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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. 3)*
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)
Joan M. Payton, General Counsel, 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)
March 27, 1998
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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
14,058,889 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 14,058,889 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
14,058,889 shares of common stock including warrants to
acquire an additional 272,222 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)
64% of the beneficially owned shares, which includes warrants
to acquire 272,222 additional shares of common stock.
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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
Chief Executive Officer, President, Suite 350
Chief Operating Officer and Secretary 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 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"), which could be converted to one share of Watermarc's Common Stock at
a later date when Watermarc had a sufficient number of authorized shares. 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.
On June 1, 1997 Mr. Bombaywala and Watermarc entered into a Subordinated Note
Conversion Agreement whereby Mr. Bombaywala forgave a $500,000.00 Subordinated
Note owed to him by Watermarc and due on July 31, 1997. In exchange for
forgiving the Subordinated Note Mr. Bombaywala received a Promissory Note from
Watermarc in the principal amount of $500,000.00 and Warrants to purchase
50,000 shares of Watermarc's Common Stock.
On January 23, 1998 Watermarc's shareholders voted to increase the company's
authorized shares of Common Stock to 100,000,000. On February 12, 1998
Watermarc's Restated Articles of Incorporation were amended to increase the
authorized shares of Common Stock to 100,000,000. On March 27, 1998 Mr.
Bombaywala was issued 7,500,000 shares of Watermarc's Common Stock.
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 a total of 272,222 shares. In
addition, Mr. Bombaywala received the Rights to acquire, and on March 27, 1998
did 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 7,500,000 shares of Common Stock 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;
(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 14,058,889 shares which includes Warrants to acquire
an additional 272,222 shares of Common Stock of Watermarc. Based on Watermarc's
issuance of 7,500,000 shares of Common Stock to Mr. Bombaywala on March 27, 1998
and Watermarc's form 10-Q filed with the Securities and Exchange Commission on
February 17, 1998, in which Watermarc disclosed that as of December 28, 1997, it
had 14,163,230 issued and outstanding shares of Common Stock, to the best of Mr.
Bombaywala's knowledge at this time, Mr. Bombaywala's ownership percentage is
64% of the beneficially owned shares of Common Stock of Watermarc, which
includes the 272,222 Warrants.
(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 Warrant Agreements (attached hereto as Exhibit 99.1 and 99.2)
referred to in Item 3 above whereby Mr. Bombaywala received Warrants to acquire
272,222 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: April 2, 1998 /s/ Ghulam M. Bombaywala
------------------------------
Ghulam M. Bombaywala
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EXHIBIT INDEX
99.1 -- Warrant to Purchase Common Stock of Billy Blues Food Corporation.
99.2 -- Warrant to Purchase Common Stock of Watermarc Food Management Co.
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EXHIBIT 99.1
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,
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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
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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.
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(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,
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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
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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
8
<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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<PAGE> 13
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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<PAGE> 17
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
<PAGE> 1
EXHIBIT 99.2
WARRANT
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 THE APPLICABLE ACTS, OR AN OPINION OF COUNSEL
SATISFACTORY TO WATERMARC FOOD MANAGEMENT CO. TO THE EFFECT THAT SUCH
REGISTRATIONS ARE NOT REQUIRED. THIS WARRANT IS SUBJECT TO OTHER LIMITATIONS ON
TRANSFER.
WARRANT
to Purchase Common Stock of
WATERMARC FOOD MANAGEMENT CO.
Expiring on June 30, 2002
THIS IS TO CERTIFY THAT, for value received Ghulan Bombaywala, or
permitted assigns, is entitled to purchase, from the date hereof, from
WATERMARC FOOD MANAGEMENT CO., 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 $1.50 (the "Exercise Price"), Fifty Thousand shares
of duly authorized, validly issued, fully paid and nonaccessable 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 are subject to adjustment in accordance with Article III hereof.
This Warrant shall expire at 5:00 p.m., C.S.T., June 30, 2002.
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 the date hereof until June 30, 2002. 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. This Warrant shall be deemed to be exercised on the date of
receipt by the Company of the Subscription Notice, 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.
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.
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<PAGE> 2
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 11111 Wilcrest Green, Suite 350, Houston, Texas
77042 and may subsequently be such other 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 herein 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 canceled 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 Warrant 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 (l) 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, not (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 (l) of Section 2.3(b), or until registration of such
Warrant Shares under the Securities Act and any applicable state securities or
blue sky laws have become effective.
(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:
2
<PAGE> 3
(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 of 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 June 1, 1997 (the "Purchase Agreement"), among the Company and
the purchasers of the Company's 11% Subordinated Notes due June 30, 2002 (the
"Notes") 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. The holder acknowledges that the Warrant is being issued in
connection with the purchase by the holder of the Notes referred to in the
Purchase Agreement entered into pursuant to, and which constitutes part of, the
Company's offering of Notes and Warrants pursuant to the Company's Confidential
Private Placement Memorandum dated June 1, 1997 (the "Memorandum"). The terms,
conditions, restrictions, risk factors and other information contained in the
Memorandum are incorporated by reference into and constitute a part of the
Purchase Agreement, the Notes and this Warrant.
2.5 Acknowledgement 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, 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
<PAGE> 4
opinion of counsel, satisfactory to counsel for the corporation, that
registration is not required under any 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
Warrant Adjustment Provisions
3.1 Adjustment of Warrant Shares. The Number of Warrant shares
purchasable upon exercise of this Warrant may be adjusted from time to time as
set forth below.
(a) If the Company at any time pays to the holders of its
Common Stock a dividend in Common Stock, the number of Warrant Shares
issuable upon the exercise of this Warrant shall be proportionally
increased, effective at the close of business on the record date for
determination of the holders of the Common Stock entitled to the dividend.
(b) If the Company at any time subdivides or combines in a larger
or smaller number of shares its outstanding shares of Common Stock, then
the number of shares of Common Stock issuable upon the exercise of this
Warrant shall be proportionally increased in the case of a subdivision and
decreased in the case of combination, effective in either case at the close
of business on the date that the subdivision or combination becomes
effective.
(c) In case of any reclassification of the Common Stock, any
consolidation of the Company with, or merger of the Company into, any other
entity, any merger of any entity into the Company (other than a merger
which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock), any sales or transfer
of all or substantially all of the assets of the Company, or any compulsory
share exchange whereby the Common Stock is converted into other securities,
cash or other property, then provisions shall be made such that the holders
of this Warrant shall have the right thereafter, during the period that
this Warrant shall be exercisable, to exercise this Warrant and receive the
kind and amount of securities, cash and other property receivable upon such
reclassification, consolidation, merger, sale, transfer or share exchange
by a holder of the number of shares of Common Stock issuable upon exercise
of this Warrant immediately prior to such reclassification, consolidation,
merger, sale, transfer or share exchange. In addition to the adjustments
provided for above to the number of Warrant Shares purchasable hereunder
upon exercise of the Warrant in certain circumstances, the Company may, in
its sole discretion, provide for further adjustments to the number of
Warrant Shares purchasable hereunder and/or the Exercise Price thereof
based on additional or other facts and circumstances where the Company
determines that such an adjustment would be fair and equitable to the
holders of the Warrants.
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. Subject to an increase in the Company's
authorized or available shares of Common Stock for future issuance, 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
<PAGE> 5
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).
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 - Watermarc Food Management Co., a Texas corporation, and any
other corporation assuming or required to assume the obligations undertaken in
connection with this Warrant.
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.
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.
5
<PAGE> 6
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 of substantially all of the Company's assets.
ARTICLE VI
Miscellaneous
6.1 Entire Agreement. This Warrant, the Purchase Agreement and the
Memorandum collectively contain and describe 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 of failure to enforce any of the
terms or conditions of this Warrant shall not in any way affect, 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 provisions 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 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
11111 Wilcrest Green, Suite 350, 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 holders 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
<PAGE> 7
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 canceled
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.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name.
Dated: June 1, 1997
WATERMARC FOOD MANAGEMENT CO.
By: /s/ GHULAM M. BOMBAYWAIA
--------------------------
Ghulam M. Bombaywaia
Chairman of the Board and
Chief Executive Officer
7
<PAGE> 8
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 payments in full therefore 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
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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
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8
