As filed with the Securities and Exchange Commission on April __, 1997.
Registration No. 333-21067
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO.1 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933,
AS AMENDED
CLUCKCORP INTERNATIONAL, INC.
(Exact Name of Small Business Issuer
As Specified In Its Charter)
Texas 5812 76-0406417
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code No.) I.D. Number)
1250 N.E. Loop 410, Suite 335
San Antonio, TX 78209
(210) 824-2496
(Address, including zip code, and telephone
number, including area code, of Registrant's principal executive offices)
William J. Gallagher, Chief Executive Officer
CluckCorp International, Inc.
1250 N.E. Loop 410, Suite 335
San Antonio, TX 78209
(210) 824-2496
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies of all communications to:
Gary A. Agron, Esq. Michael R. Koblenz, Esq.
Law Office of Gary A. Agron Mound, Cotton & Wollan
5445 DTC Parkway, Suite 520 One Battery Park Plaza
Englewood, CO 80111 New York, New York 10004
(303) 770-7254 (212) 804-4200
(303) 770-7257 (fax) (212) 344-8066 (fax)
Approximate date of commencement of the Offering: As soon as practicable
after the date of the Offering.
<PAGE>
If this Form is filed to register additional securities for an Offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same Offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same Offering.
If any of the securities registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, check
the following box. __X__
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
check the following box:
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Class Amount To Proposed Amount of
of Securities Be Maximum Price Offering Price Registration
to be Registered Registered Per Security Fee
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Series A Redeemable
Convertible Preferred
Stock, $1.00 par 575,000
value(1) Shares $10.00 $5,750,000 $1,743
Common Stock, $.01
par value, underlying
Series A Redeemable
Convertible Preferred 1,725,000
Stock(2)(4) Shares $3.33 $5,744,250 $1,741
Series A Redeemable
Convertible Preferred
Stock Underlying
Representative's 50,000
Warrants(3) Shares $13.00 $ 650,000 $ 182
Common Stock, $.01
par value, underlying
Series A Redeemable
Convertible Preferred
Stock Underlying the
Representative's 150,000
Warrants(2)(4) Shares $3.33 $ 499,500 $ 152
Common Stock, $.01 par
value, issuable as
dividends upon the 530,770
Preferred Stock (5) Shares $6.50(5) $3,450,005 $1,045
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,047,573(4) $4,863(6)
</TABLE>
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<PAGE>
(1) Includes the overallotment option granted to the Representative to purchase
an additional 112,500 shares of Series A Redeemable Convertible Preferred Stock
("Preferred Stock").
(2) Issuable upon conversion of the Preferred Stock. It is anticipated that each
share of Preferred Stock will be convertible into no more than three shares of
Common Stock, with the exact conversion ratio to be based upon the closing price
of the Common Stock on NASDAQ one day prior to the effective date of the
Registration Statement.
(3) The exercise price of the Representative's Warrants is equal to 120% of the
Preferred Stock price.
(4) Pursuant to Rule 416, there is also being registered hereunder a presently
indeterminable number of shares of Common Stock that may be issued pursuant to
the anti-dilution provisions of the Preferred Stock.
(5) Assumes an annual dividend of 12% on $5,750,000 of Preferred Stock totaling
$690,000 payable in common stock at the current closing price of $6.50 per share
on _______ 1997 for a period of five years.
(6) $3,818 was previously paid. Accordingly $1,045 is due with this filling.
The Registrant hereby amends the Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
(EXHIBIT INDEX LOCATED ON PAGE ___ OF THIS FILING)
iii
<PAGE>
CLUCKCORP INTERNATIONAL, INC.
Cross Reference Sheet
Item Caption Location or Caption in Prospectus
1. Front of Registration Statement and Outside Front Cover Page
Outside Front Cover of Prospectus
2. Inside Front and Outside Back Cover of Inside Front and Outside Back
Prospectus Cover Pages
3. Summary Information and Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Risk Factors; Underwriting
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Underwriting
9. Legal Proceedings Business - Litigation
10. Directors, Executive Officers, Management
Promoters and Control Persons
11. Security Ownership of Certain Principal Stockholders
Beneficial Owners and Management
12. Description of Securities Description of Securities
13. Interests of Named Experts and Counsel Not Applicable
14. Disclosure of Commission Position on Limitations on Liability and
Indemnification for Securities Act Indemnification
Liabilities
15. Organization Within Last Five Years Business; Certain Transactions
16. Description of Business Business; Risk Factors
17. Management's Discussion and Analysis Management's Discussion and
or Plan of Operations Analysis of Financial Condition
and Results of Operations
18. Description of Property Business - Properties
19. Certain Relationships and Related Certain Transactions
Transactions
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<PAGE>
20. Market for Common Equity and Related Price Range of Common Stock
Stockholder Matters
21. Executive Compensation Management - Executive
Compensation
22. Financial Statements Financial Statements
23. Changes in and Disagreements with Not Applicable
Accountants on Accounting and
Financial Disclosure
v
<PAGE>
Subject to Completion Preliminary Prospectus Dated __________, 1997
CLUCKCORP INTERNATIONAL, INC.
500,000 Shares of Convertible Redeemable Preferred Stock
$10.00 per share
CluckCorp International, Inc. (the "Company") is offering (the "Offering")
500,000 shares of $1.00 par value Series A Redeemable Convertible Preferred
Stock (the "Preferred Stock") at $10.00 per share through Global Equities Group,
Inc. as the lead managing underwriter and the representative ("Representative")
of the underwriters ("Underwriters") herein named and through Suncoast Capital
Corp. as the co-managing underwriter ("Co-Manager").
The Preferred Stock is convertible at the option of the holder at any time
after one year from the date hereof into shares of the Company's $.01 par value
common stock (the "Common Stock"). The number of shares of Common Stock issuable
upon conversion of each share of Preferred Stock (the "Conversion Rate") is
equal to $10.00, divided by _____ (the "Conversion Price"). The initial
Conversion Rate is _____ shares of Common Stock for each share of Preferred
Stock. No additional cash consideration must be paid to exercise the conversion
right. The Preferred Stock will automatically convert to Common Stock at the
Conversion Rate if the closing price for the Preferred Stock equals or exceeds
$20.00 per share for ten consecutive trading days at any time after one year
from the date hereof. The Preferred Stock is convertible into Common Stock at
the election of the holder at any time after one year from the date hereof. The
Preferred Stock may be redeemed in whole or in part, at the option of the
Company after two years from the date hereof upon 30 days' written notice (the
"redemption date") at 110% of the average bid price per share for the Preferred
Stock on The NASDAQ SmallCap Tier of The NASDAQ Stock Market ("The NASDAQ
SmallCap Market") for the 20 trading days prior to the redemption date.
Dividends on the Preferred Stock are cumulative, will accrue and are payable
quarterly in arrears at a quarterly rate of $.30 per share representing a yield
of 12% per annum. See "Description of Securities."
On April 25, 1997, the closing sale price of the Common Stock on The NASDAQ
SmallCap Market was $7.78 per share. The Company has applied to have the
Preferred Stock listed on The NASDAQ SmallCap Market.
This Offering involves a high degree of risk and should not be purchased by
investors requiring current income. See "Risk Factors."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
Price to Public Underwriting Proceeds to
Discounts(1)(3) Company(2)(3)
Per Share ............ $10.00 $1.00 $9.00
Total ................ $5,000,000 $500,000 $4,500,000
(1) Excludes a nonaccountable expense allowance payable by the Company to the
Representative equal to 3% of the aggregate initial public offering price
of the Preferred Stock. The Company has agreed to issue Preferred Stock
purchase warrants (the "Representative's Warrants") to the Representative
to purchase 50,000 shares of Preferred Stock for $13.00 per share and to
indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses payable by the Company estimated at $250,000,
together with the Representative's nonaccountable expense allowance of
$150,000.
(3) Assumes no exercise of the Representative's option, exercisable within 45
days from the date of this Prospectus, to purchase up to 75,000 additional
shares of Preferred Stock on the same terms, solely to cover overallotments
(the "Overallotment Option"). If the Overallotment Option is exercised in
full, the total Price to Public, Underwriting Discounts and Proceeds to
Company will be $5,750,000, $575,000 and $5,175,000, respectively. See
"Underwriting."
The Preferred Stock is offered by the Underwriters, subject to prior sale,
when, as and if delivered to and accepted by the Underwriters, and subject to
their right to reject orders, in whole or in part. It is expected that delivery
of the Preferred Stock will be made in New York, New York on or about
__________, 1997.
GLOBAL EQUITIES GROUP, INC. SUNCOAST CAPITAL CORP.
The date of this Prospectus is __________, 1997
2
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities offered by this
Prospectus. As permitted by the rules and regulations of the Commission, this
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits thereto. For further information with respect to the
Company and the securities offered hereby, reference is made to the Registration
Statement and the exhibits thereto, which may be examined without charge at the
public reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, copies of which may be obtained from
the Commission upon payment of the prescribed fees.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information may be
inspected at the public reference facilities of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such material
can be obtained at prescribed rates from the Commission at such address. Such
reports, proxy statements and other information can also be inspected at the
Commission's regional offices at 7 World Trade Center, Suite 1300, New York, New
York 10048 and at Northwestern Atrium Center, 500 West Madison, Chicago,
Illinois 60621.
Certain persons participating in this Offering may engage in transactions
that stabilize, maintain, or otherwise affect the price of the Preferred Stock
including purchase and sale transactions of the Preferred Stock on The NASDAQ
SmallCap Market. For a description of these activities, see "Underwriting."
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. Unless otherwise indicated, the information contained herein
assumes no exercise of the Overallotment Option, or the Representative's
Warrants.
Except for the historical information contained herein, the matters set
forth in this Prospectus include forward-looking statements within the meaning
of the "safe harbor" provisions of the Private Securities Litigation Reform Act
of 1995. These forward-looking statements are subject to risks and uncertainties
that may cause actual results to differ materially. These risks and
uncertainties are detailed throughout the Prospectus and will be further
discussed from time to time in the Company's periodic reports filed with the
Commission. The forward-looking statements included in the Prospectus speak only
as of the date hereof.
The Company
The Company owns, operates and franchises quick service restaurants under
the "Harvest Rotisserie" name, which feature marinated oak-roasted rotisserie
chicken, oak-roasted turkey breast, roast ham, meatloaf, an assortment of
sandwiches and other fresh homestyle food items. Harvest Rotisserie restaurants
(sometimes referred to as the "Restaurant(s)") emphasize rotisserie oak-roasted
chicken, turkey and fresh homestyle side dishes consistent with what the Company
believes to be (i) an increased consumer demand for take-home prepared foods,
(ii) an emphasis on lower fat foods such as chicken and turkey, and (iii) the
popularity of homestyle cooking. Harvest Rotisserie side dishes include cold
dishes such as coleslaws and salads and hot dishes such as baked beans,
stuffing, corn, parsley potatoes, macaroni and cheese, steamed fresh vegetables,
mashed potatoes and gravy, rice, creamed spinach, cheese rice and baked cinnamon
apples. The Company maintains strict quality standards in purchasing, storing,
preparing and serving its entrees, side dishes, desserts and other products.
To date, the Company has opened three Restaurants in San Antonio, Texas
(one of which is used as both a training facility and a public restaurant) and
one Restaurant in Corpus Christi, Texas. The Company has also executed leases or
acquired property to develop five additional Restaurants in San Antonio and
Houston, Texas, although it currently has the funds to develop only three such
restaurants. The Company seeks to enter into traditional single Restaurant
franchise agreements as well as area development agreements although it has not
yet executed any franchise agreements and has no area development agreements in
effect. Area development agreements require the area developer to develop a
specified number of Restaurants within a delineated territory in accordance with
a development schedule. Management believes that area development agreements
allow for the more rapid development of a target market area by generally more
experienced restaurant operators who are able to realize economies of scale
resulting from opening a number of Restaurants in a given area. These operators
often require less management supervision by Company personnel and provide the
Company with higher franchise fee income in a shorter period of time.
The Company intends to use substantially all of the proceeds of the
Offering to acquire restaurant properties in certain metropolitan markets and
sublease the properties to area developers who will operate them as Harvest
Rotisserie restaurants. The Company may require the area developers to execute
promissory notes to the Company representing any acquisition costs advanced by
the Company and may also advance funds to area developers for costs incurred to
4
<PAGE>
convert properties to Harvest Rotisserie restaurants and for working capital.
The Company will then seek to recoup its costs through franchise fee payments
and repayments of any promissory notes issued by the area developers who will
also be responsible to tender restaurant property lease payments directly to the
owners of the properties. See "Use of Proceeds."
History
The Company was incorporated in Texas in June 1993 under the name Clucker's
Tex-Mex Venture, Inc. and changed its name to CluckCorp International, Inc. in
April 1995. Prior to November 1994, the Company was an area developer for
Cluckers Wood Roasted Chicken, Inc. ("CWRC"), the developer and franchisor of
the original "Cluckers" restaurant concept. The Company acquired from WaterMarc
Food Management, Inc. ("WaterMarc"), formerly Billy Blues Food Corporation and
an affiliate of the Company, the Cluckers franchise development rights for
Texas, Mexico and certain Central American countries. After CWRC had opened ten
company-owned restaurants between 1991 and 1994 in Florida, Georgia and New York
and had sold franchises for an additional 165 restaurants, controlling interest
in CWRC was purchased by Kenny Rogers Roasters, Inc. ("Roasters")a non-affiliate
in November 1994. The Company then exchanged its Cluckers area development
agreement with CWRC for systems, franchising materials, signage and the
exclusive right to use the Cluckers name, trademark and service mark solely in
Texas. The Company did not acquire international rights to the Cluckers name
because neither CWRC nor anyone else had obtained any international rights,
other than the Mexican and Central American rights described above. However, the
Company subsequently registered the Cluckers name in Mexico and applied for
trademarks to use the Cluckers name and logos in the United Kingdom, Canada,
Singapore and Malaysia.
The Company is licensed to use the Cluckers name only in Texas, and is
obligated to pay a license fee of 2% of gross sales applicable only to its
Cluckers restaurants in Texas for the first 10 years and 1% of gross sales
thereafter. No such license fees are required for Restaurants outside the United
States. In February 1995 and July 1995, the Company formed Cluckers Restaurants,
Inc. and Harvest Restaurants, Inc., wholly-owned Texas corporate subsidiaries,
to act as franchisors for the Company's Cluckers and Harvest Rotisserie
restaurants. The Company is not required to pay a license fee for its Harvest
Rotisserie restaurants because it developed and owns the rights to the Harvest
Rotisserie name and concept.
In February 1996, the Company decided to concentrate on the development,
operation and franchising of Harvest Rotisserie restaurants, which the Company
believes is an improvement over the original Cluckers concept because Harvest
Rotisserie restaurants offer an expanded menu which includes a number of
additional homestyle entrees offering lower fat foods. Accordingly, it converted
its one Cluckers restaurant in San Antonio, Texas to a Harvest Rotisserie
restaurant.
In July 1996, the Company sold 1,000,000 shares of Common Stock and
2,300,000 common stock purchase warrants (the "IPO Warrants") in an initial
public offering ("IPO") of its securities through Global Equities Group, Inc.
("Global" or the "Representative") as representative of the underwriters of the
IPO. Global is also acting as the Representative in this Offering. The Company
realized net proceeds of approximately $4,700,000 from the IPO based upon the
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<PAGE>
seal of the Common Stock at $5.50 per share and the IPO Warrants at $.125
per IPO Warrant. Proceeds from the IPO were used to open three Restaurants to
date and will be sufficient to finance an additional three of the five
restaurant properties currently under lease. The remaining two restaurant
properties are the subject of ground leases and the Company will require
additional financing to construct the buildings which will house the
Restaurants. The first three Restaurants will be completed in 1997. However,
there can be no assurance that financing will be available to the Company to
complete the remaining two Restaurants. See "Business - Properties." Following
the IPO, the Company's Restaurant development schedule was initially delayed as
a result of the Company's decision to eliminate certain Restaurant sites and
substitute new sites selected following the IPO. See "Business - Properties."
The Company's principal executive offices are located at 1250 N.E. Loop
410, Suite 335, San Antonio, Texas 78209 and its telephone number is (210)
824-2496.
The Offering
Securities Offered (1)......500,000 shares of Preferred Stock.
Common Stock Outstanding(2).2,112,750 shares at December 29, 1996.
Estimated Net Proceeds(l)...Approximately $4,100,000 after deducting commissions
and expenses of approximately $900,000 including the
Representative's nonaccountable expense allowance
and other expenses of the Offering.
Use of Proceeds.............Acquisition of Restaurants for sublease to area
developers; financial assistance to area developers
and working capital. See "Use of Proceeds."
The NASDAQ SmallCap Market Symbols..............Common Stock: ROTI
Warrants: ROTIW
Preferred Stock: ROTIP
Risk Factors................Investment in the securities involves a high degree
of risk and should only be purchased by investors
capable of suffering a loss of their entire
investment. See "Risk Factors."
- ----------
(1) If the Overallotment Option is exercised in full, 75,000 additional shares
of Preferred Stock will be sold, with net proceeds to the Company of
$4,752,500 after deducting commissions and expenses.
(2) Does not include an aggregate of __________ shares of Common Stock issuable
upon exercise of outstanding warrants and options (collectively, the
"Existing Options") comprised of (i) 2,300,000 shares issuable upon
exercise of the IPO Warrants, (ii) 300,000 shares issuable upon exercise of
the Warrants earned by the Representative in the IPO (the "Representative's
IPO Warrants"), (iii) __________ shares issuable upon conversion of the
Preferred Stock and the Preferred Stock issuable under the Representative's
Warrants, (iv) 325,280 shares issuable upon exercise of other outstanding
common stock purchase warrants (257,280 of which were exercised after
December 29, 1996), and (v) 237,000 shares issuable under the Company's
1994 Stock Option Plan. See "Capitalization" and "Description of
Securities."
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<PAGE>
Description of Preferred Stock
Conversion Each share of Preferred Stock is convertible into _____
shares of Common Stock, subject to adjustment in certain
events at any time after one year from the date hereof.
Fractional shares of Common Stock will be rounded to the
nearest whole share. The Preferred Stock will automatically
convert into Common Stock at any time after one year from
the date hereof at the Conversion Rate if the closing price
for the Preferred Stock equals or exceeds $20.00 per share
for ten consecutive trading days.
Redemption The outstanding Preferred Stock is redeemable at the
Company's option at any time on or after two years from the
date hereof upon 30 days' written notice at 110% of the
average bid price per share for the Preferred Stock on
NASDAQ for the 20 trading days prior to the redemption date.
Voting Rights The Preferred Stock is nonvoting, except as to matters
affecting the rights of the Preferred Stockholders.
Liquidation
Preference $10.00 per share, plus accrued and unpaid dividends.
Dividends Quarterly cumulative dividends of $.30 per share of
Preferred Stock in cash or in the Company's Common Stock at
the sole discretion of the Company. The value of any Common
Stock issued will be the last reported sales price of the
Common Stock on The NASDAQ SmallCap Market on the last day
of each calendar quarter and fractional shares of Common
Stock will be rounded to the nearest whole share.
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<PAGE>
Summary Financial Data
The following summary financial data has been derived from the financial
statements of the Company and should be read in conjunction with such financial
statements.
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 29 December 31, December 25,
----------- ------------ ------------
1996 1995 1994
<S> <C> <C> <C>
Statement of Operations Data:
Revenues:
Restaurant ....................... $ 263,892 $ 226,678 $ 243,988
Area development fee, stockholder -- 50,000 --
----------- ----------- -----------
$ 263,892 $ 276,678 $ 243,988
Cost and Expenses:
Cost of food and paper ........... 112,530 82,171 105,650
Restaurant salaries and benefits . 125,954 127,400 146,677
Occupancy and related expenses ... 58,191 63,605 67,611
Operating expenses ............... 73,661 86,641 106,647
General and administrative ....... 1,261,198 567,605 197,641
Preopening expenses .............. 131,074 59,363 25,783
Depreciation and amortization .... 104,467 73,879 58,940
----------- ----------- -----------
Total operating expenses ...... 1,877,075 1,060,664 708,949
----------- ----------- -----------
Loss from operations ............. (1,613,183) (783,986) (464,961)
Non-operating income (expense):
Interest income .................. 56,747 -- --
Interest and debt discount expense (454,818) (140,497) (29,063)
----------- ----------- -----------
(398,071) (140,497) 29,063
Net loss ........................... $(2,011,254) $ (924,483) $ (494,024)
=========== =========== ===========
Net loss per common share .......... $ (1.29) $ (0.75) $ (0.49)
Weighted average number of
common shares outstanding(1) ..... 1,553,824 1,224,531 1,005,107
</TABLE>
December 29, 1996
-----------------
Historical As Adjusted(2)
---------- --------------
Balance Sheet Data:
Working capital $ 956,081 $ 5,056,081
Total assets 3,137,712 7,237,712
Total liabilities 554,610 554,610
Long-term debt -- --
Stockholders' equity 2,583,102 6,683,102
- ----------
(1) Weighted average number of common shares outstanding includes common
equivalent shares issuable upon the exercise of outstanding stock options
and common stock purchase warrants.
(2) To reflect the issuance of the Preferred Stock offered hereby, excluding
75,000 shares of Preferred Stock which may be issued upon exercise of the
Overallotment Option.
8
<PAGE>
RISK FACTORS
Prospective purchasers should carefully consider the following risk factors
and the other information contained in this Prospectus before making an
investment in the Preferred Stock. Information contained in this Prospectus
includes "forward-looking statements" which can be identified by the use of
forward-looking terminology such as "believes," "expects," "may," "should," or
"anticipates" or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy. See, e.g., "Management's Discussion
and Analysis of Financial Condition and Results of Operations." No assurance can
be given that the future results covered by the forward-looking statements will
be achieved. The following matters constitute cautionary statements identifying
important factors with respect to such forward-looking statements, including
certain risks and uncertainties, that could cause actual results to vary
materially from the future results covered in such forward- looking statements.
Other unanticipated factors could also cause actual results to vary materially
from the future results covered in such forward-looking statements.
Limited Operating History; Negligible Revenues; Ongoing Substantial
Operating Losses. The Company has a limited operating history (commencing in
June 1993) upon which potential investors may base an evaluation of its
performance. The Company has operated at a loss since inception and has
accumulated a deficit of $3,576,796 at December 29, 1996. For the fiscal years
ended December 29, 1996, and December 31, 1995, the Company reported revenues of
263,892 and $276,678 and net losses of $2,011,254 and $924,483, respectively.
There can be no assurance that the Company's operations will become profitable
or that revenues will increase. The Company's operating expenses are expected to
increase due to its expansion plans and, accordingly, it is anticipated that the
Company will incur additional losses unless revenues from an expanded base of
Restaurants or franchise fees become sufficient to offset ongoing operating and
expansion costs, of which there can be no assurance. The likelihood of the
Company's success must be considered in light of the problems, experiences,
difficulties, complications and delays frequently encountered in connection with
the operation and development of new businesses. See "Business" and "Financial
Statements."
Four Restaurants in Operation; Operating Losses; Uncertainty of Market
Acceptance. The Company has only four Restaurants in operation, one of which is
being used both as a training facility and a public restaurant. This restaurant
has operated at a loss since opening in January 1994 and the Company believes
that at least two of its remaining three Restaurants are also currently
operating at a loss. The Company has not conducted any formal market studies
regarding its Harvest Rotisserie concept in Texas or any other markets and has
engaged in limited marketing activities.
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Achieving consumer awareness and market acceptance for its Restaurants,
particularly as the Company seeks to penetrate new markets, will require
substantial efforts and expenditures by the Company. There can be no assurance
that the Restaurants will achieve market acceptance. See "Business."
Reliance Upon Public Offering Proceeds. The Company requires the proceeds
of the Offering to finance the acquisition of Restaurants expected to be
subleased to and operated by area developers selected by the Company. In the
event the Offering is not completed the Company will not have the funds
necessary to acquire and sublease these Restaurants. See "Use of Proceeds."
Dependence Upon Area Developers. The Company intends to use substantially
all of the proceeds of the Offering to acquire restaurant properties to be
subleased to and operated by area developers after conversion to Harvest
Rotisserie restaurants. The Company will acquire the restaurant properties,
sublease the properties to area developers (if area developers are obtained by
the Company) and may also provide funds to the area developers to convert the
properties to Harvest Rotisserie restaurants and for initial working capital.
The Company will then seek to recoup its costs through royalty payments and loan
repayments from the area developers. If the Company is unable to attract area
developers willing to operate the restaurant properties or if the area
developers are unsuccessful in the operation of the restaurant properties, the
Company may be unable to recoup any or all of its investments in the properties
and would also be liable on leases it executed with the property owners. In such
event, the Company's financial condition and results of operations would be
severely adversely affected. The Company has no current understandings,
arrangements or agreements with any such area developers. See "Use of Proceeds"
and "Business - Application of Offering Proceeds."
Intense Competition. The food service industry is intensely competitive
with respect to food quality, concept, location, service and price. There are
many well-established food service competitors with substantially greater
financial and other resources than the Company and with substantially longer
operating histories. The Company competes with take-out food service companies,
fast-food restaurants, casual full-service dine-in restaurants, delicatessens,
cafeteria-style buffets and prepared food stores, as well as with supermarkets
and convenience stores. The number of rotisserie roasted chicken establishments
and the number of national restaurant chains, fast-food and grocery stores
offering rotisserie roasted chicken and other homestyle food products has
increased in the past few years, providing direct competition for customers and
resulting in the sale or closing of a number of rotisserie roasted chicken
establishments including establishments operated by some of the larger franchise
chains. Moreover, other national restaurant chains could introduce new chains of
food service restaurants similar to Harvest Rotisserie. See
"Business-Competition."
Change of Management. Since August 1996, the Company's Chief Executive
Officer (who was also a director of the Company) and two of its outside
directors have resigned. Although the Company has added two new executive
officers and replaced the two directors who resigned, a lack of management
continuity may adversely affect the Company's operations in the near future. See
"Management."
10
<PAGE>
Risks Associated with the Food Service Industry. Food service businesses
are often affected by changes in consumer tastes, national, regional and local
economic conditions, demographic trends, traffic patterns and the type, number,
and location of competing restaurants. Multi-unit food service chains may also
be affected by publicity resulting from poor food quality, illness, injury, or
other health concerns or operating issues stemming from individual restaurants.
Dependence on frequent deliveries of fresh produce also subjects food service
businesses such as the Company to the risk that shortages or interruptions in
supply caused by adverse weather or other conditions could adversely affect the
availability, quality and cost of food ingredients. In addition, factors such as
inflation, increased food, labor and employee benefits costs, regional weather
conditions and the limited availability of experienced management and hourly
employees may also adversely affect the food service industry in general and the
Company's results of operations and financial condition in particular. See
"Business."
Risks Associated With Expansion. The Company intends to continue to apply
proceeds from its IPO to develop Company-owned Restaurants. Developing
additional Restaurants will be dependent on, among other things, market
acceptance for the Company's Harvest Rotisserie concept, the availability of
suitable Restaurant sites, timely development and construction of the
Restaurants, the hiring of skilled management and other personnel, the Company's
general ability to successfully manage growth (including monitoring Restaurants,
controlling costs and maintaining effective quality controls), the availability
of adequate financing and the Company's ability to attract and retain qualified
franchisees. In the case of franchised restaurants, the Company will also be
substantially dependent on the management skills of its franchisees. The Company
operates only four restaurants, and ongoing losses reported by these Restaurants
or losses incurred by future Restaurants developed by the Company would have an
adverse effect upon the Company's financial condition and results of operations.
See "Use of Proceeds" and "Business-Restaurant Expansion."
Need for Additional Capital. In order to develop additional Restaurants,
the Company will have an ongoing need for additional capital. The Company has no
commitments or arrangements to obtain any additional capital and no assurances
can be given that such capital will be available on terms satisfactory to the
Company, if at all. The Company's ability to open the remaining two Restaurants
of the five Restaurants for which leases have been executed is contingent upon
the Company's ability to obtain construction financing and equipment lease
financing. If it is unable to do so, the Company will be required to delay the
opening of these two Restaurants. See "Use of Proceeds" and "Business -
Properties."
Importance of Attracting Competent Area Developers and Franchisees. The
Company's future success will be dependent upon its ability to attract and
retain Restaurant area developers and franchisees and the manner in which
Restaurant franchisees operate, develop and promote their Restaurants.
Currently, the Company has no area developers or franchisees. There can be no
assurance that franchisees will have the business abilities or access to
financial resources necessary to open the Restaurants required by their
franchise agreements or that they will operate their Restaurants in a manner
consistent with the Company's concept and standards. The Company competes for
qualified franchisees with multinational fast food chains, national and regional
restaurant chains and other regional and local restaurant franchisors. Many
restaurant franchisors have greater market recognition and greater financial,
marketing and human resources than the Company. See "Business-Competition."
11
<PAGE>
Adverse Effect of Government Regulation. The restaurant industry is subject
to numerous federal, state and local government regulations, including those
relating to the preparation and sale of food and those relating to building and
zoning requirements. The Company and future franchisees are also subject to laws
relating to employees, including minimum wage requirements, overtime, working
and safety conditions and citizenship requirements. In addition, the Company is
subject to regulation by the Federal Trade Commission and must comply with many
state laws which govern the offer, sale and termination of franchises.
Compliance with such laws is time consuming and expensive and failure to comply
could subject the Company to significant liability to franchisees. The failure
to obtain or retain food licenses or approvals to sell franchises or an increase
in the minimum wage rate, employee benefits costs (including costs associated
with mandated health insurance coverage), or other costs associated with
employees, could adversely affect the operations of the Company and its
franchisees. See "Business-Regulation."
Limited Menu. The Company's Harvest Rotisserie restaurants have limited
menus with chicken and turkey products accounting for a majority of sales. A
decline in consumer demand for poultry products or increased chicken or turkey
prices would have an adverse effect on the Company's operations. In addition,
the Company could be affected by health-related concerns, such as fear of
bacterial infection, relating to poultry. If the Company seeks to expand its
menu selections, there can be no assurance that new menu selections will achieve
market acceptance. See "Business-Introduction."
Competitors Offer Discount Pricing. A number of quick service restaurant
companies (including chicken restaurants) have recently experienced lower growth
rates and declines in average sales per restaurant, in response to which certain
of these companies have adopted discount pricing strategies. Such strategies
could have the effect of drawing customers away from companies which do not
engage in discount pricing and could negatively impact the operating margins of
other competitors which do attempt to match these discount prices.
Possible Inadequacy of General Liability and Commercial Insurance; Product
Liability Insurance. Although the Company carries general liability, product
liability and commercial insurance of up to $2,000,000, there can be no
assurance that its coverage will be adequate to protect it against general,
commercial or product liability claims. Any general, commercial or product
liability claim which is not covered by such policy, or is in excess of the
limits of liability of such policy, could have a material adverse effect on the
financial condition of the Company. There can be no assurance that the Company
will be able to maintain its insurance on reasonable terms. See
"Business-Insurance."
No Assurance of Trademark and Service Mark Protection; Limited Exclusivity.
The Company believes that its Harvest Rotisserie and Cluckers names, trademarks
and service marks ("Marks") have value and are important to the marketing of its
Restaurants and products. There can be no assurance, however, that the Company's
Marks do not or will not violate the proprietary rights of others, that the
Company's Marks would be upheld if challenged or that the Company would not
otherwise be prevented from using its Marks. The Company has registered with the
United States Patent Office its Harvest Rotisserie name, trademark and service
mark. The Company's exclusive right to the Cluckers Marks is limited in the
United
12
<PAGE>
States to the State of Texas. There can be no assurance that the Company will
obtain sufficient protection for its Harvest Rotisserie or Cluckers Marks or
that it will have the financial resources to enforce or defend its Marks. See
"Business-Trademarks and Service Marks."
Dependence Upon Qualified Personnel and Executive Officers. The Company's
operations depend in part upon its ability to retain and hire qualified
personnel and the continued services of its executive officers. The loss of
services of any of the Company's executive officers, whether as a result of
death, disability or otherwise, could have a material adverse effect upon the
Company's operations. The Company does not have employment agreements with any
of its executive officers or employees (except Mr. Gallagher) and does not carry
key person insurance on any of their lives. See "Management."
No Dividends on Common Stock; Dilution Caused By Issuance of Common Stock
to Pay Preferred Stock Dividends. The Company has not paid any dividends on its
Common Stock since its inception and does not anticipate paying any dividends in
the foreseeable future. The Company plans to retain earnings, if any, to finance
the development and expansion of its business. Dividends on the Preferred Stock
may be paid in cash or in the Company's Common Stock at the sole discretion of
the Company. Should the Company elect to pay Preferred Stock dividends in Common
Stock, the ownership of Common Stock by the existing holders of Common Stock
will be diluted. See "Dividend Policy" and "Description of Securities Preferred
Stock."
Potential Adverse Effect of "In the Money" Warrants. The IPO Warrantholders
may purchase up to 2,300,000 shares of Common Stock at $4.00 per share which is
considered to be "in the money" because the price is below the current market
price of the Common Stock. Accordingly, the exercise of the IPO Warrants may
have a depressive effect on the market price of the Common Stock by
significantly increasing the number of shares outstanding. See "Description of
Securities - IPO Warrants."
Potential Adverse Effect of Shares Issuable Upon Exercise of Stock Options
and Shares Eligible for Future Sale. The Company has 2,112,750 shares of Common
Stock outstanding as of December 29, 1996, and has reserved for issuance an
aggregate of __________ shares of Common Stock upon exercise of the Existing
Options. An aggregate of 1,000,000 shares issued in the IPO, 2,300,000 shares
underlying the IPO Warrants and __________ shares issuable upon conversion of
the Preferred Stock have been previously registered or are being registered
hereby. Additionally, 300,000 shares issuable upon exercise of the
Representative's IPO Warrants and __________ shares issuable upon conversion of
the Representative's Warrants are subject to demand registration rights and
257,280 shares underlying common stock purchase warrants must be registered by
the Company by August 10, 1997. Finally, a total of 990,000 shares of the
Company's Common Stock outstanding have not been registered under the Securities
Act of 1933, as amended (the "Securities Act"), are "restricted securities" but
may be sold from time to time under Rule 144 of the Securities Act, subject to
lock up agreements restricting the sale of 500,000 of such shares until August
1997 except with the written consent of the Representative. The remaining
240,000 shares are also subject to a
13
<PAGE>
lockup agreement restricting sale through August 1997 executed by JEB Investment
Company ("JEB"). However, the shares were subsequently foreclosed upon by
WaterMarc and the JEB lockup agreement may not be effective against WaterMarc in
which event the 240,000 shares may be sold prior to August 1997. Exercise of the
Existing Options could dilute the Company's net tangible book value and/or prove
to be a hindrance to future financing. The holders of Existing Options may
exercise them at a time when the Company might otherwise be able to obtain
additional equity capital on terms more favorable to the Company. Exercise of
registration rights and maintenance of a current prospectus in connection with
the IPO Warrants, the shares issuable upon conversion of the Preferred Stock and
the Representative's Warrants could involve substantial expense to the Company
at a time when it could not afford such expenditures and may adversely affect
the terms upon which the Company could obtain additional financing. See "Certain
Transactions", "Description of Securities" and "Shares Eligible for Future
Sale."
Representative's Limited Underwriting Experience. The Representative was
recently organized and has acted as a representative of the Underwriters in only
one prior public Offering (which was the Company's IPO) although it has
participated as a dealer in offerings underwritten by others. This lack of
underwriting experience may adversely affect the development or continuation of
a trading market for the Preferred Stock and negatively influence the market
price of the Preferred Stock following the Offering. See "Underwriting."
Potential Adverse Effect due to Underwriters' Influence on the Market Price
of the Securities. A significant amount of the Preferred Stock offered hereby
may be sold to customers of the Representative and the Underwriters. Such
customers subsequently may engage in transactions for the sale or purchase of
Preferred Stock through or with the Underwriters. Should the Representative make
a market in the Preferred Stock, this market-making activity may terminate at
any time. Accordingly, the Representative may exert a dominating influence on
the market, if one develops, for the Preferred Stock, and the price and
liquidity of the Preferred Stock may be significantly affected by the degree, if
any, of the Underwriters' participation in such market.
Maintenance Criteria for The NASDAQ SmallCap Market Securities. The
National Association of Securities Dealers, Inc. ("the NASD"), which administers
The NASDAQ SmallCap Market, sets the criteria for continued eligibility on The
NASDAQ SmallCap Market. In order to continue to be included on The NASDAQ
SmallCap Market, a company must maintain $2 million in total assets, a $200,000
market value of its public float and $1 million in total capital and surplus. In
addition, continued inclusion requires two market-makers, at least 300 holders
of the Common Stock and a minimum bid price of $1 per share; provided, however,
that if a company falls below such minimum bid price, it will remain eligible
for continued inclusion in The NASDAQ SmallCap Market if the market value of the
public float is at least $1 million and the Company has $2 million in capital
and surplus. The Company's failure to meet these maintenance criteria in the
future or future maintenance requirements imposed by The NASDAQ SmallCap Market
may result in the discontinuance of the inclusion of its securities in The
NASDAQ SmallCap Market. In such event, trading, if any, in the securities may
14
<PAGE>
then continue to be conducted in the non-NASDAQ over-the-counter market in what
are commonly referred to as the electronic bulletin board and the "pink sheets."
As a result, an investor may find it more difficult to dispose of or to obtain
accurate quotations as to the market value of the securities. In addition, the
Company would be subject to Rule 15g (the "Rule") promulgated under the Exchange
Act which imposes various sales practice requirements on broker-dealers who sell
securities governed by the Rule to persons other than established customers and
accredited investors. For these types of transactions, the broker-dealer must
make a special suitability determination for the purchaser and have received the
purchaser's written consent to the transactions prior to sale. Consequently, the
Rule may have an adverse effect on the ability of broker-dealers to sell the
securities, which may affect the ability of purchasers in the Offering to sell
the securities in the secondary market. The NASD recently proposed significantly
more stringent maintenance requirements which require $2 million in net tangible
assets, 500,000 shares in the public float and elimination of the exception to
the $1 per share bid price requirement. Should these new maintenance
requirements be adopted it will be progressively more difficult for the Company
to remain on NASDAQ.
Disclosure Related to Penny Stocks. The Commission has adopted rules that
define a "penny stock" as equity securities priced at under $5.00 per share
which are not listed for trading on NASDAQ (unless (i) the issuer has a net
worth of $2,000,000 if in business for more than three years or $5,000,000 if in
business for less than three years or (ii) the issuer has had average annual
revenues of $6,000,000 for the prior three years. In the event that any of the
Company's securities are characterized in the future as penny stock,
broker-dealers dealing in the securities will be subject to the disclosure rules
for transactions involving penny stocks which require the broker-dealer among
other things to (i) determine the suitability of purchasers of the securities,
and obtain the written consent of purchasers to purchase such securities and
(ii) disclose the best (inside) bid and offer prices for such securities and the
price at which the broker-dealer last purchased or sold the securities. The
additional burdens imposed upon broker-dealers may discourage them from
affecting transactions in penny stocks, which could reduce the liquidity of the
securities offered hereby.
Stockholder Approval Not Required for Issuance of Preferred Stock;
Prevention of Change in Control. The authorized capital stock of the Company
includes 5,000,000 shares of Preferred Stock (none of which are currently
outstanding), which may be issued from time to time in one or more series with
such designations, voting powers, if any, preferences and relative,
participating, optional or other special rights, and such qualifications,
limitations and restrictions thereof, as are determined by resolution of the
Board of Directors of the Company without approval of the Company's Common
stockholders. The issuance of Preferred Stock may have the effect of delaying,
deferring or preventing a change in control of the Company without further
action by stockholders and could adversely affect the rights and powers,
including voting rights, of the holders of Common Stock. In certain
circumstances, the issuance of Preferred Stock could depress the market price of
the Common Stock. See "Description of Securities-Preferred Stock."
Limitation on Directors' Liability. The Company's Articles of Incorporation
provide for certain limitations on the liability of the Company's directors to
its stockholders for monetary damages. See "Description of Securities-Directors'
Liability."
15
<PAGE>
Redemption of Preferred Stock. Commencing two years from the date of this
Prospectus, the Preferred Stock may be redeemed by the Company on 30 days' prior
written notice at 110% of the average bid price per share for the Preferred
Stock on NASDAQ for the 20 trading days prior to the redemption date.
Accordingly, holders of the Preferred Stock may be required to either exchange
their Preferred Stock for Common Stock or accept a fixed payment price for each
share of Preferred Stock. See "Description of Securities."
No Assurance of an Active Public Market. While the Preferred Stock will be
free of restrictions on transfer, there is presently no public market for the
Preferred Stock and although the Company has applied to have the Preferred Stock
included on NASDAQ, there can be no assurance that an active market will develop
or be maintained. Accordingly, there can be no assurance that purchasers will be
able to sell the Preferred Stock in the future. See "Description of Securities."
Non-Registration in Certain Jurisdictions of Shares of Common Stock
Underlying the Preferred Stock. The Preferred Stock is not convertible unless,
at the time of conversion, the Company has a current prospectus covering the
shares of Common Stock issuable upon conversion of such Preferred Stock and such
shares of Common Stock have been registered, qualified or deemed to be exempt
under the securities laws of the state of residence of the holders of such
Preferred Stock. Although the Company is registering the underlying Common Stock
hereby and will use its best efforts to maintain a current prospectus relating
thereto while the Preferred Stock is outstanding, there is no assurance that it
will be able to do so.
Purchasers may buy Preferred Stock in the aftermarket or may move to
jurisdictions in which the shares of Common Stock underlying the Preferred Stock
are not so registered or qualified during the period that the Preferred Stock is
outstanding. In this event, the Company would be unable to issue Common Stock to
those persons desiring to convert their shares of Preferred Stock unless and
until such shares could be qualified for sale in jurisdictions in which such
purchasers reside, or an exemption from such qualification exists in such
jurisdiction. In such event, the holders of Preferred Stock could be unable to
convert their shares to Common Stock. See "Description of Securities."
Offering Price Arbitrarily Determined. The offering price of the Preferred
Stock was arbitrarily determined through negotiations between the Representative
and the Company and does not necessarily bear any relationship to the Company's
assets, earnings or other investment criteria. See "Underwriting."
16
<PAGE>
PRICE RANGE OF COMMON STOCK
The Company's Common Stock has traded on The NASDAQ SmallCap Market under
the symbol "ROTI" since July 9, 1996.
The following table sets forth for the quarters indicated the range of high
and low closing prices of the Company's Common Stock as reported by The NASDAQ
SmallCap Market.
Price
-----
By Quarter Ended: High Low
---- ---
October 6, 1996................................ $8.25 $5.67
December 29, 1996.............................. $7.75 $5.75
April 20, 1997 (through April 25, 1997)........ $7.75 $6.00
As of April 25, 1997, the Company had approximately 600 beneficial and
record holders of the Common Stock.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
Preferred Stock after deducting underwriting commissions and expenses and other
expenses of the Offering are expected to be $4,100,000. The Company intends to
apply the net proceeds generally over a 12-month period as follows:
Amount Percent
------ -------
Acquisition of Restaurants for resale
to area developers(1) 2,200,000 53.6%
Financial assistance to area developers(2) 1,200,000 29.3%
Working capital 700,000 17.1%
---------- ------
TOTALS $4,100,000 100.0%
========== ======
- ----------
(1) The Company intends to acquire approximately 12 existing restaurant
properties in certain metropolitan markets, sell the assets of the
restaurant properties (such as furniture, fixtures and equipment) and
sublease the real estate leases to area developers selected by the Company
for operation of the properties as Harvest Rotisserie restaurants. Area
developers will be required to pay for the assets in cash or by execution
of a promissory note payable to the Company in installments over a
negotiated period of time. The promissory notes will be secured by the
restaurant assets as well as the real estate lease on the property. The
Company estimates that costs to acquire these properties (assuming the real
estate and buildings are not purchased) will range from $100,000 to
$500,000 per property and will average approximately $175,000 per property.
See "Business - Application of Offering Proceeds" and "Business -
Restaurant Purchase Agreements."
(2) The Company intends to provide financing (in addition to acquiring the
restaurant properties) to area developers selected by the Company who
agree to operate the restaurant properties leased to them by the
Company. This financing will include costs incurred by the area
developer to convert the properties to Harvest Rotisserie restaurants
and initial working capital. The Company estimates such area developer
financing will
17
<PAGE>
average $100,000 per restaurant property. Any unused area developer
financing will be added to working capital. See "Business - Application of
Offering Proceeds."
Pending application, the net proceeds of the Offering will be invested in
interest bearing savings accounts, certificates of deposit and money market
accounts. Except for the working capital allocation, the net proceeds will not
be used to open Company-owned Restaurants unless the Restaurants are developed
for resale to area developers. See "Business - Restaurant Expansion." See also
"Business - Restaurant Purchase Agreements" for a description of the ten
restaurant properties the Company has contracted to acquire for resale to
prospective area developers. Any additional proceeds received upon the exercise
of the Representative's Warrants or the Representative's Overallotment Option
will be added to working capital.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 29, 1996, and as adjusted to reflect the sale of the Preferred Stock
offered hereby and the application of the net proceeds therefrom as described in
"Use of Proceeds."
<TABLE>
<CAPTION>
December 29, 1996
-----------------
Historical As Adjusted(2)
---------- --------------
<S> <C> <C>
Stockholders' equity:
Preferred Stock, $1.00 par value, 5,000,000 shares authorized,
no shares issued and outstanding, 500,000 shares as adjusted $ -- $ 500,000
Common Stock, $.01 par value, 10,000,000 shares authorized;
2,112,750 shares issued and outstanding(1) 21,128 21,128
Additional paid-in capital 6,138,770 9,738,770
Accumulated deficit (3,576,796) (3,576,796)
----------- -----------
Total stockholders' equity 2,583,102 6,683,102
----------- ----------
Total capitalization $2,583,102 $6,683,102
=========== ==========
</TABLE>
- ----------
(1) Does not include an aggregate of __________ shares of Common Stock issuable
upon exercise of the Existing Options comprised of (i) 2,300,000 shares
issuable upon exercise of the IPO Warrants, (ii) 300,000 shares issuable
upon exercise of the Warrants earned by the Representative in the IPO,
(iii) __________ shares issuable upon conversion of the Preferred Stock and
the Preferred Stock issuable under the Representative's Warrants, (iv)
325,280 shares issuable upon exercise of other outstanding common stock
purchase warrants (257,280 of which were exercised after December 29, 1996,
and (v) 237,000 shares issuable under the Company's 1994 Stock Option Plan.
See "Description of Securities."
(2) To reflect the issuance of the Preferred Stock offered hereby, excluding
112,500 shares of Preferred Stock which may be issued upon exercise of the
Overallotment Option.
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<PAGE>
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock and intends
to retain earnings, if any, for use in the operation and expansion of its
business. The amount of future dividends, if any, will be determined by the
Board of Directors based upon the Company's earnings, financial condition,
capital requirements and other conditions. The Company will pay quarterly
cumulative dividends of $.30 per share of Preferred Stock in cash or in the
Company's Common Stock at the sole discretion of the Company. The value of any
Common Stock issued will be the last reported sales price of the Common Stock on
NASDAQ on the last day of each calendar quarter. See "Description of Securities-
Preferred Stock."
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<PAGE>
SELECTED FINANCIAL DATA
The selected financial information set forth below has been derived from
the Company's financial statements which appear elsewhere in the Prospectus. The
selected financial data is qualified in its entirety by, and should be read in
conjunction with, the financial statements and the notes thereto included
elsewhere herein.
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 29, December 31, December 25,
----------- ------------ ------------
1996 1995 1994
<S> <C> <C> <C>
Statement of Operations Data:
Revenues:
Restaurant ....................... $ 263,892 $ 226,678 $ 243,988
Area development fee, stockholder -- 50,000 --
----------- ----------- -----------
$ 263,892 $ 276,678 $ 243,988
Cost and Expenses:
Cost of food and paper ........... 112,530 82,171 105,650
Restaurant salaries and benefits . 125,954 127,400 146,677
Occupancy and related expenses ... 58,191 63,605 67,611
Operating expenses ............... 73,661 86,641 106,647
General and administrative ....... 1,261,198 567,605 197,641
Preopening expenses .............. 131,074 59,363 25,783
Depreciation and amortization .... 104,467 73,879 58,940
----------- ----------- -----------
Total operating expenses ...... 1,877,075 1,060,664 708,949
----------- ----------- -----------
Loss from operations ............. (1,613,183) (783,986) (464,961)
Non-operating income (expense):
Interest income .................. 56,747 -- --
Interest and debt discount expense (454,818) (140,497) (29,063)
----------- ----------- -----------
(398,071) (140,497) 29,063
Net loss ........................... $(2,011,254) $ (924,483) $ (494,024)
=========== =========== ===========
Net loss per common share .......... $ (1.29) $ (0.75) $ (0.49)
Weighted average number of
common shares outstanding(1) ..... 1,553,824 1,224,531 1,005,107
</TABLE>
December 29, 1996
-----------------
Historical As Adjusted(2)
---------- --------------
Balance Sheet Data:
Working capital $ 956,081 $ 5,056,081
Total assets 3,137,712 7,237,712
Total liabilities 554,610 554,610
Long-term debt -- --
Stockholders' equity 2,583,102 6,683,102
20
<PAGE>
- ----------
(1) Weighted average number of common shares outstanding includes common
equivalent shares issuable upon the exercise of outstanding stock options
and common stock purchase warrants.
(2) To reflect the issuance of the Preferred Stock offered hereby, excluding
75,000 shares of Preferred Stock which may be issued upon exercise of the
Overallotment Option.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company was organized in June 1993, and opened its San Antonio Cluckers
restaurant in January 1994. The Company's operating results for 1994 and 1995,
including its limited revenues and ongoing losses, primarily reflect the
operations of its one Cluckers restaurant located in San Antonio, Texas. During
the fourth quarter of 1994, the Company established its corporate offices and
began the initial development of its franchising program. During the third
quarter of 1995 the Company began refinements to its Cluckers restaurant which
evolved into the Harvest Rotisserie restaurant, and the Company completed
development of the Harvest Rotisserie franchise program during this period. In
February 1996 the Company elected to limit its activities to the development of
Harvest Rotisserie restaurants, and opened its first Harvest Rotisserie
restaurant in November 1996. In January and February 1997 the Company open two
additional Harvest Rotisserie restaurants, and in January 1997, the Company
converted its San Antonio Cluckers restaurant to a Harvest Rotisserie
restaurant, at a cost of $25,000. To date, the Company has four Restaurants in
operation, but has not sold any franchises nor does it have any area development
agreements in effect.
Results of Operations-Fiscal Year 1996 Compared to Fiscal Year 1995.
Revenues. Restaurant revenues for 1996 were $263,892, a 16.4% increase as
compared to 1995. The increase in revenues was due to the opening of an
additional restaurant in November 1996. On a comparative basis, same store
revenues decreased $32,820 or 14.5% between 1996 and 1995. The decrease in same
store revenues was due in part to a reduction in the restaurant operating hours
for the Company's only restaurant during the second quarter of 1996. The
restaurant is currently open five days each week from 11 a.m. to 2 p.m. and is
also being used as a training facility. Restaurant revenues in 1996 were
approximately 34% of capacity for the restaurant and below the restaurant's
operating costs. Management attributes the low sales volumes to the partial use
of the restaurant as a training facility, reduced hours of operation and the
lack of a drive-through window at the restaurant, which is located in a shopping
center. Management anticipates that the sales volume for this restaurant may
improve marginally in future periods due to enhanced name recognition as the
Company opens additional Restaurants in the San Antonio area, although there can
be no such assurance. The Company expects that most new restaurants will be
free-standing with drive-through windows.
During 1995, revenues included an area development fee for $50,000 with a
then director of the Company. The area development arrangement was subsequently
modified extensively. See "Certain Transactions."
Costs and Expenses. Cost of food and paper were 46.4% of restaurant
revenues for 1996, as compared to 36.3% in 1995. The increase in food and paper
costs resulted primarily from food usage for recipe development for the
Company's expanded Harvest Rotisserie menu, and the opening of an additional
restaurant in November 1996, which typically has higher costs during the initial
periods after opening.
Restaurant salaries, benefits, occupancy and related expenses, and
operating expenses include all other restaurant level operating expenses, the
major components of which are direct
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and indirect labor, payroll taxes and benefits, operating supplies, rent,
advertising, repairs and maintenance, utilities, and other occupancy costs. The
combined total of these expenses was $257,806 or 97.7% of restaurant revenue for
1996, as compared to $277,646 or 122% in 1995. A substantial portion of these
costs are fixed or indirectly variable and therefore were disproportionate to
revenues for both periods due to low sales volumes.
General and administrative expenses increased $693,593 or 122% in 1996 as
compared to 1995. The increase resulted from the establishment of the Company's
corporate offices in 1996 and expenses associated with the Company's financing,
franchising, and expansion activities. In 1996, these expenses included
salaries, benefits and contract services (25%), professional fees and offering
expenses (37%), travel-related expenses (10%), advertising and promotion (11%),
and other general and administrative expenses (17%).
Preopening expenses increased by $71,711 1996 as compared to the same
period in 1995. A substantial portion of the increase relates to initial costs
associated with the development of a new Harvest Rotisserie restaurant which
opened in November 1996.
Interest and Debt Discount Expense. Interest and debt discount expense
increased to $454,818 for 1996 as compared to $140,497 for 1995. The significant
increase relates to the issuance of $1,684,000 face amount of 10% Bridge Notes
from December 1994 to March 1996. The total amount of amortized debt discount in
1996 was $367,153. The Bridge Notes were repaid in full in July 1996 from
proceeds of the Company's IPO.
Net Loss. The Company incurred a net loss of $2,011,254 for 1996 as
compared to $924,483 for 1995. The increase in net loss for 1996 was primarily
the result of significantly higher interest, debt discount expenses and general
and administrative expenses. The Company expects to incur significant losses in
future periods until it generates sufficient revenues from expanded restaurant
operations or from franchising activities to offset ongoing operating and
expansion costs.
Results of Operations-Fiscal Year 1995 Compared to Fiscal Year 1994
Revenues. Revenues for 1995, were comprised of $226,678 from restaurant
operations and $50,000 for an area development fee from a stockholder of the
Company. Revenues from restaurant operations were derived entirely from the San
Antonio Cluckers restaurant which opened in January 1994. Restaurant revenues
for 1995, decreased 7.1% as compared to 1994, which only included eleven months
of restaurant operations. Annualized restaurant sales volumes for 1995 were
14.8% below 1994 levels, and were approximately 30% of capacity for the
restaurant and below the restaurant's operating costs for both periods. The
decrease in revenues is due in part to a reduction in the restaurant operating
hours which was implemented during the third quarter of 1995. The restaurant is
currently open five days each week from 11 a.m. to 2 p.m. and is also being used
as a training facility. Management attributes the low sales volume to the
partial use of the restaurant as a training facility and the lack of a
drive-through window at the restaurant,
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which is located in a shopping center. The Company expects that most new
restaurants will be in free-standing facilities with drive-through windows.
Costs and Expenses. Cost of food and paper improved to 36.3% of restaurant
revenues for 1995, as compared to 43.3% for 1994. The improvement in gross
margins resulted primarily from efficiencies in food preparation as the
restaurant matured following the initial opening in January 1994.
Restaurant salaries, benefits, occupancy and related expenses, and
operating expenses include all other restaurant level operating expenses, the
major components of which are direct and indirect labor, payroll taxes and
benefits, operating supplies, rent, advertising, repairs and maintenance,
utilities and other occupancy costs. The combined total of these expenses was
$277,646, or 122% of restaurant revenues and $320,935, or 132% of restaurant
revenues for 1995 and 1994, respectively. A substantial portion of these costs
are fixed or indirectly variable and therefore were disproportionate to
restaurant revenues for both periods. The decrease in these expenses as a
percentage of restaurant revenues was due to improved cost controls implemented
during the fourth quarter of 1994.
General and administrative expenses increased $369,964, or 187% in 1995 as
compared to 1994 primarily due to the establishment of the Company's corporate
offices and expenses associated with the Company's financing, franchising and
expansion activities. In 1995, these expenses included salaries, benefits and
contract services (29%), professional fees and public offering expenses (39%),
travel related expenses (15%), advertising and promotion (6%), and other general
and administrative expenses (11%).
Preopening expenses of $59,363 in 1995 consisted primarily of lease costs
for maintaining a restaurant site for future development in Houston, Texas.
Preopening expenses of $25,783 in 1994 consisted of certain expenses incurred in
connection with the opening of the San Antonio restaurant.
Interest and debt discount expense of $140,497 for 1995, relates to the
issuance of $1,074,500 face amount of 10% Bridge Notes, from December 1994 to
November 1995, and included $87,659 of amortized debt discount. Interest expense
of $29,063 in 1994 relates to a note payable with an affiliate.
Net Loss. The Company incurred a net loss of $924,483 for 1995 as compared
to $494,024 for 1994. The increase in net loss in 1995 was primarily the result
of significantly higher general and administrative expenses and interest
expense, which offset an area development fee and slightly improved restaurant
operating results.
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Liquidity and Capital Resources
The Company has incurred losses from operations since inception and as of
December 29, 1996, has an accumulated deficit of $3,576,796. The Company is not
currently generating sufficient revenues from operations to meet its cash
requirements. Management anticipates that the Company must increase revenues
from existing Restaurants, open at least four additional Restaurants and realize
revenues from its franchise program to generate a positive cash flow from
operations, although there can be no such assurance. The Company estimates it
will require up to six months to realize such increases in revenues from
operations. The ability of the Company to fund costs associated with its
operations and expansion plans is dependent upon the successful development of
its Restaurants, its franchising activities, and its ability to obtain
additional capital through future debt or equity placements.
The Company requires capital principally for the expansion of its
Restaurant operations, for general and administrative expenses and to fund costs
associated with the promotion of its franchise program. During 1996, the Company
invested $1,059,654 in property and equipment, of which approximately $985,000
was for the development of two restaurants (which opened in November 1996 and
February 1997.) To date, the Company has funded its operations and capital needs
with funds provided from the sale of its securities, including its IPO which
raised net proceeds of approximately $4,700,000. The Company does not have a
working capital line of credit with any financial institution. Future sources of
liquidity will be limited to the Company's ability to obtain additional debt or
equity financing which will be difficult to obtain until and unless the Company
begins to generate earnings. Management's plan is to move the Company toward
profitable operations in fiscal 1997, and to seek additional capital to fund for
further expansion of its operations. There can be no assurance the Company will
be successful in either regard.
Between December 1994 and March 1996, the Company issued a total of
$1,684,500 of 10% unsecured Bridge Notes. Proceeds from the Bridge Notes were
used for working capital purposes, development of the Company's initial
franchising program and to pay certain costs associated with the Company's IPO.
The Bridge Notes were repaid on July 15, 1996 using a portion of the proceeds
from the IPO.
Internal sources of capital are limited to the Company achieving profitable
operations in future periods or raising additional capital from investors. The
Company anticipates that its existing capital resources will enable it to
maintain its current operations through 1997 however, full implementation of the
Company's expansion plans is dependent upon the completion of the Offering. If
it does not complete the Offering, the Company's expansion plans will be
significantly curtailed. See "Risk Factors - Need for Additional Capital" and
"Business - Properties."
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BUSINESS
Introduction
The Company owns, operates and franchises quick service restaurants under
the "Harvest Rotisserie" name, which feature marinated oak-roasted rotisserie
chicken, oak-roasted turkey breast, roast ham, meatloaf, an assortment of
sandwiches and other fresh homestyle food items. Harvest Rotisserie restaurants
(sometimes referred to as the "Restaurant(s)") emphasize rotisserie oak-roasted
chicken, turkey and fresh homestyle side dishes consistent with what the Company
believes to be (i) an increased consumer demand for take-home prepared foods,
(ii) an emphasis on lower fat foods such as chicken and turkey, and (iii) the
popularity of homestyle cooking. Harvest Rotisserie side dishes include cold
dishes such as coleslaws and salads and hot dishes such as baked beans,
stuffing, corn, parsley potatoes, macaroni and cheese, steamed fresh vegetables,
mashed potatoes and gravy, rice, creamed spinach, cheese rice and baked cinnamon
apples. The Company maintains strict quality standards in purchasing, storing,
preparing and serving its entrees, side dishes, desserts and other products.
To date, the Company has opened three Restaurants in San Antonio, Texas
(one of which is used as both a training facility and a public restaurant) and
one Restaurant in Corpus Christi, Texas. The Company has also executed leases or
acquired property to develop five additional Restaurants in San Antonio and
Houston, Texas, although it currently has the funds to develop only three such
Restaurants. The Company seeks to enter into traditional single Restaurant
franchise agreements as well as area development agreements although it has not
yet executed any franchise agreements and currently has no area development
agreements in effect. Area development agreements require the area developer to
develop a specified number of Restaurants within a delineated territory in
accordance with a development schedule. Management believes that area
development agreements allow for the more rapid development of a target market
area by generally more experienced restaurant operators who are able to realize
economies of scale resulting from opening a number of Restaurants in a given
area. These operators often require less management supervision by Company
personnel and provide the Company with higher franchise fee income in a shorter
period of time.
History
The Company was incorporated in Texas in June 1993 under the name Clucker's
Tex-Mex Venture, Inc. and changed its name to CluckCorp International, Inc. in
April 1995. Prior to November 1994, the Company was an area developer for
Cluckers Wood Roasted Chicken, Inc. ("CWRC"), the developer and franchisor of
the original "Cluckers" restaurant concept. The Company acquired from WaterMarc
Food Management, Inc. ("WaterMarc"), formerly Billy Blues Food Corporation and
an affiliate of the Company, the Cluckers franchise development rights for
Texas, Mexico and certain Central American countries. After CWRC had opened ten
company-owned restaurants between 1991 and 1994 in Florida, Georgia and New York
and had sold franchises for an additional 165 restaurants, controlling interest
in CWRC was purchased by Kenny Rogers Roasters, Inc. ("Roasters") in November
1994. The Company then exchanged its Cluckers area development agreement with
CWRC for systems, franchising materials, signage and the exclusive right to use
the Cluckers name, trademark and service mark solely in Texas. The Company did
not acquire international rights to the Cluckers name because neither CWRC nor
anyone else had obtained any international rights, other than the Mexican and
Central American rights described above. However, the Company subsequently
registered the Cluckers
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name in Mexico and applied for trademarks to use the Cluckers name and logos in
the United Kingdom, Canada, Singapore and Malaysia.
The Company is licensed to use the Cluckers name only in Texas, and is
obligated to pay a license fee of 2% of gross sales applicable only to its
Cluckers restaurants in Texas for the first 10 years and 1% of gross sales
thereafter. No such license fees are required for Restaurants outside the United
States. In February 1995 and July 1995, the Company formed Cluckers Restaurants,
Inc. and Harvest Restaurants, Inc., wholly-owned Texas corporate subsidiaries,
to act as franchisors for the Company's Cluckers and Harvest Rotisserie
restaurants. The Company is not required to pay a license fee for its Harvest
Rotisserie restaurants because it developed and owns the rights to the Harvest
Rotisserie name and concept.
In February 1996, the Company decided to concentrate on the development,
operation and franchising of Harvest Rotisserie restaurants, which the Company
believes is an improvement over the original Cluckers concept because Harvest
Rotisserie restaurants offer an expanded menu which includes a number of
additional homestyle entrees offering lower fat foods. Accordingly, it converted
its one Cluckers restaurant in San Antonio, Texas to a Harvest Rotisserie
restaurant.
Strategy
The Company seeks to participate in what it perceives as an emerging food
service category consisting of fresh, convenient, homestyle replacement meals.
This category combines the fresh, high quality and flavorful meals generally
associated with traditional home cooking with the convenience and value
associated with fast-food restaurants. In order to promote this category, the
Company will continue to employ the following strategies it adopted in
connection with the development of its Harvest Rotisserie restaurants.
Fresh, High Quality, Convenient Homestyle Meals. The Company will focus on
its Harvest Rotisserie concept of rotisserie oak-roasted chicken, oak roasted
turkey breast, roast ham, meatloaf, sandwiches and a variety of freshly prepared
side dishes by promoting (i) take-home prepared foods, (ii) the expanding
interest in low fat freshly prepared meals, and (iii) the consumer's desire for
homestyle, complete meals, reminiscent of home cooking. Chicken, turkey and ham
are delivered to the Company's Restaurants several times each week in order to
allow for the fresh preparation of these food products. Cooked food items are
prepared with the use of ovens and steamers, rather than the fryers, grills, and
microwaves used by many other fast-food establishments. The Company maintains
strict quality standards in purchasing, storing, preparing and serving its
entrees, fresh side dishes, desserts and other products. All visible fat is
removed from poultry and ham prior to preparation. The chickens are marinated
for 24 hours in a blend of citrus juices, fresh garlic and natural herbs and
spices and roasted over hardwood flames in a custom built rotisserie at
temperatures as high as 1,200 degrees for ninety minutes. The self-basting
characteristic of rotisserie cooking is believed to reduce fat and result in
moister meat and crispier skin.
Complete Meal Value. The Company emphasizes complete, reasonably-priced
meals rather than focusing on discounting individual items or an a la carte
pricing system. Restaurant
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meals include a variety of entrees such as rotisserie oak-roasted chicken,
oak-roasted turkey, roast ham and meatloaf customer-selected side dishes and
desserts. Complete meals begin at approximately $3.99, and menu combinations
provide convenient multiple meal selections for couples, families or larger
groups. The Company's operating philosophy is to provide high quality,
healthful, quick service food rather than the food often associated with the
fast food industry. The Restaurants offer large food portions, lunch specials
and entree combinations at lower prices in order to create a competitive "price
to value" concept.
Distinctive Appearance and Casual Atmosphere. The Company has established
what it considers to be an easily replicable prototype Harvest Rotisserie
restaurant, featuring an efficient operating layout, standardized equipment and
tasteful and distinctive trade dress. The Company believes its Restaurant store
furnishings create an attractive and casual environment for both take-out and
dine-in customers.
Visible, High Traffic Store Locations. The Company emphasizes free-standing
pad sites or end-cap locations with drive-through windows, ample parking and
easy access to and from high traffic roads. Highly visible signage consistent
with trade dress and local requirements is pursued.
Customer Service Commitment. The Company seeks friendly, customer-oriented,
and highly motivated employees at all positions to help ensure that its
customers have a pleasant dining experience, including a friendly greeting and
individual attention to all aspects of their order. Customers unfamiliar with
particular side dishes are encouraged to taste a sample.
Application of Offering Proceeds
The Company intends to use substantially all of the proceeds of the
Offering to acquire restaurant properties in certain metropolitan markets, sell
the assets and sublease the properties to area developers who will operate the
properties as Harvest Rotisserie restaurants. The Company may require the area
developers to execute promissory notes to the Company representing the purchase
price of the assets advanced by the Company and may also advance funds to area
developers for costs incurred to convert properties to Harvest Rotisserie
restaurants and for working capital. The Company will then seek to recoup its
costs through franchise fee payments and repayments of any promissory notes
issued by the area developers who will also be responsible to tender restaurant
property lease payments directly to the owners of the properties. See "Use of
Proceeds." The Company will not have any financial or ownership interest in the
Restaurants subleased to the area developers other than the right to obtain
repayment of any funds advanced to them. See "Area Development Agreements" for a
discussion of the obligations of area developers to develop specified numbers of
Restaurants in defined territories and their obligation to pay area development
fees and franchise fees to the Company.
If the Company is unable to locate area developers willing to purchase the
restaurant assets and sublease the restaurant properties or if the area
developers are unsuccessful in the operation of the restaurant properties, the
Company may be unable to recoup its investments in the properties and would be
liable for any leases it executed with the owners of the properties. If the
Company is unable to recoup such investments, its financial condition and
results of operations will be severely adversely affected. See "Use of
Proceeds."
In evaluating and selecting restaurant properties for assignment and
sublease to prospective area developers, the Company will apply the same
criteria it uses to select its own restaurant properties. Specifically, the
Company will
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limit restaurant properties to a small number of metropolitan areas which the
Company believes currently offer long range growth potential for its Harvest
Rotisserie concept. Each metropolitan area must offer the Company the
opportunity to promptly acquire at least three properties so that the Company
can take advantage of advertising and marketing economies of scale. The Company
will give priority to metropolitan areas in which it has already located a
prospective area developer and which contain identifiable properties which meet
the Company's demographic and population requirements. The Company does not have
specific population criteria for metropolitan areas, but rather evaluates the
population of the metropolitan area in comparison to the number of Restaurants
it believes its prospective area developer is capable of developing within a 24
month period. The ratio of potential Restaurants to population determines the
Company's ability to realize economies of scale. In terms of demographics, the
Company favors high employment and recreational population concentrations of
middle class white collar workers generally above the age of 30. Individual
properties within a target metropolitan area will be selected based upon the
terms of the underlying property leases, anticipated costs of conversion to
Harvest Rotisserie restaurants, the ability of the Company to refinance any debt
associated with the property and the ability of the Company to sublease the
property to an area developer. The Company has not entered into any acquisition
agreements for restaurant properties or sublease agreements with prospective
area developers and there can be no assurance it will do so in the future. The
Company may also elect to enter into agreements for the conversion of restaurant
properties (to be developed as Company-owned restaurants) which are
significantly different than the prospective agreements described herein. To
date, no such agreements have been entered into and the Company does not have a
format for any such agreements.
Current Operations
The Company's Restaurants prominently display a rotisserie within customer
view. The location of the rotisserie, coupled with the flames emanating from the
hardwood, creates a focal point for the Restaurants. Chicken, turkey and other
entrees may be purchased in varying quantities or in combination with a choice
of side dishes. Most Restaurants offer inside seating and takeout service, range
in size from approximately 1,800 to 3,500 square feet and have drive-through
windows and seating capacities for approximately 45 to 70 diners. Generally,
restaurant hours are from 11 A.M. to 11 P.M., seven days a week.
The Company considers the location of a Restaurant to be critical to its
long-term success and therefore devotes significant efforts to the evaluation of
potential Restaurant sites regardless of whether such sites are intended as
Company owned, franchised, area developed or resale Restaurants. The site
selection process involves consideration of a variety of factors including (i)
demographics, such as target population density and household income levels,
(ii) specific site characteristics such as visibility, accessibility and traffic
volume, (iii) proximity to activity centers such as prime urban office or retail
shopping districts, suburban shopping areas and hotel and office complexes, (iv)
parking availability and (v) potential competition in the area. The Company's
executive officers inspect and approve Restaurant sites prior to the execution
of a lease. The opening of new Restaurants is contingent upon, among other
things, locating satisfactory sites, negotiating favorable leases or purchase
agreements, completing construction and securing appropriate government permits
and approvals. Once a site is available to the Company and
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necessary approvals and permits have been obtained approximately 60 to 180 days
are required to complete construction and open the Restaurant.
The design of the Restaurants is flexible and may be adapted to local
architectural styles and existing buildings with varying floor plans and
configurations. The Company intends to continue to purchase most of its
restaurant equipment, such as rotisseries, furniture and fixtures from the same
suppliers, in order to promote uniformity of style and format and reduce costs.
The Restaurants are operated under standards set forth in the Company's
operating manuals, including specifications relating to food quality and
preparation, design and decor and day-to-day operations. The standards also
govern the administration, training and conduct of Restaurant personnel.
A typical Restaurant will employ between fifteen and twenty people daily,
generally on a staggered basis designed to match employee work hours to customer
traffic. Restaurant personnel generally include a manager, assistant manager,
cooks, counter personnel and kitchen workers.
The Company believes that the training and development of Restaurant
management personnel is a critical part of its operations. Restaurant management
personnel are trained by the Company for a 30-day period and until each
participant can demonstrate the management skills required to operate a
Restaurant at levels satisfactory to the Company. Restaurant managers are
responsible for day-to-day operations, including food preparation, customer
relations, maintenance, cost control and personnel relations. In addition,
Restaurant managers are responsible for selecting and training new employees who
will generally undergo an on-the-job training period under the supervision of an
experienced employee. Ongoing employee training is the responsibility of the
Restaurant manager.
Restaurant Expansion
The Company intends to open as many Restaurants as its capital will permit,
although the proceeds from the Offering (except for the working capital
allocation) will be used strictly to acquire Restaurants properties for resale
to area developers or for area developer financing. See "Use of Proceeds." The
amount of capital required will depend in part on whether the developed
Restaurants are Company-owned or franchised and whether the Restaurant buildings
are leased or constructed by the Company. The number of Restaurants opened will
also depend upon, among other things, market acceptance of the Company's
Restaurant concept, the hiring of skilled management and other personnel, the
availability of suitable locations, the general ability to successfully manage
growth (including monitoring restaurants, controlling costs and maintaining
effective quality controls), the availability of adequate financing, and its
ability to attract and retain qualified franchisees. To date the Company has
opened four Restaurants, has five other Restaurants subject to leases but has
not entered into any franchise agreements and has no area development agreements
in effect. The Company has the funds to develop three of the five Restaurants
but will be unable to develop the remaining two Restaurants without additional
financing. See "-Properties".
The Company estimates that the average cost of opening a Harvest Rotisserie
restaurant in a leased facility, including site selection costs, leasehold
improvements, acquisition of furniture, fixtures and equipment, opening
inventories and certain preopening expenses (including salaries, training,
travel, advertising and promotion), will range from $175,000 to $300,000 per
Restaurant (depending upon the size and location of the Restaurant and the
amount
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of leasehold improvements required) and will average approximately $450,000 per
Restaurant. If the Company elects to purchase the land and/or purchase or
construct the building, the development costs will be significantly higher, will
range from $500,000 to $850,000 per restaurant, and will average $650,000 per
Restaurant.
The Company previously sought to enter into joint venture agreements and
development arrangements to finance a portion of Restaurant development costs,
but was unable to attract joint venture partners upon terms acceptable to it and
has therefore terminated any such arrangements.
Franchise Agreements
The Company has completed a Uniform Franchise Offering Circular ("UFOC")
and related franchise documents for its Harvest Rotisserie restaurant but has
not sold any franchises. The Harvest Rotisserie franchise agreement provides for
(i) a $35,000 per Restaurant franchise fee (except for take-out only stores
which require a $15,000 franchise fee), (ii) a 5% royalty on the Restaurant's
gross revenue and (iii) a reserve for a national and local advertising fund
contribution aggregating up to 3% of gross revenues per Restaurant. The
franchise agreement also provides for a limited area of exclusivity surrounding
the franchised Restaurant in which the Company may neither develop nor grant to
others the right to develop additional Restaurants.
The Company's franchise agreement requires that the Restaurant be operated
in accordance with the operating procedures and menus established by the
Company. The Company conducts regular inspections of its Restaurants to
determine whether they meet applicable quality, service and cleanliness
standards and will work with franchisees to improve substandard performance or
any items of non-compliance revealed in the course of its inspection. The
Company may terminate any franchisee who does not comply with such standards.
The Company believes that maintaining superior food quality, a clean and
pleasing environment and excellent customer service is critical to the
reputation and success of its Restaurants and intends to act aggressively to
enforce applicable contractual requirements. Franchisees could contest such
terminations which would cause the Company to incur potentially significant
legal expenses.
Area Development Agreements
The Company's Harvest Rotisserie area development agreement requires the
development of a specified number of Restaurants within a delineated territory
in accordance with a development schedule. The development schedule will
generally cover three to six years and will have Restaurant operation benchmarks
for the number of Restaurants to be opened and in operation at certain yearly
intervals. It is anticipated that area developers will pay a nonrefundable fee
of $5,000 per Restaurant to be developed and a per Restaurant franchise fee as
each Restaurant is opened. Area development agreements will provide that the
area developer has the exclusive right to open Restaurants within the specified
territory during the term of the development schedule. Once an acceptable lease
for an approved Restaurant site has been fully executed and the Company has
approved design and construction specifications, the Company and the area
developer would
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enter into a franchise agreement under which the area developer would become the
franchisee for the specific Restaurant to be developed at the site. The Company
has no obligations under its area development agreements, beyond its contractual
agreement not to sell franchises to anyone within the area developer's
territory.
Failure to meet development schedules or other breaches of the area
development agreement would lead to termination of the limited exclusivity
provided by the agreement, loss of any deposits paid to the Company,
renegotiation of development and franchise provisions or termination of the
right to build future Restaurants, although such termination would not
necessarily affect the area developer's existing franchise agreements for
developed locations.
In March 1995, prior to defining certain uniform area development agreement
terms, the Company entered into an area development agreement with a stockholder
and former director of the Company, providing for the development of up to ten
Cluckers restaurants in Singapore over a 20-year period. In February 1996,
consistent with the Company's plan to develop solely Harvest Rotisserie
restaurants, the agreement was modified to provide for the development of
Harvest Rotisserie restaurants. The fee under the area development agreement was
$50,000 of which the Company received $20,000 as a deposit in cash and a $30,000
non-interest bearing unsecured promissory note. In October 1996, the Company
refunded $10,000 of the deposit, cancelled the $30,000 promissory note and
reduced the number of Restaurants anticipated to be developed under the
agreement from ten Restaurants to two Restaurants. The developer is under no
obligation to develop any Restaurants in Singapore and, accordingly, the Company
no longer considers its agreement with the developer to constitute an area
development agreement.
No area development agreements are currently in effect and there can be no
assurance that any Restaurants will be developed under area development
agreements. Negotiations with parties who previously expressed an interest in
area development agreements for Restaurants to be located in McAllen, Texas and
San Francisco, California were terminated. Although the Company continues to
negotiate with a number of entities for area developments in such markets as
Austin, Texas, Baltimore, Maryland, New York, New York, Indianapolis, Indiana,
Tampa Florida and Northern California, there can be no assurance that the
Company will execute any such area development agreements in the future.
Marketing
The Company currently markets four Restaurants on a limited basis primarily
through print media, restaurant signage, direct mail and in-store displays which
emphasize the healthfulness, quality and homestyle nature of the food products
and otherwise promote the rotisserie concept. The Company intends to expand its
advertising efforts (using working capital generated from its IPO and from
revenues from existing Restaurant operations) to include additional use of print
media, together with radio and television commercials. The Company's advertising
efforts also seek to promote value through the purchase of complete meals or
meal combinations, as opposed to a la carte selection or pricing. Company-owned
and any future franchise Restaurants will
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contribute to a national advertising fund to pay for the development of national
advertising material and to a separate fund to pay for advertising in local
markets.
Competition
The food service industry is intensely competitive with respect to food
quality, concept, location, service and price. There are many well-established
food service competitors with substantially greater financial and other
resources than the Company and with substantially longer operating histories.
The Company competes with take-out food service companies, fast-food
restaurants, casual full-service dine-in restaurants, delicatessens,
cafeteria-style buffets and prepared food stores, as well as with supermarkets
and convenience stores. Competitors include national, regional and local pizza
restaurants, Chinese food restaurants, other purveyors of carry- out food and
convenience dining establishments, including such chains as Pizza Hut,
McDonald's and others. Other rotisserie roasted chicken concepts and homestyle
food concepts, such as Boston Market and Kenny Rogers' Roasters, provide direct
and intensive competition. This intense competition has resulted in the sale or
closing of a number of rotisserie roasted chicken restaurants including
establishments operated by some of the larger franchise chains. The inclusion of
roasted or baked chicken at many large, national food service chains, such as
KFC and Roy Rogers, and in supermarkets and convenience stores, creates
significant additional competition for customers. Moreover, other national food
service chains or companies could introduce new rotisserie, roasted or baked
chicken restaurants. The Company believes that its Harvest Rotisserie
restaurants will compete favorably in terms of taste, food quality, convenience,
customer service and value, which the Company believes are the important factors
to the segments of the population the Company currently targets.
Competition in the food service business is often affected by changes in
consumer tastes, national, regional and local economic and real estate
conditions, demographic trends, traffic patterns, the cost and availability of
labor, purchasing power, availability of product and local competitive factors.
Some or all of these factors could cause the Company and future franchisees to
be adversely affected.
The Company also competes for franchisees with multinational fast food
chains, national and regional restaurant chains and other regional and local
restaurant franchisors. Most restaurant franchisors have greater market
recognition and greater financial, marketing and human resources than the
Company.
Trademarks and Service Marks
The Company has registered with the United States Patent and Trademark
Office ("PTO") its "Harvest Rotisserie" name, trademark and service mark
("MARKS"). There can be no assurance that the Company will obtain sufficient
protection for its Harvest Rotisserie Marks or, that it will have the financial
resources to enforce or defend its Marks. The Company has the exclusive right in
Texas to use the Cluckers name, trademark and service mark which have been
registered with the PTO. In addition, the Company has registered the Cluckers
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<PAGE>
name in Mexico and has applied to register the Cluckers name (or, in
certain cases, the name in connection with additional words or graphics) in the
United Kingdom, Canada, Singapore and Malaysia. The Company has no plans to use
the Cluckers name or trademark as it is currently concentrating its efforts on
its Harvest Rotisserie restaurant concept. See "Prospectus Summary."
Regulation
The Company's Restaurants must comply with federal, state and local
government regulations applicable to consumer food service businesses generally,
including those relating to the preparation and sale of food, minimum wage
requirements, overtime, working and safety conditions, mandated health insurance
coverage and citizenship requirements, as well as regulations relating to
zoning, construction, health, business licensing and employment. The Company
believes that it is in material compliance with these provisions.
Certain states and the Federal Trade Commission require a franchisor to
provide specified disclosure statements to potential franchisees before granting
a franchise. Additionally, many states require the franchisor to register its
Uniform Franchise Offering Circular ("UFOC") with the state before it may offer
a franchise. The Company believes that its Harvest Rotisserie UFOC (together
with any applicable state versions or supplements) complies with both the
Federal Trade Commission guidelines and all applicable state laws regulating
franchising in those states in which the Company intends to offer franchises.
Insurance
The Company carries general liability, product liability and commercial
insurance of up to $2,000,000 which it believes is adequate for businesses of
its size and type. However, there can be no assurance that the Company's
insurance coverage will remain adequate or that insurance will continue to be
available to the Company at reasonable rates. In the event coverage is
inadequate or becomes unavailable, the Company could be materially adversely
affected. The Company has carried workers' compensation insurance since August
1995.
Franchisees will be required to maintain certain minimum standards of
insurance pursuant to their franchise agreements including commercial general
liability insurance, worker's compensation insurance and all risk property and
casualty insurance. The Company requires that it be named as an additional
insured on any such policies.
Employees
The Company employs four executive officers, six salaried corporate
employees and approximately 100 Restaurant employees. The Company's employees
are not represented by a union and the Company believes that its relations with
employees are satisfactory.
34
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Properties
The Company leases 2,500 square feet of space for its executive offices in
San Antonio, Texas under a 12 month lease expiring June 30, 1997 for $2,500 per
month. The Company believes its executive office facilities are adequate for its
needs in the foreseeable future and that additional space is available at
reasonable rates.
The Company has four Harvest Rotisserie restaurants in operation which were
opened in January 1994, November 1996, January 1997 and February 1997. Following
its IPO, the Company canceled three proposed Restaurant property leases and
substituted three of the leases set forth below. The lease substitutions were
made because the Company concluded that the new leases offered superior
locations to the original leases. Details concerning the Company's four current
and five planned Restaurants are described below. The Company expects that all
five planned Restaurants will be Company-owned and operated and three such
Restaurants will be opened in 1997. The Company's ability to open the remaining
two Restaurants is contingent upon the Company obtaining construction financing
and equipment lease financing. If the Company is unable to obtain this
financing, it will not have sufficient funds to open the remaining two
Restaurants.
Form of Lease Monthly
Location Ownership Expiration Rent(3)
Fredericksburg Road Building Lease August 1998 $2,554
San Antonio, TX
Walzem Road Building Lease February 2006 $2,700
San Antonio, TX
Tezel Road (1) Real Estate Not Applicable Not Applicable
San Antonio, TX Owned
Hwy 281/Loop 1604(1)(4) Ground Lease February 2022 $4,500
San Antonio, TX
DeZavala Road(1)(4) Ground Lease May 2027 $5,000
San Antonio, TX
South Braeswood Road (5) Building Lease January 2004 Greater of $3,000
Houston, TX or 5% of gross
sales
4620 Broadway (5) Building Lease January 2002 $4,900
San Antonio, TX
South Padre Island Drive(2)Building Lease November 1999 $5,000
Corpus Christi, TX
11730 West Avenue (5) Building Lease May 2002 $4,500
San Antonio, TX
(1) Sites substituted for previous sites.
(2) In January 1997, the Company purchased the furniture, fixtures and
equipment of an existing restaurant property (through the assumption of
$100,000 of debt in connection with the property) and converted the
property to a Harvest Rotisserie restaurant.
(3) Monthly rents are subject to customary escalation clauses in future periods
generally tied to a consumer price index or increases in the landlord's
operating expenses on the property.
(4) These two Restaurants require construction of buildings to house the
Restaurant facilities. The Company must obtain construction and equipment
lease financing in order to complete development of the properties.
(5) These three Restaurants will be opened by the Company in 1997 using funds
currently available to it.
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Restaurant Purchase Agreements
On February 3, 1997, the Company entered into an agreement (the
"Multi-Restaurant Agreement") to purchase all of the assets of nine restaurant
properties located in Florida, Indiana and North Carolina. The assets include
all leasehold interests, leasehold improvements, restaurant equipment and
signage for a purchase price of $2,340,000 including the assumption of debt in
the amount of $1,340,000 and $1,000,000 in cash. The Company tendered an earnest
money deposit of $75,000, and expects to close the transaction by May 30, 1997.
However, the Company is still in the due diligence period and may elect to
purchase none or less than all of the properties. Therefore, there can be no
assurance that the Company will acquire the nine restaurant properties.
Moreover, the Company will be unable to close the transaction unless the
Offering is completed.
On February 7, 1997, the Company entered into an agreement (the "Tampa
Agreement") to purchase all of the assets of a single restaurant located in
Tampa, Florida. The assets include real estate and improvements, restaurant
equipment and signage for a purchase price of $1,150,000 including the
assumption of debt in the amount of $880,000 and $270,000 in cash. The Company
tendered an earnest money deposit of $25,000, with closing to occur the earlier
of May 13, 1997 or five days after the Offering is completed. The Company will
be unable to close the transaction unless the Offering is completed.
The following chart sets forth the restaurant properties included in the
Multi-Restaurant Agreement and Tampa Agreement:
Location Lease Expiration Monthly Rent
- -------- ---------------- ------------
6148 14th Street April 2018 $5,518
Bradenton, FL
855 S. Tamiami Trail June 2016 $6,335
Sarasota, FL
1360 N. Tamiami Trail January 2024 $6,311 plus 1%
Port Charlotte, FL over $1.5 million
401 North Dale Mabry Not Applicable Not Applicable
Tampa, FL (1)
7824 Fairview Road June 2014 $4,085
Charlotte, NC
3225 Eastway Drive August 2019 $3,845
Charlotte, NC
2004 East 7th Street May 2019 $3,896
Charlotte, NC
3832 Eagleview Drive September 2025 $7,472
Indianapolis, IN
10099 East Washington October 2019 $4,167
Indianapolis, IN
2518 E. County Line South September 2019 $6,104
Indianapolis, IN
(1) The Tampa Agreement calls for purchase of the real estate and improvements
comprising the restaurant property.
The Company intends to resell the restaurant properties acquired under the
Multi-Restaurant Agreement and Tampa Agreement to area developers, by selling
the assets and assigning the real estate leases as described in "Use of
Proceeds" and "-- Application of Offering Proceeds." However, the Company has
not entered into any agreements, understandings or arrangements with any such
prospective area developers, and there can be no assurance it will be able to do
so in the future. See also "Risk Factors - Dependence Upon Area Developers."
The Company has also entered into an agreement to develop one additional
restaurant property in St. Petersburg, Florida contingent upon certain due
diligence and inspections to be conducted by the Company. If the property is
acquired, it will be offered for resale to area developers along with the other
properties listed above in the Tampa, Florida area.
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<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information regarding the Company's
executive officers and directors:
Officer or
Name Age Office Director Since
William J. Gallagher(1)(2) 57 Chairman of the Board of June 1993
Directors and Chief
Executive Officer
Larry F. Harris 38 President, Chief Operating October 1996
Officer and Director
Sam Bell Steves Rosser 33 Vice President - Development, June 1993
Treasurer and Director
Michael M. Hogan(1)(2) 48 Director August 1996
Theodore M. Heesch(1)(2) 60 Director August 1996
Joseph Fazzone 36 Chief Financial Officer January 1997
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
On August 12, 1996, Jeffrey M. Morehouse resigned as a director and on
November 25, 1996, Henry H. Salzarulo resigned as a director. On December 9,
1996, D.W. Gibbs resigned as Chief Executive Officer and a director. On December
9, 1996, William J. Gallagher, the Company's Chairman, assumed the duties of
Chief Executive Officer and on the same date Larry F. Harris, the Company's
Executive Vice President, was appointed President and a director.
Directors hold office for a period of one year from their election at the
annual meeting of stockholders and until their successors are duly elected and
qualified. Officers of the Company are elected by, and serve at the discretion
of, the Board of Directors. None of the above individuals has any family
relationship with any other except Mr. Rosser who is Mr. Gallagher's son-in-law.
Directors not employed by the Company receive $750 each for attending Board of
Directors' meetings and are reimbursed for out-of-pocket expenses.
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<PAGE>
Background
The following is a summary of the business experience of each executive
officer and director of the Company for at least the last five years:
William J. Gallagher joined the Company in 1993 as its Chairman and
Director of Franchising. In December 1996 he was appointed Chief Executive
Officer. Mr. Gallagher has also been President of Jagbanc Capital Ltd., a
merchant bank headquartered in San Antonio, Texas since September 1994. From
February 1991 to September 1994, Mr. Gallagher was the founder and then Chairman
and CEO of WaterMarc Food Management, Inc., which operated 32 Marcos Mexican
Restaurants, Billy Blues Barbecue Grills, Longhorn Cafes and BBQ Pete's
restaurants and sold Chris' Pitts and Billy Blues Bar-B-Q sauce. From February
1990 until September 1992, Mr. Gallagher was a Vice President at Kemper
Securities. Prior to 1990, Mr. Gallagher founded or co-founded several companies
including Sunny's National Stores (a 150-unit convenience store chain in Texas),
American Drive-Inn (an 18-unit drive-in restaurant chain in Houston, Texas) and
the Guadalupe Valley Winery in New Braunfels, Texas. Mr. Gallagher also served
as a director of CWRC from June 1993 to November 1994. He is the Company's
Chairman and Chief Executive Officer for which he devotes approximately 90% of
his time to the Company's affairs.
Larry F. Harris joined the Company in October 1996 as its Executive Vice
President and Chief Operating Officer and was appointed its President in
December 1996. From December 1994 to September 1996 he was Chief Operating
Officer for a Monterey Pasta Company franchisee. From June 1994 to December
1994, he was director of operations for a Boston Market area developer and from
1984 to 1992, he was employed by Pizza Hut, Inc. in various capacities including
National Director of Operations for Mexico.
Sam Bell Steves Rosser joined the Company in June 1993, as its president
and assumed the duties of Vice President Development in March 1995. He was
employed by Olive Garden restaurants as a member of the store operating staff
from March 1992 until May 1993. From October 1988 until December 1991, he was
employed by Dwight L. Lieb, a real estate developer, as a commercial property
manager and leasing agent.
Michael M. Hogan received his BBA degree in accounting from the University
of Texas at Austin in 1972 and has been engaged in the private practice of
accounting since 1975. His practice emphasizes restaurant formation, operation
and financing. From 1987 to 1989, he was a co-founder and Chief Financial
Officer of the 18 unit American Drive-Inns restaurants in Houston, Texas and in
1990 was one of the founders of two Tejas Grill restaurants in Austin, Texas.
Mr. Hogan has provided consulting services to the Company from time to time
amounting to less than $5,000 for the year ended December 29, 1996.
Theodore M. Heesch has been a registered architect specializing in
restaurant and hotel design since 1967. From 1981 to 1987, he was employed by
McFaddin Kendrick, Inc., an entertainment club developer, as Executive Vice
President. In 1988, Mr. Heesch formed TMHI to offer consulting services to the
hospitality industry, specializing in the design and development
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<PAGE>
of food and beverage facilities. In June 1994, Mr. Heesch became Senior Vice
President of Development for McFaddin Partners, a restaurant developer.
Joseph Fazzone has provided accounting and financial consulting services in
San Antonio, Texas as a sole practitioner since November 1994. From December
1991 to November 1994, he served as Chief Financial Officer of WaterMarc Food
Management, Inc., a restaurant operator and franchisor founded by Mr. Gallagher.
From 1990 to 1991, he served as Corporate Controller of TI-IN Network, Inc., a
San Antonio based educational satellite broadcasting network. From 1989 to 1990,
he served as Manager-Corporate Planning and Financial Analysis of Intelogic
Trace, Inc., a nationwide computer service provider. From 1984 to 1989, Mr.
Fazzone served as an Audit Manager with the San Antonio office of Ernst & Young.
Mr. Fazzone devotes approximately 60% of his time to the Company's affairs. Mr.
Fazzone is a certified public accountant, having received a B.B.A. degree in
accounting from Southwest Texas State University and an M.B.A. degree from the
University of Texas at San Antonio.
Significant Employees
Manuel P. Ortiz has been the Company's Director of Operations since
November 1996. He managed and co-owned Country Fair restaurant from 1990 to
1992, and was a managing partner of the Boston Market area developer in Dallas,
Texas where he was involved in the development of several Boston Market
restaurants from 1992 to 1994. From 1994 until he joined the Company in November
1996, he was the General Manager in Texas for Red Robin International.
Richard N. Trimble has been the Company's Vice President of Operations
since May 1995 and its Director of Franchise Operations since November 1996. Mr.
Trimble joined Church's Fried Chicken ("Church's") in 1971, and was its District
Manager for East Texas from 1973 to 1982 and its Director of Operations for St.
Louis, Missouri from 1982 to 1986. From 1986 to 1989, Mr. Trimble was Regional
Vice President of Church's for southeast U.S. operations, directing the
operations of approximately 250 restaurants. From February 1989 to December
1993, he was a Church's franchisee in East Texas, operating two restaurants and
from December 1993 until he joined the Company in May 1995, he was an
independent restaurant consultant.
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<PAGE>
Executive Compensation
The following table sets forth certain information concerning compensation
paid to the Company's executive officers for the fiscal years ended December 29,
1996, December 31, 1995 and December 31, 1994.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
------------ ------------
Name and Other Annual Awards All Other
Principal Position Year Salary Bonus Compensation Options Compensation
- ------------------ ---- ------ ----- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sam Bell Steves Rosser 1995 $49,500 $0 $0 $0 $0
Vice President,
Treasurer and 1994 49,800 0 0 0 0
Director
D.W. Gibbs 1996 73,214 0 0 0 0
Chief Executive
Officer, President 1995 30,750 0 0 0 0
and Director
William J. Gallagher 1996 79,209 0 3,640 0 0
Chairman of the
Board and 1995 59,211 0 0 0 0
Chief Executive Officer
</TABLE>
On March 17, 1995, the Company entered into an employment agreement through
December 31, 1995 and monthly thereafter, with D.W. Gibbs, the Company's former
Chief Executive Officer and a director, pursuant to which the Company agreed to
pay Mr. Gibbs $3,000 per month through December 31, 1995, and $6,250 per month
thereafter and issue to him options to purchase 80,000 shares of the Company's
Common Stock at $2.50 per share exercisable until March 31, 2000. The stock
options vest at the rate of options to purchase 16,000 shares per year
commencing with the year ending March 31, 1996. Mr. Gibbs resigned on December
9, 1996 at which time he earned options to purchase a total of 16,000 shares.
Mr. Gibbs advised the Company that he might seek legal counsel if the Company
and he could not negotiate separation compensation. Mr. Gibbs did not have an
employment agreement with the Company at the time of his resignation and
accordingly, the Company did not negotiate separation compensation.
In August 1995, the Company entered into a five-year employment agreement
with William J. Gallagher, its Chairman, to act as its franchise sales director
based upon a salary equal to the greater of $75,000 per year or 20% of all
franchise and area development fees paid
40
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to the Company, together with 5% of all royalty fees received by the Company
under any franchise agreements and area development agreements which were
executed during the time of Mr. Gallagher's employment agreement. Mr. Gallagher
was appointed Chief Executive Officer of the Company in December 1996 and
continues to be responsible for franchise and area development sales. In
September 1996, Mr. Gallagher's employment agreement was amended to increase his
base salary from $75,000 to $90,000 per year.
Larry F. Harris, the Company's President, is paid a base salary of $90,000
per year and is entitled to incentive bonuses aggregating up to an additional
$90,000 computed under a formula based upon the number of Company operated
Restaurants in operation and gross revenues in connection with the Restaurants.
Stock Option Plan
In July 1994, the Company adopted its 1994 Stock Option Plan (the "Plan"),
which provides for the grant to employees, officers, directors and consultants
of options to purchase up to 250,000 shares of Common Stock, consisting of both
"incentive stock options" within the meaning of Section 422A of the United
States Internal Revenue Code of 1986 (the "Code") and "non-qualified" options.
Incentive stock options are issuable only to employees of the Company, while
non-qualified options may be issued to non-employee directors, consultants and
others, as well as to employees of the Company.
The Plan is administered by the Board of Directors, which determines those
individuals who shall receive options, the time period during which the options
may be partially or fully exercised, the number of shares of Common Stock that
may be purchased under each option and the option price.
The per share exercise price of the Common Stock subject to an incentive
stock option may not be less than the fair market value of the Common Stock on
the date the option is granted. The per share exercise price of the Common Stock
subject to a non-qualified option is established by the Board of Directors. The
aggregate fair market value (determined as of the date the option is granted) of
the Common Stock that any employee may purchase in any calendar year pursuant to
the exercise of incentive stock options may not exceed $100,000. No person who
owns, directly or indirectly, at the time of the granting of an incentive stock
option to him, more than 10% of the total combined voting power of all classes
of stock of the Company is eligible to receive any incentive stock options under
the Plan unless the option price is at least 110% of the fair market value of
the Common Stock subject to the option, determined on the date of grant.
Non-qualified options are not subject to these limitations.
No incentive stock option may be transferred by an optionee other than by
will or the laws of descent and distribution, and during the lifetime of an
optionee, the option will be exercisable only by him or her. In the event of
termination of employment other than by death or disability, the optionee will
have three months after such termination during which he or she can exercise the
option. Upon termination of employment of an optionee by reason of death or
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<PAGE>
permanent total disability, his or her option remains exercisable for one year
thereafter to the extent it was exercisable on the date of such termination. No
similar limitation applies to non-qualified options.
Options under the Plan must be granted within ten years from the effective
date of the Plan. The incentive stock options granted under the Plan cannot be
exercised more than ten years from the date of grant except that incentive stock
options issued to 10% or greater stockholders are limited to five year terms.
All options granted under the Plan provide for the payment of the exercise price
in cash or by delivery to the Company of shares of Common Stock already owned by
the optionee having a fair market value equal to the exercise price of the
options being exercised, or by a combination of such methods of payment.
Therefore, an optionee may be able to tender shares of Common Stock to purchase
additional shares of Common Stock and may theoretically exercise all of his
stock options with no additional investment other than his original shares. Any
unexercised options that expire or that terminate upon an optionee ceasing to be
an officer, director or an employee of the Company become available once again
for issuance.
As of the date of this Prospectus, options to purchase 237,000 shares have
been granted under the Plan of which 215,000 options have been granted to the
Company's executive officers and directors as follows. No such options have
vested or have been exercised.
<TABLE>
<CAPTION>
Number of Exercise
Name Options Granted Price Expiration Date
---- --------------- ----- ---------------
<S> <C> <C> <C>
William J. Gallagher 100,000 $6.00 September 2001
Larry F. Harris 40,000 6.00 September 2001
Theodore M. Heesch 25,000 6.00 September 2001
Michael M. Hogan 25,000 6.00 September 2001
Joseph Fazzone 25,000 6.00 January 2002
-------
Totals 215,000
</TABLE>
42
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of December 29, 1996
concerning stock ownership of the Company's Common Stock by all persons known to
the Company to own beneficially 5% or more of the outstanding shares of Common
Stock, by each director and by all directors and officers as a group. There are
no shares of Preferred Stock outstanding.
Except as otherwise noted, the persons named in the table own the shares
beneficially and of record and have sole voting and investment power with
respect to all shares of Common Stock shown as owned by them, subject to
community property laws, where applicable. Each stockholder's address is in care
of the Company at 1250 N.E. Loop 410, Suite 335, San Antonio, Texas 78209. The
table also reflects all shares of Common Stock which each individual has the
right to acquire within 60 days from the date hereof upon exercise of stock
options or common stock purchase warrants.
Number of
Shares of Percent of
Common Common Stock
Name Stock Owned Owned
of Record and
Beneficially
William J. Gallagher(1)(2) 146,667 6.6%
Larry F. Harris(3) -0- -0-
Sam Bell Steves Rosser(1) 66,666 3.2%
Michael M. Hogan(4) 265,000 12.4%
Theodore M. Heesch(5) 25,000 1.2%
JEB Investment Company(6) 240,000 11.4%
All officers and directors 478,333 22.2%
as a group (6 persons)(2)(4)(5)(6)
- ----------
(1) Messrs. Gallagher and Rosser may be deemed to be "promoters" and "founders"
of the Company as those terms are defined under the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder.
(2) Includes stock options to purchase up to 100,000 shares of Common Stock at
$6.00 per share which vest in July 1997.
(3) Mr. Harris has been granted options to purchase 40,000 shares at $6.00 per
share, which vest in August 1997.
(4) Represents 240,000 shares owned by JEB Investment Company ("JEB") of which
Mr. Hogan is the President and a principal stockholder and stock options to
purchase up to 25,000 shares of Common Stock at $6.00 per share.
(5) Represents stock options to purchase up to 25,000 shares of Common Stock at
$6.00 per share which vest in July 1997.
(6) Michael M. Hogan, a director of the Company, is the President and a
principal (and the controlling) stockholder of JEB. The JEB shares are
currently the subject of a foreclosure action by WaterMarc Food Management,
Inc. See "Certain Transactions."
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<PAGE>
CERTAIN TRANSACTIONS
William J. Gallagher, the Company's Chairman and Chief Executive Officer,
along with certain other stockholders and directors of the Company, are or were
stockholders, officers and/or directors of WaterMarc Food Management, Inc.
("WaterMarc") during the time the transactions described in the next following
paragraph occurred. Mr. Gallagher continues to be a stockholder of WaterMarc,
although not a principal stockholder. The Company believes that the transactions
described below were fair, reasonable and consistent with the terms of
transactions which the Company could have entered into with nonaffiliated third
parties. All future transactions with affiliates will be approved by a majority
of the Company's disinterested directors.
In June 1993, WaterMarc assigned to the Company all of the development
rights it had obtained for Cluckers restaurants at an original cost to WaterMarc
of 47,000 shares of its common stock. On June 18, 1993, these shares were
tendered by WaterMarc to Cluckers Wood Roasted Chicken, Inc., ("CWRC") the
Cluckers franchisor, and valued at $8.50 per WaterMarc share, or a total of
$399,500. The development rights consisted of Cluckers franchise rights in
Houston, Galveston, Dallas and San Antonio, Texas, and area development rights
in Mexico and Central America. In consideration of this assignment, the Company
issued to WaterMarc a convertible promissory note ("Note") due June 30, 1998 in
the amount of $800,000 payable at the option of the Company in whole, or in
part, in cash or Common Stock of the Company. The Note bore interest at 8% per
annum, and was secured by all the assets of the Company and the stockholdings of
Messrs. Gallagher, Coleman and Rosser. The substantial increase in the Note
above the $399,500 of consideration paid by WaterMarc for the area development
rights was attributable to the rights to the Mexico and Central America markets,
which WaterMarc and the Company believed to have more value and market
development potential than had been assigned by CWRC. During 1994, the Company
repaid $315,000 of the Note and the Company and WaterMarc agreed to convert the
remaining portion of the Note and other advances to the Company from WaterMarc
totaling approximately $42,000, and $63,430 of accrued interest, into 240,000
shares of the Company's Common Stock, (valued at $2.50 per share by the
Company's Board of Directors), which shares were subsequently sold by WaterMarc
to JEB Investment Company ("JEB") for $1,800,000 payable by JEB in the form of a
promissory note secured by the 240,000 shares, bearing interest at 9% per annum
and payable June 30, 1996. In December 1996, WaterMarc commenced foreclosure
proceedings upon the 240,000 shares held by JEB and has advised the Company it
intends to sell the shares immediately upon obtaining title to them. It is
expected that WaterMarc will complete the foreclosure by June 1997. Michael M.
Hogan, a director of the Company, is the President and a principal (and the
controlling) stockholder of JEB. See "Shares Eligible for Future Sale."
In June 1993, the Company issued 200,000 shares of its Common Stock to
Messrs. Gallagher, Coleman and Rosser, officers and directors of the Company,
for services rendered valued at $5,000, or $.025 per share which was the par
value of the Common Stock at the time of issuance. During the same month, the
Company issued 100,000 shares of its Common Stock to two investors for services
rendered valued at $12,500 or $.125 per share, an increase of $.10
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<PAGE>
per share which was acceptable to the two investors because they were not
founders of the Company and provided services rather than cash.
In August 1993, the Company sold 240,000 shares of its Common Stock to a
seven member investor group which included Bruce T. McGill, Henry H. Salzarulo,
and Jeffrey M. Morehouse, then directors of the Company, for $300,000 or $1.25
per share in order to finance the development of the Company's first Cluckers
restaurant in San Antonio, Texas.
In April 1994, the Company sold 100,000 units of its securities at $2.50
per unit to a seven member investor group which included Henry H. Salzarulo and
Jeffrey M. Morehouse, then directors of the Company. Each unit consisted of one
share of Common Stock and a warrant to purchase an additional share at $2.50 per
share at any time until April 1996. In March 1996, the expiration date of the
warrant was extended to December 1997.
In August 1994, the Company sold 110,000 shares of its Common Stock at
$2.50 per share to an investor group, none of whom were officers, directors or
principal stockholders of the Company.
The sales of Common Stock described in the three prior paragraphs reflect
an increase in price from $1.25 to $2.50 per share and were the result of
negotiations between the Company and the named investors. The Company believes
it was able to realize a higher price per share in later transactions because
the Company's business had matured and the perceived risk associated with the
business had lessened.
In March 1995, the Company entered into an employment agreement with D.W.
Gibbs, its then Chief Executive Officer and a director and in August 1995, the
Company entered into an employment agreement with Mr. Gallagher, the Chairman
and Chief Executive Officer of the Company which was subsequently amended in
September 1996. See "Management-Executive Compensation."
In March 1995, the Company executed an agreement with Bruce T. McGill, then
a director of the Company, to develop up to ten Cluckers restaurants in
Singapore over a 20-year period. Mr. McGill agreed to pay a $50,000 license fee
(including $20,000 in cash and a promissory note for $30,000), a 5% royalty and
a 4% advertising fee on gross revenues generated from the Cluckers restaurants.
The license was converted to apply to Harvest Rotisserie restaurants in March
1996. In October 1996, the Company refunded $10,000 of the deposit, canceled the
$30,000 promissory note and reduced the number of Restaurants under the
agreement from ten Restaurants to two Restaurants. Under the agreement, Mr.
McGill also has a right of first refusal until March 30, 1997, to match the
terms of any license the Company agrees to sell to develop Harvest Rotisserie
restaurants in Malaysia.
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<PAGE>
DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue 10,000,000 shares of $.01 par value
Common Stock. At December 29, 1996, there were 2,112,750 shares of Common Stock
outstanding and an additional __________ shares of Common Stock are issuable
upon exercise of the Existing Options. See "Capitalization." The holders of
Common Stock are entitled to one vote for each share held of record on all
matters submitted to a vote of stockholders, including the election of
directors. There is no right to cumulate votes in the election of directors. The
holders of Common Stock are entitled to any dividends that may be declared by
the Board of Directors out of funds legally available therefor subject to any
prior rights of holders of Preferred Stock. In the event of liquidation or
dissolution of the Company, holders of Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities and the liquidation
preferences of any outstanding shares of Preferred Stock.
Holders of Common Stock have no preemptive rights and have no right to
convert their Common Stock into any other securities. All of the outstanding
shares of Common Stock are fully paid and nonassessable.
Preferred Stock
The Company is authorized to issue 5,000,000 shares of preferred stock,
$1.00 par value (the "Preferred Stock"). The Preferred Stock may, without action
by the stockholders of the Company, be issued by the Board of Directors from
time to time in one or more series for such consideration and with such relative
rights, privileges and preferences as the Board may determine. Accordingly, the
Board has the power to fix the dividend rate and to establish the provisions, if
any, relating to voting rights, redemption rate, sinking fund, liquidation
preferences and conversion rights for any series of Preferred Stock issued in
the future.
The Series A Redeemable Convertible Preferred Stock ("Preferred Stock") has
been authorized by the Board of Directors of the Company as a new series of the
Company's Preferred Stock, $1.00 par value, consisting of up to 1,000,000
shares. The shares of Preferred Stock when issued will be fully paid and
non-assessable under Texas law.
Dividends. Holders of shares of Preferred Stock will be entitled to
receive, out of funds at the time legally available therefor, dividends at the
quarterly rate of $_____ per share, payable in cash or in the Company's Common
Stock at the sole discretion of the Company and payable quarterly in arrears on
March 31, June 30, September 30 and December 31 of each year beginning
__________, 1997. Dividends will accrue and are cumulative from the date of
first issuance of the Preferred Stock and will be payable to holders of record
as they appear on the stock books of the Company on such record dates as are
fixed by the Board of Directors. The value of the Common Stock to be issued as a
dividend will be the last reported sales price of the Common Stock on The NASDAQ
SmallCap Market. Any fractional shares of Common Stock will be rounded to the
nearest whole share
46
<PAGE>
on the last day of the calendar quarter. This Prospectus covers any Common Stock
issued as a Common Stock dividend on the Preferred Stock.
Redemption. The Preferred Stock may not be redeemed by the Company until
two years from the date hereof. Any shares of Preferred Stock outstanding
thereafter are redeemable for cash, in whole or in part, at any time, at the
option of the Company, at 110% of the bid price per share of the Preferred Stock
on NASDAQ for the 20 trading days prior to the redemption date.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Stock to
be redeemed at the holder's address shown on the stock transfer books of the
Company. After the redemption date, unless there shall have been a default in
payment of the redemption price, dividends will cease to accrue on the shares of
Preferred Stock called for redemption, and all rights of the holders of such
Preferred Stock will terminate except the right to receive the redemption price
without interest.
Conversion
Automatic Conversion. If at any time after one year from the date hereof
the closing price for the Preferred Stock, as quoted on The NASDAQ SmallCap
Market or any national securities exchange, exceeds $20.00 per share for ten
consecutive trading days, then the Preferred Stock will be automatically
converted into Common Stock.
Optional Conversion. The holder of Preferred Stock have the right, at the
holder's option at any time after one year from the date hereof, to convert any
or all such shares of Preferred Stock into Common Stock. The number of shares of
Common Stock issuable upon conversion of a share of Preferred Stock (the
"Conversion Rate") is equal to $10.00, plus accrued and unpaid dividends through
the date of conversion (to the extent unpaid within 15 business days following
the date of conversion), divided by $_____ (the "Conversion Price"). Although
the Conversion Price is subject to adjustment for stock splits, reverse stock
splits and other similar capitalizations, the Preferred Stock does not contain
provisions protecting against dilution resulting from the sale of Common Stock
at a price below the Conversion Price or the then current market price of the
Company's securities. Assuming no accrued and unpaid dividends, the initial
Conversion Rate will be __________ shares of Common Stock per share of Preferred
Stock. Fractional shares of Common Stock will be rounded to the nearest whole
share.
Liquidation Rights. In the event of any liquidation, dissolution or winding
up of the Company, holders of shares of Preferred Stock are entitled to receive,
out of legally available assets, a liquidation preference of $10.00 per share,
plus an amount equal to any accrued and unpaid dividends to the payment date,
and no more, before any payment or distribution is made to the holders of Common
Stock or any series or class of the Company's stock hereafter issued that ranks
junior as to liquidation rights to the Preferred Stock, but the holders of the
shares of the Preferred Stock will not be entitled to receive the liquidation
preference on such shares until
47
<PAGE>
the liquidation preference of any other series or class of the Company's stock
previously or hereafter issued that ranks senior as to liquidation rights to the
Preferred Stock has been paid in full.
Voting Rights. The holders of the Preferred Stock will have no voting
rights except as to matters affecting the rights of Preferred Stockholders or as
to matters that all stockholders are entitled to vote on as a matter of law,
such as mergers or acquisitions. In connection with any such vote, each
outstanding share of Preferred Stock will be entitled to one vote, excluding any
shares held by the Company or any entity controlled by the Company, which shares
shall have no voting rights.
It is not possible to state the actual effect of any other authorization of
Preferred Stock upon the rights of holders of Common Stock until the Board
determines the specific rights of the holders of any other series of Preferred
Stock. The Board's authority to issue Preferred Stock also provides a convenient
vehicle in connection with possible acquisitions and other corporate purposes,
but could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock. Accordingly, the issuance of
Preferred Stock may be used as an "anti-takeover" device without further action
on the part of the stockholders of the Company, and may adversely affect the
holders of the Common Stock.
IPO Warrants
There are 2,300,000 IPO Warrants outstanding (each of which entitles the
holder to purchase one share of Common Stock at $4.00 per share until July 9,
2001). The exercise price and the number of shares issuable upon exercise of the
IPO Warrants are subject to adjustment in certain events, including the issuance
of Common Stock as a dividend on shares of Common Stock, subdivisions or
combinations of the Common Stock or similar events. The IPO Warrants do not
contain provisions protecting against dilution resulting from the sale of
additional shares of Common Stock for less than the exercise price of the IPO
Warrants or the then current market price of the Company's Common Stock.
IPO Warrants may be redeemed in whole or in part, at the option of the
Company, upon 30 days' notice, at a redemption price equal to $.01 per IPO
Warrant at any time after July 9, 1997 if the closing price of the Company's
Common Stock on NASDAQ averages at least $8.00 per share for a period of 20
consecutive trading days.
Holders of IPO Warrants may exercise their IPO Warrants for the purchase of
shares of Common Stock only if a current prospectus relating to such shares is
then in effect and only if such shares are qualified for sale, or deemed to be
exempt from qualification, under applicable state securities laws. The Company
is required to use its best efforts to maintain a current Prospectus relating to
such shares of Common Stock at all times when the market price of the Common
Stock exceeds the exercise price of the IPO Warrants until the expiration date
of the IPO Warrants, although there can be no assurance that the Company will be
able to do so.
48
<PAGE>
The shares of Common Stock issuable on exercise of the IPO Warrants will
be, when issued in accordance with the IPO Warrants, fully paid and
non-assessable. The holders of the IPO Warrants have no rights as stockholders
until they exercise their IPO Warrants.
Other Outstanding Common Stock Purchase Warrants
The Company has issued 325,280 common stock purchase warrants each
exercisable at $2.50 per share until December 1997, 257,280 of which were
exercised subsequent to December 29, 1996. The Company is required to register
the 257,280 shares of Common Stock underlying the subject warrants by August 10,
1997.
Stock Transfer and Warrant Agent
Corporate Stock Transfer, Inc., Denver, Colorado, is the stock transfer
agent and IPO Warrant agent for the Company's securities.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION
The Company's Articles of Incorporation provide that no director of the
Company shall be personally liable to the Company or its stockholders for
monetary damages for an act or omission in the director's capacity as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for any transaction from which the director derived an improper
personal benefit or (iv) for an act or omission for which the liability of the
director is expressly provided by an applicable statute. The effect of this
provision in the Articles of Incorporation is to eliminate the rights of the
Company and its stockholders (through stockholders' derivative suits on behalf
of the Company) to recover monetary damages from a director for breach of the
fiduciary duty of care as a director (including breaches resulting from
negligent or grossly negligent behavior) except in the situations described in
clauses (i) through (iv) above. In addition, the Articles of Incorporation
provide that any repeal or modification of this provision by the Company's
stockholders or by Texas law will not adversely affect any right or protection
of a director of the Company existing at the time of such repeal or modification
with respect to acts or omissions occurring prior to such repeal or
modification. Moreover, any further elimination of director liability under
Texas law will further limit the directors' liability under this provision. This
provision does not limit or eliminate the rights of the Company or any
stockholder to seek non-monetary relief such as an injunction or rescission in
the event of a breach of a director's duty of care.
The Company's Articles of Incorporation also require the Company to
indemnify its directors and officers against expenses and certain other
liabilities arising out of their conduct on behalf of the Company to the maximum
extent and under all circumstances permitted by law, including liabilities
arising out of legal actions brought or threatened against them for their
conduct on behalf of the Company, provided that each such person acted in good
faith and in a manner he or she reasonably believed was in or not opposed to the
Company's best interests.
49
<PAGE>
In the case of an action by or in the right of the Company, indemnification is
available if such person acted in good faith and in a manner that he or she
reasonably believed was in or not opposed to the Company's best interests,
except as regards a person adjudged to be liable to the Company, unless a court
shall determine that such person is fairly and reasonably entitled to indemnity
for certain expenses.
Insofar as the indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company, the Company has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
SHARES ELIGIBLE FOR FUTURE SALE
The Company has 2,108,750 shares of Common Stock outstanding as of October
6, 1996 and has reserved for issuance an aggregate of __________ shares of
Common Stock upon exercise of the Existing Options. An aggregate of 1,000,000
shares issued in the IPO, 2,300,000 shares underlying the IPO Warrants and
__________ shares issuable upon conversion of the Preferred Stock have been
previously registered or are being registered hereby. Additionally, 300,000
shares issuable upon exercise of the Representative's IPO Warrants and
__________ shares issuable upon conversion of the Representative's Warrants are
subject to demand registration rights and 249,480 shares underlying common stock
purchase warrants exercised after October 6, 1996, must be registered by the
Company by August 10, 1997. Finally, a total of 990,000 shares of the Company's
Common Stock outstanding have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), are "restricted securities" but may be
sold from time to time under Rule 144 of the Securities Act, subject to lock up
agreements restricting the sale of 500,000 of such shares until August 1997
except with the written consent of the Representative. In general, under Rule
144, a person (or persons whose shares are aggregated) who has satisfied a one
year holding period, subject to certain requirements concerning the availability
of public information, and the manner and notice of sale, may sell within any
three-month period, a number of shares which does not exceed the greater of one
percent of the then outstanding common shares or the average weekly trading
volume during the four calendar weeks prior to such sale. Rule 144 also permits,
under certain circumstances, the sale of shares by a person without any quantity
limitation, so long as such person is not an affiliate of the Company, has not
been an affiliate for three months prior to the sale and has beneficially owned
the shares for at least two years. The remaining 240,000 shares are also subject
to a lockup agreement restricting sale through August 1997 executed by JEB
Investment Company ("JEB"). However, the shares are currently the subject of a
foreclosure proceeding by WaterMarc and the JEB lockup agreement may not be
effective against WaterMarc, in which event the 240,000 shares may be sold prior
to the end of the lock-up period in August 1997. Exercise of the Existing
Options could dilute the Company's net tangible book value and/or prove to be a
hindrance to future financing. The holders of Existing Options may exercise them
at a time when the Company might otherwise be able to obtain additional equity
capital on terms more favorable to the Company. Exercise of registration rights
and maintenance of a current prospectus in connection with the IPO Warrants, the
shares issuable upon conversion of the Preferred Stock and the Representative's
Warrants could involve substantial expense to the Company at a time when it
could not afford such expenditures and may adversely affect the terms upon which
the Company could obtain additional financing.
50
<PAGE>
UNDERWRITING
The Underwriters named below, acting through Global Equities Group, Inc. as
the lead managing underwriter (the "Representative") and __________ as the
co-managing underwriter, have agreed, severally and not jointly, subject to the
terms and conditions contained in an Underwriting Agreement dated the date of
the commencement of the Offering contemplated hereby, to purchase the Preferred
Stock from the Company in the amounts set forth below:
Shares of
Underwriter Preferred Stock
Global Equities Group, Inc. ----------
Suncoast Capital Corp. ----------
Total 500,000
The Underwriting Agreement provides that the Underwriters are obligated to
purchase all of the securities offered hereby, if any are purchased. The Company
has been advised by the Representative that the Underwriters propose to offer
the Preferred Stock to the public initially at the Offering price set forth on
the cover page of this Prospectus, and to selected dealers, including
Underwriters, at such price less a concession in an amount to be determined by
the Representative. The Underwriters will purchase the Preferred Stock
(including the Preferred Stock subject to the Overallotment Option) offered
hereby at a discount equal to 10% of the public Offering price, or $6.75 per
share of Preferred Stock.
The Company has granted the Representative an Overallotment Option,
exercisable during the 45-day period after the date of this Prospectus, to
purchase up to 75,000 shares of Preferred Stock on the same terms as the
securities being purchased by the Underwriters from the Company. The
Representative may exercise the Overallotment Option only to cover
overallotments in the sale of the Preferred Stock that the Underwriters agreed
to purchase.
The Company has agreed to issue to the Representative warrants
(collectively the "Representative's Warrants") to purchase up to 50,000 shares
of Preferred Stock at $13.00 per share. The Representative's Warrants are
exercisable for a period of four years beginning one year from the date of this
Prospectus. The Representative's Warrants are non-transferable for a period of
one year following the date of this Prospectus, except to any of the
Underwriters or to any individual who is either a partner or an officer of an
Underwriter or by operation of law or by will or the laws of descent and
distribution. The holders of the Representative's Warrants will have, in that
capacity, no voting, dividend or other shareholder rights. Any profit realized
by the Representative on the sale of the securities issuable upon exercise of
the Representative's Warrants may be deemed to be additional underwriting
compensation.
The Company has granted the holders of the Representative's Warrants and
the underlying Preferred Stock certain rights with respect to the registration
of the Preferred Stock underlying the Representative's Warrants under the
Securities Act of 1933, as amended (the
51
<PAGE>
"Securities Act"). The Company has agreed, for a period of four years commencing
one year following the effective date of the Registration Statement of which
this Prospectus is a part, at the request of any holder of the securities issued
or issuable upon exercise of the Representative's Warrants, to use its best
efforts to effect at the Company's expense a maximum of one registration under
the Securities Act (the "Demand Registration") with respect to the securities
underlying the Representative's Warrants. Subject to certain limitations, in the
event the Company proposes to register any of its securities under the
Securities Act during the five-year period following the effective date of the
Registration Statement of which this Prospectus is a part, the holders of the
Representative's Warrants and underlying securities are entitled to notice of
such registration and may elect to include ("piggyback") the securities
underlying the Representative's Warrants held by them in such registration. In
connection with the above registrations, the Company is required to pay all
fees, disbursements and out-of-pocket expenses associated with the Demand
Registration and any piggyback registrations, except for the brokerage fees,
commissions and, in the case of any piggyback registrations, legal fees of the
holders of the Representative's Warrants or the underlying securities.
The Representative will also receive a nonaccountable expense allowance of
3% of the aggregate initial public Offering price of the securities sold in this
Offering, of which $50,000 has been paid to date.
By virtue of holding the Representative's Warrants, the Representative
possesses the opportunity to profit from a rise in the market price of the
Company's securities. Furthermore, the exercise of the Representative's Warrants
could dilute the interests of the Company's Common Stockholders. The existence
of the Representative's Warrants may make it more difficult for the Company to
raise additional equity capital. Although the Company will obtain additional
equity capital upon exercise of the Representative's Warrants, it is likely that
the Company could then raise additional capital on more favorable terms than
those of the Representative's Warrants.
The Company paid the Representative a commission of $40,000 in connection
with the Company's sale of $400,000 of Bridge Notes in March 1996. In July 1996
the Representative acted as the Company's representative in connection with its
IPO sale of 1,000,000 shares of Common Stock at $5.50 per share and 2,300,000
IPO Warrants at $.125 per warrant. In November 1996, the Company entered into a
one year consulting agreement with the Representative pursuant to which the
Representative agreed to provide financial consulting services to the Company,
consider the feasibility of secondary public offerings, implement strategic
planning, evaluate strategic alliances and prospective mergers and provide other
financial services. The Company agreed to pay to the Representative for such
consulting services a fee of $75,000 of which $60,000 has been paid.
The Company has agreed (i) to allow the Representative to designate one
director to the Company's Board of Directors for a period of five years from the
date hereof, and (ii) not to offer Common Stock or grant options or warrants to
purchase Common Stock without the prior consent of the Representative for a
period of two years from the date hereof.
The Company has agreed to indemnify the Underwriters against certain
liabilities including liabilities under the Securities Act and to contribute in
certain events to liabilities incurred by the Underwriters in connection with
the sale of the Preferred Stock. In the opinion
52
<PAGE>
of the Commission, indemnification against liabilities under the Securities Act
is against public policy and is therefore unenforceable.
Prior to the Offering, there has been no public market for the Preferred
Stock. The Preferred Stock price was arbitrarily determined through negotiations
between the Company and the Representative. The principal factors considered in
pricing the Preferred Stock were the current price of the Common Stock,
Company's current and anticipated revenues and earning, its overall business
prospects and the general condition of the securities markets at the time of the
Offering.
The Representative does not intend to sell the Preferred Stock to any
accounts over which it exercises discretionary authority.
Although it has no obligation to do so, the Representative intends to
engage in market-making activities or soliciting brokerage activities with
respect to the purchase or sale of the Common Stock, Preferred Stock and IPO
Warrants in the NASDAQ SmallCap Market or other over-the-counter market where
such securities may trade. However, no assurance can be given that the
Representative will continue to participate as a market maker for the securities
of the Company or that other broker/dealers will make a market in such
securities. In connection with its IPO, the Company granted the Representative
the right to act as the Company's exclusive agent in connection with any future
solicitation of holders of the IPO Warrants to exercise their IPO Warrants.
Unless granted an exemption by the Commission from Regulation M under the
Exchange Act, the Representative will be prohibited from engaging in any
market-making activities or solicited brokerage activities with regard to the
Company's securities during a period prescribed by Regulation M before the
solicitation of the exercise of any IPO Warrants until the later of the
termination of such solicitation activities or the termination by waiver or
otherwise of any right the Representative may have to receive a fee for the
exercise of the IPO Warrants following such solicitation. As a result, the
Underwriter and soliciting broker/dealers may be unable to continue to make a
market for the Company's securities during certain periods while the IPO
Warrants are exercisable. Such a limitation, while in effect, could impair the
liquidity and market prices of the Company's securities.
In connection with the Offering, the Underwriters and selling group members
(if any) and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Preferred Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which such persons may bid for or
purchase Preferred Stock for the purpose of stabilizing its market price. The
Underwriters may also create a short position for the account of the
Underwriters by selling more Preferred Stock in connection with the Offering
than they are committed to purchase from the Company and in such case may
purchase Preferred Stock in the open market following completion of the Offering
to cover all or a portion of such short position, The Underwriters may also
cover all or a portion of such short position, up to 75,000 additional shares of
Preferred Stock, by exercising the Overallotment Option. Any of the transactions
described in this paragraph may result in the maintenance of the Preferred Stock
at a level above that which might other wise prevail in the open market. None of
the transactions described in this paragraph is required, and, if they are
undertaken, they may be discontinued at any time.
In connection with the Offering the Underwriters and selling group members
(if any) and their respective affiliates may also engage in passive market
making transactions in the Preferred Stock on the NASDAQ SmallCap Market
immediately prior to the commencement of sales in this Offering, in accordance
with Rule 103 under Regulation M. Passive market making consists of displaying
bids on The NASDAQ SmallCap Market limited by the bid prices of independent
market makers for a security and making purchases of a security which are
limited by such prices and effected in response to order flow. Net purchases by
a passive market maker on each day are limited to a specified percentage of the
passive market maker's average trading volume in the Preferred Stock during a
specified prior period and must be discontinued when such limit is reached.
Passive market making may stabilize the market price of the Preferred Stock at a
level above that which might otherwise prevail and, if commenced, may be
discontinued at any time.
53
<PAGE>
LEGAL MATTERS
Gary A. Agron, Esq., Englewood, Colorado, has represented the Company in
connection with the Offering. Mound, Cotton & Wollan, New York, New York, has
acted as counsel for the Representative in connection with the Offering.
EXPERTS
The financial statements of the Company for the years ended December 29,
1996 and December 31, 1995, included herein, have been audited by Akin, Doherty,
Klein & Feuge, P.C., independent certified public accountants. The financial
statements have been so included in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
SB-2 under the Securities Act, with respect to the securities offered by this
Prospectus. As permitted by the rules and regulations of the Commission, this
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits thereto. For further information with respect to the
Company and the securities offered hereby, reference is made to the Registration
Statement and the exhibits thereto, which may be examined without charge at the
public reference section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, at the regional offices of the
Commission located at 7 World Trade Center, New York, New York 10048 and at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of all or any portion of the Registration Statement may
be obtained from the Public Reference Section of the Commission, upon payment of
prescribed fees.
54
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and if given or made, such information or representations must not
be relied upon as having been authorized. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy such securities in any
jurisdiction to any person to whom it is unlawful to make such an offer or
solicitation in such jurisdiction. Neither the delivery of this Prospectus nor
any sale hereunder shall, under any circumstances, create any implication that
there has been no change in the affairs of the Company since the date hereof or
that the information contained herein is correct as of any time subsequent to
its date.
TABLE OF CONTENTS
Page
Available Information............................ 3
Prospectus Summary............................... 4
Risk Factors..................................... 9
Price Range of Common Stock...................... 17
Use of Proceeds.................................. 17
Capitalization................................... 18
Dividend Policy.................................. 19
Selected Financial Data.......................... 20
Management's Discussion and Analysis
of Financial Condition and
Results of Operations........................... 22
Business......................................... 26
Management....................................... 37
Principal Stockholders........................... 43
Certain Transactions............................. 44
Description of Securities........................ 46
Shares Eligible for Future Sale.................. 50
Underwriting..................................... 51
Legal Matters.................................... 54
Experts.......................................... 54
Additional Information........................... 54
Financial Statements.............................F-1
Until __________, 1997, (25 days from the date of this Prospectus) all
dealers effecting transactions in the registered securities whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
<PAGE>
CLUCKCORP
INTERNATIONAL,
INC.
500,000 Shares of
Convertible Redeemable Preferred Stock
$10.00 per share
PROSPECTUS
GLOBAL EQUITIES GROUP, INC.
SUNCOAST CAPITAL CORP.
__________, 1997
<PAGE>
CluckCorp International, Inc.
Contents
December 29, 1996
Audited Financial Statements Page
Report of Independent Certified Public Accountants F-1
Balance Sheets ................................... F-2
Statements of Operations ......................... F-3
Statements of Stockholders' Equity ............... F-4
Statements of Cash Flows ......................... F-5
Notes to Financial Statements .................... F-6
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
CluckCorp International, Inc.
San Antonio, Texas
We have audited the accompanying balance sheets of CluckCorp International, Inc.
as of December 29,1996 and December 31, 1995, and the related statements of
operations, stockholders' equity, and cash flows for the fiscal years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CluckCorp International, Inc.
as of December 29, 1996 and December 31, 1995, and the results of its operations
and its cash flows for the fiscal years then ended, in conformity with generally
accepted accounting principles.
/S/ Akin, Doherty, Klein & Feuge, P.C.
- --------------------------------------
Akin, Doherty, Klein & Feuge, P.C.
San Antonio, Texas
February 6, 1997
F-1
<PAGE>
CluckCorp International, Inc.
Balance Sheets
<TABLE>
<CAPTION>
December 29, December 31,
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash ............................................ $ 1,271,443 $ 126,447
Cash, restricted ................................ 220,000 --
Inventories ..................................... 8,658 5,044
Deferred financing costs ........................ -- 144,074
Other current assets ............................ 10,590 --
Note receivable from stockholder ................ -- 40,000
----------- -----------
Total Current Assets ....................... 1,510,691 315,565
Property and Equipment, net ......................... 1,156,362 150,868
Other Assets
Intangible property rights, net of accumulated
amortization of $139,825 and $99,875 .......... 259,675 299,625
Deposits ........................................ 83,257 25,007
Other assets .................................... 127,727 34,780
----------- -----------
470,659 359,412
----------- -----------
$ 3,137,712 $ 825,845
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Bridge notes payable, net of unamortized discount
of $ -0- and $133,523 ......................... $ -- $ 940,977
Accounts payable, trade ......................... 134,204 161,642
Accrued liabilities ............................. 220,406 89,043
Note payable to bank ............................ 200,000 --
----------- -----------
Total Current Liabilities .................. 554,610 1,191,662
Commitments and contingencies
Common stock subject to rescission, 0 shares
in 1996 and 57,750 shares in 1995 .................. -- 195,818
Stockholders' Equity
Preferred stock
Common stock - $.01 par value; 10,000,000 shares
authorized, 2,112,750 shares issued and
outstanding in 1996 and 990,000 in 1995 .... 21,128 9,900
Additional paid - in capital .................... 6,138,770 994,007
Accumulated deficit ............................. (3,576,796) (1,565,542)
----------- -----------
Total Stockholders' Equity (Deficit) ....... 2,583,102 (561,635)
----------- -----------
$ 3,137,712 $ 825,845
=========== ===========
</TABLE>
See notes to financial statements.
F-2
<PAGE>
CluckCorp International, Inc.
Statements of Operations
<TABLE>
<CAPTION>
Fiscal Years Ended
December 29, December 31,
1996 1995
----------- ------------
<S> <C> <C>
Revenues
Restaurant operations ............. $ 263,892 $ 226,678
Area development fee, stockholder . 50,000
----------- -----------
263,892 276,678
Costs and Expenses
Cost of food and paper ............ 122,530 82,171
Restaurant salaries and benefits .. 125,954 127,400
Occupancy and related expenses .... 58,191 63,605
Operating expenses ................ 73,661 86,641
Preopening expenses ............... 131,074 59,363
General and administrative expenses 1,261,198 567,605
Depreciation and amortization ..... 104,467 73,879
----------- -----------
Total costs and expenses ..... 1,877,075 1,060,664
----------- -----------
Loss from operations .................. (1,613,183) (783,986)
Other income (expense)
Interest income ................... 56,747
Interest expense and debt discount (454,818) (140,497)
----------- -----------
(398,071) (140,497)
Net Loss .............................. $(2,011,254) $ (924,483)
=========== ===========
Net loss per common share ............. $ (1.29) $ (.75)
=========== ===========
Weighted average number of common
and common equivalent shares
outstanding ......................... 1,553,824 1,224,531
=========== ===========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
CluckCorp International, Inc.
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Total
Common Stock Additional Stockholders'
--------------------------- Paid-In Accumulated Equity
Shares Amount Capital Deficit (Deficit)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 .... 990,000 $ 9,900 $ 994,007 $ (641,059) $ 362,848
Net loss for the year ......... -- -- -- (924,483) (924,483)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1995 .. 990,000 9,900 994,007 (1,565,542) (561,635)
Issuance of common stock in
initial public offering .... 1,000,000 10,000 4,730,290 -- 4,740,290
Other issuances of common stock 65,000 650 219,233 -- 219,883
Common stock no longer subject
to rescission ............. 57,750 578 195,240 -- 195,818
Net loss for the year ......... (2,011,254) (2,011,254)
----------- ----------- ----------- ----------- -----------
Balance at December 29, 1996 .. 2,112,750 $ 21,128 $ 6,138,770 $(3,576,796) $ 2,583,102
=========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-4
<PAGE>
CluckCorp International, Inc.
Statements of Cash Flows
Operating Activities
<TABLE>
<CAPTION>
Fiscal Years Ended
December 29, December 31,
1996 1995
----------- -----------
<S> <C> <C>
Operating Activities
Net loss for the year ...................................... $(2,011,254) $ (924,483)
Adjustments to reconcile net loss
to net cash used in operations:
Depreciation and amortization ......................... 94,109 73,879
Amortization of bridge note discount .................. 367,154 87,659
Loss on forfeited deposits ............................ -- 17,338
Changes in operating assets and liabilities:
Cash, restricted .................................. (20,000) --
Inventories ....................................... (3,614) (2,046)
Deferred financing costs .......................... 144,074 (142,429)
Other current assets .............................. (10,590) (40,000)
Accounts payable and accrued expenses ............. 103,925 133,037
----------- -----------
Net cash (used) by operating activities ........................ (1,336,196) (797,045)
Investing Activities
Purchases of property and equipment ........................ (1,059,654) (5,071)
Increase in deposits and other assets ...................... (151,197) (57,395)
----------- -----------
Net cash (used) by financing activities ........................ (1,210,851) (62,466)
Financing Activities
Net proceeds from sale of common stock and warrants ........ 4,960,173 --
Net proceeds from sale of common stock subject to rescission -- 195,818
Proceeds from issuance of bridge notes payable ............. 376,370 764,318
Proceeds from bank borrowings .............................. 200,000 --
Restricted cash for note payable ........................... (200,000) --
Repayments of stockholder advances ......................... 40,000 (16,889)
Repayments of bridge notes payable ......................... (1,684,500) --
----------- -----------
Net cash provided by financing activities ...................... 3,692,043 943,247
----------- -----------
Net increase in cash ........................................... 1,144,996 83,736
Cash at beginning of year ...................................... 126,447 42,711
----------- -----------
Cash at End of Year ............................................ $ 1,271,443 $ 126,447
=========== ===========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
CluckCorp International, Inc.
Notes to Financial Statements
December 29, 1996 and December 31, 1995
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization: CluckCorp International, Inc. ("CluckCorp" or the "Company") was
organized in the State of Texas on June 18, 1993, and is an operator and
developer of a quick service restaurant concept. The Company currently operates
three restaurants in San Antonio and one restaurant in Corpus Christi, Texas.
The restaurants provide high quality, quick service food featuring marinated
oak-roasted rotisserie chicken with a variety of homemade side dishes.
The Company incorporated two wholly-owned subsidiaries during 1995, Cluckers
Restaurants, Inc. and Harvest Restaurants, Inc., to act as franchisors for the
Company's restaurants. Neither subsidiary conducted operations during 1996.
Fiscal Year: In 1996, the Company adopted a 52/53 - week fiscal year ending on
the last Sunday in December. The fiscal year is divided into thirteen four-week
periods. The first quarter consists of four periods and each of the remaining
three quarters consist of three periods, with the first, second and third
quarters ending 16 weeks, 28 weeks and 40 weeks respectively, into the fiscal
year.
Cash and Cash Equivalents: The Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less to be
cash equivalents. At December 29, 1996, the Company had deposits of $218,795 in
a financial institution which exceeded the FDIC insured amount.
Inventories: Inventories are stated at the lower of cost (first-in, first-out
method) or market and consist primarily of restaurant food and paper.
Property and Equipment: Property and equipment are stated at cost. Depreciation
is provided using the straight-line method over the estimated useful lives of
the respective assets (generally seven years for furniture, fixtures and
equipment and 15 to 20 years for leasehold improvements), or applicable lease
terms, if less. Maintenance and repairs are charged to expense as incurred,
while improvements which increase the value of the property and extend the
useful lives are capitalized.
Intangible Property Rights: The Company obtained under an agreement with
Cluckers Wood Roasted Chicken, Inc. (CWRC), an unaffiliated Florida corporation,
an exclusive license to use all of CWRC's intangible property rights in the
State of Texas. Intangible property rights acquired from CWRC are stated at
original acquired cost and amortized over a ten year period. The Company
periodically assesses the valuation of the rights in light of projected
operating results and economic conditions and impairments are recognized when
the expected future undiscounted operating cash flows derived from such rights
are less than their carrying value. No impairments have been recognized to date.
Amortization expense of $39,950 is included in the accompanying statements of
operations for each of the last two fiscal years.
Deferred Offering and Financing Costs: Deferred offering costs are netted
against the equity offering to which they apply when the proceeds are received.
Deferred financing costs are amortized over the life of the respective notes
payable.
Revenue Recognition: Revenue from restaurant and product sales are recognized in
the period in which food and beverage products are sold. Revenue from
nonrefundable area development fees is recognized when all material services or
conditions relating to the area development sale have been substantially
performed or satisfied by the Company.
Preopening Costs: Preopening costs, which consist primarily of salaries and
other direct expenses relating to the set up, initial stocking, training, and
general management activities incurred prior to the opening of new stores, are
charged to expense as incurred.
Advertising Costs: Advertising costs of $133,366 and $35,820 during the fiscal
years ended December 29, 1996 and December 31, 1995, respectively, were charged
to expense as incurred.
F-6
<PAGE>
CluckCorp International, Inc.
Notes to Financial Statements
December 29, 1996 and December 31, 1995
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES - Continued
Income Taxes: In accordance with Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes", deferred tax assets and liabilities are
recognized for temporary differences between the tax basis of assets and
liabilities and their reported amounts in the financial statements. A valuation
allowance is provided against net deferred tax assets when realization during
the next fiscal year is uncertain.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE B - NOTES PAYABLE
At December 29, 1996, the Company had outstanding a $200,000 note payable to a
financial institution. The note, which is collateralized by a $200,000
certificate of deposit, bears interest at the rate of 6.50% and is payable in
monthly installments of interest only. The principal and accrued interest is due
at the maturity date of November 3, 1997.
At December 31, 1995, the Company had bridge notes payable outstanding of
$940,977, net of unamortized discount of $133,523. The notes were issued to
individuals in four separate private offerings from May, 1995 through March,
1996, and were paid off in full with the proceeds from the Company's initial
public offering completed in July 1996. During the fiscal years ended in 1996
and 1995, $367,153 and $87,659 of discount applicable to the bridge notes was
amortized to interest expense.
The Company's weighted-average interest rate on it short-term borrowings, before
amortization of debt discount, was 9. 8% in 1996 and 10.5% in 1995. After
considering amortization of debt discount, the weighted-average interest rate
was 50.6% in 1996 and 28.1% in 1995.
NOTE C - SUPPLEMENTAL FINANCIAL STATEMENT DATA
Property and equipment consists of the following:
December 29, December 31,
1996 1995
----------- -----------
Land ............................ $ 160,000 $ --
Buildings ....................... 240,400 --
Furniture, fixtures and equipment 365,719 78,150
Leasehold improvements .......... 487,515 115,830
----------- -----------
1,253,634 193,980
Less accumulated depreciation ... (97,272) (43,112)
----------- -----------
Property and equipment, net . $ 1,156,362 $ 150,868
=========== ===========
F-7
<PAGE>
CluckCorp International, Inc.
Notes to Financial Statements
December 29, 1996 and December 31, 1995
NOTE C - SUPPLEMENTAL FINANCIAL STATEMENT DATA - Continued
Accrued liabilities consists of the following at:
December 29, December 31,
1996 1995
-------- --------
Accrued payroll and related liabilities $ 21,416 $ 6,874
Accrued interest payable .............. -- 51,758
Accrued reporting costs ............... 94,900 --
Accrued property lease payments ....... 100,000 29,500
Other accrued liabilities ............. 4,090 911
-------- --------
$220,406 $ 89,043
======== ========
NOTE D - OPERATING LEASES
The Company currently conducts all its operations and maintains its
administrative offices in leased facilities. The Company also has entered into
lease agreements for facilities in San Antonio, Texas which the Company intends
to develop as restaurants in the future. Lease terms generally are ten years
with two or three five-year renewal options. Most of the leases contain
escalation clauses and require payment of common area maintenance charges or
taxes, insurance and other expenses. The Company also leases certain equipment
under non-cancelable operating leases having terms expiring at various dates
through 2001. Rental expense under operating lease agreements, including common
area maintenance charges, was $156,393 and $120,262 for the periods ended
December 29, 1996 and December 31, 1995, respectively.
Future minimum lease payments which are required under operating leases that
have initial or remaining non-cancelable lease terms in excess of one year are
as follows:
Years Ended December: Amount
--------------------- ------
1997 $ 297,710
1998 283,285
1999 258,331
2000 257,121
2001 256,435
Thereafter 1,592,780
------------
Total future minimum payments $ 2,945,662
============
F-8
<PAGE>
CluckCorp International, Inc.
Notes to Financial Statements
December 29, 1996 and December 31, 1995
NOTE E - FEDERAL INCOME TAXES
Deferred income taxes resulted from the following temporary differences and loss
carryforwards at:
December 29, December 31,
1996 1995
----------- -----------
Deferred tax asset - loss carryforwards . $ 3,400,000 $ 1,565,542
=========== ===========
Net deferred tax asset at expected rates $ 1,156,000 $ 532,284
Less valuation allowance ................ (1,156,000) (532,284)
----------- -----------
Deferred tax asset allowed $ -- $ --
=========== ===========
The Company has not recorded any income tax expense (benefit) since its
inception. The Company's tax operating loss carryforwards are available for
utilization against taxable income and expire in various amounts from 2008
through 2011.
NOTE F - STOCKHOLDERS' EQUITY
Initial Public Offering: In July 1996, the Company sold 1,000,000 shares of
common stock and 2,300,000 warrants to purchase common stock in an initial
public offering of its securities. The Company realized net proceeds of
$4,740,290 from the offering based upon the sale of the common stock at $5.50
per share and the warrants at $.125 per warrant.
Reverse Common Stock Split: On July 17, 1995, the Board of Directors authorized
a five-for-two reverse common stock split. All references to number of shares
and to stock warrants as well as per share information have been adjusted to
reflect the stock split on a retroactive basis.
Preferred Stock: The Company has authorized 5,000,000 shares of $1 par value
preferred stock, none of which is issued or outstanding. Dividend rates,
conversion rights, redemption and voting rights and liquidation rates have not
been set by the Board of Directors. See Note K.
Common Stock Subject to Rescission: At December 31, 1995, the Company had
classified 118,750 shares of common stock issued between August 1995 and March
1996 in connection with the sale of $1,197,500 of bridge notes as temporary
equity due to the uncertainty as to whether the private placement exemption
could be claimed since these securities were sold after the filing of the
Registration Statement. Without the exemption, the transactions could be
considered integrated with the offering, subjecting the Company to potential
liability for sales of unregistered securities. All bridge note holders were
repaid their investment upon the closing of the initial public offering in July
1996. However, the possibility exists the Company could be liable for a claim by
the bridge lenders in connection with the issuance of the 118,750 shares of
common stock to them at a rate of $3.83 per share (or an aggregate of $454,812),
which is the per share value, before offering costs, attributed to the common
stock. Management considers the likelihood of a claim being filed to be remote
and has reclassified these shares as equity at December 29, 1996.
Stock Option Plan: In July 1994, the Company adopted a stock option plan which
provides for the granting of either incentive stock options or non-qualified
stock options. Options can be issued to officers, employees, directors and
outside consultants; however, incentive stock options are issuable only to
eligible officers and employees. The Company has reserved a total of 250,000
shares of common stock for the plan.
F-9
<PAGE>
CluckCorp International, Inc.
Notes to Financial Statements
December 29, 1996 and December 31, 1995
NOTE F - STOCKHOLDERS' EQUITY - Continued
The Company applies APB Opinion 25 and related interpretations in accounting for
this plan. The Company considers the options granted to be for future services
and accordingly, no compensation cost would have been recognized in 1996 or 1995
had the Company applied the provisions of SFAS Number 123.
A summary of the status of the Company's stock option plan as of December 29,
1996 and December 31, 1995, and changes during the fiscal years ending on those
dates is presented below:
<TABLE>
<CAPTION>
1996 1995
------------------------------ ----------------------------
Weighted-Average Weighted-Average
Shares Exercise Price Shares Exercise Price
------ -------------- ------ --------------
<S> <C> <C> <C> <C>
Outstanding options at beginning of year 80,000 $ 2.50 -- $ --
Granted 206,000 5.94 80,000 2.50
Exercised -- -- -- --
Forfeited (80,000) 2.50 -- --
-------- -------
Outstanding options at end of year 206,000 5.94 80,000 2.50
======== =======
Options exercisable at year end -- 16,000
======== =======
Weighted-average fair value of
options granted during the year $ 1.62 --
</TABLE>
The following table summarizes information about the options outstanding at
December 29, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------ ----------------------------
Number Weighted-Average Number
Outstanding Remaining Weighted-Average Exercisable Weighted-Average
Exercise Price at 12/29/96 Contractual Life Exercise Price at 12/29/96 Exercise Price
- -------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 3.85 6,000 4.6 years $ 3.85 - $ 3.85
6.00 200,000 4.8 years 6.00 - 6.00
-------- ------------
206,000 4.8 years 5.94 - 5.92
======== ============
</TABLE>
F-10
<PAGE>
CluckCorp International, Inc.
Notes to Financial Statements
December 29, 1996 and December 31, 1995
NOTE F - STOCKHOLDERS' EQUITY - Continued
Warrants: The following is a summary of warrant activity, after giving effect to
the July 17, 1995 reverse stock split:
<TABLE>
<CAPTION>
Warrants/ Exercise
Issue Date Purpose Options Price Expiration
- ---------- ------- ------- ----- ----------
<S> <C> <C> <C> <C>
April 1994 Private sale of common stock 100,000 $ 2.50 December 31, 1997
August 1994 Private sale of common stock 30,480 2.50 December 31, 1997
December 1994 Bridge notes 35,600 2.50 December 31, 1997
May 1995 Bridge notes 159,200 2.50 December 31, 1997
July 1996 Initial public offering 2,300,000 4.00 July 9, 2001
July 1996 Initial public offering 100,000 6.60 July 9, 2001
July 1996 Initial public offering 200,000 4.15 July 9, 2001
----------
Outstanding at December 29, 1996 2,925,280
=========
</TABLE>
NOTE G - RELATED PARTY TRANSACTIONS
In March 1995, the Company entered into an area development agreement with a
stockholder of the Company for the exclusive license to develop up to ten
restaurants in Singapore over a 20-year period. The fee under the area
development agreement was $50,000, of which the Company had received $20,000. A
non-interest bearing unsecured promissory note initially due March 30, 1996 was
extended to September 30, 1996. In December 1996, the area development agreement
was modified to reduce the number of restaurants that can be developed from ten
to two and reduce the fee from $50,000 to $10,000. The stockholder was refunded
$10,000 and the balance of the note was charged to expense.
On August 10, 1995, the Company entered into a five year employment agreement
with its Chairman and Chief Executive Officer. Annual compensation is fixed at
the larger of $75,000 or 20% of all franchise and area development fees paid to
the Company, together with 5% of all royalty fees received by the Company under
any franchise agreements and area development agreements executed during the
Chairman's employment. In September 1996, the employment agreement was amended
to increase his salary from $75,000 to $90,000 per year.
During 1996, the Company paid its Chairman and Chief Executive Officer $29,800
for certain fixed assets used in the operations of the Company.
The Company has a $20,000 certificate of deposit which collateralizes a personal
loan for an officer of the Company.
NOTE H - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The Company paid interest of $139,423 during the fiscal year ended December 29,
1996. No interest was paid during the fiscal year ended December 31, 1995, and
no federal or state taxes were paid during fiscal years ended December 31, 1996
and 1995.
F-11
<PAGE>
CluckCorp International, Inc.
Notes to Financial Statements
December 29, 1996 and December 31, 1995
NOTE I - LOSS PER SHARE
Loss per common share is computed by dividing net loss by the weighted average
number of shares outstanding during each period plus, when their effect is
dilutive, common stock equivalents consisting of certain shares subject to stock
options and warrants. In 1996, the inclusion of additional shares assuming the
exercise of the stock options and warrants would have been antidilutive.
Loss per common share is calculated as follows:
Fiscal
Year Ended
December 29, December 31,
1996 1995
----------- ------------
Net loss ....................................... $(2,011,254) $ (924,483)
=========== ============
Weighted average number of shares outstanding .. 1,553,824 1,001,287
Common stock equivalents due to assumed exercise
of options and warrants ..................... -- 223,244
----------- ------------
1,553,824 1,224,531
Net loss per common share ...................... $ (1.29) $ (.75)
=========== ============
NOTE J - FAIR VALUE OF FINANCIAL INSTRUMENTS
The only financial instruments of the Company at December 29, 1996, are cash and
notes payable. The carrying amount of the financial instruments approximate fair
value.
NOTE K - SUBSEQUENT EVENTS
In January 1997, warrants to purchase 253,280 shares of common stock were
exercised, resulting in proceeds to the Company of $633,200.
In February, 1997, the Company filed a Registration Statement on Form SB-2
covering the sale of 500,000 shares of the Company's Convertible Redeemable
Preferred Stock. The stock is being offered at $10 per share and is convertible
at the option of the holder into common stock at any time after one year from
the effective date of the offering, at a to be determined conversion price.
There is no assurance that the Registration Statement will be declared effective
by the Securities and Exchange Commission, or that the Company will be
successful in selling the Preferred Stock.
F-12
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. Indemnification of Directors and Officers.
Article Eleven of the Registrant's Articles of Incorporation provide as
follows:
"Section 1. Mandatory Indemnification and Advancement of Expenses. Each
person who was or is made a party or is threatened to be made a party to or is
involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, arbitrative or investigative, any
appeal in such action, suit or proceeding, and any inquiry or investigation that
could lead to such an action, suit or proceeding ("Proceeding"), by reason of
the fact that he is or was a Director or Officer of the Corporation, or who,
while a Director or Officer of the Corporation, is or was serving at the request
of the Corporation as a director, officer, partner, venturer, proprietor,
trustee, employee, agent, or similar functionary of another corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit plan or
other enterprise, shall be indemnified and held harmless by the Corporation to
the fullest extent permitted by the Act against all judgments, penalties
(including excise and similar taxes), fines, settlements, and reasonable
expenses (including attorneys' fees) actually incurred by such person in
connection with such Proceeding. Such right shall be a contract right and shall
include the right to require advancement by the Corporation of reasonable
expenses (including attorneys' fees) incurred in defending any such Proceeding
in advance of its final disposition; provided, however, that the payment of such
expenses in advance of the final disposition of such Proceeding shall be made by
the Corporation only upon delivery to the Corporation of a written affirmation
by such person of his good faith belief that he has met the standard of conduct
necessary for indemnification under the Act and a written undertaking, by or on
behalf of such person, to repay all amounts so advanced if it should be
ultimately determined that such person has not satisfied such requirements.
Section 2. Nature of Indemnification. The indemnification and advancement
of expenses provided for herein shall not be deemed exclusive of any other
rights permitted by law to which a person seeking indemnification may be
entitled under any Bylaw, agreement, vote of Shareholders or disinterested
Directors or otherwise, and shall continue as to a person who has ceased to be a
Director or Officer of the Corporation and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 3. Insurance. The Corporation shall have power to purchase and
maintain insurance or other arrangements on behalf of any person who is or was a
director, Officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent, or similar functionary of another
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have
II-1
<PAGE>
the power to indemnify him against such liability under the provisions of this
Article Eleven or the Act."
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to officers, directors or persons
controlling the Company, the Company has been advised that, in the opinion of
the Securities and Exchange Commission, Washington, D.C. 20549, such
indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by an officer, director or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
officer, director or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in such Act and will be governed by the final adjudication
of such issue.
ITEM 25. Other Expenses of Issuance and Distribution.(1)
SEC Registration Fee..................... $ 4,863
NASD Filing Fee.......................... 2,105
Blue Sky Filing Fees..................... 10,000
Blue Sky Legal Fees...................... 20,000
Printing Expenses........................ 40,000
Legal Fees and Expenses.................. 100,000
Accounting Fees.......................... 30,000
NASDAQ SmallCap Application.............. 10,000
Transfer Agent and Certificates.......... 2,000
Miscellaneous Expenses................... 31,032
--------
TOTAL.................................... $250,000
(1) Does not include the Representative's commissions and fees of $975,000
($1,121,250 if the over-allotment is exercised). All expenses are estimated
except SEC and NASD registration and filing fees.
ITEM 26. Recent Sales of Unregistered Securities
During the last three years, the Registrant sold the following shares of
its Common Stock which were not registered under the Securities Act of 1933, as
amended (the "1933 Act").
II-2
<PAGE>
(i) In April 1994, the Registrant sold 100,000 Units of its securities,
each Unit consisting of one share of $.01 par value Common Stock and one common
stock purchase warrant for $2.50 per Unit to the following persons.
Name Number of Shares
Dr. Henry H. Salzarulo 20,000
Paul Bourke 20,000
Dr. & Mrs. George Bruce 4,000
Robert Jones 20,000
Jeffrey Morehouse 10,000
Michael Presinger 20,000
Dr. Larry Bowman 6,000
(ii) In June 1994, the Registrant issued 240,000 shares of its $.01 par
value Common Stock to WaterMarc Food Management, Inc. ("WaterMarc") in exchange
for a cancellation of approximately $485,000 of an $800,000 promissory note
issued to WaterMarc and other advances received from WaterMarc totaling
approximately $42,000.
(iii) In August 1994, the Registrant sold 110,000 shares of its $.01 par
value Common Stock to the following persons at $2.50 per share. The Private
Placement Agent, World Equities, Inc. received 11,000 common stock purchase
warrants exercisable at $2.50 per share until December 1996 as additional
compensation for acting as the Company's Selling Agent in connection with the
sale of the shares.
Name Number of Shares
David Robbins 5,000
Norman Glutzen 10,000
Eric Matye 10,000
John F. Wilhide 10,000
Andrew J. Salperto 5,000
Alan Haehle 10,000
Richard Wagner 20,000
Michael J. Grear 20,000
Bhagvan Vaghani 10,000
John M. Downey 10,000
(iv) Between December 1994 and May 1995, the Registrant borrowed $497,000
from a group of 24 investors (all of whom were "accredited investors" as that
term is defined under Regulation D of the 1933 Act), evidenced by promissory
notes ("Bridge Notes") bearing interest at 10% per annum. As additional
consideration for purchase of the Bridge Notes, each investor received one
common stock purchase warrant for each $2.50 loaned (an aggregate of 198,800
warrants), exercisable to purchase one share of Common Stock at $2.50 per share
at any time
II-3
<PAGE>
until December 1997. The Private Placement Agent, World Equities, Inc., received
19,480 warrants identical in terms to the warrants issued to the investors as
additional compensation for acting as the Company's selling agent in connection
with the loan.
(v) In August and November 1995, the Registrant borrowed $577,500 from a
group of 20 investors (all of whom were "accredited investors" as that term is
defined under Regulation D of the 1933 Act), evidenced by promissory notes
("Notes") bearing interest at 10% per annum. As additional consideration for
purchase of the Notes, the investors received an aggregate of 57,750 shares of
Common Stock for no additional consideration, which shares were registered as a
part of the Registrant's Registration Statement on Form SB-2, File No. 33-95796
declared effective July 9, 1996.
(vi) In March 1996, the Registrant borrowed $610,000 from three investors
(all of whom were "accredited investors" as that term is defined under
Regulation D of the 1933 Act), evidenced by promissory notes ("Notes") bearing
interest at 10% per annum. As additional consideration for purchase of the
Notes, the investors received an aggregate of 61,000 shares of Common Stock for
no additional consideration, which shares were registered as a part of the
Registrant's Registration Statement on Form SB-2, File No. 33-95796 declared
effective July 9, 1996.
With respect to the above sales, the Registrant relied on Section 4(2)
and/or Regulation D of the 1933 Act. No advertising or general solicitation was
employed in Offering the securities. The securities were offered to a limited
number of individuals all of whom purchased as an investment and not with a view
to distribution or resale and the transfer thereof was appropriately restricted
by the Registrant. No advertising or general solicitation was employed in any of
the sales. All security holders were sophisticated investors capable of
analyzing the merits and risks of their investment and realizing a loss of their
entire investment.
ITEM 27. Exhibits.
Exhibit No. Title
1.17 Form of Underwriting Agreement (2)
1.18 Form of Selling Group Agreement
1.19 Form of Representative's Warrant
1.20 Form of Agreement Among Underwriters
1.21 Form of Amended Underwriting Agreement
II-4
<PAGE>
2.01 Articles of Incorporation of the Registrant, as
amended(1)
2.02 Bylaws of the Registrant(1)
2.03 Articles of Incorporation of Harvest Restaurants,
Inc.(1)
2.04 Bylaws of Harvest Restaurants, Inc.(1)
2.05 Articles of Incorporation of Cluckers
Restaurants, Inc.(1)
2.06 Bylaws of Cluckers Restaurants, Inc.(1)
5.02 Opinion of Gary A. Agron, Esq., regarding
legality of the Preferred Stock (includes
Consent)(2)
10.01 Incentive Stock Option Plan(1)
10.02 Settlement Agreement with Cluckers Wood Roasted
Chicken, Inc.(1)
10.12 Uniform Franchise Offering Circular (Cluckers)(1)
10.13 Form of Franchise Agreement (Cluckers)(1)
10.14 Form of Area Development Agreement (Cluckers)(1)
10.15 Employment Agreement with Mr. Gallagher(1)
10.16 Employment Agreement with Mr. Gibbs(1)
10.17 Area Development Agreement with Mr. McGill(1)
10.20 Uniform Franchise Offering Circular (Harvest
Rotisserie)(1)
10.21 Form of Area Development Agreement (Harvest
Rotisserie)(1)
10.22 Form of Franchise Agreement (Harvest Rotisserie)
(1)
10.23 License Agreement(1)
II-5
<PAGE>
10.24 License Agreement(1)
10.25 Amendment to Area Development Agreement with
Mr. McGill(2)
10.27 Ground Lease (Harvest Rotisserie - Dezavala)(2)
10.28 Ground Lease (Harvest Rotisserie - Herzberg)(2)
10.29 Consulting Agreement with the Representative(2)
10.30 Building Lease (Harvest Rotisserie - Corpus
Christi)
10.31 Building Lease (Harvest Rotisserie - San
Antonio)(2)
10.32 Agreement with Roasters Corp.
10.33 Agreement with Pollo Operators, Inc.
10.34 Building Lease (Harvest Rotisserie - 11730 West
Avenue, San Antonio)
10.35 Land Contract (St. Petersburg)
23.09 Consent of Akin, Doherty, Klein & Feuge, P.C.(2)
23.10 Consent of Gary A. Agron, Esq., (See 5.02,
above)(2)
23.11 Consent of Akin, Doherty, Klein & Feuge, P.C.
(1) Incorporated by reference to the Registrant's definitive Registration
Statement on Form SB-2 File No. 33-95796 declared effective on July 9, 1996.
(2) Previously File
ITEM 28. Undertakings.
The Registrant hereby undertakes that:
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(b) Subject to the terms and conditions of Section 13(a) of the Securities
Exchange Act of 1934, it will file with the Securities and Exchange Commission
such supplementary and
II-6
<PAGE>
periodic information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
(c) If the issuer relies on Rule 430A under the Securities Act, that the
small business issuer will:
(i) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the small business issuer under Rule 424(b)(1), or
(4) or 497(h) under the Securities Act as part of this registration
statement as of the time the Commission declared it effective.
(ii) For determining any liability under the Securities Act, treat
each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that Offering of the securities at that time as the initial
bona fide Offering of those securities.
(d) Any post-effective amendment filed will comply with the applicable
forms, rules and regulations of the Commission in effect at the time such
post-effective amendment is filed.
(e) It will file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the Offering.
(f) It will file, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement;
(iii) Include any additional or changed material information on the
plan of distribution. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(g) It will provide to the Underwriter at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the underwriter to permit prompt delivery to each
purchaser.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and has caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in San Antonio, Texas, on ____________, 1997.
CLUCKCORP INTERNATIONAL, INC.
By: /s/ William J. Gallagher
----------------------------
William J. Gallagher
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons on
the dates indicated.
Signature Title Date
By: /s/ William J. Gallagher Chairman of the Board of __________, 1997
- ------------------------------ Directors and Chief Executive
William J. Gallagher Officer
By: /s/ Larry F. Harris President and Director __________, 1997
- ------------------------------
Larry F. Harris
By: /s/ Sam Bell Steves Rosser Vice President - Development, __________, 1997
- ------------------------------ Treasurer and Director
Sam Bell Steves Rosser
By: /s/ Michael M. Hogan Director __________, 1997
- ------------------------------
Michael M. Hogan
By: /s/ Theodore M. Heesch Director __________, 1997
- ------------------------------
Theodore M. Heesch
By: /s/ Joseph Fazzone Chief Financial Officer and __________, 1997
- ------------------------------ Principal Accounting Officer
Joseph Fazzone
<PAGE>
CLUCKCORP INTERNATIONAL, INC.
EXHIBIT INDEX
Exhibit No. Title
1.18 Form of Selling Group Agreement
1.19 Form of Representative's Warrant
1.20 Form of Agreement Among Underwriters
1.21 Form of Amended Underwriting Agreement
10.30 Building Lease (Harvest Rotisserie - Corpus Christi)
10.32 Agreement with Roasters Corp.
10.33 Agreement with Pollo Operators, Inc.
10.34 Building Lease - 11730 West Avenue, San Antonio
10.35 Land Contract (St. Petersburg)
23.11 Consent of Akins, Doherty, Klein & Feuge, P.C.
Exhibit 1.18
500,000 Shares of Convertible Redeemable Preferred Stock
$10.00 per share
April __, 1997
Global Equities Group, Inc.
As the Lead Managing Underwriter
and the Representative of the Underwriters,
5 Hanover Square
New York, New York 10004
Dear Sirs:
We acknowledge receipt of the Prospectus dated April __ , 1997 (hereinafter
called the "Prospectus") relating to the offering of 500,000 shares of $1.00 par
value Series A Redeemable Convertible Preferred Stock (the "Preferred Stock") at
$10.00 per share of CluckCorp International, Inc. (hereinafter called the
"Company").
We understand that the Underwriters are offering, through you, certain of
the Preferred Stock for sale to certain securities dealers at the public
offering price of $10.00 per share of Preferred Stock less a concession of $1.00
per share of Preferred Stock and that any Underwriter may allow, and dealers may
reallow, a concession not in excess of $. o per share of Preferred Stock to
other Underwriters or to other dealers who enter into an agreement in this form.
We hereby agree with you as follows with respect to any purchase of the
Preferred Stock from you or from any other Underwriter or from any other dealer
at a concession from the public offering price.
In purchasing the Preferred Stock, we will rely only on the Prospectus and
no other statements whatsoever, written or oral.
1. Offering and Trading Provisions. The Preferred Stock purchased by us at
a concession from the public offering price shall be promptly offered to the
public upon the terms set forth in the Prospectus or for sale at a concession
not in excess of $__ per share of Preferred Stock to any other member of the
National Association of Securities Stock Dealers, Inc. (hereinafter called the
"NASD") who enters into an agreement with you in this form or to foreign banks
or dealers not eligible for membership in the NASD who (i) agree that they will
make no sales of the Preferred Stock within the United States, its territories
its possessions, or to persons who are citizens thereof or resident therein,
<PAGE>
Global Equities
April 28, 1997
Page -2-
(ii) agree that in making sales of such Preferred Stock outside the United
States, its territories or possessions they will comply with the requirements of
the NASD's Rules of Fair Practice as though they were such a member and Section
25 of such Article as it applies to a non-member broker or dealer in a foreign
country and (iii) enter into an agreement with you in this form.
Except as permitted by you, we will not at any time prior to the completion
by us of distribution of Preferred Stock acquired by us pursuant to this
Agreement, bid for, purchase or sell, directly or indirectly, any Preferred
Stock other than (i) as provided for in this Agreement, the Agreement Among
Underwriters or the Underwriting Agreement relating to the Preferred Stock or
(ii) purchases or sales by us of any Preferred Stock as broker on unsolicited
orders for the account of others.
We represent that we have not participated in any transaction prohibited by
the preceding paragraph and that we have at all times complied with the
provisions of Regulation M of the Securities and Exchange Commission applicable
to this offering.
We agree to advise you from time to time upon request, prior to the
termination of this Agreement, of the number of Preferred Stock remaining unsold
which were purchased by us from you or from any other Underwriter or dealer at a
concession from the public offering price and, on your request, we will resell
to you any such Preferred Stock remaining unsold at the purchase price thereof
if, in your opinion, such Preferred Stock are needed to make delivery against
sales made to others.
We agree that without your consent we will not sell to any account over
which we exercise discretionary authority any of the Preferred Stock which we
purchase and which are subject to the terms of this Agreement.
If prior to the termination of this Agreement you purchase or contract to
purchase any Preferred Stock which were purchased by us from you or from any
other Underwriter or dealer at a concession from the public offering price
(including any Preferred Stock represented by certificates which may have been
issued on transfer or in exchange for certificates originally representing such
Preferred Stock), in your discretion you may (i) sell for our account the
Preferred Stock so purchased and debit or credit our account for the loss or
profit resulting from such sale, (ii) charge our account with an amount equal to
the concession to dealers with respect thereto and credit such amount against
the cost thereof or (iii) require us to purchase such Preferred Stock at a price
<PAGE>
Global Equities
April 28, 1997
Page -3-
equal to the total cost of such purchase including commissions and transfer
taxes on redelivery.
2. Delivery and Payment. If we purchase any Preferred Stock from you
hereunder, we agree that such purchases will be evidenced by your written
confirmation and will be subject to the terms and conditions set forth in the
confirmation and in the Prospectus.
Preferred Stock purchased by us from you hereunder shall be paid for in
full at the public offering price stated above, or, if you shall so advise us,
at such price less the applicable concession, at the office of Global Equities
Group, Inc., 5 Hanover Square, New York, New York 10004, at such time and on
such day as you may advise us, by certified or official bank check payable in
New York Clearing House funds to the order of Global Equities Group, Inc.
against delivery of the Preferred Stock. If we are called upon to pay the public
offering price of the Preferred Stock purchased by us, the applicable concession
will be paid to us, less any amounts charged to our account pursuant to Article
1 above, after termination of this Agreement.
3. Termination. You will advise us of the date and time of termination of
this Agreement or of any designated provisions hereof. This Agreement shall in
any event terminate 30 business days after the date of the initial public
offering of the Preferred Stock unless sooner terminated by you.
4. Representation and Liability of Dealers and Underwriters. We represent
that we are a member in good standing with the NASD or that we are a foreign
bank or dealer not eligible for membership in the NASD which agrees to make no
sales of Preferred Stock within the United States, its territories or its
possessions, or to persons who are citizens thereof or resident therein. In
making sales of Preferred Stock, if we are such a member of the NASD, we agree
to comply with all applicable rules of the NASD, including, without limitation,
the NASD's Interpretation with Respect to Free-Riding and Withholding and
Section 24 of Article III of the NASD's Rules of Fair Practice, or, if we are
such a foreign bank or dealer, we agree to comply with such Interpretation,
Sections 8, 24, and 36 of such Article as though we are such a member and
Section 25 of such Article as it applies to a non-member broker or dealer in a
foreign country.
We will not give any information or make any representations other than
those contained in the Prospectus, or act as agent for the Company or any
Underwriter.
<PAGE>
Global Equities
April 28,1997
Page -4-
We agree that you, as Representative of the Underwriters, have full
authority to take such action as may seem advisable to you in respect to all
matters pertaining to the offering of the Preferred Stock. Neither you, as
Representative of the several Underwriters, nor any of the other Underwriters
shall be under any liability to us for any act or omission, except for
obligations expressly assumed in this Agreement.
All communications to you relating to the subject matter of this Agreement
shall be addressed to Global Equities Group, Inc., 5 Hanover Square, New York,
New York 10004, and any notices to us shall be deemed to have been duly given if
mailed or telegraphed to us at the address shown below.
5. Blue Sky Matters. Neither you, as Representative of the several
Underwriters, nor any of the other Underwriters will have any responsibility
with respect to the right of any dealer to sell the Preferred Stock in any
jurisdiction, notwithstanding any information you may furnish in that
connection.
6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
Very truly yours,
------------------------------
------------------------------
------------------------------
(Address)
By____________________________
Authorized Signatory
Date__________________________
<PAGE>
Exhibit 1.19
CLUCKCORP INTERNATIONAL, INC.
AND
GLOBAL EQUITIES GROUP, INC.
REPRESENTATIVE'S
WARRANT AGREEMENT
Dated as of ______________, 1997
1
<PAGE>
REPRESENTATIVE'S WARRANT AGREEMENT dated as of , 1997 between CLUCKCORP
INTERNATIONAL, INC., a Texas corporation (the "Company"), and GLOBAL EQUITIES
GROUP, INC. (hereinafter referred to variously as the "Holder" or the
"Representative").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Representative warrants
("Warrants") to purchase up to 50,000 shares of the Company's Series A
Redeemable Convertible Preferred Stock, (the "Preferred Stock") of the Company;
and WHEREAS, the Representative has agreed pursuant to the underwriting
agreement (the "Underwriting Agreement") dated as of the date hereof between the
Company and the several Underwriters listed therein to act as the Representative
in connection with the Company's proposed public offering of up to 500,000
shares of Preferred Stock at a public offering price of $10.00 per share (the
"Public Offering"); and WHEREAS, the Warrants to be issued pursuant to this
Agreement will be issued on the First Delivery Date (as such term is defined in
the Underwriting Agreement) by the Company to the Representative in
consideration for, and as part of the Representative's compensation in
connection with, the Representative acting as the Representative pursuant to the
Underwriting Agreement; NOW, THEREFORE, in consideration of the premises, the
payment by the Representative to the Company of an aggregate ten dollars
($10.00), the agreements herein set forth and other good and valuable
consideration, hereby acknowledged, the parties hereto agree as follows:
2
<PAGE>
1. Grant. The Representative (or its designees) is hereby granted the right
to purchase, at any time from , 1998, until 5:30 P.M., New York time, on , 2002,
up to an aggregate of 50,000 shares of Preferred Stock at an initial exercise
price (subject to adjustment as provided in Section 8 hereof) of $12.00 per
share. Except as set forth herein, the shares of Preferred Stock issuable upon
exercise of the Warrants are in all respects identical to the shares of
Preferred Stock being purchased by the Underwriters for resale to the public
pursuant to the terms and provisions of the Underwriting Agreement. The shares
of Preferred Stock issuable upon exercise of the Warrants are sometimes
hereinafter referred to collectively as the "Securities."
2. Warrant Certificates. The warrant certificates (the "Warrant
Certificates") delivered and to be delivered pursuant to this Agreement shall be
in the form set forth in Exhibit A, attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. Exercise of Warrant.
Section 3.1 Method of Exercise. The Warrants initially are exercisable at
the respective initial exercise price (subject to adjustment as provided in
Section 8 hereof) per share of Preferred Stock set forth in Section 6 hereof
payable by certified or official bank check in New York Clearing House funds,
subject to adjustment as provided in Section 8 hereof. Upon surrender of a
Warrant Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the Exercise Price (as hereinafter defined) for the
Securities purchased at the Company's principal executive offices in San
Antonio, Texas (presently located at 1250 N.E. Loop 410, Suite 335, San Antonio,
3
<PAGE>
Texas 78209) the registered holder of a Warrant Certificate ("Holder" or
"Holders") shall be entitled to receive a certificate or certificates for the
shares of Preferred Stock purchased. The purchase rights represented by each
Warrant Certificate are exercisable at the option of the Holder thereof, in
whole or in part (but not as to fractional shares of the Preferred Stock
underlying the Warrants). Warrants may be exercised to purchase all or part of
the Securities. In the case of the purchase of less than all the Securities
purchasable under any Warrant Certificate, the Company shall cancel said Warrant
Certificate upon the surrender thereof and shall execute and deliver a new
Warrant Certificate of like tenor for the balance of the Securities.
Section 3.2 Definition of Market Price. As used herein, the phrase "Market
Price" at any date shall be deemed to be when referring to the Preferred Stock,
the last reported sale price, or, in case no such reported sale takes place on
such day, the average of the last reported sale prices for the last three (3)
trading days, in either case as officially reported by the principal securities
exchange on which the Preferred Stock is listed or admitted to trading or by the
Nasdaq National Market ("Nasdaq/NM"), or, if the Preferred Stock is not listed
or admitted to trading on any national securities exchange or quoted by the
National Association of Securities Dealers Automated Quotation System
("Nasdaq"), the average closing bid price as furnished by the National
Association of Securities Dealers, Inc. ("NASD") through Nasdaq or similar
organization if Nasdaq is no longer reporting such information, or if the
Preferred Stock is not quoted on Nasdaq, as determined in good faith (using
customary valuation methods) by resolution of the members of the Board of
Directors of the Company, based on the best information available.
4
<PAGE>
4. Issuance of Certificates. Upon the exercise of the Warrants, the
issuance of certificates for shares of Preferred Stock and/or other Securities,
properties or rights underlying such Warrants shall be made forthwith (and in
any event within five (5) business days thereafter) without charge to the Holder
thereof including, without limitation, any tax which may be payable in respect
of the issuance thereof, and such certificates shall (subject to the provisions
of Sections 5 and 7 hereof) be issued in the name of, or in such names as may be
directed by, the Holder thereof; provided, however, that the Company shall not
be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any such certificates in a name other
than that of the Holder, and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the shares of
Preferred Stock underlying the Warrants (and/or other Securities, properties or
rights issuable upon the exercise of the Warrants ) shall be executed on behalf
of the Company by the manual or facsimile signature of the then Chairman or Vice
Chairman of the Board of Directors or President or Vice President of the
Company. Warrant Certificates shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer.
Certificates representing the shares of Preferred Stock (and/or other
Securities, properties or rights issuable upon exercise of the Warrants) shall
be dated as of the Notice Date (regardless of when executed or delivered) and
dividend bearing Securities so issued shall accrue dividends from the date of
issuance.
5
<PAGE>
5. Restriction On Transfer of Warrants. The Holder of a Warrant
Certificate, by its acceptance thereof, covenants and agrees that the Warrants
are being acquired as an investment and not with a view to the distribution
thereof; that the Warrants may not be sold, transferred, assigned, hypothecated
or otherwise disposed of, in whole or in part, for a period of one (1) year from
the date hereof, except to officers of the Representative.
6. Exercise Price.
Section 6.1 Initial and Adjusted Exercise Price. Except as otherwise
provided in Section 8 hereof, the initial exercise price of each Warrant shall
be $12.00 per share of Preferred Stock. The adjusted exercise price shall be the
price which shall result from time to time from any and all adjustments of the
initial exercise price in accordance with the provisions of Section 8 hereof.
Any transfer of a Warrant shall constitute an automatic transfer and assignment
of the registration rights set forth in Section 7 hereof with respect to the
Securities or other Securities, properties or rights underlying the Warrants.
Section 6.2 Exercise Price. The term "Exercise Price" herein shall mean the
initial exercise price or the adjusted exercise price, depending upon the
context or unless otherwise specified.
7. Registration Rights.
Section 7.1 Registration Under the Securities Act of 1933. The Warrants,
the shares of Preferred Stock and any other Securities issuable upon exercise of
the Warrants have not been registered under the Securities Act of 1933 as
amended (the "Act"). Upon exercise, in whole or in part, of the Warrants,
certificates representing the Preferred Stock underlying the Warrants and any of
6
<PAGE>
the other Securities issuable upon exercise of the Warrants (collectively, the
"Warrant Securities") shall bear the following legend.
The Securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended ("Act"), and
may not be offered or sold except pursuant to (i) an effective
registration statement under the Act, (ii) to the extent applicable,
Rule 144 under the Act (or any similar rule under such Act relating to
the disposition of Securities), or (iii) an opinion of counsel, if
such opinion shall be reasonably satisfactory to counsel to the
issuer, that an exemption from registration under such Act is
available.
Section 7.2 Piggyback Registration. If, at any time commencing after the
date hereof and expiring five (5) years thereafter, the Company proposes to
register any of its Securities under the Act (other than pursuant to Form S-4,
Form S-8 or a comparable registration statement) it will give written notice by
registered mail, at least thirty (30) days prior to the filing of each such
registration statement, to the Representative and to all other Holders of the
Warrants and/or the Warrant Securities of its intention to do so. If the
Representative or other Holders of the Warrants and/or Warrant Securities notify
the Company within twenty (20) business days after receipt of any such notice of
its or their desire to include any such Securities in such proposed registration
statement, the Company shall afford the Representative and such Holders of the
Warrants and/or Warrant Securities the opportunity to have any such Warrant
Securities registered under such registration statement.
Notwithstanding the provisions of this Section 7.2, the Company shall have
the right at any time after it shall have given written notice pursuant to this
Section 7.2 (irrespective of whether a written request for inclusion of any such
Securities shall have been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.
7
<PAGE>
Section 7.3 Demand Registration.
(a) At any time commencing one year from the date hereof and expiring four (4)
years thereafter, the Holders of the Warrants and/or Warrant Securities
representing a "Majority" (as hereinafter defined) of such Securities
(assuming the exercise of all of the Warrants) shall have the right (which
right is in addition to the registration rights under Section 7.2 hereof),
exercisable by written notice to the Company, to have the Company prepare
and file with the Securities and Exchange Commission (the "Commission"), on
one occasion, a registration statement and such other documents, including
a prospectus, as may be necessary in the opinion of both counsel for the
Company and counsel for the Representative and Holders, in order to comply
with the provisions of the Act, so as to permit a public offering and sale
of their respective Warrant Securities for nine (9) consecutive months by
such Holders and any other Holders of the Warrants and/or Warrant
Securities who notify the Company within ten (10) days after receiving
notice from the Company of such request, provided that the holders of the
Warrants and/or Warrant Securities have purchased the Warrant Securities
prior to any such registration statement being filed.
(b) The Company covenants and agrees to give written notice of any registration
request under this Section 7.3 by any Holder or Holders to all other
registered Holders of the Warrants and the Warrant Securities within ten
(10) days from the date of the receipt of any such registration request.
(c) Notwithstanding anything to the contrary contained herein, if the Company
shall not have filed a registration statement for the Warrant Securities
within the time period specified in Section 7.4(a) hereof pursuant to the
8
<PAGE>
written notice specified in Section 7.3(a) of a Majority of the
Holders of the Warrants and/or Warrant Securities, the Company may, at
its option, upon the written notice of election of a Majority of the
Holders of the Warrants and/or Warrant Securities requesting such
registration, repurchase (i) any and all Warrant Securities of such
Holders at the higher of the Market Price per share of Preferred Stock
on (x) the date of the notice sent pursuant to Section 7.3(a) or (y)
the expiration of the period specified in Section 7.4(a) and (ii) any
and all Warrants of such Holders at such Market Price less the
Exercise Price of such Warrant. Such repurchase shall be in
immediately available funds and shall close within two (2) days after
the later of (i) the expiration of the period specified in Section
7.4(a) or (ii) the delivery of the written notice of election
specified in this Section 7.3(d).
Section 7.4 Covenants of the Company With Respect to Registration. In
connection with any registration under Section 7.2 or 7.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within sixty (60) days of receipt of any demand therefor,
shall use its best efforts to have any registration statements
declared effective at the earliest possible time, and shall furnish
each Holder desiring to sell Warrant Securities such number of
prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs (excluding fees and expenses of
Holder(s)' counsel and any underwriting or selling commissions), fees
and expenses in connection with all registration statements filed
pursuant to Sections 7.2 and 7.3 hereof including, without limitation,
the Company's legal and accounting fees, printing expenses, blue sky
fees and expenses. If the Company shall fail to comply with Section
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7.4(a), the Company shall, in addition to any other equitable or other
relief available to the Holder(s), be liable for any and all
incidental or special damages sustained by the Holder(s) requesting
registration of its or their Warrants and/or Warrant Securities.
(c) The Company will take all necessary action which may be required
in qualifying or registering the Warrant Securities included in a
registration statement for offering and sale under the securities or
blue sky laws of such states as reasonably are requested by the
Holder(s), provided that the Company shall not be obligated to execute
or file any general consent to service of process or to qualify as a
foreign corporation to do business under the laws of any such
jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Warrant Securities to
be sold pursuant to any registration statement and each person, if
any, who controls such Holders within the meaning of Section 15 of the
Act or Section 20(a) of the Securities Exchange Act of 1934, as
amended ("Exchange Act"), against all loss, claim, damage, expense or
liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to
which any of them may become subject under the Act, the Exchange Act
or otherwise, arising from such registration statement but only to the
same extent and with the same effect as the provisions pursuant to
which the Company has agreed to indemnify each of the Underwriters
contained in Section 8 of the Underwriting Agreement.
(e) The Holder(s) of the Warrant Securities to be sold pursuant to a
registration statement, and their successors and assigns, shall
severally, and not jointly, indemnify the Company, its officers and
directors and each person, if any, who controls the Company within
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the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, against all loss, claim, damage, expense or liability (including
all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from
information furnished by or on behalf of such Holders, or their
successors or assigns, for specific inclusion in such registration
statement to the same extent and with the same effect as the
provisions contained in Section 8 of the Underwriting Agreement
pursuant to which the Underwriters have agreed to indemnify the
Company.
(f) The Company shall not permit the inclusion of any Securities other
than the Warrant Securities to be included in any registration
statement filed pursuant to Section 7.3 hereof, or permit any other
registration statement to be or remain effective during the
effectiveness of a registration statement filed pursuant to Section
7.3 hereof, without the prior written consent of the Holders of the
Warrants and Warrant Securities representing a Majority of such
Securities.
(g) The Company shall furnish to each Holder participating in the offering
and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the
Company, dated the effective date of such registration statement (and,
if such registration includes an underwritten public offering, an
opinion dated the date of the closing under the underwriting
agreement), and (ii) a "cold comfort" letter dated the effective date
of such registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the closing
under the underwriting agreement) signed by the independent public
accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case
11
<PAGE>
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in
the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in
accountants' letters delivered to underwriters in underwritten public
offerings of Securities.
(h) The Company shall as soon as practicable after the effective date of
the registration statement, and in any event within 15 months
thereafter, make "generally available to its security holders" (within
the meaning of Rule 158 under the Act) an earnings statement (which
need not be audited) complying with Section 11(a) of the Act and
covering a period of at least 12 consecutive months beginning after
the effective date of the registration statement.
(i) The Company shall deliver promptly to each Holder participating in the
offering requesting the correspondence and memoranda described below
and to the managing underwriters, copies of all correspondence between
the Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its staff
with respect to the registration statement and permit each Holder and
underwriter to do such investigation, upon reasonable advance notice,
with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the NASD. Such investigation
shall include access to books, records and properties and
opportunities to discuss the business of the Company with its officers
and independent auditors, all to such reasonable extent and at such
reasonable times and as often as any such Holder or underwriter shall
reasonably request.
12
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(j) The Company shall enter into an underwriting agreement with the
managing underwriters selected for such underwriting by Holders
holding a Majority of the Warrant Securities requested to be included
in such underwriting, which may be the Representative. Such agreement
shall be satisfactory in form and substance to the Company, each
Holder and such managing underwriter(s), and shall contain such
representations, warranties and covenants by the Company and such
other terms as are customarily contained in agreements of that type
used by the managing underwriter(s). The Holders shall be parties to
any underwriting agreement relating to an underwritten sale of their
Warrant Securities and may, at their option, require that any or all
of the representations, warranties and covenants of the Company to or
for the benefit of such underwriter(s) shall also be made to and for
the benefit of such Holders. Such Holders shall not be required to
make any representations or warranties to or agreements with the
Company or the underwriter(s) except as they may relate to such
Holders and their intended methods of distribution.
(k) For purposes of this Agreement, the term "Majority" in reference to
the Holders of Warrants or Warrant Securities, shall mean in excess of
fifty percent (50%) of the then outstanding Warrants or Warrant
Securities that (i) are not held by the Company, an affiliate,
officer, creditor, employee or agent thereof or any of their
respective affiliates, members of their family, persons acting as
nominees or in conjunction therewith and (ii) have not been resold to
the public pursuant to a registration statement filed with the
Commission under the Act. 8. Adjustments to Exercise Price and Number
of Securities. Section 8.1 Subdivision and Combination. In case the
Company shall at any time subdivide or combine the outstanding shares
of Preferred Stock, the Exercise Price shall forthwith be
proportionately decreased in the case of subdivision or increased in
the case of combination.
13
<PAGE>
Section 8.2 Stock Dividends and Distributions. In case the Company shall
pay a dividend in, or make a distribution of, shares of Preferred Stock or of
the Company's capital stock convertible into Preferred Stock, the Exercise Price
shall forthwith be proportionately decreased. An adjustment made pursuant to
this Section 8.2 shall be made as of the record date for the subject stock
dividend or distribution.
Section 8.3 Adjustment in Number of Securities. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 8, the number of
Warrant Securities issuable upon the exercise at the adjusted exercise price of
each Warrant shall be adjusted to the nearest full amount by multiplying a
number equal to the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Securities issuable upon exercise of the
Warrants immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price.
Section 8.4 Definition of Preferred Stock. For the purpose of this
Agreement, the term "Preferred Stock" shall mean (i) the class of stock
designated as Series A Redeemable Convertible Preferred Stock in the Certificate
or Articles of Incorporation or (ii) any other class of stock resulting from
successive changes or reclassifications of such Preferred Stock consisting
solely of changes in par value, or from par value to no par value, or from no
par value to par value.
Section 8.5 Merger or Consolidation. In case of any consolidation of the
Company with, or merger of the Company with, or merger of the Company into,
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<PAGE>
another corporation (other than a consolidation or merger which does not
result in any reclassification or change of the outstanding Preferred Stock),
the corporation formed by such consolidation or merger shall execute and deliver
to the Holder a supplemental warrant agreement providing that the holder of each
Warrant then outstanding or to be outstanding shall have the right thereafter
(until the expiration of such Warrant) to receive, upon exercise of such
Warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the number
of Securities of the Company for which such Warrant might have been exercised
immediately prior to such consolidation, merger, sale or transfer. Such
supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in Section 8. The above provision of this
subsection shall similarly apply to successive consolidations or mergers.
Section 8.6 No Adjustment of Exercise Price in Certain Cases. No adjustment
of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Warrants or the Warrant Securities
issuable upon the exercise of the Warrants;
(b) If the amount of said adjustment shall be less than two cents
(2(cent)) per Warrant Security, provided, however, that in such case
any adjustment that would otherwise be required then to be made shall
be carried forward and shall be made at the time of and together with
the next subsequent adjustment which, together with any adjustment so
carried forward, shall amount to at least two cents (2(cent)) per
Warrant Security.
9. Exchange and Replacement of Warrant Certificates. Each Warrant
Certificate is exchangeable without expense, upon the surrender thereof by the
registered Holder
15
<PAGE>
at the principal executive office of the Company, for a new Warrant Certificate
of like tenor and date representing in the aggregate the right to purchase the
same number of Warrant Securities in such denominations as shall be designated
by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any Warrant Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not be required
to issue certificates representing fractions of shares of Preferred Stock upon
the exercise of the Warrants, nor shall it be required to issue scrip or pay
cash in lieu of fractional interests, it being the intent of the parties that
all fractional interests shall be eliminated by rounding any fraction up to the
nearest whole number of shares of Preferred Stock or Redeemable Warrants or
other Securities, properties or rights.
11. Reservation and Listing of Securities. The Company shall at all times
reserve and keep available out of its authorized shares of Preferred Stock,
solely for the purpose of issuance upon the exercise of the Warrants, such
number of shares of Preferred Stock or other Securities, properties or rights as
shall be issuable upon the exercise thereof. The Company covenants and agrees
that, upon exercise of the Warrants and payment of the Exercise Price therefor,
all shares of Preferred Stock and other Securities issuable upon such exercise
shall be duly and validly issued, fully paid, non-assessable and not subject to
the preemptive rights of any stockholder. As long as the Warrants shall be
16
<PAGE>
outstanding, the Company shall use its best efforts to cause all shares of
Preferred Stock issuable upon the exercise of the Warrants to be listed (subject
to official notice of issuance) on all securities exchanges on which the
Preferred Stock issued to the public in connection herewith may then be listed
and/or quoted.
12. Notices to Warrant Holders. Nothing contained in this Agreement shall
be construed as conferring upon the Holders the right to vote or to consent or
to receive notice as a stockholder in respect of any meetings of stockholders
for the election of directors or any other matter, or as having any rights
whatsoever as a stockholder of the Company. If, however, at any time prior to
the expiration of the Warrants and their exercise, any of the following events
shall occur:
(a) the Company shall take a record of the holders of its shares of
Preferred Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of current or
retained earnings or capital surplus (in accordance with applicable
law), as indicated by the accounting treatment of such dividend or
distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its Preferred Stock any
additional shares of capital stock of the Company or Securities
convertible into or exchangeable for shares of capital stock of the
Company, or any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other than in
connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety
17
<PAGE>
shall be proposed; then, in any one or more of said events, the
Company shall give written notice of such event at least thirty (30)
days prior to the date fixed as a record date or the date of closing
the transfer books for the determination of the stockholders entitled
to such dividend, distribution, convertible or exchangeable Securities
or subscription rights, or entitled to vote on such proposed
dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of closing the transfer books, as
the case may be. Failure to give such notice or any defect therein
shall not affect the validity of any action taken in connection with
the declaration or payment of any such dividend, or the issuance of
any convertible or exchangeable Securities, or subscription rights,
options or warrants, or any proposed dissolution, liquidation, winding
up or sale.
13. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made and
sent when delivered, or mailed by registered or certified mail, return receipt
requested:
(a) If to the registered Holder of the Warrants, to the address of such
Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3 hereof or to
such other address as the Company may designate by notice to the
Holders.
14. Supplements and Amendments. The Company and the Representative may from
time to time supplement or amend this Agreement without the approval of any
Holders of Warrant Certificates (other than the Representative) in order to cure
any ambiguity, to correct
18
<PAGE>
or supplement any provision contained herein which may be defective or
inconsistent with any provisions herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and the
Representative may deem necessary or desirable and which the Company and the
Representative deem shall not adversely affect the interests of the Holders of
Warrant Certificates.
15. Successors. All the covenants and provisions of this Agreement shall be
binding upon and inure to the benefit of the Company, the Holders and their
respective successors and assigns hereunder.
16. Termination. This Agreement shall terminate at the close of business on
, 2004. Notwithstanding the foregoing, the indemnification provisions of Section
7 shall survive such termination until the close of business on , 2010.
17. Governing Law; Submission to Jurisdiction. This Agreement and each
Warrant Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of New York and for all purposes shall be construed in
accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
The Company, the Representative and the Holders hereby agree that any
action, proceeding or claim against it arising out of, or relating in any way
to, this Agreement shall be brought and enforced in the courts of the State of
New York or of the United States of America for the Southern District of New
York, and irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company, the Representative and the Holders hereby irrevocably
waive any objection to such exclusive jurisdiction or inconvenient forum. Any
such process or summons to be served upon any of the Company, the Representative
and the Holders (at the option of the party bringing such action, proceeding
19
<PAGE>
or claim) may be served by transmitting a copy thereof, by registered or
certified mail, return receipt requested, postage prepaid, addressed to it at
the address set forth in Section 14 hereof. Such mailing shall be deemed
personal service and shall be legal and binding upon the party so served in any
action, proceeding or claim. The Company, the Representative and the Holders
agree that the prevailing party(ies) in any such action or proceeding shall be
entitled to recover from the other party(ies) all of its/their reasonable legal
costs and expenses relating to such action or proceeding and/or incurred in
connection with the preparation therefor.
18. Entire Agreement; Modification. This Agreement (including
the Underwriting Agreement to the extent portions thereof are referred to
herein) contains the entire understanding between the parties hereto with
respect to the subject matter hereof and may not be modified or amended except
by a writing duly signed by the party against whom enforcement of the
modification or amendment is sought.
19. Severability. If any provision of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision of this Agreement.
20. Captions. The caption headings of the Sections of this Agreement are
for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
21. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Representative and any other registered Holder(s) of the Warrant Certificates or
Warrant Securities any legal or
20
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equitable right, remedy or claim under this Agreement; and this Agreement shall
be for the sole benefit of the Company and the Representative and any other
registered Holders of Warrant Certificates or Warrant Securities.
22. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
CLUCKCORP INTERNATIONAL, INC.
By:________________________________
Attest:
- ---------------------------------------
Name:
Title:
GLOBAL EQUITIES GROUP, INC.
By:________________________________
21
<PAGE>
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT
REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, , 2002
No. W- Warrants to Purchase
50,000 shares of
Preferred Stock
WARRANT CERTIFICATE
This Warrant Certificate certifies that , or registered assigns, is the
registered holder of Warrants to purchase initially, at any time from , 1998
until 5:30 p.m. New York time on , 2002 ("Expiration Date"), up to 50,000 shares
of Preferred Stock, $1.00 par value ("Preferred Stock"), of CLUCKCORP
INTERNATIONAL, INC., a Texas corporation (the "Company"), at the initial
exercise price, subject to adjustment in certain events (the "Exercise Price"),
of $12.00 per share upon surrender of this Warrant Certificate and payment of
the Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the Representative's Warrant Agreement dated
as of , 1997 between the Company and GLOBAL EQUITIES GROUP, INC. (the "Warrant
Agreement"). Payment of the Exercise Price shall be made by certified or
official bank check in New York Clearing House funds payable to the order of the
Company or by surrender of this Warrant Certificate.
A-1
<PAGE>
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain events
the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax or other governmental charge
imposed in connection with such transfer.
The Warrants may be exercised in whole or in part for shares of Preferred
Stock. Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated as of ___________, 1997
A-2
<PAGE>
CLUCKCORP INTERNATIONAL, INC.
By:_______________________________
A-3
<PAGE>
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase:
( ) _______________________ Shares of Preferred Stock
( ) _______________________
( ) _______________________
( ) _______________________
and herewith tenders in payment for such securities a certified or official
bank check payable in New York Clearing House funds to the order of CLUCKCORP
INTERNATIONAL, INC. in the amount of $ _____________ all in accordance with the
terms of Section 3.1 of the Representative's Warrant Agreement dated as of
_____________, 1997 between Cluckcorp International, Inc. and Global Equities
Group, Inc. The undersigned requests that a certificate for such securities be
registered in the name of ________________________ whose address is
_______________________ and that such Certificate be delivered to
_____________________ whose address is ________________________ .
Dated:________________________ Signature:____________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
(Insert Social Security or Other
Identifying Number of Assignee)
A-4
<PAGE>
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase:
( ) _______________________ Shares of Preferred Stock
( ) _______________________
( ) _______________________
( ) _______________________
and herewith tenders in payment for such securities ___________________ Warrants
all in accordance with the terms of Section 3.2 of the Representative's Warrant
Agreement dated as of _______________, 1997 between Cluckcorp International Inc.
and Global Equities Group, Inc. The undersigned requests that a certificate for
such securities be registered in the name of_______________________ whose
address is______________________ and that such Certificate be delivered to whose
address is _______________________.
Dated:________________________ Signature:________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
(Insert Social Security or Other
Identifying Number of Assignee)
A-5
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder desires to transfer
the Warrant Certificate.)
FOR VALUE RECEIVED _______________________________ hereby sells, assigns
and transfers unto______________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint Attorney, to transfer the
within Warrant Certificate on the books of the within-named Company, with full
power of substitution.
Dated:________________________ Signature:________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
(Insert Social Security or Other
Identifying Number of Assignee)
A-6
<PAGE>
Exhibit 1.20
CLUCK CORP INTERNATIONAL, INC.
500,000 Shares of Convertible Redeemable Preferred Stock
$10.00 per share
AGREEMENT AMONG UNDERWRITERS
As of April ______________, 1997
Global Equities Group, Inc.
As Lead Managing Underwriter and
the Representative of the Underwriters
5 Hanover Square
New York, New York 10004
Attention: Thomas McDermott, Vice President
Investment Banking
Dear Sirs:
We hereby agree with you as follows with respect to (i) the purchase and
offering by Global Equities Group, Inc. as the lead managing underwriter and the
representative (the "Representative") and Suncoast Capital Corp. as the
co-managing underwriter ("Suncoast" and collectively with the Representative,
the "Underwriters") of an aggregate of 500,000 shares of $1.00 par value Series
A Redeemable Convertible Preferred Stock (the "Preferred Stock") at $10.00 per
share of Cluck Corp International, Inc. (the "Company").
1. Registration Statement. We confirm that we have examined the
registration statement (including the prospectus) relating to the Preferred
Stock as amended to the date of this agreement and we are familiar with the
terms of the Preferred Stock to be offered and the other terms of the offering
which are to be reflected in the proposed pricing amendment to the registration
statement. The registration statement as amended at the time it becomes
effective, including financial statements and exhibits, is referred to in this
agreement as the Registration Statement, and the prospectus in the form first
filed with the Securities and Exchange Commission (the "Commission") pursuant to
its Rule 424(b) is referred to as the Prospectus.
We further confirm that:
(a) Insofar as it relates to us, the information in the Registration
Statement as amended to this date and in the proposed amendment is correct and
complete and is not misleading.
<PAGE>
Global Equities
April 28, 1997
2
(b) We are aware of and are willing to accept our responsibilities under
the Securities Act of 1933 as an Underwriter and Co-Manager of the offering to
be named in the Registration Statement.
(c) We are willing to proceed with the underwriting of the Preferred Stock
in the manner contemplated in the Underwriting Agreement.
(d) You are authorized, in your discretion and on our behalf, with approval
of counsel for the Representative of the Underwriters, Mound, Cotton & Wollan,
to approve any proposed amendment and the Prospectus and to approve of or to
object to any further amendments to the Registration Statement, or amendments or
supplements to the Prospectus.
2. Underwriting Agreement.
(a) We authorize you to execute and deliver on our behalf the Underwriting
Agreement in substantially the form annexed hereto as Exhibit A. The number of
Preferred Stock set forth opposite each Underwriter's name in Schedule I to the
Underwriting Agreement, or such number increased as set forth in Section 9 of
the Underwriting Agreement, is referred to in this agreement as the original
underwriting commitment of such Underwriter, and the ratio which such original
underwriting commitment bears to the total number of shares of Preferred Stock
is referred to in this agreement as the underwriting proportion of such
Underwriter.
(b) Our firms have also agreed that in addition to the ten percent (10%)
underwriters' discount payable to each firm with respect to the Preferred Stock
which it underwriters, the three percent (3%) non-accountable expense allowance
will be paid 90 percent (90%) to Global and ten percent (10%) to Suncoast.
(c) In connection with the subject underwriting, the Representative will
receive Preferred Stock Purchase Warrants (the "Representative's Warrants") to
purchase up to fifty thousand (50,000) shares of Preferred Stock for $12.00 per
share.
3. Authorization Under Underwriting Agreement. The Under- writing Agreement
provides that the obligations of the Underwriters thereunder are subject, among
other things, to the condition that the Registration Statement shall have become
effective no later than 5:00 P.M., New York time, on the date of the
Underwriting Agreement. You are hereby authorized, in your discretion, to extend
such time to not later than 1:00 P.M., New York time, on the date following such
date and, with the consent of Underwriters, including yourselves, who have
agreed to purchase in the aggregate at least a majority of the Preferred Stock,
to agree to one or more subsequent extensions of such date and to take on our
behalf any action that may be necessary for such purposes.
<PAGE>
Global Equities
April 28, 1997
3
You are also authorized in your sole discretion to take the following
action with respect to the Underwriting Agreement:
(a) To postpone the Effective Date or the First Delivery Date (as such
terms are defined in the Underwriting Agreement) or, except as provided above,
to extend any other date specified in the Underwriting Agreement.
(b) To exercise any right of cancellation or termina- tion.
(c) To arrange for the purchase by other persons (including yourselves or
any other Underwriter) of any of the shares of Preferred Stock not taken up by
any defaulting Underwriter or by the other Underwriters as provided in Section
12 of the Underwriting Agreement.
(d) To consent to such other changes in or waivers of provisions of the
Underwriting Agreement as in your judgment do not materially and adversely
affect our rights and obligations.
4. Method of Offering. We agree, jointly with you, to manage the
underwriting and the public offering of the Preferred Stock and to take such
action in connection therewith and in connection with the purchase, carrying and
resale of the Preferred Stock, including without limitation the following, as
you in your sole discretion deem appropriate or desirable:
(a) To determine the time of the initial public offering of the Preferred
Stock and the Underwriters' gross spread.
(b) To make any changes in the terms of the offering.
(c) To make changes in those who are to be Underwriters and in the
respective numbers of the Preferred Stock to be purchased by them, provided that
our original underwriting commitment shall not be changed without our consent.
(d) To determine all matters relating to advertising and communications
with dealers or others.
(e) To reserve for sale and to sell to institutions or other retail
purchasers, for the Underwriters account, such number of shares of Preferred
Stock as the Underwriters may determine; provided, however, that such
reservations and sales shall be made for the respective accounts of the several
Underwriters as nearly as practicable in their respective underwriting
proportions, except for such sales for the account of a particular Underwriter
designated by such a purchaser.
<PAGE>
Global Equities
April 28, 1997
4
(f) To reserve for sale and to sell to dealers, for the Underwriters
account, such of the Underwriters Preferred Stock as the Underwriters may
determine; provided, however, that such dealers shall be members in good
standing of the National Association of Preferred Stock Dealers, Inc. (the
"NASD") or foreign banks or dealers not eligible for membership in the NASD who
(A) agree that they will make no sales of shares of Preferred Stock within the
United States, its territories or its possessions or to persons who are citizens
thereof or resident therein and (B) agree that in making sales of such Preferred
Stock outside the United States, its territories or possessions they will comply
with the requirements of the NASD's Interpretation with Respect to Free-Riding
and Withholding and with Sections 8, 24 and 36 of Article III of the NASD's
Rules of Fair Practice as though they were such a member and will comply with
Section 25 of such Article as it applies to a non-member broker or dealer in a
foreign country, and (C) may include any of the Underwriters. Such sales shall
be made pursuant to Dealer Agreements substantially in the form set forth as
Exhibit B hereto.
(g) To apportion such sales to dealers among the Underwriters as nearly as
practicable in the ratio that the Preferred Stock of each Underwriter so
reserved bears to the total number of Preferred Stock of all Underwriters so
reserved; provided, however, that if such ratio is to be revised by reasons of
the release of any of the Preferred Stock for direct sale as hereinafter
provided, sales may be apportioned by you from day to day on the basis of the
ratio existing at the end of the preceding day.
(h) To fix the concession to dealers and the reallowance to dealers and,
after the initial public offering of the Preferred Stock to make changes in the
concession and reallowance.
(i) At any time with respect to unsold Preferred Stock retained by an
Underwriter: (A) to reserve any such Preferred Stock for sale by the other
Underwriter for the account of the Underwriters or (B) to purchase any such
Preferred Stock which in the Representative's opinion are needed to enable you
to make deliveries for the accounts of the several Underwriters pursuant to this
agreement. Such purchases may be made at the public offering price, or at the
Underwriters' option, at such price less all or any part of the concession to
dealers.
We understand that you will advise us when the shares of Preferred Stock
are released for public offering and of the number of shares of Preferred Stock
sold or reserved for sale for our account. We shall retain for direct sale any
Preferred Stock purchased by us and not so sold or reserved. Direct sales shall
be made in accordance with the terms of offering set forth in the Prospectus.
With your consent, we may obtain release from you for
<PAGE>
Global Equities
April 28, 1997
5
the direct sale of the Preferred Stock held by you for sale pursuant to
subparagraphs (e) and (f) above but not sold and paid for. To the extent
Preferred Stock so released had been reserved for sale to dealers, the number of
Preferred Stock reserved for our account for sale to dealers shall be
correspondingly reduced. We will advise you from time to time, at your request,
of the number of Preferred Stock retained by us which remain unsold and of the
number of Preferred Stock remaining unsold which were delivered to us pursuant
to the last paragraph of this Section 4.
If, prior to the termination of this agreement, you shall purchase or
contract to purchase any of the Preferred Stock sold directly by us, in your
discretion you may (i) sell for our account the Preferred Stock so purchased and
debit or credit our account for the loss or profit resulting from such sale,
(ii) charge our account with an amount equal to the concession to dealers with
respect thereto and credit such amount against the cost thereof or (iii) require
us to purchase such Preferred Stock at a price equal to the total cost of such
purchase including commissions and transfer taxes on redelivery. Certificates
for the Preferred Stock delivered on such repurchase need not be identical to
the certificates for the Preferred Stock so purchased by you.
5. Trading Authorizations. We authorize you, during the term of this
agreement in your discretion:
To make purchases and sales of the Preferred Stock, in the open market or
otherwise (in addition to purchases and sales made under the authority of
Section 4), either for long or short account, on such terms and at such prices
as you may determine.
All such purchases and sales shall be made for the respective accounts of
the several Underwriters as nearly as practicable in their respective
underwriting proportions; provided, however, that at no time shall our net
commitment resulting from such purchases and sales, either for long or short
account, exceed 15% of our original underwriting commitment and provided that in
determining our net commitment for short account there shall be subtracted the
maximum number of Option Stock (as defined in the Underwriting Agreement) which
we are entitled to purchase. We agree to take up at cost on demand any Preferred
Stock so purchased for our account and to deliver on demand any Preferred Stock
so sold. Without limiting the generality of the foregoing, you may buy or take
over for the respective accounts of the several Underwriters, all in the
proportion and within the limits set forth, at the price at which reserved, any
of the Preferred Stock reserved for sale by you but not sold and paid for, for
such purposes as you may determine, including, but not limited to, the covering
of short sales.
<PAGE>
Global Equities
April 28, 1997
6
We agree to maintain any records required of us pursuant to Rule 17a-2
under the Preferred Stock Exchange Act of 1934.
6. Limitation on Transactions by Underwriters. Except as permitted by you,
we will not during the term of this agreement bid for, purchase, sell or attempt
to induce others to purchase or sell, directly or indirectly, any shares of
Preferred Stock other than (i) as provided in the Underwriting Agreement and
this agreement, (ii) purchases from or sales to dealers of the Preferred Stock
at the public offering price less all or any part of the reallowance to dealers
or (iii) purchases or sales by us of any securities as broker on unsolicited
orders for the account of others.
We represent that we have not participated in any transaction prohibited by
the preceding paragraph and that we have at all times complied with the
provisions of Regulation M of the Commission applicable to this offering.
We may, with your prior consent, make purchases of the Preferred Stock from
and sales to other Underwriters at the public offering price, less all or any
part of the concession to dealers.
We agree not to sell to any account over which we exercise discretionary
authority, without the prior written consent of the customer, any of the
Preferred Stock which we purchase and which are subject to the terms of this
agreement.
7. Delivery and Payment. At 9:00 A.M., New York time on the Effective Date,
we will deliver to you at your office a certified or official bank check,
payable in New York Clearing House funds, to the order of Global Equities Group,
Inc. or otherwise as you may direct, for either (a) an amount equal to the
public offering price less the selling concession in respect of the Preferred
Stock to be purchased by us or (b) an amount equal to the public offering price
less the selling concession in respect of such of the Preferred Stock to be
purchased by us as shall have been retained by or released to us for direct
sale, as you shall direct. You shall use such funds to make payment on our
behalf to the Company of the purchase price for our portion of the Preferred
Stock. Any balance shall be held by you for our account. If you have not
received our funds as requested, you may in your discretion make any such
payment on our behalf and we will promptly deliver funds to you in the amount so
requested. Any such payment by you will not relieve us from any of our
obligations under this agreement or under the Underwriting Agreement.
We authorize you, in carrying out the provisions of this agreement, in your
discretion, to arrange loans for our account, to advance your funds for our
account, charging current interest rates, and to hold or pledge as security
therefor all or any part
<PAGE>
Global Equities
April 28, 1997
7
of the Preferred Stock which you may be holding for our account. Any lender is
hereby authorized to accept your instructions with respect to such loans, and we
authorize you to execute and deliver notes or other instruments in connection
therewith.
You shall promptly remit to us or credit to your account (i) the proceeds
of any loan taken down on our behalf and (ii) upon payment to you for any
Preferred Stock sold for our account, an amount equal either to the purchase
price paid by us or the price received by you therefor, as you may determine.
We authorize you to take delivery of certificates for the Preferred Stock,
registered as you may direct in order to facilitate deliveries, and to deliver
any Preferred Stock reserved for us against sales. You will deliver to us
certificates for the unreserved Preferred Stock and certificates for the
reserved but unsold Preferred Stock as soon as practicable after the termination
of the provisions referred to in Section 10.
Certificates for all other Preferred Stock which you then hold for our
account shall be delivered to us upon termination of this agreement, or prior
thereto in your discretion, and certificates for any Preferred Stock may at any
time be delivered to us for carrying purposes only, subject to redelivery upon
demand. If, upon termination of this agreement, an aggregate of not more than
10% of the Preferred Stock remains unsold, you may, in your discretion, sell
such Preferred Stock at such prices as you may determine.
8. Blue Sky Qualification. Upon request, you will inform us as to the
jurisdictions in which you have been advised by counsel that the Preferred Stock
have been registered or qualified for sale under the respective securities or
Blue Sky laws, but you do not assume any responsibility or obligation as to our
right to sell the Preferred Stock in any jurisdiction.
9. Indemnification and Certain Claims. Each Underwriter, including
yourselves, agrees to indemnify and hold harmless each of the other
Underwriters, and each person, if any, who controls any other Underwriter within
the meaning of Section 15 of the Preferred Stock Act of 1933 and to reimburse
their expenses, all to the extent, if any, and upon the terms that we agree to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement and any person controlling the Company to reimburse
their expenses, as set forth in the Underwriting Agreement.
We agree that in respect of any matters connected with or action taken by
you pursuant to this agreement you shall act only as agent of the Underwriters
and you shall be under no liability to us in any such respect or in respect of
the form of, or the statements contained in, or the validity of, any preliminary
<PAGE>
Global Equities
April 28, 1997
8
prospectus or the Registration Statement or Prospectus, or any amendment or
supplement with respect thereto, or for any report or other filing made by you
for us on our behalf under this agreement, except for want of good faith and for
obligations expressly assumed by you herein and no obligation on you part will
be implied or inferred from confirmation or acceptance of this agreement.
We will pay our proportionate share (based on our underwriting proportion)
of (a) all expenses incurred by you in investigating or defending against any
claim or proceeding which is asserted or instituted by any party (including any
governmental or regulatory body) other than an Underwriter based upon the claim
that the Underwriters constitute an association, unincorporated business or
other separate entity, or relating to the Registration Statement or Prospectus
(or any amendment or supplement thereto) or any preliminary prospectus and (b)
any liability incurred by you in respect of any such claim or proceeding,
whether such liability shall be the result of a judgment or the result of any
settlement agreed to by you, other than any such liability as to which you
actually receive indemnity pursuant to the first paragraph of this Section 9 or
indemnity or contribution pursuant to Section 8 of the Underwriting Agreement.
Upon termination of this Agreement, all authorizations, rights and
obligations hereunder shall cease except (i) the mutual obligations to settle
accounts hereunder, (ii) our obligations to pay any transfer taxes which may be
assessed and paid on account of any sales hereunder for our account, (iii) our
obligation with respect to purchases which may be made by you from time to time
thereafter to cover any short position incurred under this agreement, (iv) our
agreements contained in the first and third paragraphs of Section 9 hereof and
(v) the obligations of any defaulting Underwriter, all of which shall continue
until fully discharged. If any other Underwriter defaults in its obligations
under this agreement we will assume our proportionate share (determined on the
basis of the respective underwriting proportions of the non-defaulting
Underwriters) of such obligations without relieving the defaulting Underwriter
from liability.
The accounts arising pursuant to this Agreement shall be settled and paid
as soon as practicable after termination, except that you may reserve such
amount as you deem advisable to cover any additional contingent expenses.
You are authorized at any time:
(a) To make partial distributions of credit balances or call for the
payment of debit balances.
<PAGE>
Global Equities
April 28, 1997
9
(b) To determine the amounts to be paid to or by us, which determination
shall be final and conclusive.
(c) To charge our account with (i) all transfer taxes on sales made for
our account and (ii) our underwriting proportion of all expenses
(other than transfer taxes) incurred by you, as Representative of the
several Underwriters, in connection with the transactions contemplated
by this agreement.
(d) To maintain any of our funds at any time with your general funds
without accountability for interest.
10. Miscellaneous. Nothing in this agreement shall constitute us partners
with you and the obligations of ourselves and you are several and not joint.
Each Underwriter elects to be excluded from the application of Subchapter K,
Chapter 1, Subtitle A, of the Internal Revenue Code of 1986, as amended. Default
by any Underwriter with respect to the Underwriting Agreement shall not release
us from any of our obligations thereunder or hereunder.
Your authority under this agreement and under the Underwriting Agreement
may be exercised solely by you.
Any notice from you to us shall be deemed to have been given if mailed,
telegraphed or hand delivered, or telephoned and subsequently confirmed in
writing, to our address stated in the Underwriting Agreement which we have
furnished to you for transmittal to the Company.
We confirm that we are a member in good standing of the NASD and that, in
making sales of the Preferred Stock, we agree to comply with all applicable
rules of the NASD, including, without limitation, the NASD's Interpretation with
Respect to Free-Riding and Withholding and Section 24 of Article III of the
NASD' Rules of Fair Practice. We also confirm that our commitment to purchase
Preferred Stock pursuant to the Underwriting Agreement will not result in a
violation of Rule 15c3-1 under the Securities Exchange Act of 1934 or of any
similar provisions of any applicable rules of any securities exchange to which
we are subject or of any restriction imposed upon us by any such exchange or any
governmental authority.
This agreement shall be governed by and construed in accordance with the
laws of the State of New York.
<PAGE>
Global Equities
April 28, 1997
10
This agreement is being executed by us and delivered to you in duplicate.
Very truly yours,
Suncoast Capital Corp.
By____________________________
Authorized Signatory or
Attorney-In-Fact
Confirmed as of the date first above mentioned.
GLOBAL EQUITIES GROUP, INC.
As Lead Managing Underwriter and
the Representative of the Underwriters
named in Schedule I
By____________________________
<PAGE>
Global Equities
April 28, 1997
11
SCHEDULE I
Shares of
Underwriters Preferred Stock
GLOBAL EQUITIES GROUP, INC. . . . . .
Suncoast Capital Corp.
Total . . . . . . . . . . . . . . . .
<PAGE>
Exhibit 1.21
UNDERWRITING AGREEMENT
CLUCKCORP INTERNATIONAL, INC.
500,000 Shares of 12%
Convertible Redeemable Preferred Stock
(Liquidation Preference $10.00 per Preferred Security)
April ___, 1997
GLOBAL EQUITIES GROUP, INC.
As Representative of the several
Underwriters named in Schedule 1
5 Hanover Square - 22nd Floor
New York, New York 10004
Dear Sirs:
CluckCorp International, Inc. a Texas corporation proposes to sell an
aggregate of 500,000 shares (the "Firm Stock") of the Company's Series A
Redeemable Convertible Preferred Stock par value $1.00 per share (the "Preferred
Stock"). In addition, the Company proposes to grant to the Underwriters named in
Schedule 1 hereto (the "Underwriters") an option to purchase up to an additional
75,000 shares of Preferred Stock on the terms and for the purposes set forth in
Section 2 (the "Option Stock"). The Firm Stock and the Option Stock, if
purchased, are hereinafter collectively called the "Stock." This is to confirm
the agreement concerning the purchase of the Stock from the Company by the
Underwriters named in Schedule 1 hereto (the "Underwriters") in the amounts set
forth opposite their respective names.
1. Representations, Warranties and Agreements of the Company. The Company
represents, warrants and agrees that:
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<PAGE>
(a) A registration statement on Form SB-2 (No. 333-21067), and an
amendment thereto, with respect to the Stock have (i) been prepared by
the Company in conformity with the requirements of the Securities Act
of 1933 (the "Securities Act") and the rules and regulations (the
"Rules and Regulations") of the Securities and Exchange Commission
(the "Commission") thereunder, (ii) been filed with the Commission
under the Securities Act and (iii) become effective under the
Securities Act; and a second registration statement on Form SB-2 with
respect to the Stock (i) may also be prepared by the Company in
conformity with the requirements of the Securities Act and the Rule
and Regulations and (ii) if to be so prepared, will be filed with the
Commission under the Securities Act pursuant to Rule 462(b) of the
Rules and Regulations on the date hereof. Copies of the first such
registration statement and the amendment to such registration
statement, together with the form of any such second registration
statement, have been delivered by the Company to you as the
representative (the "Representative") of the Underwriters. As used in
this Agreement,
-2-
<PAGE>
"Effective Time" means (i) with respect to the first such
registration statement, the date and the time as of which such
registration statement, or the most recent post-effective
amendment thereto, if any, was declared effective by the
Commission and (ii) with respect to any second registration
statement, the date and time as of which such second registration
statement is filed with the Commission, and "Effective Times" is
the collective reference to both Effective Times; "Effective
Date" means (i) with respect to the first such registration
statement, the date of the Effective Time of such registration
statement and (ii) with respect to any second registration
statement, the date of the Effective Time, and "Effective Dates"
is collective reference to both Effective Dates; "Preliminary
Prospectus" means such prospectus included in any such
registration statement, or amendments thereof, before it became
effective under the Securities Act and any prospectus filed with
the Commission by the Company with the consent of the
Representative pursuant to Rule 424(a) of the Rules and
Regulations; "Primary Registration Statement" means the first
registration statement referred to in this Section 1(a), as
amended as its Effective Time, "Rule 462(b) Registration
Statement" means the second
-3-
<PAGE>
registration Statement, if any, referred to in this Section 1(a),
as filed with the Commission, and "Registration Statements" means
both the Primary Registration Statement and any Rule 462(b)
Registration Statement, including in each case all information
contained in the final prospectus filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations in
accordance with Section 6(a) hereof and deemed to be a part of
the Registration Statement pursuant to paragraph (b) of Rule 430A
of the Rules and Regulations; and "Prospectus" means such final
prospectus, as first filed with the Commission pursuant to
paragraph (1) or (4) of Rule 424(b) of the Rules and Regulations.
The Commission has not issued any order preventing or suspending
these of any Preliminary Prospectus.
(b) The Primary Registration Statement conforms (and the Rule 462(b)
Registration Statement, if any, the Prospectus and any further
amendments or supplements to the Registration Statements or the
Prospectus, when they become effective or are filed with the
Commission, as the case may be, will conform) in all respects to the
requirements of the Securities Act and the Rules and Regulations and
do not and will not, as of the
-4-
<PAGE>
applicable effective date (as to the Registration Statements and
any amendment thereto) and as of the applicable filing date (as
to the Prospectus and any amendment or supplement thereto)
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to
make the statements therein not misleading; provided that no
representation or warranty is made as to information contained in
or omitted from the Registration Statements or the Prospectus in
reliance upon and in conformity with written information
furnished to the Company through the Representative by or on
behalf of any Underwriter specifically for inclusion therein.
(c) The Company and each of its subsidiaries (as defined in Section 15)
have been duly incorporated and are validly existing as corporations
in good standing under the laws of their respective jurisdictions of
incorporation, are duly qualified to do business and are in good
standing as foreign corporations in each jurisdiction in which their
respective ownership or lease of property or the conduct of their
respective businesses requires such qualification, and have all power
and authority necessary to own or hold their respective properties and
-5-
<PAGE>
to conduct the businesses in which they are engaged; and one of
the subsidiaries of the Company is a "significant subsidiary", as
such term is defined in Rule 405 of the Rules and Regulations.
(d) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of
the Company have been duly and validly authorized and issued, and
fully paid and non-assessable and conform to the description
thereof contained in the Prospectus; and all of the issued shares
of capital stock of each subsidiary of the Company have been duly
and validly authorized and issued and are fully paid and
non-assessable and (except for directors' qualifying shares) are
owned directly or indirectly by the Company, free and clear of
all liens, encumbrances, equities or claims. (e) The unissued
shares of the Stock to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and,
when issued and delivered against payment therefor as provided
herein will be duly and validly issued, fully paid and
non-assessable; and the Stock will conform to the description
thereof contained in the Prospectus.
-6-
<PAGE>
(f) The execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby
will not conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Company or any of its subsidiaries is a
party or by which the company or any of is subsidiaries is bound or to
which any of the properties or assets of the Company or any of its
subsidiaries is subject, nor will such actions result in any violation
of the provisions of the charter or by-laws of the Company or any of
its subsidiaries or any statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties or
assets; and except for the registration of the Stock under the
Securities Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the Exchange
Act and applicable state securities laws in connection with the
purchase and distribution of the Stock by the Underwriters, no
consent, approval, authorization or order or, or
-7-
<PAGE>
filing or registration with, any such court or governmental
agency or body is required for the execution, delivery and
performance of this Agreement by the Company and the consummation
of the transactions contemplated hereby.
(g) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the
Company to file a registration statement under the Securities Act with
respect to any securities of the Company owned or to be owned by such
person or to require the Company to include such securities in the
securities registered pursuant to the Registration Statements or in
any securities being registered pursuant to any other registration
statement filed by the Company under the Securities Act.
(h) The Company has not sold or issued any shares of Common or Preferred
Stock during the six-month period preceding the date of the
Prospectus, including any sales pursuant to Rule 144A, or Regulations
D or S of, the Securities Act.
(i) Neither the Company nor any of its subsidiaries has sustained, since
the date of the latest audited financial statements included in the
Prospectus, any material loss or interference with
-8-
<PAGE>
its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as
set forth or contemplated in the Prospectus; and, since such
date, there has not been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any
material adverse change, or any development involving a
prospective material adverse change, in or affecting the general
affairs, management, financial position, stockholders, equity or
results of operations of the Company and its subsidiaries,
otherwise than as set forth or contemplated in the Prospectus.
(j) The financial statements (including the related notes and supporting
schedules) filed as part of the Registration Statements or included in
the Prospectus present fairly the financial condition and results of
operations of the entities purported to be shown thereby, at the dates
and for the periods indicated, and have been prepared in conformity
with generally accepted accounting principles applied on a consistent
basis throughout the periods involved. (k) Akin, Doherty, Klein &
Feuge, P.C. who have certified certain financial statements of the
-9-
<PAGE>
Company, whose report appears in the Prospectus and who have
delivered the initial letter referred to in Section 7(e) hereof,
are independent public accountants as required by the Securities
Act and the Rules and Regulations.
(l) There are no legal or governmental proceedings pending to which the
Company or any of its subsidiaries is a party or of which any property
or asset of the Company or any of its subsidiaries is the subject
which, if determined adversely to the Company or any of its
subsidiaries, might have a material adverse effect on the consolidated
financial position, stockholders' equity, rules of operations,
business or prospects of the Company and its subsidiaries; and to the
best of the Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others.
(m) There are no contracts or other documents which are required to be
described in the Prospectus or filed as exhibits to either of the
Registration Statements by the Securities Act or by the Rules and
Regulations which have not been described in the Prospectus or filed
as exhibits to the either of the Registration Statements or
incorporated therein by reference as permitted by the Rules and
Regulations.
-10-
<PAGE>
(n) The warrants (the "Underwriters' Warrants") to be issued to the
Representative hereunder will be, when issued, duly and validly
authorized and executed by the Company and will constitute valid and
binding obligations of the Company, legally enforceable in accordance
with their terms, and the Company will have duly authorized, reserved
and set aside the shares of its Preferred Stock issuable upon exercise
of the Underwriters' Warrants and such stock, when issued and paid for
upon exercise of the Underwriters' Warrants in accordance with the
provisions thereof, will be duly and validly registered, authorized
and issued, fully-paid and non-assessable.
(o) The Company represents that no person has acted as a finder in
connection with the transactions contemplated herein except as set
forth in the registration statement. The Company will indemnify the
Underwriters with respect to any claim for finder's fees in connection
herewith. Except as set forth in the registration statement, the
Company further represents that it has no management or financial
consulting agreements with any person and that, except as set forth in
-11-
<PAGE>
the Registration statement and in the Prospectus or otherwise
disclosed to the Representative in writing prior to the date
hereof, no promoter, officer, director, consultant or shareholder
of the Company is directly or indirectly, affiliated or
associated with an NASD member broker-dealer.
2. Purchase of the Stock by the Underwriters. On the basis of the
representations and warranties contained in, and subject to the terms
and conditions of, this Agreement, the Company agrees to sell 500,000
shares of the Firm Stock severally and not jointly, to the several
underwriters and each of the Underwriters, severally and not jointly,
agrees to purchase the number of shares of the Firm Stock set opposite
that Underwriter's name in Schedule 1 hereto. Each Underwriter shall
be obligated to purchase from the Company that number of shares of the
Firm Stock which represents the same proportion of the number of
shares of the Firm Stock to be sold by the Company, as the number of
shares of the Firm Stock set forth opposite the name of such
Underwriter in Schedule 1 represents of the total number of shares of
the Firm Stock to be purchased by all of the Underwriters pursuant to
this Agreement. The respective purchase obligations of the
Underwriters with respect to the Firm Stock shall be rounded among the
Underwriters to void fractional shares, as the Representative may
determine.
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In addition, the Company grants to the Underwriters an option to purchase
up to 75,000 shares of Option Stock. Such option is granted solely for the
purpose of covering over-allotments in the sale of Firm Stock and is exercisable
as provided in Section 4 hereof. Shares of Option Stock shall be purchased
severally for the account of the Underwriters in proportion to the number of
shares of Firm Stock set opposite the name of such Underwriters in Schedule 1
hereto. The respective purchase obligations of each Underwriters with respect to
the Option Stock shall be adjusted by the Representative so that no Underwriter
shall be obligated to purchase Option Stock other than 100 share amounts. The
price of both the Firm Stock and any Option Stock shall be $9.00 per share which
represents the public offering price of $10.00 per share less an underwriting
discount of ten percent. All or any portion of such discount may be reallowed by
you for sale through licensed securities dealers who are members in good
standing of the NASD. Notwithstanding anything contained herein to the contrary,
Global individually and not as Representative, may purchase all or any part of
the Option Stock and is not obligated to offer the Option Stock to the other
Underwriters.
The Company is not obligated to deliver any of the Stock to be
delivered on the First Delivery Date or the Second Delivery Date (as hereinafter
defined), as the case may be, except upon payment for all the Stock to be
purchased on such Delivery Date as provided herein.
3. Offering of Stock by the Underwriters. Upon authorization by the
Representative of the release of the Firm
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Stock, the several Underwriters proposed to offer the Firm Stock for sale upon
the terms and conditions set forth in the Prospectus; provided, however, that no
Stock registered pursuant to the Rule 462(b) Registration Statement, if any,
shall be offered prior to the Effective Time thereof.
4. Delivery of and Payment for the Stock. Delivery of and payment for the
Firm Stock shall be made at the office of counsel for the Representative, Mound,
Cotton & Wollan, at One Battery Park Plaza, New York, New York 10004, at 10:00
A.M., New York City time, on the third full business day following the date of
this Agreement or at such other date or place as shall be determined by
agreement between the Representative and the Company. This date and time are
sometimes referred to as the "First Delivery Date." On the First Delivery Date,
the Company shall deliver or cause to be delivered certificates representing the
Firm Stock to the Representative for the account of each Underwriter against
payment to or upon the order of the Company of the purchase price by bank wire,
certified or official bank check or checks payable in New York Clearing House
(same-day) funds. In making payment to the Company, the Representative may first
deduct all sums due to it for the balance of the non-accountable expense
allowance and under the Financial Consulting Agreement entered into between the
Company and Representative in November 1996. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is further
condition of the obligation of each Underwriter
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hereunder. On the First Delivery Date, the Company shall deliver in respect of
the Firm Stock one certificate evidencing all of the shares of such series of
securities being sold on the First Delivery Date registered in the name of
_____________________, as nominee for The Depository Trust Company ("DTC").
Interests in the Firm Stock will be represented by book entries on the records
of DTC as the Underwriters may request not less than two full business days in
advance of the First Delivery Date. For the purpose of expediting the checking
and packaging of the certificates for the Firm Stock, the Company and the
Selling Stockholders shall make the certificates representing the Firm Stock
available for inspection by the Representative in New York, New York, not later
than 2:00 P.M., New York City time, on the business day prior to the First
Delivery Date.
At any time on or before the forty-fifth day after the date of this
Agreement the option granted in Section 2 may be exercised by written notice
being given to the Company by the Representative. Such notice shall set forth
the aggregate number of shares of Option Stock as to which the option is being
exercised, the names in which the shares of Option Stock are to be registered,
the denominations in which the shares of Option Stock are to be issued and the
date and time, as determined by the Representative, when the shares of Option
Stock are to be delivered; provided, however, that this date and time shall not
be earlier than the First Delivery Date nor earlier than the second business day
after the date on which the option shall have been exercised nor later than
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the fifth business day after the date on which the option shall have been
exercised. The date and time the shares of Option Stock are delivered are
sometimes referred to as the "Second Delivery Date" and the First Delivery Date
and the Second Delivery Date are sometimes each referred to as a "Delivery
Date".
Delivery of and payment for the Option Stock shall be made at the place
specified in the first sentence of the first paragraph of this Section 4 (or at
such other place as shall be determined by agreement between the Representative
and the Company) at 10:00 A.M., New York City time, on the Second Delivery Date.
On the Second Delivery Date, the Company shall deliver or cause to be delivered
the certificates representing the Option Stock to the Representative for the
account of each Underwriter against payment to or upon the order of the Company
of the purchase price by bank wire, certified or official bank check or checks
payable in New York Clearing House (same-day) funds. Time shall be of the
essence, and delivery at the time and place specified pursuant to this Agreement
is a further condition of the obligation of each Underwriter hereunder. On the
Second Delivery Date, the Company shall deliver in respect of the Option Stock
one certificate evidencing all of the shares of such series of securities being
sold on the Second Delivery Date registered in the mane of _______________as
nominee for DTC. For the purpose of expediting the checking and packaging of the
certificates for the Option Stock, the Company shall make the certificates
representing the Option Stock available for inspection by the Representative in
New
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York, New York, not later than 2:00 P.M., New York City time, on the business
day prior to the Second Delivery Date.
(e) At the time of making payment for the Firm stock, the Company also
hereby agrees to sell to the Representative Underwriters' Warrants to purchase
up to 50,000 shares of Preferred Stock at an aggregate purchase price of
$____________. Each Underwriters' Warrant shall entitle the owner thereof to
purchase one Preferred Stock of the Company at an exercise price of $12.00. The
Preferred Stock shall be similar in all respects to the Preferred Stock sold to
the public. Such Underwriters' Warrants are to become exercisable upon the
expiration of one year from the Effective Dte, and shall remain exercisable for
four years thereafter, such warrants may be transferred only to officers of
partners of the Underwriters and selling group members and their officers or
partners. The Underwriters' Warrants shall contain such other terms and
provisions as may be set forth in agreements with respect thereto (the
"Underwriters' Warrants Agreements") executed and delivered by the Company and
you simultaneously with the execution and delivery of this Agreement. The
Underwriters' Warrant Agreements shall provide that the exercise price and the
number and type of securities issuable upon exercise thereof shall be adjusted
upon the occurrence of certain events. As provided in the Underwriters' Warrant
Agreements, you may designate that the Underwriters' Warrants be issued in
varying amounts directly to your bona fide officers and not to you. Such
designation will be
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made by you only if you determine that such issuances would not violate the
interpretations of the NASD relating to the review of corporate financing
arrangements. The holders of the Underwriters' Warrants will be entitled to the
registration rights set forth in the Underwriters' Warrant Agreements.
5. Further Agreements of the Company. The Company agrees:
(a) To prepare the Rule 462(b) Registration Statement, if necessary, in a
form approved by the Representative and to file such Rule 462(b)
Registration Statement with the Commission on the date hereof; to
prepare the Prospectus in a form approved by the Representative and to
file such Prospectus pursuant to Rule 424(b) under the Securities Act
not later than 10:00 A.M., New York City time, the day following the
execution and delivery of this Agreement; to make no further amendment
or any supplement to the Registration Statements or to the Prospectus
prior to the Second Delivery Date except as permitted herein; to
advise the Representative, promptly after it receives notice thereof,
of the time when any amendment to either Registration Statement has
been filed or becomes effective or any supplement to the Prospectus or
any amended Prospectus has been filed and to furnish the
Representative, promptly after it receives notice thereof, of the
issuance by the Commission of any stop
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order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospects, of the suspension of the
qualification of the Stock for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding
for any such purpose, or of any request by the Commission for the
amending or supplementing of the Registration Statements or the
Prospectus or for additional information; and, in the event of
the issuance of any stock order or of any order preventing or
suspending the use of any Preliminary Prospectus or the
Prospectus or suspending any such qualification, to use promptly
its best efforts to obtain its withdrawal;
(b) To furnish promptly to the Representative and to counsel for the
Underwriters a signed copy of each of the Registration Statements as
originally filed with the Commission, and each amendment thereto filed
with the Commission, including all consents and exhibits filed
therewith;
(c) To deliver promptly to the Representative in New York City such number
of the following documents as the Representative shall request: (i)
conformed copies of the Registration Statements as originally filed
with the Commission and each amendment thereto (in each case excluding
exhibits other than this Agreement and the computation of per share
earnings) (ii) each Preliminary
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Prospectus, the Prospectus (not later than 10:00 A.M., New York
City time, of the day following the execution and delivery of
this Agreement) and any amended or supplemented Prospectus (not
later than 10:00 A.M., New York City time, on the day following
the date of such amendment or supplement) prior to the expiration
of nine months after the Effective Time of the Primary
Registration Statement in connection with the offering or sale of
the Stock (or any other securities relating thereto) and if at
such time any events shall have occurred as a result of which the
Prospectus as then amended or supplemented would include any
untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such
Prospectus is delivered, not misleading, or, if for any other
reason it shall be necessary during such same period to amend or
supplement the Prospectus in order to comply with the Securities
Act, to notify the Representative and, upon its request, to
prepare and furnish without charge to each Underwriter and to any
dealer in securities as many copies as the Representative may
from time to time reasonably request of an amended or
supplemented Prospectus which will correct such statement or
omission or effect such compliance, and in case any Underwriter
is required to
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deliver a prospectus in connection with sales of any of the
Stock at any time nine months or more after the Effective Time
of the Primary Registration Statement upon the request of the
Representative but at the expense of such Underwriter, to
prepare and deliver to such Underwriter as many copies as the
Representative may from time to time reasonably request of an
amended or supplemented Prospectus complying with Section
10(a)(3) of the Securities Act;
(d) To file promptly with the Commission any amendment to the Registration
Statements or the Prospectus or any supplement to the Prospectus that
may, in the judgment of the Company or the Representative, be required
by the Securities Act or requested by the Commission;
(e) Prior to filing with the Commission any (i) amendment to either of the
Registration Statements or supplement to the Prospectus or (ii) any
Prospectus pursuant to Rule 424 of the Rules and Regulations, to
furnish a copy thereof to the Representative and counsel for the
Underwriters and obtain the consent of the Representative to the
filing:
(f) As soon as practicable after the Effective Date of the Primary
Registration Statement, to make generally available to the Company's
security holders and to deliver to the Representative an earnings
statement of the Company and its subsidiaries (which need not be
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audited) complying with Section 11(a) of the Securities Act and
the Rules and Regulations (including, at the option of the
Company, Rule 158);
(g) For a period of five years following the Effective Date of the Primary
Registration Statement, to furnish to the Representative copies of all
materials furnished by the Company to its shareholders and all public
reports and all reports and financial statements furnished by the
Company to the principal national securities exchange upon which the
Common or Preferred Stock may be listed pursuant to requirements of or
agreements with such exchange or to the Commission pursuant to the
Exchange Act or any rule or regulation of the Commission thereunder;
(h) Promptly from time to time to take such action as the Representative
may reasonably request to qualify the Stock for offering and sale
under the securities laws of such jurisdictions as the Representative
may request and to comply with such laws so as to permit the
continuance of sales and dealings therein in such jurisdictions for as
long as may be necessary to complete the distribution of the Stock;
(i) For a period of two years from the date of the Prospectus, not to
offer for sale, sell or otherwise dispose of (or enter into any
transaction which is designed to, or could be expected to, result in
the disposition or purchase by any person of), directly or indirectly,
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any shares of Preferred Stock or Common Stock (other than the Stock
and shares issued pursuant to employee benefit plans, qualified stock
option plans or other employee compensation plans existing on the date
hereof or pursuant to currently outstanding options, warrants or
rights), or sell or grant options, rights or warrants with respect to
any shares of Common Stock (other than the grant of options pursuant
to option plans existing on the date hereof), without the prior
written consent of the Representative; and to cause each officer and
director of the Company to furnish to the Representative, prior to the
First Delivery Date, a letter or letters, in form and substance
satisfactory to counsel for the Underwriters, pursuant to which each
person shall agree not to offer for sale, sell or otherwise dispose of
(or enter into any transaction which is designed to, or could be
expected to, result in the disposition or purchase by any person of),
directly or indirectly, any shares of Common Stock for a period of two
years from the date of the Prospectus, without the prior written
consent of the Representative;
(j) Prior to filing with the Commission any reports on Form SR pursuant to
Rule 463 of the Rules and Regulations, to furnish a copy thereof to
the counsel for the Underwriters and receive and consider its comments
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thereon, and to deliver promptly to the Representative a
signed copy of each report on Form SR filed by it with the
Commission;
(k) To apply the net proceeds from the sale of the Stock being sold by the
Company as set forth in the Prospectus; and
(l) To take such steps as shall be necessary to ensure that neither the
Company nor any subsidiary shall become an "investment company" within
the meaning of such term under the Investment Company Act of 1940 and
the rules and regulations of the Commission thereunder.
(m) For a period of five years from the Effective Date of the Registration
Statement, the Representative shall have the right to designate one
person as a member to the Board of Directors of the Company, who shall
be invited to and have the right to attend every meeting of the Board
of Directors together with the right to vote. Such member will be
reimbursed for expenses, including travel, and receive compensation in
the same amount as any other member of the Board of Directors and will
be indemnified by the Company against any claims arising out of his
participation at meetings of the Board of Directors. During such
period, the Company will hold at least four meetings per year of its
Board of Directors.
(n) Until such time as the securities of the Company are listed on the New
York Stock Exchange or the American
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Stock Exchange (not including The Emerging Growth Company
List) but in no event more than three years from the Effective
Date, the Company shall retain a company reasonably acceptable
to the Representative, to prepare a post registration blue sky
market survey for the Representative for distribution to
market makers. Such survey shall be provided to the
Representative monthly with the first survey delivered to it
as soon as practicable after the completion of the public
offering. The cost of the first year's survey will not exceed
$5,000. In lieu of the foregoing, the Company may cause its
legal counsel to provide the Representative with a survey to
be updated at least monthly.
(o) The Company will use its best efforts to obtain liability insurance at
reasonable costs insuring its directors and officers against any
liabilities asserted against them in connection with the preparation
for and the closing of the public offering which is the subject of
this Agreement and the initial public offering which transpired in
July 1996.
(p) The Company, for a period of at least three years following the public
offering, shall retain the services of a financial public relations
firm(s) reasonably satisfactory to the Representative, said
agreement(s) to commence no later than 90 days after the Closing of
the public offering. During this time period, the Company
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and its officers and directors will not hold discussions with
any member of the news media, issue news releases or permit
other publicity about the Company concerning financial
information or the occurrence of material events without the
approval of the Company's counsel and for the period from the
date hereof and ending at the end of the period for which a
prospectus must be delivered, the Company will obtain the
approval of the Underwriters' counsel concerning all of the
above matters. During such period, the Company will deliver to
the Representative all press releases in advance to your
Investment Banking Department (Attention: Thomas McDermott)
and once released, final copies of such news releases or other
publicity, in any medium, related to the Company will be
delivered to you.
6. Expenses. The Company agrees to pay (a) the costs incident to the
authorization, issuance, sale and delivery of the Stock and any taxes payable in
that connection; (b) the costs incident to the preparation, printing and filing
under the Securities Act of the Registration Statements and any amendments and
exhibits thereto; (c) the costs of distributing the Registration Statements as
originally filed and each amendment thereto and any post-effective amendments
thereof (including, in each case, exhibits), any Preliminary Prospectus, the
Prospectus and any amendment or supplement to the Prospectus, all as provided
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in this Agreement; (d) the costs of reproducing and distributing this Agreement;
(e) the costs of distributing the terms of agreement relating to the
organization of the underwriting syndicate and selling group to the members
thereof by mail, telex or other means of communication; (f) the costs of
delivering and distributing the Custody Agreements and the Powers of Attorney,
if any; (g) the filing fees incident to securing any required review by the
National Association of Securities Dealers, Inc. of the terms of sale of the
Stock; (h) the fees and expenses of qualifying the Stock under the securities
laws of the several jurisdictions as provided in Section 5(h) and of preparing,
printing and distributing a Blue Sky Memorandum (including related fees and
expenses of counsel to the Underwriters) (i) the expense of placing one or more
"tombstone" advertisements or promotional materials as directed by you
(provided, however, that the aggregate amount thereof shall not exceed $20,000)
and of offering memorabilia; (j) all costs and expenses associated with due
dilligence meetings and presentations (including the payment for road show
conference centers). Further, the Company shall be responsible for all legal
fees and expenses incurred with regard to the post registration Blue Sky Market
Survey and qualification process; and (i) all other costs and expenses incident
to the performance of the obligations of the Company.
In addition, the Company will pay to the Underwriters a non-accountable
expense allowance in an amount equal to 3% of the gross proceeds derived from
the sale of the Stock, of which $50,000 has been paid and the balance of which
shall be payable at the First Delivery Date provided, however, that in the event
that no First Delivery Date shall be held, the Company in lieu of such payment
shall reimburse the Representative in full (up to a maximum of $90,000) for its
reasonable out-of-pocket expense, including,
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without limitation, its legal fees and disbursements, and the Underwriters shall
reimburse the Company if and to the extent that such expenses are less than the
$_____________ previously advanced amount with respect to such expenses. The
non-accountable expense allowance shall be payable to the Underwriters based on
their pro rata participation in the offering which is _________(__%) to Global
and __________(__%) to ________.
7. Conditions of Underwriters' Obligations. The respective obligations of
the Underwriters hereunder are subject to the accuracy, when made and on each
Delivery Date, of the representations and warranties of the Company contained
herein, to the performance by the Company its respective obligations hereunder,
and to each of the following additional terms and conditions:
(a) The Rule 462(b) Registration Statement, if any, and the Prospectus
shall have been timely filed with the Commission in accordance with
Section 6(a); no stop order suspending the effectiveness of either of
the Registration Statements or any part thereof shall have been issued
and no proceeding for that purpose shall have been initiated or
threatened by the Commission; and any request of the Commission for
inclusion of additional information in either of the Registration
Statements or the Prospectus or otherwise shall have been complied
with.
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(b) No Underwriter shall have discovered and disclosed to the Company on
or prior to such Delivery Date that the Registration Statement either
of the Registration Statements or the Prospectus or any amendment or
supplement thereto contains any untrue statement of a fact which, in
the opinion of counsel for the Underwriters, is material or omits to
state any fact which, in the opinion of such counsel, is material and
is required to be stated therein or is necessary to make the
statements therein not misleading.
(c) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Custody
Agreements, the Powers of Attorney, the Stock, the Registration
Statements and the Prospectus, and all other legal matters relating to
this Agreement and the transactions contemplated hereby shall be
reasonably satisfactory in all respects to counsel for the
Underwriters and the Company shall have furnished to such counsel all
documents and information that they may reasonably request to enable
them to pass upon such matters.
(d) Gary A. Agron, Esq. shall have furnished to the Representative his
written opinion, as counsel to the Company, addressed to the
Underwriters and dated such Delivery Date, in form and substance
satisfactory to the Representative, to the effect that:
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(i) The Company and each of its subsidiaries have been duly incorporated
and are validly existing as corporations in good standing under the
laws of their respective jurisdictions of incorporation, are duly
qualified to do business and are in good standing as foreign
corporations in each jurisdiction in which their respective ownership
or lease of property or the conduct of their respective businesses
requires such qualification, and have all power and authority
necessary to own or hold their respective properties and conduct the
businesses in which they are engaged;
(ii) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the
Company (including the shares of Stock being delivered on such
Delivery Date) have been duly and validly authorized and issued, are
fully paid and non-assessable and conform to the description thereof
contained in the Prospectus; and all of the issued shares of capital
stock of each subsidiary of the Company have been duly and validly
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authorized and issued and are fully paid, non-assessable and (except for
directors' qualifying shares) are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or
claims;
(iii)There are no preemptive or other rights to subscribe for or to
purchase, nor any restriction upon the voting or transfer of, any
shares of the Stock pursuant to the Company's charter or by-laws or
any agreement or other instrument known to such counsel;
(iv) The Company and each of its subsidiaries have good and marketable
title in fee simple to all real property owned by them, in each case
free and clear of all liens, encumbrances and defects except such as
are described in the Prospectus or such as do not materially affect
the value of such property and do not materially interfere with the
use made and proposed to be made of such property by the Company and
its subsidiaries; and all real property and buildings held under lease
by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases, with such exceptions as are not
material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its
subsidiaries;
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(v) To the best of such counsel's knowledge, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property or asset of the
Company or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, might have a
material adverse effect on the consolidated financial position,
stockholders' equity, results of operations, business or prospects of
the Company and its subsidiaries; and, to the best of such counsel's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(vi) The Primary Registration Statement was declared effective under the
Securities Act as of the date and time specified in such opinion, the
Rule 462(b) Registration Statement, if any, was filed with the
Commission on the date specified therein, the Prospectus was filed
with the Commission pursuant to the subparagraph of Rule 424(b) of the
Rules and Regulations specified in such opinion on the date specified
therein and no stop order suspending the effectiveness of either of
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the Registration Statements has been issued and, to the knowledge of such
counsel, no proceeding for that purpose is pending or threatened by
the Commission;
(vii)The Registration Statements, as of their respective Effective Dates,
and the Prospectus, as of its date, and any further amendments or
supplements thereto, as of their respective dates, make by the Company
prior to such Delivery Date (other than the financial statements and
other financial data contained therein, as to which such counsel need
express no opinion) complied as to form in all material respects with
the requirements of the Securities Act and the Rules and Regulations;
(viii) To the best of such counsel's knowledge, there are no contracts or
other documents which are required to be described in the Prospectus
or filed as exhibits to the Registration Statements by the Securities
Act or by the Rules and Regulations which have not been described or
filed as exhibits to the Registration Statements or incorporated
therein by reference as permitted by the Rules and Regulations;
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(ix) This Agreement has been duly authorized, executed and delivered by the
Company;
(x) The issue and sale of the shares of Stock being delivered on such
Delivery Date by the Company and the compliance by the Company with
all of the provisions of this Agreement and the consummation of the
transactions contemplated hereby will not conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument known to such counsel
to which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries is bound or to which any of the
properties or assets of the Company or any of its subsidiaries is
subject, nor will such actions result in any violation of the
provisions of the charter or by-laws of the Company or any of its
subsidiaries or any statute or any order, rule or regulation known to
such counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties or assets; and, except for the registration of the
Stock under the Securities Act and such consents, approvals,
authorizations,
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registrations or qualifications as may be required under the Exchange Act
and applicable state securities laws in connection with the purchase
and distribution of the Stock by the Underwriters, no consent,
approval, authorization or order of, or filing or registration with,
any such court or governmental agency or body is required for the
execution, delivery and performance of this Agreement by the Company
and the consummation of the transactions contemplated hereby; and
(xi) To the best of such counsel's knowledge, there are no contracts,
agreements or understandings between the Company and any person
granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company owned or to be owned by such person or to
require the Company to include such securities in the securities
registered pursuant to the Registration Statements or in any
securities being registered pursuant to any other registration
statement filed by the Company under the Securities Act.
In rendering such opinion, such counsel may (i) state that their opinion is
limited to matters governed by the Federal laws of the United States of America,
the laws of the State of New York and the General Corporation Law of the State
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of Texas and that such counsel is not admitted in the State of Texas and
(ii) in giving the opinion referred to in Section 9(d)(iv), state that no
examination of record titles for the purpose of such opinion has been made, and
that they are relying upon a general review of the titles of the Company and its
subsidiaries, upon opinions of local counsel and abstracts, reports and policies
of title companies rendered or issued at or subsequent to the time of
acquisition of such property by the Company or its subsidiaries, upon opinions
of counsel to the lessors of such property and, in respect of matters of fact,
upon certificates or officers of the Company or its subsidiaries, provided that
such counsel shall state that they believe that both the Underwriters and they
are justified in relying upon such opinions, abstracts, reports, policies and
certificates. Such counsel shall also have furnished to the Representative a
written statement, addressed to the Underwriters and dated such Delivery Date,
in form and substance satisfactory to the Representative, to the effect that (x)
such counsel has acted as counsel to the Company on a regular basis (although
the Company is also represented by its General Counsel, has acted as counsel to
the Company in connection with previous financing transactions and has acted as
counsel to the Company in connection with the preparation of the Registration
Statements, and (y) based on the foregoing, no facts have come to the attention
of such counsel which lead them to believe that the Registration Statements, as
of their respective Effective Dates, contained any untrue statement of a
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material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading, or
that the Prospectus contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary in order to
make the statement therein, in light of the circumstances under which they were
made, not misleading. The foregoing opinion and statement may be qualified by a
statement to the effect that such counsel does not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in the
Registration Statements or the Prospectus except for that statements made in the
Prospectus under the caption, "Description of Preferred Stock", insofar as such
statements relate to the Stock and concern legal matters.
(e) At the time this Agreement is executed, and on the First and Second
Delivery Dates you shall have received letters from Akin, Doherty,
Klein & Ferge, P.C. independent public accountants for the Company
addressed to you, as Representative of the Underwriters, and dated,
respectively, as of the date of this Agreement and as of the First or
Second Delivery Date, in form and substance satisfactory to the
Representative, to the effect that:
(i) They are independent public accountants with respect to the Company
within the meaning of the Act and the applicable published Rules and
Regulations of the Commission thereunder;
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(ii) Stating that in their opinion, the financial statements and schedules
of the Company included in the Registration Statement and Prospectus
and covered by their report therein comply as to form in all material
respects with the applicable accounting requirements of the Act and
the 1934 Act and the applicable published Rules and Regulations of the
Commission issued thereunder;
(iii)On the basis of the procedures (but not an audit made in accordance
with generally accepted auditing standards) (1) consisting of a
reading of the latest available interim financial statements of the
Company (a copy of which shall be attached to such letter), (2) a
reading of the minutes of meetings and consents of the stockholders
and the Board of Directors of the Company and the Committees of such
boards subsequent to the date of the most recent audited balance sheet
of the Company and included in the Registration Statement and the
Prospectus, as set forth in the minute books of the Company, (3)
inquiries of officers and other employees of the Company responsible
for financial and accounting matters of the Company, with respect to
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transactions and events subsequent to the date of the most recent
audited balance sheet of the Company included in the Registration
Statement and the Prospectus, and other specified procedures and
inquiries to a date not more than five days prior to the date of
such letter, nothing has come to their attention that would cause
them to believe that (a) the unaudited financial statements and
schedules of the Company included in the Registration Statement
and Prospectus do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the
Exchange Act and the applicable published Rules and Regulations
of the Commission thereunder, or that such unaudited financial
statements are not fully presented in accordance with generally
accepted accounting principles except to the extent that certain
footnote disclosures have been omitted in accordance with
applicable rules of the Commission under the Exchange Act applied
on a basis substantially consistent with that Statement and the
Prospectus; (b) with respect to the period subsequent to the date
of the most recent balance sheet of the Company included in the
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Registration Statement and the Prospectus, there were, as of the
date of the most recent available monthly financial statements of
the Company and its subsidiaries, if any, and as of a specified
date not more than five days prior to the date of such letter,
any changes in the capital or long-term indebtedness of the
Company or any decrease in the net current assets or increase in
shareholders' deficit of the Company, in each case as compared
with the amounts shown in the most recent balance sheet included
in the Registration Statement and the Prospectus, except for
changes, or decreases or increases that the Registration
Statement and the Prospectus disclose have occurred or may occur
or which are set forth in such letter; or (c) that during the
period from the date following the date of the most recent
balance sheet of the Company and its subsidiaries included in the
Registration Statement and the Prospectus to the Date of the most
recent available monthly financial statements of the Company, if
any, and to a specified date not more than five days prior to the
date of such letter, there was any decrease, as compared with the
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corresponding period in the prior fiscal year, in total revenues,
or total or per share net income, except for decreases which the
Registration Statement and the Prospectus disclose have occurred
or may occur or which are set forth in such letter and (d)
stating percentages of revenues and earnings, and other financial
information pertaining to the Company set forth in the
Registration Statement and the Prospectus, which have been
specified by you prior to the date of this Agreement, to the
extent that such amounts, numbers, percentages and information
may be derived from the general accounting and financial records
of the Company or from schedules furnished by the Company, and
excluding any questions requiring an interpretation by legal
counsel, with the results obtained from the application of
specified readings, inquiries, and other appropriate procedures
specified by you (which procedures do not constitute an audit in
accordance with generally accepted auditing standards) set forth
in such letter, and found them to be in agreement.
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(iv) In addition to the examination referred to in their reports included
in the Registration Statement and the Prospectus and the limited
procedures referred to in clause (iii) above, they have carried out
certain specified procedures, not constituting an audit, with respect
to certain amounts, percentages and financial information which are
under the captions "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Management-Executive
Compensation," "Certain Transactions," "Selected Financial Data,"
"Dilution," and "Risk Factors, " as well as such other financial
information as may be specified by the Representative, and that they
have compared such amounts, percentages and financial information with
the accounting records of the Company and have found them to be in
agreement.
(f) The Company and the Representative shall be in compliance with an
agreement (the "Financial Consulting Agreement") retaining the
Representative to act as a management and financial consultant to the
Company for a one-year period commencing as of November 1996 at a fee
of $12,000 per month.
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(g) The Company shall have furnished to the Representative a certificate,
dated such Delivery Date, of its Chairman of the Board, its President
or a Vice President and its chief financial officer stating that:
(i) The representations, warranties and agreements of the Company in
Section 1 are true and correct as of such Delivery date; the
Company has complied with all its agreements contained herein;
and the conditions set forth in Sections 9(a) and 9(i) have been
fulfilled; and
(ii) They have carefully examined the Registration Statements and the
Prospectus and, in their opinion (A) the Registration Statements,
as of their respective Effective Dates, and the Prospectus, as of
each of the Effective Dates, did not include any untrue statement
of a material fact and did not omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and (B) since the Effective Date of the
Primary Registration Statement, no event has occurred which
should have been set forth in a supplement or amendment to either
of the Registration Statements or the Prospectus.
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(h) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial
statements included in the Prospectus any loss or
interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated
in the Prospectus or (ii) since such date there shall not
have been any change in the capital stock or long-term debt
of the Company or any of its subsidiaries or any change, or
any development involving a prospective change, in or
affecting the general affairs, management, financial
position, stockholders' equity or results of operations of
the Company and its subsidiaries, otherwise than as set
forth or contemplated in the Prospectus, the effect of
which, in any such case described in clause (i) or (ii), is,
in the judgment of the Representative, so material and
adverse as to make it impracticable or inadvisable to
proceed with the public offering or the delivery of the
Stock being delivered on such Delivery Date on the terms and
in the manner contemplated in the Prospectus.
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(i) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i)
trading in securities generally on the New York Stock
Exchange or the American Stock Exchange or in the
over-the-counter market, or trading in any securities of the
Company on any exchange or in the over-the-counter market,
shall have been suspended or minimum prices shall have been
established on any such exchange or such market by the
Commission, by such exchange or by any other regulatory body
or governmental authority having jurisdiction, (ii) a
banking moratorium shall have been declared by Federal or
state authorities, (iii) the United States shall have become
engaged in hostilities, there shall have been an escalation
in hostilities involving the United States or there shall
have been a declaration of a national emergency or war by
the United States or (iv) there shall have occurred such a
material adverse change in general economic, political or
financial conditions (or the effect of international
conditions on the financial markets in the United States)
which has a material and adverse effect on the securities
markets generally as to make it, in the judgment of a
majority in interest of the several Underwriters,
impracticable or inadvisable to proceed with the public
offering or delivery of the Stock being delivered on such
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Delivery Date on the terms and in the manner contemplated in
the Prospectus.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance satisfactory to counsel
for the Underwriters.
8. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each
Underwriter, its officers and employees and each person, if
any, who controls any Underwriter within the meaning of the
Securities Act, from and against any loss, claim, damage or
liability, joint or several, or any action in respect
thereof (including, but not limited to, any loss, claim,
damage, liability or action relating to purchases and sales
of Stock), to which that Underwriter, officer, employee or
controlling person may become subject, under the Securities
Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material
fact contained (A) in any Preliminary Prospectus, either of
the Registration Statements or the Prospectus, or in any
amendment or supplement thereto, or (B) in any blue sky
application or other documents prepared or executed by the
Company (or based upon any written information furnished
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by the Company) specifically for the purpose of qualifying
any or all of the Stock under the securities laws of any
state or other jurisdiction (any such application, document
or information being hereinafter called a "Blue Sky
Application"), (ii) the omission or alleged omission to
state in any Preliminary Prospectus, either of the
Registration Statements or the Prospectus, or in any
amendment or supplement thereto, or in any Blue Sky
Application any material fact required to be stated therein
or necessary to make the statements therein not misleading
or (iii) any act or failure to act, or any alleged act or
failure to act, by an Underwriter in connection with, or
relating in any manner to, the Stock or the offering
contemplated hereby, and which is included as part of or
referred to in any loss, claim, damage, liability or action
arising out of or based upon matters covered by clause (i)
or (ii) above, and shall reimburse each Underwriter and each
such officer, employee and controlling person promptly upon
demand for any legal or other expenses reasonably incurred
by that Underwriter, officer, employee or controlling person
in connection with investigating or defending or preparing
to defend against any such loss, claim, damage, liability or
action as such expenses are incurred; provided, however,
that the Company shall not be liable in any such case to the
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extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, any untrue statement
or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or in any such amendment or
supplement, or in any Blue Sky Application in reliance upon
and in conformity with written information furnished to the
Company through the Representative by or on behalf of any
Underwriter specifically for inclusion therein; and provided
further that the Company shall not be liable in the case of
any matter covered by clause (iii) above to the extent that
it is determined in a final judgment by a court of competent
jurisdiction that such loss, claim, damage, liability or
action resulted directly from any such act or failure to act
undertaken or omitted to be taken by such Underwriter
through its gross negligence or wilful misconduct. The
foregoing indemnity agreement is in addition to any
liability which the Company may otherwise have to any
Underwriter or to any officer, employee or controlling
person of that Underwriter.
(c) Each Underwriter, severally and not jointly, shall indemnify
and hold harmless the Company, its officers and employees,
each of its directors and each person, if any, who controls
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the Company within the meaning of the Securities Act, from
and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which the
Company or any such director, officer or controlling person
may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained (A) in
any Preliminary Prospectus, either of the Registration
Statements or the Prospectus, or in any amendment or
supplement thereto, or (B) in any Blue Sky Application or
(ii) the omission or alleged omission to state in any
Preliminary Prospectus, either of the Registration
Statements or the Prospectus, or in any amendment or
supplement thereto, or in any Blue Sky Application any
material fact required to be stated therein or necessary to
make the statements therein not misleading, but in each case
only to the extent that the untrue statement or alleged
untrue statement or omission or alleged omission was made in
reliance upon and in conformity with written information
furnished to the Company through the Representative by or on
behalf of that Underwriter specifically for inclusion
therein, and shall reimburse the Company and any such
director, officer or controlling person for any legal or
other expenses reasonably incurred by the Company or any
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such director, officer or controlling person in connection
with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as
such expenses are incurred. The foregoing indemnity
agreement is in addition to any liability which any
Underwriter may otherwise have to the Company or any such
director, officer or controlling person.
(d) Promptly after receipt by an indemnified party under
this Section 10 of notice of any claim or the commencement
of any action, the indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party
in writing of the claim or the commencement of that action;
provided, however, that the failure to notify the
indemnifying party shall not relieve it from any liability
which it may have under this Section 10 except to the extent
it has been materially prejudiced by such failure and,
provided further, that the failure to notify the
indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than
under this Section 10. If any such claim or action shall be
brought against an indemnified party, and it shall notify
the indemnifying party thereof, the indemnifying party shall
be entitled to participate therein and, to the extent that
it wishes, jointly with any other similarly notified
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indemnifying party, to assume the defense thereof with
counsel satisfactory to the indemnified party. After notice
from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified
party under this Section 10 for any legal or other expenses
subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of
investigation; provided, however, that the Representative
shall have the right to employ counsel to represent jointly
the Representative and those other Underwriters and their
respective officers, employees and controlling persons who
may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Underwriters
against the Company under this Section 10 if, in the
reasonable judgment of the Representative, it is advisable
for the Representative and those Underwriters, officers,
employees and controlling persons to be jointly represented
by separate counsel, and in that event the fees and expenses
of such separate counsel shall be paid by the Company. Each
indemnified party, as a condition of the indemnity
agreements contained in Sections 10(a), 10(b) and 10(c),
shall use its best efforts to cooperate with the
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indemnifying party in the defense of any such action or claim.
No indemnifying party shall (i) without the prior written
consent of the indemnified withheld), settle or compromise or
consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in
respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual
or potential parties to such claim or action) unless such
settlement, compromise or consent includes an unconditional
release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding, or (ii) be
liable for any settlement of any such action effected without
its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there
be a final judgment of the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any
indemnified party from and against any loss of liability by
reason of such settlement or judgment.
(e) If the indemnification provided for in this Section 10 shall
for any reason be unavailable to or insufficient to hold
harmless an indemnified party under Section 10(a), 10(b) or
10(c) in respect to any loss, claim, damage or liability,
then each indemnifying party shall, in lieu of indemnifying
such indemnified party,
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contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability,
or action in respect thereof, (i) in such proportion as
shall be appropriate to reflect the relative benefits
received by the Company, on the one hand and the
Underwriters on the other from the offering of the Stock or
(ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits
referred to in clause (i) about but also the relative fault
of the Company on the one hand and the Underwriters on the
other with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action
in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other
with respect to such offering shall be deemed to be in the
same proportion as the total net proceeds from the offering
of the Stock purchased under this Agreement (before
deducting expenses) received by the Company on the one hand,
and the total underwriting discounts and commissions
received by the Underwriters with respect to the shares of
the Stock purchased under this Agreement, on the other hand,
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bear to the total gross proceeds from the offering of the
shares of the Stock under this Agreement in each case as set
forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to whether
the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact
relates to information supplied by the Company, or the
Underwriters, the intent of the parties and their relative
knowledge, access to information and opportunity to correct
or prevent such statement or omission. The Company, and the
Underwriters agree that it would not be just and equitable
if contributions pursuant to this Section 10(e) were to be
determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other
method of allocation which does not take into account the
equitable considerations referred to herein. The amount paid
or payable by an indemnified party as a result of the loss,
claim, damage or liability, or action in respect thereof,
referred to above in this Section 10(e) shall be deemed to
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include, for purposes of this Section 10(e), any legal or
other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this
Section 10(e), no Underwriter shall be required to
contribute any amount in excess of the amount by which the
total price at which the Stock underwritten by it and
distributed to the public was offered to the public exceeds
the amount of any damages which such Underwriter has
otherwise paid or become liable to pay by reason of any
untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute as provided in this
Section 10(e) are several in proportion to their respective
underwriting obligations and not joint.
(f) The Underwriters severally confirm that the statements with
respect to the public offering of the Stock set forth on the
cover page of, and under the caption "Underwriting" in, the
Prospectus are correct and constitute the only information
furnished in writing to the Company by or on behalf of the
Underwriters specifically for inclusion in the Registration
Statements and the Prospectus.
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9. Defaulting Underwriters. If, on either Delivery Date, any Underwriter
defaults in the performance of its obligations under this Agreement, the
remaining non-defaulting Underwriters shall be obligated to purchase the Stock
which the defaulting Underwriter agreed but failed to purchase on such Delivery
Date in the respective proportions which the number of shares of the Firm Stock
set opposite the name of each remaining non-defaulting Underwriter in Schedule 1
hereto bears to the total number of shares of the Firm Stock set opposite the
names of all the remaining non-defaulting Underwriters in Schedule 1 hereto;
provided, however, that the remaining non-defaulting Underwriters shall not be
obligated to purchase any of the Stock on such Delivery Date if the total number
of shares of the Stock which the defaulting Underwriter or Underwriters agreed
but failed to purchase on such date exceeds 9.09% of the total number of shares
of the Stock to be purchased on such Delivery Date, and any remaining
non-defaulting Underwriter shall not be obligated to purchase more than 110% of
the number of shares of the Stock which it agreed to purchase on such Delivery
Date pursuant to the terms of Section 3. If the foregoing maximums are exceeded,
the remaining non-defaulting Underwriters, or those other underwriters
satisfactory to the Representative who so agree, shall have the right, but shall
not be obligated, to purchase, in such proportion as may be agreed upon among
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them, all the Stock to be purchased on such Delivery Date. If the remaining
Underwriters or other underwriters satisfactory to the Representative do not
elect to purchase the shares which the defaulting Underwriter or Underwriters
agreed but failed to purchase on such Delivery date, this Agreement (or, with
respect to the Second Delivery Date, the obligation of the Underwriters to
purchase, and of the Company to sell, the Option Stock) shall terminate without
liability on the part of any non-defaulting Underwriter or the Company except
that the Company will continue to be liable for the payment of expenses to the
extent set forth in Section 6 and 11. As used in this Agreement, the term
"Underwriter" includes, for all purposes of this Agreement unless the content
requires otherwise, any party not listed in Schedule 1 hereto who, pursuant to
this Section 11, purchases Firm Stock which a defaulting Underwriter agreed but
failed to purchase.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company for damages caused by its default. If other
underwriters are obligated or agree to purchase the Stock of a defaulting or
withdrawing Underwriter, either the Representative or the Company may postpone
the First Delivery Date for up to seven full business days in order to effect
any changes that in the opinion of counsel for the Company or counsel for the
Underwriters may be necessary in the Registration Statement, the Prospectus or
in any other document or arrangement.
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10. Termination. The obligations of the Underwriters hereunder may be
terminated by the Representative by notice given to and received by the Company
prior to delivery of and payment for the Firm Stock if, prior to that time, any
of the events described in Sections 7(h) or 9(i) shall have occurred or if the
Underwriters shall decline to purchase the Stock for any reason permitted under
this Agreement.
11. Reimbursement of Underwriters' Expenses. If (a) the Company shall
fail to tender the Stock for delivery to the Underwriters for any reason
permitted under this Agreement, or (b) the Underwriters shall decline to
purchase the Stock for any reasons permitted under this Agreement (including the
termination of this Agreement pursuant to Section 10), the Company shall
reimburse the Underwriters for the fees and expenses of their counsel and for
such other out-of-pocket expenses as shall have been incurred by them in
connection with this Agreement and the proposed purchase of the Stock, and upon
demand the Company shall pay the full amount thereof to the Representative. If
this Agreement is terminated pursuant to Section 9 by reason of the default of
one or more Underwriters, the Company shall not be obligated to reimburse any
defaulting Underwriter on account of those expenses.
12. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
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(a) if to the Underwriters, shall be delivered or sent by mail, telex or
facsimile transmission to Global Equities Group, Inc., Five Hanover
Square, New York, New York 10004, Attention: Alexander Shvartz and
Thomas McDermott;
(b) if to the Company, shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Primary Registration Statement, Attention: William Gallager, Chairman
and Chief Executive Officer; provided, however, that any notice to an
Underwriter pursuant to Section 8(d) shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its
address set forth in its acceptance telex to the Representative, which
address will be supplied to any other party hereto by the
Representative upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The
Company shall be entitled to act and rely upon any request, consent,
notice or agreement given or made on behalf of the Underwriters by the
Representative.
13. Persons Entitled to Benefit of Agreement. This Agreement shall inure to
the benefit of and be binding upon the Underwriters, the Company and their
respective personal representatives and successors. This Agreement and the terms
and provisions hereof are for the sole benefit of only those persons, except
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that (A) the representations, warranties, indemnities and agreements of the
Company contained in this Agreement shall also be deemed to be for the benefit
of the officers and employees of each Underwriter and the person or persons, if
any, who control each Underwriter within the meaning of Section 15 of the
Securities Act and (B) the indemnity agreement of the Underwriters contained in
Section 8(c) of this Agreement shall be deemed to be for the benefit of
directors, officers and employees of the Company and any person controlling the
Company within the meaning of Section 15 of the Securities Act. Nothing in this
Agreement is intended or shall be construed to given any person, other than the
persons referred to in this Section 15, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
14. Survival. The respective indemnities, representations, warrants and
agreements of the Company and the Underwriters contained in this Agreement or
made by or on behalf of them, respectively, pursuant to this Agreement, shall
survive the delivery of and payment for the Stock and shall remain in full force
and effect, regardless of any investigation made by or on behalf of any of them
or any person controlling any of them.
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15. Definition of the Terms "Business Day" and "Subsidiary". For purposes
of this Agreement, (a) "business day" means any day on which the NASDAQ Stock
Market is open for trading and (b) "subsidiary" has the meaning set forth in
Rule 405 of the Rules and Regulations.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
17. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
18. Headings. The headings herein are inserted for convenience of reference
only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
If the foregoing correctly sets forth the agreement between the Company and
the Underwriters, please indicate your acceptance in the space provided for the
purpose below.
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Very truly yours,
CLUCKCORP INTERNATIONAL, INC.
By_____________________________
President
Accepted:
GLOBAL EQUITIES GROUP, INC.
By_____________________________
Michael Christ, President
For itself and as Representative
of the several Underwriters named
in Schedule 1 hereto
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SCHEDULE 1
Number of Shares
Underwriters of Firm Stock
Global Equities Group, Inc.........................................
Co- Manager
Suncoast Capital Corp.
Total............................................500,000
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EXHIBIT 10.30
LEASE AGREEMENT
THE STATE OF TEXAS
KNOW ALL MEN BY THESE PRESENTS
COUNTY OF NUECES.
THIS LEASE AGREEMENT ("Lease") is entered into as of the 18th day of
November, 1994, by and between LI CHIN LIU HO and CHI PEN HO (hereinafter
referred to as "Landlord") , and CARLETON ASSOCIATES, INC., a Nevada corporation
(hereinafter referred to as "Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant desire to enter into a lease agreement
regarding the premises (hereinafter referred to as the "Leased Promises")
situated in Corpus Christi, Nueces County, Texas, and commonly referred to as
4901 South Padre island Drive, said Leased Premises being more fully described
as follows, to-wit:
TRACT I:
Lot Nine (9), Block One (1) , MOORE PLAZA, a Subdivision of the City of
Corpus Christi, Nueces County, Texas, as shown by the map or plat thereof
recorded in volume 55, Page 17, Map Records, Nueces County, Texas, to which
reference is here made for all pertinent purposes; together with the
building and all other improvements, fixtures and structures located
thereon, and all rights, titles and privileges appurtenant thereto.
TRACT II: Easement
All rights, title and interest of CC CAPTAIN D'S SOUTH, LIMITED PARTNERSHIP
in and to and under the Reciprocal Non-Exclusive Easements created by and
more particularly described and defined in that certain estate created by
Declaration of Covenants, Conditions, Restrictions and Reciprocal Easements
for Moore Plaza, filed for record in the Office of the County Clerk of
Nueces County, Texas, on January 6, 1989, under Clerk's File No. 646701,
Volume 2141, Page 263, Deed Records of Nueces County, Texas as supplemented
by instrument filed November 6, 1991, recorded under Clerk's File No.
779878, Volume 2314, Page 234, Official Records of Real Property, Nueces
County, Texas.
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions contained herein, the parties hereby agree as follows:
I.
LETTING
1.01. Landlord hereby leases, demises and lets unto Tenant and Tenant
leases and takes of and from Landlord the Leased Premises together with all
personal property located at the Leased Premises and more fully described on
Exhibit A attached hereto and incorporated herein. Landlord warrants to Tenant
that Landlord is the owner of the Leased Premises and has full right and
authority to enter into this Lease without the necessity of obtaining prior
approval by or the joinder of any third party.
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II.
TERM
2.01. The term of this Lease shall be for a period of approximately ten
(10) years commencing as of November 18, 1994, and terminating at midnight on
January 31, 2005, unless said term is extended by exercising the option
hereinafter provided for or is sooner ended and terminated in accordance with
the provisions hereof. In the event Tenant is not in default at the time, Tenant
shall have the option to extend this Lease beyond the original term for two (2)
additional terms of five (5) years each. The new rental rate for the renewal
terms shall be as described in Article III below. Tenant shall notify Landlord
in writing not less than one hundred eighty (180) days before the expiration of
the original term or the first renewal term if Tenant intends to exercise either
renewal option. Failure to timely give the required notice shall operate to
terminate the option.
III.
RENTAL AND SECURITY DEPOSIT
3.01. Tenant shall and hereby agrees to pay Landlord as rent for the Leased
Premises during the original ten (10) year term the rental sum of $615,000.00
which shall be payable as follows:
Rent shall be payable monthly an the first day of each month beginning
February 1, 1995 and continuing monthly thereafter until the expiration of
the original term. The monthly rental amounts shall be $5,000.00 per month
for the first sixty (60) months and $5,250.00 per month for the next sixty
(60) months of the original term.
If the first five (5) year renewal term option is exercised, the monthly
rental shall be $5,643.75 per month for the sixty (60) month renewal term.
If the second five (5) year renewal term option is exercised the monthly
rental shall be $6,067.00 per month for the sixty (60) month renewal term.
All rental sums referenced in this provision are referred to as "Base
Rental." Tenant shall pay to Landlord (prior to occupancy) rental for the
remainder of the month of January, 1995 (January 18 to January 31) prorated
based on the rental sum for a full month and Tenant shall include with such
payment partial amount of the next month's rental. No rent shall be charged from
November l8, 1994 through January 17, 1995.
3.02. The payment by Tenant to Landlord of the monthly Base Rental, in the
amount and at the times hereinabove provided, may be made by the draft or check
of Tenant mailed or delivered to Landlord on or before the due dates thereof, at
the following location: 6914 Sir Lancelot Street, Corpus Christi, Texas 78413.
Such address may be changed from time to time by Landlord in accordance with
paragraph 21.08 below. Prepayments of rent shall be applied to the next monthly
rental payment due pursuant to the provisions hereof.
3.03. Landlord hereby acknowledges receipt of $11,067.00 representing the
prorated rent for January 18 through January 31 ($2,166.58) paid in advance,
*partial rent for February, 1995 paid in advance, and the balance of $6,067.00
representing Tenant's deposit ("Security Deposit") as security for the full and
faithful performance by Tenant of the terms, conditions, and covenants of this
Lease which are to be performed and kept by Tenant. Landlord may apply any
portion of the Security Deposit as may be necessary to cure an Event of Default
(hereinafter defined) by Tenant hereunder, including (but not limited to) the
failure of Tenant to pay Rent or any other charges which accrue
*On February 1, 1995, Tenant agrees to pay Landlord $3,099.58, representing the
balance of the February rent ($2,166.58) and $933.00 which is consideration for
the personal property acquisition in the fifteenth year pursuant to Section
12.02.
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in favor of Landlord hereunder. Landlord may apply any portion of the Security
Deposit as may be necessary to cure any Event of Default and Landlord shall
deliver written notice to Tenant advising the amount and nature of any such
application of the Security Deposit. Any remaining balance of the Security
Deposit shall not be considered as an advance payment of Rent or a measure of
Landlord's damages in case of default by Tenant. Further, all rent due hereunder
shall be payable without demand and without set-off or deduction (except as
expressly provided to the contrary in this Lease), for any reason whatsoever.
IV.
PROPERTY TAXES
4.01. Landlord shall be responsible for the payment of all taxes and
assessments with respect to all personal property and real property comprising a
part of the Leased Premises for calendar year 1994 and prior years.
4.02. For calendar year 1995 and subsequent years, Tenant shall pay, as
they become due, all personal property taxes, general and special assessments
which, during the term of this Lease, may be levied against all personal
property located at the Leased Premises whether owned by Tenant or Landlord.
4.03. For calendar year 1995 and subsequent years, Tenant shall pay, as
they become due, all real property taxes, general and special assessments which,
during the term of this Lease, may be levied against the Leased Premises. Such
amounts shall be considered Additional Rental and shall be promptly paid by
Tenant prior to delinquency without further demand by Landlord. Landlord agrees
to cooperate (without cost or expense to Landlord) with Tenant in any attempts
to obtain a reduction in the appraised value for property tax purposes. Promptly
following receipt Landlord shall deliver to Tenant all appraisal notices,
rendition notices, tax statements and all other notices and correspondence
received by Landlord in any manner pertaining to real or personal property taxes
or any assessments.
4.04. Taxes for any partial calendar year during the term of this Lease
shall be prorated between Landlord and Tenant.
V.
INSURANCE, FIRE AND CASUALTY
5.01. Tenant shall, at his sole expense, obtain and maintain in full force
and effect during this Lease commercial general liability insurance for bodily
injury and property damage with Premises-Operations, Independent Contractors and
Contractual Liability coverages with a limit of liability of not less than
$1,000,000.00 for bodily injury and $500,000.00 for property damage. These
required amounts shall automatically be increased every five (5) years hereafter
to correspond to the average increase in the Consumer Price Index during that
same five (5) year time period. Tenant shall cause Landlord to be named as an
additional insured under the liability policies and shall furnish Landlord with
the policies or duly executed certificates of all required insurance, together
with satisfactory evidence of the payment of the premiums therefor, on the date
Tenant first occupies the Premises and, upon renewals of the such policies, not
less than fifteen (15) days prior to the expiration of the term of such
coverage. All policies obtained pursuant hereto shall be in form and content and
written by insurers acceptable to Landlord, which acceptance shall not be
unreasonably withheld or delayed, and endorsed to expressly waive the
underwriter's and insurance carriers' right of subrogation, if any, against
Landlord and/or its insurance carriers. If Tenant shall not comply with all of
Tenant's covenants made in this section, Landlord may, at Landlord's option, and
upon not less than five (5) days advance written notice to Tenant, cause
insurance of any
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of the types and amounts set out in this section to be issued, and in such
event, Tenant agrees to pay Landlord the premium for such insurance within ten
(10) days of Landlord's demand, plus interest at the highest lawful rate for a
loan of like amount from the date of payment by Landlord until repaid by Tenant.
5.02. Tenant agrees at all times at his sole expense to keep all its
equipment, merchandise, furniture, fixtures and other property situated with the
Leased Premises and all of the personal property described on the attached
Exhibit A insured against fire (with extended coverage) and theft to the extent
of one hundred percent (100%) of the full insurable value thereof. Such
insurance shall be in the form of "all-risk" insurance and shall be carried with
companies satisfactory to Landlord and shall be in form satisfactory to
Landlord. Tenant shall obtain a written obligation of each insurance company to
notify Landlord at least ten (10) days prior to cancellation of such insurance.
Such policies or duly executed certificates of insurance shall be delivered to
Landlord prior to the commencement of Tenant's occupancy hereunder and renewals
thereof as required shall be delivered to Landlord at least thirty (30) days
prior to the expiration of the respective policy terms. The proceeds to Tenant
of such insurance shall not be used, except with the written consent of
Landlord, for any purpose other than the repair of replacement of equipment,
merchandise, furniture, fixtures and other property situated within the Leased
Premises.
5.03. Tenant shall obtain on behalf of Landlord, at the sole expense of
Tenant, and shall cause to be maintained upon the improvements to the Leased
Premises, fire and extended coverage insurance for not less than one hundred
percent (100%) of the Full Insurable Value thereof. The term "Full Insurable
Value" shall mean the actual replacement cost as of the date of the loss or
liability with respect to building and the cost of landscaping, paving, pipes
and drains (to the extent insurable). Tenant shall pay to Landlord upon demand,
and as Additional Rental, all of the fire and extended coverage insurance
premiums attributable to the Leased Premises unless paid by Tenant direct to the
insurer or the insurer's agent. Landlord shall furnish to Tenant a copy of the
present casualty insurance policy maintained with respect to the Leased Premises
and Tenant may elect to continue this policy in effect to its stated termination
date upon reimbursing to Landlord the prorata portion of the unearned premium.
5.04. Waiver of Right of Subrogation. Anything in this Lease to the
contrary notwithstanding, Landlord and Tenant each hereby waive any and all
rights of recovery, claims, actions, or causes of action against the other, its
agents, officers and employees for any loss or damage that may occur to the
Leased Premises, the building or any part thereof, or any of the personal
property of such parties therein by reason of fire, the elements, or any other
cause which is insured against under the terms of the policies of fire and
extended coverage insurance carried by either Landlord or Tenant in respect
thereof, to the extent, and only to the extent of any proceeds actually received
by Landlord and Tenant, respectively, with respect thereto, regardless of its
cause or origin, including negligence of either party hereto, its agents,
officers, or employees, and each party covenants that no insurer shall hold any
right of subrogation against the other. Each party agrees to furnish the other
with written waivers of subrogation from their respective insurers, in
reasonably satisfactory form, with respect to the other's fire and extended
coverage insurance policies. This subrogation applies only to the extent it is
permitted by law and the damage is covered by insurance proceeds.
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5.05. Destruction or Leased Premises.
(1) If the Leased Promises is partially damaged by fire, windstorm, or
other casualty during the term of this Lease, Landlord, upon receipt
of written notice of such damage from Tenant and upon receipt of
insurance proceeds relating to such damage, shall proceed to repair
such damage and restore the Leased Premises, excluding all tenant
finish installed by Tenant and Tenant property within the Leased
Premises, to substantially the same condition as it existed at the
time of such damage. Landlord shall not be responsible for any delay
which may result from causes beyond Its reasonable control; provided,
however, if the damage shall not have been repaired, regardless of the
cause of inability to repair, within one hundred eighty (180) days
from the date of damage, Tenant shall have the option to terminate
this Lease upon written notice to Landlord.
(2) If the Leased Premises is substantially damaged by fire, windstorm, or
other casualty during the Term of this Lease, either Landlord or
Tenant shall have the option to terminate this Lease. Such option may
be exercised by written notice delivered at any time after the
occurrence of such damage and until twenty one (21) days after Tenant
has given Landlord written notice of the damage. If neither Landlord
nor Tenant elects to terminate the Lease, Landlord shall, commence to
repair such damage and restore the Leased Premises, and shall
diligently prosecute the repair and restoration until its completion,
excluding all Tenant property within the Leased Premises, to
substantially the same condition as it existed at the time of such
damage. Landlord shall not be responsible for any delay which may
result from causes beyond Landlord's reasonable control; provided,
however, if such damage shall not have been repaired, regardless of
the cause of inability to repair, within two hundred seventy (270)
days from the date of damage, Tenant shall have the option to
terminate this Lease upon notice to Landlord.
(3) The terms "substantial damage" and "substantially damaged" shall mean
such damage or destruction of the Leased Premises, excluding all
Tenant property within the Leased Premises, as would reasonably be
expected to require more than one hundred eighty (180) days to repair
and/or reconstruct. The terms "partial damage" and "partially damaged"
shall mean any condition of damage and/or destruction which does not
constitute "substantial damage" or "substantially damaged" within the
foregoing definition. Notwithstanding the foregoing, it the Teased
Premises is damaged during the last year of the Term of this Lease or
Renewal Tern, if any, and it would reasonably be expected to require
more than ninety (90) days to repair and/or reconstruct the Leased
Premises, excluding all Tenant Finish and Tenant property within the
Leased Premises, then such damage shall be deemed to be substantial
damage and the Leased Premises substantially damaged.
(4) In the event of termination of this Lease pursuant to this paragraph,
such termination shall be effective as of the date upon which such
damage or destruction occurred if business has not been conducted in
the Leased Premises after such date. If business has been so
conducted, the termination shall be effective as of the date of notice
of termination. In the event of either partial damage or substantial
damage of the Leased Premises during the Term of this Lease, the Base
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Rent shall be equitably abated or reduced during any period in which
such damage or destruction interferes substantially with the operation
of the business of the Tenant in the Leased Premises. Such abatement
or reduction shall continue for the period commencing with such
destruction or damage and ending with completion by Landlord of the
repairs and/or reconstruction of the Leased Premises or the
termination of the Lease. Nothing herein contained shall be construed
to abate Tenant's obligations for the payment of any other additional
rents and charges reserved hereunder. Except for the abatement of the
rent hereinabove set forth, Tenant shall not be entitled to and hereby
waives all claims against Landlord for any compensation or damage for
loss of use of the whole or any part of the Leased Premises and/or for
any inconvenience or annoyance occasioned by any such damage,
destruction, repair or restoration unless the damage was the result of
the sole negligence of Landlord or the willful conduct or omission of
Landlord.
5.06. Negligence of Tenant. If the Leased Premises shall be partially or
totally damaged by fire or other casualty resulting solely from the fault or
negligence of Tenant, or the agents, employees, licensees, contractors,
subtenants, or invitees of Tenant, Tenant shall reimburse to Landlord the amount
of any deductible Landlord is required to pay pursuant to the terms of
Landlord's fire and extended coverage insurance policy.
VI.
USE
6.01. The Leased Premises shall be used as a restaurant (including the sale
of roasted chicken and/or sale of related products as well as all uses
incidental thereto including storage) or for any other lawful purpose; provided,
however, in no event shall the Leased Premises be used as an oriental food
restaurant which shall include a restaurant whose menu consists primarily of
Chinese, Filipino, Japanese, Thai, Vietnamese or any other food which originates
from an oriental culture. Landlord warrants to Tenant that Tenant's use of the
premises, as a restaurant is not prohibited or limited by any zoning, covenants
or other restrictions imposed by any law, statute, ordinance, regulation of any
governmental authority or any deed or covenant. In the event the use of the
premises as a restaurant shall hereafter be prohibited or restricted by any law,
ordinance, regulation or order any governmental authority, Tenant shall have the
right to terminate this Lease by giving Landlord not less than thirty (30) days
notice in writing.
VII.
ASSIGNMENT AND SUBLETTING
7.01. Tenant shall not have the right to assign this Lease except Tenant
shall have the absolute right (i) to assign this Lease to corporation, limited
liability company or partnership in which Tenant or any officer, director or
shareholder of Tenant has an interest, and (ii) to assign or sublease its
interest in this Lease to Kenny Rogers Roasters licensee, franchisee or to
Roasters Corp. or any subsidiary of Roasters Corp., without Landlord's written
approval, written or otherwise; and Tenant shall have the right to sublet the
Leased Promises without the prior written consent of Landlord. Tenant shall
notify Landlord of any such assignments or subleases. Notwithstanding any such
assignment or subletting, Tenant shall remain liable to Landlord for the full
term (including any renewals) and consideration of the Lease, except as Tenant
may otherwise be released in writing by Landlord.
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VIII.
COMPLIANCE WITH LAW
8.01. Tenant shall, at Tenant's sole cost, comply with all of the
requirements of all municipal, state and federal authorities now in force, or
which may hereafter be in force, pertaining to the use of the Leased Premises,
and shall faithfully observe in said use all municipal ordinances and state and
federal statutes now in force or which may hereafter be in force; provided,
however, (i) compliance with all environmental protection laws by Tenant shall
be limited to matters directly resulting from Tenant's use of the Leased
Premises only, (ii) compliance with the Americans With Disabilities Act (the
"ADA") shall be limited to any future changes or revisions to this act or the
related regulations which may be applicable to Tenant's use and which does not
require any structural changes to the Leased Premises, and (iii) Landlord shall,
at Landlord's expense, comply with and fully perform all applicable laws,
ordinances, regulations and orders of public authority respecting the structural
portions of the building comprising a part of the Leased Premises not resulting
from any act of Tenant. Landlord warrants to Tenant that the Leased Premises
currently is in compliance with the requirements of the ADA. If any future
compliance with the ADA or any other, statute or ordinance requires a reduction
of IOW or more in the floor area of the building available for use by Tenant's
customers, then Tenant may terminate this Lease.
IX.
ALTERATION, ADDITIONS AND IMPROVEMENTS
9.01. Tenant will make no structural alteration or addition to the Leased
Premises without the prior written consent of Landlord. Tenant may make any
non-structural alteration, change, improvement, repair, replacement or addition
to the Leased Premises desired by Tenant, and may redecorate and repaint both
the interior or exterior of the building comprising a part of the Leased
Premises including, without limitation, installation of signage, sign pylons and
neon lighting as may be desired by Tenant. Tenant may remove its trade fixtures,
supplies, movable furniture and equipment not attached to the Building provided
(i) such removal is made prior to the termination or expiration of the Term;
(ii) Tenant is not then in default in the timely performance of any obligation
or covenant under this Lease; and (iii) Tenant promptly repairs all damage
caused by such removal. All other property at the Leased Premises and any
alteration or addition to the Leased Premises and any other articles attached or
affixed to the floor, wall, or ceiling of the Leased Premises is a part of the
property of Landlord and shall be surrendered with the Leased Premises as a part
thereof at the termination or expiration of this Lease, without payment or
compensation therefor. If, however, Landlord so requests in writing, Tenant
will, prior to termination or expiration of this Lease, remove any and all
alterations, additions, fixtures, equipment and property placed or installed by
Tenant or installed by Landlord at Tenant's expense in the Leased Premises and
will repair any damage caused by such removal. Tenant agrees that Tenant will
not cause or suffer the creation of any mechanic's lien upon the Leased Premises
for any labor performed or materials furnished for or on behalf of Tenant and if
any such lien claim shall arise due to an act or omission of Tenant, then Tenant
shall remove the same at Tenant's expense.
X.
HOLDING OVER
10.01. Any holding over after the termination of this Lease shall not
further renew and extend same but during such holding over period Tenant shall
be a tenant for a month-to-month term at 110% of the then current monthly Base
Rental.
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XI.
UTILITIES AND ALLOCATION OF EXPENSES
11.01. Tenant shall pay promptly all gas, light, power, water, garbage
service and telephone utility charges incurred in the use of the Leased Premises
and its operations therein. Tenant shall also keep the parking lot area and
yard/landscaped areas in a clean condition and free of debris and shall promptly
replace with glass of like kind any plate glass or window glass of the Leased
Premises which may become cracked or broken.
XII.
REPAIRS AND MAINTENANCE
12.01. Repairs and Maintenance by Landlord.
(1) Landlord shall repair, replace and maintain in good condition and
repair only (i) the roof and (ii) the structural portions of all
improvements with respect to the Leased Premises. This Section 12.01
shall not apply in the case of damage or destruction by f ire or other
casualty (as to which Section 5.05 shall apply), or damage resulting
from an eminent domain taking (as to which Section 14.01 shall apply).
In the event Landlord replaces the roof, then Tenant shall reimburse
to Landlord an equitable part of the reasonable cost of the new roof
with due consideration given for the anticipated life of the new roof
and the remaining term of this Lease.
(2) Landlord shall have the right to enter all parts of the Leased
Premises during business hours to inspect the Leased Premises, to show
the Leased Premises to prospective purchasers of the Leased Premises
or mortgagees thereof, to show the Leased Premises for rent during the
last six months to the Term at this Lease, and to conduct any repairs
required to be performed by Landlord. In the event any entry by
Landlord for repairs substantially interferes with Tenant's use of the
Leased Premises, then the Base Rent shall be equitably abated so long
as such interference continues.
12.02. Repairs and Maintenance by Tenant. Tenant shall, at Tenant's cost
and normal wear and tear, obsolence and damage from fire, windstorm or other
casualty excepted, repair, replace and maintain all parts of the Leased Premises
(including Landlord's personal property) which are not the responsibility of
Landlord as elsewhere provided in this Lease. If Tenant fails to commence making
such repairs, replacements or maintenance promptly following not less than
fifteen (15) days written notice from Landlord, then Landlord may, at their
option, make such repairs, replacements or maintenance and the cost thereof
shall be payable by Tenant on demand as a part of the rent hereunder, and
failure of Tenant to pay such costs within ten (10) days shall constitute a
failure to pay rent when due and an Event of Default by Tenant hereunder. All
personal property shall be kept in good condition and good working order. Any
lost, stolen, misplaced or worn out personal property owned by landlord shall be
replaced by Tenant or Tenant shall pay to Landlord as Additional Rent, the full
replacement value thereof within ten (10) days after demand and if prompt
payment is not made, then such action shall be considered an Event of Default.
At the and of the fifteenth year of the term of this Lease, all of Landlord's
personal property not physically attached or incorporated into the building
shall become the sole property of Tenant without any further payment or
obligation to Landlord. Further, Tenant shall regularly water and mow the grass
areas and shall maintain in a healthy condition all trees, plants and shrubbery
located on the Leased Premises.
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XII.
DEFAULT
13.01. The occurrence of any of the following events shall constitute an
event of default ("Event of Default"):
(a) Failure to pay any rent payable under this Lease following not less
than tan (10) days written notice from Landlord.
(b) Delinquency by Tenant in the performance of or compliance with any of
the provisions contained in this Lease for a period of thirty (30)
days after written notice thereof from Landlord to Tenant, except for
any default not susceptible of being cured within such thirty (30) day
period, in which event the time permitted to Tenant to cure such
default shall be extended for as long as shall be necessary to cure
such default, provided, Tenant commences promptly and proceeds
diligently to cure such default, and provided further, that such
period of time shall not be so extended as to subject Landlord or
Tenant to any civil or criminal liabilities.
(c) Tenant shall become insolvent, shall make a transfer in fraud of
creditors or shall make an assignment for the benefit of creditors.
(d) Tenant shall file a petition under any section or chapter of the
National Bankruptcy Act, as amended, or under any similar law or
statute of the United States or any state thereof: or Tenant shall be
adjudged bankrupt or insolvent in proceedings filed against Tenant or
such guarantor thereunder.
13.02. Upon the occurrence of an Event of Default, Landlord's remedies for
Tenant's default are to (a) enter and take possession of the Leased Premises,
after which Landlord may relet the Leased Premises on behalf of Tenant and
receive the rent directly by reason of the reletting (which rent shall be
credited in reduction of Tenant's obligations to Landlord) , and Tenant agrees
to reimburse Landlord for any expenditures made in order to relet; (b) enter the
Leased Premises and perform Tenant's obligations or (c) terminate this Lease by
written notice and sue for damages. Upon the occurrence of an Event of Default
Landlord may enter and take possession of the Leased Premises by self-help, by
picking or changing locks if necessary, and may lack out Tenant or any other
person who may be occupying the Leased Premises, until the default is cured,
without being liable for damages.
13.03. No acceptance of rentals by Landlord, nor delay in enforcing any
obligation shall be construed as a waiver of any default then or thereafter
existing in the performance of any obligation undertaken by Tenant, and no
waiver of performance of any obligation shall be construed as a waiver of any
default then or thereafter existing in the performance of any other obligation
undertaken by a Tenant. No forfeiture of this Lease shall release Tenant from
responsibility to Landlord for rentals theretofore due and unpaid, nor from the
performance of any of said covenants, agreements or stipulations herein by
Tenant undertaken to be kept and performed which are an existing liability at
the time of said forfeiture.
13.04. Any notice of default from Landlord to Tenant shall also be
delivered to Roasters Corp. and Roasters Corp. shall have the same opportunity
to cure the default as is available to Tenant. In the event Roasters Corp.
decides to cure the default, then Roasters Corp., at its option and upon
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satisfaction of the default, shall be entitled to be subrogated to the position
of Tenant and shall thereafter enjoy all of Tenant's rights and privileges
hereunder.
13.05. If Landlord fails to perform any act or obligation required of
Landlord within thirty (30) days after written notice of default from Tenant to
Landlord (except for any default not susceptible of being cured within such
thirty (30) day period, in which event the time permitted to Landlord to cure
such default shall be extended for as long as shall be necessary to cure such
default, provided Landlord promptly commences and proceed diligently to cure
such default, and provided further that such period of time shall not be so
extended as to subject Landlord or Tenant to any criminal liabilities), then
Tenant shall have the right (but not be obligated) to perform such thing or act
at the most reasonable cost possible and to deduct that cost from any rent due
under the terms of this Lease.
XIV.
EMINENT DOMAIN
14.01. If there shall be taken during the term of this Lease or any
extension thereof by eminent domain or condemnation proceedings or conveyed by
Landlord in lieu of condemnation, all of the Leased Premises or so large a part
thereof that the balance cannot be practicably and economically restored or
Tenant's use of the Leased Premises is materially impaired, then in any of such
events, this Lease shall, upon election of either party exercised by written
notice given to the other party within sixty (60) days after the taking of
possession by the condemning authority, terminate, if a lesser part of the
Leased Premises should be so taken, then Landlord shall restore the premises and
the Lease shall continue in effect as to the part of the Leased Premises
remaining, provided, however, rent shall be equitably reduced. All funds derived
from such condemnation proceedings shall be paid directly to Landlord and Tenant
shall not have any right in or to any award to Landlord made by the condemning
authority; provided, however, Tenant shall, in any event, be entitled to claim
compensation from the condemning authority with respect to the loss of, or
damage to, its leasehold interest hereunder and its equipment and other property
an the Leased Promises, either by seeking a separate award of compensation or by
claiming a share of a single award of compensation to the extent of Tenant's
interest.
XV.
WAIVER AND INDEMNITY
15.01. Tenant agrees that Tenant's use and occupancy of the Leased Premises
shall be wholly and only at his own risk. By taking possession of the Leased
Premises, Tenant accepts such Leased Premises as suitable for the purposes for
which same are leased and accepts the building and each and every appurtenance
thereof, and waives all defects therein. Tenant will indemnify, defend and bold
Landlord harmless from and against all fines, suits, claims, demands, damages,
expenses, liabilities and actions, including costs and expenses of defending
against such claims (the "Claims") resulting from any breach, violation or
non-performance of any covenant or condition hereof or from the use or occupancy
of the Leased Premises by Tenant or Tenant's agents, employees, licensees or
invitees, provided such Claims did not result from a negligent or wrongful act
or omission of Landlord. Landlord shall not be liable to Tenant or Tenant's
agents, employees, licensees, or invitees, for any damage to person or property
resulting from any act or omission or negligence of Tenant. In addition,
Landlord shall have no liability for loss or damage to the fixtures or other
personal property of Tenant or the property of those so claiming under Tenant
whether occurring by reason of theft, vandalism, fire or other casualty or the
bursting, stopping or leaking of water,
10
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gas, sewer pipes or otherwise, nor for personal injury or death of any person,
except to the extent Landlord has insurance coverage for same as provided
herein.
XVI.
TENANT'S POSSESSION
16.01. Subject to the other terms hereof, Landlord agrees that Tenant shall
and may quietly and peaceably hold and enjoy possession of the Leased Premises
for all of the term of this Lease, and so long as Tenant is not in default in
payment of the rental accruing hereunder, Tenant may at any time during the term
of this Lease and/or at the end of such term, remove from the Leased Premises
all property, fixtures and equipment which has been placed, constructed or
erected by Tenant on the Leased Promises. Tenant shall repair any damage caused
by the removal of his property so as to leave the Leased Premises in the same
condition they were in prior to installation of such property, reasonable wear
and tear excepted.
XVII.
SIGNS
17.01. Subject to the provisions of any applicable ordinance Tenant shall
have the right to place signage on the Leased Promises. At the termination of
this Lease and any extension thereof, Tenant shall, at his expense, remove all
signs owned by Tenant and shall repair any damage and close any holes caused by
such removal.
XVIII.
CARE OF THE LEASED PREMISES
18.01. Tenant shall maintain the Leased Promises in a clean, attractive
condition, and not commit or allow any waste or damage to be committed on or to
any portion of the Leased Premise, and at the expiration or termination of this
Lease shall deliver up the Leased Premises to Landlord in as good condition as
at date of possession by Tenant, ordinary wear and tear, obsolence and damage
from fire, windstorm and other casualty excepted.
XIX.
LATE CHARGES
19.01. In the event Tenant fails to pay to Landlord within ten (10) days of
when due any installment of rental or other sum to be paid to Landlord which may
become due hereunder, Landlord will incur additional expenses in an amount not
readily ascertainable and which has not been elsewhere provided for between
Landlord and Tenant. If Tenant should fail to pay to Landlord within ten (10)
days of when due any installment of rental or other sum to be paid hereunder,
Tenant will pay Landlord on demand a late charge equal to $150. This provision
shall be in addition to all other rights and remedies available to Landlord
hereunder or at law or in equity and shall not be construed as liquidated
damages or limiting Landlord's remedies in any manner.
XX.
LANDLORD'S MORTGAGEE
20.01. This Lease shall be subordinate to the lien of any bank or
institutional mortgage or dead of trust now or hereafter encumbering the Leased
Premises provided the holder of the mortgage or deed of trust shall execute and
deliver to Tenant a non-disturbance agreement in recordable form and to which
Tenant shall have no reasonable objection, which will recognize this Lease and
not disturb Tenant's possession of the Leased Premises in the event of
foreclosure if Tenant is not then in default.
11
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Tenant agrees, upon receipt of such non-disturbance agreement, to execute such
further instrument as may be reasonably requested to subordinate this Lease to
the lien of any such mortgage or deed of trust. Specifically, it is recognized
that the Leased Premises currently is encumbered by a mortgage or deed of trust
and Landlord, within ten (10) days from the effective date of this Lease, shall
obtain and furnish to Tenant a non-disturbance agreement executed by the holder
of the mortgage or dead of trust In form reasonably acceptable to Tenant, and if
Landlord fails to obtain such non-disturbance agreement, then Tenant may
terminate this Lease effective ten (103 days from the date of written notice to
Landlord unless during the 10-day period the required non-disturbance agreement
is delivered to Tenant.
XXI.
MISCELLANEOUS
21.01. This Lease embodies the entire agreement and understandings between
the parties and may not be omitted, waived or discharged except by instruments
in writing, executed by the party against whom enforcement of such amendment,
waiver or discharge is sought.
21.02. Time is of the essence of this Lease.
21.03. The captions of the several paragraphs of this Lease are for
reference purposes only and shall not affect the meaning or interpretation of
this Lease.
21.04. This Lease shall be governed by and construed under the laws of the
State of Texas.
21.05. This Lease is being executed in duplicate, each of which shall have
the force and effect of an original, but both of which shall constitute but one
and the same agreement.
21.06. This Lease shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, legal
representatives, successors and permitted assigns.
21.07. in case any one (1) or more of the provisions contained in this
Lease shall, for any reason, be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality, or unenforceability shall not affect
any other provisions thereof and this Lease shall be construed as if such
invalid, illegal or unenforceable provisions had never been contained herein.
21.08. Any notice required or permitted to be given under this Lease by one
party to the other shall be deemed to have been served and given if delivered in
person to the address set forth hereafter for the party to whom such notice is
given, or placed in the United States Mail, postage prepaid, by registered or
certified mail, with return receipt requested, addressed to the party at the
address hereinafter specified.
The address of Landlord for all purposes under this Agreement and for all
notices hereunder shall be:
Li Chin Liu Ho and
Chi Pen Ho
6914 Sir Lancelot Street
Corpus Christi, Texas 78413
The address of Tenant for all Purposes under this Agreement and for all
notice hereunder shall be:
12
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Carleton Associates, Inc.
P. 0. Box 80010
Las Vegas, Nevada 89180-0010
With copies to:
Carleton Associates
G. Payne, President
PO Box 270177
Corpus Christi, Texas 78427
Roasters Corp.
899 West Cypress Creek Road
Suite 500
Ft. Lauderdale, Florida 33309
Attn: Real Estate Department
From time to time either party may designate another address for all
purposes of this lease by giving the other party written notice of such change
of address in accordance with the provisions hereof.
21.09. In the event either party turns this Lease over to their respective
attorneys for the enforcement of the terms hereof, the defaulting party agrees
to pay the non-defaulting party's reasonable attorney's fees so incurred upon
entry of a judgment therefor by a court of competent jurisdiction.
21.10. The parties hereto may prefer to record a memorandum of short form
of this Lease rather than to record the Lease itself. it is agreed by and
between the parties hereto that in such event said memorandum shall be recorded
in lieu of recording of this Lease. It is specifically understood and agreed
that none of the terms of said memorandum shall be deemed to modify or amend any
of the terms of this Lease, nor shall the same be used in any way to explain,
modify, amplify or aid in the interpretation, construction or meaning of the
specific provisions contained herein.
21.11. Landlord releases and waives any lien or security interest
(statutory or otherwise) against any of Tenant's property.
21.12. At any time after the first lease year Tenant may elect by written
notice to terminate the term of this Lease effective as of the last day of the
calendar month stated in the written notice and conditioned upon Tenant paying
to Landlord an amount equal to the Base Rent for six (6) months.
21.13. For a period of thirty (30) days commencing with the date that
Tenant enters the Leased Premises and all utilities and equipment have been
turned on and operated, Landlord warrants to Tenant that all appliances,
equipment, machinery, air conditioning and heating equipment, refrigerators,
electrical and lighting fixtures, plumbing fixtures, restroom facilities and
utility and sewerage connections to the Leased Premises shall be and remain in
good working order and operating condition. If during the 30-day period any of
these matters should require repair or replacement, Landlord shall promptly
perform such repair or replacement at Landlord's cost and expense.
21.14. Tenant shall comply with the terms and conditions of the
Declaration of Covenants ' Conditions, Restrictions and Reciprocal Easements for
Moore Plaza as recorded under Clerk's File No. 646701, Real Property Records of
Nueces County, Texas and supplement by instrument recorded under Clerk's File
No. 779878, Real Property Records of Nueces County, Texas, which may be
applicable to Tenant's use of the Leased Premises.
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<PAGE>
21.15. Carter L. Tate, as real estate broker (the "Broker"), has negotiated
this lease on behalf of Tenant, and Tenant agrees to pay to Broker a flat fee of
Twenty Thousand Dollars ($20,000) payable under the terms contained in a
separate document. Payment is to be made in Nueces County, Texas. Both Tenant
and Landlord warrant that neither party has had dealings with any other real
estate broker or agent in connection with the negotiation of this Lease
excepting only Broker and they know of no other real estate broker or agent who
is entitled to a commission in connection with this Lease. If Tenant during the
term of this Lease, or any extension or renewal, purchases the real property
herein leased, Landlord agrees to pay Broker, in Nueces County, Texas, a fee of
three percent (3%) of the sales price upon closing of the sale of the property.
XXII.
PURCHASE REFUSAL OPTION
22.01. In the event Landlord shall at any time during the term of this
Lease negotiate a sale of the Leased Premises or any interest therein to any
person or entity other than members of Landlord's immediate family, Landlord
shall promptly give to Tenant written notice of the terms of the sale and
furnish to Tenant a true and complete copy of the sales contract signed by
seller and buyer, and Tenant shall have the option and privilege of purchasing
the premises on the same terms. Tenant shall notify Landlord in writing, within
fifteen (15) business days after the date an which Landlord delivers notice to
Tenant, whether it will purchase the premises for the amount and upon the terms
specified in said negotiated sale. In the event Tenant shall not elect within
the fifteen (15) day period to exercise this option, Landlord may thereafter
sell the premises to the identified buyer upon the stated price and terms
subject, however, to the leasehold estate herein granted to Tenant. If for any
reason the negotiated sale is not completed according to the stated price and
terms, any subsequent sales shall be submitted to Tenant, for acceptance or
refusal, upon the same terms and conditions as hereinabove provided.
22.02. The foregoing Purchase Refusal Option shall available to Tenant only
if Tenant is not in default-of any of the conditions of this Lease at the time
it desires to exercise the option.
LANDLORD:
11/30/94 /s/ LI CHIN LIU HO
Date ------------------
LI CHIN LIU HO
/s/ CHI PEN HO
--------------
CHI PEN HO
TENANT:
CARLETON ASSOCIATES, INC.
12/1/94 By: /s/ GREGORY PAYNE
Date ---------------------
GREGORY PAYNE (Name)
PRESIDENT (Title)
14
<PAGE>
THE STATE OF TEXAS
COUNTY OF NUECES
This instrument was acknowledged before me on November 1994, by Li Chin Liu
Ho and Chi Pen Ho.
/S/ MARK B. GILBREATH
---------------------
NOTARY PUBLIC, State of Texas
Mark B. Gilbreath
(Type or Print Name)
June 3, 1996
My commission expires
THE STATE OF FLORIDA
COUNTY OF BRANSON
This instrument was acknowledged before me on December 1, 1994, by
President of Carleton Associates Inc., a Nevada corporation, behalf of the
corporation.
/S/ ANGELA CASTIGLIA
NOTARY PUBLIC, State of Florida
ANGELA CASTIGLIA
(Type or Print Name)
March 27, 1997
My commission expires
15
<PAGE>
EXHIBIT 10.32
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (hereafter referred to as the "Agreement" or
"Contract") is entered into as of the 3 day of February, 1997 (the "Effective
Date"), between ROASTERS CORP., a Florida corporation, ("seller"), whose address
is 899 West Cypress Creek Rd., Suite 500, Ft. Lauderdale, Fla. 33309 and
CLUCKCORP INTERNATIONAL, INC., or its assigns ("Buyer"), a Texas corporation,
whose address is 1250 N.E. Loop 410, Suite 335, San Antonio, TX 78209.
WITNESSETH:
ARTICLE I
Section 1.01 Sale of Assets. Seller agrees to sell, and Buyer agrees to
buy, upon the terms and conditions and for the consideration herein stated, the
following properties and assets of Seller (the "Assets"):
(a) The leasehold estates, and all rights of the tenant, existing
under and by virtue of the Lease Agreements (individually, a
"Lease" and collectively, the "Leases") by and between various
entities, as Landlord, and Seller, as Tenant, covering certain
leasehold premises described therein (the "Leased Premises") in
various locations in Florida, Indiana and North Carolina,
described in Schedules "A-1" through "A-9" attached hereto and
made a part hereof; and
(b) All right, title and interest of Seller in and to the leasehold
improvements (in their present condition) located on the Leased
Premises or existing in connection with the Leases; and
(c) All restaurant equipment, point-of-sale systems (i.e. cash
registers and the like), machinery, furnishings, fixtures, and
non-food inventories (including without limitation, all pots,
pans, utensils, flatware, dishes, glassware, tablecloths and
napkins) located on the Lease and the Leased Premises (the
"Equipment") substantially in the condition in which they exist
on the date hereof, Seller's sign frames, sign structures and
poles (but not sign panels).
Assets shall not include trade names, trademarks, Kenny Rogers Restaurant
menus, table advertising placards, insignias, photos and similar point of
purchase advertising materials bearing Kenny Rogers Restaurant logos, or
franchise rights of Seller or its subsidiaries, their business records, phone
listings, business and occupational licenses (other than certificates of
occupancy for the particular lease locations being assigned) and the right to
use any of the foregoing.
Section 1.02 Closing. The sale and purchase of the Assets (the "Closing")
shall be consummated at the offices of Chicago Title Company (the "Title
Company"), 14607 San Pedro, Suite 100, San Antonio, Texas 78232, on the
thirtieth (30th) day after the expiration of Buyer's Feasibility Study Period,
or such other date as may be agreed upon by the parties (the "Closing Date").
ASSET PURCHASE AGREEMENT Page 1
<PAGE>
ARTICLE II
Section 2.01 Consideration. As full consideration for the Assets, Buyer
agrees to pay to Seller at Closing the sum of Two Million Three Hundred Forty
Three Thousand Two Hundred Nineteen Dollars ($2,343,219.00) (the "Purchase
Price"), payable as follows: (a) the assumption and promise to pay by Buyer of
not more than $1,343,219.00 in existing indebtedness owing by Seller to third
parties as of the date of Closing (comprised of purchase money debt and/or
equipment lease/financing obligations described in detail in Schedules B-l
through B-9 attached hereto and made a part hereof (the "Assumed Liabilities")
and (b) approximately One Million Dollars ($1,000,000.00) in immediately
available funds (the "Cash Portion") (such amount to be adjusted upwards to the
extent that the Assumed Liabilities owing by Seller at Closing are below the
amount set forth in Subparagraph 2.01 (a) above, provided, that in no event
shall the Cash Portion of the Purchase Price payable by Buyer be adjusted
upwards by more than Fifty Thousand Dollars ($50,000.00), it being agreed that
to the extent that the Assumed Liabilities owing by Seller at Closing have been
reduced by more than $50,000.00 below the amount stated in subparagraph 2.01 (a)
above, the difference shall be evidenced by Buyer's Promissory Note (the "Note")
payable to Seller in the amount of such difference, such Note bearing interest
at eight percent (8%) per annum, such Note being payable in equal monthly
installments of principal and interest amortized over five (5) years), such Cash
Portion of the Purchase Price to be wire transferred to the Title Company on the
Closing Date. Notwithstanding anything to the contrary set forth above, Buyer
shall not assume any liability or contingent liability of Seller unless and only
to the extent of the dollar amount of such liability as is reflected in
Schedules B-1 through B-9. All liabilities which are not expressly assumed by
Buyer are referred to as "Retained Liabilities".
Section 2.02 Earnest Money. Buyer has previously delivered to Seller's
counsel, Charles D. Barnett, a check payable to Chicago Title Company c/o Carol
Perry, National Accounts, 14607 San Pedro, Suite 175, San Antonio, Texas 78232
("Escrow Agent") the sum of $25,000.00 as earnest money to bind this sale (the
"Earnest Money"). Upon Closing, the Earnest Money shall be applied to the
Purchase Price. Upon signing of the Agreement, the Earnest Money shall be
delivered by Seller's counsel to Escrow Agent for deposit in a Federally-insured
interest-bearing account, and the interest earned on the deposit shall be
credited to Buyer (Federal ID No. 76 0406417).
ARTICLE III
Section 3.01 Title Insurance. Buyer shall cause the Title Company to
deliver to Buyer Commitments for Title Insurance (the "Title Commitments")
covering the Leases set forth in Schedules A-1 through A-9, with coverages and
amounts determined by Buyer. At or prior to Closing, Seller at its expense
(other than the expense for the title premium, which shall be paid by Buyer)
shall cause to be satisfied any of the title requirements (the "Title
Requirements") set forth in such Title Commitment so as to enable the Title
Company to insure that the applicable landlord is the fee owner and that Buyer
is the lessee. Notwithstanding the foregoing provisions of this Section 3.01, if
Seller is unable to satisfy the Title Requirements on any Lease as above
provided, Buyer may terminate this Agreement on or before Closing Date, and
receive a refund of the Earnest Money.
ASSET PURCHASE AGREEMENT Page 2
<PAGE>
Section 3.02 Leases. Seller at its expense shall use its best efforts to
deliver to Buyer at Closing a duly executed counterpart of an Assignment of
Lease and Consent of Landlord (a consent from the applicable landlord shall only
be required if specifically required by the Lease or by law for the assignment
to be effective without creating an event of default thereunder) (an "Assignment
and Consent") relating to each of the Leases in form attached hereto as Exhibit
"C" plus consents to the assumption by Buyer of the Assumed Liabilities
described in Schedules B-1 through B-9 (the "Lender Consents"). If Seller is
unable, on or before Closing, to provide an Assignment and Consent with respect
to any Lease or Leases, or any of the Lender Consents, Buyer or Seller may
terminate this Agreement on or before the Closing Date, and if so, Buyer shall
receive a refund of the Earnest Money.
Section 3.03 WARN Act Notice. Prior to the Closing, Seller shall deliver
written notice, conforming to the requirements of this paragraph, to each of its
employees who work at Seller's restaurant on the Leasehold Premises or who may
otherwise be reasonably expected to experience an employment loss as a result of
Seller's cessation of operations in such restaurant (collectively, the "Affected
Employees"). The written notice to be delivered to each of such persons (the
"WARN Act Notice") shall contain the following provisions: (i) the employment of
the Affected Employees shall be terminated on the day preceding the Closing Date
and (ii) provisions which would prevent the imposition of any liabilities under
Section 2104(a) of the Worker Adjustment and Retraining Notification Act (the
"WARN Act") and the regulations promulgated thereunder. The WARN Act Notice
shall also be delivered to each party specified in Sections 2101 and 2102 of the
WARN Act.
ARTICLE IV
Section 4.01 Feasibility. Buyer is granted the right to conduct an
engineering and/or market and economic feasibility study (the "Feasibility
Study") of all of the Assets, including a physical inspection of all Leases,
improvements, fixtures, mechanical equipment and Personal Property. Buyer shall
have thirty (30) days from the date of delivery by Seller to Buyer of all of the
items described in Section 4.02 below (the "Inspection Period") to perform such
study and inspection; and in this regard, Buyer or its designated agents may
enter upon the Leased Premises for purposes of such analysis, tests and
inspections which may be deemed necessary by Buyer, at times and places
reasonably convenient to both Seller and Buyer. If Buyer determines, in Buyer's
sole judgment, that any of the Leased Premises and/or the Assets are not
suitable for any reason for Buyer's intended use or purpose, then Buyer may, on
written notice to Seller on or before the expiration of the Inspection Period,
terminate this Agreement and receive a refund of the Earnest Money. If the
written notice is not given to Seller within such period, this condition and any
and all objections with respect to the Feasibility Study shall be deemed to have
been waived by Buyer for all purposes, and Buyer shall be required to deposit an
additional Fifty Thousand Dollars ($50,000.00) with the Escrow Agent within five
(5) business days thereafter as additional Earnest Money. In the event this
Contract shall not close through no fault of Seller, Buyer shall restore the
Leased Premises to their original condition if changed due to the tests and
inspections performed by Buyer. Seller acknowledges and agrees that Buyer shall
expend substantial sums of money in connection with its investigation of the
Leased Premises and that such expenditures shall be deemed as additional
consideration for this Contract; provided, that in no event shall Seller have
any duty to reimburse Buyer for such sums in the event that this Contract is
terminated. Buyer shall further indemnify Seller and hold Seller harmless from
and against any and all liability for physical injury to persons or property
arising out of the exercise of Buyer's rights under this Section 4.01.
ASSET PURCHASE AGREEMENT Page 3
<PAGE>
Section 4.02 Documents to be Delivered by Seller. Seller shall deliver to
Buyer copies of the following within fifteen (15) days from the Effective Date
hereof:
(1) a current inventory of all Personal Property, certified by Seller
as being true and correct as of the date of delivery;
(2) the Leases, Note(s), Deed(s) of Trust, Security Agreements,
Financing Statements, Agreements and other loan documents
pertaining to the Leases assumed or taken subject to;
(3) all services, maintenance, management or other contracts and all
personal property leases relating to the ownership and operation
of the restaurants located on the Leased Premises;
(4) any and all warranties, guaranties and bonds relating to the
Leased Premises, or any part thereof;
(5) certificates of all fire, hazard, liability and other insurance
policies maintained by Seller with regard to the Leased Premises;
(6) the most recent real estate and personal property tax statements
with regard to the Leased Premises;
(7) any and all available site plans, surveys, soil studies,
architectural drawings, plans and specifications with respect to
the Leased Premises;
(8) a true and correct statement of all repairs in excess of
$1,000.00 for the Leased Premises from January 1, 1996 to
December 31, 1996;
(9) Copies of all zoning designations, grants of zoning variances,
building permits, certificates of occupancy and other
governmental licenses or approvals relating to any portion of the
Assets in Seller's possession;
(10) With respect to the Assets, any and all existing environmental
studies and reports, and all contracts, reports, reflecting
removal of hazardous materials or substances, if any such
materials or substances existed;
(11) If such exist, all notices, citations or other documents
evidencing actions, suits or proceedings pending, or threatened
or asserted against Seller affecting any portion of the Assets,
at law or in equity, before or by any federal, state, county,
municipal or other governmental department, commission, board,
bureau, agency or instrumentality, whether domestic or foreign.
(12) If such exist, all notices or other documents evidencing that
notice has been received from an insurance company that has
issued a policy with respect to any portion of the Assets or from
any board of fire underwriters (or other
ASSET PURCHASE AGREEMENT Page 4
<PAGE>
body exercising similar functions), claiming any defects or
deficiencies or requiring the performance of any repairs,
replacements, alterations or other work;
(13) If such exist, all documents or notices indicating that
condemnation, assessment or similar proceeding or charge
affecting the Assets or a portion thereof is pending or
contemplated.
(14) If such exist, all documents, notices or citations indicating
that: violation of zoning, building, fire or similar law,
ordinance, code, order, regulation or restriction is claimed by
applicable governmental authority under current use of any
building or other improvement constituting the Assets;
(15) If such exist, all notices, citations or other documents claiming
or asserting that a default or breach exists under any one or
more of the covenants, conditions, restrictions, rights-of-way or
easements affecting the Assets or any portion thereof;
(16) If such exist, all notices, citations or other documents
indicating that a fact or condition exists which would result in
the termination of the current access from the Assets to any
presently existing highways and roads adjoining or situated near
the Assets.
(17) Sales reports for the period from January 1, 1996 through
December 31, 1996 for each of the Lease locations;
Section 4.03 If any one or more of the items described in Section 4.02 do
not exist, Seller shall advise Buyer, in writing, to that effect contemporaneous
with the delivery of such items which do exist. Buyer shall, upon receipt of the
last of the documents referenced in Section 4.02 above, transmit written
acknowledgment of receipt of the documents to Seller. The Inspection Period
shall be calculated commencing the business day next following transmission of
the acknowledgment of receipt.
Section 4.04 In the event that Closing does not occur, Buyer shall return
all documents described in this Article IV to Seller.
ARTICLE V
Section 5.01 Representations and Warranties of Seller. Seller represents
and warrants to Buyer as set forth in the remaining sections of this Article V.
Section 5.02 Status of Seller. Seller is a corporation duly organized,
validly existing and in good standing under the laws of Florida.
Section 5.03 Authority of Seller. Seller has the requisite corporate power
to enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement by the Company, the performance by the
Seller of its obligations hereunder and the
ASSET PURCHASE AGREEMENT Page 5
<PAGE>
consummation by the Seller of the transactions contemplated herein have been
duly authorized by the board of directors of the Seller, and no other corporate
proceedings on the part of the, Seller are necessary to authorize the execution
and delivery of this Agreement, the performance by the Seller of its obligations
hereunder and the consummation by the Seller of the transactions contemplated
hereby. This Agreement and all agreements contemplated hereby have been duly
executed and delivered by the Seller and constitute valid and binding
obligations of the Seller, enforceable in accordance with their terms.
Section 5.04 No Impediment to Seller's Performance. Neither the execution
nor the performance of this Asset Purchase Agreement by Seller will conflict
with or result in any default under or in any violation of any provision of (i)
the charter or bylaws of Seller or (ii) any agreement, mortgage or other
instrument to which Seller is a party or by which Seller or any of its
properties is bound or (iii) any applicable statute, regulation, ordinance,
judgment, order or decree to which Seller or any of its properties is subject.
Section 5.05 Title to Assets. Seller has good and indefeasible title to the
Assets, free and clear of liens, security interests and encumbrances, except as
set forth in the Title Commitment and for liens to those creditors and in the
amounts described in Section 2.01.
Section 5.06 Debts and Taxes. All debts, obligations, liabilities, taxes
and assessments incurred, arising, existing, levied or imposed upon or with
respect to the use, occupancy, possession or operation of the Assets at any time
prior to the Closing Date have been or will be paid, discharged and satisfied by
Seller on or prior to the Closing Date, except as otherwise provided in Section
7.02 relating to the proration of ad valorem taxes.
Section 5.07 Board Recommendations: Seller Action.
(a) The board of directors of Seller has by resolutions duly adopted
by the requisite vote of the directors acting by unanimous written consent
determined that the sale of the Assets to Buyer, as well as the Assignment
of the Leases, taken together, in accordance with the terms of this
Agreement are fair and in the best interests of the Seller and its
stockholders, and has approved and adopted this Agreement, the Sale of the
Assets, the Assignment of the Leases and the other transactions
contemplated hereby.
(b) The affirmative vote of stockholders of the Company is not
required for approval and adoption of this Agreement and such Assets and
Leases do not constitute a substantial portion of the assets of Seller.
Section 5.08 Legal Proceedings. To the best of Seller's knowledge, there
are no suits or proceedings pending or threatened in any court, governmental
agency or other tribunal, nor is there any other proceeding or governmental
investigation pending or threatened, which relate in any way to the Assets, or
which would adversely affect or interfere with the performance of this Asset
Purchase Agreement by Seller.
Section 5.09 No Brokers. Seller has not entered into any agreement or taken
any action which would require the payment of a real estate commission or
finders fee with respect to this Agreement or the transactions herein
contemplated.
ASSET PURCHASE AGREEMENT Page 6
<PAGE>
Section 5.10 The Leases. The copies of the Leases which have been or shall
be delivered by Seller to Buyer are or shall be true and complete. The Leases
are in full force and effect and have not been altered, amended, modified or
supplemented, except for amendments delivered to Buyer. No default or event of
default exists under the, Leases.
Section 5.11 Financing Statements. Lien Searches. No currently effective
financing statement under the Uniform Commercial Code which names Seller as
debtor has been filed against the Assets or the Leases in any jurisdiction and
Seller has not signed any such financing statement or any security agreement
authorizing any secured party thereunder to file any such financing statement,
except for those perfecting liens securing those debts as described in Schedules
B-1 through B-9, attached hereto and incorporated herein for all purposes. Buyer
will order, at its expense, a lien search with respect to the Assets and the
Leases in each of the counties where such Assets lie. If such lien search
reflects any liens securing debt other than Assumed Liabilities, Buyer shall so
inform Seller, and Seller agrees at Closing to extinguish such debt(s) and to
exercise reasonable efforts to cause such creditor(s) to release its lien of
record. If, notwithstanding Sellers payment of such debt(s), Seller is unable,
at or prior to Closing, to cause any and all such liens and encumbrances (except
to the extent they secure Assumed Liabilities) to be released of record, Buyer
may either accept Seller's indemnification against such lien(s), or terminate
this Agreement on or before the Closing Date, and receive a refund of the
Earnest Money.
Section 5.12 Compliance With Laws. Except as may be otherwise expressly
stated in the Disclosure Schedule attached hereto as Schedules C-1 through C-9
and made a part hereof, Seller represents, covenants and warrants to Buyer and
its legal representatives, successors and assigns, as follows:
(a) The location and construction, occupancy, operation and use of all
improvements now placed, erected, constructed or developed as a
portion of the Leased Premises (the "Improvements") do not and will
not violate any applicable law, statute, ordinance, rule, regulation,
policy, order or determination of any federal, state, local or other
governmental authority ("Governmental Authority") or any board of fire
underwriters (or other body exercising similar functions), or any
restrictive covenant or deed restriction affecting any portion of the
Leased Premises, including without limitation, any applicable zoning
ordinances and building codes, flood disaster laws and health and
environmental laws, rules and regulations (hereinafter collectively
called the "Applicable Laws").
(b) Without in any way limiting the generality of above, to the best of
Seller's knowledge neither the Leased Premises nor the Seller are the
subject of any pending or, to the best of Seller's knowledge,
threatened investigation or inquiry by any Governmental Authority, or
are subject to any remedial obligations under any Applicable Laws
pertaining to health or the environment ("Applicable Environmental
Laws"), including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended
("CERCLA"), or the Resource Conservation and Recovery Act of 1987, as
amended ("RCRA"), and to the best of Seller's knowledge, this
representation and warranty would continue to be true and
ASSET PURCHASE AGREEMENT Page 7
<PAGE>
correct following disclosure to any applicable Governmental Authority
of all relevant facts, conditions and circumstances pertaining to the
Leased Premises and/or the Seller.
(c) [Deleted)
(d) To the best of Seller's knowledge and belief, Seller has taken all
steps necessary to determine and has determined that Seller has
properly disposed of all fats, grease, oil, degreasers and cleaning
solvents ("Hazards") generated and/or utilized on the Leased Premises
(e) To the best of Seller's knowledge and belief, there are no on-site or
off-site locations where hazardous substances, solid wastes or Hazards
from the Leased Premises have been stored, treated, recycled, or
disposed of.
(f) To the best of Seller's knowledge and belief, there has been no
litigation brought or threatened nor any settlement reached by or with
any parties alleging the presence, disposal, release, or threatened
release, of any hazardous substance, solid wastes or Hazards from the
use or operation of the Leased Premises.
(g) To the best of Seller's knowledge and belief the Leased Premises are
not on any federal or state "Superfund" list, nor subject to any
environmentally related liens.
(h) Between execution of this Agreement and the Closing, Seller shall not
cause any violation of any Applicable Environmental Laws, nor permit
any tenant of any portion of the Leased Premises to cause such a
violation, nor permit any environmental liens to be placed on any
portion of the Leased Premises.
Section 5.13 At all times from the date of this Agreement to the Closing,
Seller shall cause to be maintained in force, fire and extended coverage
insurance upon the Assets and public liability insurance with respect to damage
or injury to person or property occurring on the Assets in such amounts as are
sufficient to afford reasonable insurance protection to the owner of the Assets.
Section 5.14 At all times from the date of this Agreement to the Closing,
Seller shall keep and perform all of the obligations to be performed by the
tenant under the Leases including, without limitation, any maintenance of the
Assets to be performed by the tenant under such Leases.
Section 5.15 During the Inspection Period, Seller shall not enter into any
new or renewal leases in regards to the Leased Premises without
contemporaneously advising Buyer of such act. After the expiration of the
Inspection Period, and prior to Closing, Seller shall not enter into any new or
renewal leases in regards to the Leased Premises without having received prior
written consent from Buyer. Seller shall not enter into any new or renewal
service, maintenance, or management agreement in regards to the Leased Premises
with respect to all or any portion of the Assets without Buyer's prior written
approval.
Section 5.16 Prior to the Closing, Seller shall manage the Assets in
substantially the same manner as they have been managed up to and including the
date hereof, Subject, however, to all relevant provisions of this Agreement.
ASSET PURCHASE AGREEMENT Page 8
<PAGE>
Section 5.17 Prior to the Closing, Seller shall maintain the Assets in good
condition and repair, except for normal wear and tear and any casualty or
condemnation, and Seller shall not remove any fixtures, equipment, furnishings
or other personalty which constitute Assets without replacing them with
substantially similar items, nor shall Seller in any manner neglect the Assets.
Section 5.18 Seller shall cause all trade accounts and costs and expenses
of operation and maintenance of the Assets incurred prior to the Closing to be
promptly paid when due.
Section 5.19 From the date of this Agreement until the Closing, Seller, at
its sole cost and expense, will make or cause to be made all ordinary repairs
and replacements reasonably and customarily required with respect to any portion
of the Assets. From the date of this Agreement until the Closing, Seller, at its
sole cost and expense, will maintain the Assets, or cause the same to be
maintained, in the normal manner.
Section 5.20 No work will have been performed or will be in progress on any
of the Assets, and no materials will have been delivered for use in conjunction
therewith that might provide the basis for a mechanic's, materialman's or other
lien against the Assets or any portion thereof. There exist no service
contracts, management or other agreements applicable to the Assets other than
those furnished to Buyer pursuant to Section 4.02.
Section 5.21 Prior to the Closing, Seller shall not create or voluntarily
permit to be created any liens, easements or other conditions affecting any
portion of the Assets without the prior written consent of Buyer, which consent
shall not be unreasonably withheld.
Section 5.22 The execution by Seller of this Agreement and the consummation
by Seller of the transactions contemplated hereby do not, and at the Closing
will not, result in a breach of any of the terms or provisions of, or constitute
a default or a condition which upon notice or lapse of time or both would ripen
into a default under any indenture, agreement, instrument or obligation to which
Seller is a party or by which the Assets or any portion thereof is bound; and
does not, and at the Closing will not, to the knowledge of Seller, constitute a
violation of any order, rule or regulation applicable to Seller or any portion
of the Assets of any court or of any federal or state or municipal regulatory
body or administrative agency or other governmental body having jurisdiction
over Seller or any portion of the Assets.
Section 5.23 Solvency. That (i) Seller is currently, and will be, able to
meet its obligations as they become due; (ii) the value of the assets of Seller
is currently, and will be, in excess of its total liabilities; (iii) the
transactions contemplated by this Agreement will not result in Seller having
unreasonably small capital with which to continue its operations; and (iv) the
transactions contemplated by this Agreement will not increase the indebtedness
of Seller beyond its ability to pay such debts.
ARTICLE VI
Section 6.01 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as set forth in the remaining sections of this Article VI.
Section 6.02 Status of Buyer. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas.
ASSET PURCHASE AGREEMENT Page 9
<PAGE>
Section 6.03 Authority of Buyer. Buyer has good right, power and authority
to enter into this Asset Purchase Agreement and to carry out and perform its
duties and obligations hereunder. All corporate action on the part of Buyer
necessary to authorize the execution, delivery and performance of this Asset
Purchase Agreement by Buyer has been duly and legally taken.
Section 6.04 Legal Proceeding. To the best of Buyer's knowledge, there are
no suits or proceedings pending or threatened in any court, governmental agency
or other tribunal which would adversely affect or interfere with the performance
of this Asset Purchase Agreement by Buyer.
Section 6.05 No Brokers. Buyer has not entered into any agreement or taken
any action which would require the payment of a real estate commission or
finder's fee with respect to this Asset Purchase Agreement or the transactions
contemplated herein.
Section 6.06 Seller's Employees. Buyer intends to renovate most of the
Leased Premises acquired under this Asset Purchase Agreement and to install
additional equipment therein. Thereafter, Buyer intends to open and operate
restaurants at such locations under Buyer's trade name. Any and all persons who
are currently employed by Seller in connection with the management, operation or
maintenance of the Assets shall be terminated by Seller at or prior to Closing
insofar as their employment relates to the Assets, and Setter shall indemnify
and hold Buyer harmless of and from any and all claims by such employees.
Although Buyer may employ some of the qualified former employees of Seller who
apply to work for Buyer, Buyer will not be obligated to provide employment for
any particular former employee or employees of Seller.
Section 6.07 Conversion of Leased Premises. Buyer acknowledges that it
will, following the Closing date, timely convert the signage on the Leased
Premises so that they are not confusingly similar to a Roasters Restaurant.
ARTICLE VII
Section 7.01 Access and Information. To the extent reasonably required for
the purposes hereof, Seller will cause to be furnished to Buyer all such
information relating to the Assets as Buyer may reasonably request.
Section 7.02 Ad Valorem Taxes. At or prior to Closing, Seller shall pay all
ad valorem taxes on the Assets for the year 1996 and prior years. Such taxes for
the year of Closing shall be prorated at Closing, based upon the number of days
in the year of Closing elapsing before and after the Closing.
Section 7.03 Rents and Charges Under the Leases. All rents and charges of
every kind payable by the tenant under the provisions of the Leases which are
not yet due and payable as of the Closing Date will be prorated between Seller
and Buyer as of such date. Such prorations will reflect appropriate credits to
Seller with respect to any such rents or charges prepaid by Seller. As soon as
the final accounting of such prorations can be made (on the basis of actual and
not estimated charges), Buyer and Seller will determine the net effect of the
prorations, and the party obligated to make payment to the other as a result
thereof will promptly do so upon demand. Seller agrees to report to the various
landlords all sales on the Leased Premises for all periods up to the Closing
Date and to make available to Buyer such sales figures for the current lease
year.
ASSET PURCHASE AGREEMENT Page 10
<PAGE>
Section 7.04 Utilities. Seller and Buyer shall cooperate in making
arrangements to assure that utility services to the Leased Premises are not
interrupted as a result of the change of ownership. It is agreed that utility
meters shall be read on the Closing Date, and all utility charges shall be
prorated as of the Closing Date. Seller shall be responsible for and shall pay
for all utilities used or consumed on the Leased Premises prior to the Closing
Date. Seller shall be entitled to receive all refundable utility deposits made
by Seller. Buyer shall be responsible for and shall pay for all utilities used
or consumed on the Leased Premises on and after the Closing Date.
Section 7.05 Expenses. At or prior to Closing, Seller shall pay the cost of
recording any curative instruments and releases, and any other costs which
Seller is expressly obligated to pay hereunder. At Closing, Buyer shall pay the
escrow fee, if any, the cost of recording all closing instruments other than
curative instruments and releases, the cost of any title insurance policies, and
any other costs which Buyer is expressly obligated to pay hereunder. Each party
shall pay its own attorneys' fees.
Section 7.06 Damage or Condemnation Prior to Closing. Notwithstanding
anything elsewhere herein contained, if any of the Leased Premises is damaged by
fire or other cause (excluding ordinary wear and tear from normal usage) or
becomes the subject of a condemnation under right of eminent domain prior to the
Closing Date, and if such damage is not fully repaired or restored, or if such
condemnation is not abandoned, prior to the Closing Date, Buyer as its sole
remedy may either (i) accept title subject to the damage or condemnation and
receive an assignment of any insurance proceeds or condemnation award or (ii)
terminate this Contract and receive a refund of the Earnest Money.
Section 7.07 Security Deposits. Any security deposits held by Landlords
under the Leases are not included in the Purchase Price. At Closing, Buyer shall
pay to Seller the amount of any security deposits as additional consideration
and Seller shall assign to Buyer its interest in any security deposits.
Section 7.08 Transfer Taxes. All sales, transfer or use taxes and/or other
fees, including bulk sales taxes which may be imposed or assessed as the result
of the transaction effected by this Agreement, except those taxes imposed upon
the income of Seller, if any, shall be paid equally by the Buyer and the Seller
as soon after the Closing as may be required by taxing authorities pursuant to
Federal, state or local laws.
Section 7.09 Bulk Transfer Laws. The Buyer agrees to waive any formal
requirements, if any, of the Bulk Transfer Law of the state in which the Leased
Premises or Assets may be located. Seller agrees to hold Buyer harmless and
indemnify Buyer against any claims asserted against Buyer due to the operation
of the Roasters Restaurant on the Property prior to Closing, or arising under
the Bulk Transfer Law of the state in which the Leased Premises or Assets may be
located.
ARTICLE VIII
Section 8.01 Assumption by Buyer. At Closing, Buyer at its expense shall
execute and deliver to Seller a separate Assumption Agreement in recordable form
by which Buyer assumes the Assumed Liabilities described in Schedules B-1
through B-9 and all obligations of the tenant under each of the Leases arising
on and after the Closing Date.
ASSET PURCHASE AGREEMENT Page 11
<PAGE>
Section 8.02 Bills of Sale. At Closing, Seller at its expense shall execute
and deliver to Buyer a separate Bill of Sale in recordable form covering the
Equipment on each of the Leased Premises with covenants of general warranty of
title, free and clear of liens, security interests and encumbrances.
Section 8.03 Other Instruments. At Closing, Seller at its expense shall
execute and deliver to Buyer such other instruments as Buyer may reasonably
request in order to vest Buyer with title to, and to place Buyer in possession
of, the Assets, including:
(i) All keys to all locks and all access codes to all electronic
security systems on the Assets in the possession of Seller and copies of
any documents in the possession of the Seller which are reasonably
necessary for the continued operation of the Assets.
(ii) To the extent available, original copies of all necessary permits
issued by appropriate governmental authorities and utility companies when
the Assets were completed, including, but not limited to, certificate(s) of
occupancy.
(iii) To the extent available, all plans, specifications, mechanical,
electrical and plumbing layouts, operating manuals, leasing information and
similar items in the possession of Seller and utilized in connection with
the operation of the Assets.
Section 8.04 Title Policies. The Title Policies shall be delivered to Buyer
as provided in Section 3.01.
Section 8.05 Removal by Seller. On or prior to the Closing Date, Seller at
its expense shall remove from the Lease and the Leased Premises all food
inventories. It is agreed that the building sign frames, foundations, pylons and
structural components of Seller's free-standing sign structures are not to be
removed by Seller and are to remain as part of the Assets.
Section 8.06 Certificates at Closing. The representations and warranties of
Seller in Article V shall be deemed to be made again as of the time of the
Closing and shall then be true in all material respects; and Seller at the
Closing shall deliver to Buyer a currently-dated certificate to such effect
signed by the President or a Vice President of Seller. The representations and
warranties of Buyer in Article VI shall be deemed to be made again as of the
time of the Closing and shall then be true in all material respects; and Buyer
at the Closing shall deliver to Seller a currently-dated certificate to such
effect signed by the President or a Vice President of Buyer.
Section 8.07 Possession. Subject to Seller's obligations regarding
operation of the Assets between the date hereof and Closing, Seller shall
deliver possession of all of the Assets in their then "as is" condition to Buyer
on the Closing Date.
Section 8.08 Survival. The representations, warranties and covenants of
Seller in this Agreement, except as such covenants may be fully performed at or
prior to the time of the Closing, shall survive the Closing and shall be fully
enforceable at law or in equity against Seller and its successors and assigns.
The representations, warranties and covenants of Buyer in this Asset Purchase
Agreement, except as such covenants may be fully performed at or prior to the
time of the Closing, shall survive the Closing and shall be fully enforceable at
law or in equity against Buyer and its successors and assigns by Seller and its
successors and assigns.
ASSET PURCHASE AGREEMENT Page 12
<PAGE>
Section 8.10 Indemnities.
A. Seller agrees to indemnify Buyer and to hold Buyer harmless from any
loss, cost, expense or liability arising out of or in connection with (i) the
breach or falsity of any representation or warranty of Seller in this Agreement,
(ii) the use, occupancy, possession or operation of the Assets as currently used
at any time prior to the Closing Date, (iii) an indemnifiable claim arising out
of any indemnities set out elsewhere in the Agreement, or (iv) the Retained
Liabilities. Buyer agrees to indemnify Seller and to hold Seller harmless from
any loss, cost, expense or liability arising out of or in connection with (i)
the breach or falsity of any representation or warranty of Buyer in this Asset
Purchase Agreement, (ii) the use, occupancy, possession or operation of the
Assets at any time after the Closing Date, or (iii) a failure by Buyer to pay
the Assumed Liabilities. The provisions of this Section shall survive the
Closing.
B. If any action, suit or proceedings shall be commenced against, or any
claim or demand be asserted against a party with respect of which the other
party proposes to demand indemnification, the recipient of such a demand for
indemnification (the "Indemnifying Party") shall, within thirty (30) days after
receipt of demand for indemnification have the right to assume the entire
control of the defense, compromise or settlement thereof, including the right of
the selection of counsel, subject to the right of the other party (the
"Notifying Party") to participate and, to the extent the Notifying Party shall
wish, to direct the defense at its expense and with counsel of its choice. In
connection therewith, the Notifying Party shall cooperate fully in all respects
with the Indemnifying Party in any such defense, compromise or settlement,
including, without limitation, making available to the Indemnifying Party all
pertinent information under the control of Notifying Party. The Indemnifying
Party will not compromise or settle any such action, suit, proceeding, claim or
demand without the prior written consent of Notifying Party.
ARTICLE IX
Section 9.01 lndemnity Escrow Fund. In order to secure Seller's obligations
described in Section 8.10, Seller shall deposit with Title Company on the
Closing Date the amount of Seventy Five Thousand Dollars ($75,000.00)
("Indemnity Fund"). If Seller fails to pay any of its obligations set forth in
Section 8.10. Buyer shall have the right to withdraw from the Indemnity Fund all
amounts due and owing from Seller thirty (30) days after Buyer provides written
notice to Seller of its intention to do so. Seller shall deliver to the Title
Company the appropriate written authorization required to effect the withdrawal
by Buyer. After the expiration of one (1) year from Closing Date, any amounts in
excess of pending claims by Buyer against the Indemnity Fund shall be released
to the Seller. Buyer and Seller agree to execute an Escrow Fund Agreement with
the Title Company in form reasonably requested by the Title Company, containing
usual and customary indemnities.
ARTICLE X
Section 10.01 Parties in Interest. This Agreement shall inure to the
benefit of and shall be binding upon Seller and Buyer and their respective
successors and assigns. Nothing in this Asset Purchase Agreement, expressed or
implied, is intended to confer upon any other person any rights or remedies
hereunder.
ASSET PURCHASE AGREEMENT Page 13
<PAGE>
Section 10.02 Entire Agreement. This Agreement, including the exhibits
referred to herein, contains the entire agreement of the parties with respect to
the subject matter hereof. This Agreement may be amended only by an agreement in
writing signed by both parties hereto.
Section 10.03 Assignment It is expressly understood and agreed that Buyer
intends to enter into transactions with area developers to whom Buyer will
assign the leases (with no release of liability for Buyer), and which area
developers will assume those portions of the Assumed Liabilities relating the
Assets utilized in conjunction with the Leases so assumed by such area
developers.
Section 10.04 Headings. The headings and captions used herein are for
reference purposes only and are not intended to affect the meaning or
interpretation of any of the provisions of this Agreement.
Section 10.05 Notices. Any notice given with respect to this Agreement to
either party shall be in writing and shall be mailed to such party at its
address shown above. Notices hereunder shall be deemed to have been received
upon deposit of such notice in the U.S. Mails, certified, return receipt
requested, properly addressed to recipient at the address shown above
Section 10.06 Governing Law. This Agreement and the rights and obligations
of the parties hereunder shall be governed by and shall be construed and
enforced in accordance with the laws of Texas.
Section 10.07 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 10.08 Termination. If, as a result of any cause other than Buyer's
default hereunder, the transactions contemplated herein are not consummated by
March 31, 1997, this Agreement shall automatically terminate, in which event the
Earnest Money and the accrued interest thereon shall be delivered promptly to
Buyer, and neither party shall have any further obligations hereunder.
Section 10.09 Remedies Upon Default
A. Seller's Remedies. If Buyer shall materially default in the performance
of its representations, warranties and covenants under this Agreement, and fails
to cure such default within ten (10) days after receipt of written notice from
Seller, and Seller shall for this reason fail to consummate this Agreement at
the Closing Date, and Seller is not then in default of any of its
representations, warranties and covenants hereunder, Seller shall then be
entitled, as its sole and exclusive remedy, to terminate this Agreement and
retain the Earnest Money as liquidated damages, and not as a penalty, it being
agreed that the actual amount of damages would be difficult to determine.
ASSET PURCHASE AGREEMENT Page 14
<PAGE>
B. Buyer's Remedies. If Seller shall materially default in the performance
of its representations, warranties and covenants under this Agreement at the
Closing Date, and fails to cure such default within ten (10) days after receipt
of written notice from Buyer, and Buyer is not then in default of any of its
representations, warranties an d covenants hereunder, Buyer shall be entitled at
its option:
(i) to terminate this Agreement;
(ii) to require Seller to consummate the Sale in accordance with the
terms of this Agreement, if necessary through injunction or other
court order or process; and,
(iii)in addition to the foregoing, to have such other remedies
against Seller as shall be available to Buyer elsewhere hereunder
and/or under applicable law or equity, including recovery of
reasonable attorneys' fees and return of any costs incurred by
Buyer in the preparation for consummation of the acquisition
contemplated herein.
Section 10.11 Confidentiality. Buyer acknowledges that Seller is currently
in possession of the Leased Premises and the Assets and is operating the
properties as Roasters Restaurants. Except to the extent necessary to comply
with state or federal securities laws, Seller and Buyer each agrees to not
publicize the existence of the terms of this Agreement, and Buyer agrees to
first contact Seller should it or anyone on its behalf wish to enter the Leased
Premises for any reason prior to Closing.
Executed in multiple counterparts as of the date first above written.
ROASTERS CORP.
By: /s/ Thomas Metzger
----------------------
Name: Thomas Metzger
Title: President
CLUCKCORP INTERNATIONAL, INC.
By: /s/ William Gallagher
-------------------------
Name: William Gallagher
Title: Chairman
<PAGE>
CAUTHORN HALE HORNBERGER
FULLER SHEEHAN & BECKER
INCORPORATED
ATTORNEYS AT LAW
ONE RIVERWALK PLACE, SUITE 620
700 NORTH ST, MARY'S STREET (210)271-1700
SAN ANTONIO, TEXAS 78205-3508 FAX (210)271-1740
February 6, 1997
Mr. William Gallagher
CluckCorp International, Inc. HAND DELIVERY
1250 N. E. Loop 410, Suite 335
San Antonio, TX 78209
Dear Bill:
Attached are four original execution counterparts of the contract with
Polio Operations, Inc. for the purchase of the building in Tampa, Florida.
Please sign the four originals where indicated, and initial the strikeout of
language on Page 3 of the Addendum, and sign on Page 4 of the Addendum, Mike
Gulley needs to sign for Hardy & Company on Page 4 of the contract. The four
originals should then be forwarded to Mr. Glenn Rozansky at Pollo Operations,
Inc., 7300 N. Kendall Drive, Suite 800, Miami, Florida 33516. You should also
send along with the contracts and earnest money check in the amount of
$25,000.00 payable to Chicago Title Insurance company. Mr. Rozansky will then
sign the four originals, and initial the deleted language on Page 3 of the
Addendum, and should secure the signatures of the two brokers listed on Page 4
of the contract. Mr. Rozansky should then forward the contracts and the earnest
money check to Chicago Title's National Accounts Division in Miami for signature
as well. By copy of this letter to Carol Perry in the San Antonio office, I will
ask her to coordinate the handling of this matter in accordance with Paragraph 8
of the Addendum.
Finally, by copy of this letter to Howard Friedberg, I will remind him that
we are still awaiting delivery of the Phase I and Phase II Environmental Reports
referred to Paragraph 7 of the Addendum. If you or any of the persons receiving
copy of this letter have any further questions, please do not hesitate to
contact the undersigned.
Very truly yours,
CAUTHORN, HALE, HORNBERGER,
FULLER, SHEEHAN & BECKER, INC.
By: /s/ Douglas W. Becker
-------------------------
Douglas W. Becker
DWB/ldf
34/CO163/012/03.ltr
Enclosures
cc: Mr. Howard L. Friedberg(w/o enclosure)
Ms. Carol Perry/(w/enclosure)
Mr. Mike Gulley/(w/o enclosure)
Mr. Glen Rozansky/(w/o enclosure)
<PAGE>
EXHIBIT 10.33
CONTRACT FOR SALE AND PURCHASE
(Approved by the Dade County Associations of Realtors)
Date Prepared: January __,1997
PARTIES: CLUCKCORP INTERNATIONAL , INC., a Texas corporation ("Buyer"), and
POLLO OPERATIONS, INC., a Florida corporation ("Seller"), hereby agree that
Seller shall sell and Buyer shalt buy the following real property ("Real
Property") and personal property ("Personally") (collectively, "Property") upon
the terms and conditions of this Contract For Sale And Purchase ("Contract"),
which includes any Riders attached hereto.
1. DESCRIPTION OF PROPERTY:
A. TAX FOLIO #: 114319.00 and 114317.00
B. LEGAL DESCRIPTION OF REAL PROPERTY: SEE EXHIBIT A ATTACHED HERETO AND
MADE A PART HEREOF
C. STREET ADDRESS: 401 NORTH DALE MABRY City: TAMPA, FLORIDA Zip:
D. PERSONALTY: SEE EXHIBIT B ATTACHED HERETO AND MADE A PART HEREOF
2. PURCHASE PRICE AND METHOD OF PAYMENT:
A. PURCHASE PRICE $1,150,000.00
B. DEPOSIT to be held in escrow by Chicago Title Insurance Company
(National Accounts Division - Miami, Florida) ("Escrow Agent")
1. Initial deposit $25,000.00
2. Additional deposit due within ____ days after Effective Date $ N/A
3. Total deposit ("Deposit") $25,000.00
C. FINANCING as a percentage of the Purchase Price (%) or dollar amount ($)
880,000.00 to be provided by (please check as applicable):
[ ] 1. New third party conventional mortgage loan
a. [ ] first or [ ] second mortgage
b. [ ] fixed rate [ ] adjustable/variable rate [ ] fixed or
adjustable/variable rate
c. Term: years
[ ] 2. New third party FHA or VA mortgage loan (see FHA/VA Rider)
[ ] 3. Assumption of existing mortgage(s) (see Financing Rider)
[x] 4. Seller financing
[ ] 5. Other:
D. OTHER TERMS: N/A
E. BALANCE TO CLOSE, In U.S. Dollars, by received wire transfer, subject to
adjustments and prorations.
3. FINANCING:
4. ACCEPTANCE; FACSIMILE; EFFECTIVE DATE: If this offer is not executed by and
delivered to all parties on or before ________________ the Deposit will, at
Buyer's option, be returned to Buyer and this offer withdrawn. Facsimile
copies of this Contract, signed and initialed in counterpart, shalt be
considered for all purposes, including delivery, as originals. The
"Effective Date" of this Contract will be: (a) the date when the last one
of the Buyer and Seller has signed this offer; or (b) if changes in this
offer (after signature) have been made and initialed by the parties, the
date when the last one of the Buyer and Seller has initiated those changes.
5. DATE AND PLACE OF CLOSING: This transaction shall close on the first
business day which is 15 days after expiration of the Inspection Period,
unless extended by other provisions of this Contract ("Closing"), at the
office of Seller's attorney.
6. SPECIAL CLAUSES: See Addendum attached hereto and made a part hereof.
7. RIDERS: (Check applicable Riders which are attached to this Contract):
[ ] 1. Association Rider [ ] 5. Interest Bearing [ ] 8. Coastal Construction
[ ] 2. FHA/VA Rider Escrow Rider Control Line Rider
[ ] 3. Latent Defect Rider [ ] 6. "AS IS" Rider [ ] 9. Other: Addendum
[ ] 4. Financing Rider [ ] 7. Misc. Clauses Rider
<PAGE>
8. EVIDENCE OF TITLE:
A. DEFINED: Evidence Of Title shall be defined as:
a title commitment to be issued by Chicago Title Insurance company or
other title insurer acceptable to Seller and Buyer, at Buyer's
expense, with fifteen (15) days after the Effective Date. Buyer shall
cause its title insurer to omit the "gap" and all "standard"
exceptions and requirements, and to the extent of Seller's obligations
herein provided, Seller shall reasonably cooperate with the title
insurer with respect thereto.
C. DELIVERY, EXAMINATION:
Prior to the expiration of the Inspection Period, Buyer shall notify
Seller in writing of any title defects, If any title defects render
the title unmarketable, Seller shall use diligent effort to cure such
defects (excluding the bringing of necessary lawsuits) within 90 days
from receipt of such notice. If Seller shall fail to cure such defects
within the 90 day period, Buyer shall have the option of: (1)
accepting title as it is; or (2) demanding a refund of the Deposit, in
which case, the Deposit shall forthwith be returned to Buyer, and
Buyer and Seller shall be relieved, as to each other, of all
obligations under this Contract. Upon Closing, the Evidence Of Title
shall become the property of Buyer.
9. RESTRICTIONS AND EASEMENTS; BUILDING AND ZONING: (A) Buyer shall take title
subject to: (1) Zoning restrictions imposed by governmental authority (2)
Restrictions and matters appearing on the plan, or otherwise common, to the
subdivision; (3) Taxes for year of Closing; (4)Assumed mortgages and
purchase money mortgages, if any; (5) Restrictions, utility easements or
other matters which do not render the title unmarketable or adversely
affect the present use of the Property and (6) Permitted Exceptions.
10. SURVEY: Buyer, within the time allowed for delivery of Evidence Of Title
and examination thereof, shall have the Real Property surveyed at Buyer's
expense. If the survey shows any encroachment on the Real Property or that
the improvements presumed to be located on the Real Property in face
encroach on setback lines, easements, or lands of others, or violate any
restriction, Contract covenant, or applicable governmental regulation, the
same shall be treated as a title defect which renders title unmarketable.
The Survey shall also be certified to Seller.
11. INGRESS AND EGRESS: Seller covenants and warrants that there is ingress and
egress to the Property over public roads.
12. (INTENTIONALLY OMITTED)
13. EXISTING MORTGAGES: Seller shall obtain and furnish to Buyer no later than
10 days prior to Closing: (a)an estoppel letter for each existing mortgage
containing the necessary data for payoff; and (b) for equity line loans, a
written statement from the mortgagee showing that the account has been
closed in accordance with mortgagee's requirements to facilitate payoff at
Closing. Any prepayment penalties charged by mortgagees shall be paid by
Seller.
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<PAGE>
14. POSSESSION: LEASES: Unless otherwise specified in this Contract: (a) Seller
warrants and represents that there are no Parties in possession or with a
right to possession of the Property other than Seller: and (b) Seller shall
deliver possession of the Property to Buyer at the time of delivery to
Seller of the proceeds of the sale in accordance with paragraph 20. If this
Contract specifies that there are parties in possession or with a right to
possession who shall retain such possession or right to possession after
Closing and delivery to Seller of the proceeds of sale, then: (c) Seller
shalt, no later than 15 days after Effective Date. furnish to Buyer copies
of all written leases and estoppel letters from each tenant specifying the
nature and duration of the tenants' occupancy, rental rates, advance rent
and security deposits paid by tenant and (d) at Closing: (1) the rent Shall
be prorated: (2) any security deposit and advance rent small be paid to
Buyer; and (3) all original leases shall be assigned and delivered to
Buyer.
15. INSURANCE: The premium on any hazard insurance and flood insurance policies
in force covering improvements on the Property shall be on or before
Closing.
16. RISK OF LOSS: If the improvements are damaged by fire or other casualty
before delivery of the deed and can be restored to substantially the
same condition as now existing within a period of 60 days thereafter,
Seller may restore the improvements and the Closing shalt be extended
accordingly. It Seller fails to so restore the Property. Buyer shall have
the option of (a) taking the Property in "as is" condition, together with
the insurance proceeds, if any, or (b) cancelling this Contract and the
Deposit shall forthwith be returned to Buyer, and Buyer and Seller shall be
relieved, as to each other, of all obligations under this Contract. (SEE
ADDENDUM)
17. MAINTENANCE: Between the Effective Date and Closing, the Property,
including lawn, shrubbery and pool, if any, shall be maintained by Seller
substantially in the condition as it exists as of the Effective Date,
ordinary wear and tear excepted.
18. ESCROW AGENT: Any escrow agent ("Agent") including the Escrow Agent for the
Deposit, receiving funds or equivalent ("Escrow Funds"), is authorized to
receive the Escrow Funds, hold the Escrow Funds in escrow, and, subject to
clearance, disburse the Escrow Funds according to this Contract. If Agent
is in doubt as to Agent's duties or liabilities under this Contract, Agent
may, at Agent's option: (a) continue to hold the Escrow Funds until Buyer
and Seller mutually agree to its disbursement or until a judgment of a
court of competent jurisdiction shall determine the rights of the parties;
or (b) place the Escrow Funds into the registry of the circuit court having
jurisdiction of the dispute and interplead the parties having an interest
in the Escrow Funds. Upon notifying all interested parties of such action,
all liability on the part of Agent shall fully terminate, except to the
extent of accounting for the Escrow Funds. If Agent is a licensed real
estate broker, Agent will comply with the provisions of Chapter 475
F.S.(1991), as amended. Any suit between Buyer and Seller wherein Agent is
made a party because of acting as Agent hereunder, or in any suit wherein
Agent places the Escrow Funds into the registry of the court and
interpleads the interested parties, Agent shall recover reasonable
attorney's fees and costs incurred, which fees and costs shalt be paid from
and out of the Escrow Funds and charged and awarded as court costs in favor
of the prevailing party. All parties agree that Agent shall not be liable
to any party or person for misdelivery to Buyer or Seller of the Escrow
Funds unless such misdelivery is due to willful breach of this Contract or
gross negligence of Agent.
19. CLOSING DOCUMENTS: Seller shall deliver to Buyer at Closing: (a) special
warranty, trustee's, personal representative's, or guardian's deed, as
appropriate to the status of Seller, free and clear of all reverter clauses
and reservations for drainage, phosphate, minerals, metals, petroleum and
road rights-of-way, whether in favor of an individual or governmental unit
(waiver of right of entry from governmental unit shall be sufficient), but
subject to matters contained in Paragraph 9.(A); (b) Bill of sale conveying
Personalty: (c) affidavit attesting to the absence of liens or potential
lienors known to Seller, gap affidavit, and affidavit of possession; (d)
IRS form 1099b or such other forms as maybe required by the federal
government from time to time; (a) FIRPTA affidavits or exemption
certificates as may be required to exempt Seller or any agent from the
income tax withholding requirements Buyer shall execute and deliver to
Seller the Note, Mortgage, UCCs and Closing Statement.
20. CLOSING PROCEEDS; ESCROW AND DELIVERY: (INTENTIONALLY OMITTED)
21. EXPENSES: State documentary stamps and surtax on deed and the cost of
recording any corrective instruments shall be paid by Seller. Documentary
stamps to be affixed to the note secured by the purchase money mortgage,
intangible lax on the purchase money mortgage and the cost of recording the
deed and purchase money mortgage shall be paid by Buyer.
22. PRORATIONS: All prorations shall be made as of midnight to the day
preceding the Closing. Real and personal property taxes shall be prorated
based on the current year's tax with due allowance being made for the
maximum allowable discount and for homestead or other exemption if allowed
for said year. If Closing occurs at a date when the current years
assessment is not available, then taxes shall be prorated on the prior
year's tax. However, it there are completed improvements on the Property by
January 1st of the year of Closing which improvements were not in existence
on January 1st of the prior year, then the taxes shalt be prorated based
upon the prior year's millage and at are equitable assessment to be agreed
upon between the parties. However, any tax proration based on an estimate
may at the request of either party be subsequently readjusted upon receipt
of the tax bill, and a statement to that effect will be set forth in the
closing statement. Waste fees, association fees, expenses and revenues of
the Property shall also be prorated.
23. SPECIAL ASSESSMENT LIENS: Certified, confirmed and ratified special
assessment liens as of Closing are to be paid by Seller. Pending liens as
of closing shall be assumed by Buyer, provided, however, that where the
improvement has been substantially completed as of Effective Date, such
pending lien shall be considered as certified or ratified and Seller shall,
at Closing, be charged an amount equal to the last estimate by the public
body of the assessment for the improvement.
24. JOINDER Of SPOUSE: In the event there is failure of a spouse of Buyer or
Seller to join in the execution of any documents required by a mortgage
lender due to Florida homestead law considerations, whether in the case of
a new mortgage or an assumption of an existing loan, such failure shall be
deemed a default under this Contract.
25. PERSONS BOUND; GENDER; FLORIDA LAW: The benefits and obligations of this
Contract shall enure to and bind the respective heirs, personal
representatives, successors and assigns of the parties hereto. Whenever
used, free singular shall include the plural, the plural the singular, and
the use of any gender shall include all genders. This Contract shall be
governed by the law of the State of Florida. Venue shall lie only in Dade
County, Florida.
26. DEFAULT: It Buyer fails to perform this Contract within the time specified
(including the payment of the Deposit), the Deposit made, or agreed to be
made by Buyer, may be retained or recovered by or for the account of Seller
as agreed upon liquidated damages as consideration for the execution of
this Contract and in full settlement of Seller's claims (except as set
forth in Addendum Section 1), whereupon Buyer and Seller shall be relieved,
as to each other, of all obligations under this Contract: or Seller, at
Seller's option, may proceed in equity to enforce Seller's rights under
this Contract. If, for any reason other than failure of Seller to make
Seller's title marketable after diligent effort, Seller fails, neglects or
refuses to perform this Contract, Buyer may seek specific performance or
elect to receive the return of Buyer's Deposit, thereby waiving any action
for damages resulting from Seller's breach, Seller shall not be liable for
monetary damages.
27. ATTORNEYS' FEES AND COSTS: In connection with any litigation (including all
appeals and interpleaders) involving the Seller, Buyer, or Escrow Agent,
arising out of this Contract, the prevailing party shall be entitled to
recover all costs incurred, including reasonable attorney's fees at trial
and appellate levels.
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<PAGE>
23. ASSIGNABILITY: SEE ADDENDUM
29. TIME: Time is of the essence for all provisions of this Contract.
30. ENTIRE AGREEMENT; TYPEWRITTEN OR HANDWRITTEN PROVISIONS: NOT RECORDABLE:
This contract, including any exhibits and Riders attached, set forth the
entire agreement between Buyer and Seller and contains all of the
covenants, promises, agreements, representations, conditions and
understandings. Typewritten or handwritten provisions inserted in this
Contract or attached hereto as exhibits or Riders shall control all printed
provisions in conflict. Neither this Contract, nor any notice of it, shall
be recorded in any public records.
31. RADON GAS: Radon is a naturally occurring, radioactive gas that, when it
has accumulated in a building in sufficient quantities, may present health
risks to persons who are exposed to it over time. Levels of radon that
exceed federal and state guidelines have been found in buildings in
Florida. Additional information regarding radon and radon testing may be
obtained from your county public health unit.
32. (INTENTIONALLY OMITTED)
33. DISCLOSURES: BUYER ACKNOWLEDGES RECEIPT OF THE AGENCY, RADON, COMPENSATION,
AND REAL PROPERTY SALES DISCLOSURES BUYER'S INITIALS:
THIS IS INTENDED TO BE A LEGALLY BINDING CONTRACT.
IF NOT FULLY UNDERSTOOD, SEEK THE ADVICE OF AN ATTORNEY PRIOR TO SIGNING.
This Form has been approved by and Copyright 1992 by the following Dade County
Associations of Realtors: Coral Gables Association of REALTORS, Hialeah-Miami
Springs Association, of REALTORS, Homestead South Dade Board of REALTORS
Kendall-Parrine Association of REALTORS, Miami Beach Association at REALTORS,
and REALTOR Association of Miami, Approval of this form by these organizations
does not constitute an opinion that any of the terms and conditions in this
Contract form should be accepted by the parties in a particular transaction.
Terms and conditions should be negotiated between the parties based upon the
respective interests, objectives and bargaining positions of all interested
parties.
Date last initialed by Buyer,
if applicable:____________________
BUYER: CLUCKCORP INTERNATIONAL, INC., Date Signed by BUYER:_____________
A Texas corporation
By: /s/ William J. Gallagher (Seal) _____________________________(Seal)
- ----------------------------
William J. Gallagher, Chairman and CEO
Tax ID #:____________________________ Tax ID #:_________________________
Address: Cluckcorp International , Inc. , 1250 NE Loop 410 , Suite 335 , San
Antonio TX 73209 Attention: William J. Gallagher
34. BROKERAGE FEE: Seller acknowledges that this Contract has been read in its
entirety and agrees to sell the Property for the terms and conditions
stated in this Contract, and does hereby approve, ratify and confirm the
Contract in all respects. The undersigned Seller acknowledges employment of
the Broker(s) named herein as sole, the Seller (or of the Buyer, if so
designated) and agrees to pay said Broker(s) five % of the Purchase Price
or $57,500.00 for services performed said fee is payable at time of Closing
of this transaction. The provisions of this paragraph shall survive the
Closing. If Buyer fails to perform and the Deposit is retained, 0% shall be
paid Broker, and all shall be paid to seller.
Date last initialed by Seller,
if applicable:____________________
SELLER: POLLO OPERATIONS, INC., Date Signed by Seller:____________
a Florida corporation
_______________________________(Seal) _____________________________(Seal)
Tax ID #:____________________________ Tax ID #:_________________________
Address: 7300 North Kendall Drive, Suite 800, Miami, Florida 33156.
Attention G. Rozansky
35. BROKERS: The Broker(s) named below constitute the agent(s) of the Seller
(or of the Buyer, if so designated) regarding the safe of the Property, and
each Broker hereto will hold the other Broker harmless from any claims for
brokerage fees arising from his/her dealings with any Broker not specified
herein. By their execution, the Broker(s) agree to the brokerage fee
specified herein and to the proportions set out adjacent to their names.
Excess Space Disposition, Inc. 1.5% Hardy & Company 1.75%
By:_________________________________ Firm name of Selling Broker as
(Authorized Signatory) (check one.)
[ ] Cooperating Sub-agent; or
Sevell & Duncan Realty Services, Inc. 1.73% [X] Buyer's Broker
By:_________________________________ BY: SIGNED
(Authorized Signatory) (Authorized Signatory)
36. DEPOSIT RECEIPT: The Deposit (subject to clearance) was received on January
1997 and shall be held and disbursed according to this Contract by the
undersigned Escrow Agent.
Chicago Title Insurance Company ______________ By:____________________
Firm Name of Escrow Agent Telephone (Authorized Signatory)
<PAGE>
ADDENDUM
Anything contained in that certain Contract for Sale and Purchase (the
"Original Contract") by and between POLLO OPERATIONS, INC. ("Seller") and
CLUCKCORP INTERNATIONAL, INC., a Texas corporation ("Buyer"), respecting that
certain property having an address of 401 North Dale Mabry, Tampa, Florida (the
"Property") , to and of which this Addendum is attached and made a part, the
terms, conditions and provisions of this Addendum shall be paramount and
controlling.
1. INSPECTION RIGHTS:
(A) Rights of Inspection and Termination: During the thirty (30) day
period following the Effective Date ("Inspection Period"), Buyer shall have
the right, subject to the provisions of this Section 1, to inspect the
Property. In the event Buyer, in its sole discretion, shall ascertain that
the Property is unsuitable for its intended use as a "Harvest Rotisserie"
restaurant, then Buyer shall have the right to terminate this Agreement by
delivering written notice to Seller at any time prior to the expiration of
the Inspection Period. Upon such termination, the Deposit shall be returned
to Buyer, any information compiled by Buyer pertaining to the Property
shall be delivered to Seller, and thereafter, the parties hereto shall be
relieved of any and all obligations hereunder, except for those arising
pursuant to the immediately following paragraph. If Buyer shall fail to
terminate this Agreement within the time provided above, time being
strictly of the essence, Buyer right of termination as provided in this
Section shall be forever waived.
(B) Insurance: As a condition precedent to Buyer's right to enter upon
the Real Property, Buyer shall deliver to Seller an original certificate of
insurance, reflecting liability insurance in an amount not less than
$1,000,000 per occurrence, and $2,000,000 in the aggregate, showing Seller
as a named insured, from a company and upon terms reasonably acceptable to
Seller.
(C) Indemnity: Buyer shall (i) immediately pay or cause to be removed
any liens filed against the Property as a result of any actions taken above
by or on behalf of Buyer; (ii) immediately repair and restore the Property
to its condition existing immediately prior to the conduct of Buyer entry
thereon; and (iii) shall indemnify, defend and hold Seller harmless from
and against all claims, damages or losses incurred to the Property or
anyone on the Property as a result of the actions taken above by Buyer, or
any of its agents, representatives or contractors, or any persons
performing inspection activities or other activities on its behalf. The
terms and provisions of this inspection indemnity shall survive any
termination of this Agreement.
2. PURCHASE MONEY FINANCING: On the Closing Date, the Buyer shall execute
and deliver to the Seller that certain (i) promissory note, a copy of which is
attached hereto as Exhibit C-1 and made a part hereof (the "Note") , (ii)
purchase money mortgage, a copy of which is attached hereto as Exhibit C-2 and
made a part hereof (the "Mortgage") , and (iii) UCC-1 financing statements,
copies of which are attached hereto as Exhibit C-3(l) and C-3 (2) and made a
part hereof (collectively, the "UCCS") . At Closing, Buyer, at its sole cost and
expense, shall cause Chicago Title Insurance Company or other title insurer who
shall be subject to Seller's approval, to issue a loan title commitment and
policy in favor of Seller, in the amount of $1,100,000, which title policy shall
(a) omit the "gap" and all "standard" exceptions, and all requirements, (b)
include an ALTA Form 9 endorsement, (c) otherwise be in form and substance
satisfactory to Seller. Buyer shall pay any and all costs relating to the
Mortgage and UCCS, including without limitation, documentary stamp and
intangible taxes.
3. AS IS DELIVERY/PERMITTED EXCEPTIONS:
(A) As Is Delivery: At Closing, Buyer shall accept the Property in "AS
IS" and "WHERE IS" condition. Buyer further acknowledges that: (i) Seller
shall not be required or obligated to undertake any work in respect to the
Property; (ii) Seller makes no warranty, express or implied, concerning the
fitness of the Property; and (iii) Buyer has not relied in entering into
this Agreement on any express representations of Seller, if made, in
respect thereto, other than on those representations expressly set forth in
this Contract, nor has Buyer limited, nor shall Buyer limit, the scope or
extent of its independent investigations of the Property. Except as
expressly set forth in this Contract, SELLER HEREBY EXPRESSLY DISCLAIMS
<PAGE>
ANY AND ALL WARRANTIES REGARDING THE PROPERTY, SUCH DISCLAIMER TO INCLUDE
WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY, AND WARRANTIES OF
HABITABILITY AND WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE.
(B) Permitted Exceptions: Notwithstanding anything contained in this
Agreement to the contrary: (a) Seller has delivered to Buyer a copy of
seller's existing survey and Seller's existing title insurance policy,
together with "hard" copies of all exceptions thereto (collectively,
"Seller's Title Information"), and (b) Buyer acknowledges and approves all
matters shown thereon (the "Permitted Exceptions"), none of which shall
constitute or be raised by Buyer as a title defect. Moreover, Buyer
acknowledges the existence of an Agreement Not To Encumber ("First Union
Agreement") encumbering the Property in favor of First Union National Bank
of Florida, N.A. So long as the First Union Agreement shall be released
in conjunction with the Closing, the same shall be a Permitted Exception,
and shall not constitute or be raised by Buyer as a title defect.
4. BROKERAGE: Seller and Buyer each represent and warrant to the other that
neither has had any dealings with any person, firm, broker or finder in
connection with the negotiations of this Agreement and/or the consummation of
the purchase and sale contemplated hereby, other than Excess Space Disposition,
Inc., Sevell & Duncan Realty Services, Inc. and Hardy &, Company (collectively,
"Brokers") , and no other broker or other person, firm or entity is entitled to
any commission or finder's fee in connection with this transaction. Seller and
Buyer do each hereby indemnify, defend, protect and hold the other harmless from
and against any costs, expense or liability for compensation, commission or
charges which may be claimed by any broker, finder or other similar party, other
than Brokers, by reason of any actions of the indemnifying party.
5. SELLER'S DISCLOSURES:
(A) Delivery: Seller shall use reasonable efforts to make copies of
the following information, to the extent the same exists in Seller's
corporate offices, and to deliver such copies to Buyer within fifteen (15)
days from the Effective Date:
(1) warranties, guaranties and bonds relating to the Property;
(2) the most recent real estate and personal property tax
statements with regard to the Property;
(3) soil studies with respect to the Property;
(4) copies of building permit and certificate of occupancy
relating to the Property;
(5) written notices or citations evidencing actions, suits or
other legal proceedings pending or threatened against Seller
affecting the Property, at law or in equity, before or by
any federal, state, county, municipal or other governmental
department, commission, board, bureau, agency or
instrumentality, whether domestic or foreign;
(6) documents or written notices evidencing that any
condemnation proceeding affecting the Property is pending or
contemplated;
(7) documents, written notices or citations evidencing that the
Property is in violation of any building and zoning law; and
(8) written notices claiming or asserting that a default or
breach exists under any covenants, conditions, restrictions,
right-of-way or easement affecting the Property.
(E) Return of Documents: In the event that Closing does not occur,
Buyer shall promptly return to Seller all documents described in Paragraph
5(A) above.
2
<PAGE>
6. ASSIGNMENT: Buyer shall not be permitted to assign this Contract without
Seller's prior written consent. Subject to the conditions provided below in this
Section 6, Seller shall be obligated to consent to an assignment of this
Contract, at Closing (and not prior to Closing), to any bona fide franchisee of
Buyer who shall have the exclusive right to own and operate a "Harvest
Rotisserie" restaurant or restaurants in Hillsborough County, Florida ("Area
Developer"). In the event of any such assignment to an Area Developer, as a
condition to Seller's obligation to consent thereto, both Cluckcorp
International, Inc., a Texas corporation ("Cluckcorp"), and such Area Developer
(and any guarantors thereof to Cluckcorp with respect to any such area
development agreement or franchise or license agreement) shall (i) execute and
deliver the Note, Mortgage and other Loan Documents to Seller (or Cluckcorp
shall guarantee all of the same, in form and substance satisfactory to Seller),
and (ii) be responsible and liable for any and all obligations of the Buyer
hereunder and of the maker/mortgagor under the Loan Documents.
7. ENVIRONMENTAL INFORMATION: Seller has delivered to Buyer copies of the
following reports prepared by Law Engineering and Environmental Services: (i)
Phase I Environmental Site Assessment and Asbestos Survey dated May 26, 1994,
under Project No. 464-00323.01, and (ii) Report of Phase II Environmental
Assessment dated July, 1994, under Project No. 464-00223.02 (collectively, the
"Existing Reports"). Buyer, at its expense, shall obtain an "enhanced Phase I"
or a Phase II environmental audit report certified to Buyer prior to the
expiration of the Inspection Period. Seller represents to Buyer that Seller, at
its corporate office, has not received any written notice of violation from any
environmental authority with respect to Seller's operation of business upon the
Property, nor to Seller's actual knowledge (without inquiry, and based solely
upon records contained in Seller' s corporate offices, and excluding any matter
disclosed in the Existing Reports), has Seller violated any environmental laws
pertaining to its operation of business upon the Real Property during its
ownership thereof. By closing this transaction, Buyer acknowledges that, having
performed its due diligence with respect to environmental matters, it has not
learned of any matter indicating the falsity of Seller's foregoing
representations.
B. CLOSING: The Closing may take place as a "mail away". Buyer has
advised Seller that Chicago Title Insurance Company, National Accounts
Division (San Antonio, Texas - Carol Perry) shall assist Buyer in
connection with the Closing.
9. RENOVATION PLANS: Buyer shall prepare and deliver to Seller its plans
and specifications for Buyer's intended renovations at any time prior to the end
of the Inspection Period. Such plans and specifications shall be subject to
Seller's approval, not to be unreasonably withheld, and shall be attached to the
Mortgage as Exhibit X thereto.
10. [INTENTIONALLY OMITTED]
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals as of the Effective Date.
WITNESSES: SELLER:
POLLO OPERATIONS, INC., a Florida
corporation
_________________________________
_________________________________ BY:_________________________________
3
<PAGE>
WITNESSES: BUYER:
CLUCKCORP INTERNATIONAL, INC., a
Texas corporation
SIGNED
- ---------------------------------
SIGNED By: SIGNED
- --------------------------------- --------------------------------
4
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF REAL PROPERTY
PARCEL I:
Lots 22. 23, and 24, CORRECTED MAP OF MIDWEST SUB, according to the map or plat
thereof as recorded in Plat Book 24, page 74. of the Public records of
Hillsborough County, Florida, less right of way of Dale Mabry.
PARCEL II:
Lots 28 and 29, CORRECTED MAP OF MIDWEST SUB, according to the map or plat
thereof as recorded in Plat Book 24, page 74, of the public records of
Hillsborough County, Florida.
PARCEL III:
Lots 25, 26, and 27 of CORRECTED MAP OF MIDWEST SUBDIVISION, according to the
map or plat thereof as recorded in Plat Book 24, on Page 711, of the public
records of Hillsborough County, Florida, less the North 5 feet of said Lots 25,
26, and 27 which were deeded to the City of Tampa in OR Book 3137, page 492;
Less that part of said Lot 25 lying in right of way for Dale Mabry Highway and
Less that portion of said Lot 25 conveyed to the State of Florida by Dead
recorded in OR Book 2806, page 41.
<PAGE>
EXHIBIT B
DESCRIPTION OF PERSONAL PROPERTY
The personal property to be conveyed hereunder (the "Personal Property") shall
include that certain property set forth on the following schedule, and such
other equipment and personal property as shall be located in the Real Property
as of the Closing. Seller reserves the right to remove any equipment and
personal property (other than that set forth on the following schedule as it may
elect at any time prior to Closing. All personal property to be conveyed shall
be in "AS IS" and "WHERE IS" condition, as of Closing.
<PAGE>
EXHIBIT 10.34
REAL PROPERTY LEASE
THIS REAL PROPERTY LEASE ("Lease") is made and entered into as of the
latest date of execution by the parties hereto, by and between TOUFIC KHALIFE
("Landlord"), and CLUCKCORP INTERNATIONAL, INC. d/b/a HARVEST ROTISSERIE
RESTAURANT ("Tenant"), For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. PREMISES. Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, the real property and all improvements thereupon ("Premises"),
situated in the City of San Antonio, County of Bexar, and State of Texas, and
commonly referred to as 11730 West Avenue, and as more particularly described on
the plat of survey attached hereto and made a part hereof as Exhibit "A". Tenant
will use the Premises in accordance with the provision regarding Use, below.
2. TRIPLE NET LEASE. This is a triple net Lease. Tenant, in addition to the
payment of "Rent" (as hereinafter defined) shall also pay and be responsible for
all taxes, insurance, repairs, utilities and maintenance relating to the
Premises.
3. TERM, COMMENCEMENT DATE.
a. Term. The term of this Lease ("Term") shall consist of the "Primary Term" and
may include one or more "Option Terms,"
b. Primary Term, The primary term of this Lease ("Primary Term") shall be five
(5) years from the "Effective Date" (as hereinafter defined). The Primary Term
shall commence on the Effective Date and shall end at 12:01 A.M. on the date
which is five (5) years after the Effective Date.
c. Option Terms. The Tenant shall have four (4) rights to extend the Term of
this Lease for four (4) separate five (5) year terms ("Option Term(s)"), Each
Option Term must be exercised by the Tenant sending written notice of the
exercise of this option to the Landlord, not less than sixty (60) days prior to
the expiration of the preceding Term. These rights and options are wholly
conditioned and contingent upon (i) the Tenant not being in default beyond the
applicable cure periods under this Lease upon the exercise of an option, and
(ii) in addition to the condition above, the second, third and fourth Option
Terms are each conditioned and contingent upon the exercise of the preceding
Option Term.
d. Effective Date. The term "Effective Date" shall mean the date which is thirty
(30) days after the latest date of execution of this Lease by the parties
hereto. The term "Lease Year" shall mean any period of twelve (12) calendar
months commencing on the Effective Date or an anniversary thereof and ending on
the last day of the twelfth (12th) month thereafter,
4. FEASIBILITY PERIOD. In consideration of the sum of One Thousand Dollars
$1,000.00) ("Option Fee") paid by Tenant to Landlord upon execution of this
Lease, within thirty (30) days after execution of this Lease, Tenant , at
Tenant's expense, may complete or cause to be completed inspections of the
Premises (including any improvements) by inspectors of Tenant's choice,
Inspections may include, but are not limited to: (i) physical property
inspections, (ii) economic feasibility studies; and (iii) any type of
environmental assessment or engineering study. If Tenant determines, in Tenant's
sole judgment, that the Premises is not suitable for any reason for Tenant's
intended use or is not in satisfactory condition, then Tenant may terminate this
Lease by providing written notice of termination to Landlord within the time
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required to complete the inspections, studies or assessments under this Section,
and the Option Fee shall be retained by Landlord as independent consideration
for Tenant's right to terminate under this Section, Thereafter, neither Tenant
nor Landlord will have any further obligations or liabilities under this Lease,
In the event Tenant does not elect to terminate this Lease, as provided herein,
then within the time period set forth in this Section, Tenant shall notify
Landlord which items of furniture, fixtures and equipment located on the
Premises shall not be required for Tenant's use therein. In the event Landlord
fails to remove such items from the Premises, within ten (10) days of the date
of such notice, Landlord shall be deemed to have abandoned the same, and Tenant
may dispose of the same without liability to Landlord or any third party.
5. RENT.
a. Triple Net Expenses. From and after the Effective Date triple net expenses
will be payable by Tenant, i.e. taxes, insurance, repairs, utilities and
maintenance,
b. Primary Term Rent, During the Primary Term of this Lease, Tenant shall pay to
Landlord, as rent ("Rent") for the Premises, the sums set forth below, plus
triple net expenses.
(1) Commencing on the Effective Date, the Tenant shall pay to the
Landlord, as Rent, through and including the last day of the third
(3rd) month after the Effective Date, the net sum of $1,000.00 per
month. The parties acknowledge and agree that the Option Fee shall be
applied by Landlord to the first month's Rent. If the Effective Date
is a day other than the first day of a month, the Rent for the first
and last month of this period shall be prorated. In addition, Tenant
shall pay all triple net expenses, i.e. taxes, insurance, repairs,
utilities and maintenance.
(2) Commencing on the first day of the first month following the above,
the Tenant shall pay to the Landlord, as Rent, through and including
the end of the Primary Term, the net sum of $4,000.00 per month. If
the Effective Date is a day other than the first day of a month, the
Rent for the first and last month of this period shall be prorated. In
addition, Tenant shall pay all triple net expenses, i.e. taxes,
insurance, repairs, utilities and maintenance.
C. Option Term Rent. During the Option, Terms of this Lease, Tenant shall pay to
Landlord, as Rent for the Premises, the sums as set forth below
(1) During the first Option Term, Tenant shall pay to Landlord, as Rent,
the net sum of $4,200.00 per month. In addition, Tenant shall pay all
triple net expenses, i.e. taxes, insurance, repairs, utilities and
maintenance,
(2) During the second Option Term, Tenant shall pay to Landlord, as Rent,
the net sum of $4,400.00 per month. In addition, Tenant shall pay all
triple net expenses, i.e. taxes, insurance, repairs, utilities and
maintenance.
(3) During the third Option Term, Tenant shall pay to Landlord, as Rent,
the net sum of $4,600.00 per month. In addition, Tenant shall pay all
triple net expenses, i.e. taxes, insurance, repairs, utilities and
maintenance.
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(4) During the fourth Option Term, Tenant shall pay to Landlord, as Rent,
the net sum of $4,800.00 per month. In addition, Tenant shall pay all
triple net expenses, i.e. taxes, insurance, repairs, utilities and
maintenance.
d. Option Term Percentage Rent.
(1) Tenant shall not later than sixty (60) days after the end of each
Lease Year or partial Lease Year during any Option Term, deliver to
Landlord a statement of Gross Sales (defined below) for such Lease
Year or partial Lease Year, the correctness of which is certified to
by Tenant or an officer of Tenant, With sixty (60) days after the end
of each Lease Year or partial Lease Year during any Option Term,
Tenant shall pay Landlord the amount by which four percent (4%) of
Tenant's Gross Sales during the Lease Year or partial Lease Year
exceeds the minimum monthly Rent (i.e. excluding triple net expenses)
for such period.
(2) Gross Sales Defined. As used herein, Gross Sales means the sale prices
of all goods, wares and merchandise sold and the charges for all
services performed by Tenant or any other person or entity in, at, or
from the Premises for cash, credit or otherwise, without reserve or
deduction for uncollected amounts, including but not limited to sales
and services (i) where the orders originate in, at or from the
Premises, regardless from whence delivery or performance is made, (ii)
pursuant to mail, telephone, telegraph or otherwise received or filled
at the Premises, (iii) resulting from transactions originating in, at
or from the Premises, and deposits not refunded to customers, Excluded
from Gross Sales shall be: (1) exchange of merchandise between
Tenant's stores made only for the convenient operation of Tenant's
business and not to consummate a sale made in, at or from the
Premises, (ii) returns to manufacturers, (iii) refunds to customers
(but only to the extent included in Gross Sales), (iv) sales of
fixtures, machinery and equipment after use in Tenant's business in
the Premises, (v) free meals furnished to Tenant's employees, (vi)
meals sold to Tenant's employees at discount prices (not to exceed two
percent (2%) of annual Gross Sales), (vii) receipts from vending
machines utilized solely by Tenant's employees, (viii) any sale of
Tenant's assets in connection with a corporate reorganization or the
sale of a substantial portion of Tenant's business, (ix) sales or gift
certificates (which shall be excluded until redeemed by Tenant at the
Premises, at which time the redemption shall be included in Gross
Sales), and (x) sales, excise or similar tax imposed by governmental
authority and collected from customers and paid out by Tenant, No
other taxes shall be deducted from Gross Sales.
e. Payment Date. With the exception of Option Term Percentage Rent, which is
payable as set forth above, Rent is payable in advance on or before the first
(1st) day of each and every calendar month, at the address of Landlord set forth
herein, without demand In the event Tenant shall fail to pay the Rent, including
Option Term Percentage Rent, within five (5) days after the date that such
installment is due hereunder, then Tenant shall be liable for, and Landlord may
collect, a late charge of five percent (5%) of any such installment of rent due
hereunder.
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f. Sums Expended. in the event Tenant, at any time, does not strictly comply
with all of the terms, covenants and conditions of this Lease, Landlord may,
without obligation, but following notice to Tenant, elect to perform on behalf
of Tenant. In such event, any amounts expended by Landlord shall be immediately
due and payable by Tenant to Landlord as additional Rent hereunder, and in the
event of nonpayment thereof, Landlord shall be entitled to exercise all of its
remedies for Tenant's failure to pay Rent as set forth herein.
6. RENT AND SECURITY DEPOSITS.
a. Rental Deposit. On the Effective Date, Tenant shall pay to Landlord the sum
of $6,000.00 as a prepayment of the fourth (4th) month's Rent and as prepayment
of half of the last month's Rent due under the Primary Term, such sum to be held
by Landlord without interest. Landlord shall have the right to commingle the sum
so deposited with other funds of Landlord. Upon default by Tenant hereunder,
Landlord shall have the right, without notice to Tenant, to off-set the sums so
deposited against the obligations of Tenant hereunder, and shall off-set such
sum against the first and last month's Rent of the Primary Term at the time the
same shall be due.
b. Security Deposit. On the Effective Date, Tenant shall pay to Landlord the sum
of $2,000.00, as a security deposit (the "Security Deposit") to be held by
Landlord without interest. Landlord shall have the right to commingle the sum so
deposited with other funds of Landlord. Upon default by Tenant hereunder,
Landlord shall have the right, without notice to Tenant, to off-set the sum so
deposited against the obligations of Tenant hereunder. The Security Deposit
shall remain on deposit with Landlord during the entire Term of this Lease. In
the event of an off-set of the Security Deposit upon demand from Landlord,
Tenant shall restore the Security Deposit to the original amount thereof,
7. "AS IS" CONDITION OF THE PREMISES. Tenant agrees that it has examined and
knows the condition of the Premises and every part thereof and improvements
thereon, and that no statements or representations as to the condition or repair
of the Premises have been made by or for Landlord prior to or contemporaneously
with the execution of this Lease, TENANT ACCEPTS THE PREMISES AND IMPROVEMENTS
THEREON IN AN "AS IS, WHERE IS CONDITION", with defects, if any.
8. QUIET ENJOYMENT. Landlord agrees that if Tenant is not in default hereunder,
Tenant's quiet and peaceable enjoyment of the Premises during the Term of this
Lease shall not be disturbed by Landlord.
9. USE. Tenant shall use and occupy the Premises for the operation of a fast
food restaurant and for no other purpose without first obtaining Landlord 's
written consent, which consent shall not be unreasonably withheld.
10. LAWS AND STANDARDS. Tenant shall promptly comply with all laws, ordinances,
rules and regulations of all Federal, state, county and municipal governments
now in force or that may be enacted hereafter, with all directions, rules and
regulations of the fire marshal, health officer, building inspector or other
proper officers of the governmental agencies having jurisdiction and with such
standards established from time to time by the National Board of Fire
Underwriters of the National Fire Protective Association, or any similar bodies
which are applicable to Tenant's use and occupancy of the Premises.
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11. UTILITIES AND OTHER COSTS. Tenant shall pay for all water, fuel, light,
power, heat, telephone, sewer and rubbish services or other utility services
supplied to the Premises, as well as all other similar costs and expenses which
are customarily paid by tenants under triple net leases. Landlord shall not be
liable to Tenant if said utilities or services are interrupted or terminated
because of necessary repairs, installations, improvements or any cause beyond
Landlord's control; provided however, in the event the interruption is caused by
Landlord's negligence, willful act or omission and Tenant is unable to operate
its business, then there shall be an abatement of all rental obligations
hereunder during such time period.
12, REPAIR AND MAINTENANCE. Landlord shall have no obligation, express or
implied, for repair and maintenance. Tenant shall keep and maintain the Premises
in a clean and sanitary order and in good condition and repair, Tenant shall
make such structural and nonstructural repairs and replacements to the Premises
as may from time to time be necessary or required for the proper use thereof.
The parties agree that any repairs, whether considered maintenance or permanent
improvements, shall be the exclusive responsibility of Tenant.
13. ALTERATIONS; SIGNS.
a. Tenant shall have the right to make structural and nonstructural changes or
alterations to the building or improvements on the Premises. Prior to the
commencement of any construction for alterations, Tenant shall furnish to
Landlord, for its approval, which shall not be unreasonably withheld or delayed,
plans and specifications for such alterations, In the event Landlord fails to
approve or disapprove, as the case may be, such plans within five (5) days from
the date of submission to Landlord, then Landlord shall be deemed to have
approved the same.
b. Tenant shall have the right, at Tenant's sole cost, to erect, install,
maintain, and operate on the Premises such equipment, trade and business
fixtures, and signs as Tenant may deem advisable for the operation of Tenant's
business. Such items shall not be deemed to be part of the Premises, but shall
remain the property of Tenant. All such installations shall be effected in
compliance with applicable governmental laws, ordinances and regulations. At any
time during the term of this Lease, Tenant shall have the right to remove its
equipment, trade or business fixtures signs and other personal property from the
Premises provided that (i) Tenant is not then in default, and (ii) Tenant shall
repair any damage to the improvements and building of the Premises resulting
from such removal.
14. LIABILITY INSURANCE.
a. Commencing on the Effective Date, Tenant will procure, maintain and keep in
force, comprehensive general liability insurance for claims for bodily injury,
death or property damage, occurring in or about the Premises, with a limit of
one million ($1,000,000,00) each occurrence for bodily injury or death to any
one person, or property damage with a general policy aggregate of $1,000,000.00.
Landlord shall be named as an additional insured. Tenant shall (provide
certificates of such insurance to Landlord on or prior to the Effective Date.
b. If Tenant shall not provide evidence of insurance, Landlord may, at its
option, cause such insurance to be issued, and Tenant shall pay the premiums for
such insurance, which shall be deemed additional Rent, promptly upon demand by
Landlord.
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15. FIRE/EXTENDED COVERAGE INSURANCE.
a. Commencing on the Effective Date. Tenant shall procure, at its expense, a
standard form policy or policies of insurance providing coverage against loss by
fire, extended coverage, vandalism and malicious mischief insurance on the
building and other improvements constructed upon the Premises in an amount equal
to the greater of (a) eighty percent (80%) of the full replacement value of the
building (exclusive of foundations) and improvements', or (b) One Hundred Fifty
Thousand Dollars ($150,000.00). Landlord shall be named as an additional
insured. Tenant shall provide certificates of such insurance to Landlord on or
prior to the Effective Date .
b. If Tenant shall not provide evidence of insurance, Landlord may, at its
option, cause such insurance to be issued, and Tenant shall pay the premiums for
such insurance, which shall be deemed additional Rent, promptly upon demand by
Landlord.
c. If the building or other improvements shall be damaged or destroyed during
the Term by fire or other casualty, Tenant shall have the right, but not the
obligation, to elect to cancel or terminate this Lease; provided, however, if
such damage or destruction is caused by the willful act or omission of Tenant,
then Tenant shall not have the right to terminate this Lease. Said right shall
be exercised in writing and delivered to Landlord within sixty (60) days after
the date of such occurrence as set forth in this Section. Upon such termination,
Landlord shall be entitled to all insurance proceeds covering the Premises (but
not covering Tenant's equipment, trade or business fixtures or personal
property, furnishings or furniture) resulting from such damage or destruction.
d. If the building or other improvements shall be damaged or destroy during the
Term by fire or other casualty, and Tenant elects not to terminate the Lease, as
permitted above, then promptly after adjustment of the insurance claim and the
agreement of Landlord to make the proceeds available to Tenant to restore the
improvements, Tenant, using any and all available insurance proceeds, shall
repair and restore the building and improvements to approximately the same
condition as existed immediately prior to the date of such damage or
destruction, During the time of such repair and restoration, if Tenant is unable
to operate its business, there shall not be an abatement of all rental
obligations hereunder.
e. The Tenant acknowledges that the insurance provided above insures only the
building and improvements and not its contents and Tenant will procure renter's
or other coverage as it deems necessary.
16. MECHANIC'S LIENS. Tenant agrees and covenants that it will not allow any
mechanic's liens, or other liens for any labor performed or materials furnished
which may cloud or impair title to the Premises, and that if any such liens
shall arise, within ten (10) days after request from Landlord, Tenant shall
either discharge and cancel the lien of record or post a bond (in connection
with which Tenant may contest any claims of any persons who have provided or
alleged to have provided, work to the Premises) in favor of Tenant.
17. INDEMNITY. Landlord shall not be liable for any damage or liability of any
kind, for any injury or death of persons, or damage to property of Tenant or any
other person occurring from and after the date of execution of this Lease, from
any cause whatsoever, by reason of the use or occupancy of the Premises by
Tenant or any person thereon or holding under Tenant, unless such damage is
caused by the negligent or willful act or omission of Landlord, its employees or
agents. Tenant shall indemnify and save Landlord harmless from all liability
whatsoever, on account of any such real or claimed damage or injury and from all
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liens, claims and demands arising out of the use or occupancy of the Premises
and its facilities, or any repairs, alterations or improvements which Tenant may
make to the Premises, unless such liability is caused by the negligent or
willful act or omission of Landlord, its agents or employees.
18. WAIVER OF SUBROGATION. The parties release each other, and their respective
authorized representatives, from any claims for damage to any person or property
of either Landlord or Tenant in or on the Premises that are caused by or result
from risks insured against under any insurance policies carried by the parties
and in force at the time of any such damage. The parties further agree neither
party shall be liable to the other for any damage caused by fire or any of the
risks insured against under any insurance policy required by this Lease, and
each party shall cause each insurance policy obtained by it to provide that the
insurance company waives all right of recovery by way of subrogation against
either party in connection with any covered damage.
19. PROPERTY TAXES.
a. Taxes. From the Effective Date of this Lease, Tenant shall pay all taxes,
assessments, levies, fees, water and sewer charges, sales and use taxes and all
other governmental charges, general and special, ordinary and extraordinary,
together with any interest and penalties thereon, which are, at any time,
imposed or levied upon or assessed against (i) the Premises, (ii) any Rent,
(iii) this Lease; or (iv) any personal property owned or leased by Tenant
(collectively, "Taxes"). Notwithstanding the foregoing, Tenant shall not be
required to pay any franchise, corporate, estate, inheritance, succession,
transfer, income, profits or revenue taxes of Landlord, unless any such tax is
imposed or levied upon or assessed against Landlord in substitution for or in
place of any other tax, assessment, charge or levy referred to above.
b. Apportionment. All property taxes and assessments that shall become due and
payable during the first and last years of the Term of this Lease, shall be
apportioned pro rata between Landlord and Tenant in accordance with the
respective number of months during which the Tenant occupies the Premises and
shall be based on the taxing authority's year. For the first year of the Term of
this Lease, Tenant shall pay Landlord its pro rata share of the taxes for the
current year, within ten (10) days of the presentation by Landlord to Tenant of
the tax bill for the current year.
c. Contesting Assessment. Tenant, at its expense, shall have the right to
contest the amount or validity of any tax or assessment imposed against the
Premises, but Landlord shall not be liable for any expenses, including
attorney's fees, in connection therewith, Landlord will cooperate with Tenant in
its contest of any tax or assessment imposed against the Premises.
d. Method of Payment. Each Lease Year, Landlord shall forward to Tenant, upon
Landlord's receipt of the same, a statement ("Statement") from the taxing
authority showing the total Taxes due for the year, Tenant shall pay such Taxes
within thirty (30) days of Tenant's receipt of said Statement, and Tenant shall
forward to Landlord proof of such payment, addition to the Statement, Landlord
shall forward to Tenant, upon Landlord's receipt of the same, copies of any
other notices from the taxing authority relating to the Premises, including but
not limited to any notices of increases in valuation.
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20. BANKRUPTCY OR INSOLVENCY.
a. In the event of the filing or commencement of any proceeding by or against
Tenant under the Bankruptcy Code, the duly appointed Trustee, subject to Court
approval, shall have the right to assume this Lease if the Trustee shall (i)
cure any default or provide adequate assurance that the Trustee will promptly
cure such default; (ii) compensate or provide adequate assurance that the
Trustee will promptly compensate the Landlord for any actual loss resulting from
such default; and (iii) provide adequate assurance of future performance of the
covenants, agreements and obligations of Tenant under the terms of this Lease.
b. The failure by the Trustee to assume or reject this Lease within sixty (60)
days after the order for relief (Chapter 7), or within sixty (60) days of
confirmation of a plan (Chapter 11), shall, at Landlord's option, be deemed a
rejection.
21. DEFAULT.
a. The default on the part of Tenant shall exist under this Lease when:
(1) Tenant fails to pay any monetary sum due hereunder, including without
limitation, Rent or any other charges as and when due, and such
failure continues for ten (10) days after written notice thereof by
Landlord to Tenant;
(2) Tenant fails to observe or perform any other provision, covenant or
condition of this Lease to be observed or performed by Tenant, and
such failure continues for thirty (30) days after written notice
thereof by Landlord to Tenant; provided if such default cannot
reasonably be cured within thirty (30) days, then Tenant shall have
additional time to cure such default as is reasonable and necessary,
provided that Tenant diligently, continuously and in good faith
prosecutes the cure of such default;
(3) A general assignment by Tenant for the benefit of creditors occurs or
the filing by or against Tenant of any proceeding under any insolvency
or bankruptcy law occurs, or the appointment of a trustee or receiver
to take possession of all or substantially all of Tenant's assets
located upon the Premises or of Tenant's interest in this Lease,
unless such seizure is discharged within sixty (60) days thereof for
the purpose of effecting a moratorium upon or composition of its debts
occurs within sixty (60) days.
b. In the event of a default, Landlord may treat same as a breach of this Lease,
and, in addition to any or all other rights or remedies of Landlord, and by the
law provided and without being considered an election of remedies, Landlord
shall have the option without further notice or demand: (i) to declare the Term
hereof ended and to reenter the Premises and take possession thereof and remove
all persons therefrom, and Tenant shall have no further claim thereon or
hereunder; or (ii) without declaring this Lease terminated, to reenter the
Premises and occupy the whole or any part thereof for and on account of Tenant
and to collect any unpaid rentals and any other charges which have become
payable or which may thereafter become or (iii) even though Landlord may have
reentered the Premises, to thereafter elect to terminate this Lease and all of
the rights of Tenant in or to the Premises.
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c. Landlord shall not be deemed to have terminated this Lease or the liability
of Tenant to pay any rental or other charges thereafter accruing, or to have
terminated Tenant's liability for damages under any of the provisions hereof, by
any such reentry or by any action in unlawful detainee, or otherwise, to obtain
possession of the Premises, unless Landlord shall have notified Tenant in
writing that Landlord has so elected to terminate this Lease. The service by
Landlord of any notice pursuant to the unlawful detainer statutes of the state
where the Premises are situated and the surrender of possession pursuant to such
notice shall not (unless Landlord elects to the contrary at the time of or at
any time subsequent to the serving of such notices and such election is
evidenced by a written notice to Tenant) be deemed to be a termination of this
Lease. In the event of any entry or taking possession of the Premises as
aforesaid, Landlord shall have the right, but not the obligation, to remove
therefrom all or any part of the personal property located therein and may place
the same in storage at a public warehouse at the expense and risk of Tenant.
d. Should Landlord elect to terminate this Lease, Landlord may recover from
Tenant as damages, (i) the worth at the time of award of judgment of the unpaid
rent which had been earned at the time of termination; plus (ii) the worth at
the time of award of judgment of the amount by which the unpaid minimum monthly
rent for the balance of the term of the Lease exceeds the fair rental value of
the Premises; plus (iii) any reasonable costs or expenses incurred by Landlord
in, (a) retaking possession of the Premises, including reasonable attorney's
fees therefor, (b) leasing commissions, and (c) any other reasonable costs
necessary or appropriate to relet the Premises; plus (d) such other reasonable
amounts in addition to or in lieu of the foregoing as may be permitted from time
to time by the laws of the state where the Premises are situated.
e. Efforts by the Landlord to mitigate the damages caused by the Tenant's breach
of the Lease, including but not limited to making a reasonable effort to relet
the Premises on account of the Tenant, do not waive the Landlord's right to
recover damages.
f. Even though Tenant has breached this Lease and abandoned the Premises, this
Lease shall remain in effect for so long as Landlord does not terminate the
Lease, and the Landlord may enforce all its rights and remedies under this
Lease, including the right to recover the Rent as it becomes due under this
Lease. The following do not constitute a termination, of Tenant's right to
possession: (i) acts of maintenance or preservation; (ii) efforts to relet the
Premises, or (iii) the appointment of a receiver on initiation by Landlord to
protect its interest under this Lease. Should Landlord relet the Premises on
account of the Tenant, the Landlord shall not be obligated to terminate this
Lease, and in addition to such other relief as may be allowed by law, Landlord
may recover from Tenant the past due Rent and unpaid Rent for the balance of the
Term of the Lease, less the amount of rent collected under the reletting of the
Premises, plus (iii) any reasonable costs or expenses incurred by Landlord in,
(a) retaking possession of the Premises, including reasonable attorneys fees
therefor, (b) leasing commissions, and (c) any other reasonable costs necessary
or appropriate to relet the Premises. Landlord shall have no obligation or duty
to Tenant to relet the Premises.
g. The rights of Landlord are not exclusive and shall be cumulative to all other
rights or remedies now or hereafter given to Landlord by law or by the terms of
this Lease. Nothing herein affects the right of Landlord to equitable relief
where such relief is appropriate, The bringing of an action as described herein
does not affect Landlord's right to bring a separate action for relief on
termination, or in equity but no relief shall be requested and no damages shall
be recovered in the subsequent action for any detriment for which a claim for
damages was made and determined on the merits in the previous action.
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22. CONDEMNATION.
a. If thirty percent (30%) or more of the rentable area of the Premises shall be
acquired or condemned by power of condemnation or eminent domain, or be sold in
lieu thereof, then Tenant, by written notice given within sixty (60) days after
notice of such taking or acquisition, may terminate this Lease effective on the
date that title vests in the condemning authority. Tenant shall pay all Rent,
additional rentals and all other charges and expenses as shall be prorated and
payable to the date of such termination, and Tenant shall promptly vacate the
Premises. Tenant shall have no claim against Landlord for the value of any
unexpired term of this Lease,
b. If all or any portion of the Premises shall be acquired by authority of any
governmental authority pursuant to the exercise of its power of eminent domain
or by deed in lieu thereof and the Lease is not terminated then, commencing on
the date of such acquisition, the Rent provided shall be reduced in the same
proportion that the fair rental value of the Premises immediately after such
acquisition and any restoration agreed to be performed by the parties hereto
bears to the fair rental value of the Premises immediately prior to such
acquisition. In addition, if Tenant shall restore the remaining portion of the
Premises to as close to its previously existing condition as possible, then
Tenant shall first be entitled to recover its expenses incurred in such
restoration out of any such award and the balance shall be allocated to
Landlord, as aforesaid. If the parties are unable to agree on such fair rental
values within ninety (90) days after the date of such acquisition, the same
shall be determined by appraisal. Until the new Rent shall have been determined,
Tenant shall continue to pay Rent at the rate in effect immediately prior to
such acquisition, and upon such determination, an appropriate adjustment shall
be made.
c. If the parties do not agree upon any fair rental value, then Landlord shall
within ten (10) days provide Tenant with the name of three (3) appraisers.
Tenant shall within ten (10) days select one of the named appraisers, who shall
determine the fair rental value. All appraisers appointed shall be licensed by
the State of Texas, shall be members of the Appraisal Institute and shall be
qualified by experience and ability to determine the foregoing fair rental
value, and the fees and other costs shall be shared equally by both Landlord and
Tenant.
23. ASSIGNMENT.
a. Tenant shall have the right to assign this Lease, or its rights hereunder, or
to sublet all or any part of the Premises to an affiliate of Tenant or to a
third-party franchisee of Tenant, without the prior written consent of the
Landlord, in all other cases, Tenant must obtain Landlord's prior written
consent, which consent shall not be unreasonably withheld or delayed. In the
event of an assignment or sublease, Tenant shall remain primarily liable for any
and all obligations under this Lease. No assignment or sublease shall alter,
affect or modify any of the rights of Landlord under this Lease.
b. Tenant may mortgage, pledge or otherwise encumber its interest in this Lease
or in the Premises to any financial institution advancing purchase-money
financing for Tenant's operations on the Premises; provided, however, that in
the event of a foreclosure of the interest of such financial institution, the
Premises may be used only in the manner permitted by this Lease.
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24. NOTICES. Any and all notices or demands by or from Landlord to Tenant, or
Tenant to Landlord shall be in writing. They shall be served either personally,
via messenger or overnight carrier, or by certified mail. If served personally,
service shall be conclusively deemed made at the time of service. If served by
certified mail, service shall be conclusively deemed made twenty-four (24) hours
after deposit thereof in the United States mail, postage prepaid.
Any notice or demand to Landlord may be given unto it at:
Toufic Khalife
602 Birdsong South
San Antonio, Texas 78258
Any notice or demand to Tenant may be given unto it at:
Cluckcorp International, Inc.
1250 N.E. Loop 41 0, Suite 335
San Antonio, Texas 78209
Attention: Steves Rosser
With copy to:
Douglas W. Becker
Cauthorn, Hale, Hornberger, Fuller,
Sheehan & Becker, Incorporated
700 North St. Mary's Street, Suite 620
San Antonio, Texas 78205
Said addresses may be changed from time to time by notice given in accordance
with the provisions of this Section.
25. TERMINATION. On the last day of the Term of this Lease or sooner termination
as provided herein, Tenant shall peaceably and quietly leave the Premises in
good working order, condition and repair, damage by events or acts beyond the
reasonable control of Tenant and permitted alterations excepted. The Premises
shall be returned in a broom clean condition.
26. HOLDING OVER. Tenant shall not continue to conduct its business at the
Premises after the last day of the Term herein created. Any holding over shall
create no more than a month-to-month tenancy, subject to all of the terms and
conditions of this Lease provided herein,
27. HAZARDOUS SUBSTANCES.
a. Tenant shall not cause or permit to occur: (i) any violation of any federal,
state, or local law, ordinance, or regulation now or hereafter enacted, related
to environmental conditions on, under, or about the Premises; or (ii) the use,
generation, release, manufacture, refining, production, processing, storage, or
disposal of any hazardous substances on, under, or about the Premises, other
than used in Tenant's ordinary course of business.
b. Tenant shall comply with all laws regulating the use, generation, storage,
transportation, or disposal of hazardous substances.
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c. If Tenant fails to fulfill any duty imposed under this provision, then
Landlord may take whatever actions are necessary to correct the situation. and
Tenant shall reimburse Landlord for all costs associated therewith (including
reasonable attorney fees),
d. Tenant shall indemnify, defend, and hold harmless the Landlord from all
fines, suits, procedures, claims and actions of every kind, and all costs
associated therewith arising out of or in any way connected with any deposit,
spill, discharge, or other release of hazardous substances that occurs during
the Term of this Lease.
e. Landlord shall indemnify, defend and hold harmless the Tenant from all fines,
suits, procedures, claims and actions of every kind, and all costs associated
therewith arising out of or in any way connected with any deposit, spill,
discharge or other release of hazardous substances that occur before or after
the Term of this Lease.
28. LEASING COMMISSION. Landlord represents to Tenant that he has dealt with no
broker or person entitled to a fee or commission on this Lease other than Edward
Karam, of Texas Broker Systems ("Karam"). Landlord agrees to pay Karam a
commission as determined by a separate agreement between Landlord and Karam.
Tenant represents to Landlord that it has dealt with no broker or other person
entitled to a fee or commission on this Lease other than Michael Gulley, of
Hardy & Company ("Gulley"). Landlord agrees to pay Gulley a commission equal to
Four Thousand Dollars ($4,000.00) payable on the Effective Date if Tenant has
not terminated this Lease. In addition, in the event Tenant exercises its
purchase option during the first two (2) years of 'The Lease Term, as set forth
in Section 29, at such closing, Landlord agrees to pay Gulley a commission equal
to three percent (3%) of the gross sales price, less the prorated portion of
Guiley's lease commission set forth in this Section. For example, in the event
Tenant exercises its purchase option during the first year of the Lease Term,
and the parties close the transaction on the last day of the first Lease Year,
then Gulley would be entitled to receive from Landlord a commission equal to
$8,650.00 [(.03) x (395,000,60) - (48/60 x (4,000.00)].
29. OPTION TO PURCHASE. Tenant shall have the option to purchase the Premises
during the first three (3) years of the Lease Term, as follows:
(i) Tenant may exercise its option hereunder by delivering written notice
to Landlord at any time during the first three (3) years of the Lease
Term.
(ii) The purchase price to be paid by the Tenant shall be Three Hundred
Ninety Five Thousand and No/l 00 Dollars ($395,000.00) for a notice of
purchase delivered during the first year of the Lease Term; Four
Hundred Five Thousand and No/100 Dollars ($405,000,00) for a notice of
purchase delivered during the second year of the Lease Term; and Four
Hundred Twenty Thousand and No/100 Dollars ($420,000,00) for a notice
of purchase delivered during the third year of the Lease Term.
(iii)The closing pursuant to the option shall be held in the office of a
local title company acceptable to Landlord and Tenant (or at such
other place as shall be acceptable to Landlord and Tenant) on or
before a date which is sixty (60) days after Tenant's notice of
purchase to Landlord, but in no event shall the closing be held later
than the last day of the third year of the Lease Term. Neither default
on the part of the Landlord nor litigation between the parties shall
cause an extension of said time period.
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(iv) The purchase price shall be paid at closing in cash, by cashier's
check on cleared local funds or by wire transfer to Landlord's
account.
(v) Title to the Premises shall be good and marketable, free of all title
exceptions and defects other than those in existence just prior to the
time of the conveyance of the Premises to Landlord, or those created
by Tenant after the Effective Date.
(vi) All expenses of closing, including the premium for the owner's ALTA
extended coverage policy, shall be paid equally by Tenant and
Landlord, except that each shall pay its respective legal expenses.
(vii)The option granted to Tenant pursuant to this paragraph shall
terminate and become null and void in the event Tenant shall purport
to exercise said option at a time when Tenant shall then be in default
(beyond any applicable cure period) under any term or condition of
this Lease.
30. MISCELLANEOUS PROVISIONS.
a. Nothing contained in this Lease shall be deemed or construed by the
parties hereto, or any third party, to create the relationship of principal
and agent, or of partnership or of joint venture, or of trustee and
beneficiary, or of any other association between the parties hereto, and
neither the method of payment of any monies hereunder, nor any other
provisions in this Lease, nor any acts of the parties hereto, shall be
deemed to create any relationship set forth hereinabove.
b. No waiver of default by the party or parties hereunder shall be implied
from any omission by a party or parties to take action on account of such
default if such default persists or is repeated, and no express waiver
shall affect any default other than the default specified in the express
waiver, and that only for the time and to the extent therein stated. One or
more waivers of any covenant, term or condition of this Lease by a party or
parties shall not be deemed to waive or render unnecessary the consent to
or approval of said party or parties of any subsequent or similar acts by a
party or parties.
c. This Lease may be executed in any number of counterparts, each of which
when so executed and delivered shall be deemed an original, but such
counterparts together shall constitute but one Lease.
d. This Lease shall be construed according to the laws of the State in
which the Premises are located,
e. Time is of the essence of this Lease,
f. Should any portion of this Lease be declared invalid and unenforceable,
then such portion shall be deemed to be severable from this Lease and shall
not affect the remainder thereof.
9. It is expressly understood that this Lease contains all terms, covenants,
conditions and agreements between the parties hereto relating to the subject
matter of this Lease, and that no prior agreements or understandings, either
oral or written, pertaining to the same, shall be valid or of any force or
effect, and that the terms, covenants, conditions and provisions of this Lease
cannot be altered, changed, modified or added to except in writing by all the
parties hereto.
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h. Should any party or parties hereto institute any action or proceeding in
Court or by arbitration to enforce any provision or provisions hereof, or
for damages by reason of any default under this Lease, or for a declaration
of such party's or parties' rights or obligations hereunder, or for any
other judicial remedies, the prevailing party or parties shall be entitled
to receive from the losing party or parties such amount as the Court may
find to be reasonable and actual attorney's fees and costs incurred for the
services rendered the party or parties prevailing in any such action or
proceeding or on appeal therefrom.
This Lease shall be binding upon and inure to the benefit of the personal and
legal representatives, successors and assigns of the parties.
i. Force Maieure. The time for the completion of any alterations, repairs
or improvements shall be deemed extended by time lost due to delays
resulting from acts of God, strikes, unavailability of materials, civil
riots, floods, other unusually inclement weather (but not including
seasonally inclement weather), national or labor restrictions by
governmental authority, and any other cause not within the control of such
party.
k. Warranties: Guarantees. Landlord hereby permits Tenant to retain, during
the Term of this Lease, all warranties and guarantees pertaining to
improvements and equipment erected or installed upon the Premises. In the
event of termination of this Lease when any warranties or guarantees are
still applicable, Tenant hereby assigns to Landlord, effective as of the
date of termination, all such warranties and guarantees pertaining to the
improvements (including, without limitation, all heating and air
conditioning equipment installed upon the Premises, but not including
Tenant's kitchen equipment, furniture, personal property or inventory).
1. Subordination: Non-Disturbance. Tenant accepts this Lease subject and
subordinate to any mortgage, deed of trust or other lien presently existing
upon the Premises and to any renewals and extensions thereof; provided that
Tenant and holder of said mortgage, deed of trust or other lien now or
hereafter existing shall have executed and delivered a non-disturbance
agreement reasonably acceptable to said lienholder and Tenant. Tenant
further agrees that any such mortgagee shall have the right at any time to
subordinate such mortgage, deed of trust or other lien to this Lease.
Landlord is hereby irrevocably vested with full power and authority to,
upon execution of a non-disturbance agreement as set forth above,
subordinate this Lease to any mortgage, deed of trust or other lien
hereafter placed upon the Premises, and Tenant agrees upon demand to
execute such further instruments subordinating the Lease upon the express
condition that this Lease shall be recognized by the mortgagee by the
execution of a non-disturbance agreement acceptable to Tenant and
mortgagee, and that the rights of Tenant shall remain in full force and
effect during the term of this Lease so long as Tenant shall continue to
perform all of the covenants and conditions of this Lease.
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<PAGE>
The parties hereto have executed this Lease on the date of execution by both
of the parties.
LANDLORD:
/s/ Toufic Khalife
--------------------------
Toufic Khalife
Date: 4-9-1997
TENANT:
CLUCKCORP INTERNATIONAL, INC.
/s/ Steves Rosser
----------------------------
Steves Rosser
V.P. Development
Date: 4-8-1997
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EXHIBIT "A"
(insert plat of survey)
<PAGE>
EXHIBIT 10.35
Vacant Land Contract
FLORIDA ASSOCIATION OF REALTORS
PARTIES AND DESCRIPTION OF PROPERTY
1. SALE AND PURCHASE: Feather Walk at Feather Sound ("Seller") and CluckCorp
International, Inc. ("Buyer") agree to sell and buy on the terms and conditions
specified below the property ("Property") described as: Address: Northwest
Corner Ulmerton Rd. & Feather Sound Drive at median cut Legal Description:
Exhibit A including all improvements and the following additional property:
PRICE AND FINANCING
2. PURCHASE PRICE: $360,000.00 payable by Buyer in U.S. funds as follows:
(a)$5,000.00 Deposit received (checks are subject to clearance) upon
execution by ______________ for ________________ ("Escrow Agent")
Signature Name of Company
(b) $25,000.00 Additional deposit to be made by end of diligence period
(c) _______________ Total Financing (see Paragraph 3 below) (express as a
dollar amount or percentage)
(d) $________________ Other: __________________________________
(e)$33,000.00 Balance to close (not including Buyer's closing costs,
prepaid items and prorations). All funds paid at closing must be paid by locally
drawn casher's check or wired funds.
[x](f) (complete only if purchase price will be determined based on a per
unit cost instead of a fixed price) The unit used to determine the purchase
price is [ ] lot [ ] acre [x] square foot [ ] other (specify:_____________)
prorating areas of less than a full unit, The purchase price will be $9.00
per unit based on a calculation of total area of the Property as certified
to Buyer and Seller by a Florida-licensed surveyor in accordance with
Paragraph 8(c) of this Contract. The following rights of way and other
areas will be excluded from the calculations:__________________________
3. CASH/FINANCING: (Check as applicable) [x] (a) Buyer will pay cash for the
Property with no financing contingency.
CLOSING
4. CLOSING DATE; OCCUPANCY: This Contract will be closed and the deed and
possession delivered on or before July 15, 1997, unless extended by other
provisions of this Contract. If on Closing Date insurance underwriting is
suspended, Buyer may postpone closing up to 5 days.
<PAGE>
5. CLOSING PROCEDURE; COSTS. If title insurance insures Buyer for title defects
arising between the title binder effective date and recording of Buyer's deed,
closing agent will disburse at closing the net sale proceeds to Seller and
brokerage fees to Broker as per Paragraph 18. In addition to Other expenses
Provided in this Contract, Seller and Buyer will pay the costs indicated below.
(a) Seller Costs: Seller will pay taxes on the deed and recording fees for
documents needed to Cure title; certified, confirmed and ratified special
assessment liens; title evidence (if applicable under Paragraph 6); Other:
________________________
(b) Buyer Costs: Buyer will pay taxes and recording fees on notes and
mortgages and recording fees on the deed and financing statements; loan
expenses: pending special assessment liens; lender's title policy at the
simultaneous issue rate; inspections; survey and sketch; insurance;
Other:____________________
(c) Title Evidence and Insurance: Check (1) or (2):
[x](1) Seller wilt provide a Paragraph 8(a)(1) owner's title insurance
commitment as title evidence. [ ] Seller [x] Buyer will select the
title agent. [x]Seller [ ]Buyer will pay for the owner's title policy.
search, examination and related charges. Each party will pay its own
closing fees.
[ ](2) Seller will provide title evidence as specified in Paragraph
8(a)(2). [ ]Seller [ ]Buyer will pay for the owner's title policy and
select the title agent Seller will pay fees for title searches prior
to closing, including tax search and lien search fees, and Buyer will
pay fees for title searches after closing (if any), title examination
fees and closing fees.
(d) Prorations: The following items wilt be made current and prorated as of
the day before Closing Date: real estate taxes, interest, bonds,
assessments, leases and other Property expenses and revenues. If taxes and
assessments for the current year cannot be determined, the previous year's
rates will be used with adjustment for any exemptions.
(e) Tax Withholding. Buyer and Seller will comply with the Foreign
Investment in Real Property Tax Act, which may require Seller to provide
additional cash at closing it Seller is a "foreign person" as defined by
federal law.
PROPERTY CONDITION
6. LAND USE: Seller will deliver the Property to Buyer at the time agreed in its
present "as is" condition, with conditions resulting from Buyer's Inspections
and casualty damage, if any, excepted. Seller will maintain the landscaping and
grounds in a comparable condition and will not engage in or permit any activity
that would materially alter the Property's condition without the Buyer's prior
written consent,
(b) Flood Zone: Buyer is advised to verify by survey, with the tender and
with appropriate government agencies which flood zone the Property is in,
whether flood insurance is required and what restrictions apply to
improving the Property and rebuilding in the event of casualty.
(c) Government Regulation: Buyer is advised that changes in government
regulations and levels of service which affect Buyer's intended use of the
Property will not be grounds for canceling this Contract if the Feasibility
Study Period has expired or if Buyer has checked choice (d)(2) below,
(d) Inspections: (check (1) or (2) below)
[x] (1) Feasibility Study: Buyer will, at Buyer's expense and within
60 days from Effective Date ("Feasibility Study Period"), determine
whether the Property is suitable, in Buyer's sole arid absolute
discretion, for restaurant, retail use. During the Feasibility Study
Period, Buyer may conduct a Phase I environmental assessment and any
other tests, analyses, surveys and investigations ("Inspections") that
Buyer deems necessary to determine to Buyer's satisfaction the
Property's engineering, architectural and environmental properties;
zoning and zoning restrictions; subdivision statutes; soil and grade;
availability of access to public roads, water, and other utilities:
consistency with local, state and regional growth management plans:
availability of permits, government approvals, and licenses; and other
Inspections that Buyer deems appropriate to determine the Property's
suitability for the Buyer's intended use. If the Property must be
rezoned, Buyer will obtain the rezoning from the appropriate
government agencies. Seller will sign all documents Buyer is required
to file in connection with development or rezoning approvals, provided
Seller incurs no expense or liability in the application process or
related proceedings.
Seller gives Buyer, its agents, contractors and assigns, the right to
enter the Property at any time during the Feasibility Study Period for
the purpose of conducting Inspections; provided, however, that Buyer,
its agents, contractors and assigns enter the Property and conduct
Inspections at their own risk. Buyer will indemnify and hold Seller
harmless from losses, damages, costs, claims and expenses of any
nature, Including attorney's fees, and from liability to any person,
arising from the conduct of any and sit Inspections or any work
authorized by Buyer. Buyer will not engage in any activity that could
result in a construction lien being filed against the Property without
Seller's prior written consent. If this transaction does not close,
Buyer will, at Buyer's expense, (1) repair all damages to the Property
resulting from the Inspections and return the Property to the
condition it was in prior to conduct of the Inspections, and (2)
release to Seller all reports and other work generated as a result of
the Inspections.
Buyer will deliver written notice to Seller prior to the expiration of
the Feasibility Study Period of Buyer's determination of whether or
not the Property is acceptable. Buyer's failure to comply with this
notice requirement will constitute acceptance of the Property as
suitable for Buyer's intended use in its "as is" condition. If the
Property is unacceptable to Buyer and written notice of this fact is
timely delivered to Seller, this Contract will be deemed terminated as
of the day after the Feasibility Study period ends and Buyer's
deposit(s) will be returned after Escrow Agent receives proper
authorization from all interested parties.
[ ](2) No Feasibility Study: Buyer is satisfied that the Properly is
suitable for Buyers purposes, including being satisfied that either
public sewerage and water are available to the Property or the
Property will be approved for the installation of a well and/or
private sewerage disposal system and that existing zoning and other
pertinent regulations and restrictions, such as subdivision or deed
restrictions, concurrency, growth management and environmental
conditions, are acceptable to Buyer. This Contract is not contingent
on Buyer conducting any further investigations.
7. RISK OF LOSS: EMINENT DOMAIN: If any portion of the Property is materially
damaged by casualty before closing, or Seller negotiates with a governmental
authority to transfer all or part of the Property in lieu of eminent domain
proceedings, or if an eminent domain proceeding is initiated, Seller will
promptly inform Buyer. Either party may cancel this Contract by written notice
to the other within 10 days from Buyer's receipt of Seller's notification,
failing which Buyer will close in accordance with this Contract and receive all
payments made by the government authority or insurance company, if any.
TITLE
8. TITLE: Seller will convey marketable title to the Property by statutory
warranty deed or trustee, personal representative or guardian dead as
appropriate to Seller's status.
(a) Title Evidence: Title evidence will show legal access to the Property
and marketable title of record in Seller in accordance with current title
standards adopted by the Florida Bar, subject only to the following title
exceptions, none of which prevent residential use of the Property:
covenants, easements and restrictions of record; matters of plat existing
zoning and government regulations; oil, gas and mineral rights of record if
there is no right of entry; current taxes; mortgages that Buyer will
assume; and encumbrances that Seller will discharge at or before closing,
Seller will, prior to
<PAGE>
closing, deliver to Buyer Seller's choice of one of the following types of
title evidence, which must be generally accepted in the county where the
Property is located (specify in Paragraph 5(c) the selected type). Seller
will use option (1) in Palm Beach County and option (2) in Dade County.
(1) A title insurance commitment issued by a Florida-licensed title
insurer in the amount of the purchase price and subject only to title
exception, set forth in this Contract.
(b) Title Examination: Buyer will examine the title evidence and deliver
written notice to Seller, within 5 days from receipt of title evidence but
no later than closing, of any defects that make the title unmarketable.
Seller will have, 30 days from receipt of Buyer's notice of
defects("Curative Period") to cure the defects at Seller's expenses. If
Seller cures the defects within the Curative Period, Seller will deliver
written notice to Buyer and the parties will close the transaction on
Closing Date or within 10 days from Buyer's receipt of Seller's notice if
Closing Date has passed. If Seller is unable to cure the defects within the
Curative Period, Seller will deliver written notice to Buyer and Buyer
will, within 10 days from receipt of Seller's notice, either cancel this
Contract or accept title with existing defects and close the transaction.
(c) Survey: Buyer may, prior to Closing Date and at Buyer's expense, have
the Property surveyed and deliver written notice to Seller, within 5 days
from receipt of survey but no later than closing, of any encroachments on
the Property, encroachments by the Property's improvements on other lands
or deed restriction or zoning violations. Any such encroachment or
violation will be treated in the same manner as a title defect and Buyer's
and Seller's obligations will be determined in accordance with subparagraph
(b) above. If any part of the Property lies seaward of the coastal
construction control line, Seller will provide Buyer with an affidavit or
survey as required by law delineating the line's location on the property,
unless Buyer waives this requirement in writing.
MISCELLANEOUS
9.EFFECTIVE DATE; TIME. The "Effective Date" of this Contract is the date on
which the last of the parties initials or signs the latest offer, Time is of the
essence for all provisions of this Contract. All time periods will be computed
in business days (a "business day" is every calendar day except Saturday, Sunday
or national legal holidays). If any deadline falls on a Saturday, Sunday or
national legal holiday, performance will be due the next business day. All time
periods will end at 5:00 p.m. local time (meaning in the county where the
Property is located) of the appropriate day.
10.NOTICES: All will be made to the parties and Broker by mail, personal
delivery or electronic media. Buyer's failure to deliver timely written notice
to Seller, when such notice is required by this Contract, regarding any
contingencies will render that contingency null and void and the Contract will
be construed as if the contingency did not exist.
11. COMPLETE AGREEMENT: This contract is the entire agreement between Buyer and
Seller. Except for brokerage agreements, no prior or present agreements will
bind Buyer, Seller or Broker unless incorporated into this Contract.
Modifications of this Contract will not be binding unless in writing, signed and
delivered by the party to be bound. Signatures, initials, documents referenced
in this Contract, counterparts and written modifications communicated
electronically or on paper will be acceptable for all purposes, including
delivery, and will be binding. Handwritten or typewritten terms inserted in or
attached to this Contract prevail over preprinted terms. If any provision of
this Contract is or becomes invalid or unenforceable, all remaining provisions
will continue to be fully effective. This Contract will not be recorded in any
public records.
12.ASSIGNABILITY; PERSONS BOUND: Buyer may assign this Contract without Seller's
written consent. The terms "Buyer" "Seller," and "Broker" may be singular or
plural. This Contract is binding on the heirs, administrators, executors,
personal representatives and assigns (if permitted) of Buyer, Seller and Broker.
DEFAULT AND DISPUTE RESOLUTION
13. DEFAULT: (a) Seller Default: If for any reason other than failure of Seller
to make Seller's title marketable after diligent effort, Seller fails, refuses
or neglects to perform this Contract, Buyer may choose to receive a return of
Buyer's deposit without waiving the right to seek damages or to seek specific
performance as per Paragraph 16. Seller will also be liable to Broker for the
full amount of the brokerage fee. (b) Buyer Default: If Buyer fails to perform
this Contract within the time specified, including timely payment of all
deposits, Seller may choose to retain and collect all deposits paid and agreed
to be paid as liquidated damages or to seek specific performance as per
Paragraph 16: and Broker will, upon demand, receive 50% of all deposits paid and
agreed to be paid (to be split equally among cooperating brokers) up to the full
amount of the brokerage fee.
14. DISPUTE RESOLUTION, This Contract will be construed under Florida law. All
controversies, claims, and other matters in question between the parties arising
out of or relating to this Contract or its breach will be settled as follows:
(a) Disputes concerning entitlement to deposits made and agreed to be made:
Buyer and Seller will have 30 days from the date conflicting demands are
made to attempt to resolve the dispute through mediation. If that fails,
Escrow Agent will submit the dispute, if so required by Florida law, to
Escrow Agent's choice of arbitration, a Florida court or the Florida Real
Estate Commission. Buyer and Seller will be bound by any resulting
settlement or order.
(b) All other disputes: Buyer arid Seller will have 30 days from the date a
dispute arises between them to attempt to resolve the matter through
mediation, failing which the parties will resolve the dispute through
neutral binding arbitration in the county where the Property is located.
The arbitrator may not after the Contract terms or award any remedy not
provided for in this Contract. The award will be based off the greater
weight of the evidence and will state findings of fact and the contractual
authority on which it is based. It the parties agree to use discovery, it
will be in accordance with the Florida Rules of Civil Procedure and the
arbitrator will resolve all discovery-related disputes. Any disputes with a
real estate licensee named in Paragraph 18 will be submitted to arbitration
only if the licensee's broker consents in writing to become a party to file
proceeding. This clause will survive closing.
(c) Mediation and Arbitration; Expenses: "Mediation" is a process in which
parties attempt to resolve a dispute by submitting it to an impartial
mediator who facilitates the resolution of the dispute but who is not
empowered to impose a settlement on the parties. Mediation will be in
accordance with the rules of the American Mediation Association or other
mediator agreed on by the parties. The parties will equally divide the
mediation fee, if any. "Arbitration" is a process in which the parties
resolve a dispute by a hearing before a neutral person who decides the
matter and whose decision is binding on the parties. Arbitration will be in
accordance with the rules of the American Arbitration Association or other
arbitrator agreed on by the parties. Each party to any arbitration will pay
its own fees, costs and expenses, including attorneys' fees, and will
equally split the arbitrators' fees and administrative fees of arbitration.
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15. ESCROW AGENT.- Buyer and Seller authorize Escrow Agent to receive, deposit
and hold funds and other items in escrow and, subject to clearance, disburse
them upon proper authorization and in accordance with the terms of this
Contract, including disbursing brokerage fees. The parties agree that Escrow
Agent will not be liable to any person for misdelivery of escrowed items to
Buyer or Seller, unless the misdelivery is due to Escrow Agent's willful breach
of this Contract or gross negligence. If Escrow Agent interpleads the subject
matter of the escrow, Escrow Agent will pay the filing fees and costs from the
deposit and will recover reasonable attorneys' fees and costs to be paid from
the escrowed funds or equivalent and charged and awarded as court costs in favor
of the prevailing party. All claims against Escrow Agent will be arbitrated, so
long as Escrow Agent consents to arbitrate.
16. PROFESSIONAL ADVICE, BROKER LIABILITY: Broker advises Buyer and Seller to
verify all facts and representations that are important to them and to consult
an appropriate professional for legal advice (for example, interpreting
contracts, determining the effect of laws on the Property and transaction,
status of title, foreign investor reporting requirements, etc.) and for tax,
property condition, environmental and other specialized advice. Buyer
acknowledges that Broker does not reside in the Property and that all
representations (oral, written or otherwise) by Broker are based on Seller
representations or public records unless Broker indicates personal verification
of the representation. Buyer agrees to rely solely on Seller, professional
inspectors and governmental agencies for verification at the Property condition
and facts that materially affect Property value. Buyer and Seller respectively
will pay all costs and expenses, including reasonable attorneys' fees at all
levels, incurred by Broker and Broker's officers, directors, agents and
employees in connection with or arising from Buyer's or Seller's misstatement or
failure to perform contractual obligations. Buyer and Seller hold harmless and
release Broker and Broker's officers, directors, agents and employees from all
liability for loss or damage based on (1) Buyer's or Seller's misstatement or
failure to perform contractual obligations; (2) Broker's performance, at Buyer's
and/or Seller's request, of any task beyond the scope of services regulated by
Chapter 475, F.S., as amended, including Broker's referral, recommendation or
retention of any vendor; (3) services or products provided; and (4) expenses
incurred by any vendor, Buyer and Seller each assume full responsibility for
selecting and compensating their respective vendors. This paragraph wilt not
relieve Broker of statutory obligations. For purposes of this paragraph, Broker
will be treated as a party to this Contract. This paragraph will survive
closing.
17. BROKERS: The licensee(s) and brokerage(s) named below are collectively
referred to as "Broker." Seller and Buyer acknowledge that the brokerage(s)
named below are the procuring cause of this transaction. Instruction to Closing
Agent: Seller and Buyer direct closing agent to disburse at closing the full
amount of the brokerage fees as specified in separate brokerage agreements with
the parties and cooperative agreements between the brokers, unless Broker has
retained such fees from the escrowed funds. In the absence of such brokerage
agreements, closing agent will disburse brokerage fees as indicated below.
Frank V. Dennison Bruce Exhardt
Real Estate Licensee Real Estate Licensee
The Tony Everett Company / 50% Cushman and Wakefield Inc. /50%
Broker / Brokerage fee:___________________ Broker / Brokerage fee:___________
ADDITIONAL TERMS
18. ADDITIONAL TERMS: 60 Day Investigative Period (Due Diligence)-30 Day Close.
One (1) 30 extension with an additional $3,000.00 non-refundable, applicable to
purchase price Buyer requests Title Insurance and closing be handled by
Commonwealth Title.
This is intended to be a legally binding contract. If not fully understood, seek
the advice of an attorney prior to signing.
OFFER AND ACCEPTANCE
(Check it applicable: [ ] Buyer received a written real property disclosure
statement from Seller before making this Offer.)
Buyer offers to purchase the Property on the above terms and conditions. Unless
this Contract is signed by Seller and a copy delivered to Buyer no later than
12:00 p.m. on April 10, 1997, this offer will be revoked and Buyer's deposit
refunded subject to clearance of funds.
Date:_________________ Buyer:_______________________ Tax ID/SSN:_____________
Print name:____________________
Date:_________________ Buyer:_______________________ Tax ID/SSN:_____________
Print name:____________________
Phone:________________ Address:______________________________________________
Fax:__________________ ______________________________________________________
Date:_________________ Seller:________________________ Tax ID/SSN:___________
Print name:____________________
Date:_________________ Seller:________________________ Tax ID/SSN:___________
Print name:____________________
Phone:________________ Address:______________________________________________
Fax:__________________ ______________________________________________________
[ ] Seller counters Buyer's offer (to accept the counter offer, Buyer must sign
or Initial the counter offered terms and deliver a copy of the acceptance to
Seller by 5:00 p.m. on ____________, 19____)[ ] Seller rejects Buyer's offer.
Effective date:________________ (The date on which the last party signed or
initialed acceptance of the final offer.)
EXHIBIT 23.09
CONSENT AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
CluckCorp International, Inc.
We hereby consent to the use in this Registration Statement on Form SB-2 of our
report dated February 6, 1997, relating to the Financial Statements of CluckCorp
International, Inc. and to the references to our firm under the caption
"Experts" in the Prospectus.
Akin, Doherty, Klein & Feuge, P.C.
San Antonio, Texas
February 4, 1997
