SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 13, 1996
GRILL CONCEPTS, INC.
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(Exact name of registrant as specified in its charter)
0-23226
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(Commission File Number)
Delaware 13-3319172
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation)
11661 San Vicente Blvd., Suite 404, Los Angeles, California 90049
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 820-5559
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(Former name or former address, if changed since last report)
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ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S.
(a) On December 13, 1996, Grill Concepts, Inc. (the "Company") sold 65
shares of Series B Convertible Preferred Stock at $10,000 per share.
(b) The securities were sold to an offshore institutional investor.
(c) The aggregate sales price of such securities was $650,000. A six
percent (6%) commission was paid with respect to such sale in addition to a
$30,000 expense allowance and a three year warrant exercisable to acquire up to
46,222 shares at $3.00 per share.
(d) The securities were offered pursuant to Regulation S. The offer
was directed exclusively to non-U.S. persons based on representations from the
investor that such investor would comply with the provisions of Regulation S.
The securities will be held in escrow pending completion of the applicable
restricted period.
(e) The Series B Preferred Shares are convertible into common stock of
the Company at a conversion price equal to the lower of (i) $2.50 per share, or
(ii) the average closing bid price of the Company's common stock over the five
trading day period preceding conversion multiplied by the following percentage
when converted during the period after the issuance of the preferred shares
indicated: 61 to 90 days - 85.0%; 91 to 130 days - 83.5%; 131 to 180 days -
82.0%; and, 181 or more days - 80.0%. Conversions of the preferred shares may
not exceed 1/3 of the original amount issued commencing after the 60th day
following the date of issuance, 2/3 of the original amount commencing after the
75th day following issuance and all of the preferred shares may be converted
after the 90th day following issuance.
Any conversions for which the conversion price is less than $1.00 per
share shall be subject to the right of the Company to redeem the preferred
shares at $10,600 per share if notice of conversion is submitted prior to the
90th day following the issuance of the preferred shares and at $11,000 per
share where notice of conversion is submitted on or after 90 days following
issuance.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
Exhibit No. Description
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3.1 Certificate of Designation fixing terms of Series B
Preferred Stock
4.1 Warrant Agreement dated December 13, 1996
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GRILL CONCEPTS, INC.
(REGISTRANT)
Date: December 19, 1996 By: /s/ Robert Spivak
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Robert Spivak, President
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CERTIFICATE OF DESIGNATIONS, VOTING POWERS,
PREFERENCES AND RIGHTS
OF
THE SERIES OF PREFERRED STOCK
OF
GRILL CONCEPTS, INC.
TO BE DESIGNATED
SERIES B CONVERTIBLE PREFERRED STOCK
Pursuant to Section 151(g) of the Delaware General Corporation Law, I,
Robert Spivak, President of Grill Concepts, Inc., a Delaware corporation (the
"Corporation"), hereby certify that the following is a true and correct copy of
a resolution duly adopted by the unanimous written consent of the Corporation's
Board of Directors dated as of December 4, 1996, and that said resolution has
not been amended or rescinded and is in full force and effect at the date
hereof:
RESOLVED, that pursuant to the authority expressly granted and vested in
the Board of Directors of the Corporation by the Corporation's Certificate of
Incorporation, as amended to date, the Board of Directors hereby creates a
series of Preferred Stock of the Corporation, par value $0.001 per share, to be
designated "Series B Convertible Preferred Stock" and to consist of sixty-five
(65) shares, and hereby fixes the voting powers, designations, preferences and
relative, participating, optional or other rights and the qualifications,
limitations or restrictions thereon, of the Series B Preferred Stock (the
"Series B Preferred Stock"), as follows:
1. VOTING RIGHTS. The holders of Series B Preferred Stock will not have
any voting rights except as set forth below or as otherwise from time to
time required by law. The affirmative vote or consent of the holders of
at least a majority of the outstanding shares of Series B Preferred
Stock, voting separately as a class, will be required for an amendment,
alteration or repeal of the Corporation's Certificate of Incorporation
(including any certificate of designation of preferences) if, and only
if, the amendment, alteration or repeal adversely affects the powers,
preferences or special rights of the Series B Preferred Stock.
To the extent that under Delaware law the vote of the holders of Series
B Preferred Stock, voting separately as a class, is required to
authorize a given action of the Corporation, the affirmative vote or
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consent of the holders of at least a majority of the outstanding shares
of Series B Preferred Stock shall constitute the approval of such action
by the class. To the extent that under Delaware law the holders of
Series B Preferred Stock are entitled to vote on a matter with holders
of Common Stock, voting together as one class, each share of Series B
Preferred Stock shall be entitled to a number of votes equal to the
number of shares of Common Stock into which it is then convertible using
the record date for the taking of such vote of stockholders as the date
as of which the Conversion Price is calculated. Holders of Series B
Preferred Stock shall be entitled to notice of all shareholders meetings
or written consents with respect to which they would be entitled to
vote, which notice would be provided pursuant to the Corporation's by-
laws and applicable statutes.
2. Liquidation, Dissolution or Reorganization. Subject to the prior rights
of the Corporation's creditors and holders of securities senior to the
Series B Preferred Stock in respect of distributions upon liquidation,
dissolution, winding-up or reorganization of the Corporation, in the
event of the voluntary or involuntary liquidation, dissolution, winding-
up or reorganization of the Corporation, the holders of Series B
Preferred Stock shall be entitled to receive $10,000 per share (the
"Liquidation Preference"), together with accrued and unpaid dividends
payable thereon to the date fixed for payment of such distribution, if
any, all of which shall be paid in cash, before any distribution is made
to holders of any Junior Stock. If, upon any such liquidation,
dissolution, winding-up or reorganization of the Corporation, the assets
distributable among the holders of Series B Preferred Stock (and any
series of preferred stock ranking in parity with the Series B Preferred
Stock in respect of distributions upon liquidation, dissolution,
winding-up or reorganization of the Corporation) shall be insufficient
to permit the payment in full to such holders of the preferential amount
payable to such holders determined as aforesaid, then the holders of
Series B Preferred Stock will share ratably in any distribution of the
Corporation's assets in proportion to the respective preferential
amounts that would have been payable if such assets were sufficient to
permit payment in full of all such amounts. After payment of the full
amount of the Liquidation Preference to which they are entitled, the
holders of Series B Preferred Stock will not be entitled to any further
participation in any distribution of assets by the Corporation. Under
this Section 2, a distribution of assets in any liquidation,
dissolution, winding-up or reorganization shall include (a) any
consolidation or merger of the Corporation with or into any other
corporation in which the Corporation is not the surviving corporation,
(b) a sale or other disposition of all or substantially all of the
Corporation's assets in consideration for cash and/or the issuance of
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equity securities of another corporation, or (c) a Change of Control of
the Corporation.
3. CONVERSION RIGHTS.
(a) CONVERSION. The Series B Preferred Stock shall be convertible at
the option of the holder thereof into fully paid and non-assessable
unlegended shares (rounded up to the nearest full share) of Common
Stock of the Corporation (the "Conversion Shares") at a conversion
price (the "Conversion Price") equal to the lower of (x) $2.50 per
share of Common Stock or (y) (i) the average closing bid price of
the Corporation's Common Stock as calculated over the five (5)
trading-day period ending on the day prior to the date of a written
notice from a holder of the Series B Preferred Stock of such
conversion multiplied by (ii) the following percentage when
converted during the periods after the date of first issuance of
the Series B Preferred Stock (the "Issue Date") indicated:
61- 90 days................................85.0%
91-130 days................................83.5%
131-180 days................................82.0%
181 or more days............................80.0%
provided, however, that the Corporation shall be required to
convert no more than one-third of the aggregate stated value of
such holder's Series B Preferred Stock as of the Issue Date (the
"Original Amount") until after the sixtieth (60th) calendar day
following the Issue Date, two-thirds of the Original Amount after
the seventy-fifth (75th) calendar day following the Issue Date, and
all Series B Preferred Stock after the ninetieth (90th) calendar
day following the Issue Date.
The number of Conversion Shares issuable upon conversion of each
share of Series B Preferred Stock shall be determined by dividing
$10,000 by the Conversion Price in effect on the Conversion Date,
as defined below. An individual share of Series B Preferred Stock
may only be permitted to convert in its entirety. Partial
conversion of an individual share of Series B Preferred Stock is
not permitted.
(b) MECHANICS OF CONVERSION. The holder of any shares of Series B
Preferred Stock may exercise the conversion right as to any part
thereof by delivering via facsimile to the Corporation, at the
office of the Corporation at 11661 San Vincente Boulevard, Suite
404, Los Angeles, California 90049, a conversion notice (the
"Conversion Notice") in the form attached to the subscription
agreements pursuant to which the Series B Preferred Stock is issued
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(the "Subscription Agreements"). The Conversion Notice shall state
(i) that the holder elects to convert its shares, (ii) the number
of shares of Series B Preferred Stock which such holder is
converting, (iii) subject to applicable securities laws, the
name(s) in which the certificate(s) representing the Conversion
Shares and Dividend Shares, if any, to which such holder is
entitled are to be issued, and (iv) the telecopier number to which
the Corporation shall telecopy its confirmation described below.
Notice given by telecopier to telecopier number 310-820-6530 shall
be deemed notice for purposes of this paragraph and shall be deemed
given at the time of holder's transmittal. Immediately upon
receipt of any Conversion Notice, the Corporation shall, by
telecopier, confirm receipt thereof at the telecopier number
included thereon, which confirmation shall set forth the number of
Conversion Shares and Dividend Shares, if any, to be issued by the
Corporation as a result of such conversion. The Conversion Notice
shall be deemed accepted by the Corporation provided the holder
surrenders, or causes any agent for the holder to surrender, the
certificate(s) for the Series B Preferred Stock to be converted,
duly endorsed or assigned in blank, to the Corporation, at the
location set forth above, within seven (7) business days after
delivery of the Conversion Notice. Provided that the
certificate(s) are delivered in accordance with the preceding
sentence, the conversion shall be deemed to have been effected on
the date of delivery of the Conversion Notice by telecopier, and
such date is referred to herein as the "Conversion Date." Within
three (3) business days of receipt by the Corporation of the
certificate(s) representing the Series B Preferred Stock, the
Corporation shall issue to such holder an unlegended certificate or
certificates representing the number of full Conversion Shares and
Dividend Shares, if any, which such holder is entitled to receive
together with a check or cash in respect of any dividends as
provided in Section 4(a) hereof.
The person in whose name the certificate(s) for the Conversion
Shares and any Dividend Shares are to be issued shall be deemed to
have become a stockholder of record on the applicable Conversion
Date unless the transfer books of the Corporation are closed on
that date, in which event he or she shall be deemed to have become
a stockholder of record on the next succeeding date on which the
transfer books are open, but the Conversion Price shall be that in
effect on the Conversion Date. Upon conversion of only a portion
of the number of whole shares covered by a certificate representing
shares of Series B Preferred Stock surrendered for conversion, the
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Corporation shall issue and deliver to or upon the written order of
the holder of the certificate so surrendered for conversion, at the
expense of the Corporation, a new certificate covering the number
of shares of Series B Preferred Stock representing the unconverted
portion of the certificate so surrendered, which new certificate
shall entitle in all respects the holder thereof to the rights of
Series B Preferred Stock represented thereby to the same extent as
if the certificate theretofore covering such unconverted shares had
not been surrendered for conversion.
(c) LIQUIDATED DAMAGES. In the event the Corporation does not issue
and deliver to any holder of Series B Preferred Stock unlegended
certificate(s) for the aggregate number of Conversion Shares and
Dividend Shares, if any, to which such holder is entitled within
fifteen (15) business days after submission by such holder of a
Conversion Notice, then the Corporation shall immediately pay in
cash to such holder the sum of $50,000 as liquidated damages (and
shall pay an additional $50,000 if, five (5) business days
thereafter, the Corporation has not issued and delivered
certificate(s) for the Conversion Shares and Dividend Shares, if
any, by such date), unless such failure to deliver certificate(s)
for the Conversion Shares and Dividend Shares, if any, is a result
of a regulatory development, including, but not limited to, an
amendment of Regulation S, or a "no-action" or written
interpretative guidance from the Securities and Exchange
Commission, which calls into question the ability of the
Corporation to issue and deliver the Conversion Shares or any
Dividend Shares without registration and the Corporation has
received an opinion of its securities counsel to such effect, and
provided that the Corporation fully complies with its obligations
in Section 8 hereof. Nothing in this paragraph shall be construed
as modifying the Corporation's obligation to issue to holders of
Series B Preferred Stock unlegended certificate(s) for the
Conversion Shares within three (3) business days of receipt by the
Corporation of a Conversion Notice, as provided for in paragraph
(b) of this Section.
(d) ADJUSTMENTS TO CONVERSION PRICE FOR CERTAIN EVENTS. The Conversion
Price shall be subject to adjustment from time to time as set forth
in this subsection (d).
(i) In case at any time, or from time to time, the Corporation
shall: (A) take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend or
other distribution payable in shares of capital stock; (B)
subdivide its outstanding shares of Common Stock into a larger
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number of shares; (C) combine its outstanding shares of Common
Stock into a smaller number of shares; or (D) issue by
reclassification or recapitalization of its Common Stock any
other class or series of shares of the Corporation (including
any such reclassification or recapitalization in connection
with a consolidation or merger in which the Corporation is the
continuing corporation), the Conversion Price in effect at the
time of the record date for such dividend or of the effective
date of such subdivision, combination, reclassification or
recapitalization shall be proportionately adjusted so that the
holder of any Series B Preferred Stock surrendered for
conversion after such time shall be entitled to receive the
aggregate number and kind of shares which, if such Series B
Preferred Stock had been converted immediately prior to such
time, such holder would have owned or have been entitled to
receive. Such adjustment shall be made successively whenever
any event listed above shall occur. In the event that such
dividend or distribution is not so made, the Conversion Price
shall again be adjusted to be the Conversion Price which would
then be in effect if such record date has not been fixed.
(ii) In case at any time, or from time to time, the Corporation
shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock at a discount to the Current
Market Price on the date set forth below which is greater than
the then applicable discount set forth in the table in Section
3(a), such table shall be adjusted to reflect the greater
discount. For the purposes of this subsection (d)(ii), the
date as of which the Current Market Price for such Additional
Shares of Common Stock shall be computed shall be the earlier
of (x) the date on which the Corporation shall enter into a
legally binding contract for the issuance or sale of such
Additional Shares of Common Stock or (y) the date of the actual
issuance of such Additional Shares of Common Stock. The
provisions of this subsection (d)(ii) shall not apply to any
issuance of Additional Shares of Common Stock for which an
adjustment is provided under subsection (i) hereof. No
adjustment shall be made under this subsection (d)(ii) upon the
issuance of any Additional Shares of Common Stock which are
issued pursuant to the exercise of any warrants or other
subscription or purchase rights or pursuant to the exercise of
any conversion or exchange rights in any Convertible
Securities, if any such adjustment shall previously have been
made upon the issuance of such warrants or other rights or upon
the issuance of such Convertible Securities (or upon the
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issuance of any warrant or other rights therefor) pursuant to
subsection (d)(iii) hereof. Adjustments shall be made
successively whenever such an issuance of Additional Shares of
Common Stock shall occur. In the event that such Additional
Shares of Common Stock are not so issued or sold, the
Conversion Price shall again be adjusted to be the Conversion
Price which would then be in effect if such issuance had not
occurred.
(iii) In case at any time, or from time to time, the Corporation
shall take a record of the holders of the Common Stock for the
purpose of entitling them to receive a distribution of, or
shall otherwise issue, any warrants or other rights to
subscribe for or purchase any Additional Shares of Common Stock
or any Convertible Securities and the consideration per share
for which Additional Shares of Common Stock may at any time
thereafter be issuable pursuant to such warrants or other
rights or pursuant to the terms of such Convertible Securities
shall be less than the Current Market Price, then the
Conversion Price immediately thereafter shall be adjusted as
provided in subsection (d)(ii) hereof on the basis that (a) the
maximum number of Additional Shares of Common Stock issuable
pursuant to all such warrants or other rights or necessary to
effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued as of the date
for the determination of the Current Market Price per share of
Common Stock as hereinafter provided, and (b) the aggregate
consideration for such maximum number of Additional Shares of
Common Stock shall be deemed to be the minimum consideration
received and receivable by the Corporation for the issuance of
such Additional Shares of Common Stock pursuant to such
warrants or other rights or pursuant to the terms of such
Convertible Securities. For the purposes of this subsection
(d)(iii), the date as of which the Current Market Price per
share of Common Stock shall be computed shall be the earliest
of (i) the date on which the Corporation shall take a record of
the holders of its Common Stock for the purpose of entitling
them to receive any such warrants or other rights, (ii) the
date on which the Corporation shall enter into a legally
binding contract for the issuance of such warrants or other
rights or (iii) the date of actual issuance of such warrants or
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other rights. Such reduction shall be made successively
whenever such a record date is fixed. In the event that such
rights or warrants are not so issued or (if issued) to the
extent not exercised, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in
effect if such record date had not been fixed or such
unexercised rights or warrants had not been issued.
(iv) In case at any time, or from time to time, the Corporation
shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution, by
dividend or otherwise, of evidences of its indebtedness or
assets (including securities, but excluding (x) any dividend or
distribution referred to in subsection (d)(i) hereof and (y)
any dividend or distribution paid in cash out of funds legally
available therefor of the Corporation), then in each such case
the Conversion Price in effect after such record date shall be
determined by multiplying the Conversion Price in effect
immediately prior to such record date by a fraction, of which
the numerator shall be the total number of outstanding shares
of Common Stock multiplied by the Current Market Price on such
record date, less the fair market value (as determined by the
Board of Directors of the Corporation, whose determination
shall be conclusive) of the portion of the assets or evidences
of indebtedness so to be distributed, and of which the
denominator shall be the total number of outstanding shares of
Common Stock multiplied by such Current Market Price. Such
adjustment shall be made successively whenever such a record
date is fixed. In the event that such distribution is not so
made, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such record
date had not been fixed.
(v) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at
least five percent (5%) in such conversion price; provided,
however, that any adjustment which by reason of this paragraph
(v) is not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All
calculations under this subsection (d) shall be made to the
nearest cent or to the nearest 1/100 of a share, as the case
may be.
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(e) AUTOMATIC CONVERSION. The Series B Preferred Stock shall mature
two years after the Issue Date (the "Maturity Date") and shall
automatically convert into Conversion Shares at the then current
Conversion Price on the Maturity Date. All accrued but unpaid
dividends on the Series B Preferred Stock shall be payable to the
holders on the Maturity Date in either Dividend Shares or cash, at
the option of the Corporation.
(f) NO IMPAIRMENT. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization
(pursuant to any petition under the Bankruptcy Code or otherwise),
transfer of assets, consolidation, merger or dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all
times in good faith assist in the carrying out of all the
provisions of this Section 3 and in the taking of all such action
as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Series B Preferred Stock
against impairment.
(g) NOTICE PROVISIONS.
(i) Whenever any conversion price shall be adjusted pursuant to
subsection (d) hereof, the Corporation shall forthwith obtain
a certificate signed by the Corporation's chief financial
officer, setting forth, in reasonable detail, the event
requiring the adjustment and the method by which such
adjustment was calculated (including a description of the
basis on which the Corporation's independent public
accountants determined the fair value of any evidences of
indebtedness, shares of stock, other securities or property or
assets or warrants or other subscription or purchase rights
referred to in subsections (d)(ii) through (d)(v) hereof) and
specifying the new conversion prices and (if applicable)
describing the amount and kind of common stock, securities,
property or assets or cash which may be received upon
conversion of the Series B Preferred Stock, after giving
effect to such adjustment. The Corporation shall promptly
cause a signed copy of such certificate to be delivered to
each holder of Series B Preferred Stock.
(ii) In case the Corporation shall propose (a) to pay any dividend
payable in stock of any class to the holders of its Common
Stock or to make any other distribution to the holders of its
Common Stock, (b) to offer to the holders of its Common Stock
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rights to subscribe for or to purchase any Convertible
Securities or Additional Shares of Common Stock or shares of
stock of any class or any other securities, rights or options,
(c) to effect any reclassification of its Common Stock (other
than a reclassification involving only the subdivision or
combination of outstanding shares of Common Stock), (d) to
effect any capital reorganization, (e) to effect any
consolidation, merger or sale, transfer or other distribution
of all or substantially all its property, assets or business,
(f) to file a voluntary petition seeking liquidation,
reorganization, arrangement, readjustment of debts or for any
other relief under the Bankruptcy Code or under any other act
or law pertaining to insolvency or debtor relief, whether
state, federal or foreign, now or hereafter existing, or (g)
to effect the liquidation, dissolution, winding-up or
reorganization of the Corporation, then in each such case, the
Corporation shall give to each holder of Series B Preferred
Stock a notice of such proposed action, which shall specify
the date on which a record is to be taken for the purposes of
such stock dividend, distribution or rights, or the date on
which such reclassification, reorganization, consolidation,
merger, sale, transfer, disposition, filing of bankruptcy,
liquidation, dissolution or winding-up is to take place and
the date of participation therein by the holders of Common
Stock, if any such date is to be fixed, and shall also set
forth such facts with respect thereto as shall be reasonably
necessary to indicate the effect of such action on the Common
Stock and the conversion prices after giving effect to any
adjustment which will be required as a result of such action.
Such notice shall be so given in the case of any action
covered by (a) or (b) above at least 20 days prior to the
record date for determining holders of the Common Stock for
purposes of such action and, in the case of any other such
action, at least 20 days prior to the date of the taking of
such proposed action or the date of participation therein by
the holders of Common Stock, whichever shall be the earlier.
(h) TREASURY STOCK. The sale or other disposition of any issued shares
of Common Stock owned or held by or for the account of the
Corporation shall be deemed an issuance thereof for purposes of
subsection (d) hereof, but until so issued such shares shall not be
deemed to be outstanding.
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(i) COMPUTATION OF CONSIDERATION. To the extent that any
Additional Shares of Common Stock or any Convertible
Securities or any warrants or other rights to subscribe
for or purchase any Additional Shares of Common Stock or
any Convertible Securities shall be issued for a cash
consideration, the consideration received by the Corporation
therefor shall be deemed to be the amount of the cash received
by the Corporation therefor, or, if such Additional Shares of
Common Stock or Convertible Securities are offered by the
Corporation for subscription, the subscription price, or, if
such Additional Shares of Common Stock or Convertible
Securities are sold to underwriters or dealers for public
offering without a subscription offering, the initial public
offering price, in any such case excluding any amounts paid or
receivable for accrued interest or accrued dividends and
without deduction of any compensation, discounts or expenses
paid or incurred by the Corporation for and in the
underwriting of, or otherwise in connection with, the issue
thereof. To the extent that such issuance shall be for a
consideration other than cash, then, except as herein
otherwise expressly provided, the amount of such consideration
shall be deemed to be the fair value of such consideration at
the time of such issuance as determined by the Board of
Directors of the Corporation. The consideration for any
Additional Shares of Common Stock issuable pursuant to any
warrants or other rights to subscribe for or purchase the same
shall be the consideration received by the Corporation for
issuing such warrants or other rights, plus the additional
consideration payable to the Corporation upon the exercise of
such warrants or other rights. The consideration for any
Additional Shares of Common Stock issuable pursuant to the
terms of any Convertible Securities shall be the consideration
received by the Corporation for issuing any warrants or other
rights to subscribe for or purchase such Convertible
Securities, plus the consideration paid or payable to the
Corporation in respect of the subscription for or purchase of
such Convertible Securities, plus the additional
consideration, if any, payable to the Corporation upon the
exercise of the right of conversion or exchange in such
Convertible Securities. In case of the issuance at any time
of any Additional Shares of Common Stock or Convertible
Securities in payment or satisfaction of any dividend upon any
class of stock other than Common Stock or in payment of any
debt, the Corporation shall be deemed to have received for
such Additional Shares of Common Stock or Convertible
Securities a consideration equal to the amount of such
dividend or debt so paid or satisfied.
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(j) ANTIDILUTION PROVISIONS. No adjustment shall be made as a result
of any increase in the number of Additional Shares of Common Stock
issuable or any decrease in the consideration payable upon any
issuance of Additional Shares of Common Stock, pursuant to any
provisions intended solely to avoid dilution contained in any
warrants, rights or Convertible Securities.
(k) WHEN ADJUSTMENT NOT REQUIRED.
(i) If the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a
dividend or distribution or subscription or purchase rights
and shall, thereafter and before the distribution to
stockholders thereof, legally abandon its plan to pay or
deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by
reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and
annulled.
(ii) If the Corporation declares or makes any dividend or
distribution with respect to Common Stock, other than regular
cash dividends or dividends payable solely in shares of Common
Stock, and each holder of Series B Preferred Stock
concurrently receives dividends or distributions equal in
amount and in the same kind of property (whether cash,
securities or other property) as such holder would be entitled
to receive if all of the outstanding Series B Preferred Stock
were converted into Common Stock as of the record date of such
dividend or distribution with respect to Common Stock, then
thereafter no adjustment shall be required with respect to
such dividend or distribution.
(l) OTHER ACTION AFFECTING COMMON STOCK. If a state of facts shall
occur which, without being specifically controlled by the other
provisions of this Section 3, would not fairly protect the
conversion rights of the Series B Preferred Stock in accordance
with the essential intent and principles of such provisions, then
the Board of Directors of the Corporation shall in good faith make
an adjustment in the application of such provisions, in accordance
with such essential intent and principles, so as to protect such
conversion rights.
(m) NECESSARY CORPORATE ACTION. Before taking any action which would
result in an adjustment in the Conversion Price, the Corporation
shall obtain all such authorizations or exemptions thereof, or
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consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
(n) TAXES UPON CONVERSION. The Corporation shall pay all documentary,
stamp or other transaction taxes attributable to the issuance or
delivery of shares of Common Stock upon conversion of any shares of
Series B Preferred Stock.
(o) RESERVATION OF COMMON STOCK. The Corporation shall at all times
reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the
conversion of shares of Series B Preferred Stock, the full number
of whole shares of Common Stock then deliverable upon the
conversion of all shares of Series B Preferred Stock at the time
outstanding (assuming full payment of dividends with Dividend
Shares). All shares of Common Stock which shall be so issuable
shall, when issued upon conversion of all or any portion of the
Series B Preferred Stock, be duly and validly issued and fully paid
and non-assessable and free from all taxes, liens and charges with
respect to the issuance thereof. Upon conversion of Series B
Preferred Stock, the shares of Series B Preferred Stock so
converted shall have the status of authorized and unissued
Preferred Stock, and the number of shares of Series B Preferred
Stock which the Corporation shall have authority to issue shall be
decreased by any such conversion.
(p) DIVIDENDS CONSTITUTE CORPORATE DEBT. All dividends accrued and
unpaid on Series B Preferred Stock to and including the date of
conversion, whether or not declared by the Board of Directors,
shall constitute a debt of the Corporation payable without interest
to the converting holders and shall be paid by the Corporation on
the Conversion Date, in its option, either in cash or by the
issuance of Dividend Shares as provided in Section 4 hereof.
4. DIVIDENDS.
(a) DIVIDENDS. Each holder of shares of Series B Preferred Stock shall
be entitled to receive, in preference to the holders of Common
Stock or any other Junior Stock, a cumulative annual dividend
payment of $800 for each share of Series B Preferred Stock held;
provided, however, a holder shall be entitled to receive an annual
dividend payment of $400 on shares of Series B Preferred Stock
which have been converted and certificates representing the
Conversion Shares have been delivered to such holder prior to one
hundred eighty (180) days after the Issue Date. Dividends are
payable only upon conversion or redemption of the shares of Series
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<PAGE>
B Preferred Stock pursuant to Section 3 or Section 5 hereof and are
payable upon conversion or redemption either (i) in shares of
Common Stock ("Dividend Shares"), with the number thereof to be
determined by dividing the accrued dividend payable by the
Conversion Price in effect on the Conversion Date and rounded up to
the nearest full share, or (ii) in cash, at the option of the
Corporation. Dividends on the shares of Series B Preferred Stock
shall accumulate from the Issue Date through the date of conversion
or redemption, as the case may be, on the basis of a calendar year
consisting of twelve (12) months each consisting of thirty (30)
days. Dividends shall be payable in cash only out of the assets of
the Corporation legally available for the payment thereof.
(b) RESTRICTIONS ON DIVIDENDS, ETC. As long as any shares of Series B
Preferred Stock shall be outstanding, the Corporation shall not
declare, pay or set aside for payment any dividend or declare or
make any distributions upon or purchase, redeem or otherwise
acquire Common Stock or any other series or class of capital stock;
provided, however, that the Corporation may declare, pay or set
aside for payment, dividends required by the preferences, rights
and designations of the Series A Preferred Stock and any other
series or class of Preferred Stock ranking senior to, or pari passu
with, Series B Preferred Stock.
5. REDEMPTION.
(a) OPTIONAL REDEMPTION OF OUTSTANDING SERIES B PREFERRED STOCK. The
Corporation shall have the right to redeem the outstanding Series B
Preferred Stock, in whole or in part, at any time and from time to
time, after the Issue Date by paying to the holders thereof in cash
the redemption price per share of $12,500, together with cash in
the amount of all accrued and unpaid dividends thereon through the
Redemption Date (as defined in subsection (d) herein); provided,
however, that the Corporation may not, pursuant to this subsection
(a), redeem any shares of Series B Preferred Stock for which it has
received, on or prior to the Redemption Date, a Conversion Notice.
If, on the Redemption Date, the Corporation fails to pay to the
holder(s) the redemption price in cash for the shares of Series B
Preferred Stock which were subject to the Redemption Notice then
such shares of Series B Preferred Stock shall remain issued and
outstanding as if the Redemption Notice had not been sent.
(b) OPTIONAL REDEMPTION OF CONVERSIONS OF SERIES B PREFERRED STOCK.
The Corporation shall have the right to redeem all, but not less
than all, shares of Series B Preferred Stock subject to a
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Conversion Notice for which the Conversion Price is less than $1.00
per share, by paying to the holders thereof in cash the redemption
price per share of (a) $11,000 per share of Series B Preferred
Stock, together with cash in the amount of all accrued and unpaid
dividends thereon through the Redemption Date (as defined in
subsection (d) herein), if the Conversion Notice is submitted on or
after the ninetieth (90th) calendar day following the Issue Date or
(b) $10,600 per share of Series B Preferred Stock, together with
cash in the amount of all accrued and unpaid dividends thereon
through the Redemption Date, if the Conversion Notice is submitted
prior to the ninetieth (90th) calendar day following the Issue
Date; provided, however, prior to the Redemption Date fixed for any
such conversion, the holder may withdraw the Conversion Notice by
delivering to the Corporation, via facsimile, a notice of such
withdrawal. The withdrawal notice shall state (i) the name of the
holder and that such holder elects to withdraw the Conversion
Notice previously delivered by such holder to the Corporation, (ii)
the date such Conversion Notice was delivered to the Corporation,
and (iii) the telecopier number to which the Corporation shall
telecopy its confirmation that it has received the holder's notice
of withdrawal. Notice given by telecopier to telecopier number
310-820-6530 shall be deemed notice for purposes of this paragraph
and shall be deemed given when receipt is acknowledged by
transmittal confirmation report. Immediately upon receipt of any
notice of withdrawal, the Corporation shall, by telecopier, confirm
receipt thereof at the telecopier number included thereon. If, on
the Redemption Date, the Corporation fails to pay to the holder the
redemption price in cash for all of the shares of Series B
Preferred Stock which were subject to the conversion notice
submitted by the holder thereof then such shares of Series B
Preferred Stock shall be converted as originally requested by the
holder thereof in the conversion notice.
(c) MANDATORY REDEMPTION. The Corporation shall be required to redeem
the outstanding shares of Series B Preferred Stock, by paying to
the holders of such outstanding Series B Preferred Stock in cash
the redemption price of $11,800 per share of Series B Preferred
Stock, together with cash in the amount of all accrued and unpaid
dividends thereon through the Redemption Date (as defined in
subsection (d) herein), if a Conversion Notice is submitted which,
if accepted, would otherwise require the Corporation to issue a
greater number of shares of Common Stock than the Corporation was
authorized to issue at the time of submission of such Conversion
Notice. If, on the Redemption Date, the Corporation fails to pay
to the holder(s) the redemption price in cash for all of the
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outstanding shares of Series B Preferred Stock then the Corporation
shall pay in cash to the holder(s) thereof, as liquidated damages,
an amount equal to 1.5% of the redemption price for each thirty
(30) calendar day period, or portion thereof, during which the
redemption price remains unpaid, which period shall commence on the
Redemption Date. Any payments required to be made by the
Corporation pursuant to the preceding sentence shall be made in
cash and on the last day of each period as described therein and
shall not have the effect of reducing the redemption price.
(d) NOTICE OF REDEMPTION. If any shares of Series B Preferred Stock
are to be redeemed pursuant to subsection (b) or (c) hereof, notice
thereof (the "Redemption Notice") shall be sent (which such notice
shall be sent not later than one (1) business day after the date on
which the Corporation received the Conversion Notice which is the
subject of subsections (b) or (c) hereof) to each holder of record
whose Series B Preferred Stock is to be redeemed pursuant to
subsection (b) or (c) hereof, by telecopier and for overnight
delivery by a nationally recognized overnight express courier
service, to such holder at such holder's address and telecopier
number as the same shall appear on the books of the Corporation.
The Corporation shall redeem the shares of Series B Preferred Stock
it is redeeming pursuant to subsections (a) or (c) hereof on the
seventh (7th) calendar day following the date on which the
Corporation provides notice to the holders of its intention to
redeem such shares of Series B Preferred Stock (the "Redemption
Date"). If any shares of Series B Preferred Stock are to be
redeemed pursuant to subsection (b) hereof, the Redemption Date
shall be the tenth (10th) calendar day following the date on which
the Corporation delivers the Redemption Notice to the holders
thereof. The Redemption Notice shall state (a) the shares of
Preferred Stock will be redeemed at the close of business on the
Redemption Date, (b) the redemption price, (c) the place at which
certificates for shares of Series B Preferred Stock called for
redemption must be surrendered to collect the redemption price,
(d) that dividends on shares of Series B Preferred Stock called for
redemption cease to accrue at the close of the last day prior to
the Redemption Date, (e) the Section of this Certificate of
Designation, Voting Powers, Preferences and Rights pursuant to
which they are to be redeemed and (f) that shares of Series B
Preferred Stock may be converted at any time prior to the close of
business on the Redemption Date by delivery of a Conversion Notice
by facsimile to the Corporation pursuant to Section 3(b) hereof.
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<PAGE>
(e) PARTIAL REDEMPTION. If less than all of the outstanding shares of
Series B Preferred Stock are to be redeemed, the shares to be
redeemed shall be determined pro rata relative to each holder's
percentage of ownership of the outstanding shares of Series B
Preferred Stock as of the date of the Redemption Notice. On or
after the Redemption Date, each holder of shares of Series B
Preferred Stock that were called for redemption shall present and
surrender the certificate or certificates for such shares to the
Corporation at the place designated in the Redemption Notice and
thereupon the redemption price of such shares shall be paid to, or
to the order of, the person whose name appears on such certificate
or certificates as the owner thereof. From and after the
Redemption Date, unless the Corporation shall default in the
payment of redemption price pursuant to the Redemption Notice, all
dividends on the Series B Preferred Stock shall cease to accrue and
all rights of the holders thereof as stockholders of the
Corporation, except the right to receive the redemption price (but
without interest thereon), shall cease and terminate. Any and all
shares of Series B Preferred Stock redeemed, purchased or otherwise
acquired by the Corporation thereafter shall be canceled and
returned to the status of authorized and unissued Preferred Stock.
(f) TRANSFER BOOKS. To facilitate the redemption of any shares of
Series B Preferred Stock, the Board of Directors is authorized to
cause the transfer books for such Series B Preferred Stock to be
closed as to the shares to be redeemed, unless the rules of any
national securities exchange or automated quotation system on which
the Series B Preferred Stock may be listed or quoted prohibit the
closing of such transfer books.
6. PURCHASE OPTION.
(a) PURCHASE OPTION. If, at any time when any shares of Series B
Preferred Stock shall remain outstanding, the Corporation shall
issue shares of Common Stock at a purchase price, or Convertible
Securities with a conversion, exchange or exercise price, less than
the then Current Market Price and any such shares of Common Stock
may become freely transferrable prior to 180 days following the
Issue Date ("Purchase Option Trigger Event"), then each holder of
any shares of Series B Preferred Stock then outstanding shall, upon
notice from the Corporation in accordance with Section 6(b) hereof,
be entitled to elect (the "Purchase Option") to have the
Corporation purchase 75% of the shares of Series B Preferred Stock
then held by such holder for a purchase price payable in cash of
$10,800 per share of Series B Preferred Stock (the "Purchase
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<PAGE>
Amount"). Nothing contained in this Section 6 shall require the
Company to purchase any shares of Series B Preferred Stock if such
purchase is prohibited by applicable law.
(b) NOTICE. If the Corporation expects that a Purchase Option Trigger
Event will occur, then the Corporation shall, not less than ten
(10) calendar days prior to the occurrence of the Purchase Option
Trigger Event, give written notice (the "Purchase Option Notice")
thereof to each holder of record of shares of Series B Preferred
Stock. The Purchase Option Notice shall be sent by telecopier and
by a nationally recognized overnight express courier service for
overnight delivery to each holder of record of shares of Series B
Preferred Stock at such holders' address and telecopier number as
the same shall appear on the books of the Corporation. The
Purchase Option Notice shall state that: (i) the Corporation will
purchase on the Purchase Date 75% of the shares of Series B
Preferred Stock held by any holder who, prior to the close of
business on the third (3rd) calendar day prior to the anticipated
date of the occurrence of the Purchase Option Trigger Event set
forth in the Purchase Option Notice, sends written notice (a
"Purchase Option Exercise Notice") to the Corporation delivered by
telecopier in the same manner as a Conversion Notice (which
Purchase Option Exercise Notice shall state (A) that such holder
elects to exercise its Purchase Option as set forth herein and (B)
the name in which the bank check in payment of the Purchase Amount
shall be issued and the address to which it shall be delivered, if
different from the registered name and address of such holder);
(ii) the Purchase Amount per share of Series B Preferred Stock;
(iii) the place at which certificates for shares of Series B
Preferred Stock which any holder wishes to sell to the Corporation
pursuant to the Purchase Option must be surrendered to collect the
Purchase Price; and (iv) that the "Purchase Date" shall be the date
of the occurrence of the Purchase Option Trigger Event (which shall
be no more than one (1) business day after the expected Purchase
Date set forth in the Purchase Option Notice).
(c) PENALTY PAYMENTS. If for any reason the Corporation shall fail to
purchase any share or shares of Series B Preferred Stock for which
it has received a Purchase Option Exercise Notice in accordance
with Section 6(b) hereof, then (i) the Corporation shall be
obligated to pay to each holder of any such shares a monthly
penalty payment in cash in an amount each month equal to 1-1/2%
of the Payment Amount that was payable by the Corporation to such
holder on the Payment Date and (ii) dividends shall continue to
accrue on such shares, in each case until such date (the "Actual
Purchase Date") as the Corporation shall purchase such share or
shares from
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such holder in accordance with the provisions of this Section 6 at
a Purchase Amount which shall include not only the amount specified
in Section 6(a) hereof but also (x) all dividends accrued and
unpaid from the original Purchase Date to the Actual Purchase Date
and (y) all penalty payments required pursuant to this Section 6(c)
accrued and, notwithstanding the immediately succeeding sentence,
unpaid from the original Purchase Date to the Actual Purchase Date.
The first such penalty payment shall be due and payable on the
thirtieth day following the Purchase Date, and each subsequent
penalty payment shall be due and payable on each succeeding monthly
anniversary of the Purchase Date. Penalty payments shall be pro
rated for any partial monthly period ending on the Actual Payment
Date.
(d) STATUS OF PURCHASED SHARES. Any and all shares of Series B
Preferred Stock purchased pursuant to this Section 6 shall be
canceled and returned to the status of authorized and unissued
Preferred Stock.
7. NO PREEMPTIVE RIGHTS. No holder of Series B Preferred Stock shall have
any preemptive or preferential right of subscription to any shares of
stock of the Corporation, or to options, warrants or other interests
therein or therefor, or to any obligations convertible into stock of the
Corporation, issued or sold, or any right of subscription to any thereof
other than such, if any, as the Board of Directors, in its discretion,
from time to time may determine and at such price or prices as the Board
of Directors from time to time may fix pursuant to the authority
conferred by the Corporation's Certificate of Incorporation.
8. CERTAIN RESTRICTIONS. So long as any Series B Preferred Stock is
outstanding, the Corporation shall not, without the consent of holders
of a majority of the outstanding shares of Series B Preferred Stock, (i)
purchase, redeem or otherwise acquire any shares of any class of the
Corporation's outstanding capital stock (except as otherwise provided in
Section 4(b) hereof), (ii) issue any class or series of any class of
capital stock which ranks prior to the Series B Preferred Stock with
respect to dividend rights or rights on liquidation, winding-up or
dissolution of the Corporation or (iii) amend, alter or change the
preferences or rights of any series or class of capital stock of the
Corporation (including the Series B Preferred Stock) or the
qualifications, limitations or restrictions thereof if such amendment,
alteration or change adversely affects the Series B Preferred Stock.
The Series B Preferred Stock shall rank pari passu with the Series A
Preferred Stock with respect to rights on dividends, liquidation and
redemption.
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<PAGE>
9. REGISTRATION. The Corporation hereby agrees that, upon demand of the
holders of the Series B Preferred Stock or the Conversion Shares, as a
result of a regulatory development including, but not limited to, an
amendment of Regulation S, or any "no-action" or written interpretive
guidance from the Securities and Exchange Commission, which calls into
question the ability of the holders of the Series B Preferred Stock or
the Conversion Shares to resell the Series B Preferred Stock or the
Conversion Shares without registration, the Corporation will file, and
use its reasonable best efforts to cause to become effective a
registration statement on Form S-3 (or any other available form) under
the Securities Act covering the resale of the Series B Preferred Stock
and the Conversion Shares. Any such registration statement shall remain
effective for up to twelve (12) months, or until all of the Conversion
Shares are sold, whichever is earlier. The Corporation shall provide
the holders of the Series B Preferred Stock or the Conversion Shares
with such number of copies of the prospectus as shall be reasonably
requested to facilitate the sale of the Series A Preferred Stock and the
Conversion Shares. The Corporation shall bear all expenses incurred in
connection with any such registration, excluding discounts and
commissions and other expenses of the holders (including, but not
limited to any holder's counsel's fees).
10. DEFINITIONS.
(a) "Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Corporation after December 4, 1996, except
Common Stock which may be issued pursuant to: (i) the conversion of
the Series A Preferred Stock; (ii) the conversion of the Series B
Preferred Stock; (iii) the exercise by employees of the Corporation
or any of its subsidiaries of options granted pursuant to any stock
option plan which may hereafter be adopted by the Corporation where
the exercise price of such options is not less than the fair market
value of a share of Common Stock on the date of grant thereof; and
(iv) the exercise of any warrants to purchase Common Stock issued
by the Corporation and outstanding as of December 4, 1996.
(b) "Bankruptcy Code" shall mean 11 U.S.C. 101 et seq, as amended,
and any successor statute or statute having substantially the same
function.
(c) "Change in Control" shall mean a merger or consolidation of the
Corporation with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Corporation outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty
percent (50%) of the total of the voting power represented by the
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voting securities of the Corporation or such surviving entity
outstanding immediately after such merger or consolidation or,
except as provided under Section 2 hereof, the closing of a sale or
disposition by the Corporation of all or substantially all of the
Corporation's assets (other than to a subsidiary or subsidiaries of
the Corporation).
(d) "Common Stock" shall mean the shares of common stock of the
Corporation, par value $.00001 per share, and any stock into which
such Common Stock may hereinafter be changed.
(e) "Conversion Date" shall have the meaning such term is given in
Section 3(b) hereof.
(f) "Conversion Notice" shall have the meaning such term is given in
Section 3(b) hereof.
(g) "Conversion Price" shall have the meaning such term is given in
Section 3(a) hereof.
(h) "Conversion Shares" shall have the meaning such term is given in
Section 3(a) hereof.
(i) "Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities which are convertible into or
exercisable or exchangeable for, with or without payment of
additional consideration in cash or property, for Additional Shares
of Common Stock, either immediately or upon the arrival of a
specified date or the happening of a specified event.
(j) "Current Market Price" per share of Common Stock at any date herein
specified shall mean the average of the daily market prices for 5
consecutive Trading Days ending on the last trading day prior to
such date, except that for purposes of Section 3(c) hereof, the
"Current Market Price" per share of Common Stock shall mean the
market prices on the Trading Day therein specified. The market
price for each such Trading Day shall be (i) if the Common Stock is
quoted on the Nasdaq National Market or Nasdaq Small Cap Market,
the reported last sales price, or (ii) if the Common Stock is
listed or admitted to trading on a national securities exchange,
the last reported sales prices regular way, or (iii) if the Common
Stock is quoted on the NASD OTC Bulletin Board, the average of the
closing bid and asked prices regular way, or (iv) if the Common
Stock is not so quoted, as reasonably determined by the Board of
Directors of the Corporation.
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(k) "Dividend Shares" shall have the meaning such term is given in
Section 4 hereof.
(l) "Issue Date" shall have the meaning such term is given in Section
3(a) hereof.
(m) "Junior Stock" shall mean the Common Stock or any other class or
series of capital stock of the Corporation which at the time of
issuance is not declared to be senior to or on a parity with the
Series B Preferred Stock as to dividends or rights upon liquidation
and shall not include the Corporation's outstanding Series A
Preferred Stock (other than for purposes of Section 2 hereof).
Solely for the purposes of Section 2 hereof, the Series B Preferred
Stock shall be deemed to rank pari passu to the Corporation's
Series A Preferred Stock, $0.001 par value per share.
(n) "Liquidation Preference" shall have the meaning such term is given
in Section 2 hereof.
(o) "Maturity Date" shall have the meaning such term is given in
Section 3(f) hereof.
(p) "Person" shall mean any individual, corporation, association,
company, business trust, partnership, joint venture, joint-stock
company, trust, unincorporated organization or association or
government or any agency or political subdivision thereof.
(q) Redemption Date" shall have the meaning such term is given in
Section 5(c) hereof.
(r) "Redemption Notice" shall have the meaning such term is given in
Section 5(c) hereof.
(s) "Securities Act" shall mean the Securities Act of 1933, as amended.
(t) "Trading Day" shall mean any day on which trading takes place (a)
in the over-the-counter-market and prices reflecting such trading
are published by the National Association of Securities Dealers
Automated Quotation System or (b) if the Common Stock is then
listed or admitted to trading on a national securities exchange,
on the principal national securities exchange on which the Common
Stock is then listed or admitted to trading.
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IN WITNESS WHEREOF, the undersigned has executed this Certificate this 12th
day of December, 1996.
By: /s/ Michael Weinstock
-------------------------------------
Name: Michael Weinstock
Title: Executive Vice-President
ATTEST:
By: /s/ Ben Sumner
--------------------------------
Name: Ben Sumner
Title: Assistant Secretary
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GRILL CONCEPTS, INC.
AND
ROCHON CAPITAL GROUP, LTD.
WARRANT AGREEMENT
Dated as of December , 1996
------
<PAGE>
WARRANT AGREEMENT, dated as of December , 1996 by and between GRILL
------
CONCEPTS, INC., a Delaware corporation (the "Company"), and ROCHON CAPITAL
GROUP, LTD. ("Placement Agent").
The Company proposes to issue to the Placement Agent warrants as
hereinafter described (the "Warrants") to purchase that number of common shares
of the Company, $0.00001 par value per share ("Common Stock"), calculated
pursuant to the formula set forth in Section 4 hereof, subject to adjustment as
provided in Section 8 hereof (such number of shares, as adjusted, being
hereinafter referred to as the "Shares"), each Warrant entitling the holder
("Holder") thereof to purchase one share of Common Stock. All capitalized
terms used herein and not otherwise defined herein shall have the same meanings
as assigned thereto in that certain placement agency agreement, dated as of
December 4, 1996, by and between the Company and the Placement Agent.
NOW THEREFORE, in consideration of the premises and the mutual
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. ISSUANCE OF WARRANTS; FORM OF WARRANT. On the Closing Date
the Company will issue, sell and deliver the Warrants to the Placement Agent or
its bona fide officers or principals for an aggregate price of $100. The form
of the Warrant and of the form of election to purchase Shares to be attached
thereto shall be substantially as set forth on Exhibit A attached hereto. The
Warrants shall be executed on behalf of the Company by the manual or facsimile
signature of the present or any future Chairman or Co-Chairman, President or
any Vice President of the Company, under its corporate seal, affixed or in
facsimile, and attested by the manual or facsimile signature of the present or
any future Secretary or Assistant Secretary of the Company.
2. REGISTRATION. The Warrants shall be numbered and shall be
registered in a Warrant register (the "Warrant Register"). The Company shall
be entitled to treat the registered holder of any Warrant on the Warrant
Register as the owner in fact thereof for all purposes and shall not be bound
to recognize any equitable or other claim to or interest in such Warrant on the
part of any other person, and shall not be liable for any registration or
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transfer of Warrants which are registered or are to be registered in the name
of a fiduciary or the nominee of a fiduciary unless made with the actual
knowledge that a fiduciary or nominee is committing a breach of trust in
requesting such registration or transfer, or with such knowledge or such facts
that its participation therein amounts to bad faith. The Warrants shall be
registered initially in the name of the Placement Agent in such denominations
as the Placement Agent may request in writing to the Company; provided,
however, that the Placement Agent may designate that all or a portion of the
Warrants be issued in varying amounts directly to its bona fide officers or
principals and not to itself. Such designation will only be made by the
Placement Agent if it determines that such issuances would not violate the
interpretation of the Board of Governors of the National Association of
Securities Dealers, Inc. (the "NASD"), relating to the review of corporate
financing arrangements.
3. TRANSFER OF WARRANTS. The Holder of a Warrant Certificate, by
its acceptance thereof, acknowledges that the Warrants are "restricted
securities" which have not been registered under the Securities Act, and
represents that the Warrants are being acquired as an investment and not with a
view to the distribution thereof and will not transfer such Warrants, except to
bona fide officers, directors, shareholders, principals, employees or
registered representatives of the Holder upon written request to the Company
delivered in accordance with Section 12 hereof and upon delivery of the Warrant
Certificate duly endorsed by the Holder or by his duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment or
authority to transfer. In all cases of transfer by an attorney, the original
power of attorney, duly approved, or an official copy thereof, duly certified,
shall be deposited with the Company. In case of transfer by executors,
administrators, guardians or other legal representatives, duly authenticated
evidence of their authority shall be produced, and may be required to be
deposited with the Company in its discretion. Upon any registration of
transfer, the Company shall deliver a new Warrant or Warrants to the persons
entitled thereto. The Warrants may be exchanged at the option of the Holder
thereof for other Warrants of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of shares of
Common Stock upon surrender to the Company or its duly authorized agent. The
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Company may require payment of a sum sufficient to cover all taxes and other
governmental charges that may be imposed in connection with any voluntary
transfer, exchange or other disposition of the Warrants. Notwithstanding the
foregoing, the Company shall have no obligation to cause Warrants to be
transferred on its books to any person, if such transfer would violate the
Securities Act or applicable state securities laws.
4. TERM OF WARRANTS; EXERCISE OF WARRANTS. The Placement Agent is
hereby granted that number of warrants equal to ten percent (10%) of the
aggregate gross proceeds raised in the Placement divided by the average
closing bid price of the Common Stock (the "Closing Date Average") as
calculated over the five (5) trading day period ending on the Closing Date, at
any time from the first anniversary of the Closing Date until 5:00 p.m., Los
Angeles time, on December , 1999. Each Warrant entitles the registered
-----
owner thereof to purchase one Share at a purchase price equal to two hundred
percent (200%) of the Closing Date Average, but in no event less than $3.00
per share (as adjusted from time to time pursuant to the provisions hereof, the
"Exercise Price"). The Exercise Price and the Shares issuable upon exercise of
Warrants are subject to adjustment upon the occurrence of certain events,
pursuant to the provisions of Section 8 of this Agreement. Subject to the
provisions of this Agreement, each Holder shall have the right, which may be
exercised as set forth in such Warrants, to purchase from the Company (and the
Company shall issue and sell to such Holder) the number of fully paid and
nonassessable Shares of Common Stock (rounded up to the nearest full share)
specified in such Warrants, upon surrender to the Company, or its duly
authorized agent, of such Warrants, with the form of election to purchase
attached thereto duly completed and signed, with signatures guaranteed by a
member firm of a nationalsecurities exchange, a commercial bank (not a savings
bank or savings and loan association) or trust company located in the United
States or a member of the NASD and upon payment to the Company of the Exercise
Price, as adjusted in accordance with the provisions of Section 8 of this
Agreement, for the number of Shares in respect of which such Warrants are then
exercised. Payment of such Exercise Price may be made in cash or by certified
check or official bank check payable to the order of the Company. No
adjustment shall be made for any
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dividends on any Shares issuable upon exercise of a Warrant. Upon each
surrender of Warrants and payment of the Exercise Price as aforesaid, the
Company shall issue and cause to be delivered with all reasonable dispatch to
or upon the written order of the Holder of such Warrants and in such name or
names as such Holder may designate, a certificate or certificates for the
number of full Shares so purchased upon the exercise of such Warrants. Such
certificate or certificates shall be deemed to have been issued and any person
so designated to be named therein shall be deemed to have become a holder of
record of such Shares as of the date of the surrender of Warrants and payment
of the Exercise Price as aforesaid; provided, however, that if, at the date of
surrender of such Warrants and payment of such Exercise Price, the transfer
books for the Common Stock or other class of securities issuable upon the
exercise of such Warrants shall be closed, the certificates for the Shares
shall be issuable as of the date on which such books shall next be opened and
until such date the Company shall be under no duty to deliver any certificate
for such Shares; provided, further, however, that the transfer books or record,
unless otherwise required by law, shall not be closed at any one time for a
period longer than twenty (20) days. The rights of purchase represented by
the Warrants shall be exercisable, at the election of the Holder(s) thereof,
either in full or from time to time in part and, in the event that any Warrant
is exercised in respect of less than all of the Shares issuable upon such
exercise, a new Warrant or Warrants will be issued for the remaining number of
Shares specified in the Warrant so surrendered.
5. PAYMENT OF TAXES. The Company will pay all documentary stamp
taxes, if any, attributable to the issuance of Shares upon the exercise of
Warrants; provided, however, that the Company shall not be required to pay any
tax or taxes which may be payable in respect of any transfer involved in the
issue or delivery of any certificates for Shares in a name other than that of
the Holder of Warrants in respect of which such Shares are issued.
6. MUTILATED OR MISSING WARRANTS. In case any of the Warrants shall
be mutilated, lost, stolen or destroyed, the Company shall issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant,
or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new
Warrant of like tenor and representing an equivalent right or interest, but
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only upon receipt of evidence reasonably satisfactory to the Company of such
mutilation, loss, theft or destruction of such Warrant and indemnity, if
requested, reasonably satisfactory to the Company. An applicant for such
substitute Warrants shall also comply with such other reasonable regulations
and pay such other reasonable charges and expenses as the Company may
prescribe.
7. RESERVATION OF SHARES, ETC. There have been reserved, and the
Company shall at all times keep reserved, out of the authorized and unissued
Common Stock of the Company, a number of shares of Common Stock sufficient to
provide for the exercise of the rights of purchase represented by the
outstanding Warrants. Securities Transfer Corporation, transfer agent for the
Common Stock (the "Transfer Agent"), and every subsequent transfer agent, if
any, for the Company's securities issuable upon the exercise of the Warrants
will be irrevocably authorized and directed at all times to reserve such number
of authorized and unissued shares as shall be required for such purpose. The
Company will keep a copy of this Agreement on file with the Transfer Agent and
with every subsequent transfer agent for any shares of the Company's securities
issuable upon the exercise of the Warrants. The Company will supply the
Transfer Agent or any subsequent transfer agent with duly executed certificates
for such purpose. All Warrants surrendered in the exercise of the rights
thereby evidenced shall be canceled, and such canceled Warrants shall
constitute sufficient evidence of the number of Shares that have been issued
upon the exercise of such Warrants.
8. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF SHARES. The Exercise
Price and the number and kind of securities issuable upon exercise of each
Warrant shall be subject to adjustment from time to time upon the happening of
certain events, as follows:
(a) In case the Company shall (i) declare a dividend on its
Common Stock in shares of Common Stock or make a distribution in shares of
Common Stock, (ii) subdivide its outstanding shares of Common Stock,
(iii) combine its outstanding shares of Common Stock into a smaller number
of shares of Common Stock or (iv) issue by reclassification of its shares
of Common Stock other securities of the Company (including any such
reclassification in connection with a consolidation or merger in which the
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Company is the continuing corporation), the number of Shares purchasable
upon exercise of each Warrant immediately prior thereto shall be adjusted
so that the Holder of each Warrant shall be entitled to receive the kind
and number of Shares or other securities of the Company which he would
have owned or have been entitled to receive after the happening of any of
the events described above, had such Warrant been exercised immediately
prior to the happening of such event or any record date with respect
thereto. An adjustment made pursuant to this paragraph (a) shall become
effective immediately after the effective date of such event retroactive
to immediately after the record date, if any, for such event.
(b) In case the Company shall issue rights, options or warrants
to all holders of its shares of Common Stock, without any charge to such
holders, entitling them (for a period expiring within 45 days after the
record date mentioned below in this paragraph (b)) to subscribe for or to
purchase shares of Common Stock at a price per share that is lower at the
record date mentioned below than the then current market price per share
of Common Stock (as defined in paragraph (d) below), the number of shares
thereafter purchasable upon exercise of each Warrant shall be determined
by multiplying the number of Shares theretofore purchasable upon exercise
of each Warrant by a fraction, of which the numerator shall be the number
of shares of Common Stock outstanding on such record date plus the number
of additional shares of Common Stock offered for subscription or purchase,
and of which the denominator shall be the number of shares of Common Stock
outstanding on such record date plus the number of shares which the
aggregate offering price of the total number of shares of Common Stock so
offered would purchase at the then current market price per share of
Common Stock. Such adjustment shall be made whenever such rights, options
or warrants are issued, and shall become effective retroactively to
immediately after the record date for the determination of shareholders
entitled to receive such rights, options or warrants.
(c) In case the Company shall distribute to all holders of its
shares of Common Stock shares of stock other than Common Stock or
evidences of its indebtedness or assets (excluding cash dividends payable
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out of consolidated earnings or retained earnings and dividends or
distributions referred to in paragraph (a) above) or rights, options or
warrants or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock (excluding those referred
to in paragraph (b) above), then in each case the number of Shares
thereafter issuable upon the exercise of each Warrant shall be determined
by multiplying the number of Shares theretofore issuable upon the exercise
of each Warrant, by a fraction, of which the numerator shall be the
current market price per share of Common Stock (as defined in paragraph
(d) below) on the record date mentioned below in this paragraph (c), and
of which the denominator shall be the current market price per share of
Common Stock on such record date, less the then fair value (as determined
in good faith by the Board of Directors of the Company, whose
determination shall be conclusive) of the portion of the shares of stock
other than Common Stock or assets or evidences of indebtedness so
distributed or of such subscription rights, options or warrants, or of
such convertible or exchangeable securities applicable to one share of
Common Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date of
distribution retroactive to immediately after the record date for the
determination of shareholders entitled to receive such distribution.
(d) For the purpose of any computation under paragraphs (b) and
(c) of this Section 8, the current market price per share of Common Stock
at any date (the "Current Market Price") shall be the average of the daily
closing prices for fifteen (15) consecutive trading days commencing
twenty (20) trading days before the date of such computation. The closing
price for each day shall be the last reported sale price regular way or,
in case no such reported sale takes place on such day, the average of the
closing bid and asked prices regular way for such day, in either case on
the principal national securities exchange on which the shares are listed
or admitted to trading, or if they are not listed or admitted to trading
on any national securities exchange, but are traded in the over-the-
counter market, the closing sale price of the Common Stock or, in case no
sale is publicly reported, the average of the representative closing bid
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and asked quotations for the Common Stock, on the NASDAQ system or any
comparable system, or if the Common Stock is not listed on the NASDAQ
system or a comparable system, the closing sale price of the Common Stock
or, in case no sale is publicly reported, the average of the closing bid
and asked prices as furnished by two members of the NASD selected from
time to time by the Company for that purpose.
(e) No adjustment in the number of Shares purchasable hereunder
shall be required unless such adjustment would require an increase or
decrease of at least one percent (1%) in the number of Shares purchasable
upon the exercise of each Warrant; provided, however, that any adjustments
which by reason of this paragraph (e) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment but
not later than three years after the happening of the specified event or
events. All calculations shall be made to the nearest one thousandth of a
share.
(f) Whenever the number of Shares purchasable upon the exercise
of each Warrant is adjusted, as herein provided, the Exercise Price shall
be adjusted by multiplying the Exercise Price in effect immediately prior
to such adjustment by a fraction, of which the numerator shall be the
number of Shares purchasable upon the exercise of each Warrant immediately
prior to such adjustment, and of which the denominator shall be the number
of Shares so purchasable immediately thereafter.
(g) For the purpose of this Section 8, the term "shares of
Common Stock" shall mean (i) the class of stock designated as the Common
Stock of the Company at the date of this Agreement or (ii) any other class
of stock resulting from successive changes or reclassifications of such
shares consisting solely of changes in par value, or from no par value to
par value, or from par value to no par value. In the event that at any
time, as a result of an adjustment made pursuant to paragraph (a) above,
the Holders shall become entitled to purchase any shares of capital stock
of the Company other than shares of Common Stock, thereafter the number of
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such other shares so purchasable upon exercise of each Warrant and the
Exercise Price of such shares shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Shares contained in paragraphs (a) through
(f), inclusive, and paragraphs (h) through (m), inclusive, of this Section
8, and the provisions of Sections 4, 5, 7 and 10, with respect to the
Shares, shall apply on like terms to any such other shares.
(h) Upon the expiration of any rights, options, warrants or
conversion rights or exchange privileges, if any thereof shall not have
been exercised, the Exercise Price and the number of shares of Common
Stock purchasable upon the exercise of each Warrant shall, upon such
expiration, be readjusted and shall thereafter be such as it would have
been had it originally been adjusted (or had the original adjustment not
been required, as the case may be) as if (i) the only shares of Common
Stock so issued were the shares of Common Stock, if any, actually issued
or sold upon the exercise of such rights, options, warrants or conversion
rights or exchange privileges and (ii) such shares of Common Stock, if
any, were issued or sold for the consideration actually received by the
Company upon such exercise plus the aggregate consideration, if any,
actually received by the Company for the issuance, sale or grant of all of
such rights, options, warrants or conversion rights or exchange privileges
whether or not exercised; provided, however, that no such readjustment
shall have the effect of decreasing the number of shares issuable upon the
exercise of each Warrant or increasing the Exercise Price by an amount in
excess of the amount of the adjustment initially made in respect of the
issuance, sale or grant of such rights, options, warrants or conversion
rights or exchange privileges.
(i) The Company may, at its option at any time during the term
of the Warrants, reduce the then current Exercise Price to any amount
deemed appropriate by the Board of Directors of the Company.
(j) Whenever the number of Shares issuable upon the exercise of
each Warrant or the Exercise Price of such Shares is adjusted, as herein
provided, the Company shall promptly mail by first class mail, postage
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prepaid, to each Holder, notice of such adjustment or adjustments. The
Company shall retain a firm of independent public accountants (who may be
the regular accountants employed by the Company) to make any computation
required by this Section 8 and shall cause such accountants to prepare a
certificate setting forth the number of Shares issuable upon the exercise
of each Warrant and the Exercise Price of such Shares after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was
made. Such certificate shall be conclusive as to the correctness of such
adjustment and each Holder shall have the right to inspect such
certificate during reasonable business hours.
(k) Except as provided in this Section 8, no adjustment in
respect of any dividends shall be made during the term of a Warrant or
upon the exercise of a Warrant.
(l) In case of any consolidation of the Company with or merger
of the Company with or into another corporation or in case of any sale or
conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, the Company or such successor or
purchasing corporation (or an affiliate of such successor or purchasing
corporation), as the case may be, agrees that each Holder shall have the
right thereafter upon payment of the Exercise Price in effect immediately
prior to such action to purchase upon exercise of each Warrant the kind
and amount of shares and other securities and property (including cash)
which he would have owned or have been entitled to receive after the
happening of such consolidation, merger, sale or conveyance had such
Warrant been exercised immediately prior to such action. The provisions
of this paragraph (l) shall similarly apply to successive consolidations,
mergers, sales or conveyances.
(m) Notwithstanding any adjustment in the Exercise Price or the
number or kind of shares purchasable upon the exercise of the Warrants
pursuant to this Agreement, certificates for Warrants issued prior or
subsequent to such adjustment may continue to express the same price and
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number and kind of Shares as are initially issuable pursuant to this
Agreement.
9. RESERVED.
10. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS. The Company covenants and agrees
with the Placement Agent and any other or subsequent Holders of the Registrable
Securities (as defined in paragraph (f) of this Section 10) that, subject to
the availability of audited financial statements which would comply with
Regulation S-X under the Securities Act, upon written request of the then
Holder(s) of at least a majority of the Warrants or the Registrable Securities,
or both, which were originally issued to the Placement Agent or its
designees, made at any time within the period commencing one year and ending
five years after the Closing Date, the Company will file as promptly as
practicable and, in any event, within 60 days after receipt of such written
request, at its expense (other than the fees of counsel and sales commissions
for such Holders), no more than once, a post-effective amendment (the
"Amendment") to a registration statement, or a new registration statement or a
Regulation A Offering Statement (an "Offering Statement") under the Securities
Act, registering or qualifying the Registrable Securities for sale. Within
fifteen (15) days after receiving any such notice, the Company shall give
notice to the other Holders of the Registrable Securities advising that the
Company is proceeding with such Amendment, registration statement or Offering
Statement and offering to include therein the Registrable Securities of such
Holders. The Company shall not be obligated to any such other Holder unless
such other Holder shall accept such offer by notice in writing to the Company
within ten (10) days thereafter. The Company will use its best efforts,
through its officers, directors, auditors and counsel in all matters necessary
or advisable, to file and cause to become effective such Amendment,
registration statement or Offering Statement as promptly as practicable and for
a period of nine months thereafter to reflect in the Amendment, registration
statement or Offering Statement financial statements which are prepared in
accordance with Section 10(a) (3) of the Securities Act and any facts or events
arising that, individually, or in the aggregate, represent a fundamental and/or
material change in the information set forth in the Amendment, registration
statement or Offering Statement to
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enable any Holders of the Warrants to either sell such Warrants or to exercise
such Warrants and sell Shares, or to enable any holders of Shares to sell such
Shares, during said nine-month period. The Holders may sell the Registrable
Securities pursuant to the Amendment, registration statement or the Offering
Statement without exercising the Warrants. If any registration pursuant to
this paragraph (a) is an underwritten offering, the Holders of a majority of
the Registrable Securities to be included in such registration shall be
entitled to select the underwriter or managing underwriter (in the case of a
syndicated offering) of such offering, subject to the Company's approval which
shall not be unreasonably withheld.
(b) PIGGYBACK REGISTRATION RIGHTS. The Company covenants and agrees
with the Placement Agent and any other Holders or subsequent Holders of the
Registrable Securities that if, at any time within the period commencing one
year and ending five years after the Closing Date, it proposes to file a
registration statement or Offering Statement with respect to any class of
equity or equity-related security (other than in connection with an offering to
the Company's employees or in connection with an acquisition, merger or similar
transaction) under the Securities Act in a primary registration on behalf of
the Company and/or in a secondary registration on behalf of holders of such
securities and the registration form or Offering Statement to be used may be
used for registration of the Registrable Securities, the Company will give
prompt written notice (which, in the case of a registration statement or
notification pursuant to the exercise of demand registration rights other than
those provided in Section 10(a) of this Agreement, shall be within ten (10)
business days after the Company's receipt of notice of such exercise and, in
any event, shall be at least 30 days prior to such filing) to the Holders of
Registrable Securities (regardless of whether some of the Holders shall have
theretofore availed themselves of the right provided in Section 10(a) of this
Agreement) at the addresses appearing on the records of the Company of its
intention to file a registration statement or Offering Statement and will offer
to include in such registration statement or Offering Statement all but not
less than 20% of the Registrable Securities and limited, in the case of a
Regulation A offering, to the amount of the available exemption, subject to
paragraphs (i) and (ii) of this paragraph (b), such number of Registrable
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Securities with respect to which the Company has received written requests for
inclusion therein within ten (10) days after the giving of notice by the
Company. All registrations requested pursuant to this paragraph (b) are
referred to herein as "Piggyback Registrations". All Piggyback Registrations
pursuant to this paragraph (b) will be made solely at the Company's expense.
This paragraph is not applicable to a registration statement filed by the
Company with the Commission on Forms S-4 or S-8 or any successor forms.
(i) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback Registration
includes an underwritten primary registration on behalf of such Company and
the underwriter(s) for such offering determines in good faith and advises
the Company in writing that in its/their opinion the number of Registrable
Securities requested to be included in such registration exceeds the number
that can be sold in such offering without materially adversely affecting
the distribution of such securities by the Company, the Company will
include in such registration (A) first, the securities that the Company
proposes to sell and (B) second, the Registrable Securities requested to be
included in such registration, apportioned pro rata among the Holders of
Registrable Securities, and (C) third, securities of the holders of other
securities requesting registration.
(ii) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback
Registration consists only of an underwritten secondary registration on
behalf of holders of securities of the Company (other than pursuant to
Section 10(a)), and the underwriter(s) for such offering advises the
Company in writing that in its/their opinion the number of Registrable
Securities requested to be included in such registration exceeds the number
which can be sold in such offering without materially adversely affecting
the distribution of such securities by the Company, the Company will
include in such registration (A) first, the securities requested to be
included therein by the holders requesting such registration and the
Registrable Securities requested to be included in such registration, pro
rata among all such holders on the basis of the number of shares requested
to be included by each such holder, provided, however, the Company will use
its best efforts to include not less than 20% of the Registrable
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Securities, and (B) second, other securities requested to be included in
such registration.
Notwithstanding the foregoing, if any such underwriter shall
determine in good faith and advise the Company in writing that the distribution
of the Registrable Securities requested to be included in the registration
concurrently with the securities being registered by the Company would
materially adversely affect the distribution of such securities by the Company,
then the Holders of such Registrable Securities shall delay their offering and
sale for such period ending on the earliest of (1) 90 days following the
effective date of the Company's registration statement, (2) the day upon which
the underwriting syndicate, if any, for such offering shall have been disbanded
or, (3) such date as the Company, managing underwriter and Holders of
Registrable Securities shall otherwise agree. In the event of such delay, the
Company shall file such supplements, post-effective amendments and take any
such other steps as may be necessary to permit such Holders to make their
proposed offering and sale for a period of 120 days immediately following the
end of such period of delay. If any party disapproves of the terms of any such
underwriting, it may elect to withdraw therefrom by written notice to the
Company, the underwriter, and the Placement Agent. Notwithstanding the
foregoing, the Company shall not be required to file a registration statement
to include Shares pursuant to this Section 10(b) if independent counsel,
reasonably satisfactory to counsel for the Company and counsel for the
Placement Agent, renders an opinion to the Company that the Shares proposed to
be disposed of may be transferred pursuant to the provisions of Rule 144 under
the Securities Act or otherwise without registration under the Securities Act.
(c) OTHER REGISTRATION RIGHTS. In addition to the rights above
provided, the Company will cooperate with the then Holders of the Registrable
Securities in preparing and signing any registration statement or Offering
Statement, in addition to the registration statements and Offering Statements
discussed above, required in order to sell or transfer the Registrable
Securities and will supply all information required therefor, but such
additional registration statement or Offering Statement, shall be at the then
Holders' cost and expense; provided, however, that if the Company elects to
register or qualify additional shares of Common Stock, the cost and expense of
such registration statement or Offering Statement will be prorated between the
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Company and the Holders of the Registrable Securities according to the
aggregate sales price of the securities being issued. Notwithstanding the
foregoing, the Company will not be required to file a registration statement or
Offering Statement pursuant to this paragraph (c), (i) at a time when the
audited financial statements required to be included therein are not available,
which time shall be limited to the period commencing 45 days after the end of
the Company's last fiscal year and ending 90 days after the end of such fiscal
year, or (ii) within 90 days after completion of a public offering by the
Company of any of its Common Stock or equity-related securities or (iii) if it
would adversely impact the Company it its capital raising plans or otherwise
(in which latter case filing may be delayed no longer than 120 days).
(d) ACTION TO BE TAKEN BY THE COMPANY. In connection with the
registration of Registrable Securities in accordance with paragraphs (a), (b)
or (c) of this Section 10, the Company agrees to:
(i) Bear the expenses of any registration or qualification under
paragraphs (a) or (b) of this Section 10, including but not limited to,
legal, accounting and printing fees; provided, however, that in no event
shall the Company be obligated to pay (A) any fees and disbursements of
special counsel for Holders of Registrable Securities, or (B) any
underwriters' discount or commission in respect of such Registrable
Securities, (C) any stock transfer taxes attributable to the sale of the
Registrable Securities, or (D) upon the exercise of any demand
registration right provided for in paragraph (a) of this Section 10, the
cost of any liability or similar insurance required by an underwriter, to
the extent that such costs are attributable solely to the offering of such
Registrable Securities, payment of which shall, in each case, be the sole
responsibility of the Holders of the Registrable Securities.
(ii) Use its best efforts to register or qualify the Registrable
Securities for offer or sale under state securities or Blue Sky laws of
such jurisdictions in which the Placement Agent or such Holders shall
reasonably request, provided, however, that no qualification shall be
required in any jurisdiction where, as a result thereof, the Company would
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be subject to service of general process or to taxation as a foreign
corporation doing business in such jurisdiction to which it is not then
subject, and to do any and all other acts and things which may be
necessary or advisable to enable the holders to consummate the proposed
sale, transfer or other disposition of such securities in any
jurisdiction; and
(iii) Enter into a cross-indemnity agreement, in customary form,
with each underwriter, if any, and each holder of securities included in
such Amendment, registration statement or Offering Statement.
(e) ACTION TO BE TAKEN BY THE HOLDERS. In connection with the
registration of the Registrable Securities in accordance with paragraphs
(a), (b) or (c) of this Section 10, the Company's obligation shall be
conditioned as to each such public offering upon a timely receipt by the
Company in writing of:
(i) Information as to the terms of such public offering furnished by
or on behalf of each Holder intending to make a public offering of his,
her or its Registrable Securities; and
(ii) Such other information as the Company may reasonably require
from such Holders, or any underwriter for any of them, for inclusion in
such registration statement or Notification on Form 1-A.
(f) For purposes of this Section 10, (i) the term "Holder" shall
include holders of Shares, and (ii) the term "Registrable Securities" shall
mean the Shares, if issued.
11. NOTICE TO HOLDERS.
(a) Nothing contained in this Agreement or in any of the Warrants
shall be construed as conferring upon the Holders thereof the right to vote or
to receive dividends or to consent or to receive notice as shareholders in
respect of the meetings of shareholders or the election of directors of the
Company or any other matter, or any rights whatsoever as shareholders of the
Company; provided, however, that in the event that a meeting of shareholders
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shall be called to consider and take action on a proposal for the voluntary
dissolution of the Company, other than in connection with a consolidation,
merger or sale of all, or substantially all, of its property, assets, business
and good will as an entirety, then and in that event the Company shall cause a
notice thereof to be sent by first-class mail, postage prepaid, at least twenty
(20) days prior to the date fixed as a record date or the date of closing the
transfer books in relation to such meeting, to each registered Holder of
Warrants at such Holder's address appearing on the Warrant Register;
but failure to mail or to receive such notice or any defect therein or in the
mailing thereof shall not affect the validity of any action taken in connection
with such voluntary dissolution.
(b) In the event the Company intends to make any distribution on its
Common Stock (or other securities which may be issuable in lieu thereof upon
the exercise of Warrants), including, without limitation, any such distribution
to be made in connection with a consolidation or merger in which the Company is
the continuing corporation, or to issue subscription rights or warrants to
holders of its Common Stock, the Company shall cause a notice of its intention
to make such distribution to be sent by first-class mail, postage prepaid, at
least twenty (20) days prior to the date fixed as a record date or the date of
closing the transfer books in relation to such distribution, to each registered
Holder of Warrants at such Holder's address appearing on the Warrant Register,
but failure to mail or to receive such notice or any defect therein or in the
mailing thereof shall not affect the validity of any action taken in connection
with such distribution.
12. NOTICES. Any notice pursuant to this Agreement to be given or
made by the Holder of any Warrant and/or the holder of any Share to or on the
Company shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed as follows or to such other address as the Company
may designate by notice given in accordance with this Section 12, to the
Holders of Warrants and/or the holders of Shares:
GRILL CONCEPTS, INC.
11661 San Vincente Boulevard
Suite 404
Los Angeles, CA 90049
Attention: Secretary
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Notices or demands authorized by this Agreement to be given or made
by the Company to or on the Holder of any Warrant and/or the holder of any
Share shall be sufficiently given or made (except as otherwise provided in this
Agreement) if sent by first-class mail, postage prepaid, addressed to such
Holder or such holder of Shares at the address of such Holder or such holder of
Shares as shown on the Warrant Register or the books of the Company, as the
case may be.
13. GOVERNING LAW. This Agreement and each Warrant issued hereunder
shall be governed by and construed in accordance with the substantive laws of
the State of California. The Company hereby agrees to accept service of
process by notice given to it pursuant to the provisions of Section 12.
14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original; but
such counterparts together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day, month and year first above written.
GRILL CONCEPTS, INC.
(registrant)
By:
--------------------------------------
Name: Michael Weinstock
Title: Executive Vice President
ROCHON CAPITAL GROUP, LTD.
By:
--------------------------------------
Name: Phillip L. Neiman
Title: President
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<PAGE>
No. Warrants
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GRILL CONCEPTS, INC.
Warrant Certificate
THIS CERTIFIES THAT for value received ,
---------------------------------
or registered assigns, is the owner of the number of Warrants set forth above,
each of which entitle the owner thereof to purchase one fully paid and
nonassessable share of common stock, $0.0001 par value (the "Common Stock"), of
GRILL CONCEPTS, INC., a Delaware corporation (the "Company"), at the purchase
price equal to the Exercise Price, as defined in the Warrant Agreement, dated
as of December , 1996 (the "Warrant Agreement"), between the Company and
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Rochon Capital Group, Ltd. upon presentation and surrender of this Warrant
Certificate with the Form of Election to Purchase duly executed. The number of
Warrants evidenced by this Warrant Certificate (and the number of shares which
may be purchased upon exercise thereof, rounded up to the nearest full share)
set forth above, and the Exercise Price per share set forth above, are the
number and Exercise Price as of the date of original issuance of the Warrants,
based on the shares of Common Stock of the Company as constituted at such date.
As provided in the Warrant Agreement, the Exercise Price and the number or kind
of shares which may be purchased upon the exercise of the Warrants evidenced by
this Warrant Certificate are, upon the happening or certain events, subject to
modification and adjustment.
This Warrant Certificate is subject to, and entitled to the benefits
of, all of the terms, provisions and conditions of the Warrant Agreement, which
Warrant Agreement is hereby incorporated herein by reference and made a part
hereof and to which Warrant Agreement reference is hereby made for a full
description of the rights, limitations of rights, duties and immunities
hereunder of the Company and the holders of the Warrant Certificates. Copies
of the Warrant Agreement are on file at the principal office of the Company.
This Warrant Certificate, with or without other Warrant Certificates,
upon surrender at the principal office of the Company, may be exchanged for
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<PAGE>
another Warrant Certificate or Warrant Certificates of like tenor and date
evidencing Warrants entitling the holder to purchase a like aggregate number of
shares of Common Stock as the Warrants evidenced by the Warrant Certificate or
Warrant Certificates surrendered entitled such holder to purchase. If this
Warrant Certificate shall be exercised in part, the holder hereof shall be
entitled to receive upon surrender hereof another Warrant Certificate or
Warrant Certificates for the number of whole Warrants not exercised.
No holder of this Warrant Certificate shall be entitled to vote,
receive dividends, subscription rights or be deemed the holder of Common Stock
or any other securities of the Company which may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issue of stock, reclassification of stock,
change of par value or change of stock to no par value, consolidation, merger,
conveyance, or otherwise)or, except as provided in the Warrant Agreement, to
receive notice of meetings, until the Warrant or Warrants evidenced by this
Warrant Certificate shall have been exercised and the Shares shall have become
deliverable as provided in the Warrant Agreement.
If this Warrant shall be surrendered for exercise within any period
during which the transfer books for the Company's Common Stock or other class
of stock purchasable upon the exercise of this Warrant are closed for any
purpose, the Company shall not be required to make delivery of certificates for
shares purchasable upon such exercise until the date of the reopening of said
transfer books, provided, however, that such books shall not be closed for
longer than a 20-day period.
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<PAGE>
IN WITNESS WHEREOF, THE COMPANY has caused the signature (or
facsimile signature) of its President and its Secretary to be printed hereon
and its corporate seal (or facsimile) to be printed hereon.
Date: December , 1996
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GRILL CONCEPTS, INC.
(registrant)
By:
--------------------------------------
Name: Robert Spivak
Title: President
Attest:
By:
------------------------------
Name: Michael Weinstock
Title: Secretary
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<PAGE>
FORM OF
ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Warrant Certificate.)
FOR VALUE RECEIVED hereby sells, assigns and
--------------------------
transfers unto this Warrant Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint
, to transfer the within Warrant Certificate on the
- ---------------------------
books of the within-named Company, with full power of substitution.
Dated: , 19
------------------- ----
---------------------------------------
Signature
Signature Guaranteed:
NOTICE
The signature of the foregoing Assignment must correspond to the name
as written upon the face of this Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever.
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<PAGE>
FORM OF
ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Warrant Certificate.)
TO: GRILL CONCEPTS, INC.
The undersigned hereby irrevocably elects to exercise Warrants
represented by this Warrant Certificate to purchase shares of Common
--------
Stock issuable upon the exercise of such Warrants and requests that
certificates for such shares be issued in the name of:
(Please insert social security, tax identification or other identifying
number)
------------------------------
------------------------------
------------------------------
(Please print name and address)
Date: , 19
------------------ -----
-------------------------------------
Signature
(Signature must conform in all
respects to name of holder as
specified on the face of this Warrant
Certificate)
Signature Guaranteed:
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