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EXHIBIT 10.19
AGREEMENT AMONG GUARANTORS
This Agreement (the "Agreement") is made and entered into as of January
22, 1999, by and among Xxxxxxx X. Xxxx ("Xxxx"), Xxxxx X. Xxxxx ("Ruyan") Xxxxxx
Xxxxx ("Green") (each also a "Guarantor"), and Cafe Odyssey, Inc., a Minnesota
corporation (the "Company").
INTRODUCTION
A. The Company is a party to a Loan Agreement dated October 9, 1996
with PNC Bank, Ohio, National Association, as amended (the "PNC Loan
Agreement").
B. As of September 23, 1998, the Company entered into a Revolving
Promissory Note (the "Note") with The Provident Bank, an Ohio banking
corporation ("Provident") in order to retire the Company's indebtedness under
the PNC Loan Agreement and obtain additional financing (collectively, the
"Provident Financing"). The Provident Financing consists of a first tranche in
the principal amount of $1,000,000 (the "First Tranche") and a subsequent or
concurrent second tranche in a principal amount of up to $2,000,000 (the "Second
Tranche").
C. In connection with the Second Tranche, Provident required guarantors
to execute Several Limited Guarantees (each, a "Second Tranche Guaranty") of the
Note and pledge certain assets to Provident. King and Ruyan have each executed a
$500,000 Second Tranche Guaranty, Green is executing a $500,000 Second Tranche
Guaranty concurrently herewith and Green will execute another $500,000 Second
Tranche Guaranty on or before March 10, 1999.
D. In consideration of Green's Guarantees and pledge of collateral, the
Company wishes to issue to Green a warrant to purchase shares of the Common
Stock, $.01 par value (the "Common Stock"), of the Company (individually a
"Warrant" and collectively the "Warrants"). Green and the Company also desire to
provide for the issuance of additional Warrants and payment of cash to Green if
the Company does not repay the Note on a timely basis.
E. The Company has already undertaken to issue warrants and pay cash to
King and Ruyan pursuant to that certain Agreement Among Guarantors dated
November 16, 1998, to which the Company, King and Ruyan are parties.
F. The Guarantors desire to remedy the inequities that may otherwise
result from enforcement of any of the Guarantees through an agreement providing
for appropriate indemnification and contribution rights and obligations among
the Guarantors.
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NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Guarantors hereto agree as follows:
1. Guarantees and Collateral. On or before the date hereof, Green
has executed a $500,000 Second Tranche Guaranty and a Pledge and Security
Agreement (a "Pledge") in connection therewith. Green agrees to execute another
$500,000 Second Tranche Guaranty on or before March 10, 1999.
2. Issuance of Warrants upon Execution of Second Tranche
Guarantees and Pledge. In connection with the Second Tranche, the Company shall
issue to Green a Warrant to purchase 200,000 shares of Common Stock in the form
attached as Exhibit A hereto upon his execution of his first $500,000 Second
Tranche Guaranty and a second Warrant to purchase 200,000 shares of Common Stock
upon his execution of his second $500,000 Second Tranche Guaranty.
3. Issuance of Warrants and Payment of Cash upon Company's Failure
to Timely Repay the Note. If the Company does not repay the Second Tranche of
the Note in full on or before September 30, 1999 (the "Due Date"), and assuming
Green has executed two $500,000 Second Tranche Guarantees:
(a) the Company shall issue to Green a Warrant to purchase
40,000 shares of Common Stock in the form attached as Exhibit A hereto.
Thereafter, for so long as any amount due under the Note shall remain unpaid, on
each monthly anniversary of the Due Date, the Company shall issue to Green a
Warrant to purchase 40,000 shares of Common Stock in the form attached as
Exhibit A hereto; and
(b) the Company shall pay Green $10,000 on the Due Date,
$20,000 on the first monthly anniversary of the Due Date, $30,000 on the second
monthly anniversary of the Due Date and $40,000 on the third and each subsequent
monthly anniversary of the Due Date until the Note is paid in full.
4. Company Liability for Payments on Guarantees; Green's Priority.
Upon Green's payment of any loss, claim, damage, expense or liability arising
under the Note (each a "Claim"), the Company shall be obligated to immediately
reimburse Green for the full amount of such payment. In order to secure its
obligation pursuant to this Section, the Company shall execute a Security
Agreement in the form attached as Exhibit B hereto. The parties agree that the
Company's liability to Green under this Section 4 shall have priority over any
obligation of the Company to King or Ruyan under the Agreement Among Guarantors.
5. Draws under Provident Financing. The Chairman of the Board of
the Company, in his or her sole discretion, shall determine the amount and
timing of draws to be made under the Provident Financing, subject to the
aggregate amounts set forth in paragraph B. above.
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6. Amendment, Waiver and Third Party Beneficiaries. This Agreement
may not be amended orally, but only by an instrument in writing signed by all of
the Guarantors who are parties hereto. No delay or failure on the part of any
Guarantor to exercise any power or right hereunder shall operate as a waiver
thereof, nor as an acquiescence in any default, nor shall any single or partial
exercise of any power or right preclude any other or further exercise thereof,
or the exercise of any other power or right. The Guarantors acknowledge and
agree that this Agreement is not intended to create any third party beneficiary
rights.
7. Partial Invalidity. If any provision or application of this
Agreement is held unlawful or unenforceable in any respect, such illegality or
unenforceability shall not effect other provisions or applications which can be
given effect, and this Agreement shall be construed as if the lawful and
unenforceable provision or application had never been contained hereby or
prescribed hereby.
8. Governing Law, Submission to Jurisdiction. All questions
concerning the construction, validity and interpretation of this Agreement will
be governed by and construed in accordance with the internal law, and not the
law of conflicts of law, of the State of Minnesota. Each of the parties hereto
consents and agrees to the jurisdiction of any state court sitting in the City
of Minneapolis, State of Minnesota, or any federal court sitting in the city of
Minneapolis, State of Minnesota, and waives any objection based on venue or
forum non conveniens with respect to any action instituted therein.
9. Assignment. This Agreement shall be binding upon the Guarantors
and their successors and assigns and shall inure to the benefit of the
Guarantors and their successors and assigns.
10. Integration. This Agreement contains the full, final and
exclusive statement of the agreement between the Guarantors relating to all
matters set forth herein and supersedes all other oral and written
understandings to the contrary.
11. Counterparts. This Agreement may be executed in separate
counterparts, each of which will be an original and all of which taken together
will constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
CAFE ODYSSEY, INC.
By: /s/ Xxxxxxx X. Xxxx
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Name: Xxxxxxx X. Xxxx
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Title: Chief Executive Officer
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/s/ Xxxxxxx X. Xxxx
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XXXXXXX X. XXXX
/s/ Xxxxx X. Xxxxx
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XXXXX X. XXXXX
/s/ Xxxxxx Xxxxx
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XXXXXX XXXXX
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EXHIBIT A
[WARRANT]
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EXHIBIT B
SECURITY AGREEMENT
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The Warrant and the securities issuable upon exercise of this Warrant (the
"Securities") have not been registered under the Securities Act of 1933 (the
"Securities Act") or under any state securities or Blue Sky laws ("Blue Sky
Laws"). No transfer, sale, assignment, pledge, hypothecation or other
disposition of this Warrant or the Securities or any interest therein may be
made except (a) pursuant to an effective registration statement under the
Securities Act and any applicable Blue Sky Laws or (b) if the Company has been
furnished with both an opinion of counsel for the holder, which opinion and
counsel shall be reasonably satisfactory to the Company, to the effect that no
registration is required because of the availability of an exemption from
registration under the Securities Act and applicable Blue Sky Laws, and
assurances that the transfer, sale, assignment, pledge, hypothecation or other
disposition will be made only in compliance with the conditions of any such
registration or exemption.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF CAFE ODYSSEY, INC.
XXXXXXX XX. XX-0 Xxxxxxxxxxx, Xxxxxxxxx
November 16, 1998
This certifies that, for value received, XXXXXXX X. XXXX, or his
successors or assigns ("Holder") is entitled to purchase from Cafe Odyssey, Inc.
(the "Company") Forty Thousand (40,000) fully paid and nonassessable shares (the
"Shares") of the Company's Common Stock, $.01 par value (the "Common Stock"), at
any time and from time to time from the date hereof until November 16, 2003, at
an exercise price equal to the lower of (i) $0.75 or (ii) the price per share at
which the Company sells Common Stock or issues warrants or options in any public
or private transaction which is consummated between the date of this Warrant and
the earlier of (a) the date of exercise of this Warrant and (b) the date on
which no Guarantees by the original Holder of indebtedness of the Company to
Provident Bank, an Ohio banking corporation, are still outstanding (the
"Exercise Price"), subject to adjustment as herein provided.
This Warrant is subject to the following provisions, terms and
conditions:
1. Exercise of Warrant.
a. Exercise for Cash. The rights represented by this Warrant may
be exercised by the Holder, in whole or in part (but not as to a
fractional share of Common Stock), by the surrender of this Warrant
(properly endorsed, if required, at the Company's principal office in
Bloomington, Minnesota, or such other office or agency of the Company
as the Company may designate by notice in writing to the Holder at the
address of such Holder appearing on the books of the Company at any
time within the period above named), and upon payment to it by
certified check, bank draft or cash of the purchase price for such
Shares. The Company agrees that the Shares so purchased shall have and
are deemed to be issued to the Holder as the record owner of such
Shares as of the close of business on the date on which this Warrant
shall have been surrendered and payment made for such Shares as
aforesaid. Certificates for the Shares of Common Stock so purchased
shall be delivered to the Holder within a reasonable time, not
exceeding ten (10) days, after the rights represented by this Warrant
shall have been so exercised, and, unless this Warrant has expired, a
new Warrant representing the number of Shares, if any, with respect to
which this Warrant shall not then have been exercised shall also be
delivered to the Holder within such time. The Company may require that
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Warrant or any certificate for Shares purchased upon the exercise
hereof bear a legend substantially similar to that which is contained
on the face of this Warrant.
b. Cashless Exercise. Upon receipt of a notice of cashless
exercise, the Company shall deliver to the Holder (without payment by
the Holder of any exercise price) that number of Shares that is equal
to the quotient obtained by dividing (x) the value of the Warrant on
the date that the Warrant shall have been surrendered (determined by
subtracting the aggregate exercise price for the Shares in effect on
the Exercise Date from the aggregate Fair Market Value (hereinafter
defined) for the Shares by (y) the Fair Market Value of one share of
Common Stock. A notice of "cashless exercise" shall state the number of
Shares as to which the Warrant is being exercised. "Fair Market Value"
for purposes of this Section (b) shall mean the average of the Common
Stock closing prices reported by the principal exchange on which the
Common Stock is traded, or the last sale prices as reported by the
National Association of Securities Dealers, Inc. Automated Quotation
System ("Nasdaq") National Market or SmallCap Market, as the case may
be, for the ten (10) business days immediately preceding the Exercise
Date or, in the event no public market shall exist for the Common Stock
at the time of such cashless exercise, Fair Market Value shall mean the
fair market value of the Common Stock as the same shall be determined
in the good faith discretion of the Board of Directors, after full
consideration of all factors then deemed relevant by such Board in
establishing such value, including by way of illustration and not
limitation, the per share purchase price of Common Stock or per
security convertible into one share of Common Stock of the most recent
sale of shares of Common Stock or securities convertible into Common
Stock by the Company after the date hereof all as evidenced by the vote
of a majority of the directors then in office.
2. Transferability of This Warrant. This Warrant is issued upon the
following terms, to which each Holder consents and agrees:
a. Until this Warrant is transferred on the books of the Company,
the Company will treat the Holder of this Warrant registered as such on
the books of the Company as the absolute owner hereof for all purposes
without being affected by any notice to the contrary.
b. This Warrant may not be exercised, and this Warrant and the
Shares underlying this Warrant shall not be transferable, except in
compliance with all applicable state and federal securities laws,
regulations and orders, and with all other applicable laws, regulations
and orders.
c. The Warrant may not be transferred, and the Shares underlying
this Warrant may not be transferred, without the Holder obtaining an
opinion of counsel satisfactory in form and substance to the Company's
counsel stating that the proposed transaction will not result in a
prohibited transaction under the Securities Act of 1933, as amended
("Securities Act"), and applicable Blue Sky laws. By accepting this
Warrant, the Holder agrees to act in accordance with any conditions
reasonably imposed on such transfer by such opinion of counsel.
d. Neither this issuance of this Warrant nor the issuance of the
Shares underlying this Warrant have been registered under the
Securities Act.
3. Certain Covenants of the Company. The Company covenants and agrees
that all Shares which may be issued upon the exercise of the rights represented
by this Warrant, upon issuance and full payment for the Shares so purchased,
will be duly authorized and issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issue hereof, except those that
may be
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created by or imposed upon the Holder or its property, and without limiting the
generality of the foregoing, the Company covenants and agrees that it will from
time to time take all such actions as may be requisite to assure that the par
value per share of the Common Stock is at all times equal to or less than the
effective purchase price per share of the Common Stock issuable pursuant to this
Warrant. The Company further covenants and agrees that during the period within
which the rights represented by this Warrant may be exercised, the Company will
at all times have authorized and reserved free of preemptive or other rights for
the exclusive purpose of issue upon exercise of the purchase rights evidenced by
this Warrant, a sufficient number of shares of its Common Stock to provide for
the exercise of the rights represented by this Warrant.
4. Adjustment of Exercise Price and Number of Shares. The Exercise
Price and number of Shares are subject to the following adjustments:
a. Adjustment of Exercise Price for Stock Dividend, Stock Split or
Stock Combination. In the event that (i) any dividends on any class of
stock of the Company payable in Common Stock or securities convertible
into or exercisable for Common Stock ("Common Stock Equivalents") shall
be paid by the Company, (ii) the Company shall subdivide its then
outstanding shares of Common Stock into a greater number of shares, or
(iii) the Company shall combine its outstanding shares of Common Stock,
by reclassification or otherwise, then, in any such event, the Exercise
Price in effect immediately prior to such event shall (until adjusted
again pursuant hereto) be adjusted immediately after such event to a
price (calculated to the nearest full cent) determined by dividing (a)
the number of shares of Common Stock outstanding immediately prior to
such event, multiplied by the then existing Exercise Price, by (b) the
total number of shares of Common Stock outstanding immediately after
such event, and the resulting quotient shall be the adjusted Exercise
Price per share. No adjustment of the Exercise Price shall be made if
the amount of such adjustment shall be less than $.05 per share, but in
such case any adjustment that would otherwise be required then to be
made shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which, together with any
adjustment or adjustments so carried forward, shall amount to not less
than $.05 per share.
b. Adjustment of Exercise Price for Dilutive Common Stock Issuances. If
at any time prior to the exercise of this Warrant in full but following
the date on which no Guarantees by the original Holder of indebtedness
of the Company to Provident Bank are still outstanding, the Company
shall (i) issue or sell any Common Stock Equivalents without
consideration or for consideration per share (in cash, property or
other assets) less than the Exercise Price per share on the date of
such issuance or sale or (ii) fix a record date for the issuance of
subscription rights, options or warrants to all holders of Common Stock
entitling them to subscribe for or purchase Common Stock (or Common
Stock Equivalents) at a price (or having an exercise or conversion
price per share) less than the Exercise Price on the record date
described below, the Exercise Price shall be adjusted so that the
Exercise Price shall equal the price determined by multiplying the
Exercise Price in effect immediately prior to the date of such sale or
issuance (which date in the event of distribution to shareholders shall
be deemed to be the record date set by the Company to determine
shareholders entitled to participate in such distribution) by a
fraction, the numerator of which shall be (i) the number of shares of
Common Stock outstanding on the date of such sale or issuance, plus
(ii) the number of additional shares of Common Stock which the
aggregate consideration received by the Company upon such issuance or
sale (plus the aggregate of any additional amount to be received by the
Company upon the exercise of such subscription rights, options or
warrants) would purchase at such current market price per share of the
Common Stock; and the denominator of which
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shall be (i) the number of shares of Common Stock outstanding on the
date of such issuance or sale, plus (ii) the number of additional
shares of Common Stock offered for subscription or purchase (or into
which the Common Stock Equivalents so offered are exercisable or
convertible). Any adjustments required by this paragraph shall be made
immediately after such issuance or sale or record date, as the case may
be. Such adjustments shall be made successively whenever such event
shall occur.
c. Adjustment of Number of Shares Purchasable on Exercise of
Warrants. Upon each adjustment of the Exercise Price pursuant to this
Section, the Holder shall thereafter (until another such adjustment) be
entitled to purchase at the adjusted Exercise Price the number of
shares, calculated to the nearest full share, obtained by multiplying
the number of shares specified in such Warrant (as adjusted as a result
of all adjustments in the Exercise Price in effect prior to such
adjustment) by the Exercise Price in effect prior to such adjustment
and dividing the product so obtained by the adjusted Exercise Price.
d. Notice as to Adjustment. Upon any adjustment of the Exercise
Price and any increase or decrease in the number of shares of Common
Stock purchasable upon the exercise of the Warrant, then, and in each
such case, the Company within thirty (30) days thereafter shall give
written notice thereof, by first class mail, postage prepaid, addressed
to each Holder as shown on the books of the Company, which notice shall
state the adjusted Exercise Price and the increased or decreased number
of shares purchasable upon the exercise of the Warrants, and shall set
forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
e. Effect of Reorganization, Reclassification, Merger, etc. If at
any time while any Warrant is outstanding there should be any capital
reorganization of the capital stock of the Company (other than the
issuance of any shares of Common Stock in subdivision of outstanding
shares of Common Stock by reclassification or otherwise and other than
a combination of shares provided for in Section 4(a) hereof), or any
consolidation or merger of the Company with another corporation, or any
sale, conveyance, lease or other transfer by the Company of all or
substantially all of its property to any other corporation, which is
effected in such a manner that the holders of Common Stock shall be
entitled to receive cash, stock, securities, or assets with respect to
or in exchange for Common Stock, then, as a part of such transaction,
lawful provision shall be made so that each Holder shall have the right
thereafter to receive, upon the exercise hereof, the number of shares
of stock or other securities or property of the Company, or of the
successor corporation resulting from such consolidation or merger, or
of the corporation to which the property of the Company has been sold,
conveyed, leased or otherwise transferred, as the case may be, which
the Holder would have been entitled to receive upon such capital
reorganization, reclassification of capital stock, consolidation,
merger, sale, conveyance, lease or other transfer, if such Warrant had
been exercised immediately prior to such capital reorganization,
reclassification of capital stock, consolidation, merger, sale,
conveyance, lease or other transfer. In any such case, appropriate
adjustments (as determined by the Board of Directors of the Company)
shall be made in the application of the provisions set forth in this
Warrant (including the adjustment of the Exercise Price and the number
of Shares issuable upon the exercise of the Warrants) to the end that
the provisions set forth herein shall thereafter be applicable, as near
as reasonably may be, in relation to any shares or other property
thereafter deliverable upon the exercise of the Warrants as if the
Warrants had been exercised immediately
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prior to such capital reorganization, reclassification of capital
stock, such consolidation, merger, sale, conveyance, lease or other
transfer and the Warrant Holders had carried out the terms of the
exchange as provided for by such capital reorganization, consolidation
or merger. The Company shall not effect any such capital
reorganization, consolidation, merger or transfer unless, upon or prior
to the consummation thereof, the successor corporation or the
corporation to which the property of the Company has been sold,
conveyed, leased or otherwise transferred shall assume by written
instrument the obligation to deliver to each Holder such shares of
stock, securities, cash or property as in accordance with the foregoing
provisions such Holder shall be entitled to purchase.
5. No Rights as Stockholders. This Warrant shall not entitle the
Holder as such to any voting rights or other rights as a stockholder of the
Company.
6. Registration Rights. At any time after the Company is eligible to
file a registration statement on Form S-3, but in any event no later than
January 1, 1999, the Company shall register the Shares under a registration
statement (the "Registration Statement") under the Securities Act and such Blue
Sky Laws of those states as are reasonably selected by the Holder. The Company
shall use its best efforts to have the Registration Statement declared effective
by the Securities and Exchange Commission (the "Commission") as soon as
practicable. The Company shall keep the Registration Statement effective and
current until the earlier to occur of (i) the date all the Shares are sold, (ii)
the date all of the Shares may be sold under Rule 144(k) under the Securities
Act or (iii) the expiration date of this Warrant. Except as set forth in the
following sentence, the Company shall bear all expenses and fees incurred in
connection with the preparation, filing, and amendment of the Registration
Statement with the Commission. The Holder shall pay (i) all fees, disbursements
and expenses of any counsel or expert retained by the Holder and (ii) all
underwriting discounts and commissions, filing fees and any transfer or other
taxes relating to the Shares included in the Registration Statement.
7. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Minnesota.
8. Amendments and Waivers. The provisions of this Warrant may not be
amended, modified or supplemented, and waiver or consents to departures from the
provisions hereof may not be given, unless the Company agrees in writing and has
obtained the written consent of the Holders.
9. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to the Holder
shall be mailed, delivered, or telefaxed and confirmed to the Holder at his or
her address set forth on the records of the Company; or if sent to the Company
shall be mailed, delivered, or telefaxed and confirmed to Cafe Odyssey, Inc.,
0000 Xxxx 00xx Xxxxxx, Xxxxx 000, Xxxxxxxxxxx, XX 00000 or to such other address
as the Company or the Holder shall notify the other as provided in this Section.
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IN WITNESS WHEREOF, Cafe Odyssey, Inc. has caused this Warrant to be
signed by its duly authorized officer in the date set forth above.
CAFE ODYSSEY, INC.
By /s/ Xxxxxxx X. Xxxx
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Its Chief Executive Officer
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SUBSCRIPTION FORM
To be signed only upon exercise of Warrant.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ____________________ of the shares of Common Stock of Cafe
Odyssey, Inc. (the "Shares") to which such Warrant relates and herewith makes
payment of $_____________ therefor in cash, certified check or bank draft and
requests that a certificate evidencing the Shares be delivered to,
_______________________________, the address for whom is set forth below the
signature of the undersigned:
Dated:
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(Signature)
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(Address)
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ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrant.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto_____________________________________ the right to purchase
shares of Common Stock of Cafe Odyssey, Inc. to which the within Warrant
relates and appoints____________________ attorney, to transfer said right on
the books of_________________ with full power of substitution in the premises.
Dated:
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(Signature)
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(Address)
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