors or petition or apply to any tribunal for the
appointment of a custodian, receiver or trustee for it or for a
substantial part of its assets; (b) commence any proceeding under
any bankruptcy, reorganization, rearrangement, readjustment of
debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; (c) have had any
such petition or application filed or any such proceeding commenced
against it in which an order for relief is entered or an
adjudication or appointment is made, and which remains undismissed
for a period of thirty (30) days or more; or (d) take any board or
shareholder action approving any such petition, application,
proceeding, or order for relief or the appointment of a custodian,
receiver or trustee for all or any substantial part of its
properties; or (e) suffer any such custodianship, receivership or
trusteeship to continue undischarged for a period of thirty (30)
days or more; or
Page 2 of 5
<PAGE> 17
$224,202.00 HOUSTON, TEXAS JANUARY 26, 1996
4. The Guaranty Agreement or Security Documents shall at any time
after execution and delivery thereof and for any reason cease to
be in full force and effect or shall be declared null and void, or
the validity or enforceability thereof shall be contested by the
Guarantor or Maker or if Guarantor or Maker shall deny that it or
they have any liability or obligation under, or shall fail to
perform their respective obligations under the Guaranty Agreement
or Security Agreements.
IF ANY EVENT OF DEFAULT shall occur and be continuing under this Note,
Payee or any owner and holder of this Note agrees to provide Maker and the
Guarantor hereof thirty (30) days prior written notice specifying such default
and providing Maker an opportunity to cure such default within such period prior
to any acceleration of this Note; provided, however, no notice shall be required
upon the occurrence of the Events of Default set forth in clauses (a), (b) or
(d) of number subparagraph 3 of this Note above and sixty (60) days prior
written notice shall be provided upon the occurrence of the Events of Default
set forth in numbered subparagraphs 2 and 4 above. Following such written
notice, if required, and the failure of Maker to cure such default in every
respect, all indebtedness represented by this Note shall be immediately due and
payable without further action or notice by Payee or any holder hereof to Maker.
If Maker cures such default after receiving notice thereof, Maker shall provide
written notice to Payee or the owner and holder hereof stating the steps taken
to cure such default and stating that the default is cured within the specified
notice period.
MAKER reserves the option of prepaying the principal of this Note, in
whole or in part, at any time after the date hereof without penalty. Accrued
and unpaid interest with respect to such principal amount prepaid is due and
payable on the date of such prepayment. Maker shall be required to prepay the
Note to the extent and in the circumstances set forth in Section 2.02 of the
Plan and Agreement of Merger by and among Maker, Guarantor, Payee and The
Original Pasta Company dated effective as of September 14, 1995 (the "Merger
Agreement"). Payment of this Note is subordinated in the circumstances set
forth in Section 2.02 of the Merger Agreement.
THIS NOTE is entitled to the benefits of and the security afforded by
(I) that certain Security Agreement between Maker and Payee dated September 14,
1995; (ii) Pledge and Security Agreement dated September 14, 1995 between
Watermarc Food Management Co. ("Guarantor") and Payee dated September 14, 1995;
(iii) the Guaranty Agreement executed by the Guarantor in favor of the Payee
dated September 14, 1995; and (iv) any other agreements, instruments or filings
intended to provide security for this Note as provided for in Section 2.02 of
the Merger Agreement (collectively, the "Security Documents").
IN THE EVENT OF ANY DISPUTE or litigation between the Payee and the
Maker or Guarantor or any other person or party with respect to this Note, the
Merger Agreement or the Security Documents or with respect to any other matter,
thing, event or occurrence, whether past, present or arising in the future, the
Maker waives all rights of set off, offset and the right to interpose
Page 3 of 5
<PAGE> 18
$224,202.00 HOUSTON, TEXAS JANUARY 26, 1996
any legal claims or counterclaims, the effect of which would be to delay,
reduce, deny, limit or offset its obligations under this Note.
IF THE EVENT OF ANY CONFLICT between the terms and provisions of this
Note, the Security Documents or the Merger Agreement or any other agreement
relating hereto or thereto, the terms and provisions of this Note shall control.
EXCEPT AS EXPRESSLY SET FORTH TO THE CONTRARY HEREIN, Maker and any
endorsers or guarantors of this Note severally waive notice, grace,
presentment and demand for payment, notice of dishonor, notice of intent to
accelerate maturity, notice of acceleration of maturity, protest and notice of
protest and non-payment, bringing of suit, and diligence in taking any action
to collect any sums owing under Note or in proceeding against any of the rights
and properties securing payment of this Note, and indulgences of every kind.
Maker and any endorsers or guarantors of this Note agree that, from time to
time, both before and after the maturity date of this Note and without notice,
Payee may renew the indebtedness evidenced by this Note, extend the time for
any payments on the Note, consent to the substitution of security, accept
additional security, or release any existing security for this Note and accept
partial payments of this Note without in any manner effecting the liability of
maker or any endorser or guarantor under or with respect to this Note, even
though Maker or such endorser or guarantor is not a party to any agreement
regarding such actions.
NEITHER THE Payee's acceptance of partial or delinquent performance or
payment nor any forbearance, failure or delay by Payee or any holder hereof in
exercising any right, power or remedy shall be deemed a waiver of any
obligation of the Maker or any endorser, guarantor or other party liable for
payment of this Note or of any right, power or remedy of the Payee or any
holder hereof or preclude any other or further exercise thereof; and no single
or partial exercise of any right, power or remedy shall preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
THE PROVISIONS OF THIS NOTE may not be changed, modified or terminated
orally, but only by an agreement in writing, signed by the Maker and Payee or
any holder hereof. If any term or provision of this Note shall be held invalid,
illegal or unenforceability, the validity of all other terms and provisions
shall in no way be effected thereby. Any waiver or forbearance must be in
writing to be effective against the Payee or any holder hereof and shall only
be applicable in the specific instance for which it is given.
Page 4 of 5
<PAGE> 19
$224,202.00 HOUSTON, TEXAS JANUARY 26, 1996
THIS NOTE has been executed and delivered in and shall be construed in
accordance with and governed by the laws of the State of Texas and of the
United States of America.
PASTA ACQUISITION CO.
By: /s/ THOMAS BUCKLEY
---------------------------
Thomas Buckley, Treasurer
Page 5 of 5
<PAGE> 20
EXHIBIT D
PROMISSORY NOTE
$595,000.00 HOUSTON, TEXAS JANUARY 26, 1996
PASTA ACQUISITION CO., a Texas corporation (hereinafter called "Maker"),
for value received, promises and agrees to pay in installments and as herein
provided unto the order of GHULAM M. BOMBAYWALA, a resident of Fort Bend
County, Texas, whose business address is 10777 Westheimer, Suite 1030, Houston,
Texas 77042 or at such other address as Payee shall designate, in lawful
currency of the United States of America, the principal sum of FIVE HUNDRED
NINETY FIVE THOUSAND AND NO/100 DOLLARS ($595,000.00), together with interest
thereon from and after the date hereof at the rate of ten percent (10%) per
annum until maturity. All past due principal and interest shall bear interest
until paid at twelve percent (12%) per annum (but in no event to exceed the
maximum rate of nonusurious interest allowed by law). All sums paid hereon
shall apply first to the satisfaction of accrued interest and the balance to
the unpaid principal.
INTEREST AND PRINCIPAL ON THIS NOTE is payable one (1) year from the date
hereof.
IT IS ESPECIALLY agreed between the parties hereto that time is of the
essence with respect to the payment of this Note and, if an "Event of Default"
(as defined below) occurs, the owner and holder of this Note may, at its
option, declare all sums owing hereon at once due and payable. If default is
made in the payment of this Note at maturity (regardless of how its maturity
may be brought about) and the same is placed in the hands of an attorney for
collection, or suit is filed hereon, or proceedings are had in bankruptcy,
probate, receivership, reorganization, arrangement, or other judicial
proceedings for the establishment or collection of any amount called for
hereunder, or any amount payable or to be payable hereunder is collected
through any such proceedings, Maker agrees and is also to pay to the owner and
holder of this Note all reasonable attorney's or collection fees incurred.
IT IS the intention of Maker and Payee to conform strictly to applicable
usury laws. Accordingly, if the transactions contemplated hereby would be
usurious under any applicable law (including the laws of the State of Texas and
the laws of the United States of America), then, in that event, notwithstanding
anything to the contrary in any agreement entered into in connection with or as
security for this Note, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under applicable law that is taken,
reserved, contracted for, charged or received under this Note or under any of
the other aforesaid agreements or otherwise in connection with this Note shall
under no circumstances exceed the maximum amount of interest allowed by
applicable law, and any excess shall be credited on this Note by the holder
hereof (or, if this Note shall have been paid in full, refunded to Maker); (ii)
in the event that maturity of the Note is accelerated by reason of an election
by the holder hereof resulting from any default hereunder or otherwise, or in
the event of any required or permitted prepayment, then such consideration that
constitutes interest may never include more than the maximum amount allowed by
applicable law, and excess interest, if any, provided for in this Note or
otherwise shall be canceled automatically as of the date of such acceleration
or prepayment and, if theretofore prepaid, shall be credited on this Note (or
if this Note
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Page 1 of 5 INITIALS
<PAGE> 21
$595,000.00 HOUSTON, TEXAS JANUARY 26, 1996
shall have been paid in full, refunded to Maker); and (iii) it is further
agreed, without limitation of the foregoing, that all calculations of the rate
of interest contracted for, charged, or received on this Note that are made for
the purpose of determining whether such rate exceeds the maximum amount of
interest allowed by applicable law, shall be made, to the extent permitted by
applicable law, by amortizing, prorating, allocating, and spreading throughout
the full stated term of this Note so that such rate of interest on account of
this Note, as so calculated, is uniform throughout the term thereof, and (iv)
that the Maker and Payee agree that for the purposes of this paragraph, the
applicable interest ceiling is the Highest Lawful Rate under the laws of any
jurisdiction which may be held to apply to this Note.
EVENT OF DEFAULT OR DEFAULT shall mean the occurrence of any of the
following events:
1. Maker's failure to pay the principal of, or interest on, this Note
as and when due and payable or the failure of Maker or the
Guarantor, as defined below, to pay when due any installment or
payment of principal or interest owed by Maker or Guarantor to
Payee under the Notes as defined in Section 2.02 of the Merger
Agreement;
2. Maker or Guarantor fails to perform or observe any material term,
covenant or agreement contained in the Guaranty Agreement or the
Security Documents referred to below;
3. Maker, Guarantor or any of their material subsidiaries shall
individually or collectively: (a) make an assignment for the
benefit of creditors or petition or apply to any tribunal for the
appointment of a custodian, receiver or trustee for it or for a
substantial part of its assets; (b) commence any proceeding under
any bankruptcy, reorganization, rearrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction,
whether now or hereafter in effect; (c) have had any such petition
or application filed or any such proceeding commenced against it in
which an order for relief is entered or an adjudication or
appointment is made, and which remains undismissed for a period of
thirty (30) days or more; (d) take any board or shareholder action
approving any such petition, application, proceeding, or order for
relief or the appointment of a custodian, receiver or trustee for
all or any substantial part of its properties; or (e) suffer any
such custodianship, receivership or trusteeship to continue
undischarged for a period of thirty (30) days or more; or
________
Page 2 of 5 INITIALS
<PAGE> 22
$595,000.00 HOUSTON, TEXAS JANUARY 26, 1996
4. The Guaranty Agreement or security Documents shall at any time
after execution and delivery thereof and for any reason cease to be
in full force and effect or shall be declared null and void, or the
validity or enforceability thereof shall be contested by the
Guarantor or Maker or if Guarantor or Maker shall deny that it or
they have any liability or obligation under, or shall fail to
perform their respective obligations under the Guaranty Agreement
or Security Agreements.
IF ANY EVENT OF DEFAULT shall occur and be continuing under this Note,
Payee or any owner and holder of this Note agrees to provide Maker and the
Guarantor hereof thirty (30) days prior written notice specifying such default
and providing Maker an opportunity to cure such default within such period
prior to any acceleration of this Note; provided, however, no notice shall be
required upon the occurrence of the Events of Default set forth in clauses (a),
(b) or (d) of numbered subparagraph 3 of this Note above and sixty (60) days
prior written notice shall be provided upon the occurrence of the Events of
Default set forth in numbered subparagraphs 2 and 4 above. Following such
written notice, if required, and the failure of Maker to cure such default in
every respect, all indebtedness represented by this Note shall be immediately
due and payable without further action or notice by the Payee or any holder
hereof to Maker. If Maker cures such default after receiving notice thereof,
Maker shall provide written notice to Payee or the owner and holder hereof
stating the steps taken to cure such default and stating that the default is
cured within the specified notice period.
MAKER reserves the option of prepaying the principal of this Note, in
whole or in part, at any time after the date hereof without penalty. Accrued
and unpaid interest with respect to such principal amount prepaid is due and
payable on the date of such prepayment. Maker shall be required to prepay the
Note to the extent and in the circumstances set forth in Section 2.02 of the
Plan and Agreement of Merger by and among Maker, Guarantor, Payee and The
Original Pasta Co. dated effective as of September 14, 1995 (the "Merger
Agreement"). Payment of this Note is subordinated in the circumstances set
forth in Section 2.02 of the Merger Agreement.
THIS NOTE is entitled to the benefits of and the security afforded by
(I) that certain Security Agreement between Maker and Payee dated September 14,
1995; (ii) the Pledge and Security Agreement dated September 14, 1995 between
Watermarc Food Management Co. ("Guarantor") and Payee dated September 14, 1995;
(iii) the Guaranty Agreement executed by the Guarantor in favor of the Payee
dated September 14, 1995; and (iv) any other agreements, instruments or filings
intended to provide security for this Note as provided for in Section 2.02 of
the Merger Agreement (collectively the "Security Documents").
IN THE EVENT OF ANY DISPUTE or litigation between the Payee and the
Maker or Guarantor or any other person or party with respect to this Note, the
Merger Agreement or the Security Documents or with respect to any other matter,
thing, event or occurrence, whether past, present or arising in the future, the
Maker waives all rights of set off, offset and the right to interpose
Page 3 of 5
<PAGE> 23
$595,000.00 HOUSTON, TEXAS JANUARY 26, 1996
any legal claims or counterclaims, the effect of which would be to delay,
reduce, deny, limit or offset its obligations under this Note.
IN THE EVENT OF ANY CONFLICT between the terms and provisions of this
Note, the Security Documents or the Merger Agreement or any other agreement
relating hereto or thereto, the terms and provisions of this Note shall
control.
EXCEPT AS EXPRESSLY SET FORTH TO THE CONTRARY HEREIN, Maker and any
endorsers or guarantors of this Note severally waive notice, grace, presentment
and demand for payment, notice of dishonor, notice of intent to accelerate
maturity, notice of acceleration of maturity, protest and notice of protest and
non-payment, bringing of suit, and diligence in taking any action to collect
any sums owing under this Note, and indulgences of every kind. Maker and any
endorsers or guarantors of this Note Agree that, from time to time, both before
and after the maturity date of this Note and without notice, Payee may renew
the indebtedness evidenced by this Note, extend the time for any payments on
the Note, consent to the substitution of security, accept additional security,
or release any existing security for this Note and accept partial payments of
this Note without in any manner effecting the liability of Maker or any
endorser or guarantor under or with respect to this Note, even though Maker or
such endorser or guarantor is not a party to any agreement regarding such
actions.
NEITHER THE Payee's acceptance of partial or delinquent performance or
payments nor any forebearance, failure or delay by Payee or any holder hereof
in exercising any right, power or remedy shall be deemed a waiver of any
obligation of the Maker or any endorser, guarantor or other party liable for
payment of this Note or of any right, power or remedy of the Payee or any
holder hereof or preclude any other or further exercise thereof, and no single
or partial exercise of any right, power or remedy shall preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
THE PROVISIONS OF THIS NOTE may not be changed, modified or terminated
orally, but only by an agreement in writing, signed by the Maker and Payee or
any holder hereof. If any term or provision of this Note shall be held invalid,
illegal or unenforceable, the validity of all other terms and provisions shall
in no way be effected thereby. Any waiver or forbearance must be in writing to
be effective against the Payee or any holder hereof and shall only be
applicable in the specific instance for which it is given.
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<PAGE> 24
$595,000.00 HOUSTON, TEXAS JANUARY 26, 1996
THIS NOTE has been executed and delivered in and shall be construed in
accordance with and governed by the laws of the State of Texas and of the
United States of America.
PASTA ACQUISITION CO.
By: /s/ THOMAS BUCKLEY
---------------------------------
Thomas Buckley, Treasurer
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Page 5 of 5 INITIALS
<PAGE> 25
Exhibit E
PROMISSORY NOTE
$2,175,310.40 HOUSTON, TEXAS JULY 31, 1994
GHULAM M. BOMBAYWALA, a resident of Harris county, Texas (hereinafter
called "Maker") for value received, promises and agrees to pay in installments
and as herein provided unto the order of MARCO'S MEXICAN RESTAURANTS, INC., a
Texas corporation (hereinafter called "Payee") at its offices in Houston,
Harris County, Texas, or at such other location in Harris County, Texas as
Payee shall designate, in lawful money of the United States of America, the
principal sum of TWO MILLION ONE HUNDRED SEVENTY-FIVE THOUSAND THREE HUNDRED
TEN AND 40/100 DOLLARS ($2,175,310.40), together with interest thereon from and
after the date hereof at the rate of six percent (6%) per annum until maturity,
payable as it accrues on the maturity date of each of the hereinafter mentioned
installments, on the then unpaid principal amount hereof. All past due
principal and interest shall bear interest until paid at the highest rate
allowed by law (but in no event to exceed the maximum rate of nonusurious
interest allowed by law). All sums paid hereon shall apply first to the
satisfaction of accrued interest and the balance to the unpaid principal.
INTEREST ON THIS NOTE shall be due and payable annually on July 1 of
each year beginning July 31, 1995. Principal payments of $200,000 each shall be
due on July 1, 1996, 1997 and 1998 and all remaining principal and interest
shall be due on July 31, 1999. Notwithstanding the foregoing, mandatory
prepayments of principal shall be payable within thirty (30) days of receipt by
Maker of proceeds from the sale of all shares of Billy Blues Food Corporation
by him, but only to the extent Maker has previously sold and received cash
proceeds from the sale of 2,000,000 shares of Billy Blues Food Corporation
which may be retained by him and not applied to prepayment of this Note.
IF default is made in the payment of any installment of principal or
interest hereof, as and when the same is or becomes due, or if default occurs
under any instrument securing the payment hereof or executed in connection
herewith, the owner and holder of this note may, at its option, with thirty
(30) days written notice, declare all sums owing hereon at once due and
payable. If default is made in the payment of this note at maturity (regardless
of how its maturity may be brought about) and the same is placed in the hands
of an attorney for collection, or suit is filed hereon, or proceedings are had
in bankruptcy, probate, receivership, reorganization, arrangement, or other
judicial proceedings for the establishment or collection of any amount called
for hereunder, or any amount payable or to be payable hereunder is collected
through any such proceedings, Maker agrees and is also to pay to the owner and
holder of this note a reasonable amount as attorney's or collection fees.
IT IS the intention of Maker and Payee to conform strictly to
applicable usury laws. Accordingly, if the transactions contemplated hereby
would be usurious under applicable law (including the laws of the State of
Texas and the laws of the United States of America), then, in that event,
notwithstanding anything to the contrary in any agreement entered into in
connection with or
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INITIALS
Page 1 of 2
<PAGE> 26
$2,175,310.40 HOUSTON, TEXAS JULY 31, 1994
as security for this note, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under applicable law that is taken,
reserved, contracted for, charged or received under this note or under any of
the other aforesaid agreements or otherwise in connection with this note shall
under no circumstances exceed the maximum amount of interest allowed by
applicable law, and any excess shall be credited on this note by the holder
hereof (or, if this note shall have been paid in full, refunded to Maker); (ii)
in the event that maturity of the note is accelerated by reason of an election
by the holder hereof resulting from any default hereunder or otherwise, or in
the event of any required or permitted prepayment, then such consideration that
constitutes interest may never include more than the maximum amount allowed by
applicable law, and excess interest, if any, provided for in this note or
otherwise shall be cancelled automatically as of the date of such acceleration
or prepayment and, if theretofore prepaid, shall be credited on this note (or
if this note shall have been paid in full, refunded to Maker) and (iii) it is
further agreed, without limitation of the foregoing, that all calculations of
the rate of interest contracted for, charged, or received on this note that are
made for the purpose of determining whether such rate exceeds the maximum
amount of interest allowed by applicable law, shall be made, to the extent
permitted by applicable law, by amortizing, prorating, allocating, and
spreading throughout the full stated term of this note so that such rate of
interest on account of this note, as so calculated, is uniform throughout the
term thereof; and (iv) that the Maker and Payee agree that for the purposes of
this paragraph, the applicable interest ceiling is the Highest Lawful Rate.
MAKER reserves the option of prepaying the principal of this note, in
whole or in part, at any time after the date hereof without penalty. Accrued
and unpaid interest with respect to such principal amount prepaid is due and
payable on the date of such prepayment.
THIS NOTE is entitled to the benefits and security afforded by a Pledge
Agreement executed by Maker to Payee of even date herewith.
NOTWITHSTANDING ANYTHING in this Agreement to the contrary, Maker shall
have no personal liability on this Note and the sole and exclusive recourse of
any owner or holder of this Note for nonpayment hereof is to exercise its
rights with respect to the collateral set forth in the above-referenced Pledge
Agreement.
THIS NOTE has been executed and delivered in and shall be construed in
accordance with and governed by the laws of the State of Texas and the United
States of America.
By: /s/ GHULAM M. BOMBAYWALA
----------------------------------
GHULAM M. BOMBAYWALA
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Page 2 of 2 INITIALS
<PAGE> 1
EXHIBIT 99.2
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES ACT OF ANY STATE (COLLECTIVELY, THE "ACTS"). NEITHER
THIS WARRANT NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT WITH RESPECT HERETO UNDER ALL OF THE APPLICABLE ACTS, OR AN OPINION
OF COUNSEL SATISFACTORY TO BILLY BLUES FOOD CORPORATION TO THE EFFECT THAT SUCH
REGISTRATIONS ARE NOT REQUIRED. THIS WARRANT IS SUBJECT TO OTHER LIMITATIONS ON
TRANSFER.
WARRANT
to Purchase Common Stock of
BILLY BLUES FOOD CORPORATION
Expiring on December 31, 1999
THIS IS TO CERTIFY THAT, for value received, , or
permitted assigns, is entitled to purchase from BILLY BLUES FOOD CORPORATION, a
Texas corporation (the "Company"), at the place where the Warrant Office
designated pursuant to Section 2.1 is located, at a purchase price per share of
$2.25 (as adjusted pursuant to the terms of this Warrant, the "Exercise
Price"), shares of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock, $.05 par value, of the Company (the
"Common Stock"), and is entitled also to exercise the other appurtenant
rights, powers and privileges hereinafter set forth. The number of shares of
the Common Stock purchasable hereunder and the Exercise Price are subject to
adjustment in accordance with Article III hereof. This Warrant shall expire at
5:00 p.m., C.S.T., on December 31, 1999.
Certain Terms used in this Warrant are defined in Article IV.
ARTICLE I
Exercise of Warrant
1.1 Method of Exercise. This Warrant may be exercised as a whole or in
part from time to time. To exercise this Warrant, the holder hereof or
permitted assignees of all rights of the registered owner hereof shall deliver
to the Company, at the Warrant Office designated in Section 2.1, (a) a written
notice in the form of the Subscription Notice attached as an exhibit hereto,
stating therein the election of such holder or such permitted assignees of the
holder to exercise this Warrant in the manner provided in the Subscription
Notice, (b) payment in full of the Exercise Price (in the manner described
below) for all Warrant Shares purchased hereunder, and (c) this Warrant.
Subject to compliance with Section 3.1(a)(vii), this Warrant shall be deemed to
be exercised on the date of receipt by the Company of the Subscription Notice,
<PAGE> 2
accompanied by payment for the Warrant Shares and surrender of this Warrant, as
aforesaid, and such date is referred to herein as the "Exercise Date". Upon
such exercise (subject as aforesaid), the Company shall issue and deliver to
such holder a certificate for the full number of the Warrant Shares purchasable
by such holder hereunder, against the receipt by the Company of the total
Exercise Price payable hereunder for all the Warrant Shares, (a) in cash or by
certified or cashier's check or (b) by surrendering Warrant Shares having a
Current Market Value equal to the Exercise Price for all of the Warrant Shares,
so purchased. The Person in whose name the certificate(s) for Common Stock is
to be issued shall be deemed to have become a holder of record of such Common
Stock on the Exercise Date.
1.2 Fractional Shares. Instead of any fractional shares of Common
Stock which would otherwise be issuable upon exercise of this Warrant, no
shares will be issued for less than one-half a share and the Company shall
issue a certificate for the next higher number of whole shares of Common Stock
for any fraction of a share which is one-half or greater.
1.3 Conversion Right. This Warrant may be converted as a whole or in
part from time to time into shares of Common Stock. To convert this Warrant,
the holder hereof or permitted assignees of all rights of the registered owner
hereof shall deliver to the Company, at the Warrant Office designated in
Section 2.1, (a) a written notice in the form of the Subscription Notice
attached as an exhibit hereto, stating therein the election of such holder or
such permitted assignees of the holder to convert this Warrant in the manner
provided in the Subscription Notice and (b) this Warrant. Subject to compliance
with Section 3.1(a)(vii), this Warrant shall be deemed to be converted on the
date of receipt by the Company of the Subscription Notice, accompanied by this
Warrant, as aforesaid, and such date is referred to herein as the "Conversion
Date". Upon such conversion (subject as aforesaid), the Company shall issue and
deliver to such holder (without payment of any Exercise Price) a certificate
for the full number of the Warrant Shares equal to the quotient obtained by
dividing (a) the amount determined by subtracting the aggregate Exercise Price
on the Conversion Date for the Warrant Shares purchasable by such holder
hereunder from the Current Market Value (as hereinafter defined) for such
Warrant Shares on the Conversion Date by (b) the Current Market Value of one
share of Common Stock on the Conversion Date. The Person in whose name the
certificate(s) for Common Stock is to be issued shall be deemed to have become
a holder of record of such Common Stock on the Conversion Date.
ARTICLE II
Warrant Office; Transfer
2.1 Warrant Office. The Company shall maintain an office for certain
purposes specified herein (the "Warrant Office"), which office shall initially
be the Company's office at 10777 Westheimer, Suite 1030, Houston, Texas 77042
and may subsequently be such other
2
<PAGE> 3
office of the Company or of any transfer agent of the Common Stock in the
continental United States as to which written notice has previously been given
to the holder of this Warrant. The Company shall maintain, at the Warrant
Office, a register for the Warrant, in which the Company shall record the name
and address of the person in whose name this Warrant has been issued, as well
as the name and address of each permitted assignee of the rights of the
registered owner hereof.
2.2 Ownership of Warrant. The Company may deem and treat the person in
whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any
notice to the contrary, until presentation of this Warrant for registration of
transfer as provided in this Article II.
2.3 Restrictions on Exercise and Transfer of Warrants. The Company
agrees to maintain at the Warrant Office books for the registration and
transfer of this Warrant. Subject to the restrictions on transfer of Warrants
in this Section 2.3, the Company, from time to time, shall register the
transfer of this Warrant in such books upon surrender of this Warrant at the
Warrant Office properly endorsed or accompanied by appropriate instruments of
transfer and written instructions for transfer satisfactory to the Company.
Upon any such transfer, a new Warrant shall be issued to the transferee and the
surrendered Warrant shall be cancelled by the Company. The Company shall pay
all taxes (other than securities transfer taxes) and all other expenses and
charges payable in connection with the transfer of Warrants pursuant to this
Section 2.3.
(a) Restrictions in General. Notwithstanding any provisions
contained in this Warrant to the contrary, this Warrant shall not be
exercisable or transferable and the related shares of Common Stock issuable
upon exercise of this Warrant (the "Warrant Shares") shall not be transferable
except upon the conditions specified in this Section 2.3, which conditions are
intended, among other things, to insure compliance with the provisions of the
Securities Act in respect of the exercise or transfer of this Warrant or
transfer of such Warrant Shares. The registered holder of this Warrant agrees
that it will neither (i) transfer this Warrant prior to delivery to the Company
of the opinion of counsel referred to in, and to the effect described in,
clause (1) of Section 2.3(b), or until registration hereof under the Securities
Act and any applicable state securities or blue sky laws, (ii) exercise this
Warrant prior to delivery to the Company of the opinion of counsel referred to
in, and to the effect described in, clause (1) of Section 2.3(b), or until
registration of the related Warrant Shares under the Securities Act and any
applicable state securities or blue sky laws have become effective, nor (iii)
transfer such Warrant Shares prior to delivery to the Company of the opinion
of counsel referred to in, and to the effect described in, clause (1) of Section
2.3(b), or until registration of such Warrant Shares under the Securities Act of
any applicable state securities or blue sky laws have become effective.
3
<PAGE> 4
(b) Statement of Intention to Exercise; Opinion of Counsel.
The registered holder of this Warrant, by its acceptance hereof, agrees that
prior to any exercise or transfer of this Warrant or any transfer of the
related Warrant Shares, said holder will deliver to the Company a statement
setting forth either said holder's intention with respect to the retention or
disposition of any Warrant Shares, or the intention of said holder's
prospective transferee with respect to its retention or disposition of this
Warrant or of said Warrant Shares (whichever is involved in such transfer), in
either such case, together with a signed copy of the opinion of said holder's
counsel, or such other counsel as shall be acceptable to the Company, as to the
necessity or non-necessity for registration under the Securities Act and any
applicable state securities or blue sky laws in connection with such exercise
or such transfer. The following provisions shall then apply:
(1) If, in the opinion of said holder's counsel, concurred in
by counsel to the Company, the proposed exercise or transfer of this
Warrant or the proposed transfer of such Warrant Shares may be effected
without registration under the Securities Act and any applicable state
securities or blue sky laws of this Warrant or such Warrant Shares, as
the case may be, then the registered holder of this Warrant shall be
entitled to exercise or transfer this Warrant or to transfer such
Warrant Shares in accordance with the statement of intention delivered
by said holder to the Company.
(2) If, in the opinion of said counsel, concurred in by
counsel to the Company, either the proposed exercise or transfer of
this Warrant or the proposed transfer or such Warrant Shares may not be
effected without registration under the Securities Act and any
applicable state securities or blue sky laws of this Warrant or such
Warrant Shares, as the case may be, the registered holder of this
Warrant shall not be entitled to exercise or transfer this Warrant or
to transfer such Warrant Shares, as the case may be, until such
registration is effected.
2.4 Registration Rights. The registered holder of this Warrant shall
be entitled to all of the rights and benefits of a purchaser under the Purchase
Agreement dated December 19, 1994 (the "Purchaser Agreement"), among the
Company and the purchasers of the Company's 12% Subordinated Notes Due March
31, 1996 and the Warrants (as defined in the Purchase Agreement). The Warrant
Shares shall be considered Restricted Stock under the Purchase Agreement. The
terms of the Purchase Agreement are hereby incorporated herein for all purposes
and shall be considered a part of this Agreement as if they had been fully set
forth herein.
2.5 Acknowledgment of Rights. The Company will, at the time of the
exercise of this Warrant in accordance with the terms hereof, upon the request
of the registered holder hereof, acknowledge in writing its continuing
obligation to afford to such holder any rights (including without limitation,
any right to registration of the Warrant Shares) to which such holder shall
continue to be entitled after such exercise in accordance with the provisions
of this Warrant,
4
<PAGE> 5
provided that if the holder of this Warrant shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.
2.6 Expenses of Delivery of Warrants. The Company shall pay all
expenses, taxes (other than transfer taxes) and other charges payable in
connection with the preparation, issuance and delivery of Warrants and related
Warrant Shares hereunder.
2.7 Compliance with Securities Laws. The holder hereof understands and
agrees that the following restrictions and limitations shall be applicable to
all Warrant Shares and resales or other transfers of such Shares pursuant to
the Securities Act.
(a) The holder hereof agrees that the Warrant Shares shall not be
sold or otherwise transferred unless the Warrant Shares are registered under
the Securities Act and state securities laws or are exempt therefrom.
(b) A legend in substantially the following form has been or will
be placed on the certificate(s) evidencing the Warrant Shares:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 or any state securities
act. The shares have been acquired for investment and may not be sold,
transferred, pledged or hypothecated unless (i) they shall have been
registered under the Securities Act of 1933 and any applicable state
securities act, or (ii) the corporation shall have been furnished with
an opinion of counsel, satisfactory to counsel for the corporation that
registration is not required under any of such acts."
(c) Stop transfer instructions have been or will be imposed with
respect to the Warrant Shares so as to restrict resale or other transfer
thereof, subject to this Section 2.7.
ARTICLE III
Anti-Dilution Provisions
3.1 Adjustment of Exercise Price and Number of Warrant Shares. The
Exercise Price shall be subject to adjustment from time to time as hereinafter
in this Article III provided. Upon each adjustment of the Exercise Price,
except pursuant to 3.1(a)(vi) and 3.1(a)(vii), the registered holder of the
Warrant shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of the Common Stock
(calculated to the nearest whole share pursuant to Section 1.2) obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment
by the number of shares of the Common Stock purchasable
5
<PAGE> 6
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
(a) Exercise Price Adjustments. The Exercise Price shall be
subject to adjustment from time to time as follows:
(i) Issuances of Common Stock. (A) If, at any time, during
the period (the "Note Period") that any principal amount is outstanding on
the Notes (as defined in the Purchase Agreement), the Company shall issue
any Common Stock other than Excluded Stock or Additional Excluded Stock (as
hereinafter defined) without consideration or for a consideration per share
less than the Exercise Price applicable immediately prior to such issuance,
the Exercise Price in effect immediately prior to each such issuance shall
immediately (except as provided below) be reduced to the price equal to the
greater of (I) the result obtained by dividing (aa) the consideration, if
any, received by the Company upon such issuance by (bb) the total number of
shares of Common Stock issued by the Company upon such issuance and (II)
$0.05 or
(B) If, at any time, subsequent to the Note Period, the
Company shall issue any Common Stock other than Excluded Stock (as
hereinafter defined) without consideration or for a consideration per share
less than the Exercise Price applicable immediately prior to such issuance,
the Exercise Price in effect immediately prior to each such issuance shall
immediately (except as provided below) be reduced to the price determined
as follows: by dividing (A) an amount equal to the sum of (x) the number of
shares of Common Stock outstanding immediately prior to such issuance
multiplied by the Exercise Price immediately prior to such issuance and (y)
the consideration, if any, received by the Company upon such issuance, by
(B) the total number of shares of Common Stock outstanding immediately
after such issuance;
; provided, however, that if the number of shares of Common Stock (other than
Excluded Stock) issued or reserved or agreed to be reserved for issuance by the
Company should at any time exceed 5% of the Company's issued and outstanding
shares of Common Stock none of such shares (whether or not previously issued or
reserved for issuance by the Company) shall be considered Additional Excluded
Stock for purposes of determining the Exercise Price adjustment in Section
3.1(a)(i)(A) and the Exercise Price shall be readjusted accordingly in
accordance with the provisions of Section 3.1(a)(i)(A) using the lowest per
share price of any Common Stock so issued or reserved or agreed to be reserved
for issuance.
For the purpose of any adjustment of the Exercise Price pursuant to this
clause (i) of this Section 3.1(a), the following provisions shall be applicable:
(A) Cash. In the case of the issuance of Common Stock for
cash, the amount of the consideration received by the Company shall be
deemed to be the
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<PAGE> 7
amount of the cash proceeds received by the Company for such Common
Stock before deducting therefrom any reasonable discounts, commissions,
taxes or other expenses allowed, paid or incurred by the Company for any
underwriting or otherwise in connection with the issuance and sale
thereof.
(B) Consideration Other Than Cash. In the case of the issuance
of Common Stock (otherwise than upon the conversion of shares of capital
stock or other securities of the Company) for a consideration in whole
or in part other than cash, including securities acquired in exchange
therefor (other than securities by their terms so exchangeable), the
consideration other than cash shall be deemed to be the fair value
thereof as determined by the Board of Directors in good faith,
irrespective of any accounting treatment.
(ii) Options and Convertible Securities, etc. In case, at any time,
the Company shall issue any (i) options, warrants or other rights to purchase
or acquire Common Stock other than Excluded Stock (whether or not at the time
exercisable), (ii) securities by their terms convertible into or exchangeable
for Common Stock (whether or not at the time so convertible or exercisable) or
(iii) options, warrants or rights to purchase such convertible or exchangeable
securities (whether or not at the time exercisable), and such securities so
issued or rights granted in the cases of (i), (ii) or (iii) are not Excluded
Stock, the Exercise Price in effect immediately prior to each such issuance
shall immediately (except as provided below) be reduced to the price determined
in accordance with Section 3.1(a)(i) and the following:
(1) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options, warrants or other rights to
purchase or acquire Common Stock shall be deemed to have been issued at
the time such options, warrants or rights were issued and for a
consideration equal to the consideration (determined in the manner
provided in subclauses (A) and (B) above), if any, received by the
Company upon the issuance of such options, warrants or rights plus the
minimum purchase price provided in such options, warrants or rights for
the Common Stock covered thereby;
(2) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such convertible
or exchangeable securities, or upon the exercise of options, warrants or
other rights to purchase or acquire such convertible or exchangeable
securities and the subsequent conversion or exchange thereof, shall be
deemed to have been issued at the time such securities were issued or
such options, warrants 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, warrants or rights (excluding any cash
received on account of accrued interest or accrued
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<PAGE> 8
dividends), plus the additional consideration, if any, to be received by
the Company upon the conversion or exchange of such securities and the
exercise of any related options, warrants or rights (the consideration
in each case to be determined in the manner provided in subclauses (A)
and (B) above);
(3) on any change in the number of shares of Common Stock
deliverable upon exercise of any such options, warrants or rights or
conversion or of exchange for such convertible or exchangeable
securities or any change in the consideration to be received by the
Company upon such exercise, conversion or exchange, including, but not
limited to, a change resulting from the antidilution provisions thereof,
the Exercise Price as then in effect shall forthwith be readjusted to
such Exercise Price as would have been obtained had an adjustment been
made upon the issuance of such options, warrants or rights not exercised
prior to such change, or securities not converted or exchanged prior to
such change, on the basis of such change;
(4) on the expiration or cancellation of any such options,
warrants or rights, or the termination of the right to convert or
exchange such convertible or exchangeable securities, if the Exercise
Price shall have been adjusted upon the issuance thereof, the Exercise
Price shall forthwith be readjusted to such Exercise Price as would have
been obtained had an adjustment been made upon the issuance of such
options, warrants, rights or securities on the basis of the issuance of
only the number of shares of Common Stock actually issued upon the
exercise of such options, warrants or rights, or upon the conversion or
exchange of such securities; and
(5) if the Exercise Price shall have been adjusted upon the
issuance of any such options, warrants, rights or convertible or
exchangeable securities, no further adjustment of the Exercise Price
shall be made for the actual issuance of Common Stock upon the exercise,
conversion or exchange thereof;
provided, however, that no increase in the initial Exercise Price shall be made
pursuant to this Section 3.1(a)(ii).
(iii) Excluded Stock. "Excluded Stock" shall mean shares of Common
Stock issued or reserved or agreed to be reserved for issuance by the Company
(A) under options, warrants, or other securities convertible or exercisable
into Common Stock (whether pursuant to a stock option plan or otherwise),
provided the same are issued to officers, directors or employees of the Company
and provided that the aggregate number of shares of Common Stock issued or
issuable under this clause (A) shall not exceed 10% of the Company's issued and
outstanding shares of Common Stock, (B) pursuant to antidilution provisions or
rights with respect to any other presently issued and outstanding
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<PAGE> 9
securities of the Company convertible into, exchangeable for, or giving the
holder thereof the option or right to purchase shares of Common Stock, or
(C) pursuant to a stock dividend, subdivision or split-up covered by
clause (iv) of this Section 3.1(a). "Additional Excluded Stock" shall mean
shares of Common Stock (other Excluded Stock) issued or reserved or agreed
to be reserved for issuance by the Company whether directly or under options,
warrants, or other securities convertible or exercisable into Common Stock,
provided that the aggregate number of shares of Common Stock issued or
issuable under such options, warrants, or other convertible securities shall
not exceed 5% of the Company's issued and outstanding shares of Common Stock.
(iv) Stock Dividends. If the number of shares of Common Stock
outstanding at any time after the date of this Warrant is increased by a
stock dividend payable in shares of Common Stock or by a subdivision or
split-up of shares of Common Stock, then immediately after the record date
fixed for the determination of holders of Common Stock entitled to receive
such stock dividend or the effective date of such subdivision or
split-up, as the case may be, the Exercise Price shall be appropriately
adjusted so that the adjusted Exercise Price shall bear the same relation to
the Exercise Price in effect immediately prior to such adjustment as the
total number of shares of Common Stock outstanding immediately prior to such
action shall bear to the total number of shares of Common Stock outstanding
immediately after such action.
(v) Combination of Stock. If the number of shares of Common
Stock outstanding at any time after the date of issuance of this Warrant
is decreased by a combination of the outstanding shares of Common Stock,
then, immediately after the effective date of such combination, the Exercise
Price shall be appropriately adjusted so that the adjusted Exercise Price
shall bear the same relation to the Exercise Price in effect immediately prior
to such adjustment as the total number of shares of Common Stock outstanding
immediately prior to such action shall bear to the total number of shares of
Common Stock outstanding immediately after such action.
(vi) Reorganizations, etc. In case of any capital reorganization
of the Company, or of any reclassification of the Common Stock, or in case
of the consolidation of the Company with or the merger of the Company with or
into any other Person or of the sale, lease or other transfer of all or
substantially all of the assets of the Company to any other Person, this Warrant
shall, after such capital reorganization, reclassification, consolidation,
merger, sale, lease or other transfer, be exercisable for the number of shares
of stock or other securities or property to which the Common Stock issuable
(at the time of such capital reorganization, reclassification, consolidation,
merger, sale, lease or other transfer) upon exercise of this Warrant would
have been entitled to receive upon such capital reorganization,
reclassification, consolidation, merger, sale, lease or other transfer if such
exercise had taken place; and in any such case, if necessary, the provisions
set forth herein with respect to the rights and interests
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<PAGE> 10
thereafter of the holder of this Warrant shall be appropriately adjusted so as
to be applicable, as nearly as may reasonably be, to any shares of stock or
other securities or property thereafter deliverable on the exercise of this
Warrant. In case of any distribution by the Company of any security (including
rights or warrants to subscribe for any such securities but excluding Common
Stock and any securities referred to in Section 3.1(a)(ii) of the Company,
evidences of its indebtedness, cash or other assets to all of the holders of
its Common Stock, then in each such case the Exercise Price in effect
thereafter shall be determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction the numerator of which shall be the
total number of outstanding shares of Common Stock multiplied by the Current
Market Price on the record date mentioned below, less the fair market value
(as determined in good faith by the Board of Directors) of the securities,
evidences of its indebtedness, cash or other assets distributed by the Company
and the denominator of which shall be the total number of outstanding shares of
Common Stock multiplied by the Current Market Price; such adjustment shall
become effective as of the record date for the determination of stockholders
entitled to receive such distribution. The subdivision or combination of shares
of Common Stock issuable upon exercise of this Warrant at any time outstanding
into a greater or lesser number of shares of Common Stock (whether with or
without par value) shall not be deemed to be a reclassification of the Common
Stock of the Company for the purposes of this clause (vi).
(vii) Rounding of Calculations; Minimum Adjustment. All calculations
under this Section 3.1(a) shall be made to the nearest cent or to the nearest
whole share (as provided in Section 1.2) share, as the case may be. Any
provision of this Section 3.1 to the contrary notwithstanding, no adjustment in
the Exercise Price shall be made if the amount of such adjustment would be less
than $.05, but any such amount shall be carried forward and an adjustment with
respect thereto shall be made at the time of and together with any subsequent
adjustment which, together with such amount and any other amount or amounts so
carried forward, shall aggregate $.05 or more. In case the Company shall at any
time issue shares of Common Stock in any transaction described in Section
3.1(a)(iv) or 3.1(a)(v), such amount of $.05 per share (as theretofore
increased or decreased, if such amount shall have been adjusted in accordance
with the provisions of this Section 3.1(a)(vii) shall forthwith be
proportionately increased in the case of a transaction described in Section
3.1(a)(v) or decreased in the case of a transaction described in Section
3.1(a)(iv) so as appropriately to reflect such transaction.
(viii) Timing of Issuance of Additional Common Stock Upon Certain
Adjustment. In any case in which the provisions of this Section 3.1(a) shall
require that an adjustment shall become effective immediately after a record
date for an event, the Company may defer until the occurrence of such event
issuing to the holder of this Warrant after such record date and before the
occurrence of such event the additional shares of Common Stock or other
property issuable or deliverable upon exercise by
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<PAGE> 11
reason of the adjustment required by such event over and above the
shares of Common Stock or other property issuable or deliverable upon
such exercise before giving effect to such adjustment; provided,
however, that the Company upon request shall deliver to such holder a
due bill or other appropriate instrument evidencing such holder's right
to receive such additional shares or other property, and such cash, upon
the occurrence of the event requiring such adjustment.
(b) Current Market Price. The Current Market Price shall
mean, as of any date, 10% of the sum of the average, for each of the 10
consecutive Trading Days immediately prior to such date, of either: (i) the
high and low sales prices of the Common Stock on such Trading Day as reported
on the composite tape for the principal national securities exchange on which
the Common Stock may then be listed, or (ii) if the Common Stock shall not be
so listed on any such Trading Day, the high and low sales prices of Common
Stock in the over-the-counter market as reported by the National Association of
Securities Dealers Automated Quotations System ("NASDAQ") for National Market
Issues, or (iii) if the Common Shares shall not be included in the NASDAQ
National Market System on any such Trading Day, the representative bid and
asked prices at the end of such Trading Day in such market as reported by
NASDAQ, or 1(iv) if there be no such representative prices reported by NASDAQ,
the lowest bid and highest asked prices at the end of such Trading Day in the
over-the-counter market as reported by the National Quotation Bureau, Inc., or
any successor organization. For purposes of determining Current Market Price,
the term "Trading Day" shall mean a day on which an amount greater than zero
can be calculated with respect to the Common Stock under any one or more of the
foregoing categories (i), (ii), (iii) and (iv), and the "end" thereof, for the
purposes of categories (iii) and (iv), shall mean the exact time at which
trading shall end on the New York Stock Exchange. If the Current Market Price
cannot be determined under any of the foregoing methods, Current Market Price
shall mean the fair value per share of Common Stock on such date determined by
the Board of Directors in good faith, irrespective of any accounting treatment,
upon a review of relevant factors.
(c) Statement Regarding Adjustments. Whenever the Exercise
Price shall be adjusted as provided in Section 3.1(a), and upon each change in
the number of shares of the Common Stock issuable upon exercise of this
Warrant, the Company shall forthwith file, at the office of any transfer agent
for this Warrant and at the principal office of the Company, a statement
showing in detail the facts requiring such adjustment and the Exercise Price
and new number of shares issuable that shall be in effect after such
adjustment, and the Company shall also cause a copy of such statement to be
given to the holder of this Warrant. Each such statement shall be signed by the
Company's chief financial or accounting officer. Where appropriate, such copy
may be given in advance and may be included as part of a notice required to be
mailed under the provisions of Section 3.1(d).
(d) Notice to Holders. In the event the Company shall
propose to take any action of the type described in clause (i) or (ii) (but
only if the action of the type described in
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<PAGE> 12
such clause would result in an adjustment in the Exercise Price), (iv), (v) or
(vi) of Section 3.19(a), the Company shall give notice to the holder of this
Warrant, in the manner set forth in Section 6.6, which notice shall specify the
record date, if any, with respect to any such action and the approximate date
on which such action is to take place. Such notice shall also set forth such
facts with respect thereto as shall be reasonably necessary to indicate the
effect of such action (to the extent such effect may be known at the date of
such notice) on the Exercise Price and the number, kind or class of shares or
other securities or property which shall be deliverable upon exercise of this
Warrant. In the case of any action which would require the fixing of a record
date, such notice shall be given at least 10 days prior to the date so fixed,
and in case of all other action, such notice shall be given at least 15 days
prior to the taking of such proposed action. Failure to give such notice, or
any defect therein, shall not affect the legality or validity of any such
action.
(e) Treasury Stock. For the purposes of this Section 3.1,
the sale or other disposition of any Common Stock of the Company theretofore
held in its treasury shall be deemed to be an issuance thereof.
3.2 Costs. The Company shall pay all documentary, stamp, transfer
or other transactional taxes attributable to the issuance or delivery of shares
of Common Stock of the Company upon exercise of this Warrant; provided,
however, that the Company shall not be required to pay any taxes which may be
payable in respect of any transfer involved in the issuance or delivery of any
certificate for such shares in a name other than that of the holder of this
Warrant in respect of which such shares are being issued.
3.3 Reservations of Shares. The Company shall reserve at all times
so long as this Warrant remains outstanding, free from preemptive rights, out
of its treasury Common Stock or its authorized but unissued shares of Common
Stock, or both, solely for the purpose of effecting the exercise of this
Warrant, sufficient shares of Common Stock to provide for the exercise hereof.
3.4 Valid Issuance. All shares of Common Stock which may be issued
upon exercise of this Warrant will upon issuance by the Company be duly and
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issuance thereof attributable to any act or
omission by the Company, and the Company shall take no action which will cause
a contrary result (including without limitation, any action which would cause
the Exercise Price to be less than the par value, if any, of the Common Stock).
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ARTICLE IV
Terms Defined
As used in this Warrant, unless the context otherwise requires, the
following terms have the respective meanings set forth below or in the
Section indicated:
Board of Directors -- the Board of Directors of the Company.
Common Stock -- the Company's authorized Common Stock, par value
$.05 per share.
Company -- Billy Blues Food Corporation, a Texas corporation, and
any other corporation assuming or required to assume the obligations
undertaken in connection with this Warrant.
Current Market Price -- Section 3.1(b).
Excluded Stock -- Section 3.1(a)(iii).
Outstanding -- when used with reference to Common Stock at any date,
all issued shares of Common Stock (including, but without duplication, shares
deemed issued pursuant to Article III) at such date, except shares then held
in the treasury of the Company.
NASDAQ -- Section 3(b).
Person -- any individual, corporation, partnership, trust, organization,
association or other entity or individual.
Securities Act -- the Securities Act of 1933 and the rules and
regulations thereunder, all as the same shall be in effect at the time.
Trading Day -- Section 3.1(b).
Warrant -- this Warrant and any successor or replacement Warrant
delivered in accordance with Section 2.3 or 6.8.
Warrant Office -- Section 2.1.
Warrant Shares -- shall mean the shares of Common Stock purchased or
purchasable by the registered holder of this Warrant or the permitted assignees
of such holder upon exercise thereof pursuant to Article I hereof.
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ARTICLE V
Covenant of the Company
The Company covenants and agrees that this Warrant shall be binding
upon any corporation succeeding to the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets.
ARTICLE VI
Miscellaneous
6.1 Entire Agreement. This Warrant contains the entire agreement
between the holder hereof and the Company with respect to the shares which he
can purchase upon exercise hereof and the related transactions and supersedes
all prior arrangements or understanding with respect thereto.
6.2 Governing Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of Texas.
6.3 Waiver and Amendment. Any term or provision of this Warrant may
be waived at any time by the party which is entitled to the benefits thereof
and any term or provision of this Warrant may be amended or supplemented at any
time by agreement of the holder hereof and the Company, except that any waiver
of any term or condition, or any amendment or supplementation, of this Warrant
must be in writing. A waiver of any breach or failure to enforce any of the
terms or conditions of this Warrant shall not in any way effect, limit or waive
a party's rights hereunder at any time to enforce strict compliance thereafter
with every term or condition of this Warrant.
6.4 Illegality. In the event that any one or more of the provisions
contained in this Warrant shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of this Warrant shall not, at the election of the party for whom the
benefit of the provision exists, be in any way impaired.
6.5 Copy of Warrant. A copy of this Warrant shall be filed among
the records of the Company.
6.6 Notice. Any notice or other document required or permitted to
be given or delivered to the holder hereof shall be delivered at, or sent by
certified or registered mail to such holder at, the last address shown on the
books of the Company maintained at the Warrant Office
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<PAGE> 15
for the registration of this Warrant or at any more recent address of which the
holder hereof shall have notified the Company in writing. Any notice or other
document required or permitted to be given or delivered to the Company, other
than such notice or documents required to be delivered to the Warrant Office,
shall be delivered at, or sent by certified or registered mail to, the office
of the Company at 10777 Westheimer, Suite 1030, Houston, Texas 77042 or such
other address within the continental United States of America as shall have
been furnished by the Company to the holders of this Warrant.
6.7 Limitation of Liability; Not Stockholders. No provision of this
Warrant shall be construed as conferring upon the holder hereof the right to
vote, consent, receive dividends or receive notices (other than as herein
expressly provided) in respect of meetings of stockholders for the election of
directors of the Company or any other right whatsoever as a stockholder of the
Company. No provision hereof, in the absence of affirmative action by the
holder hereof to purchase shares of Common Stock, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the purchase price of any shares of Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
6.8 Exchange, Loss, Destruction, etc. of Warrant. Upon receipt of
evidence satisfactory to the Company of the loss, theft, mutilation, or
destruction of this Warrant, and in the case of any such loss, theft or
destruction upon delivery of a bond of indemnity in such form and amount as
shall be reasonably satisfactory to the Company, or in the event of such
mutilation upon surrender and cancellation of this Warrant, the Company will
make and deliver a new Warrant of like tenor, in lieu of such lost, stolen,
destroyed or mutilated Warrant. Any Warrant issued under the provisions of this
Section 6.8 in lieu of any Warrant alleged to be lost, destroyed or stolen, or
in lieu of any mutilated Warrant, shall constitute an original contractual
obligation on the part of the Company. This Warrant shall be promptly cancelled
by the Company upon the surrender hereof in connection with any exchange or
replacement. The Company shall pay all taxes (other than securities transfer
taxes) and all other expenses and charges payable in connection with the
preparation, execution and delivery of Warrants pursuant to this Section 6.8.
6.9 Headings. The Article and Section and other headings herein are
for convenience only and are not a part of this Warrant and shall not affect
the interpretation thereof.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name.
Dated: December __, 1994
BILLY BLUES FOOD CORPORATION
By:
---------------------------
Ghulam M. Bombaywala,
Chairman of the Board and Chief
Executive Officer
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SUBSCRIPTION NOTICE
The undersigned, the holder of the foregoing Warrant, hereby elects to
exercise purchase rights represented by said Warrant for, and to purchase
thereunder _____________________________ shares of the Common Stock covered by
said Warrant and
(Choose one option)
[ ] (i) herewith makes payment in full therefor pursuant to Section
1.1 of such Warrant, or
[ ] (ii) elects the Conversion Right as set forth in Section 1.3 of
the Warrant and requests (a) that certificates for such shares (and any
securities or other property issuable upon such exercise) be issued in the name
of, and delivered to, _______________________ , _______________________________
and (b) if such shares shall not include all of the shares issuable as provided
in said Warrant, that a new Warrant of like tenor and date for the balance of
the shares issuable thereunder be delivered to the undersigned.
------------------------
Dated: , 19
------------- ----
ASSIGNMENT
For value received, _________________________________, hereby sells,
assigns and transfers unto ___________________________________ the within
Warrant, together with all right, title and interest therein and does hereby
irrevocably constitute and appoint __________________________________________
attorney, to transfer said Warrant on the books of the Company, with full power
of substitution.
------------------------
Dated: , 19
------------- ----
17
