EXHIBIT 10.17
BUCA, INC.
SECURITIES PURCHASE AGREEMENT
Dated as of October 13, 1998
[As Amended by Amendment No. 1
to Securities Purchase Agreement
dated as of December 21, 1998]
To Each of the Persons Named in
Schedule A to this Agreement
(the "Purchasers")
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Ladies and Gentlemen:
In consideration of the agreement of the Purchasers to purchase the Series C
Preferred Shares (as hereinafter defined), as provided for herein, the
undersigned BUCA, INC., a Minnesota corporation (the "Company"), hereby agrees
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with each of the Purchasers as follows:
1. Authorization of Securities. The Company, by all requisite action, has
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designated as authorized capital, 3,679,053 Series C Preferred Shares and has
authorized the issuance and sale pursuant to this Agreement of 2,614,635 Series
C Preferred Shares, to be issued pursuant to and be entitled to the benefits of
the capital stock provisions of the Articles of Incorporation of the Company, as
amended, (the "Articles"; the Articles of Incorporation of the Company, as
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amended, shall hereinafter be referred to as the "Articles of Incorporation") as
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set forth in Exhibit 1 hereto.
The Company, by all requisite action, has authorized the issuance and sale to
the Purchasers of the Contingent Value Rights in the form annexed hereto as
Exhibit 3 ("CVRs," and together with the Series C Preferred Shares, the
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"Purchased Securities") in accordance with the provisions of this Agreement.
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The CVRs shall be exercisable for Series C Preferred Shares having the rights,
privileges and conditions set forth in the Articles or, in the event that the
Common Stock (as hereinafter defined) is traded on a national securities
exchange, the NASDAQ National Market or the NASDAQ Small Cap Market, then Common
Stock as provided therein.
The term "Series C Preferred Shares" as used herein shall mean the series C
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convertible preferred shares set forth in Schedule A hereto, any series C
convertible preferred shares issued pursuant to a Phase II Closing (as
hereinafter defined) and all preferred shares of the Company issued in exchange
or substitution therefor. The term "Series B Preferred Shares" as used herein
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shall mean the series B convertible preferred shares issued by the Company
pursuant to the Stock Purchase Agreement, dated September 2, 1997, among the
Company and the parties named therein (the "1997 Stock Purchase Agreement"), and
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all preferred shares issued in exchange or substitution therefor. The term
"Series A Preferred Shares" as used herein shall mean the Series A convertible
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preferred shares issued by the Company pursuant to the Stock Purchase
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Agreement, dated October 23, 1996, among the Company and the parties named
therein (the "1996 Stock Purchase Agreement"), and all preferred shares issued
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in exchange or substitution therefor. The term "Preferred Shares" as used herein
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shall mean the Series A Preferred Shares, the Series B Preferred Shares and the
Series C Preferred Shares.
The Series C Preferred Shares shall be convertible into shares of the
Company's Common Stock (such shares of Common Stock into which the Series C
Preferred Shares are convertible and all shares of Common Stock of the Company
issued in exchange or substitution therefor being hereinafter sometimes referred
to as the "Conversion Stock"), initially at the rate of one share of Conversion
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Stock for each Series C Preferred Share (subject to adjustment as hereinafter
provided), all as more fully set forth in the Articles; provided, that the
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Series C Conversion Price (as defined in the Articles of Incorporation) per
Series C Preferred Share purchased at a Phase II Closing shall increase by an
amount equal to ten percent (10%) per annum computed on $5.125 for the period
from October 5, 1998, or the date the Articles are first amended to provide for
the authorization of the Series C Preferred Shares (as evidenced by the filing
of such amendment with the Secretary of State of the State of Minnesota),
whichever is the last to occur, until the time of such Phase II Closing. The
Series C Preferred Shares shall be subject in all respects to all of the other
provisions of the Articles.
The CVRs shall be convertible into either Series C Preferred Shares or Common
Stock (such Series C Preferred Shares or shares of Common Stock issued pursuant
to the CVRs and all shares of capital stock of the Company issued in exchange or
substitution therefor being hereinafter sometimes referred to as the "CVR
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Stock"), all as more fully set forth in Exhibit 3 hereto.
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2. Sale and Purchase of Securities.
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(a) Subject to the terms and conditions hereof, on the Phase I Closing
Date (as hereinafter defined) the Company shall sell, assign, transfer, convey
and deliver to each Purchaser, and each Purchaser shall purchase from the
Company, free and clear of all pledges, liens, encumbrances and restrictions
(other than restrictions imposed by the Amended and Restated Shareholder
Agreement, in the form of Exhibit 2 hereto (the "Stockholders' Agreement")),
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the number of Series C Preferred Shares and CVRs set forth opposite such
Purchaser's name in Schedule A hereto.
(b) Subject to the terms and conditions hereof, on each Phase II Closing
Date (as hereinafter defined) the Company shall sell, assign, transfer, convey
and deliver to each of the first six Purchasers named in Schedule A (each a
"Centre Purchaser" and collectively, the "Centre Purchasers"), in
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proportion to the maximum number of Series C Preferred Shares and CVRs
reflected on Schedule A hereto, and each Centre Purchaser shall purchase from
the Company, free and clear of all pledges, liens, encumbrances and
restrictions (other than restrictions imposed by the Stockholders Agreement),
the number of Purchased Securities specified in a notice provided pursuant to
Section 2(d) below.
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(c) The purchase price for the Purchased Securities purchased on the
Phase I Closing Date or any Phase II Closing Date shall be $5.125 per unit
consisting of one Series C Preferred Share and one CVR (the "Purchase
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Price"), and the aggregate purchase price paid by the Purchasers for the
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Purchased Securities purchased on the Phase I Closing shall be $8,400,007.02,
and the aggregate purchase price paid by the Centre Purchasers for the
Purchased Securities purchased in all Phase II Closings shall not exceed
$5,000,000.
(d) The aggregate number of Purchased Securities to be issued on a Phase
II Closing Date shall be specified (i) in the event of a Phase II Closing
initiated by the Company, in one or more written notices given by the Company
to the Centre Purchasers at any time prior to October 13, 1999 (the aggregate
number of Series C Preferred Shares to be issued on any Phase II Closing Date
not to be less than 400,000 or in the event that fewer than 400,000 shares
remain, all such remaining shares as set forth in the proviso hereto), or (ii)
in the event less than 975,610 Series C Preferred Shares have been issued in
one or more Phase II Closings initiated by the Company on or prior to October
13, 1999, in a written notice given on or prior to October 13, 1999 by the
Centre Purchasers to the Company; provided that the aggregate number of Series
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C Preferred Shares purchased in all Phase II Closings shall not exceed
975,610. The Company shall be permitted to initiate a Phase II Closing
hereunder solely for the purpose of funding impending working capital and
expansion capital requirements in excess of funds on hand and availability
under loan facilities.
(e) The Company and the Purchasers hereby acknowledge and agree that the
Series C Preferred Shares and the CVRs should be treated as an investment
unit under principles similar to rules governing debt instruments under
Section 1273(c)(2) of the Internal Revenue Code of 1986, as amended (the
"Code"). Notwithstanding anything to the contrary contained herein, the
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Company and the Purchasers hereby further acknowledge and agree that, for
United States federal, state and local income and franchise tax purpose, the
"issue price" of the Series C Preferred Shares under Section 305 of the Code
shall equal $5.07 per share and that they will use the foregoing issue price
for all income and franchise tax purposes with respect to the transactions
contemplated herein. The Purchasers and the Company also agree to allocate the
remainder of the Purchase Price to the CVRs.
3. Closings.
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(a) Subject to the satisfaction of the conditions set forth in Section 7,
the closing of the sale to, and purchase by, the Purchasers of the Purchased
Securities provided for in Section 2(a) hereof (the "Phase I Closing")
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shall occur at the offices of Faegre & Xxxxxx LLP, 2200 Norwest Center, 00
Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx, at the hour of 8:30 A.M.,
Minneapolis time, on October 13, 1998 or on such other day or at such other
time or place as the Purchasers and the Company shall mutually agree upon (the
"Phase I Closing Date").
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(b) Subject to the satisfaction of the conditions set forth in Section 8,
the closing(s) of the sale to, and purchase by, the Centre Purchasers of the
Purchased Securities provided for in Section 2(b) hereof (each a "Phase II
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Closing" and, collectively with the Phase I Closing, sometimes referred to
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herein as a "Closing") shall occur at the offices of Faegre & Xxxxxx LLP,
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2200 Norwest Center, 00 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx, at the
hour of 8:30 a.m., Minneapolis time, on the date that is fifteen (15) Business
Days following the date of the written notice(s) triggering such purchase and
sale, or on such other day or at such other time or place as the Centre
Purchasers and the Company shall mutually agree upon. The date on which a
Phase II Closing shall be held is referred to in this Agreement as a "Phase II
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Closing Date."
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(c) At each Closing, (i) the Company shall deliver to the Purchasers
certificates representing the Series C Preferred Shares and CVRs being
purchased by the Purchasers, registered in their respective names as stated in
Schedule A hereto, against payment of the amount of the purchase price
therefor, payable in accordance with Section 2 hereof by wire transfer of
immediately available funds to an account designated in writing by the Company
and (ii) the parties shall make the other deliveries provided in Section 16 or
17 hereof, as applicable.
4. Restriction on Transfer of Securities.
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4.1 Restrictions. The Purchased Securities and the Conversion Stock
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are transferable only pursuant to (a) a public offering registered under the
Securities Act of 1933, as amended (the "Securities Act"), (b) Rule 144 (or
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any similar rule then in effect) adopted under the Securities Act, if such
rule is available, and (c) subject to the conditions elsewhere specified in
this Section 4, any other legally available means of transfer.
4.2 (a) Legend. Each certificate representing Purchased Securities
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shall be endorsed with the following legend:
"The securities evidenced hereby may not be transferred without (i) the
opinion of counsel reasonably satisfactory to the Company that such
transfer may be lawfully made without registration under the federal
Securities Act of 1933 and all applicable state securities laws or (ii)
such registration."
Upon the conversion of any Series C Preferred Shares, unless the Company
receives an opinion of counsel from the holder of such a security reasonably
satisfactory to the Company to the effect that a sale, transfer, assignment,
pledge or distribution of the Conversion Stock issuable upon such conversion
may be made without registration, or unless such Conversion Stock is being
disposed of pursuant to registration under the Securities Act and any
applicable state act, the same legend shall be endorsed on the certificate
evidencing such Conversion Stock.
The aforesaid legend shall be removed with respect to securities held for at
least two years (including, with respect to the Conversion Stock, the period
during which the related
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converted Series C Preferred Shares had been held) by a person who has not been
an affiliate of the Company (as defined in Rule 144 under the Securities Act)
during the three months preceding the request for removal of such legend. The
foregoing legend removal requirement is based on Rule 144(k) under the
Securities Act as currently in force, and assumes that such Rule (or a successor
thereto) in substantially its current form shall be in effect at the time of any
such request for legend removal.
(b) Stop Transfer Order. A stop transfer order shall be placed
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with the Company's transfer agent preventing transfer of any of the securities
referred to in paragraph (a) above pending compliance with the conditions set
forth in any such legend (except as otherwise provided in paragraph (a) above).
4.3 Removal of Legend. Any legend endorsed on a certificate or instrument
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evidencing a security pursuant to Section 4.2 hereof shall be removed, and the
Company shall issue a certificate or instrument without such legend to the
holder of such security, (a) in accordance with Section 4.2(a) hereof, (b) if
such security is being disposed of pursuant to registration under the Securities
Act and any applicable state acts or pursuant to Rule 144 or any similar rule
then in effect, or (c) if such holder provides the Company with an opinion of
counsel reasonably satisfactory to the Company to the effect that a sale,
transfer, assignment, offer, pledge or distribution for value of such security
may be made without registration and that such legend is not required to satisfy
the applicable exemption from registration.
4.4 Register of Securities. The Company or its duly appointed agent shall
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maintain separate registers for the Series C Preferred Shares and the CVRs in
which it shall register the issuance and transfer of such securities. All
transfers of Series C Preferred Shares and CVRs shall be recorded on the
registers maintained by the Company or its agent, and the Company shall be
entitled to regard the registered holder of such securities as the actual owner
of the securities so registered until the Company or its agent is required to
record a transfer of such securities on its register. The Company or its agent
shall be required to record any such transfer when it receives (a) the security
to be transferred duly and properly endorsed by the registered holder thereof or
by its attorney duly authorized in writing, and (b) the opinion of counsel
referred to in Sections 4.2 and 4.3 hereof or evidence of compliance with the
registration provisions referred to in those Sections.
5. Representations and Warranties by Company. The Company represents and
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warrants to the Purchasers that:
5.1 Organization, Standing, Etc. The Company and each of its Subsidiaries
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is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation, and has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted. The Company has all requisite corporate
power and authority to issue the Purchased Securities, the Conversion Stock and
the CVR Stock, and to otherwise perform its obligations under this Agreement.
The copies of the Articles of Incorporation and Bylaws of the Company delivered
to the Purchasers or their agents prior to the execution of this Agreement are
true, correct and
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complete copies of the duly and legally adopted Articles of Incorporation and
Bylaws of the Company in effect as of the date of this Agreement. The Company
does not have any direct or indirect equity interest in any other firm,
corporation, partnership, joint venture association or other business
organization except as set forth in Schedule 5.1 hereto.
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5.2 Qualification. The Company and each of its Subsidiaries is duly
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qualified or authorized to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction in which it owns or leases real
property and each other jurisdiction, wherein the nature of its activities or of
its properties owned or leased makes such qualification or authorization
necessary and failure to be so qualified or authorized could reasonably be
expected to have a Material Adverse Effect (as hereinafter defined). Schedule
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5.2 sets forth a true, correct and complete list of each jurisdiction in which
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the Company or any of its Subsidiaries is qualified or authorized to do business
as a foreign corporation.
5.3 Financial Statements. Attached hereto as Schedule 5.3 are (a) the
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audited consolidated balance sheets of the Company and its Subsidiaries as at
December 31, 1995 and 1996 and December 28, 1997 together with the related
audited consolidated statements of operations, shareholders' equity and cash
flows for the fiscal years then ended and (b) an unaudited consolidated balance
sheet of the Company and its Subsidiaries as at June 28, 1998, and the related
consolidated statement of operations for the six months then ended and for the
comparable periods in the prior year, prepared by the Company (such audited and
unaudited statements, including the related notes and schedules thereto, are
referred to herein as the "Financial Statements"). The Financial Statements (i)
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have been prepared from the books and records of the Company and its
Subsidiaries, (ii) present fairly the financial condition of the Company and its
Subsidiaries at the balance sheet dates and the results of its operations,
shareholders' equity and cash flows as at the dates and for the periods therein
specified, and (iii) have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
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periods indicated, except, in the case of the six-month financial statements,
for the failure of the unaudited financial statements to include the footnotes
required by GAAP, and subject to normal year-end audit adjustments that will not
individually or in the aggregate be material. For the purposes hereof, December
28, 1997 is referred to as the "Balance Sheet Date."
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5.4 Tax Returns and Audits. Except as set forth on Schedule 5.4, all
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required federal, state and local tax returns or appropriate extension requests
of the Company and each of its Subsidiaries have been filed, and all federal,
state and local taxes required to be paid with respect to such returns (whether
or not shown due thereon and whether attributable to a separate, consolidated,
combined or unitary tax return) have been paid or due provision for the payment
thereof has been made. Neither the Company nor any of its Subsidiaries is
delinquent in the payment of any such tax or in the payment of any assessment or
governmental charge. Neither the Company nor any of its Subsidiaries has either
received notice of any tax deficiency proposed or assessed against it, or
executed any waiver of any statute of limitations on the assessment or
collection of any tax. None of the Company's or any Subsidiary's tax returns has
been audited by governmental authorities in a manner to bring such audits to the
Company's attention. Neither the Company nor any of its Subsidiaries has any tax
liabilities except those reflected in
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the Financial Statements and those incurred in the ordinary course of business
since the Balance Sheet Date.
5.5 No Undisclosed Liabilities. Except for the transactions contemplated
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by this Agreement and as set forth on Schedule 5.5, neither the Company nor any
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Subsidiary has any indebtedness, or material obligations or liabilities of any
kind, absolute, accrued, contingent or otherwise and whether due or to become
due which (i) is not fully reflected in, reserved against or otherwise described
in the Financial Statements, (ii) is not disclosed pursuant to any other
representation or warranty set forth in this Agreement or in the Schedules
attached hereto, (iii) was incurred in the ordinary course of business
consistent with past practice since the Balance Sheet Date, or (iv) could
reasonably be expected to have a Material Adverse Effect.
5.6 Absence of Certain Developments. Except for the transactions
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contemplated by this Agreement, or as set forth in the Financial Statements or
in Schedule 5.6, since the Balance Sheet Date neither the Company nor any
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Subsidiary has: (a) paid any obligation or liability (fixed or contingent) other
than, or discharged or satisfied any liens or encumbrances other than those
securing, current liabilities, in each case in the ordinary course of business
consistent with past practice; (b) declared, set aside or made any payment or
other distribution to its shareholders as such, or purchased, redeemed or
otherwise acquired any of its shares of capital stock, other securities or
ownership interests, or obligated itself to do so; (c) mortgaged, pledged or
subjected to any lien, charge, security interest or other encumbrance any of its
assets, tangible or intangible, except in the ordinary course of business
consistent with past practice; (d) acquired, sold, transferred, assigned,
conveyed or leased or otherwise disposed of any of its assets except in the
ordinary course of business consistent with past practice; (e) cancelled or
compromised any debt or claim, or amended, canceled, terminated, relinquished,
waived or released any contract or right except in the ordinary course of
business consistent with past practice and which, in the aggregate, would not be
material to the Company; (f) suffered any damage, destruction or loss (whether
or not covered by insurance) involving property having a value in excess of
$100,000 or which had or could reasonably be expected to have a Material Adverse
Effect; (g) entered into any transaction or contract or conducted its business
other than in the ordinary course of business consistent with past practice; (h)
encountered any labor difficulties or labor union organizing activities; (i)
issued or sold any shares of capital stock or other securities or granted any
options, warrants or other purchase rights with respect thereto other than as
contemplated by this Agreement; (j) made any acquisition or disposition of any
material assets or become involved in any other material transaction, other than
for fair value in the ordinary course of business consistent with past practice;
(k) awarded or paid any bonuses to employees of the Company and its Subsidiaries
with respect to the period ended on the Balance Sheet Date or in respect of any
period thereafter, except to the extent accrued on the Financial Statements, or
entered into any employment, deferred compensation, severance or similar
agreement (nor amended any such agreement) or agreed to increase the
compensation payable or to become payable by it to any of the Company's or its
Subsidiaries' directors, officers, employees, agents or representatives or
agreed to increase the coverage or benefits available under any severance pay,
termination pay, vacation pay, company awards, salary continuation for
disability, sick leave, deferred compensation, bonus or other incentive
compensation, insurance, pension or other employee benefit plan, payment or
arrangement made to, for or with
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such directors, officers, employees, agents or representatives (other than
normal increases in the ordinary course of business consistent with past
practice and that in the aggregate have not resulted in a material increase in
the benefits or compensation expense of the Company and its Subsidiaries); (l)
changed the accounting or tax reporting principles, methods or policies of the
Company or any of its Subsidiaries; (m) failed to promptly pay and discharge
current liabilities except where disputed in good faith by appropriate
proceedings; (n) made any loans, advances or capital contributions to, or
investments in, any Person (other than wholly-owned Subsidiaries) or paid any
fees or expenses to any Affiliate of the Company or its Subsidiaries; (o) made
or committed to make any capital expenditures or capital additions or
improvements in excess of $10,000; (p) instituted or settled any material legal
actions, suits, arbitrations, claims or other legal, administrative or
governmental proceedings; or (q) agreed to do any of the foregoing other than
pursuant hereto.
5.7 Title to Properties and Encumbrances. The Company and each of its
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Subsidiaries has good and marketable title to all its owned properties and
assets, including without limitation the properties and assets reflected in the
Financial Statements and the properties and assets used in the conduct of its
business, except for property disposed of in the ordinary course of business
since the Balance Sheet Date, which properties and assets are not subject to any
mortgage, pledge, lease, lien, charge, security interest, encumbrance or
restriction, except (a) those which are shown and described in the Financial
Statements, (b) Permitted Liens (as hereinafter defined) and (c) as set forth on
Schedule 5.7. The plant, offices and equipment owned and leased by the Company
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and its Subsidiaries have been kept in good condition and repair in the ordinary
course of business, and neither the Company nor any of its Subsidiaries has been
threatened with any action or proceeding under any building or zoning ordinance,
law or regulation.
5.8 Litigation; Governmental Proceedings . Except as set forth on
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Schedule 5.8, there are no legal actions, suits, arbitrations, claims or other
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legal, administrative or governmental proceedings or investigations pending or,
to the knowledge of the Company, threatened against the Company or any of its
Subsidiaries, or to the knowledge of the Company, pending or threatened, against
any of the officers, directors or key employees of the Company or any of its
Subsidiaries with respect to their business activities on behalf of the Company
and its Subsidiaries, and the Company is not aware of any facts which are likely
to result in or form the basis for any such action, suit or other proceeding
which could reasonably be expected to have a Material Adverse Effect. Neither
the Company nor any of its Subsidiaries is in default with respect to any
judgment, order or decree of any court or any governmental agency or
instrumentality. Neither the Company nor any of its Subsidiaries has been
threatened with any action or proceeding under any business or zoning ordinance,
law or regulation. Except as set forth on Schedule 5.8, neither the Company
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nor any of its Subsidiaries is engaged in any legal action to recover monies due
it or for damages sustained by it.
5.9 Compliance with Applicable Laws and Other Instruments. Except as set
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forth on Schedule 5.9, the business and operations of the Company and each of
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its Subsidiaries have been and are being conducted in accordance with all
applicable laws, rules and regulations of all governmental authorities, except
where the failure to do so has had or would reasonably be
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expected to have a Material Adverse Effect. Neither the execution nor delivery
of, nor the performance of or compliance with, this Agreement nor the
consummation of the transactions contemplated hereby or thereby will conflict
with, or, with or without the giving of notice or passage of time, result in any
breach of, or constitute a default under, or result in the imposition of any
lien or encumbrance upon any asset or property of the Company or any of its
Subsidiaries pursuant to, any applicable law, administrative regulation or
judgment, order or decree of any court or governmental body, any agreement or
other instrument to which the Company and its Subsidiaries or the Existing
Shareholders (as hereinafter defined) is a party or by which it or any of its
properties, assets or rights is bound or affected, and will not violate the
Articles of Incorporation or Bylaws of the Company or any of its Subsidiaries.
The Company and each of its Subsidiaries is not in violation of its Articles of
Incorporation or its Bylaws nor in violation of, or in default under, any lien,
indenture, mortgage, lease, agreement, instrument, commitment or arrangement in
any material respect.
5.10 Purchased Securities, Conversion Stock and CVR Stock. The
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Purchased Securities, when issued and paid for pursuant to the terms of this
Agreement, will be duly authorized, validly issued and outstanding, fully paid,
nonassessable and free and clear of all pledges, liens, encumbrances and
restrictions, except as set forth in Section 4 hereof. The shares of Conversion
Stock issuable upon conversion of the Series C Preferred Shares have been
reserved for issuance based upon the initial Series C Conversion Price, and the
shares of CVR Stock issuable pursuant to the CVRs have been reserved for
issuance, and when issued upon conversion such Conversion Stock and CVR Stock
will be duly authorized, validly issued and outstanding, fully paid,
nonassessable and free and clear of all pledges, liens, encumbrances and
restrictions, except as set forth in Section 4 hereof. The certificates
representing the Purchased Securities to be delivered by the Company hereunder,
the certificates representing the Conversion Stock to be delivered upon the
conversion of the Series C Preferred Shares and the certificates representing
the CVR Stock to be delivered upon the conversion of the CVRs, will be genuine,
and the Company has no knowledge of any fact which would impair the validity
thereof.
5.11 Securities Laws. Based in part upon the representations and
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warranties contained in Section 6 hereof, except as set forth on Schedule 5.11,
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no consent, authorization, approval, permit or order of or filing with any
governmental or regulatory authority is required under current laws and
regulations in connection with the execution and delivery of this Agreement or
the offer, issuance, sale or delivery of the Purchased Securities, the offer of
the Conversion Stock or the offer of the CVR Stock other than the filing of a
Form D under the Securities Act and the qualification thereof, if required,
under applicable state securities laws, which qualification has been or will be
effected as a condition of these sales. Under the circumstances contemplated
hereby, the offer, issuance, sale and delivery of the Purchased Securities, the
offer of the Conversion Stock and the offer of the CVR Stock will not under
current laws and regulations require compliance with the prospectus delivery or
registration requirements of the Securities Act.
5.12 Patents and Other Intangible Rights. Schedule 5.12 contains a
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complete and correct list of each patent, license, trademark, trade name, brand
xxxx, brand name, assumed name, service xxxx and copyright owned or used by the
Company or required by the
9
Company in the operation of its business as well as all registrations thereof
and pending applications therefor, and each license or other agreement relating
thereto, excluding off-the-shelf, commercially available software products with
respect to which the Company is in compliance with the applicable license
agreements. The Company and each of its Subsidiaries (a) owns or has the
exclusive right to use, free and clear of all material liens, claims and
restrictions, all patents, trademarks, service marks, trade names, copyrights,
licenses and rights with respect to the foregoing, used in the conduct of its
business as now conducted, (b) is not obligated or under any liability
whatsoever to make any payments of a material nature by way of royalties, fees
or otherwise to any owner of, licensor of, or other claimant to, any patent,
trademark, trade name, copyright or other intangible asset, with respect to the
use thereof or in connection with the conduct of its business or otherwise, (c)
owns or has the unrestricted right to use all trade secrets, including know-how,
inventions, designs, processes, computer programs and technical data necessary
to the development, operation and sale of all products and services sold or
proposed to be sold by it, free and clear of any rights, liens or claims of
others, and (d) is not using any confidential information or trade secrets of
others. The Company and each of its Subsidiaries is not, nor has it received
notice with respect to, infringing upon or otherwise acting adversely to any
known right or claimed right of any person under or with respect to any patents,
trademarks, service marks, trade names, copyrights, licenses or rights with
respect to the foregoing.
5.13 Capital Stock. Immediately upon giving effect to the Articles and
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the issuance and sale of the Purchased Securities at the Phase I Closing
pursuant to this Agreement, the authorized capital stock of the Company shall
consist of 28,500,000 shares, of which 19,650,000 shares have been designated
Common Stock, 2,396,800 shares have been designated Series A Convertible
Preferred Stock, 2,100,000 shares have been designated Series B Convertible
Preferred Stock, 3,679,053 shares have been designated Series C Preferred Stock
and 674,147 shares are undesignated. Of the Common Stock, 3,738,997 shares are
issued and outstanding. Of the Series A Convertible Preferred Stock, 2,240,000
shares are issued and outstanding, and of the Series B Convertible Preferred
Stock, 1,922,222 shares are issued and outstanding, and of the Series C
Convertible Preferred Stock, 1,639,025 shares are issued and outstanding. All of
the outstanding shares of capital stock of the Company were duly authorized and
validly issued and are fully paid and nonassessable. There are no outstanding
subscriptions, options, warrants, calls, contracts, demands, commitments,
Convertible Securities (as hereinafter defined) or other agreements or
arrangements of any character or nature whatever, except as otherwise disclosed
on Schedule 5.13 hereto or as contemplated by this Agreement, under which the
-------------
Company is or may be obligated to issue capital stock or other securities of any
kind representing an ownership interest or contingent ownership interest in the
Company. Schedule 5.13 sets forth the true and correct date of grant, term,
-------------
number of underlying shares and strike price for any such subscriptions,
options, warrants, calls, contracts, demands, commitments, Convertible
Securities or other agreements set forth therein. Neither the offer nor the
issuance or sale of the Purchased Securities, the Conversion Stock or the CVR
Stock, constitutes an event, under any anti-dilution provisions of any
securities issued or issuable by the Company or any agreements with respect to
the issuance of securities by the Company, which will either increase the number
of shares issuable pursuant to such provisions or decrease the consideration per
share to be received by the Company pursuant to such provisions. All of the
issued and outstanding
10
shares of capital stock of each of the Subsidiaries have been duly and validly
authorized and issued and are fully paid and nonassessable, and the Company owns
of record and beneficially, free and clear of any security interests, claims,
liens, proxies, equities or other encumbrances, all of the issued and
outstanding shares of such stock. No holder of any security of the Company is
entitled to any preemptive or similar rights to purchase securities from the
Company except as otherwise contemplated by this Agreement, provided, however,
that nothing in this Section 5.13 shall affect, alter or diminish any right
granted to the Purchasers in this Agreement. All outstanding securities of the
Company have been issued in full compliance with an exemption or exemptions from
the registration and prospectus delivery requirements of the Securities Act and
from the registration and qualification requirements of all applicable state
securities laws. The Company is not a party or subject to any agreement or
understanding, and to the knowledge of the Company, there is no agreement or
understanding between any persons or entities or by a director of the Company,
which affects or relates to the voting or giving of written consents with
respect to, or purchase, sale, redemption, transfer or other disposition of, any
security of the Company, other than warrants, options and debentures of the
Company outstanding as of the date hereof and disclosed in Schedule 5.13, the
-------------
Stockholders' Agreement and the 1997 Stock Purchase Agreement.
5.14 Outstanding Debt. The Company and each of its Subsidiaries has no
----------------
Indebtedness for Borrowed Money (as hereinafter defined) except as otherwise set
forth in the Financial Statements. Neither the Company nor any of its
Subsidiaries is in default in the payment of the principal of or interest or
premium on any such Indebtedness for Borrowed Money, and no event has occurred
or is continuing under the provisions of any instrument, document or agreement
evidencing or relating to any such Indebtedness for Borrowed Money which with
the lapse of time or the giving of notice, or both, would constitute an event of
default thereunder.
5.15 Schedule of Assets and Contracts. Attached hereto as Schedule 5.15
-------------------------------- -------------
is a Schedule of Assets and Contracts containing:
(a) Annex A: a listing of all real properties owned by the Company and
each of its Subsidiaries;
(b) Annex B: a listing of each indenture, lease, sublease, license or
other instrument under which the Company and each of its Subsidiaries claims
or holds a leasehold interest in real property;
(c) Annex C: a listing of all written and oral contracts, agreements,
subcontracts, purchase orders, commitments and arrangements involving
payments remaining to or from the Company and each of its Subsidiaries in
excess of $100,000 in any 12 month period and other agreements material to
the Company's business to which the Company or any of its Subsidiaries is a
party or by which it is bound, under which full performance (including
payment) has not been rendered by any party thereto;
11
(d) Annex D: a listing of all collective bargaining agreements,
employment agreements, consulting agreements, noncompetition agreements,
nondisclosure agreements, executive compensation plans, profit sharing
plans, bonus plans, deferred compensation agreements, employee pension
retirement plans and employee benefit stock option or stock purchase plans
and other employee benefit plans, entered into or adopted by the Company
and each of its Subsidiaries;
(e) Annex E: a listing of all deeds of trust, mortgages, security
agreements, pledge agreements and other agreements or arrangements whereby
any of the assets or properties of the Company or any of its Subsidiaries
are subject to any lien, encumbrance, security interest or charge;
(f) Annex F: a listing of all leases of personal property involving
payment remaining to or from the Company or its Subsidiaries in excess of
$100,000;
(g) Annex G: a listing of all bank accounts (or accounts with other
financial institutions) maintained by the Company or its Subsidiaries,
together with the persons authorized to make withdrawals from such
accounts;
(h) Annex H: the name of each employee of the Company or its
Subsidiaries whose annual compensation is in excess of $50,000 and the
remuneration currently payable to each such employee;
(i) Annex I: the name of each shareholder of the Company and the
number of shares owned by such shareholder;
(j) Annex J: a listing of all insurance policies in force and
referred to in Section 5.17 hereof; and
(k) Annex K: a listing of all patents (including applications
therefor), royalty and license agreements (other than those relating to
off-the-shelf, commercially available software products), trademarks, trade
names, service marks and copyrights relating to Company products or the
products of its Subsidiaries.
Prior to the Closing Date, the Company shall provide Purchasers or
their legal counsel with a true, correct and complete copy of each document
referred to above.
The Company has in all material respects substantially performed all
obligations required to be performed by it to date and is not in default in any
material respect under any of the contracts, agreements, leases, documents,
commitments or other arrangements to which it is a party or by which it is
otherwise bound. All instruments referred to above are in effect and enforceable
according to their respective terms (except as the enforceability thereof may be
12
limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the enforcement of creditors' rights generally, and except for
judicial limitations on the enforcement of the remedy of specific performance
and other equitable remedies), and there is not under any of such instruments
any existing material default or event of default or event which, with notice or
lapse of time or both, would constitute an event of default thereunder. To the
knowledge of the Company, all parties having material contractual arrangements
with the Company and its Subsidiaries are in substantial compliance therewith
and none are in material default in any respect thereunder. All plans or
arrangements listed pursuant to clause (d) above are fully funded to the extent
that such funding is required by GAAP.
5.16 Corporate Acts and Proceedings. This Agreement has been duly
------------------------------
authorized by all necessary corporate action on behalf of the Company, and has
been duly executed and delivered by authorized officers of the Company. All
corporate action necessary to the authorization, creation, issuance and delivery
of the Purchased Securities, the Conversion Stock and the CVR Stock has been
taken on the part of the Company, or will be taken by the Company on or prior to
the Phase I Closing Date. This Agreement is a valid and binding agreement of the
Company enforceable in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium, reorganization or
other similar laws affecting the enforcement of creditors' rights generally, and
except for judicial limitations on the enforcement of the remedy of specific
enforcement and other equitable remedies.
5.17 Insurance Coverage. There are in full force policies of insurance
------------------
issued by insurers of recognized responsibility insuring the Company and each of
its Subsidiaries, their properties and businesses against such losses and risks,
and in such amounts, as in the Company's best judgment, after advice from its
insurance broker, are acceptable for the nature and extent of its business and
the Company's resources. A list of such insurance policies is attached hereto as
Schedule 5.17.
-------------
5.18 No Brokers or Finders. Except as set forth in Schedule 5.18, no
--------------------- -------------
person, firm or corporation has or will have, as a result of any act or omission
of the Company, any right, interest or valid claim against or upon the Company
or any Purchaser for any commission, fee or other compensation as a finder or
broker, or in any similar capacity, in connection with the transactions
contemplated by this Agreement. The Company will indemnify and hold each
Purchaser harmless against any and all liability with respect to any such
commission, fee or other compensation which may be payable or determined to be
payable in connection with the transactions contemplated by this Agreement.
5.19 Conflicts of Interest. Except as set forth on Schedule 5.19, no
--------------------- -------------
officer, director or shareholder of the Company or any affiliate (as such term
is defined in Rule 405 under the Securities Act (for the purposes of this
Agreement, Brand Equity Ventures, L.P. shall be considered an affiliate of
Consumer Venture Partners II, L.P.)) (the "Affiliate") of any such person has
----------
any direct or indirect interest (a) in any entity which does business with the
Company or any of its Subsidiaries, or (b) in any property, asset or right which
is used by the Company or any of its Subsidiaries in the conduct of its
business, or (c) in any contractual relationship with the Company or any of its
Subsidiaries other than as an employee. For the purpose of this
13
Section 5.19, there shall be disregarded any interest which arises solely from
the ownership of less than a 1% equity interest in a corporation whose stock is
regularly traded on any national securities exchange or in the over-the-counter
market.
5.20 Licenses. The Company and each of its Subsidiaries possesses
--------
from the appropriate agency, commission, board and government body and
authority, whether state, local or federal, all licenses, permits,
authorizations, approvals, franchises and rights which (a) are necessary for it
to engage in the business currently conducted by it, and (b) if not possessed by
the Company or any of its Subsidiaries would have an adverse impact on the
Company's business. Except as set forth on Schedule 5.20, the Company has no
-------------
knowledge that would lead it to believe that it will not be able to obtain all
licenses, permits, authorizations, approvals, franchises and rights that may be
required for any business the Company or any of its Subsidiaries proposes to
conduct.
5.21 Registration Rights. Other than under this Agreement and the 1997
-------------------
Stock Purchase Agreement and as set forth on Schedule 5.21, the Company has not
-------------
agreed to register any of its authorized or outstanding securities under the
Securities Act.
5.22 Employee Benefit Plans.
----------------------
(a) Schedule 5.22 sets forth a list of each Employee Benefit Plan that
-------------
the Company or any of its Subsidiaries maintains or to which the Company or
any of its Subsidiaries contributes.
(b) Each such Employee Benefit Plan (and each related trust, insurance
contract, or fund) complies in form and in operation in all material respects
with the applicable requirements of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), the Internal Revenue Code of 1986, as
-----
amended (the "Code"), and other applicable laws. The Company's Employee
----
Stock Ownership Plan complies in form and in operation with the applicable
requirements of ERISA, the Code and other applicable laws.
(c) All required reports and descriptions (including Form 5500 Annual
Reports, Summary Annual Reports, and Summary Plan Descriptions) have been
filed or distributed appropriately with respect to each such Employee Benefit
Plan. The requirements of Part 6 of Subtitle B of Title I of ERISA and of
Code (S) 4980B have been met with respect to each group health plan (as
defined in Section 607(1) of ERISA and Section 4980B(g)(2) of the Code).
(d) All contributions (including all employer contributions and employee
salary reduction contributions) which are due have been paid to each such
Employee Benefit Plan which is an Employee Pension Benefit Plan (as defined
in ERISA (S) 3(2)) and all contributions for any period ending on or before
the Phase I Closing Date which are not yet due have been paid to each such
Employee Pension Benefit Plan or accrued in accordance with the past custom
and practice of the Company and its Subsidiaries. All
14
premiums or other payments for all periods ending on or before the Phase I
Closing Date have been paid with respect to each such Employee Benefit Plan
which is an Employee Welfare Benefit Plan (as defined in ERISA (S) 3(1)).
(e) Each such Employee Benefit Plan which is an Employee Pension Benefit
Plan meets the requirements of a "qualified plan" under Code (S) 401(a), and,
except as set forth on Schedule 5.22, either (i) in the case of any
-------------
"standardized form plan" (as defined in Rev. Proc. 89-9) which is a defined
contribution plan, a favorable opinion letter has been issued or (ii) in the
case of all other qualified plans, a favorable determination letter has been
received by the plan within the last two years from the Internal Revenue
Service.
(f) Neither the Company nor any of its Subsidiaries has ever maintained
or been required to contribute to any Employee Pension Benefit Plan subject
to Title IV of ERISA.
(g) The Company has made available to the Purchasers correct and
complete copies of the plan documents and summary plan descriptions, and,
where applicable, the most recent determination letter received from the
Internal Revenue Service, the most recent Form 5500 Annual Report, and all
related trust agreements, insurance contracts, and other funding agreements
which implement each such Employee Benefit Plan.
(h) With respect to each Employee Benefit Plan that the Company or any
of its Subsidiaries maintains or ever has maintained or to which it
contributes, ever has contributed, or ever has been required to contribute:
(1) There have been no Prohibited Transactions (as defined in ERISA
(S) 406 and Code (S) 4975) with respect to any such Employee Benefit
Plan. To the knowledge of the Company, no Fiduciary (as defined in ERISA
(S) 3(21)) has any liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration or
investment of the assets of any such Employee Benefit Plan. No action,
suit, proceeding, hearing, or investigation (of which the Company has
notice) with respect to the administration or the investment of the
assets of any such Employee Benefit Plan (other than routine claims for
benefits) is pending or, to the knowledge of the Company, threatened; and
(2) Neither the Company nor any of its Subsidiaries has incurred,
any liability to the Pension Benefit Guaranty Corporation ("PGBC") (other
----
than PBGC premium payments) or otherwise under Title IV of ERISA
(including any withdrawal liability) or under the Code with respect to
any such Employee Benefit Plan which is an Employee Pension Benefit Plan.
15
(i) Neither the Company nor any of its Subsidiaries contributes to,
or has ever contributed to or has ever been required to contribute to any
Multiemployer Plan (as defined in ERISA (S) 3(37)) nor has any liability
(including withdrawal liability) under any Multiemployer Plan.
(j) Neither the Company nor any of its Subsidiaries maintains or
contributes to, or has ever maintained or contributed to, or has ever been
required to contribute to, any Employee Welfare Benefit Plan providing
medical, health or life insurance or other welfare-type benefits for
current or future retired or terminated employees, their spouses, or their
dependents (other than in accordance with Code (S) 4980B).
5.23 Environmental and Safety Laws. Except as set forth on Schedule
----------------------------- --------
5.23, neither the Company nor its Subsidiaries is in violation in any material
----
respect of any applicable and material statute, law or regulation relating to
the environment or occupational health and safety, and no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation.
The operations of the Company and its Subsidiaries do not involve any
asbestos, urea-formaldehyde foamed-in-place insulation, polyclorinated biphenyls
("PCBs") or any other hazardous substances or materials including, but not
----
limited to, hazardous substances or materials under the Comprehensive
Environmental Response, Compensation and Liability Act, as amended by the
Superfund Amendments and Reauthorization Act, the Resource Conservation and
Recovery Act, the Minnesota Environmental Response and Liability Act, or any
other federal, state or local statute, regulation, code or ordinance.
5.24 Employees. To the best of the Company's knowledge, no officer
---------
of the Company or any of its Subsidiaries or employee of the Company or any of
its Subsidiaries whose annual compensation is in excess of $50,000 has any plans
to terminate his or her employment with the Company or any of its Subsidiaries.
Except as set forth on Schedule 5.24, the Company and its Subsidiaries have
-------------
complied in all material respects with all laws relating to the employment of
labor, including provisions relating to wages, hours, equal opportunity,
collective bargaining and payment of Social Security and other taxes, and
neither the Company nor any of its Subsidiaries has encountered any material
labor difficulties. Except as set forth on Schedule 5.24, neither the Company
-------------
nor any of its Subsidiaries has any worker's compensation liabilities, except
those reflected in the Financial Statements and there are no other worker's
compensation liabilities that would constitute a Material Adverse Effect.
5.25 Small Business Concern. The Company is a "small business
----------------------
concern" within the meaning of the Small Business Investment Act of 1958, as
amended, and the regulations thereunder, including Title 13, Code of Federal
Regulations, (S) 121.301 (the "SBIA"). The information set forth in the Small
Business Administration Forms 480, 652 and Section A of Form 1031 regarding the
Company is accurate and complete. Copies of such forms shall have been completed
and executed by the Company and delivered to each Purchaser that is a licensed
small business investment company (an "SBIC") at the Closing. The Company does
not
16
presently engage in, and it shall not hereafter engage in, any activities,
and shall not use directly or indirectly the proceeds from the sale of the
Purchased Securities for any purpose for which an SBIC is prohibited from
providing funds by the SBIA.
5.26 Absence of Restrictive Agreements. To the best of the Company's
---------------------------------
knowledge, no employee of the Company or any of its Subsidiaries is subject to
any secrecy or non-competition agreement or any agreement or restriction of any
kind that would impede in any way the ability of such employee to carry out
fully all activities of such employee in furtherance of the business of the
Company. To the best of the Company's knowledge, no employer or former employer
of any employee of the Company or any of its Subsidiaries has any claim of any
kind whatsoever in respect of any of the rights described in Section 5.12
hereof.
5.27 Application of Proceeds. The proceeds from the issuance and
-----------------------
sale of the Purchased Securities pursuant to this Agreement will be used for
development and construction of additional restaurants, working capital and for
general corporate purposes.
5.28 Disclosure. The Company has not knowingly withheld from the
----------
Purchasers any material facts relating to the assets, business, operations,
financial condition or prospects of the Company. No representation or warranty
in this Agreement or in any certificate, schedule, statement or other document
furnished or to be furnished to any Purchaser pursuant hereto or in connection
with the transactions contemplated hereby contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
required to be stated herein or therein or necessary to make the statements
herein or therein not misleading.
5.29 Payables. Except as set forth on Schedule 5.29, all accounts
-------- -------------
payable of the Company and its Subsidiaries reflected on the Company's audited
balance sheet dated December 28, 1997 or arising after the date thereof are the
result of bona fide transactions in the ordinary course of business and have
been paid consistent with past practice or are not yet due and payable.
5.30 Year 2000. The software and hardware operated by the Company are
---------
capable of providing or are being adapted or replaced to provide uninterrupted
millennium functionality to record, store, process and present calendar dates
falling on or after January 1, 2000 and date-dependent data in substantially the
same manner and with the same functionality as such software records, stores
processes and presents such calendar dates and date-dependant data as of the
date hereof, except for the failure to have such capability which would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect.
17
6. Representations and Warranties of Purchasers. Each of the Purchasers
--------------------------------------------
severally represents and warrants for itself that:
6.1 Investment Intent. The Purchased Securities being acquired by such
-----------------
Purchaser hereunder are being purchased, the Conversion Stock acquired by such
Purchaser upon conversion of the Series C Preferred Shares and the CVR Stock
acquired by such Purchaser pursuant to the CVRs will be acquired, for such
Purchaser's own account and not with the view to, or for resale in connection
with, any distribution or public offering thereof within the meaning of the
Securities Act. Such Purchaser understands that the Purchased Securities, the
Conversion Stock and the CVR Stock have not been registered under the Securities
Act or any applicable state laws by reason of their issuance or contemplated
issuance in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act and such laws, and that the reliance of the
Company and others upon this exemption is predicated in part upon this
representation and warranty. Such Purchaser further understands that the
Purchased Securities, the Conversion Stock and the CVR Stock may not be
transferred or resold without (a) registration under the Securities Act and any
applicable state securities laws, or (b) an exemption from the requirements of
the Securities Act and applicable state securities laws.
Such Purchaser understands that an exemption from such registration is
not presently available pursuant to Rule 144 promulgated under the Securities
Act by the Securities and Exchange Commission (the "Commission") and that in any
----------
event such Purchaser may not sell any securities pursuant to Rule 144 prior to
the expiration of a one-year period after such Purchaser has acquired the
securities. Such Purchaser understands that any sales pursuant to Rule 144 may
only be made in full compliance with the provisions of Rule 144.
6.2 Location of Principal Office and Qualification as Accredited
------------------------------------------------------------
Investor. The state in which such Purchaser's principal office (or domicile,
--------
if such Purchaser is an individual) is located is set forth in such Purchaser's
address in Schedule A hereto. Such Purchaser is familiar with the definition of
"Accredited Investor" set forth in Rule 501 under the Securities Act and such
Purchaser hereby certifies that it qualifies as an Accredited Investor. Such
Purchaser has such knowledge and experience in financial and business matters
that such Purchaser is capable of evaluating the merits and risks of the
investment to be made hereunder by such Purchaser. Such Purchaser has and has
had access to all of the Company's material books and records and access to the
Company's executive officers has been provided to such Purchaser or to such
Purchaser's qualified agents.
6.3 Acts and Proceedings. This Agreement has been duly authorized by
--------------------
all necessary action on the part of such Purchaser, has been duly executed and
delivered by such Purchaser, and is a valid and binding agreement upon the part
of such Purchaser.
6.4 No Brokers or Finders. Except for the transaction fees referred to
---------------------
in Sections 7.12 and 8.9, no person, firm or corporation has acted, directly or
indirectly, as a broker, finder or financial advisor for the Purchasers in
connection with the transactions contemplated by this Agreement and no person,
firm or corporation is entitled to any fee or
18
commission or like payment in respect thereof, in each case for which the
Company would be liable.
7. Conditions of Each Purchaser's Obligation at the Phase I Closing.
----------------------------------------------------------------
The obligation to purchase and pay for the Purchased Securities which each
Purchaser has agreed to purchase on the Phase I Closing Date is subject to the
fulfillment prior to or on the Phase I Closing Date of the following conditions
(any or all of which may be waived by the Purchasers in whole or in part to the
extent permitted by applicable law). In the event that any such condition is
not satisfied to the satisfaction of each Purchaser, or in the event that any of
the Purchasers does not proceed with the purchase of the number of Purchased
Securities it has committed to purchase, then no Purchaser shall be obligated to
proceed with the purchase of such Purchased Securities.
7.1 No Errors, Etc. The representations and warranties of the Company
---------------
under this Agreement shall be true in all material respects as of the Phase I
Closing Date with the same effect as though made on and as of the Phase I
Closing Date.
7.2 Compliance with Agreement. The Company shall have performed and
-------------------------
complied with all agreements or conditions required by this Agreement to be
performed and complied with by it prior to or as of the Phase I Closing Date.
7.3 Material Adverse Change. Nothing shall have occurred that would
-----------------------
constitute a Material Adverse Effect since the Balance Sheet Date.
7.4 Legal Proceedings. No legal actions, suits, arbitrations, claims
-----------------
or other legal, administrative or governmental proceedings shall have been
instituted or threatened or claim or demand made against the Company or the
Purchasers seeking to restrain or prohibit or to obtain substantial damages with
respect to the consummation of the transactions contemplated hereby and there
shall not be in effect any order by a governmental body of competent
jurisdiction restraining, enjoining or otherwise prohibiting the consummation of
the transactions contemplated hereby.
7.5 Consents. The Company shall have obtained all required consents
--------
of third parties to the transactions contemplated hereby, including those
required under the Company's outstanding credit facilities, the 1997 Stock
Purchase Agreement and the Articles of Incorporation, and waivers of any
preemptive rights granted under the 1997 Stock Purchase Agreement and all
waivers and consents with respect to all Phase II Closings. In addition, the
Company shall have obtained the consent of the holders of Series A Preferred
Shares (the "Series A Preferred Shareholders") and the holders of the Series B
------------------------------
Preferred Shares (the "Series B Preferred Shareholders") to Sections 9.9 and
-------------------------------
29 hereof, and, if necessary, the consent of the holders of Common Stock (the
"Common Shareholders") to Section 9.9. Furthermore, the Company shall have
-------------------
obtained waivers or modifications of all registration rights granted by the
Company so that they are not inconsistent with Section 13 of this Agreement.
7.6 Certificate of Officers. The Company shall have delivered to the
-----------------------
Purchasers a certificate, dated the Phase I Closing Date, executed by the Chief
Executive Officer
19
and the senior financial officer of the Company and certifying to the
satisfaction of the conditions specified in Sections 7.1, 7.2, 7.3, 7.4 and 7.8
hereof.
7.7 Opinion of Company's Counsel. The Company shall have delivered to
----------------------------
each of the Purchasers an opinion or opinions of Faegre & Xxxxxx LLP, counsel
for the Company, dated the Phase I Closing Date, to the effect that:
(a) The Company and each of its Subsidiaries is a duly and validly
existing corporation in good standing under the laws of the state of its
incorporation; has the corporate power and authority to own and hold its
properties owned and leased and to carry on the business in which it is
engaged; and has the corporate power and authority to enter into this
Agreement, to issue and sell the Series C Preferred Shares and the
Conversion Stock as contemplated by this Agreement, and to carry out the
provisions of this Agreement.
(b) This Agreement has been duly authorized, executed and delivered by
the Company, and is a legal, valid and binding obligation of the Company
enforceable in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium, reorganization
or similar laws affecting the enforcement of creditors' rights generally, and
except for judicial limitations on the enforcement of the remedy of specific
performance and other equitable remedies.
(c) The Stockholders' Agreement, substantially in the form set forth as
Exhibit 2 hereto, and the Articles, substantially in the form set forth as
Exhibit 1 hereto, have been duly adopted by all necessary corporate action,
and have been duly filed with the Secretary of State of the State of
Minnesota (no other or additional filing or recording being necessary in
order to perfect the rights and privileges of the holders of the Series C
Preferred Shares contained therein).
(d) The Series C Preferred Shares are entitled to the rights,
preferences and provisions of the Articles.
(e) The Purchased Securities have been duly authorized and delivered by
the Company and are fully paid and nonassessable, and the certificates for
the Purchased Securities are in valid and sufficient form, and the Purchased
Securities are entitled to the benefits of this Agreement applicable thereto.
(f) The Conversion Stock has been duly authorized and reserved for
issuance upon conversion of the Series C Preferred Shares based upon the
initial Series C Conversion Price, and when issued upon such conversion in
accordance with the terms and conditions of the Series C Preferred Shares and
those of this Agreement the Conversion Stock will be duly authorized and
validly issued and will be fully paid and nonassessable.
20
(g) The CVR Stock has been duly authorized and reserved for issuance
pursuant to the CVRs, and when issued in accordance with the terms and
conditions of the CVRs and those of this Agreement the CVR Stock will be
duly authorized and validly issued and will be fully paid and
nonassessable.
(h) All corporate proceedings required by law or by the provisions of
this Agreement to be taken by the Board of Directors and the shareholders
of the Company on or prior to the Phase I Closing Date in connection with
the execution and delivery of this Agreement, the offer, issuance and sale
of the Purchased Securities, the Conversion Stock and the CVR Stock and in
connection with the consummation of the transactions contemplated by this
Agreement, have been duly and validly taken.
(i) Immediately upon giving effect to the Articles and the issuance
and sale of the Purchased Securities at the Phase I Closing pursuant to
this Agreement, the Company is authorized by its Articles of Incorporation
to issue 28,500,000 shares, of which 19,650,000 are designated common
shares, 2,396,800 are designated series A convertible preferred shares,
2,100,000 are designated as series B convertible preferred shares,
3,679,053 are designated series C convertible preferred shares and 674,147
are undesignated. Except for such Series A Preferred Shares, Series B
Preferred Shares, Series C Preferred Shares and such common shares, the
Company has no other authorized or outstanding series or class of capital
stock, and, to the knowledge of such counsel, there are no outstanding
securities convertible into common shares of the Company or outstanding
options, warrants or other rights to acquire securities of the Company,
other than (a) the Preferred Shares, and (b) options, warrants and
Convertible Securities disclosed in Schedule 5.13 to this Agreement. To
-------------
the knowledge of such counsel, there are no agreements or understandings on
the part of the Company with respect to the registration of any securities
of the Company under the Securities Act, other than those granted under
this Agreement and as otherwise disclosed in Schedule 5.21 to this
-------------
Agreement, and there are no obligations on the part of the Company to
purchase or redeem any outstanding shares of capital stock of the Company,
other than as set forth in the Articles and as otherwise disclosed in
Schedule 5.13 to this Agreement.
-------------
(j) No security holder of the Company is entitled to preemptive or,
to the best of such counsel's knowledge, similar rights to subscribe for or
to purchase any shares of capital stock of the Company except as otherwise
contemplated by this Agreement, the 1997 Stock Purchase Agreement and the
stock purchase warrants issued in connection with the Company's Senior
Subordinated Loan and Security Agreement dated as of October 31, 1997 and
the First Amendment thereto dated as of May 19, 1998, nor will any security
holder of the Company be entitled to any such rights as a result of the
execution or delivery of this Agreement or the issuance of the Purchased
Securities, the Conversion Stock or the CVR Stock.
21
(k) Assuming the accuracy of the representations of the Purchasers
set forth in Section 6 hereof and assuming that the limitations on the
manner of offering contained in Rule 502(c) of the Securities Act have been
complied with, the Company has obtained the approval or consent of all
governmental agencies or bodies required to be obtained by it for the legal
and valid execution and delivery of this Agreement and the legal and valid
offer, issuance and sale of the Purchased Securities, the offer of the
Conversion Stock to the Purchasers through conversion by them of the Series
C Preferred Shares and the offer of the CVR Stock to the Purchasers
issuable pursuant to the CVRs and for the performance of the obligations of
the Company under any provisions of this Agreement. To the best of such
counsel's knowledge, neither the Company nor any of its Subsidiaries is in
violation of any term, provision or condition of its Articles of
Incorporation or Bylaws; and the execution, delivery and performance of
this Agreement by the Company, the offer, issuance and sale of the
Purchased Securities, the Conversion Stock and the CVR Stock and the
consummation of the transactions contemplated by this Agreement by the
Company will not result in any breach or violation of the terms or
provisions of, or constitute a default under, the Articles of Incorporation
or the Bylaws of the Company or its Subsidiaries; or in violation of any
agreement listed on Schedule 5.15 attached to this Agreement or any
-------------
judgment, decree or order specifically directed to the Company or any
Subsidiary listed on Schedule 5.8 to this Agreement, or any statute, rule
------------
or regulation.
(l) Assuming the accuracy of the representations of the Purchasers
set forth in Section 6 hereof and assuming that the limitations on the
manner of offering contained in Rule 502(c) of the Securities Act have been
complied with, the offer, sale, issuance and delivery of the Purchased
Securities, the offer of the Conversion Stock to the Purchasers through
conversion by them of the Series C Preferred Shares and the offer of the
CVR Stock to the Purchasers issuable pursuant to the CVRs under the
circumstances contemplated by the CVRs, the Articles and this Agreement are
exempt from the registration and prospectus delivery requirements of the
Securities Act, and all registrations, qualifications, permits and
approvals required under applicable state securities laws for the lawful
offer, sale, issuance and delivery of the Purchased Securities, the
Conversion Stock and the CVR Stock have been obtained.
(m) Except as otherwise disclosed in Schedule 5.8 to this Agreement,
such counsel have no knowledge of any litigation, proceeding or
governmental investigation pending or threatened in writing against the
Company or its Subsidiaries, its key management employees, properties or
business which, if determined adversely to the Company or its Subsidiaries,
would have a Material Adverse Effect.
7.8 No Event of Default. There shall exist at the time of the Phase I
-------------------
Closing no condition or event which would constitute an Event of Default (as
hereinafter defined) or
22
which, after notice or lapse of time or both, would constitute an Event of
Default.
7.9 Qualification Under State Securities Laws. All registrations,
-----------------------------------------
qualifications, permits and approvals required under applicable state securities
laws for the lawful execution and delivery of this Agreement and the offer,
sale, issuance and delivery of the Purchased Securities, the offer of the
Conversion Stock and the offer of the CVR Stock shall have been obtained.
7.10 Proceedings and Documents. All corporate and other proceedings
-------------------------
and actions taken in connection with the transactions contemplated hereby and
all certificates, opinions, agreements, instruments and documents mentioned
herein or incident to any such transaction shall be satisfactory in form and
substance to the Purchasers and their special counsel.
7.11 Stockholders' Agreement. Each of the Series A Shareholders (as
-----------------------
hereinafter defined), the Series B Shareholders (as hereinafter defined), the
Purchasers and Xxxxxx X. Xxxxxxx, Xxxxx X. Xxxxxxxx, Xxx X. Xxxx, Xxxxx Xxxxxxx,
Xxxxxxx Xxxxxxxx, Xxxxxx Xxxxxxxxxx, Xxxxxx Xxxxxxx, Xxxxx Xxxx, Xxxxxx
Xxxxxxxx, the Xxxxxxxx Family Limited Partnership, the Mihajlov Irrevocable
Grandchildren's Trust and the Xxxx Family Limited Partnership shall have entered
into the Stockholders' Agreement with the Purchasers substantially in the form
of Exhibit 2 hereto.
7.12 Transaction Fee. The Company shall have paid Centre Partners
---------------
Management LLC a transaction commitment fee of $75,000, and the Company shall
have paid to each other Purchaser a transaction fee of 1.5% of the portion of
the Purchase Price paid by such Purchaser at the Phase I Closing.
7.13 Expenses. The Company shall have paid, or reimbursed the
--------
Purchasers for, all costs and expenses provided in Section 22 to be borne by the
Company upon consummation of the transactions contemplated hereby.
8. Conditions of Each Centre Purchaser's Obligation at a Phase II
---------------------------------------------------------------
Closing. The obligation to purchase and pay for the Purchased Securities which
-------
each Centre Purchaser has agreed to purchase at any Phase II Closing Date is
subject to the fulfillment prior to or on the Phase II Closing Date of the
following conditions (any or all of which may be waived by the Centre Purchasers
in whole or in part to the extent permitted by applicable law).
8.1 No Errors, Etc. The representations and warranties of the
--------------
Company under this Agreement shall be true in all material respects as of the
Phase II Closing Date with the same effect as though made on and as of the Phase
II Closing Date; provided, that the failure of any such representation and
warranty to be so true shall not be a condition to the Centre Purchasers
obligations if either (i) such failure was caused by or results from an action
approved by the Board of Directors of the Company with the Series C Preferred
Shares designee voting in favor of such action or (ii) all such failures, in the
aggregate, have not and could not reasonably be expected to have a Material
Adverse Effect.
23
8.2 Compliance with Agreement. The Company shall have performed and
-------------------------
complied with all agreements or conditions required by this Agreement to be
performed and complied with by it prior to or as of the Phase II Closing Date.
8.3 Legal Proceedings. No legal actions, suits, arbitrations, claims
-----------------
or other legal, administrative or governmental proceedings shall have been
instituted or threatened or claim or demand made against the Company or the
Centre Purchasers seeking to restrain or prohibit or to obtain substantial
damages with respect to the consummation of the transactions contemplated hereby
and there shall not be in effect any order by a governmental body of competent
jurisdiction restraining, enjoining or otherwise prohibiting the consummation of
the transactions contemplated hereby.
8.4 Consents. The Company shall have obtained all required consents
--------
of third parties to the transactions contemplated hereby.
8.5 Certificate of Officers. The Company shall have delivered to the
-----------------------
Centre Purchasers a certificate, dated the Phase II Closing Date, executed by
the Chief Executive Officer and the senior financial officer of the Company and
certifying to the satisfaction of the conditions specified in Sections 8.1, 8.2,
8.3 and 8.7 hereof.
8.6 Opinion of Company's Counsel. The Company shall have delivered to
----------------------------
each of the Centre Purchasers an opinion or opinions of Faegre & Xxxxxx LLP,
counsel for the Company, dated the Phase II Closing Date, in substantially the
form as set forth in Section 7.7 hereof.
8.7 No Event of Default. There shall exist at the time of the Phase
-------------------
II Closing no condition or event which would constitute an Event of Default or
which, after notice or lapse of time or both, would constitute an Event of
Default.
8.8 Qualification Under State Securities Laws. All registrations,
-----------------------------------------
qualifications, permits and approvals required under applicable state securities
laws for the lawful offer, sale, issuance and delivery of the Purchased
Securities, the offer of the Conversion Stock and the offer of the CVR Stock
shall have been obtained.
8.9 Transaction Fee. The Company shall have paid Centre Partners
---------------
Management LLC a prorated portion of a transaction fee of $75,000 based on the
ratio that 975,610 bears to the number of Series C Preferred Shares purchased at
such Phase II Closing.
8.10 Expenses. The Company shall have paid, or reimbursed the Centre
--------
Purchasers for, all costs and expenses provided in Section 22 to be borne by the
Company upon consummation of the transactions contemplated hereby.
9. Affirmative Covenants. Subject to the provisions of Section 15 hereof,
---------------------
the Company covenants and agrees that:
24
9.1 Corporate Existence. Except in the event of the merger or
-------------------
consolidation of a Subsidiary with another Subsidiary or into the Company, the
Company will maintain and cause each Subsidiary (as hereinafter defined) to
maintain its corporate existence in good standing and comply with all applicable
laws and regulations of the United States or of any state or states thereof or
of any political subdivision thereof and of any governmental authority where
failure to so comply would have a material adverse impact on the Company or its
business or operations.
9.2 Books of Account and Reserves. The Company will, and will cause
-----------------------------
each of its Subsidiaries to, keep books of record and account in which full,
true and correct entries are made of all of its and their respective dealings,
business and affairs, in accordance with GAAP consistently applied. The Company
will employ certified public accountants selected by the Board of Directors of
the Company who are "independent" within the meaning of the accounting
regulations of the Commission and who are either one of the so-called "Big Five"
accounting firms or an otherwise nationally recognized accounting firm, and have
annual audits made by such independent public accountants in the course of which
such accountants shall make such examinations, in accordance with generally
accepted auditing standards, as will enable them to give such reports or
opinions with respect to the financial statements of the Company and its
Subsidiaries as will satisfy the requirements of the Commission in effect at
such time with respect to certificates and opinions of accountants.
9.3 Furnishing of Financial Statements and Information. The Company
--------------------------------------------------
will deliver to each Purchaser and to each Preferred Shareholder that holds at
least five percent (5%) of any series of Preferred Shares:
(a) as soon as practicable, but in any event within 30 days after the
close of each month, unaudited consolidated balance sheets of the Company
and its Subsidiaries as of the end of such month, together with the related
consolidated statements of operations for such month, setting forth the
budgeted figures for such month prepared and submitted in connection with
the Company's annual plan as required under Section 9.5 hereof and in
comparative form figures for the corresponding month of the previous fiscal
year, all in reasonable detail and certified by an authorized accounting
officer of the Company, subject to year-end adjustments;
(b) as soon as practicable, but in any event within 120 days after
the end of each fiscal year, a consolidated balance sheet of the Company
and its Subsidiaries, as of the end of such fiscal year, together with the
related consolidated statements of operations, shareholders' equity and
cash flow for such fiscal year, setting forth in comparative form figures
for the previous fiscal year, all in reasonable detail and duly certified
by the Company's independent public accountants, which accountants shall
have given the Company an opinion, unqualified as to the scope of the
audit, regarding such statements;
25
(c) within 120 days after the end of each fiscal year, written notice
of any change during the past fiscal year of the Conversion Price for the
Preferred Shares, including a brief statement indicating any adjustments
reasonably anticipated;
(d) concurrently with the delivery in each year of the financial
statements referred to in paragraph (b) of this Section 9.3, a statement
and report signed by the independent public accountants who certified such
financial statements to the effect that they have read this Agreement and
that in the course of the audit upon which their certificate was based they
became aware of no condition or event which constituted an Event of Default
or which, after notice or lapse of time or both, would constitute an Event
of Default or if such accountants did become aware of any such condition or
event, specifying the nature and period of existence thereof;
(e) promptly after the submission thereof to the Company, copies of
all reports and recommendations submitted by independent public accountants
in connection with any annual or interim audit of the accounts of the
Company or any of its Subsidiaries made by such accountants;
(f) promptly upon transmission thereof, copies of all reports, proxy
statements, registration statements and notifications filed by it with the
Commission pursuant to any act administered by the Commission or furnished
to stockholders of the Company or to any national securities exchange;
(g) with reasonable promptness, such other financial data relating to
the business, affairs and financial condition of the Company and any
Subsidiaries as is available to the Company and as from time to time the
Preferred Shareholders may reasonably request;
(h) promptly following the issuance of any Additional Shares of
Common Stock or of any Convertible Securities, or any options, warrants or
other rights to purchase Additional Shares of Common Stock or Convertible
Securities (other than the issuance of any such securities pursuant to key
employee and consultant benefit plans adopted by the Company's Board of
Directors), as these terms are hereinafter defined, written notice of the
amount of securities so issued and the total consideration received
therefor;
(i) at least 20 days prior to the earlier of (i) the execution of any
agreement relating to any merger or consolidation of the Company or any of
its Subsidiaries with another corporation, or a plan of exchange involving
the outstanding capital stock of the Company or any of its Subsidiaries, or
the sale, transfer or other disposition of all or substantially all of the
property, assets or business of the Company or any of its Subsidiaries to
another corporation, or (ii)
26
the holding of any meeting of the shareholders of the Company for the
purpose of approving such action, written notice of the terms and
conditions of such proposed merger, consolidation, plan of exchange, sale,
transfer or other disposition;
(j) within 15 days after the Company learns in writing of the
commencement or threatened commencement of any material suit, legal or
equitable, or of any material administrative, arbitration or other
proceeding against the Company, any of its Subsidiaries or their respective
businesses, assets or properties, written notice of the nature and extent
of such suit or proceeding;
(k) as soon as reasonably practical after the written request of any
Preferred Shareholder that is an SBIC, confirm the use of the proceeds as
described in Section 5.27 hereof; and
(l) promptly furnish to each Preferred Shareholder that is an SBIC
all information necessary in order for such Preferred Shareholder to
prepare and file SBA Form 468 and other information requested or required
by any governmental authority asserting jurisdiction over such Preferred
Shareholder, such information to be provided within 20 days of such
Preferred Shareholder's request, but in no event shall such Preferred
Shareholder request any information that has previously been disclosed
pursuant to the reporting requirements set forth herein.
9.4 Inspection. The Company will permit each Preferred Shareholder
----------
and any of its partners, officers or employees, or any outside representatives
designated by such Preferred Shareholder and reasonably satisfactory to the
Company, to visit and inspect at such Preferred Shareholder's expense any of the
properties of the Company or its Subsidiaries, including their books and records
(and to make photocopies thereof or make extracts therefrom), and to discuss
their affairs, finances, and accounts with their officers, lawyers and
accountants, except with respect to trade secrets and similar confidential
information, all to such reasonable extent and at such reasonable times and
intervals as such Preferred Shareholder may reasonably request. Except as
otherwise required by laws or regulations applicable to a Preferred Shareholder,
the Preferred Shareholders shall maintain, and shall require their
representatives to maintain, all information obtained pursuant to Section 9.3
hereof, this Section 9.4 and Section 9.5 hereof on a confidential basis.
9.5 Preparation and Approval of Budgets. At least one month prior to
-----------------------------------
the beginning of each fiscal year of the Company, the Company shall prepare and
submit to its Board of Directors, for its review and approval, an annual plan
for such year (the "Annual Plan"), which shall include monthly capital and
-----------
operating expense budgets, cash flow statements and profit and loss projections
itemized in such detail as the Board of Directors may reasonably request. The
Annual Plan shall also include, without limitation, a development plan for
restaurants for the ensuing year including plans for market locations of such
restaurants, estimated timing of openings and a budget of expenses. Each Annual
Plan shall be modified as often as is necessary in the judgment of the Board of
Directors to reflect changes required as a result of operating results and other
events that occur, or may be reasonably expected to occur,
27
during the year covered by the Annual Plan, and copies of each such modification
shall be submitted to the Board of Directors. Each Annual Plan, or modification
thereof, must be approved by at least 66-2/3% of the members of the Board of
Directors. The Company will, simultaneously with the submission thereof to the
Board of Directors, deliver a copy of each such annual plan and modification
thereof to each Preferred Shareholder. Each site for a new restaurant shall be
approved by a real estate site selection committee comprised of six members
selected by the Board of Directors in the same manner the Annual Plan is
approved from members of the Board of Directors and senior management, at least
one of which shall be the member of the Board of Directors elected by the
holders of the Series C Preferred Shares. Each new restaurant site shall be
approved by four of the six members of such committee; provided, however, that
each site so approved shall be in accordance with the Annual Plan then in
effect.
9.6 Payment of Taxes and Maintenance of Properties. The Company will,
----------------------------------------------
and will cause each Subsidiary to:
(a) pay and discharge promptly, or cause to be paid and discharged
promptly when due and payable, all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or upon any of its
properties, as well as all material claims of any kind (including claims
for labor, material and supplies) which, if unpaid, might by law become a
lien or charge upon its property; provided, however, that neither the
Company nor any Subsidiary shall be required to pay any such tax,
assessment, charge, levy or claim if the amount, applicability or validity
thereof shall currently be contested in good faith by appropriate
proceedings and if the Company or such Subsidiary as the case may be shall
have set aside on its books reserves (segregated to the extent required by
GAAP) deemed adequate by it with respect thereto; and
(b) maintain and keep, or cause to be maintained and kept, its
properties in good repair, working order and condition, and from time to
time make, or cause to be made, all repairs and renewals and replacements
which in the opinion of the Company are necessary and proper so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times; the Company will maintain or cause
to be maintained back-up copies of all valuable papers and software.
9.7 Insurance. The Company will, and will cause each Subsidiary to,
---------
obtain and maintain in force such property damage, public liability, business
interruption, worker's compensation, indemnity bonds and other types of
insurance as the Company's executive officers, after consultation with an
accredited insurance broker, shall determine to be necessary or appropriate to
protect the Company from the insurable hazards or risks associated with the
conduct of the Company's business. In addition, the Company shall maintain
director and officer insurance in the amounts and substantially the terms set
forth in Schedule 5.17. The Company's executive officers shall periodically
-------------
report to the Board of Directors on the status of such insurance coverage.
28
All insurance shall be maintained in at least such amounts and to such
extent as shall be determined to be reasonable by the Board of Directors; and
all such insurance shall be effected and maintained in force under a policy or
policies issued by insurers of recognized responsibility, except that the
Company or any Subsidiary may effect worker's compensation or similar insurance
in respect of operations in any state or other jurisdiction either through an
insurance fund operated by such state or other jurisdiction or by causing to be
maintained a system or systems of self-insurance which is in accord with
applicable laws.
9.8 Payment of Indebtedness and Discharge of Obligations. The Company
----------------------------------------------------
will, and will cause each Subsidiary to, pay or cause to be paid the principal
of and interest and premium, if any, on all Indebtedness for Borrowed Money
heretofore or hereafter incurred or assumed by it when and as the same shall
become due and payable, unless such Indebtedness for Borrowed Money is renewed
or extended. The Company will, and will cause each Subsidiary to, faithfully
observe, perform and discharge all of the material covenants, conditions and
obligations which are imposed on it by any and all indentures and other
agreements securing or evidencing such Indebtedness for Borrowed Money or
pursuant to which such Indebtedness for Borrowed Money is issued, and will not
permit the continuance of any act or omission which is or under the provisions
thereof may be declared to be a material default thereunder, unless such default
is waived pursuant to the provisions thereof. Neither the Company nor any
Subsidiary shall be required to make any payment or to take any other action by
reason of this Section 9.8 at any time while it shall be currently contesting in
good faith by appropriate proceedings its obligations to make such payment or to
take such action provided that the Company or such Subsidiary, as the case may
be, shall have set aside on its books reserves (segregated to the extent
required by GAAP) deemed adequate by it with respect thereto.
9.9 Directors' and Shareholders' Meetings; Board Committees. The
-------------------------------------------------------
Series A Preferred Shareholders shall have the right to elect two directors of
the Company (the "Series A Preferred Stock Directors") as set forth in the
----------------------------------
Articles. Each Series A Preferred Shareholder agrees to vote or execute written
consents in respect of such Series A Preferred Shareholder's respective shares
of Series A Preferred Stock now owned or hereafter acquired, at all regular,
special or adjourned meetings of the Series A Preferred Shareholders of the
Company at which such Series A Preferred Shareholders are entitled to vote such
shares in respect of the election of directors to be elected by the Series A
Preferred Shareholders, or in connection with any written action in lieu
thereof, for the following persons: (i) one person nominated by Norwest Equity
Partners V, or its successors or assigns; and (ii) one person nominated by
Consumer Venture Partners II, L.P.; provided, however, that upon such time as a
-------- -------
current Series A Preferred Shareholder, other than Norwest Equity Partners V,
holds, together with such Series A Preferred Shareholder's Affiliates, a number
of shares exceeding 130% of the number of shares held by Consumer Venture
Partners II, L.P. and its Affiliates, such Series A Preferred Shareholder shall
then make the nomination provided under clause (ii) of this section. Such
persons so nominated shall constitute both of the two Series A Preferred Stock
Directors.
The holders of the Series C Preferred Shares (the "Series C Preferred
------------------
Shareholders") shall have the right to elect one director of the Company (the
------------
"Series C Preferred Stock Director") as set forth in the Articles, which
---------------------------------
director shall serve on the real estate site
29
selection and compensation committees of the Board of Directors, and in the
event the number of directors of the Company's Board of Directors shall be
increased above seven (7), then the Series C Preferred Shareholders shall have
the right to elect one or more additional directors so that the percentage of
directors elected by the Series C Preferred Shareholders shall not be less than
the percentage of the directors elected by the Series C Preferred Shareholders
as of the Phase I Closing (provided, that the first such additional director
--------
shall be elected jointly by the holders of the Series A Preferred Shares and the
Series C Preferred Shares, voting together as a class).
The Common Shareholders shall have the right to elect two directors of
the Company as provided in the Articles. The remaining two directors (the
"Remaining Directors") shall be elected by the Preferred Shareholders and the
-------------------
Common Shareholders as provided in the Articles. In electing the Remaining
Directors, the Company, the Preferred Shareholders and the Common Shareholders
agree that they shall cause to be nominated and shall vote or execute written
consents in respect of such Preferred Shareholder's respective Preferred Shares
now owned or hereafter acquired, at all regular, special or adjourned meetings
of the Preferred Shareholders of the Company at which such Preferred
Shareholders are entitled to vote such shares in respect of the election of
directors to be elected by the Preferred Shareholders, or in connection with any
written action in lieu thereof, for the following persons: (i) the incumbent
chief executive officer of the corporation, (ii) a person chosen jointly by the
Common Shareholders and the Preferred Shareholders, but in any case approved by
the holders of a majority of the Preferred Shares outstanding from time to time,
and (iii) upon expiration of any Remaining Director's term, persons nominated as
provided below. Except in the case of a directorship to be filled from time to
time by the incumbent chief executive officer of the Company, upon expiration of
the term of any Remaining Director then in office, or if any Remaining Director
shall cease to serve in such capacity for any other reason, the Remaining
Directors who shall thereafter be nominated and elected shall be individuals
approved by the holders of a majority of the Preferred Shares outstanding. Such
persons shall be nominated to serve as Remaining Directors by the affirmative
vote of a majority of the remaining members of the Board of Directors.
The Company shall reimburse such holders of Series A Preferred Shares
and Series C Preferred Shares for the reasonable out-of-pocket expenses incurred
by them or the directors elected by them pursuant to the Articles in connection
with the attending of meetings by their director designees or carrying out any
other duties by such director designees that may be specified by the Board of
Directors. The Company (i) shall pay the same director's fees to the Series A
Preferred Stock Directors and the Series C Preferred Stock Director as it pays
to directors who are not employees of the Company and (ii) shall grant the same
stock options to the Series A Preferred Stock Directors and the Series C Stock
Director as it grants to directors who are not employees of the Company under
the Company's policies now in effect; provided, that the Company, by vote of a
--------
majority of its directors, shall have the discretion and authority to grant
different or more substantial option packages to future directors who are not
employees of the Company or representatives or designees of stockholders of the
Company, and neither the Series A Preferred Stock Directors or the Series C
Stock Director shall have the right to require the Company to grant them similar
or the same option packages as such future directors. The Company shall
maintain as part of its Articles of Incorporation or Bylaws a provision for the
30
indemnification of its directors to the full extent permitted by law.
So long as an officer or partner or employee of a Preferred
Shareholder or an Affiliate thereof is not a director of the Company, the
Company shall notify such Preferred Shareholder of all regular meetings and
special meetings of the Board of Directors of the Company at least two business
days in advance of such meetings, and afford any representative designated by
such Preferred Shareholder the right and opportunity to attend any such meeting.
Such right to attend the meetings of the Board of Directors shall extend only to
Preferred Shareholders who, together with any Affiliates thereof, hold at least
250,000 Series A Preferred Shares, 250,000 Series B Preferred Shares or 250,000
Series C Preferred shares. Such representative shall be entitled to receive all
written materials and other information given to directors of the Company in
connection with any such meeting at the time such materials or information are
given to such directors.
The Company agrees, as a general practice, to hold a meeting of its
Board of Directors at least once every two months, and during each year to hold
its annual meeting of shareholders on or approximately on the date provided in
its Bylaws.
9.10 Replacement of Certificates Representing Preferred Shares or
------------------------------------------------------------
Conversion Stock. Upon receipt of evidence reasonably satisfactory to the
----------------
Company of the loss, theft, destruction or mutilation of any certificates
representing Series A Preferred Shares, Series B Preferred Shares, Series C
Preferred Shares, CVRs or any shares of stock issued upon conversion thereof or
in exchange therefor, and, in the case of any such loss, theft or destruction,
upon delivery of a bond of indemnity satisfactory to the Company, or, in the
case of any such mutilation, upon surrender and cancellation of the certificates
representing Series A Preferred Shares, Series B Preferred Shares, Series C
Preferred Shares, CVRs or any shares of stock issued upon conversion thereof or
in exchange therefor, as the case may be, the Company will issue new
certificates representing such Preferred Shares or any shares of stock issued
upon conversion thereof or in exchange therefor, as the case may be, of like
tenor, in lieu of such lost, stolen, destroyed or mutilated certificates
representing such Preferred Shares or any shares of stock issued upon conversion
thereof or in exchange therefor, as the case may be.
9.11 Application of Proceeds. Unless otherwise approved by the
-----------------------
Preferred Shareholders, the net proceeds received by the Company from the sale
of the Purchased Securities shall be used substantially for development and
construction of additional restaurants, working capital and for general
corporate purposes. Pending use of the proceeds in the business, they shall be
deposited in a bank or banks having deposits of $125,000,000 or more, invested
in money market mutual funds having assets of $500,000,000 or more, or invested
in securities issued or guaranteed by the United States Government.
9.12 Retirement Plans. The Company will cause each retirement plan
----------------
of the Company or any of its Subsidiaries in which any employees of the Company
or of any of its Subsidiaries participate that is subject to the provisions of
ERISA and the documents and instruments governing each such plan to be conformed
to when necessary, and to be administered in a manner consistent with, those
provisions of ERISA which may, from time to time, become
31
effective and operative with respect to such plans; if requested by the
Preferred Shareholders in writing from time to time, furnish to the Preferred
Shareholders a copy of any annual report with respect to each such plan that the
Company files with the Secretary of Labor pursuant to ERISA; and at such time as
such insurance shall be available at rates deemed commercially reasonable by the
Company, maintain insurance against the contingent liability imposed in respect
of each such plan by the provisions of ERISA.
9.13 Filing of Reports. The Company will, from and after such time
-----------------
as it has securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, or has securities registered pursuant to the
Securities Act, make timely filing of such reports as are required to be filed
by it with the Commission so that Rule 144 under the Securities Act or any
successor provision thereto will be available to the security holders of the
Company who are otherwise able to take advantage of the provisions of such Rule.
9.14 Patents and Other Intangible Rights. The Company will apply
-----------------------------------
for, or obtain assignments of, or licenses to use, all patents, trademarks,
trademark rights, trade names, trade name rights and copyrights which in the
opinion of a prudent and experienced businessman operating in the industry in
which the Company is operating are desirable or necessary for the conduct and
protection of the business of the Company.
9.15 Insurance on Lives of Key Personnel. The Company will maintain
-----------------------------------
life insurance under the current policy (or a substantially equivalent policy)
on the life of Xxxxxx Xxxxxxxxxx so long as Xx. Xxxxxxxxxx is an employee of the
Company. Such policy shall name the Company as the beneficiary thereunder, and
shall be in addition to any policy or policies maintained by the Company to fund
potential stock repurchase obligations of the Company.
9.16 Rights to Purchase Additional Securities. If the Company should
----------------------------------------
decide to issue and sell additional shares of any capital stock of the Company
or any warrants, securities convertible into capital stock of the Company or
other rights to subscribe for or to purchase any capital stock of the Company,
other than (a) shares of Common Stock sold to the public pursuant to a
registration statement filed under the Securities Act, if such offering is
underwritten on a firm commitment basis by an underwriter, or group of
underwriters represented by an underwriter or underwriters, which is a member of
the New York Stock Exchange, (b) (i) shares of Common Stock awarded or issued
upon the exercise of options granted pursuant to employee and consultant benefit
plans adopted by the Company, and the grant of such options themselves, provided
that the aggregate number of shares thus awarded and issued and issuable
pursuant to the exercise of all such options shall not be in excess of 1,500,000
(appropriately adjusted to reflect stock splits, stock dividends,
reorganizations, consolidations and similar changes effected after the Phase I
Closing Date), or (ii) up to 24,000 shares of Common Stock issued upon exercise
of an option granted to its Minneapolis landlord (appropriately adjusted in
accordance with the terms thereof), (c) shares of Common Stock issued upon
conversion of the Company's outstanding Series A Convertible Subordinated
Debentures (appropriately adjusted in accordance with the terms thereof), (d)
shares of Series A Preferred Shares issued upon exercise of warrants to Xxxxx
Xxxxxxx Inc. for 112,000 shares and to Xxxxxxx X. Xxxxxxx for 44,800 shares (the
"1996 Warrants") or shares of Common Stock issued upon conversion of such Series
-------------
A Preferred
32
Shares (appropriately adjusted in accordance with the terms thereof) (the "1996
----
Warrant Stock"), (e) shares of Common Stock issued upon conversion of the Series
-------------
A Preferred Shares and the Series B Preferred Shares, (f) warrants to purchase
up to 50,000 shares of Series B Preferred Shares issued to Xxxxx Xxxxxxx at the
initial Closing of the 1997 Stock Purchase Agreement ("1997 Warrants"), any
-------------
shares of Series B Preferred Shares issued upon the exercise of such warrants,
and any shares of Common Stock issued upon conversion of such Series B Preferred
Shares (appropriately adjusted in accordance with the terms thereof) (the "1997
----
Warrant Stock"), (g) warrants to purchase up to 241,666 shares of Common Stock
-------------
issued to Sirrom Capital Corporation and up to 132,917 shares of Common Stock
issued to Regent Capital Partners, L.P. and any shares of Common Stock issued
upon the exercise of such warrants (appropriately adjusted in accordance with
the terms thereof) (the "Financing Warrants"), (h) shares of Series C Preferred
------------------
Stock issued upon the consummation of any Phase II Closing, (i) warrants to
purchase 100,000 shares of Common Stock issued to the Series B Preferred
Shareholders as of October 31, 1997 and any shares of Common Stock issued upon
the exercise of such warrants (appropriately adjusted in accordance with the
terms thereof), (j) Series C Preferred Shares or Common Shares issued upon
conversion of the CVRs or (k) shares of Common Stock issued upon conversion of
the Series C Preferred Shares (all such capital stock, warrants, securities
convertible into capital stock and other rights, other than securities referred
to in (a), (b), (c), (d), (e), (f), (g), (h), (i), (j) and (k) above, being
hereinafter sometimes collectively referred to as "Additional Securities"), the
---------------------
Company shall first offer to sell to each of the Preferred Shareholders, or an
Affiliate thereof, upon the same terms and conditions as the Company is
proposing to issue and sell such Additional Securities to others, such Preferred
Shareholder's pro rata share (as defined below) of such Additional Securities.
Such offer shall be made by written notice given to each such Preferred
Shareholder and specifying therein the amount of the Additional Securities being
offered, the purchase price and other terms of such offer. Such Preferred
Shareholder shall have a period of 30 days from and after the date of receipt by
it of such notice within which to accept such offer. If a Preferred Shareholder
elects to accept such offer in whole or in part, such Preferred Shareholder
shall so accept by written notice to the Company given within such 30-day
period. If a Preferred Shareholder fails to accept such offer in whole or in
part within such 30-day period, any of such Additional Securities not purchased
by such Preferred Shareholder pursuant to such offer may be offered for sale to
others by the Company for a period of 90 days from the last day of such 30-day
period, but only on the same terms and conditions as set forth in the initial
offer to such Preferred Shareholder, free and clear of the restrictions imposed
by this Section 9.16.
For purposes of the previous paragraph, a Preferred Shareholder's "pro
rata share" is the number of shares of Additional Securities (rounded to the
nearest whole share) as is equal to the product of (a)(i) the number of shares
of Common Stock issued, or issuable upon the exercise or conversion of rights,
options or Convertible Securities without the payment of any additional cash
consideration or with the payment of a nominal cash consideration, as the case
may be (collectively, "Fully Paid Securities"), to such Preferred Shareholder
---------------------
immediately prior to the issuance of the Additional Securities being offered
divided by (ii) the total number of Fully Paid Securities issued or issuable by
the Company immediately prior to the issuance of the Additional Securities,
multiplied by (b)(i) if so approved by the affirmative vote of the holders of
two-thirds of the shares of Purchased Stock (as hereinafter defined) held by
Preferred
33
Shareholders entitled by this Section 9.16 to purchase a portion of such
Additional Securities, that portion of the offering of Additional Securities
that remains after considering binding commitments to purchase that have been
received from persons other than the Preferred Shareholders, or (ii) if not so
approved, the entire offering of Additional Securities.
9.17 Rule 144A. The Company agrees that, upon the request of any
---------
holder of Series A Preferred Shares, Series B Preferred Shares, Series C
Preferred Shares or shares issued upon conversion thereof or exchange therefor,
or any prospective purchaser of such shares, the Company shall promptly provide
(but in any case within 15 days of a request) to such holder or potential
purchaser the following information: (a) a brief statement of the nature of the
business of the Company and its Subsidiaries and the products and services they
offer; (b) the Company's most recent consolidated balance sheets and profit and
loss and retained earnings statements, and similar financial statements for such
part of the two preceding fiscal years prior to such request as the Company has
been in operation (such financial information shall be audited, to the extent
reasonably available); and (c) such other information about the Company, its
Subsidiaries and their business, financial condition and results of operations
as the requesting person shall request in order to comply with Rule 144A
promulgated under the Securities Act and the antifraud provisions of the federal
and state securities laws.
The Company hereby represents and warrants to any such requesting
person that the information provided by the Company pursuant to this Section
9.17 will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
9.18 Net Worth. The Company agrees that it will at all times
---------
maintain Consolidated Tangible Net Worth (as hereinafter define d) in an amount
(a) after the Phase I Closing of at least equal to $11,785,000 plus ninety
percent (90%) of the gross proceeds to the Company from the Phase I Closing, and
(b) after the Phase II Closing of at least $11,785,000 plus ninety percent (90%)
of the gross proceeds to the Company from the Phase I Closing and the Phase II
Closing, in each case excluding one-time charges attributable to any early
repayment of the Company's outstanding senior subordinated debt.
9.19 Best Efforts. In the event the Centre Purchasers shall initiate
------------
a Phase II Closing pursuant to Section 2(d) hereof, the Company agrees to use
its best efforts to satisfy all the conditions and covenants required hereunder
for the consummation of such Phase II Closing.
9.20 Management Rights. As of the date of this Agreement, the
-----------------
Company shall grant the following management rights to Centre Capital Tax-Exempt
Investors II, L.P. and the State Board of Administration of Florida so long as
such Purchasers own an equity interest in the Company:
(a) the right to receive the same information as is provided to
members of the Board of Directors of the Company;
(b) upon a reasonable request of either Centre Capital Tax-Exempt
34
Investors II, L.P. or the State Board of Administration of Florida and at
reasonable times during normal business hours, to receive income
statements, balance sheets, budgets, business plans and other financial
information and to inspect books and records of the Company; and
(c) upon a reasonable request and at reasonable times during normal
business hours, to meet and consult with management with respect to the
business of the Company.
The above-mentioned rights are intended to satisfy the requirement of
management rights for purposes of qualifying such Purchaser's ownership of the
Company as a venture capital investment for purposes of the Department of Labor
"plan asset" regulations, 29 C.F.R. (S) 2510.3-101.
The Purchasers subject to this Section 9.20 hereby agree to hold in
confidence, and refrain from disclosing to any unaffiliated third party, any
confidential or secret information regarding the Company provided hereunder
unless compelled to so disclose by any governmental, judicial or regulatory
authority, and except to the extent that any such information (i) is or becomes
generally available to the public through no fault of such Purchaser or (ii) is
or becomes available to the Purchasers from a source not known to the Purchasers
to be bound by a confidentiality obligation to the Company.
10. Negative Covenants. Subject to the provisions of Section 14 hereof,
------------------
the Company will be limited and restricted as follows:
10.1 Dividends on or Redemption of Junior Stock. Without the prior
------------------------------------------
approval of the Preferred Shareholders, the Company will not declare or pay any
dividend or make any other distribution on any shares of Junior Stock (as
hereinafter defined), other than those payable solely in shares of Junior Stock,
or purchase, redeem or otherwise acquire for any consideration (other than in
exchange for or out of the net cash proceeds of the contemporaneous issue or
sale of other shares of Junior Stock or debt securities convertible into other
shares of Junior Stock), or set aside a sinking fund or other fund for the
redemption or repurchase of any shares of Junior Stock or any warrants, rights
or options to purchase shares of Junior Stock, except for (i) repurchases of
Common Stock required by the Redemption Agreement dated September 30, 1996
between the Company and Parasole Restaurant Holdings, Inc., (ii) repurchases of
Common Stock required under the Company's Employee Stock Ownership Plan, (iii)
repurchases under the Financing Warrants, (iv) repurchases in accordance with
and pursuant to the Stockholders' Agreement, or (v) repurchases of capital stock
pursuant to options and awards to key employees and consultants granted with the
approval of the Company's Board of Directors under plans or agreements adopted
by the Company, including without limitation, the Company's 1996 Stock Incentive
Plan and the Paisano Partnership Program.
10.2 Future Registration Rights. Except for any registration
--------------------------
expressly permitted by Section 13 hereof and pursuant to registration rights
previously granted and disclosed in Schedule 5.21, the Company will not, without
-------------
the prior approval of the Preferred
35
Shareholders, agree with the holders of any securities issued or to be issued by
the Company to register such securities under the Securities Act nor will it
grant any incidental registration rights.
10.3 Other Restrictions. The Company, without the prior approval of
------------------
a majority of the Board of Directors or a duly appointed committee thereof,
which majority shall include the Series C Preferred Stock Director and one of
the Series A Preferred Stock Directors:
(a) guarantee, endorse or otherwise be or become contingently liable,
or permit any Subsidiary to guarantee, endorse or otherwise become
contingently liable, in connection with the obligations, securities or
dividends of any person, firm, association or corporation, other than the
Company or any of its Subsidiaries, except that the Company and any
Subsidiary may endorse negotiable instruments for collection in the
ordinary course of business; or
(b) make or permit any Subsidiary to make loans or advances to any
person (including without limitation to any officer, director or
shareholder of the Company or any Subsidiary), firm, association or
corporation, except loans and advances to the Company and its wholly-owned
Subsidiaries and advances to suppliers and employees made in the ordinary
course of business; or
(c) purchase or invest, or permit any Subsidiary to purchase or
invest, in the stock or obligations of any other person, firm or
corporation, other than a wholly-owned Subsidiary; or
(d) pay, or permit any Subsidiary to pay, compensation, whether by
way of salaries, bonuses, participations in pension or profit sharing
plans, options, warrants, fees under management contracts or for
professional services or fringe benefits to any officer in excess of
amounts fixed by the Board of Directors of the Company prior to any payment
to such officer; or
(e) make any material change in the nature of its business as carried
on at the date of this Agreement.
11. The Preferred Shares.
--------------------
11.1 Conversion of Preferred Shares. Any holder of any Preferred
------------------------------
Shares may, at its option, at any time and from time to time, convert such
Preferred Shares, or any thereof, into Common Stock at the rate and upon the
terms and conditions and subject to the adjustments set forth in the Articles.
11.2 Stock Fully Paid; Reservation of Shares. The Company covenants
---------------------------------------
and agrees that all Common Stock that may be issued upon conversion of the
Preferred Shares will, upon issuance in accordance with the terms of the
Articles, be fully paid and nonassessable, and that the issuance thereof shall
not give rise to any preemptive rights on the part of any person. The Company
further covenants and agrees that the Company will at all times have authorized
36
and reserved a sufficient number of its Preferred Shares and Common Stock for
the purpose of issue upon the conversion of the CVRs and the Preferred Shares.
11.3 Adjustment of Number of Shares and Conversion Price. The number
---------------------------------------------------
of shares of Common Stock issuable upon conversion of the Preferred Shares and
the Conversion Price with respect thereto shall be subject to adjustment from
time to time as set forth in the Articles.
11.4 Mandatory Conversion of Preferred Shares. The Preferred Shares
----------------------------------------
shall automatically be converted into shares of Common Stock, without any act by
the Company or the holders of the Preferred Shares, concurrently with the
closing of a public offering by the Company of shares of Common Stock registered
under the Securities Act that meets the conditions set forth in the Articles for
such mandatory conversion of the Preferred Shares.
12. Redemption of Preferred Shares. The Company will redeem and
------------------------------
repurchase the Preferred Shares from the holders thereof at the times and upon
the terms and conditions set forth in the Articles to the extent funds are
legally available to do so. Optional redemptions of the Preferred Shares by the
Company shall not be permitted.
13. Registration of Stock.
---------------------
13.1 Required Registration. If the Company shall receive at any time
---------------------
after the earlier of (1) October 1, 1999, or (2) six (6) months after the
effective date of the first registration statement for a public offering of
securities of the Company (other than a registration statement relating either
to the sale of securities to employees of the Company pursuant to a stock
option, stock purchase or similar plan or an SEC Rule 145 transaction), a
written request therefor from any record holder or holders of an aggregate of at
least 1,500,000 shares of Registrable Securities not theretofore registered
under the Securities Act and sold, the Company shall prepare and file a
registration statement under the Securities Act covering the Registrable
Securities which are the subject of such request and shall use its best efforts
to cause such registration statement to become effective. In addition, upon the
receipt of such request, the Company shall promptly give written notice to all
other record holders of Registrable Securities not theretofore registered under
the Securities Act and sold that such registration is to be effected. The
Company shall include in such registration statement such Registrable Securities
for which it has received written requests to register by such other record
holders within 30 days after the delivery of the Company's written notice to
such other record holders. The Company shall be obligated to prepare, file and
cause to become effective only three registration statements pursuant to this
Section 13.1, and to pay the expenses associated with such registration
statements. In the event that the holders of a majority of the Registrable
Securities for which registration has been requested pursuant to this Section
13.1 determine for any reason not to proceed with a registration at any time
before a registration statement has been declared effective by the Commission,
and such registration statement, if theretofore filed with the Commission, is
withdrawn with respect to the Registrable Securities covered thereby, and the
holders of such Registrable Securities agree to bear their own expenses incurred
in connection therewith and to reimburse the Company for the expenses incurred
by it attributable to the registration of such
37
Registrable Securities, then the holders of such Registrable Securities shall
not be deemed to have exercised their right to require the Company to register
Registrable Securities pursuant to this Section 13.1.
If, at the time any written request for registration is received by
the Company pursuant to this Section 13.1, the Company has determined to proceed
with the actual preparation and filing of a registration statement under the
Securities Act in connection with the proposed offer and sale for cash of any of
its securities by it or any of its security holders, such written request shall
be deemed to have been given pursuant to Section 13.2 hereof rather than this
Section 13.1, and the rights of the holders of Registrable Securities covered by
such written request shall be governed by Section 13.2 hereof.
Without the written consent of the holders of a majority of the
Registrable Securities for which registration has been requested pursuant to
this Section 13.1, neither the Company nor any other holder of securities of the
Company may include securities in such registration if in the good faith
judgment of the managing underwriter of such public offering the inclusion of
such securities would interfere with the successful marketing of the Registrable
Securities or require the exclusion of any portion of the Registrable Securities
to be registered.
Notwithstanding any of the foregoing, if the Company shall furnish to
holders requesting a registration statement pursuant to this Section 13.1, a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors, it would be seriously detrimental to
the Company and its shareholders to proceed with such registration and it is
therefor essential to defer such registration, the Company shall have the right
to defer action under this Section 13.1 for a period of not more than 90 days
after receipt of the request of the holders; provided, however, that the Company
-------- -------
may not utilize this right more than once in any 12 month period. During the
period of deferral, the Company shall not file any other registration statement
under the Securities Act.
13.2 Incidental Registration. Each time the Company shall determine
-----------------------
to proceed with the actual preparation and filing of a registration statement
under the Securities Act in connection with the proposed offer and sale for cash
of any of its securities by it or any of its security holders (other than a
registration statement on a form that does not permit the inclusion of shares by
its security holders), the Company will give written notice of its determination
to all record holders of Registrable Securities not theretofore registered under
the Securities Act and sold. Upon the written request of a record holder of any
Registrable Securities given within 30 days after receipt of any such notice
from the Company, the Company will, except as herein provided, cause all such
Preferred Shares, the record holders of which have so requested registration
thereof, to be included in such registration statement, all to the extent
requisite to permit the sale or other disposition by the prospective seller or
sellers of the Registrable Securities to be so registered; provided, however,
-------- -------
that nothing herein shall prevent the Company from, at any time, abandoning or
delaying any such registration initiated by it; provided further, however, that
---------------- -------
if the Company determines not to proceed with a registration after the
registration statement has been filed with the Commission and the Company's
decision not to proceed is primarily based upon the anticipated public offering
price of the securities to be sold by the
38
Company, the Company shall promptly complete the registration for the benefit of
those selling security holders who wish to proceed with a public offering of
their securities and who bear all expenses for such registration incurred after
the Company has decided not to proceed. If any registration pursuant to this
Section 13.2 shall be underwritten in whole or in part, the Company may require
that the Registrable Securities requested for inclusion pursuant to this Section
13.2 be included in the underwriting on the same terms and conditions as the
securities otherwise being sold through the underwriters. In the event that the
Registrable Securities requested for inclusion pursuant to this Section 13.2
would, in the good faith judgment of the managing underwriter of such public
offering, reduce the number of shares to be offered by the Company or interfere
with the successful marketing of the shares of stock offered thereby, the number
of Registrable Securities otherwise to be included in the underwritten public
offering may be reduced, first by excluding pro rata (by number of shares held)
the Contingent Warrants and Contingent Warrant Stock, and then, if necessary,
pro rata (by number of shares held) the 1996 Warrants, the 1997 Warrant, the
1996 Warrant Stock and the 1997 Warrant Stock, and then, if necessary, pro rata
(by number of shares held) among the holders of other Registrable Securities
requesting such registration, but in either case only after exclusion of all
other shares proposed to be sold by other selling securityholders. The holders
of the Registrable Securities shall agree upon request to withhold from the
market any and all Registrable Securities and Common Stock held by such holders
for a period, not to exceed 90 days, which the managing underwriter reasonably
determines is necessary in order to effect any underwritten public offering.
13.3 Registration Procedures. If and whenever the Company is
-----------------------
required by the provisions of Section 13.1 or 13.2 hereof to effect the
registration of Registrable Securities under the Securities Act, the Company
will:
(a) prepare and file with the Commission a registration statement
with respect to such securities, and use its best efforts to cause such
registration statement to become and remain effective for such period as
may be reasonably necessary to effect the sale of such securities, not to
exceed nine months;
(b) prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained therein
as may be necessary to keep such registration statement effective for such
period as may be reasonably necessary to effect the sale of such
securities, not to exceed nine months;
(c) furnish to the securityholders participating in such
registration and to the underwriters of the securities being registered
such reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such underwriters
may reasonably request in order to facilitate the public offering of such
securities;
(d) use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or blue
sky laws of such jurisdictions as such participating holders may reasonably
request in writing
39
within 20 days following the original filing of such registration
statement, except that the Company shall not for any purpose be required to
execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified;
(e) notify the securityholders participating in such registration,
promptly after it shall receive notice thereof, of the time when such
registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
(f) notify such holders promptly of any request by the Commission for
the amending or supplementing of such registration statement or prospectus
or for additional information;
(g) prepare and file with the Commission, promptly upon the request
of any such holders, any amendments or supplements to such registration
statement or prospectus which, in the opinion of counsel for such holders
(and concurred in by counsel for the Company), is required under the
Securities Act or the rules and regulations thereunder in connection with
the distribution of the Registrable Securities by such holder;
(h) prepare and promptly file with the Commission and promptly notify
such holders of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Securities Act, any event
shall have occurred as the result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they were
made, not misleading;
(i) advise such holders, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of such registration statement or
the initiation or threatening of any proceeding for that purpose and
promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued;
(j) not file any amendment or supplement to such registration
statement or prospectus to which a majority in interest of such holders
shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the requirements
of the Securities Act or the rules and regulations thereunder, after having
been furnished with a copy thereof at least five business days prior to the
filing thereof, unless in the opinion of counsel for the Company the filing
of such amendment or supplement is
40
reasonably necessary to protect the Company from any liabilities under any
applicable federal or state law and such filing will not violate applicable
law; and
(k) at the request of any such holder, furnish: (i) an opinion, dated
as of the closing date, of the counsel representing the Company for the
purposes of such registration, addressed to the underwriters, if any, and
to the holder or holders making such request, covering such matters as such
underwriters and holder or holders may reasonably request; and (ii) letters
dated as of the effective date of the registration statement and as of the
closing date, from the independent certified public accountants of the
Company, addressed to the underwriters, if any, and to the holder or
holders making such request, covering such matters as such underwriters and
holder or holders may reasonably request.
13.4 Expenses. With respect to each registration requested pursuant
--------
to Section 13.1 hereof (except as otherwise provided in such Section with
respect to registrations voluntarily terminated at the request of the requesting
security holders) and with respect to each inclusion of Registrable Securities
in a registration statement pursuant to Section 13.2 hereof (except as otherwise
provided in Section 13.2 with respect to registrations initiated by the Company
but with respect to which the Company has determined not to proceed), the
Company shall bear the following fees, costs and expenses: all registration,
filing and NASD fees, printing expenses, fees and disbursements of counsel and
accountants for the Company, fees and disbursements of counsel for the
underwriter or underwriters of such securities (if the Company and/or selling
securityholders are required to bear such fees and disbursements), all internal
Company expenses, all legal fees and disbursements and other expenses of
complying with state securities or blue sky laws of any jurisdictions in which
the securities to be offered are to be registered or qualified, and the premiums
and other costs of policies of insurance against liability (if any) arising out
of such public offering. Fees and disbursements of counsel and accountants for
the selling securityholders, underwriting discounts and commissions and transfer
taxes relating to the shares included in the offering by the selling
securityholders, and any other expenses incurred by the selling securityholders
not expressly included above, shall be borne by the selling securityholders.
13.5 Indemnification. (a) In the event that any Registrable
---------------
Securities are included in a registration statement under Section 13.1 or 13.2
hereof:
(1) The Company will indemnify and hold harmless each holder of
shares of Registrable Securities which are included in a registration
statement pursuant to the provisions of this Section 13, its
directors, officers, employees, agents, successors and assigns, and
each person, if any, who controls such holder (collectively, the
"Purchaser Indemnified Parties") and any underwriter (as defined in
-----------------------------
the Securities Act) for such holder and each person, if any, who
controls such underwriter within the meaning of the Securities Act,
from and against, and will reimburse the Purchaser Indemnified Parties
and each such underwriter and controlling person with respect to, any
and all loss,
41
damage, liability, cost, obligation and expense to which the Purchaser
Indemnified Parties or any such underwriter or controlling person may
become subject under the Securities Act or otherwise (collectively,
"Losses"), insofar as such Losses are caused by any
------
untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained
therein or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were
made, not misleading; provided, however, that the Company will not be
-------- -------
liable in any such case to the extent that any such Loss arises out of
or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission so made in conformity with information
furnished by such holder, such underwriter or such controlling person
in writing specifically for use in the preparation thereof.
(2) Each holder of shares of Registrable Securities which are
included in a registration pursuant to the provisions of this Section
13 will indemnify and hold harmless the Company, its directors and
officers, any controlling person and any underwriter from and against,
and will reimburse the Company, its directors and officers, any
controlling person and any underwriter with respect to, any and all
Losses to which the Company or any controlling person and/or any
underwriter may become subject under the Securities Act or otherwise,
insofar as such Losses are caused by any untrue or alleged untrue
statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading, in each
case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was so
made in reliance upon and in strict conformity with written
information furnished by such holder specifically for use in the
preparation thereof. The liability of holders of shares of Registrable
Securities under this Section 13.5(a)(2) shall not exceed, in
aggregate, the proceeds of the offering through which the Registrable
Securities were acquired from the Company.
(b) The Company hereby agrees to indemnify and hold each Purchaser,
and their respective officers, directors, employees, agents, successors and
assigns, harmless from and against:
(1) any and all loss, damage, liability, cost, obligation and
expense
42
based upon, attributable to or resulting from the failure of
any representation or warranty of the Company set forth in Sections
5.4 or 5.5 (to the extent relating to federal and state income taxes)
to be true and correct in all material respects; and
(2) any and all notices, actions, suits, proceedings, claims,
demands, assessments, judgments, costs, penalties and expenses,
including attorneys' and other professionals' fees and disbursements
(collectively, "Expenses") incident to any Losses, with respect to
which indemnification is provided hereunder.
13.6 Indemnification Procedures. Promptly after receipt by an
--------------------------
indemnified party pursuant to the provisions of paragraph (a) or (b) of Section
13.5 of notice of the commencement of any action involving the subject matter of
the foregoing indemnity provisions such indemnified party will, if a claim
thereof is to be made against the indemnifying party pursuant to the provisions
of said paragraph (a) or (b), promptly notify the indemnifying party of the
commencement thereof; but the omission to so notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than hereunder. In case such action is brought against any indemnified
party and it notifies the indemnifying party of the commencement thereof, the
indemnifying party shall have the right to participate in, and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to such indemnified
party, provided, however, if the defendants in any action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, or if there is a conflict of interest which
would prevent counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties shall have the right to
select separate counsel to participate in the defense of such action on behalf
of such indemnified party or parties. After notice from the indemnifying party
to such indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to the
provisions of said paragraph (a) or (b) for any legal or other expense
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless (i) the indemnified
party shall have employed counsel in accordance with the proviso of the
preceding sentence, (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after the notice of the commencement of the action, or (iii)
the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party.
43
14. Default
-------
14.1 Events of Default. Each of the following events shall be an
-----------------
event of default (an "Event of Default") for purposes of this Agreement:
----------------
(a) if the Company or any Subsidiary makes an assignment for the
benefit of creditors, or ceases doing business as a going concern, or the
Company or any Subsidiary applies for or consents to the appointment of a
trustee or receiver for the Company or any Subsidiary, or for the major
part of the property of either; provided, however, that this subparagraph
(a) shall not apply to any Subsidiary (i) that ceases to do business due to
the closure of one or more restaurants or any merger with another
Subsidiary or the Company with the approval of the majority of the Board of
Directors of the Company or (ii) that is not a Significant Subsidiary
within the meaning of Rule 405 of Regulation C under the Securities Act of
1933; or
(b) if a trustee or receiver is appointed for the Company or any
Subsidiary or for the major part of the property of either and the order of
such appointment is not discharged, vacated or stayed within 30 days after
such appointment; or
(c) if an order for relief shall be entered in any Federal
bankruptcy proceeding in which the Company or any Subsidiary is the debtor;
or if bankruptcy, reorganization, arrangement, insolvency, or liquidation
proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or against
the Company or any Subsidiary and, if instituted against the Company or any
Subsidiary, are consented to or, if contested by the Company or the
Subsidiary, are not dismissed by the adverse parties or by an order, decree
or judgment within 30 days after such institution; or
(d) if any representation or warranty made by or on behalf of the
Company in this Agreement or in any certificate, report or other instrument
delivered under or pursuant to any term hereof or thereof shall prove to
have been untrue or incorrect in any material respect as of the date of
this Agreement or as of the Phase I Closing Date; or
(e) if an Event of Default (for purposes of this Section 14.1(e),
as such term is defined in the 1997 Stock Purchase Agreement) shall have
occurred under Section 13(d) of the 1997 Stock Purchase Agreement; or
(f) if default shall be made in the Company's obligation to
redeem the Preferred Shares, as required by the Articles, whether or not
funds are legally available therefor; or
44
(g) if either of the Series C Preferred Stock Director or the
Series A Preferred Stock Directors shall fail to be elected to the Board of
Directors in the manner and under the terms and conditions set forth in
Section 9.9 hereof; provided, however, that there shall be no event of
default if such failure to elect the Series C Preferred Stock Director or
the Series A Preferred Stock Directors is due to the act of the Preferred
Shareholders; or
(h) if default shall be made in the due and punctual performance
or observance of any of the terms contained in Section 9.5, Section 9.18,
Section 10.1, Section 10.2, or Section 10.3 hereof, and such default shall
have continued for a period of 30 days after written notice thereof to the
Company by the holder of any Preferred Shares which period shall be
extended, not to exceed a total of 90 days, if the Company reasonably
demonstrates to the Preferred Shareholders diligent and good faith efforts
to cure the default; or
(i) if Xxxxxx Xxxxxxxxxx shall not be employed as President and
Chief Executive Officer of the Company, and the Company shall have failed
to employ within 60 days of such termination of employment a successor to
Xx. Xxxxxxxxxx approved by a majority of the Board of Directors of the
Company, which majority shall include the Series C Preferred Stock Director
and the Series A Preferred Stock Director designated by Norwest Equity
Partners V. Such 60 day period shall be extended, to not exceed a total of
180 days, if the Company reasonably demonstrates good faith and diligent
efforts to retain a qualified successor.
14.2 Remedies Upon Events of Default. Upon the occurrence of an
-------------------------------
Event of Default as herein defined, except for an Event of Default under Section
14.1(d) hereof, and so long as such Event of Default continues unremedied, then,
unless such Event of Default shall have been waived by the holders of two-thirds
of the Preferred Shares then outstanding, (a) the holders of two-thirds of the
Preferred Shares then outstanding shall be entitled to designate a majority of
the Board of Directors of the Company as provided in the Articles and (b) the
holders of two-thirds of the Preferred Shares then outstanding may require the
Company immediately to redeem, at $3.75 per Series A Preferred Share, $4.50 per
Series B Preferred Share and $5.125 per Series C Preferred Share (appropriately
adjusted to reflect stock splits, stock dividends, reorganizations,
consolidations and similar changes hereafter effected) plus all dividends unpaid
and accumulated or accrued thereon, if any, to the date of such redemption,
including in the case of the Series C Preferred Shares, all Series A Preferred
Shares, Series B Preferred Shares and Series C Preferred Shares then
outstanding, and thereupon the Company shall be obligated to redeem all Series A
Preferred Shares, Series B Preferred Shares and Series C Preferred Shares then
outstanding.
Upon the occurrence of an Event of Default under Section 14.1(d) hereof,
and so long as such Event of Default continues unremedied, then, unless such
Event of Default shall have been waived by the holders of two-thirds of the
Series C Preferred Shares then outstanding, (a) the holders of two-thirds of the
Preferred Shares then outstanding shall be entitled to designate a majority of
the Board of Directors of the Company as provided in the Articles and (b) the
holders
45
of two-thirds of the Series C Preferred Shares then outstanding may require the
Company immediately to redeem, at $5.125 per Series C Preferred Share
(appropriately adjusted to reflect stock splits, stock dividends,
reorganizations, consolidations and similar changes hereafter effected) plus all
dividends unpaid and accumulated or accrued thereon, if any, to the date of such
redemption, including, in the case of the Series C Preferred Shares, all Series
C Preferred Shares then outstanding, and thereupon the Company shall be
obligated to redeem all Series C Preferred Shares then outstanding.
14.3 Notice of Defaults. When, to its knowledge, any Event of
------------------
Default has occurred or exists, the Company agrees to give written notice within
three Business Days of such Event of Default to the holders of all outstanding
Preferred Shares. If the holder of any Preferred Shares shall give any notice or
take any other actions in respect of a claimed Event of Default, the Company
will forthwith give written notice thereof to all other holders of Preferred
Shares at the time outstanding, describing such notice or action and the nature
of the claimed Event of Default.
14.4 Suits for Enforcement. In case any one or more Events of
---------------------
Default shall have occurred and be continuing, unless such Events of Default
shall have been waived in the manner provided in Section 14.2 hereof, the
holders of two-thirds of the Preferred Shares may proceed to protect and enforce
their rights under this Section 14 by suit in equity or action at law. It is
agreed that in the event of such action such holders of Preferred Shares shall
be entitled to receive all reasonable fees, costs and expenses incurred,
including without limitation such reasonable fees and expenses of attorneys
(whether or not litigation is commenced) and reasonable fees, costs and expenses
of appeals.
14.5 Remedies Cumulative. No right, power or remedy conferred
-------------------
upon any holder of Preferred Shares shall be exclusive, and each such right,
power or remedy shall be cumulative and in addition to every other right, power
or remedy, whether conferred hereby or by any such security or now or hereafter
available at law or in equity or by statute or otherwise.
14.6 Remedies not Waived. No course of dealing between the
-------------------
Company and any Preferred Shareholder, and no delay in exercising any right,
power or remedy conferred hereby or by any such security or now or hereafter
existing at law or in equity or by statute or otherwise, shall operate as a
waiver of or otherwise prejudice any such right, power or remedy; provided,
however, that this Section 14.6 shall not be construed or applied so as to
negate the provisions and intent of any statute which is otherwise applicable.
46
15. Termination of Certain Covenants. The obligations of the Company
--------------------------------
under Sections 9 and 10 hereof, other than its obligations under Sections 9.10
and 9.13 hereof, shall, notwithstanding any provisions hereof apparently to the
contrary, terminate and shall be of no further force or effect from and after
the earlier to occur of (i) the date on which less than 25% of the Series A
Preferred Shares are outstanding, less than 25% of the Series B Preferred Shares
are outstanding and less than 25% of the Series C Preferred Shares are
outstanding and (ii) the date on which all of the Preferred Shareholders hold,
in the aggregate, less than 5% of the Fully Paid Securities of the Company.
16. Documents to be Delivered at the Phase I Closing.
------------------------------------------------
16.1 Deliveries by the Company to the Purchasers. At the Phase I
-------------------------------------------
Closing, the Company shall deliver, or shall cause to be delivered, to the
Purchasers the following:
(a) certificates (dated the Phase I Closing Date and in form and
substance reasonably satisfactory to the Purchasers) executed on behalf of
the Company pursuant to Section 7.6 hereof;
(b) certificates representing 100% of the Series C Preferred
Shares and the CVRs purchased at the Phase I Closing shall have been, or
shall at the Phase I Closing be, validly delivered and transferred to the
Purchasers, free and clear of any and all pledges, liens, restrictions and
encumbrances;
(c) all consents and waivers referred to in Section 7.5 hereof,
in a form reasonably satisfactory to the Purchasers, with respect to the
transactions contemplated by this Agreement;
(d) an affidavit, in a form reasonably satisfactory to the
Purchasers, of the Company stating under penalties of perjury the Company's
United States taxpayer identification number and that the Company is not a
foreign person within the meaning of Section 1445(b)(2) of the Code;
(e) a filed copy of the Articles of Incorporation, as amended by
the Articles, certified by the Secretary of State of the State of
Minnesota;
(f) the Stockholders' Agreement substantially in the form
attached hereto as Exhibit 2, duly executed by the Company and each of the
parties thereto (other than the Purchasers);
(g) the opinion of Faegre & Xxxxxx LLP, counsel for the Company,
dated the Phase I Closing Date pursuant to Section 7.7 hereof;
(h) a receipt for the purchase price paid at the Phase I
Closing;
(i) a certificate of the Secretary of the Company, certifying as
to (i)
47
the Company's By-laws, (ii) the incumbency of those officers of the Company
who shall be executing and delivering this Agreement and (iii) the adoption
by the Board of Directors of the Company and its shareholders of
appropriate corporate resolutions authorizing the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
and thereby;
(j) certificates of good standing with respect to the Company
and each Subsidiary, issued by the Secretary of the State of the state of
incorporation and for each state in which the Company and each Subsidiary
are qualified to do business as a foreign corporation dated as soon as
practicable prior to the Phase I Closing Date; and
(k) evidence acceptable to the Purchasers reflecting the
recomposition of the Board of Directors of the Company as set forth in
Section 9.9 hereof.
16.2 Deliveries by the Purchasers to the Company. At the Phase I
-------------------------------------------
Closing, the Purchasers shall have delivered to the Company the following:
(a) the purchase price payable at the Phase I Closing; and
(b) the Stockholders' Agreement substantially in the form
attached hereto as Exhibit 2, duly executed by the Purchasers.
17. Documents to be Delivered at the Phase II Closing.
-------------------------------------------------
17.1 Deliveries by the Company to the Centre Purchasers. At a
--------------------------------------------------
Phase II Closing, the Company shall deliver, or shall cause to be delivered, to
the Centre Purchasers the following:
(a) certificates (dated the Phase II Closing Date and in form
and substance reasonably satisfactory to the Centre Purchasers) executed on
behalf of the Company pursuant to Section 8.5 hereof;
(b) certificates representing 100% of the Series C Preferred
Shares and the CVRs purchased at such Phase II Closing shall have been, or
shall at such Phase II Closing be, validly delivered and transferred to the
Centre Purchasers, free and clear of any and all pledges, liens,
restrictions and encumbrances;
(c) all consents and waivers referred to in Section 8.4 hereof,
in a form reasonably satisfactory to the Centre Purchasers, with respect to
the transactions contemplated by this Agreement;
48
(d) the opinion of Faegre & Xxxxxx LLP, counsel for the Company,
dated the Phase II Closing Date pursuant to Section 8.6 hereof;
(e) a receipt for the purchase price paid at the Phase II
Closing;
(f) a certificate of the Secretary of the Company, certifying as
to (i) the Company's By-laws, (ii) that the resolutions adopted by the
Company's Board of Directors and its shareholders on or before the Phase I
Closing Date remain in full force and effect and (iii) that the incumbency
of those officers of the Company certified to on or before the Phase I
Closing Date remains in full force and effect; and
(g) certificates of good standing with respect to the Company
and each Subsidiary, issued by the Secretary of the State of the state of
incorporation and for each state in which the Company and each Subsidiary
are qualified to do business as a foreign corporation dated as soon as
practicable prior to the Phase II Closing Date.
17.2 Deliveries by the Centre Purchasers to the Company. At a
--------------------------------------------------
Phase II Closing, the Centre Purchasers shall have delivered to the Company the
purchase price payable at a Phase II Closing.
18. Definitions. Unless the context otherwise requires, the terms
-----------
defined in this Section 18 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms of
any of the terms herein defined. All accounting terms defined below shall,
except as otherwise expressly provided, be determined by reference to the
Company's books of account and in conformity with GAAP consistently applied as
applied to such books of account in the opinion of the independent certified
public accountants selected by the Board of Directors of the Company as required
under the provisions of Section 9.3 hereof.
18.1 "Additional Shares of Common Stock" shall mean all shares of
Common Stock of the Company issued by the Company on or after the Phase I
Closing Date or any Phase II Closing Date, except the Common Stock issued upon
conversion of Preferred Shares.
18.2 "Annual Plan" shall have the meaning set forth in Section
9.5 hereof.
18.3 "Articles" shall have the meaning set forth in Section 1
hereof.
18.4 "Articles of Incorporation" shall have the meaning set forth
in Section 1 hereof.
18.5 "Balance Sheet Date" shall have the meaning set forth in
Section 5.3 hereof.
49
18.6 "Business Day" shall mean any day of the year on which
national banking institutions in New York are open to the public for conducting
business and are not required or authorized to close.
18.7 "Closing" shall have the meaning set forth in Section 3(b)
hereof.
18.8 "Commission" shall have the meaning set forth in Section
6.1 hereof.
18.9 "Common Shareholders" shall have the meaning set forth in
Section 7.5 hereof.
18.10 "Common Stock" shall mean the Company's authorized common
shares, any additional common shares which may be authorized in the future by
the Company, and any stock into which such common shares may hereafter be
changed, and shall also include stock of the Company of any other class which is
not preferred as to dividends or as to distributions of assets on liquidation,
dissolution or winding up of the Company over any other class of stock of the
Company, and which is not subject to redemption.
18.11 "Company" shall have the meaning set forth in the recital
hereof.
18.12 "Consolidated Tangible Net Worth" shall mean the aggregate
amount of shareholder's equity of the Company and its Subsidiaries on a
consolidated basis determined in accordance with GAAP consistent with those
followed in preparation of the Financial Statements, plus the aggregate
principal amount of the outstanding Convertible Debentures, less the purchase
price of acquired businesses in excess of the fair market value of tangible net
assets, other items of goodwill, patents, trademarks, trade names, copyrights,
organization expense, treasury stock, unamortized debt discount and expense, any
write-up of the value of any asset, and other like intangibles (but excluding
the book value of capitalized pre-opening expenses), all determined on a
consolidated basis in accordance with GAAP consistent with those followed in the
preparation of the Financial Statements.
18.13 "Contingent Warrants" shall mean the warrants dated October
31, 1997, issued to the holders of the Series B Preferred Shares.
18.14 "Contingent Warrant Stock" shall mean the shares of Common
Stock issuable upon exercise of the Contingent Warrants and all securities
issued in substitution or exchange therefore.
18.15 "Conversion Price" shall mean such price at which the
Preferred Shares are convertible into Common Stock pursuant to the Articles.
18.16 "Conversion Stock" shall have the meaning set forth in
Section 1 hereof.
18.17 "Convertible Securities" shall mean evidences of
indebtedness, shares of stock or other securities which are at any time directly
or indirectly convertible into or
50
exchangeable for Additional Shares of Common Stock.
18.18 "CVR Stock" shall have the meaning set forth in Section 1
hereof.
18.19 "Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) tax-qualified defined contribution retirement plan or
arrangement which is an Employee Pension Benefit Plan, (c) tax-qualified defined
benefit retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
18.20 "Event of Default" shall have the meaning set forth in Section
14.1 hereof.
18.21 "Expenses" shall have the meaning set forth in Section
13.5(b)(2) hereof.
18.22 "Financial Statements" shall have the meaning set forth in
Section 5.3 hereof.
18.23 "Financing Warrants" shall have the meaning set forth in
Section 9.16 hereof.
18.24 "Fully Paid Securities" shall have the meaning set forth in
Section 9.16 hereof.
18.25 "Indebtedness for Borrowed Money" shall include only
indebtedness of the Company and its Subsidiaries incurred as the result of a
direct borrowing of money and shall not include any other indebtedness
including, but not limited to, indebtedness incurred with respect to trade
accounts.
18.26 "Junior Stock" shall mean Common Stock and all other shares of
stock of any other class of the Company at any time created and issued ranking
junior to the Series A Preferred Shares, the Series B Preferred Shares or the
Series C Preferred Shares with respect to the right to receive dividends and/or
the right to the distribution of assets upon liquidation, dissolution or winding
up of the Company.
18.27 "Losses" shall have the meaning set forth in Section 13.5(a)(1)
hereof.
18.28 Any reference to any event, change, condition or effect being
"material" with respect to any entity or group of entities shall mean any
material event, change, condition or effect related to the condition (financial
or otherwise), properties, assets (including intangible assets), liabilities,
business, prospects, operations or results of operations of the Company and its
Subsidiaries, taken as a whole.
51
18.29 "Material Adverse Effect" shall mean any event, change or
effect that is materially adverse to (i) the condition (financial or otherwise),
properties, assets, liabilities, business, prospects, operations or results of
operations of the Company and its Subsidiaries, taken as a whole, (ii) the
ability of the Company to perform its obligations under this Agreement, or (iii)
the ability of the Company and its Subsidiaries to conduct their respective
businesses after the Phase I Closing Date substantially as such businesses are
being conducted as of the date hereof.
18.30 "Permitted Liens" shall mean (a) liens for taxes and
assessments or governmental charges or levies not at the time due or in respect
of which the validity thereof shall currently be contested in good faith by
appropriate proceedings; (b) capitalized leases and purchase money liens; and
(c) liens in respect of pledges or deposits under worker's compensation laws or
similar legislation, carriers', warehousemen's, mechanics', laborers' and
materialmen's, landlord's and statutory and similar liens, if the obligations
secured by such liens are not then delinquent or are being contested in good
faith, and liens and encumbrances incidental to the conduct of the business of
the Company or any Subsidiary which were not incurred in connection with the
borrowing of money or the obtaining of advances or credits and which do not in
the aggregate materially detract from the value of its property or materially
impair the use thereof in the operation of its business.
18.31 "Phase I Closing" shall have the meaning set forth in Section
3(a) hereof.
18.32 "Phase I Closing Date" shall have the meaning set forth in
Section 3(a) hereof.
18.33 "Phase II Closing" shall have the meaning set forth in Section
3(b) hereof.
18.34 "Phase II Closing Date" shall have the meaning set forth in
Section 3(b) hereof.
18.35 "Preferred Shareholders" shall mean the Purchasers under this
Agreement, the 1997 Stock Purchase Agreement and the 1996 Stock Purchase
Agreement.
18.36 "Purchased Stock" shall mean the Series C Preferred Shares, the
Conversion Stock, the CVR Stock and the stock or other securities of the Company
issued in a stock split or reclassification of, or a stock dividend or other
distribution on or in substitution or exchange for, or otherwise in connection
with, the foregoing securities, or in a merger or consolidation involving the
Company or a sale of all or substantially all of the Company's assets.
18.37 "Purchase Price" shall have the meaning set forth in Section
2(c) hereof.
18.38 "Purchaser Indemnified Parties" shall have the meaning set
forth in Section 13.5(a)(1) hereof.
18.39 "Registrable Securities" shall mean the Series A Preferred
Shares, the
52
Series B Preferred Shares, the Series C Preferred Shares and all shares of
Common Stock of the Company issued in exchange or substitution therefor (and all
shares of Common Stock issued pursuant to the CVRs), and the stock or other
securities of the Company issued in a stock split or reclassification of, or a
stock dividend or other distribution on or in substitution or exchange for, or
otherwise in connection with, any of the foregoing securities, or in a merger or
consolidation involving the Company or a sale of all or substantially all of the
Company's assets. Solely for the purpose of Section 13, the term Registrable
Securities shall also include the 1996 Warrants, the 1997 Warrants, the
Contingent Warrants, the 1996 Warrant Stock, the 1997 Warrant Stock and the
Contingent Warrant Stock. Nothing in this Section 18.39 shall be deemed to
require the Company to register any Preferred Shares, the 1996 Warrants, the
1997 Warrants or the Contingent Warrants, it being understood that the
registration rights granted by Section 13 hereof relate only to shares of Common
Stock and securities issued in substitution or exchange therefor.
18.40 "Remaining Directors" shall have the meaning set forth in
Section 9.9 hereof.
18.41 "Securities Act" shall have the meaning set forth in Section
4.1 hereof.
18.42 "Senior Indebtedness" shall mean (a) the principal of all
Indebtedness for Borrowed Money of the Company and its Subsidiaries to banks,
insurance companies or other financial institutions, (b) the present value of
net minimum lease payments of all leases under which the Company or any of its
Subsidiaries is the lessee and which are required to be capitalized under GAAP,
(c) the principal of all indebtedness of the Company or any of its Subsidiaries
under installment purchase agreements, and (d) the principal of all indebtedness
of the Company or any of its Subsidiaries to the owners of any real property
leased by the Company for leasehold improvements financed by such owners.
18.43 "Series A Preferred Shareholders" shall have the meaning set
forth in Section 7.5 hereof.
18.44 "Series A Preferred Shares" shall have the meaning set forth in
Section 1 hereof.
18.45 "Series A Preferred Stock Directors" shall have the meaning set
forth in Section 9.9 hereof.
18.46 "Series B Preferred Shareholders" shall have the meaning set
forth in Section 7.5 hereof.
18.47 "Series B Preferred Shares" shall have the meaning set forth in
Section 1 hereof.
18.48 "Series C Preferred Shareholders" shall have the meaning set
forth in Section 9.9 hereof.
53
18.49 "Series C Preferred Shares" shall have the meaning set forth in
Section 1 hereof.
18.50 "Series C Preferred Stock Director" shall have the meaning set
forth in Section 9.9 hereof.
18.51 "Stockholders' Agreement" shall have the meaning set forth in
Section 2 hereof.
18.52 "1996 Stock Purchase Agreement" shall have the meaning set
forth in Section 1 hereof.
18.53 "1997 Stock Purchase Agreement" shall have the meaning set
forth in Section 1 hereof.
18.54 "Subsidiary" shall mean any corporation, association or other
business entity more than a majority (by number of votes) of the voting stock of
which is owned or controlled, directly or indirectly, by the Company or by one
or more of its Subsidiaries or both.
18.55 "1996 Warrants" shall have the meaning set forth in Section
9.16 hereof.
18.56 "1997 Warrants" shall have the meaning set forth in Section
9.16 hereof.
18.57 "1996 Warrant Stock" shall have the meaning set forth in
Section 9.16 hereof.
18.58 "1997 Warrant Stock" shall have the meaning set forth in
Section 9.16 hereof.
19. Understanding Among Purchasers. The determination by each of the
------------------------------
Purchasers to purchase the Purchased Securities pursuant to this Agreement has
been made by such Purchaser independent of the other Purchasers, and independent
of any statements or opinions as to the advisability of such purchase or as to
the properties, business, prospects or condition (financial or otherwise) of the
Company which may have been made or given by the other Purchasers or by any
agent or employee of the other Purchasers. In addition, it is acknowledged by
each of the Purchasers that the other Purchasers have not acted as such
Purchaser's agent in connection with making its investment hereunder and that
the other Purchasers will not be acting as such Purchaser's agent in connection
with monitoring such Purchaser's investment hereunder.
20. Consents; Waivers and Amendments. Except as otherwise specifically
--------------------------------
provided herein, in each case in which approval of the Preferred Shareholders is
required by the terms of this Agreement, such requirement shall be satisfied by
a vote or the written consent of such holders owning at least two-thirds of the
Preferred Shares then owned by the Preferred Shareholders (for purposes of this
Section 20, the Preferred Shares shall have a number of votes equal to the
number of shares of Common Stock into which the Preferred Shares are
convertible).
54
With the written consent of holders owning at least two-thirds of the Purchased
Stock then owned by the Series C Preferred Shareholders, the obligations of the
Company under this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), and with the same approval
the Company may enter into a supplementary agreement for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Agreement or of any supplemental agreement or modifying in any manner
the rights and obligations of the holders of the Purchased Stock and of the
Company; provided, however, that no such waiver or supplemental agreement shall
-------- -------
(a) amend the terms of the Series C Preferred Shares as set forth in the
Articles (any such amendment to the terms of the Series C Preferred Shares shall
require the vote of the holders of the Series C Preferred Shares called for by
the Articles), or (b) reduce the aforesaid percentage of Purchased Stock, the
holders of which are required to consent to any waiver or supplemental
agreement, without the consent of all of the record holders of shares whose
rights would be affected by such reduction. Written notice of any such waiver,
consent or agreement of amendment, modification or supplement shall be given to
the record holders of the Purchased Stock who have not previously consented
thereto in writing. Notwithstanding the foregoing, following the Phase I
Closing, no provision of Sections 9,10,11,12,13,14 or 20 shall be amended,
waived or modified unless consented to by holders of a majority of the Preferred
Shares.
21. Changes, Waivers, Etc. Neither this Agreement nor any provision hereof
---------------------
may be changed, waived, discharged or terminated orally, but only by a statement
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, except to the extent provided in Section 20
hereof.
22. Payment of Fees and Expenses of Purchasers. Upon the consummation of
------------------------------------------
the sale of the Purchased Securities anticipated by this Agreement (at either of
the Phase I Closing or a Phase II Closing) or upon failure by the Company to
consummate such sales, the Company will pay the reasonable out-of-pocket
expenses incurred by the Purchasers (including amounts owed to third parties) in
connection with the transactions herein contemplated, including without
limitation the reasonable fees and out-of-pocket expenses of Weil, Gotshal and
Xxxxxx LLP for their services as special counsel to the Purchasers in connection
with the transactions herein contemplated. The Company will also pay (a) all
fees and expenses incurred by the Purchasers with respect to any amendments or
waivers requested by the Company (whether or not the same become effective)
under or in respect of this Agreement or the agreements contemplated hereby, and
(b) all fees and expenses incurred by the Purchasers with respect to the
enforcement of the rights granted under this Agreement or the agreements
contemplated hereby.
23. Notices. All notices, requests, consents and other communications
-------
required or permitted hereunder shall be in writing and shall be delivered, or
mailed first-class postage prepaid, registered or certified mail,
(a) if to any holder of any Purchased Stock, addressed to such holder
at its address as shown on the books of the Company, or at such other
address as such holder may specify by written notice to the Company, or
55
(b) if to the Company, addressed to the Company, 0000 Xxxx Xxxx
Xxxxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxxx 00000, attention President, or to
such other address as the Company may specify by written notice to the
Purchasers,
and such notices and other communications shall for all purposes of this
Agreement be treated as being effective or having been given if delivered
personally, or, if sent by mail, when received.
24. Survival of Representations and Warranties, Etc. All representations
-----------------------------------------------
and warranties contained herein shall survive the execution and delivery of this
Agreement, any investigation at any time made by the Purchasers or on their
behalf, and the sale and purchase of the Purchased Securities and payment
therefor. All statements contained in any certificate, instrument or other
writing delivered by or on behalf of the Company pursuant hereto or in
connection with or contemplation of the transactions herein contemplated (other
than legal opinions) shall constitute representations and warranties by the
Company hereunder.
25. Parties in Interest. All the terms and provisions of this Agreement
-------------------
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto, whether so expressed or
not, and, in particular, shall inure to the benefit of and be enforceable by the
holder or holders at the time of any of the Purchased Stock.
26. Headings. The headings of the Sections and paragraphs of this
--------
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
27. Choice of Law. It is the intention of the parties that the laws of
-------------
Minnesota, without giving regard to the conflicts of laws provisions thereof,
shall govern the validity of this Agreement, the construction of its terms and
the interpretation of the rights and duties of the parties.
28. Counterparts. This Agreement may be executed concurrently in two or
------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
29. 1997 Stock Purchase Agreement. After the Phase I Closing of the sale
-----------------------------
of Purchased Securities hereunder, this Agreement shall supersede the 1997 Stock
Purchase Agreement with respect to Sections 8, 9, 10, 11, 12 (except for Section
12.5), 13 (except Section 13.1(d) and the remedy provided therefor in Section
13.2) and 14 thereof (and applicable definitions), and those same sections of
the 1997 Stock Purchase Agreement shall be of no further force and effect.
56
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
undersigned, whereupon this letter shall become a binding contract among you and
the undersigned.
Very truly yours,
BUCA, INC.
By: /s/ Xxxx X. Xxxxx
--------------------
Name: Xxxx X. Xxxxx
Title: CFO
57
The foregoing Agreement is hereby
accepted as of the date first above written.
THE PURCHASERS:
--------------
CENTRE CAPITAL INVESTORS II, L.P.
CENTRE CAPITAL TAX-EXEMPT INVESTORS II, L.P.
CENTRE CAPITAL OFFSHORE INVESTORS II, L.P.
By: Centre Partners II, L.P.
General Partner
By: Centre Partners Management LLC
Attorney-in-fact
By: /s/ Xxxx Xxxx
-----------------------------
Xxxx Xxxx
Managing Director
STATE BOARD OF ADMINISTRATION OF FLORIDA
By: Centre Parallel Management Partners, L.P.
Manager
By: Centre Partners Management LLC
Attorney-in-fact
By: /s/ Xxxx Xxxx
-----------------------------
Xxxx Xxxx
Managing Director
CENTRE PARALLEL MANAGEMENT PARTNERS, L.P.
CENTRE PARTNERS COINVESTMENT, L.P.
By: Centre Partners II LLC
General Partner
By: /s/ Xxxx Xxxx
--------------------------------
Xxxx Xxxx
Managing Director
58
THE PURCHASERS:
--------------
NORWEST EQUITY PARTNERS V,
A MINNESOTA LIMITED PARTNERSHIP
By: Itasca Partners V, L.L.P., General Partner
By: /s/ Xxxx X. Xxxxxx
----------------------
Partner
NORTHWOOD CAPITAL PARTNERS LLC
By: /s/ Xxxxx X. Xxxxxx
-----------------------
Managing Director
NORTHWOOD VENTURES
By: /s/ Xxxxx X. Xxxxxx
----------------------
Managing Director
REGENT CAPITAL PARTNERS, L.P.
By: Regent Capital Holdings, L.P., General Partner
By: Regent Capital Holdings, Inc., General Partner
By: /s/ J. Xxxxxx Xxxxxxx
-------------------------
XXXXXX-SBIC, L.P.
By: /s/ Xxxxxx Xxxxxxxx
------------------------
XXXXXX TECHNOLOGY VENTURES II, L.P.
By: /s/ Xxxxxx Xxxxxxxx
-----------------------
59
SCHEDULE A
No. of
Series C No. of Purchase
Preferred Shares CVRs Price
---------------- ---- -----
CENTRE CAPITAL INVESTORS II, L.P. 300,515 300,515 $1,540,140.00
CENTRE CAPITAL TAX-EXEMPT 97,793 97,793 $ 501,190.00
INVESTORS II, L.P.
CENTRE CAPITAL OFFSHORE 65,390 65,390 $ 335,125.00
INVESTORS II, L.P.
CENTRE PARALLEL MANAGEMENT 4,607 4,607 $ 23,612.00
PARTNERS, L.P.
CENTRE PARTNERS 50,944 50,944 $ 261,090.00
COINVESTMENT, L.P.
STATE BOARD OF ADMINISTRATION 456,360 456,360 $2,338,843.00
OF FLORIDA
NORWEST EQUITY PARTNERS V, L.P. 424,203 424,203 $2,174,040.38
NORTHWOOD CAPITAL PARTNERS LLC 9,756 9,756 $ 49,999.50
NORTHWOOD VENTURES 87,805 87,805 $ 450,000.63
REGENT CAPITAL PARTNERS, L.P. 72,659 72,659 $ 372,377.38
XXXXXX-SBIC, L.P. 59,170 59,170 $ 303,246.25
XXXXXX TECHNOLOGY VENTURES II, L.P. 9,823 9,823 $ 50,342.88
--------- --------- -------------
TOTAL: 1,639,025 1,639,025 $8,400,007.02
60
TABLE OF CONTENTS
1. Authorization of Securities..................................... 1
2. Sale and Purchase of Securities................................. 2
3. Closings........................................................ 3
4. Restriction on Transfer of Securities........................... 4
4.1 Restrictions........................................... 4
4.2 (a) Legend............................................ 4
(b) Stop Transfer Order............................... 5
4.3 Removal of Legend...................................... 5
4.4 Register of Securities................................. 5
5. Representations and Warranties by Company....................... 5
5.1 Organization, Standing, Etc............................ 5
5.2 Qualification.......................................... 6
5.3 Financial Statements................................... 6
5.4 Tax Returns and Audits................................. 6
5.5 No Undisclosed Liabilities............................. 7
5.6 Absence of Certain Developments........................ 7
5.7 Title to Properties and Encumbrances................... 8
5.8 Litigation; Governmental Proceedings................... 8
5.9 Compliance with Applicable Laws and Other Instruments.. 8
5.10 Purchased Securities, Conversion Stock and CVR Stock... 9
5.11 Securities Laws........................................ 9
5.12 Patents and Other Intangible Rights.................... 9
5.13 Capital Stock.......................................... 10
5.14 Outstanding Debt....................................... 11
5.15 Schedule of Assets and Contracts....................... 11
5.16 Corporate Acts and Proceedings......................... 13
5.17 Insurance Coverage..................................... 13
5.18 No Brokers or Finders.................................. 13
5.19 Conflicts of Interest.................................. 13
5.20 Licenses............................................... 14
5.21 Registration Rights.................................... 14
5.22 Employee Benefit Plans................................. 14
5.23 Environmental and Safety Laws.......................... 16
5.24 Employees.............................................. 16
5.25 Small Business Concern................................. 16
5.26 Absence of Restrictive Agreements...................... 17
5.27 Application of Proceeds................................ 17
5.28 Disclosure.................................................................. 17
5.29 Payables.................................................................... 17
5.30 Year 2000................................................................... 17
6. Representations and Warranties of Purchasers......................................... 18
6.1 Investment Intent........................................................... 18
6.2 Location of Principal Office and Qualification as Accredited Investor....... 18
6.3 Acts and Proceedings........................................................ 18
6.4 No Brokers or Finders....................................................... 18
7. Conditions of Each Purchaser's Obligation at the Phase I Closing..................... 19
7.1 No Errors, Etc.............................................................. 19
7.2 Compliance with Agreement................................................... 19
7.3 Material Adverse Change..................................................... 19
7.4 Legal Proceedings........................................................... 19
7.5 Consents.................................................................... 19
7.6 Certificate of Officers..................................................... 19
7.7 Opinion of Company's Counsel................................................ 20
7.8 No Event of Default......................................................... 22
7.9 Qualification Under State Securities Laws................................... 23
7.10 Proceedings and Documents................................................... 23
7.11 Stockholders' Agreement..................................................... 23
7.12 Transaction Fee............................................................. 23
7.13 Expenses.................................................................... 23
8. Conditions of Each Purchaser's Obligation at a Phase II Closing...................... 23
8.1 No Errors, Etc.............................................................. 23
8.2 Compliance with Agreement................................................... 24
8.3 Legal Proceedings........................................................... 24
8.4 Consents.................................................................... 24
8.5 Certificate of Officers..................................................... 24
8.6 Opinion of Company's Counsel................................................ 24
8.7 No Event of Default......................................................... 24
8.8 Qualification Under State Securities Laws................................... 24
8.9 Transaction Fee............................................................. 24
8.10 Expenses.................................................................... 24
9. Affirmative Covenants................................................................ 24
9.1 Corporate Existence......................................................... 25
9.2 Books of Account and Reserves............................................... 25
9.3 Furnishing of Financial Statements and Information.......................... 25
9.4 Inspection.................................................................. 27
9.5 Preparation and Approval of Budgets......................................... 27
9.6 Payment of Taxes and Maintenance of Properties.............................. 28
9.7 Insurance................................................................... 28
9.8 Payment of Indebtedness and Discharge of Obligations..................................... 29
9.9 Directors' and Shareholders' Meetings; Board Committees.................................. 29
9.10 Replacement of Certificates Representing Preferred Shares or Conversion Stock............ 31
9.11 Application of Proceeds.................................................................. 31
9.12 Retirement Plans......................................................................... 31
9.13 Filing of Reports........................................................................ 32
9.14 Patents and Other Intangible Rights...................................................... 32
9.15 Insurance on Lives of Key Personnel...................................................... 32
9.16 Rights to Purchase Additional Securities................................................. 32
9.17 Rule 144A................................................................................ 34
9.18 Net Worth................................................................................ 34
9.19 Best Efforts............................................................................. 34
9.20 Management Rights........................................................................ 34
10. Negative Covenants................................................................................ 35
10.1 Dividends on or Redemption of Junior Stock............................................... 35
10.2 Future Registration Rights............................................................... 35
10.3 Other Restrictions....................................................................... 36
11. The Preferred Shares.............................................................................. 36
11.1 Conversion of Preferred Shares........................................................... 36
11.2 Stock Fully Paid; Reservation of Shares.................................................. 36
11.3 Adjustment of Number of Shares and Conversion Price...................................... 37
11.4 Mandatory Conversion of Preferred Shares................................................. 37
12. Redemption of Preferred Shares.................................................................... 37
13. Registration of Stock............................................................................. 37
13.1 Required Registration.................................................................... 37
13.2 Incidental Registration.................................................................. 38
13.3 Registration Procedures.................................................................. 39
13.4 Expenses................................................................................. 41
13.5 Indemnification.......................................................................... 41
13.6 Indemnification Procedures............................................................... 43
14. Default........................................................................................... 44
14.1 Events of Default........................................................................ 44
14.2 Remedies Upon Events of Default.......................................................... 45
14.3 Notice of Defaults....................................................................... 46
14.4 Suits for Enforcement.................................................................... 46
14.5 Remedies Cumulative...................................................................... 46
14.6 Remedies not Waived...................................................................... 46
15. Termination of Certain Covenants.................................. 47
16. Documents to be Delivered at the Phase I Closing.................. 47
16.1 Deliveries by the Company to the Purchasers.............. 47
16.2 Deliveries by the Purchasers to the Company.............. 48
17. Documents to be Delivered at the Phase II Closing................. 48
17.1 Deliveries by the Company to the Purchasers.............. 48
17.2 Deliveries by the Purchasers to the Company.............. 49
18. Definitions....................................................... 49
19. Understanding Among Purchasers.................................... 54
20. Consents; Waivers and Amendments.................................. 54
21. Changes, Waivers, Etc............................................. 55
22. Payment of Fees and Expenses of Purchasers........................ 55
23. Notices........................................................... 55
24. Survival of Representations and Warranties, Etc................... 56
25. Parties in Interest............................................... 56
26. Headings.......................................................... 56
27. Choice of Law..................................................... 56
28. Counterparts...................................................... 56
29. 1997 Stock Purchase Agreement..................................... 56
SCHEDULES AND EXHIBITS
Exhibits:
--------
Exhibit 1 - Articles
Exhibit 2 - Amended and Restated Shareholder Agreement
Exhibit 3 - Form of Contingent Value Rights
Schedules:
---------
Schedule A - Purchasers
Schedule 5.1 - Organization
Schedule 5.2 - Qualifications
Schedule 5.3 - Financial Statements
Schedule 5.4 - Tax
Schedule 5.5 - No Undisclosed Liabilities
Schedule 5.6 - Certain Developments
Schedule 5.7 - Title to Properties and Encumbrances
Schedule 5.8 - Litigation
Schedule 5.9 - Compliance with Applicable Law and Other Instruments
Schedule 5.11 - Securities Laws
Schedule 5.12 - Intellectual Property
Schedule 5.13 - Capital Stock
Schedule 5.15 - Material Contracts and Assets
Schedule 5.17 - Insurance Coverage
Schedule 5.18 - Brokers or Finders
Schedule 5.19 - Conflicts
Schedule 5.20 - Licenses
Schedule 5.21 - Registration Rights
Schedule 5.22 - Retirement Plans
Schedule 5.23 - Environmental
Schedule 5.24 - Employees
Schedule 5.28 - Payables
Schedule 5.29 - Year 2000
Schedule 9.15 - Key Man Life Insurance
