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 29,1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
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Commission File No. 0-23226
GRILL CONCEPTS, INC.
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(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
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(Address of principal executive offices)
(310) 820-5559
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(Issuer's telephone number)
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(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 1, 1997, 15,672,481 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 29, 1997
and December 29, 1996............................................ 1
Consolidated Condensed Statements of Operations -
For the three months and six months ended June 29, 1997
and June 30, 1996................................................ 3
Consolidated Condensed Statements of Cash Flows - For the
six months ended June 29, 1997 and June 30, 1996................. 4
Notes to Consolidated Condensed Financial Statements............. 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 7
PART II - OTHER INFORMATION
Item 2. Changes in Securities........................................ 9
Item 4. Submission of Matters to a Vote of Security Holders.......... 10
Item 6. Exhibits and Reports on Form 8-K............................. 10
SIGNATURES................................................................. 11
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GRILL CONCEPTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
June 29, December 29,
1997 1996
---------- ------------
Current assets:
Cash and cash equivalents $ 645,151 $ 372,317
Inventory 299,261 239,237
Prepaid expenses 957,228 1,038,036
---------- ----------
Total current assets 1,901,640 1,649,590
---------- ----------
Property and equipment, at cost 10,243,162 8,589,597
Less: accumulated depreciation (3,786,847) (3,364,486)
---------- ----------
Property and equipment, net 6,456,315 5,225,111
---------- ----------
Other assets:
Goodwill 241,733 245,829
Other 1,032,400 961,484
---------- ----------
Total other assets 1,274,133 1,207,313
---------- ----------
Total assets $9,632,088 $8,082,014
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE>
GRILL CONCEPTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 29, December 29,
1997 1996
---------- ------------
Current liabilities:
Accounts payable $ 1,266,253 $ 1,143,484
Accrued expenses 1,406,902 1,283,805
Current portion of long term debt 401,189 421,317
----------- -----------
Total current liabilities 3,074,344 2,848,606
Long-term debt, net of current 877,681 1,030,927
----------- -----------
Total liabilities 3,952,025 3,879,533
----------- -----------
Stockholders' equity:
Series A, Convertible Preferred Stock,
$.001 par value, authorized 1,000,000
shares; Shares issued and outstanding:
0 in 1997, 700 in 1996 1
Series B, Convertible Preferred Stock,
$.001 par value, authorized 1,000,000
shares; shares issued and outstanding:
32 in 1997, 65 in 1996. 1 1
Series I, Convertible Preferred Stock,
$.001 par value, authorized 1,000,000
shares, shares issued and outstanding:
1000 shares in 1997, 0 in 1996 1
Series II, Convertible Preferred Stock,
$0.001 par value, authorized 1,000,000
shares, shares issued and outstanding:
500 shares in 1997, 0 in 1996 1
Common stock, $.00001 par value:
30,000,000 shares authorized, shares
issued and outstanding: 15,672,481 in
1997 and 13,799,230 in 1996 157 138
Additional paid-in capital 11,010,801 9,552,458
Accumulated deficit (5,330,898) (5,350,117)
----------- -----------
Stockholders' equity 5,680,063 4,202,481
----------- -----------
Total liabilities and stockholders'
equity $ 9,632,088 $ 8,082,014
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements
2
<PAGE>
GRILL CONCEPTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------- --------------------------
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 7,306,781 $ 5,691,606 $14,447,501 $10,937,385
Cost of sales 1,987,026 1,546,185 3,943,243 2,892,312
----------- ----------- ----------- -----------
Gross Profit 5,319,755 4,145,421 10,504,258 8,045,073
----------- ----------- ----------- -----------
Costs and expenses:
Restaurant operating expenses 4,535,844 3,580,099 8,876,711 6,766,900
General and administrative 539,641 440,217 1,063,124 911,151
Depreciation and amortization 224,978 186,552 424,656 377,987
Amortization of preopening expenses 85,300 -- 135,600 --
----------- ----------- ----------- -----------
Total operating expenses 5,385,763 4,206,868 10,500,091 8,056,038
Income (loss) from operations (66,008) (61,447) 4,167 (10,965)
Non-recurring credit 43,714 -- 93,000 --
Interest expense, net (29,567) (32,561) (73,614) (70,458)
----------- ----------- ----------- -----------
Income (loss) before taxes on income (51,861) (94,008) 23,553 (81,423)
Provision for taxes on income -- -- 800 800
----------- ----------- ----------- -----------
Net income (loss) $ (51,861) $ (94,008) $ 22,753 $ (82,223)
----------- =========== ----------- ===========
Preferred stock:
Dividends accrued (417) (417)
Accounting deemed dividends (126,389) (126,389)
----------- -----------
(126,806) (126,806)
----------- -----------
Net loss applicable to common
stock $ (178,667) $ (104,053)
=========== ===========
Net income (loss) per share
Net income (loss) $ (0.00) $ 0.00
----------- -----------
Preferred Stock
Dividends $ (0.00) $ (0.00)
Accounting deemed dividends $ (0.01) $ (0.01)
----------- ------------
$ (0.01) $ (0.01)
----------- -----------
Net loss applicable to common
stocks $ (0.01) $ (0.01) $ (0.01) $ (0.01)
=========== =========== =========== ===========
Average weighted shares
outstanding 14,708,761 13,653,076 14,518,749 13,326,153
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
GRILL CONCEPTS, INC. AND SUBSIDIARES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended
-----------------------------
June 29, June 30,
1997 1996
----------- -----------
Cash flows from operating activities:
Net income (loss) $ 22,753 $ (82,223)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 560,256 371,507
Changes in operating assets and liabilities
Inventories (60,024) (9,041)
Prepaid expenses 80,808 32,050
Other assets (206,510) (31,027)
Accounts payable 122,769 (153,793)
Accrued liabilities 123,097 (115,449)
----------- ----------
Net cash provided by (used in) operating
activities 643,149 12,023
----------- ----------
Cash flows from investing activities;
Additions to furniture, equipment and
improvements (1,653,565) (397,084)
Net cash acquired through purchase of business -- 253,231
----------- ----------
Net cash (used in) investing activities (1,653,565) (143,853)
----------- ----------
Cash flows from financing activities:
Proceeds from issue of Common and Preferred
Stock 1,456,630 1,455,000
Payments on long-term debt (173,374) (195,758)
----------- ----------
Net cash provided by financial activities 1,283,250 1,259,242
----------- ----------
Net increase in cash and cash equivalents 272,834 1,127,412
Cash and cash equivalents, beginning of period 372,317 631,116
----------- ----------
Cash and cash equivalents, end of period $ 645,151 $1,788,528
----------- ----------
*Net cash acquired through purchase of business
Working capital, other than cash 26,716
Furniture, equipment and improvements (321,880)
Excess of cost over net assets acquired (245,829)
Other assets (55,776)
Fair value of stock exchanged 850,000
----------
Net cash acquired $ 253,231
----------
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 53,598 $ 104,935
Income taxes -- $ 800
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
GRILL CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL PRESENTATION
The interim consolidated financial statements are prepared pursuant to the
requirements for reporting on Form 10-QSB. These financial statements have
not been audited by independent accountants. The December 29, 1996 balance
sheet data was derived from audited financial statements but does not
include all disclosures required by generally accepted accounting
principles. The interim financial statements and notes thereto should be
read in conjunction with the financial statements and notes included in the
Company's Form 10-KSB dated December 29, 1996. In the opinion of
management, these interim financial statements reflect all adjustments of a
normal recurring nature necessary for a fair statement of the results for
the interim periods presented. The current period results of operations are
not necessarily indicative of results which ultimately will be reported for
the full year ending December 28, 1997.
2. BUSINESS AND ORGANIZATION
In April of 1996, the Company acquired 100% of the common stock of EMNDEE,
Inc. ("EMNDEE") and The Grill on the Alley, Inc. ("Grill, Inc."). EMNDEE
and Grill, Inc. own, collectively, 100% of The Grill Limited Partnership, a
California limited partnership which owns and operates 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. As
a result of the foregoing, these interim statements include the accounts of
the Grill during 1997. As acquisition of the Grill occurred April 1,1996,
the accounts of the Grill, for the 13 week period from April 1, 1996 to
June 30, 1996, are reflected in the financial statements as of and for the
quarter ended June 30, 1996.
The unaudited proforma financial information set forth below is presented
as if the acquisition of the Grill had been consummated as of December 31,
1995. The proforma financial information is not necessarily indicative of
what actual results of operations of the Company would have been if the
acquisitions were consummated as of December 31, 1995, nor does it purport
to represent the results of operations for future periods.
1997 1996
----------- -----------
Sales $14,447,501 $11,792,680
Net income (loss) $ 22,753 $ (25,931)
3. STOCKHOLDERS' EQUITY
During the quarter ended June 29, 1997, the remaining 610 shares of Series
A Convertible Preferred Stock were converted resulting in the issuance of
an aggregate of 702,080 shares of common stock at an average price of $0.87
per share. Additionally, during the quarter, 33 shares of Series B
Convertible Preferred Stock were converted resulting in the issuance of an
aggregate of 388,067 shares of common stock at an average price of $0.85
per share.
On June 24, 1997, the Company completed a private placement of 200,000
shares of common stock, 1,000 shares of Series I Convertible Preferred
Stock, 500 shares of Series II Convertible Preferred Stock, 750,000 five
year $2.00 Warrants and 750,000 five year $3.00 Warrants. The aggregate
sales price of those securities was $1,500,000.
The Series I Convertible Preferred Stock is convertible into common stock
at $1.25 per share.
5
<PAGE>
The Series II Convertible Preferred Stock is convertible into common stock
commencing one year from the date of issuance at the greater of (i) $1.00
per share, or (ii) 75 % of the average closing price of the Company's
common stock for the five trading days immediately prior to the date of
conversion; provided, however, that the conversion price shall in no event
exceed $2.50 per share. The Series II Convertible Preferred Stock is
entitled to receive an annual dividend equal to $100 per share payable on
conversion or redemption in cash or, at the Company's option, in common
stock at the then applicable conversion price. The Series II Convertible
Preferred Stock is subject to redemption, in whole or in part, at the
option of the Company on or after the second anniversary of issuance at
$1,000 per share.
The $2.00 Warrants are exercisable to purchase common stock at a price of
$2.00 per share commencing three years from the date of issuance and ending
five years from the date of issuance. The $2.00 Warrants are subject to
cancellation in the event the holders of Series I Preferred Stock, or
common stock issued upon conversion of such preferred stock, sell, assign
or transfer such preferred stock or underlying common stock, other than
transfers to permitted persons, within three years of the initial sale of
the warrants.
The $3.00 Warrants are exercisable to purchase common stock at a price of
$3.00 per share commencing three years from the date of issuance and ending
five years from the date of issuance. The $3.00 Warrants are subject to
cancellation in the event the holders of Series I Preferred Stock , or
common stock issued upon conversion of such preferred stock, sell, assign
or transfer such preferred stock or underlying common stock, other than
transfers to permitted persons, within three years of the initial sale of
the warrants.
4. BANK LINE OF CREDIT
During the quarter, the Company paid down its $1,000,000 available line of
credit to $0.
5. DEEMED DIVIDEND
In accordance with the recent position of the Securities and Exchange
Commission regarding accounting for Preferred Stock which is convertible at
a discount from market price for common stock, the Company has reflected an
accounting "deemed dividend". This accounting deemed dividend, which
relates to the issuance of the Preferred Stock, is a non-cash,
non-recurring accounting entry for determining income (loss) applicable to
common stock and income (loss) per share.
6. IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share", which establishes standards for computing and
presenting earnings per share. SFAS No. 128 requires the replacement of
primary earnings per share with basic earnings per share. Basic earnings
per share excludes dilution, and is computed by dividing income available
to common stockholders by the weighted-average number of common shares
outstanding during the period. The Company will be required to adopt the
provisions of SFAS No. 128 for 1997. It is not expected that the adoption
of the SFAS No. 128 will have a material impact on earnings per share
results reported by the Company under the Company's current capital
structure.
Other recently issued standards of the FASB are not expected to affect the
Company as conditions to which those standards apply are absent.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion and analysis should be read in conjunction with the
Company's financial statements and notes thereto included elsewhere in this Form
10-QSB. Except for the historical information contained herein, the discussion
in this Form 10-QSB contains certain forward looking statements that involve
risks and uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Form 10-QSB
should be read as being applicable to all related forward statements wherever
they appear in this Form 10-QSB. The Company's actual results could differ
materially from those discussed here.
MATERIAL CHANGES IN RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 29, 1997
AS COMPARED TO THE SIX MONTHS ENDED JUNE 29, 1996.
The results of operations for the 26 week period ended June 29, 1997 include the
operations of seven Daily Grill restaurants for the full six months plus the
Washington D.C. Daily Grill for sixteen weeks, three Pizzeria Uno units and The
Grill restaurant. The first half of 1996 includes six Daily Grill restaurants,
three Pizzeria Uno stores and The Grill for thirteen weeks.
The Company's revenues for the six month period increased 32.1% to $14,447,000
from $10,937,000 for the same period in 1996. The increase of $3.5 million is
primarily a result of added sales by the inclusion of The Grill restaurant for
the full period this year, the addition of the Irvine, California, Daily Grill
opened in September, 1996 and sales from the Washington D.C. Daily Grill, opened
in March, 1997. Additionally, same store sales increased 2.9%.
While revenues increased by 32.1% in the 1997 six month period when compared
with the similar period in 1996, cost of sales increased 36.3% and increased as
a percentage of sales from 26.4% to 27.3%. This increase in cost of sales as a
percentage of sales during the 1997 period is attributable principally to the
inclusion of The Grill which has historically experienced an approximate 31%
cost of sales as compared to approximately a 27% cost of sales for Daily Grill
restaurants. This higher cost of sales at The Grill is offset by lower labor
costs.
As a result, gross profit increased 30.6% from $8,045,000 (73.6% of sales) in
1996 to $10,504,000 (72.7% of sales) in 1997.
Restaurant operating expenses increased to $8,877,000 (61.4% of sales) in 1997
from $6,767,000(61.9% of sales) in 1996. The dollar increase in restaurant
operating expenses was attributable to the operation of the two new restaurants
during the 1997 period, plus the operation of The Grill for two full quarters in
1997.
General and administrative expenses increased only 16.7% to represent 7.4% of
sales in the 1997 six months while amounting to 8.3% of sales in the 1996
period. This percentage decrease occurred as a result of the added volume from
two additional Daily Grills and the addition of The Grill with only a $152,000
increase in corporate overhead.
Depreciation and amortization expense increased by $182,000 during the 1997 six
month period as a result of the opening of two new restaurants. Included in
amortization expense is $136,000 relating to the amortization of preopening
expenses for these two new Daily Grill restaurants. The Company had no
amortization of preopening expenses during the similar period in 1996.
The Company also reported a non-recurring credit of $93,000 during 1997 relating
to overaccruals of non-recurring acquisition costs reported in 1996.
MATERIAL CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES.
At June 29, 1997 the Company had negative working capital of $1,173,000 and a
cash balance of $645,000 compared to negative working capital of $1,119,000 and
a cash balance of $372,000 at December 29, 1996. The change in working capital
and cash was primarily attributable to the sale of the Preferred I and II stocks
in June, 1997 offset by funds expended on the Washington, D.C. Daily Grill.
7
<PAGE>
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 sale of
Preferred Stock, the issuance of warrants, and loans and tenant allowances from
certain of its landlords. At June 29,1997, the Company had existing term loan
bank borrowing of $907,000, an SBA loan of $151,000, loans from
stockholders/officers of $84,000 and loans/advances from a landlord of $137,000.
In addition to the Washington, D.C. Daily Grill opened in March, 1997, the
Company presently anticipates opening one additional Daily Grill store in the
greater Washington, D.C. area and has signed an agreement to form an LLC for the
operation of a "The Grill" restaurant in San Jose, California. The Company will
contribute $200,000 toward the expected cost of this restaurant of approximately
$1,500,000. The cost of opening new Daily Grill restaurants is anticipated to be
between $800,000 and $1,400,000 per site depending upon the location and
available tenant allowances.
On June 24, 1997, the Company completed a private placement of 200,000 shares of
common stock, 1,000 shares of Series I Convertible Preferred Stock, 500 shares
of Series II Convertible Preferred Stock, 750,000 five year $2.00 Warrants and
750,000 five year $3.00 Warrants. The aggregate sales price of those securities
was $1,500,000.
The Series I Convertible Preferred Stock is convertible into common stock at
$1.25 per share.
The Series II Convertible Preferred Stock is convertible into common stock
commencing one year from the date of issuance at the greater of (i) $1.00 per
share, or (ii) 75 % of the average closing price of the Company's common stock
for the five trading days immediately prior to the date of conversion; provided,
however, that the conversion price shall in no event exceed $2.50 per share. The
Series II Convertible Preferred Stock is entitled to receive an annual dividend
equal to $100 per share payable on conversion or redemption in cash or, at the
Company's option, in common stock at the then applicable conversion price. The
Series II Convertible Preferred Stock is subject to redemption, in whole or in
part, at the option of the Company on or after the second anniversary of
issuance at $1,000 per share.
The $2.00 Warrants are exercisable to purchase common stock at a price of $2.00
per share commencing three years from the date of issuance and ending five years
from the date of issuance. The $2.00 Warrants are subject to cancellation in the
event the holders of Series I Preferred Stock, or common stock issued upon
conversion of such preferred stock, sell, assign or transfer such preferred
stock or underlying common stock, other than transfers to permitted persons,
within three years of the initial sale of the warrants.
The $3.00 Warrants are exercisable to purchase common stock at a price of $3.00
per share commencing three years from the date of issuance and ending five years
from the date of issuance. The $3.00 Warrants are subject to cancellation in the
event the holders of Series I Preferred Stock, or common stock issued upon
conversion of such preferred stock, sell, assign or transfer such preferred
stock or underlying common stock, other than transfers to permitted persons,
within three years of the initial sale of the warrants.
In accordance with the recent position of the Securities and Exchange Commission
regarding accounting for Preferred Stock which is convertible at a discount from
market price for common stock, the Company has reflected an accounting "deemed
dividend". This accounting deemed dividend, which relates to the issuance of the
Preferred Stock, is a non-cash, non-recurring accounting entry for determining
income (loss) applicable to common stock and income (loss) per share.
Other than the opening of new 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.
PART II - OTHER INFORMATION
Item 2. Changes in Securities
(a) On June 24, 1997, the Company sold (i) 200,000 shares of common stock, (ii)
1,000 shares of Series I Convertible Preferred Stock, (iii) 500 shares of
Series II Convertible Preferred Stock, (iv) 750,000 five year $2.00
warrants and (v) 750,000 five year $3.00 warrants.
(b) The securities were issued to a single accredited investor.
8
<PAGE>
(c) The aggregate sales price of such securities was $1,500,000. No commissions
or discounts were paid in connection with the placement.
(d) The securities were offered pursuant to Regulation D. The offer was
directed exclusively to a single accredited investor without general
solicitation or advertising and based on representations from the investor
that such investor was acquiring for investment. The securities bear
legends restricting the resale thereof.
(e) The Series I Convertible Preferred Stock is convertible into common stock
at $1.25 per share.
The Series II Convertible Stock is convertible into common stock commencing
one year from the date of issuance at the greater of (i) $1.00 per share, or
(ii) 75% of the average closing price of the Company's common stock for the five
trading days immediately prior to the date of conversion; provided, however,
that the conversion price shall in no event exceed $2.50 per share. The Series
II Convertible Preferred Stock is entitled to receive an annual dividend equal
to $100 per share payable on conversion or redemption in cash or, at the
Company's option, in common stock at the then applicable conversion price. The
Series II Convertible Preferred Stock is subject to redemption, in whole or in
part, at the option of the Company on or after the second anniversary of
issuance at $1,000 per share.
The $2.00 Warrants are exercisable to purchase common stock at a price of
$2.00 per share commencing three years from the date of issuance and ending five
years from the date of issuance. The $2.00 Warrants are subject to cancellation
in the event the holders of Series I Preferred Stock, or common stock issued
upon conversion of such preferred stock, sell, assign or transfer such preferred
stock or underlying common stock, other than transfers to permitted persons,
within three years of the initial sale of the warrants.
The $3.00 Warrants are exercisable to purchase common stock at a price of
$3.00 per share commencing three years from the date of issuance and ending five
years from the date of issuance. The $3.00 Warrants are subject to cancellation
in the event the holders of Series I Preferred Stock, or common stock issued
upon conversion of such preferred stock, sell, assign or transfer such preferred
stock or underlying common stock, other than transfers to permitted persons,
within three years of the initial sale of the warrants.
Item 4. Submission of Matters to a Vote of Security Holders
(a) On June 6, 1997, an annual meeting of shareholders of Grill Concepts, Inc.
was held.
(b) The following directors were elected (by the vote indicated) at such
meeting:
Robert Wechsler 9,621,920 For 15,642 Against 18,590 Abstain
Robert Spivak 9,636,635 For 927 Against 18,590 Abstain
Michael Weinstock 9,636,635 For 927 Against 18,590 Abstain
Richard Shapiro 9,636,920 For 642 Against 18,590 Abstain
Charles Frank 9,636,920 For 642 Against 18,590 Abstain
Glenn Golenberg 9,621,635 For 13,905 Against 18,590 Abstain
Pater Balas 9,621,635 For 15,927 Against 18,590 Abstain
(c) In addition to the election of directors as noted above, the following
matters were voted upon at such meeting:
(i) Approval of amendment to Certificate of Incorporation to increase the
number of authorized shares of common stock from 20,000,000 shares to
30,000,000 shares (8,203,638 For, 166,068 Against, 22,233 Abstain)
(ii) Ratification of appointment of Coopers & Lybrand LLP as the Company's
independent certifying accountants (9,524,903 For, 79,066 Against,
51,183 Abstain)
9
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
3.1 Certificate of Amendment to Restated Certificate of
Incorporation
4.1 Certificate of Designation of Series I Convertible
Preferred Stock
4.2 Certificate of Designation of Series II Convertible
Preferred Stock
10.1 Form of $2.00 Warrant
10.2 Form of $3.00 Warrant
(b) Reports on Form 8-K
None
10
<PAGE>
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, INC.
Dated: August 8, 1997 By: /s/ Robert Spivak
-------------------------------
Robert Spivak
President and C.E.O
Dated: August 8, 1997 By: /s/ Ben Sumner
-------------------------------
Ben Sumner
Chief Financial Officer and
Accounting Officer
11
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
GRILL CONCEPTS, INC.
* * * * * * * *
GRILL CONCEPTS, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware, does hereby certify:
FIRST: That at a meeting of the Board of Directors of the Corporation
resolutions were duly adopted setting forth proposed amendments to the Restated
Certificate of Incorporation of said Corporation, declaring said amendments to
be advisable and calling a meeting of the Stockholders of said Corporation for
consideration thereof. The resolutions setting forth the proposed amendments are
as follows:
RESOLVED, that the Corporation's Restated Certificate of Incorporation, as
amended, be amended to increase the authorized shares of common stock to
30,000,000 shares and to read in full as follows:
"Fourth: The aggregate number of shares of all classes of stock which
the Corporation shall have authority to issue is thirty-one million
(31,000,000) shares, consisting of (a) one million (1,000,000) shares
of preferred stock, par value $.001 per share (hereinafter referred to
as "Preferred Stock"); and (b) thirty million (30,000,000) shares of
common stock, par value $.00001 per share (hereinafter referred to as
"Common Stock")."
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
an annual meeting of the stockholders of said corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
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IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by its President and attested by its Assistant Secretary this day of
June, 1997.
GRILL CONCEPTS, INC.
By:
--------------------------------
Robert Spivak, President
ATTEST:
By:-------------------------------
Michael Weinstock,
Secretary
2
GRILL CONCEPTS, INC.
CERTIFICATE OF DESIGNATIONS
OF
SERIES I 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, DOES HEREBY CERTIFY that at a
meeting of the Board of Directors of the Corporation duly convened and held on
June 6, 1997 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 I Convertible Preferred Stock" (the "Convertible Preferred
Stock") and the number of shares constituting the Convertible Preferred Stock
shall be 1,000. Such number of shares may be 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 reserved 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 any time and without the
payment of any additional consideration therefor, 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 dividing $1,000 (the
"Original Issue Price") by $1.25 (the "Conversion Price").
b. 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 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
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such office that the holder elects to convert the same, the number of shares of
Convertible Preferred Stock so converted and the number of shares of Common
Stock to be issued on conversion; provided, however, that the Corporation shall
not be obligated to honor any conversion notice covering less than 100 shares of
Convertible Preferred Stock unless such conversion notice covers all shares of
Convertible Preferred Stock then outstanding. The Corporation shall not be
obligated to issue certificates evidencing shares of Common Stock issuable upon
such conversion unless certificates evidencing such shares of Convertible
Preferred Stock are delivered to the Corporation or its transfer agent as
provided above, or the holder notifies 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 certificates, or after such agreement and indemnification, to
such holder of 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 persons 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 Stick 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.
Unless (i) the shares of Common Stock issuable upon conversion of the
Convertible Preferred Stock (the "Conversion Shares") have been held long enough
to satisfy the holding period set forth in, and the holder otherwise meets the
requirements of, Rule 144(k) (or any successor provision) promulgated under the
Securities Act of 1933 (the "Securities Act"), (ii) such shares become freely
tradeable pursuant to another exemption under the Securities Act, or (iii) the
converting holder purchased such shares pursuant to a current prospectus under
an effective registration statement covering the purchase and sale of such
shares, the certificate(s) representing the Conversion Shares will bear the
following legend:
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THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
EITHER AN EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
Additionally, until the third anniversary of the original sale of the
Convertible Preferred Stock (the "Warrant Vesting Date"), the Conversion Shares
shall bear a legend indicating that a sale, transfer or assignment of any of the
Conversion Shares prior to the Warrant Vesting Date (other than sales, transfers
or assignments, to members of the immediate family of Lew Wolff, including
trusts and/or family partnerships for the benefit of said family members, or to
executive officers, partners or principals of Wolff DiNapoli LLC ("Permitted
Transferees")) shall require a written notice to the Corporation and may result
in the cancellation of certain warrants issuable in connection with the
Convertible Preferred Stock, which legend shall read as follows:
THE HOLDER OF THE SHARES EVIDENCED BY THIS CERTIFICATE SHALL
PROVIDE WRITTEN NOTICE TO GRILL CONCEPTS, INC. OF ANY SALE,
TRANSFER OR ASSIGNMENT OF THE SHARES EVIDENCED HEREBY
OCCURRING ON OR BEFORE JUNE, 2000. IN THE EVENT OF ANY SALE,
TRANSFER OR ASSIGNMENT ON OR BEFORE SUCH DATE, OTHER THAN
TRANSFERS OR ASSIGNMENTS TO PERMITTED TRANSFEREES (AS DEFINED
IN THE $2.00 WARRANTS AND $3.00 WARRANTS) OR TRANSFERS OR
ASSIGNMENTS TO WHICH GRILL CONCEPTS HAS PREVIOUSLY CONSENTED,
THE $2.00 WARRANTS AND $3.00 WARRANTS ISSUED IN CONNECTION
WITH GRILL CONCEPTS' INITIAL SALE OF THE SECURITIES EVIDENCED
HEREBY STOCK MAY BE SUBJECT TO CANCELLATION.
On or after the Warrant Vesting Date, the holder(s) of Conversion Shares
may request that the foregoing legend be removed from such certificates and the
Corporation shall use reasonable efforts to cause such legend to be so removed.
Section 3. Dividend Provisions. The holders of Convertible Preferred Stock
will only be entitled to dividends if and when declared by the Board of
Directors on a non-cumulative basis pari passu with the holders of Common Stock.
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Section 4. 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) the date on which any such record date is to be
declared for the purpose 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 have received prior notice pursuant to Section 4.a.) 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 5. 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 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.
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Section 6. 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 the Original Issue Price (as adjusted for any
reclassification, stock dividends, combinations, splits and similar
recapitalization affecting such shares) plus accrued dividends, if any. 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
Corporations's Certificate of Incorporation, as amended.
b. Upon the completion of the distribution required by subsection 6.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 6.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 6, but shall instead be treated pursuant to Section 4 hereof.
Section 7. 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.
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<PAGE>
To the extent that under Delaware law the vote of the holder 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 Convertible 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 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.
Notwithstanding the foregoing, if at any time while shares of Convertible
Preferred Stock are outstanding, Mr. Lew Wolff should provide written request of
such, the Corporation shall use its best efforts to nominate Mr. Wolff for
election as a director of the Corporation at the next annual shareholders
meeting of the Corporation and shall recommend such election to its shareholders
and, in the event a vacancy occurs on the Board of Directors of the Corporation
prior to the election of Mr. Wolff, the Corporation's Board of Directors shall
appoint Mr. Wolff to fill any such vacancy. Until such time as Mr. Wolff is
elected as a director of the Corporation, Mr. Wolff shall be entitled to notice
of all meetings of the Corporation's Board of Directors and may attend any such
meeting as a non-voting advisory director.
Section 8.
a. Demand Registration Rights. The Corporation covenants and agrees with
the Holders of the Convertible Preferred Stock and Conversion Shares (the
"Registrable Securities") that, subject to the availability of audited financial
statements which would comply with Regulation S-X under the Securities Act and
provided that the holders have not previously had the option of including all of
the Registrable Securities in one or more Piggyback Registrations pursuant to
Section 8.b., upon written request of the then Holder(s) of at least a majority
of the Registrable Securities made at any time within the period commencing
three (3) years and ending five (5) years after the date the Convertible
Preferred Stock was initially issued (the "Original Issuance Date"), the
Corporation will file as promptly as practicable and, in any event, within sixty
(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 under the Securities Act, registering or qualifying the
Registrable Securities for sale. Within fifteen (15) days after receiving any
such notice, the Corporation shall give notice to the other Holders of the
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<PAGE>
Registrable Securities, if any, advising that the Corporation is proceeding with
such Amendment or registration statement and offering to include therein the
Registrable Securities of such Holders. The Corporation shall not be obligated
to any such other Holder unless such other Holder shall accept such offer by
notice in writing to the Corporation within ten (10) days thereafter. The
Corporation 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 or registration statement as promptly as practicable
and for a period of nine months thereafter to reflect in the Amendment or
registration 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 or registration statement
to enable any Holders of the Registrable Securities to sell such Securities
during said nine-month period. The Holders may sell the Registrable Securities
pursuant to the Amendment or registration statement without converting the
Convertible Preferred Stock. If any registration pursuant to this paragraph 8.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 Corporation's approval which shall not be
unreasonably withheld.
b. Piggyback Registration Rights. The Corporation covenants and agrees with
any holder of the Registrable Securities that if, at any time within the period
commencing one year and ending five years from the Original Issuance Date, it
proposes to file a registration 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
Corporation and/or in a secondary registration on behalf of holders of such
securities and the registration form to be used may be used for registration of
the Registrable Securities, the Corporation will give prompt written notice
(which, in the case of a registration statement pursuant to the exercise of
demand registration rights shall be within ten (10) business days after the
Corporation'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 at
the addresses appearing on the records of the Corporation of its intention to
file a registration statement and will offer to include in such registration
statement all, but not less than 20% of the Registrable Securities, subject to
paragraphs i and ii of this Section 8.b., such number of Registrable Securities
with respect to which the Corporation has received written requests for
inclusion therein within ten (10) days after the giving of notice by the
Corporation. All registrations requested pursuant to this Section 8.b. are
referred to herein as "Piggyback Registrations". All Piggyback Registrations
pursuant to this Section 8 will be made solely at the Corporation's expense.
This Section is not applicable to a registration statement filed by the
Corporation on Forms S-4 or S-8 or any successor forms.
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i. Priority on Primary Registrations. If a Piggyback Registration
includes an underwritten primary registration on behalf of the Corporation
and the underwriter(s) for such offering determines in good faith and
advises the Corporation 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 Corporation,
the Corporation will include in such registration (A) first, the securities
that the Corporation proposes to sell and (B) second, the Registrable
Securities requested to be included in such registration, apportioned pro
rata among the holders of the Registrable Securities and 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 Corporation, and the underwriter(s) for such
offering advises the Corporation 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, the
Corporation will include in such registration (A) first, the securities
requested to be included therein by the holders requesting such
registration, and (B) second, the Registrable Securities requested to be
included in such registration and securities of holder of other securities
requested to be included in such registration statement, 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 Corporation will use its best
efforts to include not less than 20% of the Registrable Securities.
Notwithstanding the foregoing, if any such underwriter shall determine in
good faith and advise the Corporation in writing that the distribution of the
Registrable Securities requested to be included in the registration concurrently
with the securities being registered by the Corporation would materially
adversely affect the distribution of such securities by the Corporation, 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 Corporation'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 Corporation, managing underwriter and holders of
Registrable Securities shall otherwise agree. In the event of such delay, the
Corporation 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
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end of any such period of delay. If any party disapproves the terms of any such
underwriting, it may elect to withdraw therefrom by written notice to the
Corporation, the underwriter, and the holder. Notwithstanding the foregoing, the
Corporation shall not be required to file a registration statement to include
shares pursuant to this Section 8 if independent counsel, reasonably
satisfactory to the Corporation, renders an opinion to the Corporation that the
Registrable Securities 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. Action to be Undertaken by the Corporation. In connection with the
registration of Registrable Securities hereunder, the Corporation agrees to (i)
bear the expenses of any registration; provided, however, that in no event shall
the Corporation be obligated to pay (A) any fees and disbursements of special
counsel for holders of Registrable Securities, (B) any underwriters' discount or
commission in respect of such Registrable Securities, and (C) any stock transfer
taxes attributable to the sale 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 such
holders shall reasonably request, provided, however, that no qualification shall
be required in any jurisdiction where, as a result thereof, the Corporation
would 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 (iii) enter into a cross-indemnity agreement, in customary form, with each
underwriter, if any, and each holder of securities included in such registration
statement.
d. Action to be Taken by the Holders. The Corporation's obligations under
this Section 8 shall be conditioned upon a timely receipt by the Corporation in
writing of: (i) information as to the terms of such public offering furnished by
or on behalf of each holder of Registrable Securities intending to make a public
offering of his, her or its Registrable Securities, and (ii) such other
information as the Corporation may reasonably require from such holders, or any
underwriter for any of them, for inclusion in such registration statement.
Section 9. 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:
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;
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<PAGE>
b. create any new class or series of stock having a preference over the
Convertible Preferred Stock with respect to distributions pursuant to Section 6
above;
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);
d. redeem, repurchase or pay any distribution with respect to any class of
securities of the Corporation ranking junior to the Convertible Preferred Stock
or redeem or repurchase any shares of Series A Preferred Stock or Series B
Preferred Stock; or
e. reissue any shares of the Convertible Preferred Stock after such shares
have previously been converted, redeemed or repurchased.
Section 10. Miscellaneous. The Convertible Preferred Stock shall rank pari
passu with the Series A Preferred Stock, Series B Preferred Stock and Series II
Preferred Stock of the Corporation with respect to rights on liquidation.
IN WITNESS WHEREOF, I have executed this Certificate this day of June 20,
1997.
By: /s/ Robert Spivak
------------------------------
President, Robert Spivak
ATTEST:
/s/ Michael Weinstock
- --------------------------------
Secretary, Michael Weinstock
10
GRILL CONCEPTS, INC.
CERTIFICATE OF DESIGNATIONS
OF
SERIES II 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, DOES HEREBY CERTIFY that at a
meeting of the Board of Directors of the Corporation duly convened and held on
June 6, 1997 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 II Convertible Preferred Stock" (the "Convertible
Preferred Stock") and the number of shares constituting the Convertible
Preferred Stock shall be 500. Such number of shares may be 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 reserved 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 commencing one year following the
date on which the Convertible Preferred Stock was first issued (the "Original
Issuance Date") and without the payment of any additional consideration
therefor, 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 dividing $1,000 (the "Original Issue Price") by the greater of (i)
$1.00, or (ii) 75% of the average closing price (the "Closing Price") 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.b., as reported on Nasdaq
(the "Conversion Price"). Notwithstanding the foregoing, in no event shall the
Conversion Price exceed $2.50 per share.
b. 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 order to convert Convertible Preferred
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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 the number of shares of Common
Stock to be issued on conversion; provided, however, that the Corporation shall
not be obligated to honor any conversion notice covering less than 100 shares of
Convertible Preferred Stock unless such conversion notice covers all shares of
Convertible Preferred Stock then outstanding. The Corporation shall not be
obligated to issue certificates evidencing shares of Common Stock issuable upon
such conversion unless certificates evidencing such shares of Convertible
Preferred Stock are delivered to the Corporation or its transfer agent as
provided above, or the holder notifies 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 certificates, or after such agreement and indemnification, to
such holder of 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 persons 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.
Unless (i) the shares of Common Stock issuable upon conversion of the
Convertible Preferred Stock (the "Conversion Shares") and/or the shares of
Common Stock issuable as dividends on the Convertible Preferred Stock (the
"Dividend Shares") have been held long enough to satisfy the holding period set
forth in, and the holder otherwise meets the requirements of, Rule 144(k) (or
any successor provision) promulgated under the Securities Act of 1933 (the
"Securities Act"), (ii) such shares become freely tradeable pursuant to another
exemption under the Securities Act, or (iii) the converting holder purchased
such shares pursuant to a current prospectus under an effective registration
statement covering the purchase and sale of such shares, the certificate(s)
representing the Conversion Shares and the Dividend Shares will bear the
following legend:
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THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
EITHER AN EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
Section 3. Dividend Provisions. The holders of shares of Convertible
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
$100 per share of Convertible Preferred Stock held (as adjusted for any
reclassification, stock dividends, combinations, splits and similar
recapitalization affecting such shares). Dividends are payable only upon
conversion of the Convertible Preferred Stock pursuant to Section 2 hereof and
are payable either (i) in shares of Common Stock, with the number of shares of
Common Stock so payable to be determined by dividing the accrued dividend
payable by the Conversion Price in effect on the Date of Conversion and rounded
up to the nearest full share, or (ii) in cash, at the option of the Corporation.
Dividends on the shares of Convertible Preferred Stock shall accumulate from the
date the Convertible Preferred Stock was initially issued (the "Original
Issuance Date") through the Date of Conversion on the basis of a calendar year
consisting of twelve (12) months each consisting of thirty (30) days. Dividends
shall payable in cash only out of the assets of the Corporation legally
available for the payment thereof.
Section 4. 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) the date on which any such record date is to be
declared for the purpose 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.
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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 have received prior notice pursuant to Section 4.a.) 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 5. 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 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 6. Redemption. The Corporation shall have the right but not the
obligation to redeem, in part or in whole, any shares of Convertible Preferred
Stock remaining outstanding on or after the second anniversary date of the
Original Issuance Date at a redemption price of $1,000 per share plus any
accrued but unpaid dividends (the "Redemption Price"). In the event the
Corporation elects to redeem part or all of the outstanding shares of
Convertible Preferred Stock, the Corporation shall provide a written notice of
such intent to the holders of the Convertible Preferred Stock at least ten (10)
days in advance of the date set for redemption (the "Redemption Date"). Such
notice shall set forth the Redemption Date, the number of shares to be redeemed,
the Redemption Price, the time, place and manner of delivery of funds and
certificates evidencing the shares to be redeemed and the procedures to be
followed to collect the Redemption Price. The holders' right to convert shares
of Convertible Preferred Stock to be redeemed shall terminate at 5:00 P.M.
Pacific time on the business day immediately preceding the Redemption Date.
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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 the Original Issue Price (as adjusted for any
reclassification, stock dividends, combinations, splits and similar
recapitalization affecting such shares) plus accrued dividends. 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
Corporations'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 4 hereof.
Section 8. 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.
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To the extent that under Delaware law the vote of the holder 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 Convertible 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 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.
Notwithstanding the foregoing, if, at any time while shares of Convertible
Preferred Stock are outstanding, Mr. Lew Wolff should provide written request of
such, the Corporation shall use its best efforts to nominate Mr. Wolff for
election as a director of the Corporation at the next annual shareholders
meeting of the Corporation and shall recommend such election to its shareholders
and, in the event a vacancy occurs on the Board of Directors of the Corporation
prior to the election of Mr. Wolff, the Corporation's Board of Directors shall
appoint Mr. Wolff to fill any such vacancy. Until such time as Mr. Wolff is
elected as a director of the Corporation, Mr. Wolff shall be entitled to notice
of all meetings of the Corporation's Board of Directors and may attend any such
meetings as a non-voting advisory director.
Section 9. Registration Rights.
a. Demand Registration Rights. The Corporation covenants and agrees with
the Holders of the Convertible Preferred Stock, Conversion Shares or Dividend
Shares (the "Registrable Securities") that, subject to the availability of
audited financial statements which would comply with Regulation S-X under the
Securities Act and provided that the holders have not previously had the option
of including all of the Registrable Securities in one or more Piggyback
Registrations pursuant to Section 8.b., upon written request of the then
Holder(s) of at least a majority of the Registrable Securities made at any time
within the period commencing three (3) years and ending five (5) years after the
Original Issuance Date, the Corporation will file as promptly as practicable
and, in any event, within sixty (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 under the Securities Act,
registering or qualifying the Registrable Securities for sale. Within fifteen
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(15) days after receiving any such notice, the Corporation shall give notice to
the other Holders of the Registrable Securities, if any, advising that the
Corporation is proceeding with such Amendment or registration statement and
offering to include therein the Registrable Securities of such Holders. The
Corporation shall not be obligated to any such other Holder unless such other
Holder shall accept such offer by notice in writing to the Corporation within
ten (10) days thereafter. The Corporation 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 or registration statement
as promptly as practicable and for a period of nine months thereafter to reflect
in the Amendment or registration 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
or registration statement to enable any Holders of the Registrable Securities to
sell such Securities during said nine-month period. The Holders may sell the
Registrable Securities pursuant to the Amendment or registration statement
without converting the Convertible Preferred Stock. If any registration pursuant
to this paragraph 8.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 Corporation's approval which shall
not be unreasonably withheld.
b. Piggyback Registration Rights. The Corporation covenants and agrees with
any holder of the Convertible Preferred Stock, Conversion Shares or Dividend
Shares (the "Registrable Securities") that if, at any time within the period
commencing one year and ending five years from the Original Issuance Date, it
proposes to file a registration 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
Corporation and/or in a secondary registration on behalf of holders of such
securities and the registration form to be used may be used for registration of
the Registrable Securities, the Corporation will give prompt written notice
(which, in the case of a registration statement pursuant to the exercise of
demand registration rights shall be within ten (10) business days after the
Corporation'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 at
the addresses appearing on the records of the Corporation of its intention to
file a registration statement and will offer to include in such registration
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statement all, but not less than 20% of the Registrable Securities, subject to
paragraphs i and ii of this Section 9.b., such number of Registrable Securities
with respect to which the Corporation has received written requests for
inclusion therein within ten (10) days after the giving of notice by the
Corporation. All registrations requested pursuant to this Section 9.b. are
referred to herein as "Piggyback Registrations". All Piggyback Registrations
pursuant to this Section 9 will be made solely at the Corporation's expense.
This Section is not applicable to a registration statement filed by the
Corporation 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 the Corporation
and the underwriter(s) for such offering determines in good faith and
advises the Corporation 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 Corporation,
the Corporation will include in such registration (A) first, the securities
that the Corporation proposes to sell and (B) second, the Registrable
Securities requested to be included in such registration, apportioned pro
rata among the holders of the Registrable Securities and 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 Corporation, and the underwriter(s) for such
offering advises the Corporation 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, the
Corporation will include in such registration (A) first, the securities
requested to be included therein by the holders requesting such
registration, and (B) second, the Registrable Securities requested to be
included in such registration and securities of holder of other securities
requested to be included in such registration statement, 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 Corporation will use its best
efforts to include not less than 20% of the Registrable Securities.
Notwithstanding the foregoing, if any such underwriter shall determine in
good faith and advise the Corporation in writing that the distribution of the
Registrable Securities requested to be included in the registration concurrently
with the securities being registered by the Corporation would materially
adversely affect the distribution of such securities by the Corporation, 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 Corporation'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 Corporation, managing underwriter and holders of
Registrable Securities shall otherwise agree. In the event of such delay, the
Corporation shall file such supplements, post-effective amendments and take any
such other steps as may be necessary to permit such holders to make their
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proposed offering and sale for a period of 120 days immediately following the
end of any such period of delay. If any party disapproves the terms of any such
underwriting, it may elect to withdraw therefrom by written notice to the
Corporation, the underwriter, and the holder. Notwithstanding the foregoing, the
Corporation shall not be required to file a registration statement to include
shares pursuant to this Section 9 if independent counsel, reasonably
satisfactory to the Corporation, renders an opinion to the Corporation that the
Registrable Securities 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. Action to be Undertaken by the Corporation. In connection with the
registration of Registrable Securities hereunder, the Corporation agrees to (i)
bear the expenses of any registration; provided, however, that in no event shall
the Corporation be obligated to pay (A) any fees and disbursements of special
counsel for holders of Registrable Securities, (B) any underwriters' discount or
commission in respect of such Registrable Securities, and (C) any stock transfer
taxes attributable to the sale 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 such
holders shall reasonably request, provided, however, that no qualification shall
be required in any jurisdiction where, as a result thereof, the Corporation
would 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 (iii) enter into a cross-indemnity agreement, in customary form, with each
underwriter, if any, and each holder of securities included in such registration
statement.
d. Action to be Taken by the Holders. The Corporation's obligations under
this Section 9 shall be conditioned upon a timely receipt by the Corporation in
writing of: (i) information as to the terms of such public offering furnished by
or on behalf of each holder of Registrable Securities intending to make a public
offering of his, her or its Registrable Securities, and (ii) such other
information as the Corporation may reasonably require from such holders, or any
underwriter for any of them, for inclusion in such registration statement.
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:
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 the
Convertible Preferred Stock with respect to distributions pursuant to Section 7
above;
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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);
d. redeem, repurchase or pay any distribution with respect to any class of
securities of the Corporation ranking junior to the Convertible Preferred Stock
or redeem or repurchase any shares of Series A Preferred Stock or Series B
Preferred Stock; or
e. reissue any shares of the Convertible Preferred Stock after such shares
have previously been converted, redeemed or repurchased.
Section 11. Miscellaneous. The Convertible Preferred Stock shall rank pari
passu with the Series A Preferred Stock, Series B Preferred Stock and Series I
Preferred Stock of the Corporation with respect to rights on dividends and
liquidation.
IN WITNESS WHEREOF, I have executed this Certificate this day of June 20,
1997.
By: /s/ Robert Spivak
-----------------------------
President, Robert Spivak
ATTEST:
/s/ Michael Weinstock
- --------------------------------
Secretary, Michael Weinstock
10
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 AND THE UNDERLYING SHARES OF COMMON STOCK MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED UNLESS REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
THIS WARRANT IS SUBJECT TO CANCELLATION IF ANY COMMON SHARES OR SHARES OF COMMON
STOCK ISSUABLE UPON CONVERSION OF THE SERIES I CONVERTIBLE PREFERRED STOCK OF
GRILL CONCEPTS, INC. SOLD IN CONJUNCTION WITH THE ISSUANCE OF THIS WARRANT ARE
SOLD, TRANSFERRED OR ASSIGNED (OTHER THAN AS PERMITTED BY SECTION 9 HEREOF)
PRIOR TO THE WARRANT VESTING DATE.
W97-A 1
WARRANT
to Purchase Shares
of
Common Stock (.00001 par value)
of
GRILL CONCEPTS, INC.
June 20, 1997
This certifies that, for value received, ,
("Wolff") and any subsequent transferee pursuant to the terms hereof (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 June 20, 2000 (subject to adjustment pursuant to
Section 5(d))(the "Warrant Vesting Date") and on or before June 20, 2002 (the
"Expiration Date"), Seven Hundred Fifty Thousand (750,000) fully paid and
nonassessable shares of common stock, $.00001 par value (the "Common Stock"), of
the Issuer at an exercise price equal to $2.00 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. 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 Warrant Vesting Date 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 10 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 1, for the
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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 the Warrant. The Exercise
Price for the number of Warrant Shares specified in the Election to
Purchase Form shall be payable (i) 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; or (ii) if permitted by the Issuer as evidenced by written
notice to such effect, by means of a "cashless exercise." In the event the
Issuer permits "cashless exercise," the Holder may deliver in payment of
the Exercise Price (x) certificates representing shares of Common Stock
theretofore owned by the Holder having a fair market value equal to the
Exercise Price; (y) an election by the Holder to have the Issuer withhold
the number of shares of Common Stock the fair market value, less the
Exercise Price, of which is equal to the aggregate Exercise Price of the
Warrant Shares specified in the Election to Purchase Form, or (z) any
combination of the preceding and cash, equal in value to the full amount of
the Exercise Price. For purposes hereof, the "fair market value" of shares
of Common Stock shall equal the closing sales price of the Issuer's Common
Stock on the last trading day immediately preceding the date on which the
Election to Purchase Form is delivered to the Issuer along with the Warrant
and payment of the Exercise Price.
(b) Certificates representing Warrant Shares shall bear the following
restrictive legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
IN THE ABSENCE OF EITHER AN EFFECTIVE REGISTRATION STATEMENT FOR THESE
SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF
COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
Section 2. 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
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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.
Section 3. Exchange, Transfer, Assignment or Loss of Warrant. This Warrant
is not transferable or assignable except to members of the immediate family of
Lew Wolff, including trusts and/or family partnerships for the benefit of said
family members. 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. Upon surrender of this Warrant to the Issuer by any
transferee authorized under the provisions of this Section 3, 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.
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Section 4. 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 5. 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 5.
(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 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 7 below.
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(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 5. If any such
consolidation, merger, sale, transfer or exchange should occur prior to the
Warrant Vesting Date, the Warrant Vesting Date shall be adjusted to the
date which is one business day prior to the closing of any such
consolidation, merger, sale, transfer or exchange. 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 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
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<PAGE>
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 liquidation.
(f) If an event occurs which is similar in nature to the events
described in this Section 5, 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 date of issuance of this
Warrant or as such stock may be constituted from time to time, except that
for the purpose of this Section 5, 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 5, and a
certificate signed by such firm shall be conclusive evidence of the
correctness of any computation made under this Section 5.
(i) Whenever the number of Warrant Shares or the Exercise Price shall
be adjusted as required by the provisions of this Section 5, 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.
(k) No adjustment in the Exercise Price in accordance with the
provisions of this Section 5 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.
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(l) If an adjustment is made under this Section 5 and the event to
which the adjustment relates does not occur, then any adjustments in
accordance with this Section 5 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 6. 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 7. 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 holder 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 notices, 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.
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Section 8. Registration Rights.
a. Demand Registration Rights. The Issuer covenants and agrees with the
holders of Warrants or Warrant Shares (the "Registrable Securities") that,
subject to the availability of audited financial statements which would comply
with Regulation S-X under the Securities Act and provided that the Holders have
not previously had the option of including all of the Registrable Securities in
one or more Piggyback Registrations pursuant to Section 8.b., upon written
request of the then Holder(s) of at least a majority of the Warrants or the
Registrable Securities, or both, made at any time within the period commencing
three years and ending five years after the date herein first set forth, the
Issuer 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 under the Securities Act, registering or qualifying the
Registrable Securities for sale. Within fifteen (15) days after receiving any
such notice, the Issuer shall give notice to the other Holders of the
Registrable Securities, if any, advising that the Issuer is proceeding with such
Amendment or registration statement and offering to include therein the
Registrable Securities of such Holders. The Issuer shall not be obligated to any
such other Holder unless such other Holder shall accept such offer by notice in
writing to the Issuer within ten (10) days thereafter. The Issuer 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 or registration statement as promptly as practicable and for a period
of nine months thereafter to reflect in the Amendment or registration 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 or registration statement to enable any Holders of the
Warrants to either sell such Warrants or to exercise such Warrants and sell
Warrant Shares, or to enable any holders of Warrant Shares to sell such Warrant
Shares, during said nine-month period. The Holders may sell the Registrable
Securities pursuant to the Amendment or registration statement without
exercising the Warrants. If any registration pursuant to this paragraph 8(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 Issuer's approval which shall not be unreasonably
withheld.
b. Piggyback Registration Rights. The Issuer covenants and agrees with any
holder of the Registrable Securities that if, at any time within the period
commencing on the Warrant Vesting Date and ending on the Expiration Date, it
proposes to file a registration statement with respect to any class of equity or
equity-related security (other than in connection with an offering to the
Issuer's employees or in connection with an acquisition, merger or similar
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<PAGE>
transaction) under the Securities Act in a primary registration on behalf of the
Issuer and/or in a secondary registration on behalf of holders of such
securities and the registration form to be used may be used for registration of
the Registrable Securities, the Issuer will give prompt written notice (which,
in the case of a registration statement pursuant to the exercise of demand
registration rights shall be within ten (10) business days after the Issuer'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 at the addresses
appearing on the records of the Issuer of its intention to file a registration
statement and will offer to include in such registration statement all, but not
less than 20% of the Registrable Securities, subject to paragraphs i and ii of
this Section 8.b. such number of Registrable Securities with respect to which
the Issuer has received written requests for inclusion therein within ten (10)
days after the giving of notice by the Issuer. All registrations requested
pursuant to this Section 8.b. are referred to herein as "Piggyback
Registrations". All Piggyback Registrations pursuant to this Section 8 will be
made solely at the Issuer's expense. This Section is not applicable to a
registration statement filed by the Issuer 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 the Issuer and
the underwriter(s) for such offering determines in good faith and advises
the Issuer 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 Issuer, the Issuer will include
in such registration (A) first, the securities that the Issuer proposes to
sell and (B) second, the Registrable Securities requested to be included in
such registration, apportioned pro rata among the holders of the
Registrable Securities and 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 Issuer, and the underwriter(s) for such
offering advises the Issuer 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, the Issuer will
include in such registration (A) first, the securities requested to be
included therein by the holders requesting such registration, and (B)
second, the Registrable Securities requested to be included in such
registration and securities of holder of other securities requested to be
included in such registration statement, 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 Issuer will use its best efforts to include
not less than 20% of the Registrable Securities.
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<PAGE>
Notwithstanding the foregoing, if any such underwriter shall determine in
good faith and advise the Issuer in writing that the distribution of the
Registrable Securities requested to be included in the registration concurrently
with the securities being registered by the Issuer would materially adversely
affect the distribution of such securities by the Issuer, 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
Issuer'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 Issuer, managing underwriter and holders of Registrable Securities shall
otherwise agree. In the event of such delay, the Issuer 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 any such period of delay. If
any party disapproves the terms of any such underwriting, it may elect to
withdraw therefrom by written notice to the Issuer, the underwriter, and the
holder. Notwithstanding the foregoing, the Issuer shall not be required to file
a registration statement to include shares pursuant to this Section 8 if
independent counsel, reasonably satisfactory to the Issuer, renders an opinion
to the Issuer that the Registrable Securities 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. Actions to be taken by the Issuer. In connection with the registration
of Registrable Securities hereunder, the Issuer agrees to (i) bear the expenses
of any registration; provided, however, that in no event shall the Issuer be
obligated to pay (A) any fees and disbursements of special counsel for holders
of Registrable Securities, (B) any underwriters' discount or commission in
respect of such Registrable Securities, and (C) any stock transfer taxes
attributable to the sale 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 such
holders shall reasonably request, provided, however, that no qualification shall
be required in any jurisdiction where, as a result thereof, the Issuer would 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 (iii)
enter into a cross-indemnity agreement, in customary form, with each
underwriter, if any, and each holder of securities included in such registration
statement.
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d. Action to be Taken by the Holders. The Issuer's obligations under this
Section 8 shall be conditioned upon a timely receipt by the Issuer in writing
of: (i) information as to the terms of such public offering furnished by or on
behalf of each holder of Registrable Securities intending to make a public
offering of his, her or its Registrable Securities, and (ii) such other
information as the Issuer may reasonably require from such holders, or any
underwriter for any of them, for inclusion in such registration statement.
Section 9. Cancellation. Notwithstanding any other provision hereof, in the
event that any holder of (a) Common Shares issues in conjunction with the
issuance of this Warrant, or (b) shares of Common Stock issuable upon conversion
of the Issuer's Series I Convertible Preferred Stock, shall sell, assign or
transfer such shares of Common Stock, other than transfers or assignments to
members of the immediate family of Mr. Lew Wolff, including trusts and/or family
partnerships for the benefit of said family members, transfers or assignments to
executive officers, partners and/or principals of Wolff DiNapoli LLC (the
referenced family members and affiliates of Wolff DiNapoli are referred to as
"Permitted Transferees") or (c) transfers or assignments consented to in writing
by the Issuer, on or before the Warrant Vesting Date, as adjusted in accordance
with Section 5(d), this Warrant shall be automatically canceled and all rights
of the Holder hereof shall terminate immediately.
Section 10. Notices. All communications hereunder 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:
11828 La Grange Avenue
LA 90025
Attention: L. Wolff
Telephone: 310-4773593
Fax: 310 4772522
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 90019
Attention: Michael Weinstock, Vice Chairman
Telephone: (310) 820-5559
Facsimile: (310) 820-6530
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Section 11. Governing Law. This Warrant shall be governed by, and
interpreted in accordance with, the laws of the State of California.
Dated: June 20, 1997
GRILL CONCEPTS, INC.
By: /s/ Robert L. Spivak
---------------------------------------
Name: Robert L. Spival
Title: President
ATTEST:
/s/ Michael Weinstock
- ----------------------------------
Michael Weinstock, Secretary
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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:
----------------------------------------------------------------------
13
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 AND THE UNDERLYING SHARES OF COMMON STOCK MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED UNLESS REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
THIS WARRANT IS SUBJECT TO CANCELLATION IF ANY COMMON SHARES OR SHARES OF COMMON
STOCK ISSUABLE UPON CONVERSION OF THE SERIES I CONVERTIBLE PREFERRED STOCK OF
GRILL CONCEPTS, INC. SOLD IN CONJUNCTION WITH THE ISSUANCE OF THIS WARRANT ARE
SOLD, TRANSFERRED OR ASSIGNED (OTHER THAN AS PERMITTED BY SECTION 9 HEREOF)
PRIOR TO THE WARRANT VESTING DATE.
W97-B 1
WARRANT
to Purchase Shares
of
Common Stock (.00001 par value)
of
GRILL CONCEPTS, INC.
June 20, 1997
This certifies that, for value received, ,
("Wolff") and any subsequent transferee pursuant to the terms hereof (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 June 20, 2000 (subject to adjustment pursuant to
Section 5(d))(the "Warrant Vesting Date") and on or before June 20, 2002 (the
"Expiration Date"), Seven Hundred Fifty Thousand (750,000) fully paid and
nonassessable shares of common stock, $.00001 par value (the "Common Stock"), of
the Issuer at an exercise price equal to $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. 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 Warrant Vesting Date 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 10 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 1, 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
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of this Warrant and registration of transfer of the Warrant. The Exercise
Price for the number of Warrant Shares specified in the Election to
Purchase Form shall be payable (i) 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; or (ii) if permitted by the Issuer as evidenced by written
notice to such effect, by means of a "cashless exercise." In the event the
Issuer permits "cashless exercise," the Holder may deliver in payment of
the Exercise Price (x) certificates representing shares of Common Stock
theretofore owned by the Holder having a fair market value equal to the
Exercise Price; (y) an election by the Holder to have the Issuer withhold
the number of shares of Common Stock the fair market value, less the
Exercise Price, of which is equal to the aggregate Exercise Price of the
Warrant Shares specified in the Election to Purchase Form, or (z) any
combination of the preceding and cash, equal in value to the full amount of
the Exercise Price. For purposes hereof, the "fair market value" of shares
of Common Stock shall equal the closing sales price of the Issuer's Common
Stock on the last trading day immediately preceding the date on which the
Election to Purchase Form is delivered to the Issuer along with the Warrant
and payment of the Exercise Price.
(b) Certificates representing Warrant Shares shall bear the following
restrictive legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
IN THE ABSENCE OF EITHER AN EFFECTIVE REGISTRATION STATEMENT FOR THESE
SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF
COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
Section 2. 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
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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.
Section 3. Exchange, Transfer, Assignment or Loss of Warrant. This Warrant
is not transferable or assignable except to members of the immediate family of
Lew Wolff, including trusts and/or family partnerships for the benefit of said
family members. 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. Upon surrender of this Warrant to the Issuer by any
transferee authorized under the provisions of this Section 3, 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.
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<PAGE>
Section 4. 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 5. 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 5.
(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 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 7 below.
4
<PAGE>
(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 5. If any such
consolidation, merger, sale, transfer or exchange should occur prior to the
Warrant Vesting Date, the Warrant Vesting Date shall be adjusted to the
date which is one business day prior to the closing of any such
consolidation, merger, sale, transfer or exchange. 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 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
5
<PAGE>
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 liquidation.
(f) If an event occurs which is similar in nature to the events
described in this Section 5, 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 date of issuance of this
Warrant or as such stock may be constituted from time to time, except that
for the purpose of this Section 5, 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 5, and a
certificate signed by such firm shall be conclusive evidence of the
correctness of any computation made under this Section 5.
(i) Whenever the number of Warrant Shares or the Exercise Price shall
be adjusted as required by the provisions of this Section 5, 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.
6
<PAGE>
(k) No adjustment in the Exercise Price in accordance with the
provisions of this Section 5 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 5 and the event to
which the adjustment relates does not occur, then any adjustments in
accordance with this Section 5 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 6. 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 7. 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 holder 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 notices, 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.
7
<PAGE>
Section 8. Registration Rights.
a. Demand Registration Rights. The Issuer covenants and agrees with the
holders of Warrants or Warrant Shares (the "Registrable Securities") that,
subject to the availability of audited financial statements which would comply
with Regulation S-X under the Securities Act and provided that the Holders have
not previously had the option of including all of the Registrable Securities in
one or more Piggyback Registrations pursuant to Section 8.b., upon written
request of the then Holder(s) of at least a majority of the Warrants or the
Registrable Securities, or both, made at any time within the period commencing
three years and ending five years after the date herein first set forth, the
Issuer 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 under the Securities Act, registering or qualifying the
Registrable Securities for sale. Within fifteen (15) days after receiving any
such notice, the Issuer shall give notice to the other Holders of the
Registrable Securities, if any, advising that the Issuer is proceeding with such
Amendment or registration statement and offering to include therein the
Registrable Securities of such Holders. The Issuer shall not be obligated to any
such other Holder unless such other Holder shall accept such offer by notice in
writing to the Issuer within ten (10) days thereafter. The Issuer 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 or registration statement as promptly as practicable and for a period
of nine months thereafter to reflect in the Amendment or registration 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 or registration statement to enable any Holders of the
Warrants to either sell such Warrants or to exercise such Warrants and sell
Warrant Shares, or to enable any holders of Warrant Shares to sell such Warrant
Shares, during said nine-month period. The Holders may sell the Registrable
Securities pursuant to the Amendment or registration statement without
exercising the Warrants. If any registration pursuant to this paragraph 8 (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 Issuer's approval which shall not be unreasonably
withheld.
b. Piggyback Registration Rights. The Issuer covenants and agrees with any
holder of the Registrable Securities that if, at any time within the period
commencing on the Warrant Vesting Date and ending on the Expiration Date, it
proposes to file a registration statement with respect to any class of equity or
equity-related security (other than in connection with an offering to the
Issuer's employees or in connection with an acquisition, merger or similar
8
<PAGE>
transaction) under the Securities Act in a primary registration on behalf of the
Issuer and/or in a secondary registration on behalf of holders of such
securities and the registration form to be used may be used for registration of
the Registrable Securities, the Issuer will give prompt written notice (which,
in the case of a registration statement pursuant to the exercise of demand
registration rights shall be within ten (10) business days after the Issuer'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 at the addresses
appearing on the records of the Issuer of its intention to file a registration
statement and will offer to include in such registration statement all, but not
less than 20% of the Registrable Securities, subject to paragraphs i and ii of
this Section 8.b., such number of Registrable Securities with respect to which
the Issuer has received written requests for inclusion therein within ten (10)
days after the giving of notice by the Issuer. All registrations requested
pursuant to this Section 8.b. are referred to herein as "Piggyback
Registrations". All Piggyback Registrations pursuant to this Section 8 will be
made solely at the Issuer's expense. This Section is not applicable to a
registration statement filed by the Issuer 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 the Issuer and
the underwriter(s) for such offering determines in good faith and advises
the Issuer 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 Issuer, the Issuer will include
in such registration (A) first, the securities that the Issuer proposes to
sell and (B) second, the Registrable Securities requested to be included in
such registration, apportioned pro rata among the holders of the
Registrable Securities and 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 Issuer, and the underwriter(s) for such
offering advises the Issuer 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, the Issuer will
include in such registration (A) first, the securities requested to be
included therein by the holders requesting such registration, and (B)
second, the Registrable Securities requested to be included in such
registration and securities of holder of other securities requested to be
included in such registration statement, 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 Issuer will use its best efforts to include
not less than 20% of the Registrable Securities.
9
<PAGE>
Notwithstanding the foregoing, if any such underwriter shall determine in
good faith and advise the Issuer in writing that the distribution of the
Registrable Securities requested to be included in the registration concurrently
with the securities being registered by the Issuer would materially adversely
affect the distribution of such securities by the Issuer, 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
Issuer'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 Issuer, managing underwriter and holders of Registrable Securities shall
otherwise agree. In the event of such delay, the Issuer 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 any such period of delay. If
any party disapproves the terms of any such underwriting, it may elect to
withdraw therefrom by written notice to the Issuer, the underwriter, and the
holder. Notwithstanding the foregoing, the Issuer shall not be required to file
a registration statement to include shares pursuant to this Section 8 if
independent counsel, reasonably satisfactory to the Issuer, renders an opinion
to the Issuer that the Registrable Securities 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. Action to be Taken by the Issuer. In connection with the registration of
Registrable Securities hereunder, the Issuer agrees to (i) bear the expenses of
any registration; provided, however, that in no event shall the Issuer be
obligated to pay (A) any fees and disbursements of special counsel for holders
of Registrable Securities, (B) any underwriters' discount or commission in
respect of such Registrable Securities, and (C) any stock transfer taxes
attributable to the sale 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 such
holders shall reasonably request, provided, however, that no qualification shall
be required in any jurisdiction where, as a result thereof, the Issuer would 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 (iii)
enter into a cross-indemnity agreement, in customary form, with each
underwriter, if any, and each holder of securities included in such registration
statement.
10
<PAGE>
d. Action to be Taken by the Holders. The Issuer's obligations under this
Section 8 shall be conditioned upon a timely receipt by the Issuer in writing
of: (i) information as to the terms of such public offering furnished by or on
behalf of each holder of Registrable Securities intending to make a public
offering of his, her or its Registrable Securities, and (ii) such other
information as the Issuer may reasonably require from such holders, or any
underwriter for any of them, for inclusion in such registration statement.
Section 9. Cancellation. Notwithstanding any other provision hereof, in the
event that any holder of (a) Common Shares issued in conjunction with the
issuance of this Warrant, or (b) shares of Common Stock issuable upon conversion
of the Issuer's Series I Convertible Preferred Stock, shall sell, assign or
transfer such shares of Common Stock, other than transfers or assignments to
members of the immediate family of Mr. Lew Wolff, including trusts and/or family
partnerships for the benefit of said family members, transfers or assignments to
executive officers, partners and/or principals of Wolff DiNapoli LLC (the
referenced family members and affiliates of Wolff DiNapoli are referred to as
"Permitted Transferees") or (c) transfers or assignments consented to in writing
by the Issuer, on or before the Warrant Vesting Date, as adjusted in accordance
with Section 5(d), this Warrant shall be automatically canceled and all rights
of the Holder hereof shall terminate immediately.
Section 10. Notices. All communications hereunder 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:
11828 La Grange
LA 90025
Attention: L. Wolff
Telephone: 310-4773593
Fax: 310-477-2522
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 90019
Attention: Michael Weinstock, Vice Chairman
Telephone: (310) 820-5559
Facsimile: (310) 820-6530
11
<PAGE>
Section 11. Governing Law. This Warrant shall be governed by, and
interpreted in accordance with, the laws of the State of California.
Dated: June 20, 1997
GRILL CONCEPTS, INC.
By: /s/ Robert L. Spivak
--------------------------------------
Name: Robert L. Spivak
Title: President
ATTEST:
/s/ Michael Weinstock
- -------------------------------
Michael Weinstock, Secretary
12
<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:
----------------------------------------------------------------------
13
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<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1997
<PERIOD-END> Jun-29-1997
<CASH> 645,151
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 299,261
<CURRENT-ASSETS> 1,901,640
<PP&E> 10,243,162
<DEPRECIATION> 3,786,847
<TOTAL-ASSETS> 9,632,088
<CURRENT-LIABILITIES> 3,074,344
<BONDS> 877,681
0
3
<COMMON> 157
<OTHER-SE> 5,679,903
<TOTAL-LIABILITY-AND-EQUITY> 9,632,088
<SALES> 14,447,501
<TOTAL-REVENUES> 14,447,501
<CGS> 3,943,243
<TOTAL-COSTS> 3,943,243
<OTHER-EXPENSES> 10,500,091
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73,614
<INCOME-PRETAX> 23,553
<INCOME-TAX> 800
<INCOME-CONTINUING> 22,753
<DISCONTINUED> 0
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<NET-INCOME> 22,753
<EPS-PRIMARY> 0.00
<EPS-DILUTED> (0.01)
</TABLE>
