SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
Commission File No. 0-23226
GRILL CONCEPTS, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 13-3319172
- --------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
11661 San Vicente Blvd., Suite 404, Los Angeles, California 90049
-------------------------------------------------------------------
(Address of principal executive offices)
(310) 820-5559
(Issuer's telephone number)
-----------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes x No
As of August 9, 1996 13,849,230 shares of Common Stock of the issuer were
outstanding.
<PAGE>
GRILL CONCEPTS, INC.
----------------------
INDEX
Page
Number
PART I - FINANCIAL INFORMATION -------
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - June 30, 1996 and
December 31, 1995............................................... 1
Consolidated Condensed Statements of Operations -
For the three months and six months ended
June 30, 1996 and June 25, 1995................................. 3
Consolidated Condensed Statements of Cash Flows -
For the six months ended June 30, 1996 and June 25, 1995........ 4
Notes to Unaudited Consolidated Condensed Financial
Statements...................................................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 8
PART II - OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders..............11
Item 6. Exhibits and Reports on Form 8-K...............................11
SIGNATURES.................................................................11
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GRILL CONCEPTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
ASSETS
June 30, December 31,
1996 1995
---------- --------------
Current assets:
Cash and cash equivalents $1,788,528 $631,116
Receivables 38,338
Inventory 213,407 154,898
Prepaid expenses 675,535 742,419
---------- --------
Total current assets 2,715,808 1,528,433
--------- ---------
Property and equipment, at cost 7,211,289 6,340.966
Less: accumulated depreciation (2,908,153) (2,603,443)
----------- -----------
Property and equipment, net 4,303,136 3,737,523
---------- ---------
Other assets:
Goodwill 1,968,792 2,003,144
Liquor license, net 702,676 658,569
Other 181,191 104,143
--------- ---------
Total other assets 2,852,659 2,765,856
---------- ---------
Total assets $9,871,603 $8,031,812
========== ==========
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
GRILL CONCEPTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, December 31,
1996 1995
----------- ------------
Current liabilities:
Accounts payable $943,131 $1,038,440
Accrued expenses 896,339 988,258
Current portion of long term debt 450,969 450,386
----------- ------------
Total current liabilities 2,290,439 2,477,084
----------- ------------
Long-term debt, net of current 1,129,585 1,325,926
----------- ------------
Shareholders' equity:
Preferred stock, $.001 par value
authorized 1,000,000 shares;
Shares issued and outstanding
none in 1995, 1500 in 1996 2
Common stock, $.00001 par value:
20,000,000 shares authorized:
shares issued and outstanding:
12,999,230 in 1995 and
13,849,230 in 1996 138 130
Capital in excess of par value 9,031,071 6,726,081
Accumulated deficit (2,579,632) ( 2,497,409)
----------- ------------
Shareholder's equity 6,451,579 4,228,802
----------- ------------
Total liabilities and
shareholder's equity $9,871,603 $8,031,812
=========== ===========
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
GRILL CONCEPTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- ----------------
<S> <C> <C> <C> <C>
June June 25, June 30 June 25
1996 1995 1996 1995
---------- ---------- ------- ---------
Sales $5,691,606 $5,385,837 $10,937,385 $9,905,992
Cost of sales 1,546,185 1,452,721 2,892,312 2,669,339
---------- ---------- ----------- ----------
Gross profit 4,145,421 3,933,116 8,045,073 7,236,653
---------- ---------- ----------- ----------
Costs and expenses:
Restaurant operating expenses 3,580,099 3,308,517 6,766,900 6,046,079
General and administrative 440,217 396,973 911,151 697,747
Depreciation and amortization 186,552 187,585 377,987 350,227
Amortization of preopening expenses - - - 4,043
---------- ---------- ----------- ----------
Total operating expenses 4,206,868 3,893,075 8,056,038 7,098,096
---------- ---------- ----------- ----------
Income (loss) from operations (61,447) 40,041 (10,965) 138,557
---------- ---------- ----------- ----------
Interest expense, net 32,561 28,661 70,458 64,024
---------- ---------- ----------- ----------
Income (loss) before taxes on income (94,008) 11,380 (81,423) 74,533
Provision for taxes on income - - 800 800
---------- ---------- ----------- ----------
Net income (loss) ($94,008) $11,380 (82,223) $73,733
========== ========== =========== ==========
Net income (loss) per share ($0.01) $0.00 ($0.01) $0.01
========== ========== =========== ==========
Average weighted shares outstanding 13,653,076 13,613,621 13,326,153 11,731,134
========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
GRILL CONCEPTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
----------------
June 30, June 25,
1996 1995
--------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($82,223) $73,733
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 371,507 354,270
Changes in operating assets and liabilities
Inventories (9,041) (24,070)
Prepaid expenses 32,049 (22,116)
Other assets (31,027) 6,113
Accounts payable (153,793) 97,295
Accrued liabilities (199,371) (18,535)
----------- -----------
Net cash provided by (used in) operations ( 71,899) 466,690
----------- -----------
Cash flows from investing activities:
Additions to furniture, equipment and
improvements (397,084) (127,756)
Net cash acquired through purchase of business 337,153 1,105,707
----------- -----------
Net cash provided by (used in) investing activities ( 59,931) 977,951
----------- -----------
Cash flows from financing activities:
Proceeds from issue of Preferred Stock 1,455,000
Proceeds from issue of long-term debt 178,700
Payments on long-term debt (195,758) (55,239)
Payments of shareholder's loan (150,000)
----------- -----------
Net cash provided by (used) in financing activities 1,259,242 (26,539)
----------- -----------
Net increase in cash and cash equivalents 1,127,412 1,418,102
Cash and cash equivalents, Beginning of period 631,116 191,242
----------- -----------
Cash and cash equivalents, End of period $1,758,52 $1,609,344
=========== ===========
*Net cash acquired through purchase of business
Working capital, other than cash $16,168 $505,591
Furniture, equipment and improvements (473,239) (1,348,853)
Excess of cost over net assets acquired (1,895,814)
Other assets (55,776) (519,217)
Long-term debt 15,000
Fair value of stock exchanged 850,000 4,349,000
----------- -----------
Net cash acquired $337,153 $1,105,707
----------- -----------
Supplemental cash flow information:
Cash paid during the year for:
Interest $104,935 $118,476
Income taxes $800 $800
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE>
GRILL CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL PRESENTATION
The unaudited interim consolidated financial statements as of June 30, 1996
and for the six months ended June 30, 1996 and June 25, 1995 have been
prepared in accordance with generally accepted accounting principles and
include all adjustments (consisting only of normal recurring adjustments)
which are, in the opinion of management, necessary for a fair statement of
the results of operations for such interim periods presented and financial
position at such date. The current period results of operations are not
necessarily indicative of results which utimately will be reported for the
full year ending December 29, 1996.
The December 31, 1995 balance sheet data was derived from audited financial
statements but does not include all disclosures required by generally
accepted accounting principles. The interm financial statement and notes
thereto should be read in conjunction with the financial statements and
notes
included in the Company's Form10-KSB dated December 31, 1995.
2. BUSINESS AND ORGANIZATION
On March 3, 1995, pursuant to an exchange agreement previously entered into
by Magellan Restaurant Systems, Inc. (Magellan) and Grill Concepts, Inc.
(GCI), GCI became a wholly owned subsidiary of Magellan. Immediately
following the exchange, the name of Magellan was changed to Grill Concepts,
Inc., a Delaware corporation, and now is the Company.
All of GCI's common stock was exchanged for 8,500,000 shares of Magellan
Common Stock. As a result, following the Exchange, holders of GCI common
stock controlled 63% of the outstanding common stock of the Company, and
for accounting purposes the acquisition has been treated as a
recapitalization of GCI with GCI as the acquiror. The transaction was
therefore accounted for as a purchase under the "reverse acquisition"
method. The resulting excess of cost over net assets acquired will be
amortized over 30 years.
As a result of the above, these interim statements include the accounts of
GCI and Magellan on a consolidated basis for 1996. The Statement of
Operations for 1995 includes the operations of GCI for the entire 26 week
period and the operations of Magellan for only the 16 week period between
March 3, 1995 and June 25, 1995.
The operations of Tailgators are not included in 1996 since it was closed.
The second quarter of 1996 includes the accounts of "The Grill".
See note 4 below.
3. SHAREHOLDER'S EQUITY
During the quarter ended June 30, 1996, the Company completed an offering
of $1.5 million of Series A 10% Convertible Preferred Stock to an offshore
invester pursuant to Regulation S under the Securities Act of 1933, as
amended. The preferred shares are convertable at the option of the holder
in 25% increments commencing 60, 90, 120 and 150 days after June 17, 1996.
The conversion price of the preferred shares is equal to the lesser of
$2.25 per share or 85% of the average closing bid price of the common stock
for the five trading days preceding notice of conversion; provided,
however, that conversion shall be prohibited during periods where the
reported short interest in the Company's common stock exceeds 200% of the
average daily trading volume and provided, further, that the conversion
price shall in no event be less than $1.125 per share. In the event
conversion is precluded for a period of 30 days as a result of the fixed
floor on conversion price, the Company will have 15 days to redeem the
preferred shares at 110% offering price or, in the alternative, permit
conversion at the then applicable price without regard to the floor on
conversion price. The preferred shares are entitled to receive a 10%
cumulative dividend payable semi-annually until the preferred shares
are either redeemed or converted. The Company may, at its option, redeem
the preferred shares at their initial offering price or force conversion of
the preferred shares at the
5
<PAGE>
then applicable conversion price commencing June 17, 1998. The holder of
the preferred shares may, at its option, cause any preferred shares
remaining outstanding at June 17, 2000 to be redeemed at their initial
offering price.
In connection with the offshore placement of the Series A Convertible
Preferred Shares, the Company issued warrants to acquire an aggregate of
250,000 shares of the Company's common stock at a price of $3.00 per share
for a period expiring June 17, 2001. The warrants are redeemable at the
Company's option commencing June 17, 1999 at a price of $.01 per warrant
provided that the closing bid price of the Company's common stock has
equaled or exceeded $4.50 per share for 20 trading days.
4. ACQUISITION OF THE GRILL
On April 1, 1996, the Company acquired 100% of the common stock of EMNDEE,
Inc. ("EMNDEE") pursuant to a share exchange. The Company issued an
aggregate of 432,735 shares of common stock in exchange for the stock of
EMNDEE. EMNDEE was the general partner of, and held a 50.91% interest in,
The Grill Limited Partnership, a California limited partnership (the "Grill
Partnership"), which owned and operated The Grill on the Alley (the
"Grill"), an upscale Beverly Hills restaurant which opened in 1984 and
served as the model for the Company's Daily Grill restaurants.
On April 22, 1996, the Company consummated the acquisition of 100% of the
common stock of The Grill on the Alley, Inc. ("Grill, Inc."). Grill, Inc.
is a partner, and held the remaining 49.09% interest, in the Grill
Partnership. The Company issued an aggregate of 417,265 shares of common
stock in exchange for the stock of Grill, Inc.
The Company's principal shareholders and directors (Robert Spivak, Michael
Weinstock and Richard Shapiro) controlled and were the principal
shareholders of EMNDEE. From 1995 through the date of acquisition, the
Company provided management services to The Grill in exchange for a
management fee in an amount equal to 5% of the revenues of The Grill.
5. PROPOSED ACQUISITION OF HAMBURGER HAMLET
In July of 1996, the Company submitted a proposal to acquire selected
assets constituting all of the remaining operations of Hamburger Hamlet
Restaurants, Inc. ("Hamburger Hamlet"). Hamburger Hamlet, and its
predecessors, has operated high end casual dining restaurants since 1950.
The operations of Hamburger Hamlet were acquired by the then management of
the company in a leveraged buyout in 1988 and in 1991 Hamburger Hamlet
completed an initial public offering. In 1996, Hamburger Hamlet filed
bankruptcy and closed 12 unprofitable restaurants, all of which had been
opened since the leveraged buyout.
Pursuant to the Company's proposal, the Company has offered to acquire the
remaining 19 Hamburger solely from 50% of annual earnings before interest,
taxes, depreciation and amortization ("EBITDA") attributable to the
acquired restaurants to the extent EBITDA exceeds $2.5 million, not to
exceed Hamlet restaurants for (i) $8.5 million in cash (ii) 500,000
warrants exercisable for three years at a price equal to 105% of the price
of the Company's common stock at the closing of the acquisition, and (iii)
a non-interest bearing performance note (the "Performance Note") in the
amount of $3.2 million payable $750,000 per year (or, at the option of
Hamburger Hamlet, $3.0 million from 50% of annual EBITDA in excess of $2.5
million without the $750,000 annual cap).
Management of Hamburger Hamlet has submitted a plan of reorganization based
on acceptance of the Company's offer. Additionally, the secured creditors
of Hamburger Hamlet have agreed in principal to approve the Company's
offer. The general creditors of Hamburger Hamlet have, in prior
discussions, rejected the Company's offer. Consummation of the acquisition
of the Hamburger Hamlet restaurants is subject to a number of
contingencies, including completion of a definitive documents, further due
diligence, approval of the plan by the creditors and the bankruptcy court
and arrangement of satisfactory financing.
6
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Grill Proforma Proforma
Concepts, Inc. The Grill Adjustments Combined
--------------- --------- ----------- --------
<S> <C> <C> <C> <C>
Sales $10,123,258 $1,669,422 $11,792,680
Cost of sales 2,636,932 523,427 3,160.359
--------------- ---------- -----------
Gross profit 7,486,326 1,145,995 8,632,321
--------------- ---------- -----------
Restaurant operating expenses 6,372,334 841,333 7,213,667
General and administration 927,229 76,226 ($38,603) <F2>
38603 <F2> 1,003,455
Depreciation and amortization 357,369 6,480 9,456 <F1> 373,305
--------------- ----------- -------------- -----------
Total operating expenses 7,656,932 924,039 9,456 8,590,427
--------------- ----------- -------------- -----------
Income (loss) from operations (170,606) 221,956 9,456 41,894
Interest (income)/expense 74,863 ( 7,838) -.- 67,025
--------------- ----------- -------------- -----------
Income (loss) before income taxes (245,469) 229,794 9,456 (25,131)
Taxes on income 800 -.- 800
-------------- ----------- -------------- -----------
Net income (loss) ($246,269) $229,794 $9,456 ($25,931)
============== =========== =========== ===========
Net income (loss) per share ($0.00)
Weighted average shares outstanding 13,326,153
FOR THE SIX MONTHS ENDED JUNE 25, 1995
Grill Proforma Proforma
Concepts, Inc. The Grill Adjustments Combined
--------------- --------- ----------- --------
Sales $9,905,992 $1,330,267 $11,236,259
Cost of sales 2,669,339 407,882 3,077,221
--------------- ---------- -----------
Gross profit 7,236,653 922,385 8,159,038
--------------- ---------- -----------
Restaurant operating expenses 6,046,079 753,721 6,799,800
General and administration 697,747 69,495 (19,038) <F2>
19,038 <F2> 767,242
Depreciation and amortization 354,270 5,668 18,912 <F1> 378,850
-------------- ----------- ----------- -----------
Total Operating expenses 7,098,096 828,884 18,912 7,945,892
-------------- ----------- ----------- -----------
Income from operations 138,557 93,501 18,912 213,146
Interest expense, net 64,024 232 64,256
-------------- ----------- ---------- -----------
Income before income taxes 74,533 93,269 18,912 148,890
Taxes on income 800 4,000 4,800
-------------- ---------- ----------- -----------
Net income/(loss) $73,733 $ 89,269 $18,912 $144,090
============== =========== =========== ===========
Net income per share $0.01
=====
Weighted average shares outstanding 13,613,621
<FN>
===========
<F1> To record depreciation on increased value of property and equipment
due to purchase price accounting.
<F2> To eliminate inter-company management fee to Grill Concepts.
</FN>
</TABLE>
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
MATERIAL CHANGES IN RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996
AS COMPARED TO THE SIX MONTHS ENDED JUNE 25, 1995.
Due to the Exchange explained in the Notes to Unaudited Consolidated Condensed
Financial Statements the results of operations for the 26 week period ended June
30, 1996 include the operations of six Daily Grill Restaurants, three Pizzeria
Uno units of the Magellan group. The Grill restaurant for the second quarter of
1996, and exclude the operations of Tailgators which was closed. Tailgators was
a sports themed restaurant formerly operated by Magellan.
The Company's revenues for the six month period increased 10.4% to $10,937,000
from $9,906,000 for the same period in 1995. The increase of $1,031,000 is
primarily a result of added sales by the inclusion of the Pizzeria Uno
restaurants for the entire six months this year and the addition of The
Grill restaurant in the second quarter this year, offset by the elimination
of the Tailgator restaurant. Comparable store sales year to year decreased
3.3%.
While revenues increased by 10.4% in the 1996 six month period when compared
with the similar period in 1995, cost of sales increased only 8.4% and decreased
as a percentage of sales from 26.9% to 26.4%. The consolidated cost of sales
percentage increased during the second quarter to 27.2% as compared with 27% in
the second quarter of 1995. The increase in cost of sales as a percentage of
sales during the second quarter was attributable to the acquisition of The Grill
which has historically experienced a 31% cost of sales as compared to
approximately 27% cost of sales for Daily Grill. This higher cost of sales at
The Grill is offset by lower labor cost at The Grill.
As a result, gross profit increased 11.2% from $7,237,000 (73.1% of sales) in
1995 to $8,045,000 (73.6% of sales) in 1996.
Restaurant operating expenses increased to $6,767,000 (61.9% of sales) in 1996
from $6,046,000 (61.0% of sales) in 1995. This percentage increase primarily
results from the inclusion of the Pizzeria Uno restaurants for the full six
months in 1996 since they typically produce a higher restaurant expense
percentage.
General and administrative expenses increased 30.6% to represent 8.3% of sales
in the 1996 six month period while amounting to 7.0% of sales in the 1995 six
month period. This increase occurred as a result of and at the time of the
Exchange in March 1995 and represents increased executive and office salaries
and increased insurance costs.
Net interest expense was approximately the same in each of the six month periods
representing 0.6% of sales.
The acquisition of The Grill in April, 1996 is expected to contribute both sales
and store level income to the Company helping to absorb part of existing
overhead. On a pro forma basis, assuming consummation of the The Grill purchase
at December 26, 1994, the combined operations of Grill Concepts and The Grill
produced a net loss of $26,000 during the first half of 1996 as compared to net
income of $144,000 for the first six months of 1995. During such periods, The
Grill on a stand alone basis, reported a 25% increase in revenues from
$1,330,000 in 1995 to $1,669,000 in 1996 and, a 24% increase in gross profit
from $922,000 in 1995 to $1,146,000 in 1996.
The increase in sales of The Grill is attributable, in part, to the fact that in
July of 1995, The Grill began opening for Sunday evening business. Additionally,
in the past year, The Grill has been featured in several
8
<PAGE>
magazines plus was inducted into the "Fine Dining Hall of Fame" which has
increased guest counts and resulting sales. The Grill operating expenses
increased from $828,000 (62.3% of sales in 1995) to $924,000 (55.4% of sales in
1996). This decreased expense percentage resulted from the spreading of fixed
costs over significantly higher sales volume. As a result of the foregoing, The
Grill, on a stand-alone basis, reported a net income of $230,000 for the first
six months of 1996 as compared to a net income of $89,000 for the first six
months of 1995.
.
MATERIAL CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996 the Company had working capital of $425,000 and a cash balance
of $1,788,000 as compared to negative working capital of $949,000 and a cash
balance of $631,000 at December 31, 1995. The increase in working capital and
cash was primarily attributable to the cash received from the sale of preferred
stock.
Historically, the Company has funded its day-to-day operations through its
operating cash flow, while funding growth through a combination of bank
borrowing, loans from stockholders/officers, the sale of Debentures, the
issuance of warrants and loans and tenant allowances from certain of its
landlords. At June 30,1996, GCI had existing bank borrowing of $1,173,000, an
SBA loan of $165,000, loans from stockholders/officers of $84,000,
loans/advances from landlords and others of $159,000.
During the quarter ended June 30, 1996, the Company completed an offering of
$1.5 million of Series A 10% Convertible Preferred Stock. The preferred shares
are convertible at the option of the holder in 25% increments commencing 60, 90,
120 and 150 days after June 17, 1996. The conversion price of the preferred
shares is equal to the lesser of $2.25 per share or 85% of the average closing
bid price of the commn stock for the five trading days preceding notice of
conversion, subject to certain floors and limitations on conversion. The
preferrred shares are entitled to receive a 10% cumulative dividend payable
semi-annually until the preferred shares are either redeemed or converted. The
Company may, at its option, redeem the preferred shares at their initial
offering price or force conversion of the preferred shares at the then
applicable conversion price commencing June 17, 1998. The holder of the
preferred shares may, at its option, cause any preferred shares remaining
outstanding at June 17, 2000 to be redeemed at their initial offering price.
In connection with the placement of the Series A Convertable Preferred Shares,
the Company issued warrants to acquire an aggregate of 250,000 shares of the
Company's common stock at a price of $3.00 per share for a period expiring June
17, 2001. The warrents are redeemable at the Company's option commencing June
17, 1999 at a price of $.01 per warrant provided that the closing bid price of
the Company,s common stock has equaled or exceeded $4.50 per share for 20
trading days.
In July of 1996, the Company submitted a proposal to acquire out of bankruptcy
selected assets constituting all of the operations of Hamburger Hamlet
Restaurants, Inc. ("Hamburger Hamlet"). Hamburger Hamlet, and its predecessors,
has operated high end casual dining restaurants since 1950.
Pursuant to the Company's proposal, the Company has offered to acquire 19
Hamburger Hamlet restaurants for (I) $8.5 million in cash (ii) 500,000 warrants
excercisable for three years at a price equal to 105% of the price of the
Company's common stock at the closing of the acquisition, and (iii) a
non-interest bearing performance note (the "Performance Note") in the amount of
$3.2 million payable solely from 50% of annual earnings before interest, taxes,
depreciation and amortization ("EBITDA") attributable to the acquired
restaurants to the extent EBITDA exceeds $2.5 million, not to exceed $750,000
per year (or, at the option of Hamburger Hamlet, $3.0 million from 50% of annual
EBITDA in excess of $2.5 million without the $750,000 annual cap).
Management of Hamburger Hamlet has submitted a plan of reorganization based on
acceptance of the Company's offer. Additionally, the secured creditors of
Hamburger Hamlet have agreed in principal to approve the Company's offer. The
general creditors of Hamburger Hamlet have, in prior discussions, rejected the
Company's offer. Consummation of the acquisitin of the Hamburger Hamlet
restaurants is subject to a number of contingencies, including completon of
definitive documents, further due diligence, approval of the plan by the
creditors and the bankruptcy court and the arrangement to satisfactory
financing.
9
<PAGE>
Management estimates that consummation of the acquisition of Hamburger Hamlet
will require approximately $13 million to fund the cash purchase price, costs of
the acquisition, various restaurant improvements and working capital
requirements. The Company is presently engaged in efforts to identify funding
sources for the Hamburger Hamlet acquisition but has received no commitments to
provide such funding to date. Accordingly, there is no assurance that the
Company will be successful in its efforts to acquire Hamburger Hamlet.
During the coming year, the Company expects to utilize a minimum of $1,900,000
to open three additional restaurants.
Management believes that the Company has adequate resources on hand and through
cash flow to sustain operations for at least the following 12 months and to open
the LAX , Irvine and Washington, D.C. restaurants.
Impact of Inflation
To date, inflation has not been a major factor in the Company's business. There
can be no assurances, however, that this will continue to be the case. To the
extent that it is commercially feasible, menu prices will be adjusted for
increases in food and labor costs when appropriate.
10
<PAGE>
PART II - OTHER INFORMATION
Item. 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
(a) On May 17, 1996, an annual meeting of shareholders of Grill Concepts, Inc.
was held.
(b) The following directors were elected (by the votes indicated) at such
meeting:
Robert Wechsler 9,312,041 For 4,288 Against 14,449 Abstain
Robert Spivak 9,316,041 For 288 Against 14,449 Abstain
Michael Weinstock 9,316,041 For 288 Against 14,449 Abstain
Richard Shapiro 9,315,041 For 1,288 Against 14,449 Abstain
Charles Frank 9,315,041 For 1,288 Against 14,449 Abstain
Glenn Golenberg 9,314,041 For 2,288 Against 14,449 Abstain
(c) In addition to the election of directors as noted above, the following
matters were voted upon at such meeting:
(i) Approval of 1995 Stock Option Plan
(6,796,409 For, 86,517 Against, 76,973 Abstain).
(ii)Ratification of appointment of Coopers & Lybrand LLP as the Company's
independent certifying accountants (9,111,430 For, 136,121 Against,
83,575 Abstain).
Item. 6 EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit No. Description Page
----------- ----------- ----
3.4 Certificate of Designation fixing
terms of Series A Preferred Stock
4.3 Form of Offshore Warrant
(b) Reports on Form 8-K
The following Current Reports on Form 8-K were filed by the
Registrant during the quarter ended June 30, 1996:
(i) Current Report dated April 1, 1996, reporting under Item 2
the acquisition of The Grill, including (by amendment) audited
financial statements of The Grill for the year ended
December 31, 1995.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GRILL CONCEPTS
Dated: August 13, 1996 By: /s/ ROBERT SPIVAK
-----------------
Robert Spivak, President and C.E.O.
Dated: August 13, 1996 By: /s/ BEN SUMNER
--------------
Ben Sumner, Chief Financial Officer
and Accounting Officer
11
<PAGE>
Exhibit 4.3
<PAGE>
Exhibit A
THIS WARRANT AND THE SHARES OF COMMON STOCK OF GRILL CONCEPTS, INC. TO BE ISSUED
UPON ANY EXERCISE OF THE WARRANT HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND THIS
WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF ANY U.S. PERSON (AS DEFINED IN
REGULATION S UNDER THE SECURITIES ACT) UNLESS REGISTERED UNDER THE SECURITIES
ACT OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. IT IS THE
RESPONSIBILITY OF ANY INVESTOR PURCHASING THE SECURITIES REPRESENTED HEREBY TO
SATISFY ITSELF AS TO FULL OBSERVANCE OF THE LAWS OF ANY RELEVANT TERRITORY
OUTSIDE THE UNITED STATES IN CONNECTION WITH ANY SUCH PURCHASE, INCLUDING
OBTAINING ANY REQUIRED GOVERNMENTAL OR OTHER CONSENTS AND OBSERVING ANY OTHER
APPLICABLE REQUIREMENTS.
WARRANT
to Purchase Shares
of
Common Stock (.00001 par value)
of
GRILL CONCEPTS INC
June 14, 1996
This certifies that, for value received, Cameron Capital Management
Ltd. ("CCM") and any subsequent transferee pursuant to the terms of the
Agreement (as defined below) of even date and this Warrant (each, a "Holder") is
entitled to purchase, subject to the provisions of this Warrant, from Grill
Concepts, Inc., a Delaware corporation (the "Issuer"), at any time or from time
to time on or after the date hereof and on or before June 14, 2001 (the
"Expiration Date"), Two Hundred Fifty Thousand (250,000) fully paid and
nonassessable shares of common stock, $.00001 par value (the "Common Stock"), of
the Issuer at an exercise price equal to US$3.00 per share, subject to
adjustment pursuant to the terms hereunder (the "Exercise Price") (such shares
of Common Stock and other securities issued and issuable upon exercise of this
Warrant, the "Warrant Shares").
Section 1. Definitions. Except as otherwise specified herein, terms defined
herein shall have the meanings assigned to them in the Offshore Warrant
Subscription Agreement of even date herewith by and between CCM and the Issuer
(the "Agreement").
#45192v2
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<PAGE>
Section 2. Exercise of Warrant.
(a) Subject to the provisions hereof, this Warrant may be
exercised, in whole or in part, but not as to a fractional share, at
any time or from time to time on or after the date hereof and on or
before the Expiration Date, by presentation and surrender hereof to the
Issuer at the address which, in accordance with the provisions of
Section 9 hereof, is then effective for notices to the Issuer, with the
Election to Purchase Form annexed hereto as Schedule One, duly executed
and accompanied by payment to the Issuer as further set forth below in
this Section 2, for the account of the Issuer, of the Exercise Price
for the number of Warrant Shares specified in such form. If this
Warrant should be exercised in part only, the Issuer shall, upon
surrender of this Warrant, execute and deliver a new Warrant evidencing
the rights of the Holder hereof to purchase the balance of the Warrant
Shares purchasable hereunder. The Issuer shall maintain at its
principal place of business a register for the registration of this
Warrant and registration of transfer of this Warrant. The Exercise
Price for the number of Warrant Shares specified in the Election to
Purchase Form shall be payable in United States Dollars by certified or
official bank check payable to the order of the Issuer or by wire
transfer of immediately available funds to an account specified by the
Issuer for that purpose.
(b) Certificates representing Warrant Shares shall not bear any
restrictive legend.
Section 3. Reservation of Shares; Preservation of Rights of Holder. The
Issuer hereby agrees that there shall be reserved for issuance and/or delivery
upon exercise of this Warrant, such number of Warrant Shares as shall be
required for issuance or delivery upon exercise of this Warrant. The Warrant
surrendered upon exercise shall be canceled by the Issuer. After the Expiration
Date, no shares of Common Stock shall be subject to reservation in respect of
this Warrant. The Issuer further agrees (i) that it will not, by amendment of
its Articles of Incorporation or through reorganization, consolidation, merger,
dissolution or sale of assets, or by any other voluntary act, avoid or seek to
avoid the observation or performance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by the Issuer, (ii) promptly to
take all action as may from time to time be required in order to permit the
Holder to exercise this Warrant and the Issuer duly and effectively to issue
shares of its Common Stock or other securities as provided herein upon the
exercise hereof, and (iii) promptly to take all action required or provided
herein to protect the rights of the Holder granted hereunder against dilution.
Without limiting the generality of the foregoing, should the Warrant Shares at
any time consist in whole or in part of shares of capital stock having a par
value, the Issuer agrees that before taking any action which would cause an
adjustment of the Exercise Price so that the same would be less than the then
par value of such Warrant Shares, the Issuer shall take any corporate action
which may, in the opinion of its counsel, be necessary in order that the Issuer
may validly and legally issue fully paid and nonassessable shares of such Common
Stock at the Exercise Price as so adjusted. The Issuer further agrees that it
will not establish a par value for its Common Stock while this Warrant is
outstanding in an amount greater than the Exercise Price.
#45192v2
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<PAGE>
Section 4. Exchange, Transfer, Assignment or Loss of Warrant. Any
attempted transfer of this Warrant, the Warrant Shares or any new Warrant not in
accordance with this Section shall be null and void, and the Issuer shall not in
any way be required to give effect to such transfer. No transfer of this Warrant
shall be effective for any purpose hereunder until (i) written notice of such
transfer and of the name and address of the transferee has been received by the
Issuer, and (ii) the transferee shall first agree in a writing deposited with
the Secretary of the Issuer to be bound by all the provisions of this Warrant
and the Agreement. Upon surrender of this Warrant to the Issuer by any
transferee authorized under the provisions of this Section 4, the Issuer shall,
without charge, execute and deliver a new Warrant registered in the name of such
transferee at the address specified by such transferee, and this Warrant shall
promptly be canceled. The Issuer may deem and treat the registered holder of any
Warrant as the absolute owner thereof for all purposes, and the Issuer shall not
be affected by any notice to the contrary. Any Warrant, if presented by an
authorized transferee, may be exercised by such transferee without prior
delivery of a new Warrant issued in the name of the transferee.
Upon receipt by the Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the Issuer will
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute a separate contractual obligation on the
part of the Issuer, whether or not the Warrant so lost, stolen, destroyed or
mutilated shall be at any time enforceable by anyone.
Section 5. Rights of Holder. Neither a Holder nor his transferee by
devise or the laws of descent and distribution or otherwise shall be, or have
any rights or privileges of, a shareholder of the Issuer with respect to any
Warrant Shares, unless and until certificates representing such Warrant Shares
shall have been issued and delivered thereto.
Section 6. Adjustments in Exercise Price and Warrant Shares. The
Exercise Price and Warrant Shares shall be subject to adjustment from time to
time as provided in this Section 6.
(a) If the Issuer is recapitalized through the subdivision or
combination of its outstanding shares of Common Stock into a larger or
smaller number of shares, the number of shares of Common Stock for
which this Warrant may be exercised shall be increased or reduced, as
of the record date for such recapitalization, in the same proportion as
the increase or decrease in the outstanding shares of Common Stock, and
the Exercise Price shall be adjusted so that the aggregate amount
payable for the purchase of all Warrant Shares issuable hereunder
immediately after the record date for such recapitalization shall equal
the aggregate amount so payable immediately before such record date.
(b) If the Issuer declares a dividend on Common Stock, or
makes a distribution to holders of Common Stock, and such dividend or
distribution is payable or made in Common Stock or securities
convertible into or exchangeable for Common Stock, or rights
#45192v2
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<PAGE>
to purchase Common Stock or securities convertible into or exchangeable
for Common Stock, the number of shares of Common Stock for which this
Warrant may be exercised shall be increased, as of the record date for
determining which holders of Common Stock shall be entitled to receive
such dividend or distribution, in proportion to the increase in the
number of outstanding shares (and shares of Common Stock issuable upon
conversion of all such securities convertible into Common Stock) of
Common Stock as a result of such dividend or distribution, and the
Exercise Price shall be adjusted so that the aggregate amount payable
for the purchase of all the Warrant Shares issuable hereunder
immediately after the record date for such dividend or distribution
shall equal the aggregate amount so payable immediately before such
record date.
(c) If the Issuer declares a dividend on Common Stock (other
than a dividend covered by subsection (b) above) or distributes to
holders of its Common Stock, other than as part of its dissolution or
liquidation or the winding up of its affairs, any shares of its capital
stock, any evidence of indebtedness or any cash or other of its assets
(other than Common Stock or securities convertible into or exchangeable
for Common Stock), the Holder shall receive notice of such event as set
forth in Section 8 below.
(d) In case of any consolidation of the Issuer with, or merger
of the Issuer into, any other corporation (other than a consolidation
or merger in which the Issuer is the continuing corporation and in
which no change occurs in its outstanding Common Stock), or in case of
any sale or transfer of all or substantially all of the assets of the
Issuer, or in the case of any statutory exchange of securities with
another corporation (including any exchange effected in connection with
a merger of a third corporation into the Issuer, except where the
Issuer is the surviving entity and no change occurs in its outstanding
Common Stock), the corporation formed by such consolidation or the
corporation resulting from such merger or the corporation which shall
have acquired such assets or securities of the Issuer, as the case may
be, shall execute and deliver to the Holder simultaneously therewith a
new Warrant, satisfactory in form and substance to the Holder, together
with such other documents as the Holder may reasonably request,
entitling the Holder thereof to receive upon exercise of such Warrant
the kind and amount of shares of stock and other securities and
property receivable upon such consolidation, merger, sale, transfer, or
exchange of securities, or upon the dissolution following such sale or
other transfer, by a holder of the number of shares of Common Stock
purchasable upon exercise of this Warrant immediately prior to such
consolidation, merger, sale, transfer, or exchange. Such new Warrant
shall contain the same basic other terms and conditions as this Warrant
and shall provide for adjustments which, for events subsequent to the
effective date of such written instrument, shall be as nearly
equivalent as may be practicable to the adjustments provided for in
this Section 6. The above provisions of this paragraph (d) shall
similarly apply to successive consolidations, mergers, exchanges, sales
or other transfers covered hereby.
(e) If the Issuer shall, at any time before the expiration of
this Warrant, dissolve, liquidate or wind up its affairs, the Holder
shall, upon exercise of this Warrant have the right
#45192v2
4
<PAGE>
to receive, in lieu of the shares of Common Stock of the Issuer that
the Holder otherwise would have been entitled to receive, the same kind
and amount of assets as would have been issued, distributed or paid to
the Holder upon any such dissolution, liquidation or winding up with
respect to such shares of Common Stock of the Issuer had the Holder
been the holder of record of such shares of Common Stock receivable
upon exercise of this Warrant on the date for determining those
entitled to receive any such distribution. If any such dissolution,
liquidation or winding up results in any cash distribution in excess of
the Exercise Price provided by this Warrant for the shares of Common
Stock receivable upon exercise of this Warrant, the Holder may, at the
Holder's option, exercise this Warrant without making payment of the
Exercise Price and, in such case, the Issuer shall, upon distribution
to the Holder, consider the Exercise Price to have been paid in full
and, in making settlement to the Holder, shall obtain receipt of the
Exercise Price by deducting an amount equal to the Exercise Price for
the shares of Common Stock receivable upon exercise of this Warrant
from the amount payable to the Holder. For purposes of this paragraph,
the sale of all or substantially all of the assets of the Issuer and
distribution of the proceeds thereof to the Issuer's shareholders shall
be deemed a liquidation.
(f) If an event occurs which is similar in nature to the
events described in this Section 6, but is not expressly covered
hereby, the Board of Directors of the Issuer shall make or arrange for
an equitable adjustment to the number of Warrant Shares and the
Exercise Price.
(g) The term "Common Stock" shall mean the Common Stock,
$.00001 par value, of the Issuer as the same exists at the Closing Date
or as such stock may be constituted from time to time, except that for
the purpose of this Section 6, the term "Common Stock" shall include
any stock of any class of the Issuer which has no preference in respect
of dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Issuer and
which is not subject to redemption by the Issuer.
(h) The Issuer shall retain a firm of independent public
accountants of recognized standing (who may be any such firm regularly
employed by the Issuer) to make any computation required under this
Section 6, and a certificate signed by such firm shall be conclusive
evidence of the correctness of any computation made under this Section
6.
(i) Whenever the number of Warrant Shares or the Exercise
Price shall be adjusted as required by the provisions of this Section
6, the Issuer forthwith shall file in the custody of its secretary or
an assistant secretary, at its principal office, and furnish to each
Holder hereof, a certificate prepared in accordance with paragraph (h)
above, showing the adjusted number of Warrant Shares and the Exercise
Price and setting forth in reasonable detail the circumstances
requiring the adjustments.
(j) Notwithstanding any other provision, this Warrant shall be
binding upon and inure to the benefit of any successors and assigns of
the Issuer.
#45192v2
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<PAGE>
(k) No adjustment in the Exercise Price in accordance with the
provisions of this Section 6 need be made if such adjustment would
amount to a change in such Exercise Price of less than $.01; provided
however, that the amount by which any adjustment is not made by reason
of the provisions of this paragraph (k) shall be carried forward and
taken into account at the time of any subsequent adjustment in the
Exercise Price.
(l) If an adjustment is made under this Section 6 and the
event to which the adjustment relates does not occur, then any
adjustments in accordance with this Section 6 shall be readjusted to
the Exercise Price and the number of Warrant Shares which would be in
effect had the earlier adjustment not been made.
Section 7. Taxes on Issue or Transfer of Common Stock and Warrant. The
Issuer shall pay any and all documentary stamp or similar issue or transfer
taxes payable in respect of the issue or delivery of shares of Common Stock or
other securities on the exercise of this Warrant. The Issuer shall not be
required to pay any tax which may be payable in respect of any transfer of this
Warrant or in respect of any transfers involved in the issue or delivery of
shares or the exercise of this Warrant in a name other than that of the Holder
and the person requesting such transfer, issue or delivery shall be responsible
for the payment of any such tax (and the Issuer shall not be required to issue
or deliver said shares until such tax has been paid or provided for).
Section 8. Notice of Adjustment. So long as this Warrant shall be
outstanding, (a) if the Issuer shall propose to pay any dividends or make any
distribution upon the Common Stock, or (b) if the Issuer shall offer generally
to the holders of Common Stock the right to subscribe to or purchase any shares
of any class of Common Stock or securities convertible into Common Stock or any
other similar rights, or (c) if there shall be any proposed capital
reorganization of the Issuer in which the Issuer is not the surviving entity,
recapitalization of the capital stock of the Issuer, consolidation or merger of
the Issuer with or into another corporation, sale, lease or other transfer of
all or substantially all of the property and assets of the Issuer, or voluntary
or involuntary dissolution, liquidation or winding up of the Issuer, or (d) if
the Issuer shall give to its stockholders any notice, report or other
communication respecting any significant or special action or event, then in
such event, the Issuer shall give to the Holder, at least ten days prior to the
relevant date described below (or such shorter period as is reasonably possible
if ten days is not reasonably possible), a notice containing a description of
the proposed action or event and stating the date or expected date on which a
record of the Issuer's stockholders is to be taken for any of the foregoing
purposes, and the date or expected date on which any such dividend,
distribution, subscription, reclassification, reorganization, consolidation,
combination, merger, conveyance, sale, lease or transfer, dissolution,
liquidation or winding up is to take place and the date or expected date, if any
is to be fixed, as of which the holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such event.
#45192v2
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<PAGE>
Section 9. Redemption of Warrants.
(a) This Warrant or any New Warrant (for purposes of this
Section 9, collectively, the "Warrants") may be redeemed at the option
of the Issuer, at a redemption price of $.01 per Warrant Share, on, or
at any time after, the third anniversary of the date of issuance
provided the closing bid price of the Common Stock as reported on the
Nasdaq Stock Market has equaled or exceeded $4.50 (the "Target Price")
for the 20 consecutive trading days preceding the date of the notice of
redemption.
(b) In the event the conditions set forth in Section 9(a) are
met, and the Issuer shall desire to exercise its right to redeem the
Warrants, it may send via facsimile (with a confirmation) and overnight
delivery a notice of redemption to each of the Holders of the Warrants
to be redeemed, not later than the 5th day before the date fixed for
redemption, at their last address as shall appear on the records of the
Warrants. Any notice sent in the manner provided herein shall be
conclusively presumed to have been duly given whether or not the Holder
receives such notice.
(c) The notice of redemption shall specify the (i) the
redemption price, (ii) the date fixed for redemption, (iii) the place
where the Warrant certificates shall be delivered and the redemption
price paid, (iv) that the Issuer will assist each Holder of a Warrant
in connection with the exercise thereof and (v) that the right to
exercise the Warrant shall terminate at 5:00 P.M. Eastern Time on the
business day immediately preceding the date fixed for redemption. The
date fixed for the redemption of the Warrants shall be the Redemption
Date. An affidavit of the Issuer that notice of redemptions has been
sent together with copies of the facsimile confirmation and overnight
courier receipt shall, in the absence of fraud, be prima facie evidence
of the facts stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00
P.M. Eastern Time on the business day immediately preceding the
Redemption Date. On or after the Redemption Date, Holders of the
Warrants shall have no further rights except to receive, upon surrender
of the Warrant, the Redemption Price.
(e) From and after the date specified for redemption, the
Issuer shall, at the place specified in the notice of redemption, upon
presentation and surrender to the Issuer by or on behalf of the Holder
thereof of one or more Warrants to be redeemed, deliver or cause to be
delivered to such Holder a sum in cash equal to the redemption price of
each such Warrant. From and after the date fixed for redemption and
upon the deposit or setting aside by the Company of a sum sufficient to
redeem all the Warrants called for redemption, such Warrants shall
expire and become void and all rights hereunder and under the
Agreement, except the right to receive payment of the redemption price,
shall cease.
(f) If the shares of the Issuer's Common Stock are subdivided
or combined into a greater or smaller number of shares of Common Stock,
the Target Prices shall be
#45192v2
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<PAGE>
proportionally adjusted by the ratio which the total number of shares
of Common Stock outstanding immediately prior to such event bears to
the total number of shares of Common Stock to be outstanding
immediately after such event.
Section 10. Notices. All communications hereunder, other than those
pursuant to Section 9, shall be in writing, and, if sent to the Holder shall be
sufficient in all respects if delivered, sent by registered mail, or by
facsimile and confirmed to the Holder at:
Cameron Capital Management Ltd.
10 Cavendish Road
Hamilton, Bermuda HM19
Attention: Nic Snelling
Telephone: 441/295-5455
Fax: 441/295-0922
or if to any other Holder, addressed to such Holder at such address as it shall
have specified to the Issuer in writing, or, if sent to the Issuer, shall be
delivered, sent by registered mail or by facsimile and confirmed to the Issuer
at:
Grill Concepts, Inc.
11661 San Vicente Blvd.
Suite 404
Los Angeles, CA 90049
Attention: Michael Weinstock, Vice Chairman
Telephone: (310) 820-5559
Facsimile: (310) 820-6530
Section 10. Governing Law. This Warrant shall be governed by, and
interpreted in accordance with, the laws of the State of California.
Dated: June 14, 1996
GRILL CONCEPTS, INC.
By: ---------------------------------------------
Name: ---------------------------------------------
Title: ---------------------------------------------
ATTEST:
---------------------------------------------
, Secretary
#45192v2
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<PAGE>
Schedule One
ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise this Warrant and
to purchase ______ shares of Grill Concepts, Inc. Common Stock issuable upon the
exercise of this Warrant, and requests that certificates for such shares be
issued in the name of:
- --------------------------------------------------------------------------------
(Name)
- --------------------------------------------------------------------------------
(Address)
- --------------------------------------------------------------------------------
(United States Social Security or other taxpayer
identifying number, if applicable)
and, if different from above, be delivered to:
- --------------------------------------------------------------------------------
(Name)
- --------------------------------------------------------------------------------
(Address)
and, if the number of Warrant Shares so purchased are not all of the Warrant
Shares issuable upon exercise of this Warrant, that a Warrant to purchase the
balance of such Warrant Shares be registered in the name of, and delivered to,
the undersigned at the address stated below.
Date: _______________________, 19___
Name of Registered Owner: ------------------------------------------------------
- --------------------------------------------------------------------------------
Address: -----------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature: ---------------------------------------------------------------------
#45192v2
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<PAGE>
[Warrant Agent]
Dear Sir/Madam:
In connection with the warrant of Grill Concepts, Inc., issued to CCM
on June 14, 1996, and attached hereto, the undersigned certifies, represents and
warrants as follows:
1. I/We hereby exercise the warrants identified above. (Give details of
how payment is being made, in accordance with the terms of the
Warrant.) .
2. I/We hereby certify that I am/we are not a U.S. person (as that term
is defined in Regulation S under the Securities Act); nor am I/we
acting for or on behalf of a U.S. person.
3. At the time of exercise of the warrants I am/we are and any person for
whom we are acting is located outside the United States.
4. Please deliver the common stock of Grill Concepts, Inc. as follows:
-----------------------------------
Name in which certificate is to be delivered
-----------------------------------
Address (must be outside the U.S.)
-----------------------------------
Very truly yours,
WARRANT HOLDER
By: ---------------------------
Name: -------------------------
Title:-------------------------
#45192v2
<PAGE>
[Warrant Agent]
Dear Sir/Madam:
In connection with the Warrant of Grill Concepts, Inc., issued to CCM
on June 14, 1996, and attached hereto, the undersigned performed the functions
of managing underwriter in connection with the offering of such warrants and
certifies, represents and warrants as follows:
We hereby certify that the distribution of the warrants identified
above was completed on ___________, 199_.
Very truly yours,
CAMERON CAPITAL MANAGEMENT LTD.
By:----------------------------
Name:--------------------------
Title:-------------------------
#45192v2
<PAGE>
Exhibit 3.4
<PAGE>
GRILL CONCEPTS, INC.
CERTIFICATE OF
DESIGNATIONS OF
SERIES A CONVERTIBLE PREFERRED STOCK
The undersigned, Robert Spivak, President of GRILL CONCEPTS, INC., a
Delaware corporation (the "Corporation"), acting pursuant to Section 151 of the
General Corporation Law of the State of Delaware, DO HEREBY CERTIFY that a
meeting of the Board of Directors of the Corporation duly convened and held on
May 17, 1996 the following resolution was adopted:
RESOLVED, that pursuant to Article Fourth of the Corporation's
Certificate of Incorporation relating to the shares of the Corporation,
the Board of Directors hereby authorizes, fixes and creates a series of
Preferred Stock, par value $.001 per share, having the following
powers, preferences, designations, rights and other characteristics:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Convertible Preferred Stock" (the "Convertible Preferred
Stock") and the number of share constituting the Convertible Preferred Stock
shall be 1,500. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Convertible Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reversed for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Convertible Preferred Stock.
Section 2. Conversion Rights.
a. Right to Convert. Each share of Convertible Preferred Stock
may be converted at the option of the holder thereof at the times set forth
herein, and without the payment of any additional consideration thereof, into
the number of fully paid, nonassessable shares of common stock $.00001 par value
per share, of the Corporation (the "Common Stock") as is determined by
determined by dividing the price paid per share of Convertible Preferred Stock
by the lesser of (i) $2.25 or (ii) 85% of the average closing bid price (the
"Closing Price") as reported by the Nasdaq Small Cap Market of the Corporation's
Common Stock for the five (5) trading days immediately prior to the Date of
Conversion, as defined below in Section 2.c. (such lesser value is hereinafter
referred to as the "Conversion Price").
b. Conversion Periods. Each holder of shares of Convertible
Preferred Stock shall have the option to convert: (i) 25% of the aggregate
number of such shares originally held by such holder (the "Share Amount") at any
time from and after the 60th day following the date on which shares of
Convertible Preferred Stock were first issued (the "Original Issuance Date"),
(ii) 50% of the Share Amount at any time from and after the 90th day following
the Original Issuance Date, (iii) 75% of the Share Amount at any time from and
after the 120th day following the Original Issuance Date, and (iv) 100% of the
Share Amount at any time from and after the 150th day following the Original
Issuance Date. Should a holder transfer any of its shares of Convertible
Preferred Stock prior to the 150th day following the Original Issuance Date, the
transferee shall be entitled to convert such shares in accordance with the
foregoing schedule.
c. Mechanics of Conversion. No fractional shares of Common
Stock shall be issued upon conversion of Convertible Preferred Stock. In lieu of
any fractional share to which the holder would otherwise be entitled, the
Corporation shall round up to the nearest whole share. In the case of a dispute
as to the calculation of the Conversion Price, the Corporation's calculations
shall be deemed conclusive absent manifest error. In order to convert
Convertible Preferred Stock into shares of Common Stock, the holder shall
surrender the certificate or certificates thereof, duly endorsed, either by
overnight courier or two-day courier, to the office of the Corporation or of any
transfer agent for the Convertible Preferred Stock, and shall give written
notice to the Corporation at such office that the holder elects to convert the
same, the number of shares of Convertible Preferred Stock so converted and a
calculation of the Conversion Price and representing that the holder has not
participated, directly or indirectly, in any short sales or other similar
activities which could adversely effect the market price of the Common Stock so
long as the Convertible Preferred Stock is outstanding (with an advance copy of
the certificate(s) and the notice by facsimile); provided, however, that the
Corporation shall not be obligated to issue certificates evidencing shares of
Common Stock issuable upon such conversion
<PAGE>
unless certificates evidencing such shares of Convertible Preferred Stock are
delivered to the Corporation or its transfer agent that such certificates have
been lost, stolen or destroyed and executes an agreement satisfactory to the
Corporation to indemnify the Corporation from any loss incurred by it in
connection with such certificates.
The Corporation shall use its best efforts to issue and deliver within
three (3) business days after delivery to the Corporation of such Convertible
Preferred Stock at the address of the holder on the stock books of the
Corporation, a certificate or certificates for the number of shares of Common
Stock to which the holder shall be entitled as aforesaid. The date on which
notice of conversion is given (the "Date of Conversion") shall be deemed to be
the date set forth in such notice of conversion provided the original shares of
Convertible Preferred Stock to be converted are received by the Corporation or
the transfer agent, as the case may be, within three (3) business days
thereafter and the person or person entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on the Date of
Conversion. If the original shares of Convertible Preferred Stock to be
converted are not received by the transfer agent within three (3) business days
after the Date of Conversion, the notice of conversion shall become null and
void.
d. Automatic Conversion. The Corporation shall be entitled to
automatically convert each share of Convertible Preferred Stock on, or at any
time after, the second anniversary of the Original Issuance Date at the
Conversion Price in effect at the time of automatic conversion. In the event the
Corporation exercises its right to automatically convert the Convertible
Preferred Stock, the Corporation shall provide the holders of the Convertible
Preferred Stock with at least five days notice of its intent to automatically
convert and shall deliver certificates representing the Common Stock issuable
upon conversion in accordance with the provisions of subsection 2.c.
Section 3. Limitations on Conversion.
a. In no event shall the holder of the Preferred Shares be
entitled to convert the Preferred Shares to the extent such conversion would
result in such holder's beneficially owning more than five percent (5%) of the
outstanding shares of the Corporation's Common Stock. For these purposes,
beneficial ownership shall be defined and calculated in accordance with Rule
13d-3, promulgated under the Securities Exchange Act of 1934, as amended.
b. The Corporation shall be entitled to restrict, or prohibit,
conversion of the Preferred Shares on any trading day on which the reported
"short interest" exceeds 200% of the average daily trading volume of the common
stock for the five (5) trading days immediately prior to the Date of Conversion.
Such right of the Corporation is subject to the availability of accurate daily
short interest information.
c. In no event shall the holder of the Preferred Shares be
entitled to convert the Preferred Shares to the extent such conversion would
occur at a Conversion Price less than $1.125.
In the event the holder is restricted from converting the Preferred
Shares pursuant to subsection 3.c. above for a period of 30 days or more, the
Corporation shall, at its option, either (i) permit the conversion of the
Preferred Shares, or (ii) redeem the Preferred Shares eligible for conversion at
a price equal to 110% of the initial purchase price of such shares. In the event
the Corporation has not delivered to the holder the full redemption price set
forth in (ii) above by the fifteenth day following the completion of the above
referenced 30 day period, the holder shall be entitled to convert the eligible
Preferred Shares and the Corporation shall effect any such conversion without
delay.
Section 4. Dividend Policy. The holders of shares of Convertible Preferred
Stock shall be entitled to receive cumulative semi-annual dividends at the rate
of $100 per share (as adjusted for any reclassification, stock dividends,
combinations, splits and similar recapitalizations affecting such shares) per
annum, out of any assets legally available therefor, prior and in preference to
any declaration of payment of any dividend (payable other than in Common Stock
or other securities and rights convertible into Stock of the Corporation) on the
Common Stock of the Corporation. The dividends shall accrue and shall be payable
on each six month anniversary of the Original Issuance Date. Upon conversion of
the Convertible Preferred Stock,
2
<PAGE>
dividends accrued from the last semi-annual dividend payment date shall be
waived. No dividends shall be payable upon any junior securities of the
Corporation unless the holders of shares of Convertible Preferred Stock receive
their semi-annual dividends at the rate of $100 per share (as so adjusted) per
annum. Notwithstanding the foregoing, in lieu of a cash dividend payment, the
Corporation may, in the sole discretion of the Board of Directors, issue shares
of its Common Stock as payment of the dividends then due and payable. If the
Corporation elects to pay dividends in Common Stock in lieu of a cash dividend,
the Corporation shall issue to all holders of shares of Convertible Preferred
Stock such number of fully paid and non-assessable shares of Common Stock as
shall have an aggregate Closing Price value (determined as of the date such
dividend is payable) equal in amount to the cash dividend which the Corporation
has elected to pay in kind.
Section 5. Corporate Events.
a. Notices of Record Date. In the event of (i) any declaration
by the Corporation of a record date of the holders of any class of securities
for the purpose of determining the holders thereof who are entitled to receive
any dividend or other distribution or (ii) any capital reorganization of the
Corporation, any reclassification or recapitalization of the capital stock of
the Corporation, any merger or consolidation of the Corporation and any other
entity or person, or any voluntary or involuntary dissolution, liquidation or
winding up of the Corporation, the Corporation shall mail to each holder of
Convertible Preferred Stock at least 10 days prior to the record date specified
herein, a notice specifying (A) date on which any such record date is to be
declared for the purposes of such dividend or distribution and a description of
such dividend or distribution, (B) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up is expected to become effective, and (C) the time, if any, that is to
be fixed, as to when the holders of record of Common Stock (or other securities)
become eligible to receive securities or other property deliverable upon such
reorganization, reclassification, transfer, consolidation, merger, dissolution
or winding up.
b. Corporate Changes. The Conversion Price shall be
appropriately adjusted to reflect any stock dividend, stock split or share
combination of the Common Stock. In the event of a merger, reorganization,
recapitalization or similar event of or with respect to the Corporation (a
"Corporate Change") (other than a Corporate Change in which all or substantially
all of the consideration received by the holders of the Company's equity
securities upon such Corporate Change consists of cash or assets other than
securities issued by the acquiring entity or any affiliate thereof and as to
which the holders of the Convertible Preferred Stock shall be assumed by the
acquiring entity and thereafter the Convertible Preferred Stock shall be
convertible into such class and type of securities as the Holder would have
received had the Holder converted the Convertible Preferred Stock immediately
prior to such Corporate Change, as appropriately adjusted to equitably reflect
the Conversion Price and any stock dividend, stock split or share combination of
the Common Stock after such corporate event.
Section 6. Reservation of Stock Issuable Upon Conversion.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 the shares of Convertible Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all then outstanding shares of Convertible Preferred Stock; and if
at any time the number of authorized by unissued shares of Common Stock shall
not be sufficient to affect the conversion of all then outstanding shares of
Convertible Preferred Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to affect the conversion
of all then outstanding shares of the Convertible Preferred Stock, the
Corporation will take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
Section 7. Liquidation Preference.
a. In the event of any liquidation, dissolution or winding up
of the Corporation, either voluntary or involuntary, the holders of shares of
Convertible Preferred Stock shall be entitled to receive, immediately after
distributions of senior securities required by the Corporation's Certificate of
Incorporation, as amended, and prior and in preference to any distribution to
junior securities but in parity with any distribution to parity securities, an
amount per share equal to $1,000 (as adjusted for any reclassification, stock
dividends,
3
<PAGE>
combinations, splits and similar recapitalizations affecting such shares) (the
"Original Issue Price"). If upon the occurrence of such event the assets and
funds thus distributed among the holders of the Convertible Preferred Stock and
parity securities shall be insufficient to permit the payment to such holders of
the full preferential amounts due to the holders of the Convertible Preferred
Stock and the parity securities, respectively, then the entire assets and funds
of the Corporation legally available for distribution shall be distributed among
the holders of the Convertible Preferred Stock and the parity securities, pro
rata, based on the respective liquidation amounts to which such series of stock
is entitled by the Corporation's Certificate of Incorporation as amended.
b. Upon the completion of the distribution required by
subsection 7.a, if assets remain in this Corporation, they shall be distributed
to holders of parity securities (unless holders of parity securities have
received distributions pursuant to subsection 7.a. above) and junior securities
in accordance with the Corporation's Certificate of Incorporation, as amended.
c. A consolidation or merger of the Corporation with or into
any other corporation or corporations, or a sale, conveyance or distribution of
all or substantially all of the assets of the Corporation or the effectuation by
the Corporation of a transaction or series of related transactions in which more
than 50% of the voting power of the Corporation is disposed of, shall not be
deemed to be a liquidation, dissolution or winding up within the meaning of this
Section 7, but shall instead be treated pursuant to Section 5 hereof.
Section 8. Redemption.
a. The Corporation shall be entitled to redeem, from any
source of funds legally available therefor, each share of Convertible Preferred
Stock on, or at any time after, the second anniversary of the Original Issuance
Date (each such date on which the Corporation effects a redemption pursuant to
this Section 8.a., a "Corporation Redemption Date") by paying in cash to the
holder a sum equal to (i) the Original Issue Price per share of Convertible
Preferred Stock held by such holder plus (ii) an amount equal to all declared or
accumulated but unpaid dividends on such shares (such sum is hereinafter
referred to as the "Redemption Price").
Any redemption effected pursuant to this Section 8.a. shall be made on a
pro rata basis among the holders of the Convertible Preferred Stock in
proportion to the shares of Convertible Preferred Stock then held by them.
b. At the individual option of each holder of shares of
Convertible Preferred Stock, the Corporation shall redeem all or any portion of
the Convertible Preferred Stock owned by such holder or holders on, or at any
time after, the fourth anniversary of the Original Issuance Date (each such date
on which the Corporation effects a redemption pursuant to this Section 8.b., a
"Holder Redemption Date") by paying in cash to the holder the Redemption Price.
c. As used herein and in Section 8.d. and 8.e. below, the term
"Redemption Date" shall refer to each of "Corporation Redemption Date" and
"Holder Redemption Date". At least 15 but no more than 30 days prior to each
Redemption Date written notice shall be mailed, first class postage prepaid, to
each holder of record (at the close of business on the business day next
preceding the day on which notice is given) of the Convertible Preferred Stock
to be redeemed, at the address last shown on the records of the Corporation for
such holder notifying such holder of the redemption to be effected, specify the
number of shares to be redeemed from such holder, the Redemption Date, the
Redemption Price, and the place at which payment may be obtained and calling
upon such holder to surrender to the Corporation, in the manner and at the place
designated, its certificate or certificates representing the shares to be
redeemed (the "Redemption Notice"). Except as provided in Section 3.d. on or
after the Redemption Date, each holder of Convertible Preferred Stock to be
redeemed shall surrender to the Corporation the certificate or certificates
representing such shares, in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price of such shares shall be
payable to the order of the person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall be
canceled. In the event less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares.
4
<PAGE>
d. From and after the Redemption Date, unless there shall have
been a default in payment of the Redemption Price, all rights of the holder of
shares of Convertible Preferred Stock designated for redemption in the
Redemption Notice as holders of Convertible Preferred Stock (except the right to
receive the Redemption Price without interest upon surrender of their
certificate or certificates) shall cease with respect to such shares, and such
shares shall not thereafter be transferred on the books of the Corporation or be
deemed to be outstanding for any purposes whatsoever. If the funds of the
Corporation legally available for redemption of shares of Convertible Preferred
Stock on any Redemption Date are insufficient to redeem the total number of
shares of Convertible Preferred Stock to be redeemed on such date, those funds
which are legally available will be used to redeem the maximum possible number
of such shares ratably among the holders of such shares to be redeemed based
upon their holdings of Convertible Preferred Stock. The shares of Convertible
Preferred Stock not redeemed shall remain outstanding and entitled to all the
rights and preferences provided herein. At any time thereafter when additional
funds of the Corporation are legally available for the redemption of shares of
Convertible Preferred Stock such funds will immediately be used to redeem the
balance of the shares which the Corporation has become obliged to redeem on any
Redemption Date, but which it has not redeemed.
e. On or prior to each Redemption Date, the Corporation shall
deposit the Redemption Price of all shares of Convertible Preferred Stock
designated for redemption in the Redemption Notice and not yet redeemed with a
bank or trust corporation having aggregate capital and surplus in excess of
$100,000,000 as a trust fund for the benefit of the respective holders of the
shares designated for redemption and not yet redeemed, with irrevocable
instructions and authority to the bank or trust corporation to pay the
Redemption Price for such shares to their respective holders has surrendered its
share certificate to the Corporation pursuant to Section 8.c. above. As of the
Redemption Date, the deposit shall constitute full payment of the shares to
their holders, and from and after the Redemption Date the shares so called for
redemption shall be redeemed and shall be deemed to be no longer outstanding,
and the holders thereof shall cease to be stockholders with respect to such
shares and shall have no rights with respect thereto except the rights to
receive from the bank or trust corporation payment of the Redemption Price of
shares, without interest, upon surrender of their certificates therefor. Such
instructions shall also provide that any moneys deposited by the Corporation
pursuant to this Section 8.e. for the redemption of shares thereafter converted
into shares of the Corporation's Common Stock pursuant to Section 2 hereof prior
to the Redemption Date shall be returned to the Corporation pursuant to this
Section 8.e. remaining unclaimed at the expiration of two years following the
Redemption Date shall thereafter be returned to the Corporation upon its request
expressed in a resolution of its Board of Directors.
Section 9. Voting Rights. The holders of Convertible 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 Convertible 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 Convertible Preferred Stock.
To the extent that under Delaware law the vote of the holders
of the Convertible Preferred Stock, voting separately as a class, is required to
authorize a given action of the Corporation, the affirmative vote or consent of
the holders of at least a majority of the outstanding shares of the Convertible
Preferred Stock shall constitute the approval of such action by the class. To
the extent that under Delaware law the holders of the Convertible Preferred
Stock are entitled to vote on a matter with holders of Common Stock, voting
together as one class, each share 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 the
Convertible 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.
Section 10. Protective Provisions. So long as shares of Convertible
Preferred Stock are outstanding, the Corporation shall not take any action that
would impair the rights of the holders of the Convertible Preferred Stock set
forth herein and shall not without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of at least a majority of
the then outstanding shares of Convertible Preferred Stock:
5
<PAGE>
a. alter or change the rights, preferences or privileges of the shares of
the Convertible Preferred Stock or any other securities so as to affect
adversely the Convertible Preferred Stock;
b. create any new class or series of stock having a preference over, or
being on a parity with, the Convertible Preferred Stock with respect to
distributions pursuant to Section 7 above; or
c. do any act or thing which would result in taxation of the holders of
shares of the Convertible Preferred Stock under Section 305 of the Internal
Revenue Code of 1986, as amended (or any comparable provision of the Internal
Revenue Code as hereinafter from time to time amended)
IN WITNESS WHEREOF, I have executed this Certificate this 13th day of
June, 1996.
/s/ Robert Spivak
-----------------
President, Robert Spivak
ATTEST:
/s/ Michael Weinstock
Secretary, Michael Weinstock
series.a
6
<PAGE>
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