EXHIBIT 10.19
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of
acceptance set forth below, is entered into by and between GALVESTON'S
STEAKHOUSE CORP., a Delaware corporation, with headquarters located at 000 Xxxx
Xxxxxxxxxx Xxxx., Xxxxxxxxx, Xxxxxxxxxx 00000 (the "Company"), and the
undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and
delivering this Agreement in accordance with and in reliance upon the exemption
from securities registration afforded, inter alia, by Rule 506 under Regulation
D ("Regulation D" as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act"), and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and
subject to the conditions of this Agreement, 6% Convertible Debentures (the
"Debentures"), of the Company which will be convertible into shares of Common
Stock, $.01 par value per share of the Company (the "Common Stock"), upon the
terms and subject to the conditions of such Debentures (the Common Stock and the
Debentures sometimes referred to herein as the "Securities"), and subject to
acceptance of this Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase. The undersigned hereby agrees to purchase from
the Company, the Debentures of the Company, in the principal amount of $100,000
having the terms and conditions and being in the form attached hereto as Annex
I. The purchase price for the Debentures shall be as set forth on the signature
page hereto and shall be payable in United States Dollars.
b. Form of Payment. The Buyer shall pay the purchase price for
the Debentures by delivering immediately available good funds in United States
Dollars to the Company in an amount equal to the principal amount of Debentures
being so purchased. Promptly following payment by the Buyer to the Company of
the purchase price of the Debentures, the Company shall deliver the Debentures
duly executed on behalf of the Company to the Buyer.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
a. Without limiting Buyer's right to sell the Common Stock
pursuant to the Registration Statement (as defined below), the Buyer is
purchasing the Debentures and will be acquiring the shares of Common Stock
issuable upon conversion of the Debentures for its own account for investment
only and not with a view towards the public sale or distribution thereof and not
with a view to or for sale in connection with any distribution thereof;
b. The Buyer is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), and (ii) experienced in making investments of the kind
described in this Agreement and the related documents, (iii) able, by reason of
the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the Securities;
c. All subsequent offers and sales of the Debentures and the
shares of Common Stock issuable upon conversion of, or issued as dividends on,
the Debentures (the "Shares" or "Common Stock") by the Buyer shall be made
pursuant to registration of the Shares under the 1933 Act or pursuant to an
exemption from registration;
d. The Buyer understands that the Debentures are being offered
and sold, and the Shares are being offered, to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Debentures and to receive an offer of the Shares;
e. The Buyer and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Debenture and the
offer of the Shares which have been requested by the Buyer. The Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company and have received complete and satisfactory answers to any such
inquiries. Without limiting the generality of the foregoing, the Buyer has also
had the opportunity to obtain and to review the Company's (1) Special Transition
Report for the fiscal year ended December 31, 1997. (2) Quarterly Report on Form
10-Q for the fiscal quarter ended March 31, 1998 and (2) Form SB-2, dated
February 27, 1998 (the "Company's SEC Documents").
f. The Buyer understands that its investment in the
Securities involves a high degree of risk;
g. The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities;
h. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Buyer and is a valid and binding
agreement of the Buyer enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
i. Neither the Buyer, nor any affiliate of the Buyer, will
enter into, any put option, short position, or other similar position with
respect to the Debentures or the Shares.
j. Notwithstanding the provisions hereof or of the Debentures,
in no event (except with respect to an Event of Mandatory Conversion upon the
maturity of the Debentures) shall the holder be entitled to convert any
Debenture to the extent after such conversion, the sum of (1) the number of
shares of Common Stock beneficially owned by the Buyer and its affiliates on the
date of the requested conversion (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unconverted portion of
the Debenture), and (2) the number of shares of Common Stock issuable upon the
requested conversion of the Debenture with respect to which the determination of
this proviso is being made, would result in beneficial ownership by the Buyer
and its affiliates on that date of more than 4.99% of the outstanding shares of
Common Stock. For purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), except as
otherwise provided in clause (1) of such proviso. In addition, the Company and
Buyer agree that until the Company either obtains shareholder approval of the
issuance of the shares of Common Stock upon conversion of the Debentures and
exercise of the Warrants herein described, or an exemption from Nasdaq's
corporate governance rules as they may apply to such issuable shares, the Buyer
may not and will not convert the Debentures into more than 19.9% of the shares
of Company's Common Stock outstanding on the date hereof (the "Common Share
Limit").
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
a. Concerning the Shares. There are no preemptive
rights of any stockholder of the Company, as such, to acquire the Common
Stock.
b. Reporting Company Status. The Company is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company is duly qualified as a foreign corporation to do business
and is in good standing in each jurisdiction where the nature of the business
conducted or property owned by it makes such qualification necessary other than
those jurisdictions in which the failure to so qualify would not have a material
and adverse effect on the business, operations, properties, prospects or
condition (financial or otherwise) of the Company. The Company has registered
its Common Stock pursuant to Section 12 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the Common Stock is listed and traded on
the NASDAQ/Small Cap Market. The Company shall promptly provide to Buyer copies
of any notices it receives regarding the continued eligibility of the Common
Stock for listing on the NASDAQ/Small Cap Market.
c. Authorized Shares. The Company has sufficient authorized
and unissued Shares as may be reasonably necessary to effect the conversion of
the Debentures. The Shares have been duly authorized and, when issued upon
conversion of, or as interest on, the Debentures, will be duly and validly
issued, fully paid and non-assessable and will not subject the holder thereof to
personal liability by reason of being such holder.
d. Securities Purchase Agreement; Registration Rights
Agreement and Stock. This Agreement and the Registration Rights Agreement, the
form of which is attached hereto as Annex II (the "Registration Rights
Agreement"), and the transactions contemplated thereby, have been duly and
validly authorized by the Company, this Agreement has been duly executed and
delivered by the Company and this Agreement is, and the Registration Rights
Agreement, when executed and delivered by the Company, will be, valid and
binding agreements of the Company enforceable in accordance with their
respective terms, subject as to enforceability to general principles of equity
and to bankruptcy, insolvency, moratorium, and other similar laws affecting the
enforcement of creditors' rights generally; and the Debentures will be duly and
validly authorized and, when executed and delivered on behalf of the Company in
accordance with this Agreement, will be a valid and binding obligation of the
Company in accordance with its terms, subject to general principles of equity
and to bankruptcy, insolvency, moratorium, or other similar laws affecting the
enforcement of creditors' rights generally.
e. Non-contravention. The execution and delivery of this
Agreement and the Registration Rights Agreement by the Company, the issuance of
the Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Registration Rights Agreement, and the
Debentures do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under (i)
the articles of incorporation or by-laws of the Company, (ii) any indenture,
mortgage, deed of trust, or other material agreement or instrument to which the
Company is a party or by which it or any of its properties or assets are bound,
including any listing agreement for the Common Stock except as herein set forth,
(iii) to its knowledge, any existing applicable law, rule, or regulation or any
applicable decree, judgment, or (iv) to its knowledge, order of any court,
United States federal or state regulatory body, administrative agency, or other
governmental body having jurisdiction over the Company or any of its properties
or assets, except such conflict, breach or default which would not have a
material adverse effect on the transactions contemplated herein. The Company is
not in violation of any material laws, governmental orders, rules, regulations
or ordinances to which its property, real, personal, mixed, tangible or
intangible, or its businesses related to such properties, are subject.
f. Approvals. No authorization, approval or consent of any
court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market is required to be obtained by the Company for the
issuance and sale of the Securities to the Buyer as contemplated by this
Agreement, except such authorizations, approvals and consents that have been
obtained.
g. SEC Documents, Financial Statements. The Common Stock of
the Company is registered pursuant to Section 12(g) of the Exchange Act and the
Company has filed on a timely basis all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Exchange Act, including material filed pursuant to
Section 13(a) or 15(d), in addition to one or more registration statements and
amendments thereto heretofore filed by the Company with the SEC under the Act
(all of the foregoing including filings incorporated by reference therein being
referred to herein as the "SEC Documents"). The Company, through its agent, has
delivered to the Buyer true and complete copies of the SEC Documents (except for
exhibits and incorporated documents). The Company has not provided to the Buyer
any information which, according to applicable law, rule or regulation, should
have been disclosed publicly by the Company but which has not been so disclosed,
other than with respect to the transactions contemplated by this Agreement.
As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Act or the Exchange Act as
the case may be and the rules and regulations of the SEC promulgated thereunder
and other federal, state and local laws, rules and regulations applicable to
such SEC Documents, and none of the SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
h. Absence of Certain Changes. Since December 31, 1997, there
has been no material adverse change and no material adverse development in the
business, properties, operations, financial condition, or results of operations
of the Company.
i. Full Disclosure. There is no fact known to the Company
(other than general economic conditions known to the public generally) or as
disclosed in the documents referred to in Section 2(e), that has not been
disclosed in writing to the Buyer that (i) would reasonably be expected to have
a material adverse effect on the business or financial condition of the Company
or (ii) would reasonably be expected to materially and adversely affect the
ability of the Company to perform its obligations pursuant to this Agreement.
j. Absence of Litigation. Except as disclosed in the SEC
Documents referred to in Section 2(e), which the Buyer has reviewed, there is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board or body pending or, to the knowledge of the Company, threatened
against or affecting the Company, wherein an unfavorable decision, ruling or
finding would have a material adverse effect on the business or financial
condition of the Company or the transactions contemplated by this Agreement or
any of the documents contemplated hereby or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of such other documents.
k. Absence of Events of Default. No Event of Default, as
defined in the respective agreement to which the Company is a party, and no
event which, with the giving of notice or the passage of time or both, would
become an Event of Default (as so defined), has occurred and is continuing,
which would have a material adverse effect on the Company's financial condition
or results of operations.
l. Prior Issues. Except for the $600,000 of 6% Convertible
Debentures of the Company issued on July 15, 1998, during the twelve (12) months
preceding the date hereof, the Company has not issued any convertible
securities.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Buyer acknowledges that (1) the
Debentures have not been and are not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Agreement, the
Shares have not been and are not being registered under the 1933 Act, and may
not be transferred unless (A) subsequently registered thereunder or (B) the
Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Securities (other than pursuant to the Registration
Rights Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder.
b. Restrictive Legend. The Buyer acknowledges and agrees that
the Debentures, and, until such time as the Common Stock has been registered
under the 1933 Act as contemplated by the Registration Rights Agreement and sold
in accordance with an effective registration statement ("Registration
Statement"), the Shares issued to the Holder upon conversion of the Debentures
shall bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the Debentures and such
Shares):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF
COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT
SUCH REGISTRATION IS NOT REQUIRED.
c. Registration Rights Agreement. The parties hereto agree to
enter into the Registration Rights Agreement, in substantially the form attached
hereto as Annex II, on or before the Closing Date.
d. Filings. The Company undertakes and agrees to make all
necessary filings in connection with the sale of the Debentures to the Buyer
under any United States laws and regulations, or by any domestic securities
exchange or trading market, and to provide a copy thereof to the Buyer promptly
after such filing.
e. Reporting Status. So long as the Buyer beneficially owns
any of the Debentures, the Company shall file all reports required to be filed
with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
permit such termination.
f. Special Redemption. In the event the proposed Paragon
transaction is terminated by the seller and the Company receives and/or is
entitled to receive a break-up fee or other compensatory payment from Paragon by
reason of such seller's termination of its agreement with the Company, the
Company hereby covenants and agrees to first apply any and all such monies
received from the seller to effect a prompt redemption, in cash, of the Buyer's
Debentures.
g. Available Shares. The Company shall have at all times
authorized and reserved for issuance, free from preemptive rights, shares of
Common Stock sufficient to yield the number of shares of Common Stock issuable
at conversion as may be required to satisfy the conversion rights of the Buyer
pursuant to the terms and conditions of the Debentures.
h. Non-Public Information. The Company shall in no event
disclose non-public information to the Buyer, advisors to or representatives of
the Buyer unless prior to disclosure of such information the Company marks such
information as "Non-Public Information - Confidential" and provides the Buyer,
such advisors and representatives with a reasonable opportunity to accept or
refuse to accept such non-public information for review. Nothing herein shall
require the Company to disclose non-public information to the Buyer or its
advisors or representatives, and the Company represents that it does not
disseminate non-public information to any Buyers who purchase stock in the
Company in a public offering, to money managers or to securities analysts;
provided, however, that notwithstanding anything herein to the contrary, the
Company will, as hereinabove provided, immediately notify the advisors and
representatives of the Buyer and, if any, underwriters, of any event or the
existence of any circumstance (without any obligation to disclose the specific
event or circumstance) of which it becomes aware, constituting non-public
information (whether or not requested of the Company specifically or generally
during the course of due diligence by such persons or entities), which, if not
disclosed in the prospectus included in the registration statement, would cause
such prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein, in light
of the circumstances in which they were made, no misleading. Nothing herein
shall be construed to mean that such persons or entities other than the Buyer
(without the written consent of the Buyer prior to disclosure of such
information) may not obtain non-public information in the course of conducting
due diligence in accordance with the terms of this Agreement and nothing herein
shall prevent any such persons or entities from notifying the Company of their
opinion that based on such due diligence by such persons or entities, that the
Registration Statement contains an untrue statement of a material fact or omits
a material fact required to be stated in the Registration Statement or necessary
to make the statements contained therein, in light of the circumstances in which
they were made, not misleading.
5. TRANSFER AGENT INSTRUCTIONS.
(a) In order to effect the conversion of all or part of the
Debenture, the Debentureholder shall issue a notice of conversion substantially
in the form attached hereto (the "notice of conversion") which may be by
facsimile and surrender the Debenture for conversion if the Debenture is not
already in possession of the Company. Each conversion of all or any portion of
the Debenture will be deemed to have been effected as of the close of business
on the date on which such notice of conversion is delivered to the principal
office of the Company via facsimile. At such time as such conversion has been
effected, to the extent that any portion of the Debenture is converted, the
rights of the Debentureholder with respect to such portion of the Debenture
shall cease and the Debentureholder shall be deemed to have become the holder o
record of the shares of conversion Shares represented thereby.
(b) No fractional shares of Common Stock shall be issued upon
conversion of the Debenture. In lieu of any fractional share to which the holder
would otherwise be entitled, the Company shall round up to the nearest whole of
Common Share.
(c) The Company shall, immediately upon receipt of a notice of
conversion, issue and deliver to or upon the order of such Debentureholder,
against delivery of the Debentures which have been converted, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled and such certificate or certificates shall not bear any restrictive
legend; provided (a) the Common Stock evidenced thereby are sold pursuant to an
effective registration statement under the Securities Act, (b) the holder
provides the Company with an opinion of counsel reasonably acceptable to the
Company to the effect that a public sale of such shares may be made without
registration under the Securities Act, or (c) such holder provides the Company
with reasonable assurance that such shares can be sold free of any limitations
imposed by Rule 144, promulgated under the Securities Act. The Company shall
cause such issuance and delivery to be effected within five (5) business days
and shall transmit the certificates by messenger or overnight delivery service,
or via the DWAC system, to reach the address designated by such holder within
five (5) business days after the receipt of such notice.
6. GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York. Each of the parties consents
to the jurisdiction of the federal courts whose districts encompass any part of
the City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions. A facsimile transmission of this signed
Agreement shall be legal and binding on all parties hereto. This Agreement may
be signed in one or more counterparts, each of which shall be deemed an
original. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement. If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
7. NOTICES. Any notice required or permitted hereunder shall
be given in writing (unless otherwise specified herein) and shall be deemed
effectively given, (i) on the date delivered, (a) by personal delivery, or (b)
if advance copy is given by fax, (ii) seven business days after deposit in the
United States Postal Service by regular or certified mail, or (iii) three
business days mailing by international express courier, with postage and fees
prepaid, addressed to each of the other parties thereunto entitled at the
following addresses, or at such other addresses as a party may designate by ten
days advance written notice to each of the other parties hereto.
COMPANY: GALVESTON'S STEAKHOUSE CORP.
000 X. Xxxxxxxxxx Xxxx.
Xxxxxxxxx, XX 00000
ATTN: Xxxxxxx X. Xxx
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxx & Eilen, Esqs.
00 Xxxxxxx Xxxxxxxxx Xxxx.
Xxxxxxxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxx, Esq.
Telecopier No.: (000) 000-0000
BUYER: At the address set forth on the signature page of this
Agreement.
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Company's
representations and warranties shall survive the execution and delivery hereof
of this Agreement and the delivery of the Debentures and the Purchase Price, and
shall inure to the benefit of their respective successors and assigns.
9. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
IN WITNESS WHEREOF, this Agreement has been duly executed by
the Buyer or one of its officers thereunto duly authorized as of the date set
forth below.
AGGREGATE PURCHASE PRICE OF SUCH DEBENTURE: $__________
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Agreement to be duly
executed on its behalf this ____ day of July, 1998.
--------------------------- ------------------------------------
Printed Name of Subscriber
---------------------------
By: --------------------------------
Telecopier No. ------------ (Signature of Authorized Person)
------------------------------------
Printed Name and Title
This Agreement has been accepted as of the date set forth
below.
GALVESTON'S STEAKHOUSE CORP.
By: -----------------------------------
Xxxxxxx X. Xxx, Chairman & CEO
EXHIBIT 10.20
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of July 15, 1998
(this "Agreement"), is made by and between GALVESTON'S STEAKHOUSE CORP., a
Delaware corporation (the "Company"), and the entity named on the signature page
hereto (the "Initial Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement, dated as of July 15, 1998, between the Initial
Investors and the Company (the "Securities Purchase Agreement"), the Company has
agreed to issue and sell to the Initial Investors one or more 6% Convertible
Debentures of the Company, in an aggregate principal amount not exceeding
$1,000,000 (collectively, the "Debentures"), which Debentures will be
convertible into shares of the common stock, $.01 par value (the "Common
Stock"), of the Company (the "Conversion Shares") upon the terms and subject to
the conditions of such Debentures; and
WHEREAS, to induce the Initial Investors to execute and
deliver the Securities Purchase Agreement, the Company has agreed to provide
certain registration rights under the Securities Act of 1933, as amended, and
the rules and regulations thereunder, or any similar successor statute
(collectively, the "Securities Act"), with respect to the Conversion Shares;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investors hereby agree as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall have
the following meanings:
(i) "Investor" means the Initial Investors and any permitted
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iii) Potential Material Event means any of the following: (a)
the possession by the Company of material information not ripe for disclosure in
a registration statement, which shall be evidenced by determinations in good
faith by the Board of Directors of the Company that disclosure of such
information in the registration statement would be detrimental to the business
and affairs of the Company; or (b) any material engagement or activity by the
Company which would, in the good faith determination of the Board of Directors
of the Company, be adversely affected by disclosure in a registration statement
at such time, which determination shall be accompanied by a good faith
determination by the Board of Directors of the Company that the registration
statement would be materially misleading absent the inclusion of such
information.
(iv) "Registrable Securities" means the Conversion Shares.
(v) "Registration Statement" means a registration statement of
the Company under the Securities Act.
(b) Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. Registration.
(a) Mandatory Registration. The Company shall prepare and file
with the SEC, no later than forty-five (45) days following the initial Closing
Date under the Securities Purchase Agreement, either a Registration Statement on
Form SB-2 registering for resale by the Investor the number of shares into which
the Debentures would be convertible at the time of filing of the Form SB-2,
which Registration Statement shall be declared effective no later than 120 days
after the Closing Date.
(b) Payments by the Company. If the Registration Statement
covering the Registrable Securities required to be filed by the Company pursuant
to Section 2(a) hereof is not effective within the earlier of (a) 5 days after
notice by the SEC that it may be declared effective or (b) one hundred twenty
(120) days following the initial Closing Date (the Required Effective Date"), or
after a Suspension Period (except as provided by the last sentence of section
2a), then the Company will make payments to the Initial Investor in such amounts
and at such times as shall be determined pursuant to this Section 2(b). The
amount to be paid by the Company to the Initial Investor shall be determined as
of each Computation Date, and such amount shall be equal to two (2%) percent of
the cash purchase price paid by the Initial Investor for all Debentures then
purchased and outstanding pursuant to the Securities Purchase Agreement for any
period from the Required Effective Date to each Computation Date thereafter,
until the Registration Statement is declared effective by the SEC (the "Periodic
Amount"). The full Periodic Amount shall be paid by the Company in immediately
available funds within three business days after each Computation Date.
Notwithstanding the foregoing, the amounts payable by the Company pursuant to
this provision shall not be payable to the extent any delay in the effectiveness
of the Registration Statement occurs because of an act of, or a failure to act
or to act timely by the Initial Investor or its counsel, or in the event all of
the Registrable Securities may be sold pursuant to Rule 144 or another available
exemption under the Act.
As used in this Section 2(b), the following terms shall have
the following meanings:
"Computation Date" means the date which is thirty (30) days
after the Required Effective Date (except as provided by the last sentence of
section 2(a)), and, if the Registration Statement required to be filed by the
Company pursuant to Section 2(a) has not theretofore been declared effective by
the SEC, each date which is thirty (30) days after the previous Computation Date
(pro rated for partial periods) until such Registration Statement is so declared
effective.
3. Obligations of the Company. In connection with the
registration of the Registrable Securities, the Company shall do each of the
following.
(a) Prepare promptly, and file with the SEC by forty-five (45)
days after the initial Closing Date, a Registration Statement with respect to
not less than the number of Registrable Securities provided in Section 2(a),
above, and thereafter use its reasonable best efforts to cause each Registration
Statement relating to Registrable Securities to become effective the earlier of
(a) 5 days after notice by the SEC that it may be declared effective or (b) one
hundred twenty (120) days following the initial Closing Date, and keep the
Registration Statement effective at all times until the earliest (the
"Registration Period") of (i) the date that is two years after the Closing Date
(ii) the date when the Investors may sell all Registrable Securities under Rule
144 or (iii) the date the Investors no longer own any of the Registrable
Securities, which Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state 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;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) The Company shall permit a single firm of counsel
designated by the Initial Investors to review the Registration Statement and all
amendments and supplements thereto a reasonable period of time prior to their
filing with the SEC, and not file any document in a form to which such counsel
reasonably objects;
(d) Furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel identified to the
Company, (i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one (1) copy of the Registration
Statement, each preliminary prospectus and prospectus, and each amendment or
supplement thereto, and (ii) such number of copies of a prospectus, and all
amendments and supplements thereto and such other documents, as such Investor
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor;
(e) As promptly as practicable after becoming aware of such
event, notify each Investor of the happening of any event of which the Company
has knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Investor as such Investor may reasonably
request;
(f) As promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the SEC of a Notice of Effectiveness or any notice of effectiveness
or any stop order or other suspension of the effectiveness of the Registration
Statement at the earliest possible time;
(g) Notwithstanding the foregoing, if at any time or from time
to time after the date of effectiveness of the Registration Statement, the
Company notifies the Investors in writing of the existence of a Potential
Material Event, the Investors shall not offer or sell any Registrable Shares, or
engage in any other transaction involving or relating to the Registrable Shares,
from the time of the giving of notice with respect to a Potential Material Event
until such Investor receives written notice from the Company that such Potential
Material Event either has been disclosed to the public or no longer constitutes
a Potential Material Event; provided, however, that the Company may not so
suspend the right to such holders of Registrable Shares for more than two twenty
(20) day period in the aggregate during any 12-month period ("Suspension
Period") with at least a ten (10) business day interval between such periods,
during the periods the Registration Statement is required to be in effect;
(h) Provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the Registration Statement;
(i) Cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as the
Investors may reasonably request, and, within three (3) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the transfer agent for the Registrable
Securities (with copies to the Investors whose Registrable Securities are
included in such Registration Statement) an appropriate instruction and opinion
of such counsel; and
(j) Take all other reasonable actions necessary to expedite
and facilitate disposition by the Investor of the Registrable Securities
pursuant to the Registration Statement.
4. Obligations of the Investors. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. At
least five (5) days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Information") if such Investor elects to have any of such Investor's Registrable
Securities included in the Registration Statement.
(b) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(e)
or 3(f), above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f) and, if
so directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
5. Expenses of Registration. All expenses, other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 3, but including,
without limitation, all registration, listing, and qualifications fees, printers
and accounting fees, the fees and disbursements of counsel for the Company,
shall be borne by the Company.
6. Indemnification. In the event any Registrable
Securities are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act (each, an "Indemnified Person" or
"Indemnified Party"), against any losses, claims, damages, liabilities or
expenses (joint or several) (including reasonable attorneys fees) incurred
(collectively, "Claims") to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations in the Registration Statement, or any post-effective amendment
thereof, or any prospectus included therein: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any post-effective amendment thereof or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission to state
therein any material fact necessary to make the statements made therein, in
light of the circumstances under which the statements therein were made, not
misleading or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state securities
law (the matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to clause (b) of this Section 6, the Company shall
reimburse the Investors, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a) shall not (I) apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of any
Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto, (II)
be available to the extent such Claim is based on a failure of the Investor to
deliver or cause to be delivered the prospectus made available by the Company;
or (III) apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Each Investor will indemnify the Company and its
officers, directors and agents against any claims arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company, by or on behalf of such Investor, expressly
for use in connection with the preparation of the Registration Statement,
subject to such limitations and conditions as are applicable to the
Indemnification provided by the Company to this Section 6. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9;
(b) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be. In case any such action is brought against any Indemnified Person
or Indemnified Party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, assume the defense thereof, subject to the provisions herein stated
and after notice from the indemnifying party to such Indemnified Person or
Indemnified Party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such Indemnified Person or Indemnified
Party under this Section 6 for any legal or other reasonable out-of-pocket
expenses subsequently incurred by such Indemnified Person or Indemnified Party
in connection with the defense thereof other than reasonable costs of
investigation, unless the indemnifying party shall not pursue the action of its
final conclusion. The Indemnified Person or Indemnified Party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and reasonable out-of-pocket expenses of such
counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the Indemnified Person or Indemnified Party. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. Contribution. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6; (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation; and (c) contribution by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
8. Reports under Exchange Act. With a view to making available
to the Investors the benefits of Rule 144 promulgated under the Securities Act
or any other similar rule or regulation of the SEC that may at any time permit
the Investors to sell securities of the Company to the public without
registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. Assignment of the Registration Rights. The rights to have
the Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of the Registrable
Securities (or all or any portion of any Debenture of the Company which is
convertible into such securities) only if: (a) the Investor agrees in writing
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time after such
assignment, (b) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (i) the name and address of such
transferee or assignee and (ii) the securities with respect to which such
registration rights are being transferred or assigned, (c) immediately following
such transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws, and (d) at or before the time the Company received the
written notice contemplated by clause (b) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
contained herein. In the event of any delay in filing or effectiveness of the
Registration Statement as a result of such assignment, the Company shall not be
liable for any damages arising from such delay, or the payments set forth in
Section 2(c) hereof.
10. Amendment of Registration Rights. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors who
hold an eighty (80%) percent interest of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall
be in writing and shall be deemed to be sufficiently given when personally
delivered (by hand, by courier, by telephone line facsimile transmission,
receipt confirmed, or other means) or sent by certified mail, return receipt
requested, properly addressed and with proper postage pre-paid (i) if to the
Company, GALVESTON'S STEAKHOUSE CORP., 000 X. Xxxxxxxxxx Xxxx., Xxxxxxxxx,
Xxxxxxxxxx 00000, ATTN: Xx. Xxxxxxx Xxx, Telecopier No.: (000)000-0000; with a
copy to Xxxxxx & Eilen, Esqs., 00 Xxxxxxx Xxxxxxxxx Xxxx., Xxxxxxxxx, Xxx Xxxx
00000, Attention: Xxxx Xxxxxx, Esq., Telecopier No.: (000) 000-0000; (ii) if to
the Initial Investor, at the address set forth under its name in the Securities
Purchase Agreement and (iii) if to any other Investor, at such address as such
Investor shall have provided in writing to the Company, or at such other address
as each such party furnishes by notice given in accordance with this Section
11(b), and shall be effective, when personally delivered, upon receipt and, when
so sent by certified mail, four (4) calendar days after deposit with the United
states Postal Service.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York. Each of the parties consents
to the jurisdiction of the federal courts whose districts encompass any part of
the City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non coveniens, to the bringing of any such
proceeding in such jurisdictions. A facsimile transmission of this signed
Agreement shall be legal and binding on all parties hereto. This Agreement may
be signed in one or more counterparts, each of which shall be deemed an
original. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement. If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
(j) Neither party shall be liable for consequential damages.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
GALVESTON'S STEAKHOUSE CORP.
By: /s/ Xxxxxxx X. Xxx
Name: Xxxxxxx X. Xxx
Title: Chairman & CEO
------------------------------------
By: --------------------------------
Name: ------------------------------
Title: -----------------------------
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By: --------------------------------
Name: ------------------------------
Title: -----------------------------
EXHIBIT 10.21
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
No. US $ ___________
GALVESTON'S STEAKHOUSE CORP.
6% CONVERTIBLE DEBENTURE DUE JULY 15, 2001
THIS DEBENTURE is one of a duly authorized issue of up to $1,000,000 in
Debentures of GALVESTON'S STEAKHOUSE CORP., a corporation duly organized and
existing under the laws of the State of Delaware (the "Company") designated as
its 6% Convertible Debenture Due July 15, 2001.
FOR VALUE RECEIVED, the Company promises to pay to __________., the
registered holder hereof (the "Holder"), the principal sum of
_________________ THOUSAND and 00/100 (US $_________) Dollars on July 15, 2001
(the "Maturity Date") and to pay interest, in arrears on the principal sum
outstanding from time to time in arrears, on a quarterly basis on, September 30,
December 31, March 31 and June 30 of each year, at the rate of 6% per annum
accruing from the date of initial issuance. Accrual of interest shall commence
on the first such business day to occur after the date hereof until payment in
full of the principal sum has been made or duly provided for. Subject to the
provisions of #4 below, the principal of, and interest on, this Debenture are
payable at the option of the Holder, in shares of Common Stock $.01 par value
per share of the Company ("Common Stock"), or in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts, at the address last appearing on the Debenture
Register of the Company as designated in writing by the Holder from time to
time. The Company will pay the principal of and interest upon this Debenture on
the Maturity Date, less any amounts required by law to be deducted, to the
registered holder of this Debenture as of the tenth day prior to the Maturity
Date and addressed to such holder as the last address appearing on the Debenture
Register. The forwarding of such check shall constitute a payment of principal
and interest hereunder and shall satisfy and discharge the liability for
principal and interest on this Debenture to the extent of the sum represented by
such check plus any amounts so deducted.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Fifty Thousand
Dollars (US$50,000) and integral multiples thereof. The Debentures are
exchangeable for an equal aggregate principal amount of Debentures of different
authorized denominations, as requested by the Holders surrendering the same. No
service charge will be made for such registration or transfer or exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws or
other applicable laws at the time of such payments, and Holder shall execute and
deliver all required documentation in connection therewith.
3. This Debenture has been issued subject to investment representations
of the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act"), and other
applicable state and foreign securities laws. In the event of any proposed
transfer of this Debenture, the Company may require, prior to issuance of a new
Debenture in the name of such other person, that it receive reasonable transfer
documentation including opinions that the issuance of the Debenture in such
other name does not and will not cause a violation of the Act or any applicable
state or foreign securities laws. Prior to due presentment for transfer of this
Debenture, the Company and any agent of the Company may treat the person in
whose name this Debenture is duly registered on the Company's Debenture Register
as the owner hereof for the purpose of receiving payment as herein provided and
for all other purposes, whether or not this Debenture be overdue, and neither
the Company nor any such agent shall be affected by notice to the contrary.
4. A. Subject to Section 4B and 4C, the Holder of this Debenture is
entitled, at its option, to convert at any time, the principal amount of this
Debenture, provided that the principal amount is at least US $10,000 (unless if
at the time of such election to convert the aggregate principal amount of all
Debentures registered to the Holder is less that Ten Thousand Dollars (US
$10,000), then the whole amount thereof) into shares of Common Stock of the
Company at a conversion price for each share of Common Stock equal to 85% of the
Market Price (as herein defined) on the Conversion Date; provided, further, that
if such conversion is effected prior to the effective date of the Registration
Statement filed pursuant to the Registration Rights Agreement between the
Company and the Holder, or the Holder's predecessor in interest, the restrictive
legend required by the Act shall be applied to the shares of Common Stock so
issued. For purposes of this Section 4, the "Market Price" shall mean the
average closing sales price of the Company's Common Stock for the five days
preceding the Conversion Date as reported by the National Association of
Securities Dealers. Conversion shall be effectuated by surrendering the
Debentures to be converted to the Company with the form of conversion notice
attached hereto as Exhibit A, executed by the Holder of the Debenture evidencing
such Holder's intention to convert this Debenture or a specified portion (as
above provided) hereof, and accompanied, if required by the Company, by proper
assignment hereof in blank. Interest (and penalties) accrued or accruing from
the date of issuance to the date of conversion shall, at the option of the
Company, be paid in cash or Common Stock upon conversion at the Conversion Rate.
No fraction of Shares or scrip representing fractions of shares will be issued
on conversion, but the number of shares issuable shall be rounded to the nearest
whole share. The date on which notice of conversion is given (the "Conversion
Date") shall be deemed to be the date on which the Holder has delivered this
Debenture, with the conversion notice duly executed, to the Company or, the date
set forth in such facsimile delivery of the notice of conversion if the
Debenture is received by the Company within three (3) business days therefrom.
Facsimile delivery of the conversion notice shall be accepted by the Company at
telephone number (000-000-0000); ATTN: X. Xxx). Certificates representing Common
Stock upon conversion will be delivered within three (3) business days from the
date the notice of conversion with the original Debenture is delivered to the
Company.
B. (i) The Company shall have the right to redeem any Debentures
for which a Notice of Conversion has not theretofore been
submitted by delivering a Notice of Redemption to the Holder
of the Debenture; provided, however, that the Holder shall
have two (2) business days following the issuance of any
such Notice of Redemption to deliver a Notice of Conversion
to the Company in respect of the Debenture; provided,
further, that in the event the Holder shall so determine to
deliver a Notice of Conversion to the Company following the
Company's issuance of a Notice of Redemption,
notwithstanding anything to the contrary contained in this
Debenture, the applicable Conversion Price for the Debenture
shall be equal to 85% of the closing sales price of the
Company's Common Stock on last trading day preceding the
Conversion Date as reported by the National Association of
Securities Dealers.
(ii) The redemption price shall be equal to 115% of the then
outstanding principal amount of the Debenture.
(iii) The redemption price shall be paid to the Holder in cash
within ten (10) days from the date of the Notice of
Redemption. In the event such payment is not timely made,
the Notice of Redemption shall be null and void.
C. The Company shall have the right to require, by written
notice to the Holder of this Debenture no more than thirty (30) days, and no
less than ten (10) days, prior to the Maturity Date, that the Holder of this
Debenture exercise its right of conversion with respect to all or that portion
of the principal amount and interest outstanding on the Maturity Date.
5. No provision of this Debenture shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal of,
and interest on, this Debenture at the time, place, and rate, and in the coin or
currency, herein prescribed. This Debenture and all other Debentures now or
hereafter issued of similar terms are direct obligations of the Company.
6. No recourse shall be had for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, officer or director, as
such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
7. If the Company merges or consolidates with another corporation or
sells or transfers all or substantially all of its assets to another person and
the holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee agree that the Debenture may thereafter be
converted on the terms and subject to the conditions set forth above into the
kind and amount of stock, securities or property receivable upon such merger,
consolidation, sale or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before
such merger, consolidation, sale or transfer, subject to adjustments which shall
be as nearly equivalent as may be practicable. In the event of any proposed
merger, consolidation or sale or transfer of all or substantially all of the
assets of the Company (a "Sale"), the Holder hereof shall have the right to
convert by delivering a Notice of Conversion to the Company within fifteen (15)
days of receipt of notice of such Sale from the Company. In the event the Holder
hereof shall elect not to convert, the Company may prepay all outstanding
principal and accrued interest on this Debenture, less all amounts required by
law to be deducted, upon which tender of payment following such notice, the
right of conversion shall terminate.
8. The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the Shares of Common Stock
issuable upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky or foreign
laws or similar laws relating to the sale of securities.
9. This Debenture shall be governed by and construed in accordance with
the laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non coveniens, to the bringing of any such
proceeding in such jurisdictions.
10. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal
or interest on this Debenture and such default shall
remain unremedied for three (3) business days after
the Company has been notified of the default in
writing by a Holder; or
b. Any of the representations or warranties made by the
Company herein, in the Securities Purchase Agreement,
or in any certificate or financial or other written
statements furnished by the Company in connection
with the execution and delivery of this Debenture or
the Securities Purchase Agreement shall be false or
misleading in any material respect at the time made;
or
c: The Company fails to issue shares of Common Stock to the Holder
or to cause its Transfer Agent to issue shares of Common Stock
upon exercise by the Holder of the conversion rights of the
Holder in accordance with the terms of this Debenture, fails
to transfer or to cause its Transfer Agent to transfer any
certificate for shares of Common Stock issued to the Holder upon
conversion of this Debenture and when required by this Debenture
or the Registration Rights Agreement, or fails to remove any
restrictive legend or to cause its Transfer Agent to transfer on
any certificate or any shares of Common Stock issued to the
Holder upon conversion of this Debenture as and when required by
this Debenture, the Securities Purchase Agreement or the
Registration Rights Agreement and any such failure shall
continue uncured for three (3) business days after the Company
has been notified of such failure in writing by Holder.
d. The Company shall fail to perform or observe, in any
material respect, any other covenant, term,
provision, condition, agreement or obligation of the
Company under this Debenture and such failure shall
continue uncured for a period of thirty (30) days
after written notice from the Holder of such failure;
or
e. The Company shall (1) admit in writing its inability
to pay its debts generally as they mature; (2) make
an assignment for the benefit of creditors or
commence proceedings for its dissolution; or (3)
apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial
part of its property or business; or
f. A trustee, liquidator or receiver shall be appointed
for the Company or for a substantial part of its
property or business without its consent and shall
not be discharged within sixty (60) days after such
appointment; or
g. Any governmental agency or any court of competent
jurisdiction at the instance of any governmental
agency shall assume custody or control of the whole
or any substantial portion of the properties or
assets of the Company and shall not be dismissed
within sixty (60) days thereafter; or
h. Any money judgment, writ or warrant of attachment, or
similar process in excess of Five Hundred Thousand
($500,000) Dollars in the aggregate shall be entered
or filed against the Company or any of its properties
or other assets and shall remain unpaid, unvacated,
unbonded or unstayed for a period of sixty (60) days
or in any event later than five (5) days prior to the
date of any proposed sale thereunder; or
i. Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors
shall be instituted by or against the Company and, if
instituted against the Company, shall not be
dismissed within sixty (60) days after such
institution or the Company shall by any action or
answer approve of, consent to, or acquiesce in any
such proceedings or admit the material allegations
of, or default in answering a petition filed in any
such proceeding; or
j. The Company shall have its Common Stock suspended or
delisted from an exchange or over-the-counter market
from trading for a period in excess of five trading
days.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kinds, all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately enforce any and all of the Holder's rights and
remedies provided herein or any other rights or remedies afforded by law.
11. Nothing contained in this Debenture shall be construed as
conferring upon the Holder the right to vote or to receive dividends or to
consent or receive notice as a shareholder in respect of any meeting of
shareholders or any rights whatsoever as a shareholder of the Company, unless
and to the extent converted in accordance with the terms hereof.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: July 15, 1998
GALVESTON'S STEAKHOUSE CORP.
By:/s/ ------------------------
/s/ ---------------------------
(Print Name)
---------------------------
(Title)
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $ ________________
of the principal amount of the above Debenture No. ___ into shares of Common
Stock of GALVESTON'S STEAKHOUSE CORP. (the "Company") according to the
conditions hereof, as of the date written below. In converting the Debenture No.
______________, the undersigned hereby confirms and acknowledges that the shares
of Common Stock are being acquired solely for the account of the undersigned and
not a nominee for any other party, and that the undersigned will not offer, sell
or otherwise dispose of any such shares of Common Stock, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended.
Date of Conversion* ------------------------------------------------------------
Applicable Conversion Price ----------------------------------------------------
Signature ----------------------------------------------------------------------
[Name]
Address: -----------------------------------------------------------------------
-----------------------------------------------------------------------
* This original Debenture and Notice of Conversion must be received by the
Company by the third business date following the Date of Conversion.
EXHIBIT 10.22
NOTE PURCHASE AGREEMENT
THIS AGREEMENT ("Agreement") is made this 28th day of September 1998, between
Galveston's Steakhouse Corp. and its assignees and/or successors (the "Company")
and Talisman Capital Opportunity Fund Ltd. (the "Purchaser").
RECITAL
WHEREAS, the Company has authorized, the issuance and sale of the Company's
Secured Convertible Note in the amount of one million four hundred thousand
dollars ($1,400,000.00) (the "Note").
WHEREAS, the Purchaser desires to purchase the Note set forth on Schedule I
hereto.
NOW, THEREFORE, in consideration of the foregoing and of the terms and
conditions contained in this Agreement, the Company and Purchaser agree as
follows:
NOTE.The Company agrees to sell and the Purchaser agrees to buy a Note, for a
price of 100% of the face value. Subject to the terms and conditions
contained in this Agreement and in the Note, at the Closing (as hereinafter
defined) the Purchaser shall purchase from the Company and the Company
shall sell to the Purchaser the Note set forth on Schedule I hereto.
CLOSING.
Date of Closing. The Closing of the purchase and sale of the Notes (the
"Closing") shall take place on or before October 9, 1998.
2.1 Items to be Delivered to Purchaser. The following shall be delivered
by the Company to each Purchaser on the Closing Date:
a) An executed copy of the Note Purchase Agreement;
b) The Note purchased by such Purchaser (Exhibit A);
c) A legal opinion of counsel to the Company covering the due
execution, delivery and binding effect of this Agreement and the
Notes; and
d) A certificate of the secretary of the Company certifying (i)
an attached complete and correct copy of its articles of
incorporation, (ii) an attached complete and correct copy of
its bylaws, and (iii) an attached complete and correct copy of
resolutions duly adopted by its board of directors authorizing
the execution, delivery and performance of this Agreement and
the Notes;
e) Properly executed and duly authorized Collateral Assignment
Agreement.
2.2 Items to be Delivered to the Company. The following shall be delivered
by each Purchaser to the Company on the Closing Date:
a) The purchase price set forth on Schedule I by wire transfer to
the account designated by the Company.
b) Executed copy of the Note Purchase Agreement.
REPRESENTATIONS AND WARRANTIES.
3.1 Representations and Warranties of the Company. The Company represents
and warrants that as of the date of this Agreement:
a) Existence. The Company is a corporation duly organized and in
good standing under the laws of the State of Delaware and is
duly qualified to do business and is in good standing in all
states where such qualification is necessary, except for those
jurisdictions in which the failure to qualify would not, in
the aggregate, have a material adverse effect on the Company's
financial condition, results of operations or business.
b) Authority. The execution and delivery by the Company of this
Agreement and the Notes (i) are within the Company's corporate
powers; (ii) are duly authorized by the Company's board of
directors; (iii) are not in contravention of the terms of the
Company's certificate of incorporation or bylaws; (iv) are not in
contravention of any law or laws: (v) except for the filing of a
Form D Notice with the Securities and Exchange Commission and any
exemption filing related thereto which may be required pursuant to
applicable state securities or "blue sky" laws, do not require any
governmental consent, registration or approval; (vi) do not
contravene any contractual or governmental restriction binding upon
the Company; and (vii) will not result in the imposition of any
lien, charge, security interest or encumbrance upon any property of
the Company under any existing indenture, mortgage, deed of trust,
loan or credit agreement or other material agreement or instrument
to which the Company is a party or by which the Company or any of
the Company's property may be bound or affected.
c) Binding Effect. This Agreement and Notes have been duly
authorized, executed and delivered by the Company and
constitute the valid and legally binding obligation of the
Company, enforceable in accordance with their respective
terms, subject to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
d) Litigation. There is neither pending nor, to the Company's
knowledge and belief, threatened any action, suit, proceeding
or claim, or any basis therefor, to which the Company is or
may be named as a party or its property is or may be subject
or which calls into question any of the transactions
contemplated by this Agreement.
f) Securities Matters. Subject to the accuracy of the
representations of the Purchaser set forth in Section 3.2
hereof, the offer, sale and issuance of the Notes and the
Shares as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act of 1933 as
amended (The "Securities Act"). The Company has complied and
will comply with all applicable state "blue sky" or securities
laws in connection with the offer, sale and issuance of the
Notes and the Shares as contemplated by this Agreement.
g) Independent Auditors. The Company shall, until at least three
(3) years after the Closing Date, maintain as its independent
auditors an accounting firm authorized to practice before the
SEC.
h) Registration Rights. The Company will enter into a
registration rights agreement covering the resale of the
Conversion Shares and the Warrant Shares having the terms set
forth in Section 4 of this Agreement.
i) Asset Transfers. The Company shall not transfer, sell, convey,
use as collateral or otherwise dispose of any of its material
assets to any Subsidiary or affiliate except for a cash or
cash equivalent consideration and for a proper business
purpose, while any of the Notes are outstanding, without
written consent from the Purchaser.
j) Right of First Offer. The Company agrees that, during the period
beginning on the date hereof and terminating on the second
anniversary of the date of the Closing, the Company will not,
without the prior written consent of the Investor issue or sell, or
agree to issue or sell any equity or debt securities of the Company
or any of its subsidiaries (or any security convertible into or
exercisable or exchangeable, directly or indirectly, for equity or
debt securities of the Company or any of its subsidiaries) ("Future
Offerings") unless the Company shall have first delivered to the
Investor at least ten (10) trading days prior to the closing of
such Future Offering, written notice describing the proposed Future
Offering, including the terms and conditions thereof, and providing
the Investor and its affiliates an option during the five (5)
trading day period following delivery of such notice to purchase up
to the full amount of the securities being offered in the Future
Offering on the same terms as contemplated by such Future Offering.
The Investor shall notify the Company, in writing, prior to the end
of such ten (10) trading day period if it desires to participate in
the Future Offering.
k) Payment of Taxes and Other Claims. The Company shall pay or
discharge or cause to be paid or discharged, before the same shall
become delinquent, (i) in all material taxes, assessments and
governmental charges (including withholding taxes and any
penalties, interest and additions to taxes) levied or imposed upon
it or any of its Subsidiaries or properties of it or any of its
Subsidiaries and (ii) all lawful claims for labor, materials, and
supplies that, if unpaid, might by law become a Lien upon the
property of it or any of its Subsidiaries; provided, however, that
the Company shall not be required to pay or discharge any such tax,
assessment, charge or claim whose amount, applicability or validity
is being contested in good faith by appropriate proceedings
properly instituted and diligently conducted for which adequate
reserves, to the extent required under GAAP, have been taken.
l) Compliance Certificate; Notice of Default. The Company shall
deliver to the Buyer, within 90 days after the end of the
Company's fiscal year, an Officer's Certificate stating that a
review of its activities and the activities of its
Subsidiaries during the preceding fiscal year has been made
under the supervision of the signing officers with a view to
determining whether each of the Company and its Subsidiary has
kept, observed, performed and fulfilled its obligations under
this agreement.
m) Compliance with Laws. The Company shall comply, and shall
cause each of its Subsidiaries to comply, with all applicable
statutes, rules, regulations, orders and restrictions of the
United States of America, all states and municipalities
thereof, and of any instrumentality of the foregoing, in
respect of the conduct of their respective businesses and the
ownership of their respective properties, expect for
noncompliances as are not in the aggregate reasonably likely
to have a material adverse effect on the financial condition
or results of operations of the Company and its Subsidiaries,
taken as a whole.
n) Waiver of Stay, Extension of Usury Laws. The Company covenants that
it will not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or
forgive the Company from paying all or any portion of the principal
of or interest on the Notes as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect
the covenants or the performance if this Indenture; and (to the
extent that it may lawfully do so) the Company hereby expressly
waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or impede the execution of any power
herein granted to the Buyer, but will permit the execution of every
such power as though no such law had been enacted.
o) Limitation on Dividend and Other Payment Restricitons
Affecting Subsidiaries. The Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly,
create or otherwise cause or permit to exist or become
effective any encumbrance or restriction on the ability of any
Subsidiary to (a) pay dividend or make any other distributions
on or in respect of its Capital Stock; or (b) make loans or
advances or to pay any Indebtedness or other obligation owed
to the Company or any Subsidiary.
p) Change of Control. Upon the occurrence of a Change of Control, the
Company shall make an offer to purchase the outstanding Note at a
purchase price equal to the greater of: (i) 150% of the principal
amount thereof plus accrued interest to the date of purchase; or
(ii) the intrinsic value of the Note on the date the change of
control occurs. As defined herein and in Exhibits A and B hereto,
intrinsic value is defined as: (applicable market price - maximum
conversion price) x ((principal amount of Note outstanding + any
and all accrued and unpaid interest + fees)/ (maximum conversion
price)). Change of Control shall be defined as: (i) a purchase of a
majority of the Company's Common Stock; (ii) a merger of the
Company with another entity which results in shareholders of the
Company owning less than 50.01% of the Company; (iii) the removal
of Xxxxxxx X. Xxx as Chairman or Chief Executive Officer; (iv) the
sale of the Company to another entity.
3.2 Representations and Warranties of the Purchasers. Each Purchaser
represents and warrants that as of the date of the execution of this
Agreement:
a) Authorization. This Agreement constitutes a valid and legally
binding obligation of such Purchaser.
b) Investment Representations.
(i) The Purchaser has received and reviewed the Company's
disclosure documents and the Purchaser or the
Purchaser's designated representatives have concluded
a satisfactory due diligence investigation of the
Company and have had an opportunity to have all their
questions regarding the Company satisfactorily
answered.
(ii) The Purchaser (or its members and/or officers) have
previously invested in unregistered securities and
have sufficient financial and investing expertise to
evaluate and understand the risks of the Notes and
the Shares.
(iii) The Purchaser has received financial information and
general business information from the Company, and is
relying on, representations (except as set forth in
the Agreement) and projections with respect to the
Company's business and prospects.
(iv) The Purchaser is an "accredited investor" within the
meaning of Regulation D under the Securities Act.
(v) The Purchaser is acquiring the Notes and the Shares
for investment purposes only without intent to
distribute the same, and acknowledges that the Notes
and the Shares have not been registered under the
Securities Act and applicable state securities laws,
and accordingly, constitute "restricted securities"
for purposes of the Securities Act and such state
securities laws.
(vi) The Purchaser acknowledges that it will not be able
to transfer the Notes and Shares except upon
compliance with the registration requirements of the
Securities Act and applicable state securities laws
or exemptions therefrom.
(vii) The certificates and/or instruments evidencing the
Notes will contain a legend to the foregoing effect.
(viii) Neither the Buyer, nor any affiliate of the Buyer,
will enter into, any put option, short position, or
other similar position with respect to the Notes or
the shares, nor shall Buyer lend the Notes or the
shares to any person, whether or not an affiliate, so
as to enable or assist such person to enter into, any
put option, short position, or other similar position
with respect to the Notes or the shares, except that
margin accounts used by the Buyer to hold the Notes
or shares shall not be deemed to be a lending of
notes or shares.
3.3 Obligations of the Buyer. All obligations entered into by the Buyer
are contingent on successful completion of due diligence by the Buyer.
REGISTRATION RIGHTS.
4.1 Registration of Shares.
a) The Company shall prepare and file with the SEC a registration
statement as soon as practical, which registration statement shall
include shares issuable upon conversion of the Notes, and shall
thereafter use its best efforts to have such registration statement
declared effective within 120 days after the Closing Date (the
"Target Date") and remain effective until the earlier of the date on
which all the Notes are sold or for the life of the Note (the
"Effective Period"). Such Registration Statement shall initially
cover at least 150% of the shares issuable upon conversion of the
Notes into Common Stock and shall cover, to the extent allowed by
applicable law, such additional indeterminate number of shares of
Common Stock as are required to effect conversion of the Notes due to
fluctuations in the price of the Company's Common Stock, in
accordance with Rule 416 of the Act. The Company shall prepare and
file with the SEC such amendments and supplements necessary to keep
such registration statement effective throughout the Effective Period
and to comply with the provisions of the Securities Act with respect
to the sale of other disposition of the Shares covered by such
registration statement whenever the Purchaser shall desire to sell or
otherwise dispose of the same.
b) If the effectiveness of the Registration statement is suspended or a
current prospectus meeting the requirements of Section 10 of the Act
is not available for delivery by the Purchaser for a period of more
than ten (10) calendar days (either referred to herein as a
"suspension"), the Company shall pay to the Purchasers as
liquidated damages an aggregate amount equal to two percent (2%) of
the total purchase price of the Notes for each thirty (30) day period
following the initial ten (10) days of the suspension. Such amounts
shall be pro-rated daily and paid to each Purchaser by cashier's
check or wire transfer in immediately available funds to such account
as shall be designated in writing by the Purchaser. Failure to make
such payments within three (3) business days of the end of each
calendar month shall be considered under the terms of the Note an
Event of Default.
c) Any amount payable pursuant to the foregoing provisions shall
be delivered on or before the third (3rd) day following the
end of the calendar month in which such payment or delivery
obligation arose.
d) The Company shall file a request for acceleration of
effectiveness of the registration statement within five days
after it has received a no review/no further comment
determination from the SEC.
4.2 Participation in Registered Offerings ("Piggyback Rights" for Shares).
If the Company at any time after the date of this Agreement and prior
to the maturity or full conversion of the Notes proposes or is
required to register any of its shares or other equity securities for
public sale for cash under the Securities Act, it will at each such
time or times give written notice to the Purchaser of its intention to
do so. Upon the written request of the Purchaser given within twenty
(20) days after receipt of any such notice, the Company shall use its
best efforts to cause to be included in such registration any Shares
held by the Purchaser or Shares obtainable upon conversion of the Note
and requested to be registered under the Securities Act and any
applicable state securities laws; provided, that if the managing
underwriter advises that less than all of the shares to be registered
should be offered for sale so as not materially and adversely to
affect the price or salability of the offering being registered by the
company, the Purchaser (but not the Company to the extent it desires
to include shares for its own account) shall reduce the number of its
shares to be included in the registration statement, but in no case
should the share reduction be more than 50% of the shares initially
proposed to be registered by the Purchaser as required by the
underwriter to the extent requisite to permit the sale or other
disposition (in accordance with the intended method of disposition
thereof as aforesaid) by the prospective seller or sellers of the
securities so registered. The registration requested pursuant to this
Section 4.2 is referred to herein as the "Piggyback Registration".
4.3 Demand Registration Rights. If the Holders of a majority of the Notes
so elect, an offering of Registrable Securities pursuant to the
Registration Statement may be effected in an Underwritten Offering of
the Company. In such event, the investment banker that will administer
the offering will be selected by the Holders of a majority of the
Registrable Securities to be included in such offering. In connection
with any Underwritten Offering, if the managing underwriters advise
the Company and the participating Holders in writing that in their
opinion the amount of Registrable Securities proposed to be sold in
such Underwritten Offering exceeds the amount of Registrable
Securities which can be sold in such Underwritten Offering, there
shall be included in such Underwritten Offering the amount of such
Registrable Securities which in the opinion of such managing
underwriters can be sold, and such amount shall be allocated pro rata
among the Holders proposing to sell Registrable Securities in such
Underwritten Offering. No Holder may participate in any Underwritten
Offering hereunder unless such Holder (i) agrees to sell its
Registrable Securities on the basis provided in any underwriting
agreements approved by the Persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other
documents required under the terms of such arrangements.
4.4 Obligations of the Purchaser. It shall be a condition precedent to the
obligation of the company to register any Shares pursuant to this
Section 4 that Purchaser shall furnish to the Company such information
regarding the Shares held and the intended method of disposition
thereof and other information concerning the Purchaser as the Company
shall reasonably request and as shall be required in connection with
the registration statement to be filed by the company. If after a
registration statement becomes effective the Company advises the
Purchaser that the Company considers it appropriate to amend or
supplement the applicable registration statement, the Purchaser shall
suspend further sales of the Shares until the Company advises the
Purchaser that such registration statement has been amended or
supplemented.
4.5 Registration Proceedings. Whenever the Company is required by the
provisions of this Section 4 to effect the registration of the Shares
under the Securities Act, the Company shall:
(i) Prepare and file with the SEC a registration statement with
respect to such securities and use its best efforts to cause
such registration statement to become and remain effective;
(ii) Prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus
contained therein as may be necessary to keep such
registration statement effective;
(iii) Furnish to the Purchaser 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;
(iv) 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 the
Purchaser may reasonably request within twenty (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.
(v) Notify the Purchaser, within three (3) business days 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;
(vi) Notify the Purchaser within three (3) business days of any
request by the SEC for the amending or supplementing of such
registration statement or prospectus or for additional
information; and
(vii) Prepare and promptly file with the SEC and promptly notify the
Purchaser 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 light of the circumstances in which they were made, not
misleading. Notwithstanding any provision herein to the contrary,
the Company shall not be required to amend, supplement, or update a
prospectus contained in any registration statement if to do so
would result in an unduly burdensome expense to the Company.
4.6 Expenses. If registration pursuant to Section 4 does not occur, with
respect to the inclusion of the Shares in a registration statement
pursuant to this Section 4, all registration expenses, fees, costs and
expenses of and incidental to such registration, inclusion and public
offering in connection therewith shall be borne by the Company. The
fees, costs and expenses of registration to be borne by the Company
shall include, without limitation, all registration, filing, 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
security holders are required to bear such fees and disbursements),
and all legal fees and disbursements and other expenses of complying
with state securities or Blue Sky Laws of any jurisdiction in which
the securities to be offered are to be registered or qualified.
4.7 Indemnification of the Holder. Subject to the conditions set forth
below, in connection with any registration of the Shares pursuant to
this Section 4, the Company agrees to indemnify and hold harmless the
Purchaser, any underwriter for the Company or acting on behalf of the
Purchaser and each person, if any, who controls the Purchaser, within
the meaning of Section 15 of the Securities Act, as follows:
(i) Against any and all loss, claim, damage and expense whatsoever
arising out of or based upon (including, but not limited to, any and
all expense whatsoever reasonable incurred in investigating,
preparing or defending any litigation, commenced or threatened, or
any claim whatsoever based upon) any untrue or alleged untrue
statement of a material fact contained in any preliminary
prospectus (if used prior to the effective date of the registration
statement), the registration statement or the prospectus (as from
time to time amended and supplemented), or in any application or
other document executed by the Company or based upon written
information furnished by the Company filed in any jurisdiction in
order to qualify the Company's securities under the Securities laws
thereof, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein not misleading, or any other violation of applicable federal
or state statutory or regulatory requirements or limitations
relating to action or inaction by the Company in the course of
preparing, filing, or implementing such registered offering;
provided, however, that the indemnity agreement contained in this
section shall not apply to any loss, claim, damage, liability or
action arising out of or based upon any untrue or alleged untrue
statement or omission made in reliance upon and in conformity with
any information furnished in writing to the company by or on behalf
of the Purchaser expressly for use in connection therewith or
arising out of any action or inaction of the Purchaser;
(ii) Subject to the provision contained in Subsection 4.6 (i)
above, against any and all loss, liability, claim, damage and
expense whatsoever to the extent of the aggregate amount paid
in settlement of any litigation, commenced or threatened, or
of any claim whatsoever based upon any untrue statement or
omission (including, but not limited to, any and all expense
whatsoever reasonable incurred in investigating, preparing or
defending against any such litigation or claim) if such
settlement is effected with the written consent of the
Company;
(iii) In no case shall the Company be liable under this indemnity
agreement with respect to any claim made against such seller,
underwriter or any such controlling person unless the Company shall
be notified, by letter or by facsimile confirmed by letter, of any
action commenced against such persons, promptly after such person
shall have been served with the summons or other legal process
giving information as to the nature and basis of the claim. The
failure to so notify the Company, if prejudicial in any material
respect to the Company's ability to defend such claim, shall relieve
the Company from its liability to the indemnified person under this
Section 4, but only to the extent that the Company was prejudiced.
The failure to so notify the Company shall not relieve the Company
from any liability which it may have otherwise than on account of
this indemnity agreement. The Company shall be entitled to
participate at its own expense in the defense of any suit brought to
enforce any such claim, but if the company elects to assume the
defense, such defense shall be conducted by counsel chosen by it,
provided such counsel is reasonably satisfactory to the sellers or
controlling persons, defendants in any suit so brought. In the event
the Company elects to assume the defense of any such suit and retain
such counsel, the sellers, underwriter or controlling persons,
defendants in the suit, shall, after the date they are notified of
such election, bear the fees and expenses of any counsel thereafter
retained by them, as well as any other expenses thereafter incurred
by them in connection with the defense thereof; provided, however,
that if the sellers, underwriter or controlling persons reasonably
believe that there may be available to them any defense or
counterclaim different than those available to the Company or that
representation of such sellers, underwriters or controlling persons
by counsel for the Company presents a conflict of interest for such
counsel, then such sellers, underwriter and controlling person shall
be entitled to defend such suit with counsel of their own choosing
and the Company shall bear the fees, expenses and other costs of
such separate counsel.
4.8 Indemnification of the Company. Each Purchaser agrees to indemnify and
hold harmless the Company, each underwriter for the offering, and each
of their officers and directors and agents and each other person, if
any, who controls the Company and underwriter within the meaning of
Section 15 of the Securities Act against any and all such losses,
liabilities, claims, damages and expenses as are indemnified against
by the Company under Section 4.6 above; provided, however, that such
indemnification by Purchaser hereunder shall be limited to any losses,
liabilities, claims, damages, or expenses to the extent caused by any
untrue statement of a material fact or omission of a material fact
(required to be stated therein or necessary to make statements therein
not misleading), if any are made (or in settlement of any litigation
effected with the written consent of such sellers, alleged to have
been made) in any preliminary prospectus, in the registration
statement or prospectus or in any amendment or supplement thereof or
in any report furnished in respect to such seller by or on behalf of
such seller expressly for use in any preliminary prospectus, in the
registration statement or prospectus or in any amendment or supplement
thereof or in any such application or other document or arising out of
any action or inaction of such seller in implementing such registered
offering. Notwithstanding the foregoing, the indemnification
obligation of each Purchaser shall not exceed the purchase price of
the Notes paid by such Purchaser. In case any action shall be brought
against the Company, or any other person so indemnified, in respect of
which indemnity may be sought against any seller, such seller shall
have the rights and duties given to the Company, and each other person
so indemnified shall have the rights and duties given to the
Purchaser, by the provisions of Section 4.6. The person indemnified
agrees to notify the sellers promptly after the assertion of any claim
against the person indemnified in connection with the sale of
securities.
4.9 Contribution. If the indemnification provided for in Sections 4.6 and
4.7 above are unavailable or insufficient to hold harmless an
indemnified party in respect of an losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then
each indemnifying party shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages
or liabilities (or actions in respect thereof) in such proportion as
is appropriate to reflect the relative fault of the indemnified party,
on one hand, and such indemnifying party, on the other hand, in
connection with the statements or omissions which resulted in such
losses, claims, damages, or liabilities (or actions in respect
thereof). The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of
a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the indemnified
party, on one hand, or such indemnifying party, on the other hand, and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. No
person who has committed fraudulent misrepresentation (within the
meaning of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof
referred to above in this Section) shall be deemed to include any
legal or other expenses reasonable incurred by such indemnified party
in connection with investigating or defending any such action or
claim.
LIQUIDATED DAMAGES
The Company agrees that the Purchaser will suffer damages if the
Registration Statement covering all Registrable Securities is not filed
with and declared effective by the SEC and maintained in the manner and
within the time period contemplated by Article 4 hereof, or if the
Company has insufficient authorized and issuable shares necessary to
honor tendered Notices of Conversion, and it would not be feasible to
ascertain the extent of such damages with precision. Accordingly, if
(i) the Registration Statement is not filed and declared effective by
the Commission on or prior to the date that is 120 days after the
Closing Date, or (ii) the Registration Statement is filed and declared
effective but shall thereafter cease to be effective (without being
succeeded immediately by an additional Registration Statement filed and
declared effective) for a period of time which shall exceed 10 days in
the aggregate per year (defined as a period of 365 days commencing on
the date the Registration Statement is declared effective) (each such
event referred to in clauses (i) and (ii) is referred to herein as a
"Registration Default"), then, for so long as such default shall
continue, the Company shall pay in cash as Liquidated Damages to each
Holder of Restricted Securities who has complied with such Holder's
obligations hereunder an amount equal to two (2%) percent for the first
30 day period past the Target Date and three (3%) percent for each
thirty (30) day period thereafter (or fraction thereof) of the
aggregate principal amount of Notes then owned of record by such Holder
under the Securities Purchase Agreement immediately following the
occurrence of such Registration Default. Such payment shall be made to
each Purchaser within three (3) calendar days of the end of each month
by cashier's check or wire transfer in immediately available funds to
such account as shall be designated in writing by the Purchaser and
shall be paid irrespective of the amount of Shares held by Purchaser on
the Target Date and thereafter. Failure to make such payments shall be
considered under the terms of the Note an Event of Default.
6. MISCELLANEOUS.
6.1 Confidentiality.
(a) The Purchaser agrees to keep confidential any and all non-public
information delivered or made available to the Purchase by the
Company except for disclosures, as necessary, made by the
Purchaser to the Purchaser's officers, directors, employees,
agents, counsel and accountants each of whom shall be notified by
the Purchaser of this confidentiality covenant and for whom
the Purchaser shall be liable in the event of any breach of this
covenant by any such individual or individuals; provided,
however, that nothing herein shall prevent the Purchaser
from disclosing such information (a) upon the order of any court
or administrative agency, (b) upon the request or demand of any
regulatory agency or authority having jurisdiction over the
Purchaser, (c) which has been publicly disclosed or (d) to any of
its members provided that any such members agree in writing (with
a copy provided to the Company) to be bound by confidentiality
provision in form and substance substantially as are contained
herein. In the event of a mandatory disclosure as described in
clause (a) and/or (b) of the preceding sentence, the Purchaser
shall promptly notify the Company in writing of any applicable
order, request or demand for such information, cooperate with the
Company if and to the extent that the Company elects to seek an
appropriate protective order or other relief from such order,
request, or demand, and disclose only the minimal amount of
information ultimately required to be disclosed. The Purchaser
shall not use for its own benefit, nor permit any other person to
use for such person's benefit, any of the Company's non-public
information including, without limitation, in connection with the
purchase and/or sale of the Company's securities.
(b) The Company shall in no event disclose non-public information to
the Purchaser, advisors to or representatives of the Purchaser
unless prior to disclosure of such information the Company
marks such information as "Non-Public Information - Confidential"
and provides the Purchaser, such advisors and representatives
with the opportunity to accept or refuse to accept such
non-public information for review. The Company may, as a
condition to disclosing any non-public information hereunder,
require the Purchaser's advisors and representatives to enter
into a confidentiality agreement in form reasonably satisfactory
to the Company and the Purchaser.
(c) Nothing herein shall require the Company to disclose non-public
information to the Purchaser or its advisors or representatives,
and the Company represents that it does not disseminate
non-public information to any Purchasers who purchase stock in
the Company in a public offering, to money managers or to
securities analysts, provided, however, that notwithstanding
anything herein to the contrary, the Company will, as herein
above provided, immediately notify the advisors and
representatives of the Purchaser and, if any, underwriters, of
any event or the existence of any circumstance (without any
obligation to disclose the specific event or circumstance) of
which it becomes aware, constituting non-public information
(whether or not requested of the Company specifically or
generally during the course of due diligence by such person or
entities), which, if not disclosed in the prospectus included in
the Registration Statement would cause such prospectus to include
a material misstatement or to omit a material fact required to be
stated therein in order to make the statements, therein, in light
of the circumstances in which they were made, not misleading.
Nothing herein shall be construed to mean that such persons or
entities other than the Purchaser (without the written consent of
the Purchaser prior to disclosure of such information) may not
obtain non-public information in the course of conducting due
diligence in accordance with the terms of this Agreement and
nothing herein shall prevent any such persons or entities from
notifying the Company of their opinion that based on such due
diligence by such persons or entities, that a Registration
Statement contains an untrue statement of a material fact or
omits a material fact required to be stated in the Registration
Statement or necessary to make the statements contained therein,
in light of the circumstances in which they were made, nor
misleading.
6.2 Costs and Expenses. The Company shall bear their own costs and
expenses in connection with the preparation, execution and
delivery of this Agreement. The Company shall reimburse the
Purchaser, pursuant to Section 3.1(j) for its expenses in
connection with this transaction.
6.3 Assignability; Successors. The provisions of the Agreement
shall inure to the benefit of and be binding upon the
permitted successors and assigns of the parties hereto.
6.4 Survival. All agreements, covenants, representations and
warranties made by the Company or by the Purchaser herein
shall survive the execution and delivery of this Agreement for
the life of the Notes or until the Notes are fully converted
or fully redeemed.
6.5 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED ACCORDING TO
THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO THE
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAWS.
6.6 Counterparts: Headings. This Agreement may be executed in
several counterparts, each of which shall be deemed an
original, but such counterparts shall together constitute but
one and the same agreement. The descriptive headings in this
Agreement are inserted for convenience of reference only and
shall not affect the construction of this Agreement.
6.7 Entire Agreement, Amendments. This Agreement and the Exhibits
hereto contain the entire understanding of the parties with
respect to the subject matter hereof, and supersede all other
representations and understandings, oral or written, with respect
to the subject matter hereof. No amendment, modification,
alteration, or waiver of the terms of this Agreement or
consent required under the terms of this Agreement shall be
effective unless made in a writing, which makes specific
reference to this Agreement and which has been signed by the
Company and each Purchaser. Any such amendment, modification,
alteration, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
6.8 Notices. All communications or notices required or permitted by
this Agreement shall be in writing and shall be deemed to have
been given or made when delivered in hand, deposited in the mail,
or sent by facsimile, with confirmation (if sent by facsimile on
a non-business day, receipt shall be deemed to have occurred on
the next succeeding business day). Communications or notices
shall be delivered personally or by certified or registered mail,
postage, or by facsimile and addressed as follows, unless and
until either of such parties notifies the other in accordance
with this Section of a change of address:
if to the Company: Galveston's Steakhouse Corp.
000 Xxxx Xxxxxxxxxx Xxxx.
Xxxxxxxxx, XX 00000
Attn: Xxxxxxx Xxx
Phone: 000.000.0000
Fax: 000.000.0000
with copies to: Xxxx Xxxxxx, Esq.
Xxxxxx & Xxxxx
Suite 505
50 Xxxxxxx Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000-0000
Phone: 000.000.0000
Fax: 000.000.0000
if to the Purchasers: Talisman Capital Opportunity Fund Ltd.
00000 XxXxxxxx Xxxxx, Xxxxx 000
Xxxxxx Xxxx, XX 00000
Attn: Xxxxx Xxxxx
Tel: 000.000.0000
Fax: 000.000.0000
6.9 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating
the remainder of such provision or the remaining provisions of
this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
GALVESTON'S STEAKHOUSE CORP.
By:__________________________________________
Its:_________________________________________
TALISMAN CAPITAL OPPORTUNITY FUND LTD.
By:__________________________________________
Its:_________________________________________
EXHIBIT 10.23
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF
UNDER SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS
THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE COMPANY AND ITS COUNSEL AND FROM ATTORNEYS REASONABLY
ACCEPTABLE TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.
Xx. 0 Xxxxxxxxx 00, 0000
XXXXXXXXX'X STEAKHOUSE CORP.
SECURED EXCHANGEABLE NOTE
DUE SEPTEMBER 28, 2003
FOR VALUE RECEIVED, GALVESTON'S STEAKHOUSE CORP., a Delaware
corporation (the "Company") hereby promises to pay to Talisman Capital
Opportunity Fund Ltd. having an address at 00000 Xx Xxxxxx Xxxxx, Xxxxx 000,
Xxxxxx Xxxx, Xxxxxxxx, 00000 (the "Noteholder"), or registered assigns, on or
before September 28, 2003 (the "Maturity Date"), the principal sum of
$650,000.00 (six hundred fifty thousand dollars) and to pay interest from the
date hereof on the principal sum remaining unpaid at the rate of 14.375% per
annum based on a 360-day year, such interest to accrue from the date hereof and
to be payable upon exchange of the Note into common stock, until the whole
amount of principal hereof shall be paid. The Coupon Rate of the Debenture shall
increase by 225 basis points every 360 days, up to a maximum of 25%. Principal
shall be payable in lawful money of the United States of America at the
principal office of the Noteholder or at such other place as the registered
holder may designate from time to time in writing to the Company.
1. EXCHANGE.
(a) For the first 90 calendar days following Closing, the Exchange
Price shall be 110% of the Closing Bid Price as defined below. The
Closing Bid Price shall mean the 5 trading day average closing bid
price for the 5 trading days immediately preceding Closing. On the
91st calendar day following Closing, the Exchange Price shall be
the lesser of:
(i) $4.6475; or
(ii) The average of the four low trades in the primary
market for trading in the Company's common stock
(as defined by Bloomberg L.P.) over the 22
trading days immediately preceding the Exchange
Date, reduced by the Exchange Discount (as
defined below) in effect during that particular
calendar month. The Exchange Discount shall be as
follows:
Days From Close Discount
91-180 15.0%
181-270 20.0%
271- maturity 25.0%
(b) In order to effect the exchange of all or part of the Note, the
Noteholder shall issue a Notice of Exchange substantially in the
form attached hereto (the "Notice of Exchange") which may be sent via
facsimile or regular mail and surrender the Note for exchange within
three (3) business days if the Note is not already in possession of
the Company. The Notice of Exchange pertaining to any portion of the
Note may be tendered for exchange up to 12:00 p.m. Central Standard
Time (the "Exchange Date") and is deemed to have been tendered upon
confirmation of facsimile being sent or deposit into the mail.
Exchange occurs once the Notice of Exchange has been delivered to
the Company (which delivery may be by facsimile). The Notice of
Exchange will include all pricing observations up to and including
the trading date immediately preceding the Exchange Date. To the
extent that any portion of the Note is converted, the rights of the
Noteholder with respect to such portion of the Note shall cease and
the Noteholder shall be deemed to have become the holder of record
of the shares of Exchange Shares represented thereby.
(c) No fractional Common shares shall be issued upon exchange of the
Note. In lieu of any fractional share to which the holder would
otherwise be entitled, the Company shall round up to the nearest
whole Common Size. In the case of a dispute as to the calculation
of the Exchange Price, the Purchaser's calculation shall be deemed
conclusive absent manifest error.
(d) Within five days after exchange has been effected, the Company
will deliver, either via Express Mail or DTC/DWAC electronic
transfer to the Noteholder:
(i) a certificate or certificates representing
the number of Exchange Shares issuable by
reason of exchange in the name of the
Noteholder and in such denomination or
denominations as the Noteholder has
specified; and
(ii) a new Note representing any principal
balance which was not converted into
Exchange Shares in connection with such
exchange.
(e) The issuance of certificates for Exchange Shares upon exchange of
the Note and/or interest will be delivered by the Company within
five business days of the Notice of Exchange or the interest
payment due date and will be made without charge to the Noteholder
for any issuance tax in respect thereof or other cost incurred by
the Company in connection with such exchange and the related
issuance of Exchange Shares. In the event the certificates are not
delivered within such five business day period, the Company shall
pay to the Noteholder Liquidated Damages as listed below for
each day until the date such certificates are delivered to the
Noteholder. Such Liquidated Damages shall be paid within three (3)
days of delivery of the shares or within three (3) days of the end
of each 30 day period.
Liquidated Damages For Each $10,000 of
Note Principal
No. Business Days Late Amount Being Exchanged
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1000
>10 1000 + $200 for each Business Day Late beyond
10 days.
(f) The Company shall at all times have authorized, reserved and set
aside a sufficient number of Common Shares for the exchange of all
shares with respect to the Note and interest then outstanding to
facilitate exchange thereof.
(g) The Exchange Price in effect at any time and the number and kind
of securities issuable upon the exercise of the Note shall be
subject to adjustment from time to time upon the happening of
certain events as follows after the date hereof and through and
including the Maturity Date:
(i) In case the Company shall (1) declare a dividend or make a
distribution to its outstanding shares of Common Stock in
shares of Common Stock, (2) subdivide or reclassify its
outstanding shares of Common Stock into a greater number of
shares, or (3) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares,
the Exchange Price in effect at the time of the record
date for such dividend or distribution or of the effective
date of such subdivision, combination or reclassification
shall be adjusted so that it shall equal the price
determined by multiplying the Exchange Price by a
fraction, the denominator of which shall be the number of
shares of Common Stock outstanding after giving effect to
such action, and the numerator of which shall be the
number of shares of Common Stock immediately prior to such
action. Such adjustment shall be made each time any event
listed above shall occur.
(ii) Whenever the Exchange Price is adjusted pursuant to
Subsection (i) above, the number of Exchange Shares
purchasable upon exchange of the Note shall be
simultaneously be adjusted by multiplying the number of
Exchange Shares initially issuable upon exchange of the
Note by the Exchange Price in effect on the date hereof
and dividing the product so obtained by the Exchange
Price, as adjusted.
(iii) All calculations under this Section 1.3(g)
shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the
case may be.
(iv) Whenever the Exchange Price is adjusted, as herein
provided, the Company shall promptly cause a notice
setting forth the adjusted Exchange Price and adjusted
number of Exchange Shares issuable upon exercise of the
Note to be mailed to the Noteholder, at its last address
appearing in the Company's register. The Company may
retain a firm of independent certified public accountants
selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any
computation required by this Section 1.3(g)(iii), and a
certificate signed by such firm or the Company's Chief
Financial Officer shall be conclusive evidence of the
correctness of such adjustment.
(h) In the event of a merger, reorganization, recapitalization or
similar event of or with respect to the Company (a "Corporate
Change") (other than a Corporate Change in which all or
substantially all of the consideration received by the holders of
the Company's equity securities upon such Corporate Change
consists of cash or assets other than securities issued by the
acquiring entity or any affiliate thereof), this Note shall be
convertible into such class and type or securities as the holder
would have received had the holder converted the Note immediately
prior to such Corporate Change, as appropriately adjusted to
equitably reflect the Exchange Price and any stock dividend, stock
split or share combination of the Common Stock after such
corporate event.
(i) Effective as of September 28, 2003, all remaining principal amount
of this Note not converted plus all accrued and unpaid interest
and fees shall automatically and without further action on the
part of such holders, be paid in cash.
(j) If the Common Stock issuable upon exchange of this Note at any time
or from time to time after the Issuance Date shall be changed into
the same or different number of shares of any class or classes
of stock, whether by reclassification, exchange, substitution or
otherwise (other than by way of a stock split or combination of
shares or stock dividends provided for in Sections 1g(i) and g(ii),
or a reorganization, merger, consolidation or sale of assets provided
for in Section 1h, then, and in each event, an appropriate revision
to the Exchange Price shall be made and provisions shall be
made (by adjustments of Exchange Price or otherwise) so that the
holder of this Note shall have the right thereafter to convert such
Note into the kind and amount of shares of stock and other
securities receivable upon reclassification, exchange, substitution
or other change, by the Holder of the number of shares of Common
Stock into which such Note might have been converted immediately
prior to such reclassifications, exchange, substitution or other
change, all subject to further adjustment as provided herein.
(k) For the life of the Note, if there shall be a capital reorganization
of the Company (other than by way of a stock split or combination of
shares or stock dividends provided for in Sections g(i) and (ii), or
a reorganization, merger, consolidation or sale of assets provided
for in Section h, then, and in each event, an appropriate revision to
the Exchange Price shall be made and provisions shall be made (by
adjustments of Exchange Price or otherwise) so that the holder of
this Note shall have the right thereafter to convert this Note into
the kind and amount of shares of stock and other securities or
property of the Company or any successor corporation resulting from
such reorganization, merger, consolidation, or sale, to which a
holder of Common Stock deliverable upon exchange of such shares would
have been entitled upon such reorganization, merger, consolidation,
or sale. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Section 1(k) with respect
to the rights of the Holder of this Note after the reorganization,
merger, consolidation or sale to the end that the provisions of this
Section 1(k) (including any adjustment in the applicable Exchange
Ratio then in effect and the number of shares of stock or other
securities deliverable upon exchange of this Note) shall be applied
after that event in as nearly an equivalent manner as may be
practicable.
(l) For 36 months following the Issuance Date, if the Company shall issue
or sell any shares of Common Stock to any party other than Company
Employees for a consideration per share which shall be less than
eighty (80%) percent of the Average Closing Bid Price per share of
Common Stock for the five (5) consecutive trading days immediately
prior to the time of such issue or sale (the "Trigger Price"), then
forthwith upon such issue or sale, the number of shares of Common
Stock issuable upon exchange of the Note in effect immediately prior
to such issue or sale shall be adjusted by multiplying the number of
shares of Common Stock issuable upon exchange of the Note in effect
immediately prior to the time of such issue or sale by a fraction:
(A) the numerator of which shall be (i) the total number
of shares of Common Stock issued and outstanding
immediately after such issue or sale, multiplied by
(ii) the Trigger Price; and
(B) the denominator of which shall be the sum of (i) the
number of shares of Common Stock outstanding
immediately prior to such issue or sale multiplied by
the Trigger Price, plus (ii) the consideration
received by the Company upon such issue or sale.
(m) In case at any time the Company shall grant, issue or sell (whether
directly or by assumption in a merger or otherwise) any rights or
warrants to subscribe for or to purchase, or any options for the
purchase of Common Stock or any stock or securities convertible into
or exchangeable for Common Stock, whether or not such rights or
warrants or options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the price per
share for which Common Stock is issuable upon the exercise of such
rights or warrants or options or upon exchange or exchange of such
Convertible Securities shall be less than the Trigger Price as of the
date of granting such rights or warrants or options as the case may
be, then the total maximum number of shares of Common Stock issuable
upon the exercise of such rights (other than rights issued pursuant
to a stockholders rights plan adopted by the Company) or warrants or
options or upon exchange or exchange of the total maximum amount of
such Convertible Securities issuable upon the exercise of such rights
or warrants or options shall (as of the date of granting of such
rights or warrants or options) be deemed to be outstanding and to
have been issued for such price per share.
(n) No further adjustments of the number of shares of Common Stock
issuable upon exchange of this Note shall be made upon the actual
issue of such Common Stock or of such Convertible Securities upon
exercise of such rights or warrants or options or upon the actual
issue of such Common Stock upon exchange or exchange of such
Convertible Securities.
(o) The Company shall not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith,
assist in the carrying out of all the provisions herein and in the
Note Purchase Agreement in the taking of all such action as may be
necessary or appropriate in order to protect the Exchange Rights
of the Holder against impairment.
(p) Upon occurrence of each adjustment or readjustment of the Exchange
Price or number of shares of Common Stock issuable upon exchange of
the Note pursuant to this Section 1, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with
the terms hereof and furnish notice to each holder of such Note, a
certificate setting forth such adjustment and readjustment. The
Company shall, upon written request of the Holder, furnish or cause
to be furnished to such Holder a like certificate setting forth such
adjustments and readjustments, the applicable Exchange Price in
effect at the time and the number of shares of Common Stock and the
amount, if any, of other securities or property which at the time
would be received upon the exchange of such Note.
(q) The Company shall pay any and all issue and other taxes, excluding
federal, state or local income taxes, that may be payable in
respect of any issue or delivery of shares of Common Stock on
exchange of this Note pursuant hereto; provided that the Company
shall not be obligated to pay any transfer taxes resulting from
any transfer requested by any holder in connection with any such
exchange.
(r) The Company shall at all times reserve and keep available, out of its
authorized but unused shares of Common Stock, solely for the purpose
of effecting the exchange of the Note, the full number of shares
deliverable upon exchange of all the Note from time to time
outstanding. The Company shall, from time to time in accordance with
the Delaware General Corporations Law, as amended, increase the
authorized number of shares of Common Stock if at any time the unused
number of authorized shares shall not be sufficient to permit the
exchange of all of the Note at the time outstanding. In such
connection, the Company shall hold a special meeting of stockholders
for the purpose of authorizing additional shares of Common Stock not
later than 120 days after any date in which the Company shall have
insufficient shares of Common Stock so reserved. Failure to keep
available and authorized unissued shares available to facilitate
exchanges of the Notes shall constitute an Event of Default hereunder.
(s) At any time after the Closing Date, the Company may call the Note
from the Holder at the greater of: (a) 150% premium to par value of
the Note plus all accrued and unpaid interest and fees; or (b)
the intrinsic value of the Note plus accrued interest and any unpaid
fees and expenses; intrinsic value is herein defined as: (applicable
market price - maximum exchange price) x ((principal amount of Note
outstanding + any and all accrued and unpaid interest + fees)/
(maximum exchange price)). The Company must give the Holder ten (10)
trading days notice, via facsimile and overnight courier prior to
calling the Note. The company expressly warrants that by the issuance
of a Call for Redemption of the Note, that it has cash available to
make such redemption. A Call for Redemption of the Note is
irrevocable once issued by the Company. Redemptions must be paid in
cash on the 10th trading day following its issuance. Failure to pay
such redemption shall constitute an Event of Default under the terms
of this Note.
(t) Once the Holder submits a Notice of Exchange, as described in
Section 1(b) herein, the Company may not Call that portion of the
Note tendered for exchange.
(u) In no event shall any Holder of the Note be entitled to receive
Common Shares upon a exchange to the extent that the sum of (x) the
number of Common Shares beneficially owned by that Holder and its
affiliates (exclusive of shares issuable upon exchange of the
unconverted portion of the Note or the unexercised or unconverted
portion of any other securities of the Corporation subject to a
limitation on exchange or exercise analogous to the limitations
contained herein) and (y) the number of Common Shares issuable upon
exchange of the Note with respect to which the determination of this
subclause is being made, would result in beneficial ownership by the
Holder and its affiliates of more than 4.9% of the outstanding Common
Shares (the "Five Percent Limitation"), and for purposes of this
subclause, beneficial ownership shall be determined in accordance
with section 13(d) of the Securities and Exchange Act of 1934, as
amended, and Regulation 13 D-G thereunder, except as otherwise
provided in clause (x) above. To the extent the Five Percent Limitation
applies, the determination of whether the Notes shall be convertible
(vis-a-vis other securities owned by a Holder) shall be in the sole
discretion of the Holder and submission of a Notice of Exchange shall
be deemed to be the Holder's determination of whether the Note is
convertible, in whole or in part, subject to such aggregate Five
Percent Limitation. No prior inability to convert the Preferred
Shares pursuant to this clause shall have any effect on the
applicability of the provisions of this clause with respect to any
subsequent determination of ability to convert. The provisions of
this clause may be amended and/or implemented in a manner otherwise
than in strict conformity with the terms of this clause with the
approval of the Board of Directors of the Company and the affected
Holder. The limitations contained in this clause shall apply to a
successor Holder concurrently with its acquisition of such Note, such
election to be promptly confirmed in writing to the Company (provided
no transfers to a successor Holder or Holders shall be used by a
Holder to evade the limitations contained herein).
2. REGISTRAR. The Company shall maintain at its principal office a register
of the Notes and shall record therein the names and addresses of the
registered holders of the Notes, the address to which notices are to
be sent and the address to which payments are to be made as designated by
the registered holder if other than the address of the holder, and the
particulars of all transfers, exchanges and replacements of Notes. No
transfer of a Note shall be valid unless the registered holder or his or
its duly appointed attorney request such transfer to be made on such
register, upon surrender thereof for exchange as hereinafter provided,
accompanied by an instrument in writing, in form and execution reasonably
satisfactory to the Company. Each Note issued hereunder, whether
originally or upon transfer, exchange or replacement of a Note, shall be
registered on the date of execution thereof by the Company. The
registered holder of a Note shall be that person or entity in whose name
the Note has been so registered by the Company. A registered holder shall
be deemed the owner of a Note for all purposes, and the Company shall not
be affected by any notice to the contrary.
3. TRANSFER AND EXCHANGE. Subject to compliance with the restriction on
transfer set forth in the Notice Purchase Agreement, the registered
holder of any Note or Notes may, prior to maturity, surrender such Note
or Notes at the principal office of the Company for holder of its
intention to make such exchange and without expense (other than
applicable transfer taxes, if any) to such registered holder, the Company
shall issue in exchange therefor another Note or Notes dated the date to
which interest has been paid on, and for the unpaid principal amount of,
the Note or Notes so surrendered, containing the same provisions and
subject to the same terms and conditions as the Note or Notes so
surrendered. Subject to the restrictions on transfer set forth in the
Note Purchase Agreement, each new Note shall be made payable to such
person or entity, as the registered holder of such surrendered Note or
Notes may designate.
4. REPLACEMENT. Upon receipt of evidence satisfactory to the Company of the
loss, theft, destruction, or mutilation of any Note and, if requested by
the Company in the case of any such loss, theft or destruction, upon
delivery of an indemnity bond or other agreement or security reasonably
satisfactory to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of such Note, the Company will issue a new Note,
of like tenor, in the amount of unpaid principal of such Note, and dated
the date to which interest has been paid, in lieu of such lost, stolen,
destroyed or mutilated Note.
5. DEFAULT. The Company shall be in default under this Note upon the
occurrence of: (i) any of the events specified in Section 5 hereof and
failure to cure such default within five (5) days after receipt of written
notice thereof from the Noteholder; (ii) any of the events specified in
Section 5(b) or 5(d) hereof and the failure to cure such default within ten
(10) days after receipt of written notice thereof from the Noteholder; or
(iii) any of the events specified in Section 5(c) hereof (any of the
foregoing being an "Event of Default"):
(a) Failure to make any principal or interest payment required
under this Note on the due date of such payment;
(b) If the Company shall default in the performance of or
compliance with any of its material covenants or
agreements contained herein, whether expressed or
implied, or in the Purchase Agreement, and such
default shall not have been remedied within ten (10)
calendar days after written notice thereof shall have
been delivered to the Company by the Holder of this
Note;
(c) Insolvency of, business failure of, or an assignment
for the benefit of creditors by or the filing of a
petition under bankruptcy, insolvency or debtor's
relief law, or for any readjustment of indebtedness,
composition or extension by the Company, or commenced
against the Company which is not discharged within
thirty (30) days;
(d) If the Company shall not, at the time of receipt of a
Exchange Notice hereunder, have a sufficient number
of authorized and unissued shares of its Common Stock
available for issuance to the holder of this Note
upon exchange of all or any portion of this Note in
accordance with the terms hereof, and such default
shall not have been remedied within thirty (30)
calendar days from the date of such Exchange Notice;
(e) If any representation or warranty made in writing by
or on behalf of the Company in the Purchase Agreement
shall prove to have been false or incorrect in any
material respect on the date as of which made;
(f) If the Company shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its
debts as they become due, or shall file a voluntary petition in
bankruptcy or shall have an order for relief under the
Bankruptcy Act granted against it or them, or shall be
adjudicated bankrupt or insolvent, or shall file any answer
seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief
under any present or future statute, law or regulation, or shall
file any answer admitting or not contesting the material
allegations of a petition filed against the Company in any such
proceeding, or shall seek or consent to or acquiesce in the
appointment of any trustee, custodian, receiver or liquidator of
the Company or of all or any substantial part of the properties
of the Company, or the Company or its directors shall take any
action looking to the dissolution or liquidation of the Company.
(g) If the Company fails to deliver Exchange Shares
within 10 days from the Notice of Exchange Date;
(h) If the Company fails to pay Liquidated Damage amounts
due to lack of registration or late SEC registration
of underlying common shares.
(i) If the Company fails to pay Liquidated Damages due to
the Noteholder due to the late delivery of shares.
(j) If the Company fails to pay the Redemption amount
within 10 days as specified in Section 1(s) herein.
6. REMEDIES UPON EVENT OF DEFAULT. Upon the occurrence of an Event of Default,
the Company agrees that monetary damages may be difficult or impossible to
determine, and alone are inadequate protections for the Noteholders.
Therefore, the Purchaser may, in its sole determination upon the occurrence
of an Event of Default, declare the Note immediately due and payable.
The Noteholder shall have all the rights and remedies, at law and in
equity, by statue or otherwise, and no remedy herein conferred upon the
Noteholder is intended to be exclusive of any other remedy and each remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law, in, equity by statue or
otherwise. Furthermore, the Noteholder shall been able to call on
injunctive relief and/or a specific order for compliance as determined by
the Noteholders in their sole discretion and as so ordered by a court of
law.
7. CHANGES: PARTIES. This Note can only be changed by an agreement in writing
signed by he Company and the Noteholder. This Note shall inure to the
benefit of and be binding upon the Company and the Noteholder and
their respective successors and assigns.
8. WAIVER OF PRESENTMENT. The Company hereby waives, presentment, demand,
notice, protest and all other demands and notices in connection with the
delivery acceptance, performance, default or enforcement of this Note.
9. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED ACCORDING TO THE LAWS OF
THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF
RELATING TO CONFLICTS OF LAWS.
IN WITNESS WHEREOF, the Company has executed this Note as of the day
and year set forth above.
GALVESTON'S STEAKHOUSE
CORP.
By: ________________________________
Its: ________________________________
EXHIBIT 10.24
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF GALVESTON'S STEAKHOUSE CORP.
As of October 9, 1998
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") AND SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
VOID AFTER 5:00 P.M., NEW YORK TIME
ON OCTOBER 9, 2003
THIS CERTIFIES THAT for value received, Talisman Capital Opportunity
Fund Ltd., a holder of a Note (as such term is hereinafter defined), or their
registered permitted assigns (sometimes hereinafter referred to as the
"Holder"), may subscribe for and purchase, subject to the terms and conditions
hereof, from Galveston's Steakhouse Corp., a Delaware corporation (the
"Company"), 112,500 shares of common stock, per $1,000,000.00 face amount of the
Note of the Company, par value $0.01 per share (the "Common Stock"), at any time
during the period (the "Exercise Period") commencing at 9:00 a.m. New York Time
on the Effective Date (as such term is hereinafter defined) and ending at 5:00
p.m. New York Time, on September 28, 2003 (the "Expiration Date"), at an
exercise price per share (the "Exercise Price") equal to $5.28125.
Exercise Price and Expiration. (a) This Warrant may be exercised in
whole or in part on any Business Day (as such term is hereinafter defined) at
any time during the Exercise Period upon surrender to the Company, at its
address for notices set forth in Section 8 of this Warrant (or at such other
office of the Company, if any, or such other office of the Company's duly
authorized agent for such purpose, as may be maintained by the Company for such
purpose and so designated by the Company by written notice to the Holders prior
to such exercise), together with the following: (i) a duly completed and
executed Notice of Warrant Exercise in the form annexed hereto, and (ii) payment
of the full Exercise Price for this Warrant or the portion thereof then being
exercised. This Warrant and all rights and options hereunder shall expire on,
and shall be immediately wholly null and void to the extent the Warrant is not
properly exercised prior to the Expiration Date. As used in this Warrant the
term "Business Day" shall mean the time period between 9:00 a.m. New York, New
York Time and 5:00 p.m. New York, New York Time on any day other than any
Saturday, Sunday, or other day on which commercial banks in New York, New York
are required or are authorized by law to close.
(b) Such Exercise Price shall be paid in lawful money of the United
States of America by bank cashier's check or by wire transfer of immediately
available funds to such account as shall have been designated in writing by the
Company to the Holders from time to time.
(c) Upon the Holders' surrender of the Warrant and payment of the
Exercise Price as set forth above, the Company shall promptly issue and cause to
be delivered to the Holders a certificate or certificates for the total number
of whole shares of Common Stock for which this Warrant is then so exercised, as
the case may be (adjusted to reflect the effect of the anti-dilution provisions
contained in Section 2 of this Warrant, if any) in such denominations as are
requested for delivery to the Holders, and the Company shall thereupon deliver
such certificates to the Holders. The Holders shall be deemed to be the Holders
of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then be actually delivered to the Holders. If, at the time this Warrant is
exercised, a registration statement under the Securities Act is not then in
effect to register under said Securities Act the Warrant Shares issuable upon
exercise of this Warrant (together with any applicable state securities law
registrations), the Company may require the Holders to make such
representations, and may place such legends on certificates representing the
Warrant Shares, as may be reasonably required in the opinion of counsel to the
Company to permit the Warrant Shares to be issued without such registration,
unless the Company receives an opinion of counsel reasonably satisfactory to
counsel to the Company to the effect that said securities may be freely traded
without registration under the Securities Act.
(d) If the Holders shall exercise this Warrant with respect to less
than all of the Warrant Shares that may then be purchased under this Warrant,
having taken into account any prior exercise of the Warrant, the Company shall
promptly execute and deliver to the Holders a new warrant in the form of this
Warrant for the balance of such Warrant Shares.
(e) For purposes of the Warrant, the term "Effective Date" shall mean
the date that the holder of this Warrant shall have purchased from the Company
$1,400,000 principal amount of the Company's Note pursuant to the Securities
Purchase Agreement, dated as of October 9, 1998 (the "Securities Purchase
Agreement"). Unless otherwise defined herein, all capitalized terms used in this
Warrant shall have the same meaning as is defined in the Securities Purchase
Agreement or in the Note.
2. Anti-dilution.
If the Company shall (A) pay a dividend or make a distribution to
holders of shares of Company Common Stock in the form of additional shares of
Common Stock, (B) subdivide or split or reverse split or consolidate the
outstanding shares of Common Stock into a larger or smaller number of shares,
(C) or otherwise effect an increase or decrease in the number of shares of
Common Stock without consideration, or (D) effect a recapitalization which shall
reclassify the outstanding shares of Common Stock into one or more classes of
common stock, the number of shares of Common Stock issuable upon exercise of
this Warrant and the Exercise Price shall be equitably and proportionately
adjusted immediately following the occurrence of any such event, and the Holder
of record of this Warrant shall be given notice of the same at such Holder's
address in the Company's books and records. An adjustment made pursuant to this
Section shall become effective immediately after the record date in the case of
a dividend or distribution and immediately after the effective date in the case
of a subdivision, split, combination or reclassification; provided, if such
record date shall have been fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the exercise price
shall be recomputed accordingly as of the close of business on such record date
and thereafter such exercise price in effect shall be as adjusted pursuant to
this Section as of the time of actual payment of such dividend or distribution.
3. Reorganization and Asset Sales.
If any capital reorganization or reclassification of the capital stock
of the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of the capital stock of the
Company to another corporation, or the sale of all or substantially all of the
assets or properties of the Company to another corporation, shall be effected in
such a manner so that holders of Company Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Company
Common Stock, then, and in such event, the following provisions shall apply:
(i) Not more than 90 or less than 30 days prior to the consummation of
any such reorganization, reclassification, consolidation, merger or
sale (collectively, "Reorganization Transactions"), the Company shall
notify the Holders of the Reorganization Transaction (at the same time
notice of same shall be made generally available to other holders of
Company Common Stock), describing in such notice in reasonable detail
the terms of the Reorganization Transaction and the stock, securities
or assets to be received with respect to or in exchange for Common
Stock of the Company. In the event the Holders exercise this Warrant
not more than 90 or less than 30 days prior to the consummation of the
Reorganization Transaction, such Holders shall be entitled to receive
stock, securities or assets with respect to or in exchange for Common
Stock (collectively, "Reorganization Consideration") on the same basis
as the other holders of Company Common Stock participating in the
Reorganization Transaction as if such Holders had previously exercised
this Warrant and held such number of Warrant Shares to which they are
entitled based on the Exercise Price.
(ii) The Company shall not effect any such Reorganization Transaction
unless prior to or simultaneous with the consummation thereof, the
successor corporation (if other than the Company) resulting therefrom
shall assume by written instrument executed and made available to the
Holders at the last address of the Holders appearing on the books of
the Company, the obligation to deliver to the Holders such shares of
stock, securities or assets, as, in accordance with the foregoing
provisions, the Holders may be entitled to receive, and all other
liabilities and obligations of the Company hereunder. In the event the
Holders of this Warrant shall not exercise the Warrant prior to or
simultaneous with consummation of the Reorganization Transaction, such
Holders shall be entitled to receive a warrant to purchase common stock
in the successor corporation (if other than the Company) which shall be
appropriately adjusted as to exercise price, number of shares which may
be purchased thereunder and other terms, so as to equitably reflect the
Reorganization Transaction and entitle the Holder to purchase that
number of shares of common stock of the successor corporation
equivalent in value to the consideration that such Holder would have
received had Holder exercised this Warrant immediately prior to or
simultaneously with such Reorganization Transaction. In the event the
successor corporation (if other than the Company) resulting from the
Reorganization Transaction shall be a privately-held company and the
Reorganization Consideration, in part or in whole, shall be in the form
of securities for which there is no readily ascertainable market value
by virtue of not being traded on any national market or exchange, the
Company shall not effect any such Reorganization Transaction unless
prior to or simultaneous with the consummation thereof, the successor
corporation shall agree by written instrument executed and made
available to the Holders at the last address of the Holders appearing
on the books of the Company to pay to the Holder a cash amount
equivalent in value to the difference between the Exercise Price and
the Fair Market Value multiplied by the number of Warrant Shares that
such Holder would have received had the Holder exercised this Warrant
immediately prior to or simultaneously with such Reorganization
Transaction.
(iii) If a purchase, tender or exchange offer is made to and accepted
by the holders of more than 50 percent of the outstanding shares of
Common Stock of the Company, the Company shall, prior to the
consummation of any consolidation, merger or sale to or with the
person, firm or corporation having made such offer or any affiliate of
such person, firm or corporation, use its best efforts to give the
Holders a reasonable opportunity of not less than 10 days to elect to
receive upon the exercise of this Warrant, either the stock, securities
or assets then issuable with respect to the Common Stock of the Company
or the stock, securities or assets, or the equivalent, issued to
previous holders of the Common Stock in accordance with such purchase
tender or exchange offer. The Holders will have the right to convert
into common stock upon any corporate event.
4. Notice of Adjustment.
Whenever the Exercise and the number of Warrant Shares issuable upon
the exercise of this Warrant shall be adjusted as herein provided, or the rights
of the Holders shall change by reason of other events specified herein, the
Company shall compute the adjusted Exercise Price and the number of adjusted
Warrant Shares in accordance with the provisions hereof and shall prepare a
certificate signed by its Chief Executive Officer, or its President, or its
Chief Financial Officer, setting forth the adjusted Exercise Price and the
adjusted number of Warrant Shares issuable upon the exercise of this Warrant or
specifying the other shares of stock, securities, or assets receivable as a
result of such changes in rights, and showing in reasonable detail the facts and
calculations upon which such adjustments or other changes are based. The Company
shall caused to be mailed to the Holders copies of such officer's certificate
together with a notice stating that the Exercise Price and the number of Warrant
Shares purchasable upon exercise of this Warrant have been adjusted and setting
forth the adjusted Exercise Price and the adjusted number of Warrant Shares
purchasable upon the exercise of this Warrant.
5. Certain Representations of the Company.
Throughout the Exercise Period, the Company has (i) all requisite power
and authority to issue this Warrant and the Exercised Shares, and (ii)
sufficient authorized and unissued securities of Common Stock to permit exercise
of this Warrant.
6. Certain Covenants of the Company.
(a) The Company shall take such steps as are necessary to cause the
Company to continue to have sufficient authorized and unissued shares of Common
Stock reserved in order to permit the exercise of the unexercised and unexpired
portion of this Warrant, if any.
(b) The Company covenants and agrees that all Warrant Shares issued
upon the due exercise of this Warrant will, upon issuance in accordance with the
terms hereof, be duly authorized, validly issued, fully paid and non-assessable
and free and clear of all taxes, liens, charges, and security interests created
by the Company with respect to the issuance thereof.
(c) The Company will pay all documentary stamp taxes, if any,
attributable to the initial issuance of Warrant Shares upon the exercise of this
Warrant; provided, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issue of this Warrant
or of any certificates for Warrant Shares in a name other than that of the
Holders upon the exercise of this Warrant, and the Company shall not be required
to issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax, or shall have established to the satisfaction of the Company that such
tax has been paid.
(d) This Warrant and, when so issued, the shares of Common Stock
which may be issued upon exercise of the Warrants, will have been issued,
pursuant to an available exemption from registration under the Securities Act.
(e) The Company covenants and agrees that if it fails (i) to register
the Warrant Shares as provided in a Registration Rights Agreement between the
Holders and the Company, dated of even date herewith, or (ii) to issue the
shares of Common Stock upon the proper exercise of the Warrant, then the Holders
may immediately commence an action for specific performance and/or damages.
7. No Shareholder Rights. No Holders of this Warrant shall, as such, be
entitled to vote or be deemed the holder of Common Stock or any other kind of
securities of the Company, nor shall anything contained herein be construed to
confer upon the Holders the rights of a shareholder of the Company or the right
to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or give or withhold consent to any
corporate action or to receive notice of meetings or other actions affecting
shareholders (except as otherwise expressly provided herein), or to receive
dividends or subscription rights or otherwise, until the date of Holders' proper
exercise of this Warrant as described herein.
8. Notices. Any notice, demand, request, waiver or other communication
under this Agreement must be in writing and will be deemed to have been duly
given (i) on the date of delivery if delivered by hand to the address of the
party specified below (including delivery by courier), or (ii) on the fifth day
after deposit in the U.S. Mail if mailed to the party to whom notice is to be
given to the address specified below, by first class mail, certified or
registered, return receipt requested, First Class postage prepaid, to the
Company and to the Holder at the addresses specified in the Securities Purchase
Agreement.
with a copy sent concurrently to:
Xxxx Xxxxxx, Esq.
Xxxxxx & Eilen
Suite 505
50 Xxxxxxx Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000-0000
Phone: 000.000.0000
Fax: 000.000.0000.
Any party may from time to time change its address for the purpose of notices to
that party by a similar notice specifying a new address, but no such change will
be deemed to have been given until it is actually received by the party sought
to be charged with its contents.
9. General.
(a) This Warrant shall be governed by and construed in accordance
with the laws of the State of New York without regard to its conflict of laws
provisions.
(b) Section and subsection headings used herein are included herein
for convenience of reference only and shall not affect the construction of this
Warrant or constitute a part of this Warrant for any other purpose.
(c) This Warrant may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument when instruments
originally executed by each party shall have been received by the Company.
IN WITNESS WHEREOF, the Company has duly executed this Warrant on and
as of the date first set forth above.
GALVESTON'S STEAKHOUSE CORP.
By: ______________________________________________
Its: _____________________________________________
NOTICE
OF
WARRANT EXERCISE
TO Galveston's Steakhouse Corporation:
The undersigned hereby irrevocably elects to exercise the Warrant and
to purchase thereunder ____ full shares of Common Stock issuable upon
the exercise of such Warrant. The Exercise Price for this warrant
shall be paid by delivery of $___________ in cash as provided for in
the Warrant.
The undersigned requests that certificates for such Warrant Shares be
issued in the name of:
Name: --------------------------------
Address: -----------------------------
Employer I.D. or S.S. #: -------------
If such number of Warrants shall not be all the Warrants evidenced by
the Warrant document, the undersigned requests that a new document evidencing
the Warrants not so exercised issued and registered in the name of and delivered
to:
----------------------------------------
Name
----------------------------------------
Address
----------------------------------------
Employer I.D. or Social Security Number
Date: ________________ ________________________________________
Signature
(Signature must conform in all respects to name
of holder as specified on the face of this
Warrant Certificate)
EXHIBIT 10.25
COLLATERAL, PLEDGE AND SECURITY AGREEMENT, dated September 28th, 1998
(this "Security Agreement"), by and among GALVESTON'S STEAKHOUSE CORP., a
Delaware corporation, with headquarters located at 000 Xxxx Xxxxxxxxxx Xxxx.,
Xxxxxxxxx, XX 00000 (the "Debtor"), and Talisman Capital Opportunity Fund Ltd.
(the "Secured Party").
WITNESSETH:
WHEREAS, reference is made to (i) that certain Note Purchase Agreement
of even date (the "Note Purchase Agreement") between the Debtor and the Secured
Party, (ii) the Secured Exchangeable Note (the "Note") originally issued on the
Closing Date (as those terms are defined in the Note Purchase Agreement) by the
Debtor to the Secured Party (together with any replacements thereof, the
"Debenture"), and (iii) the other documents and instruments contemplated by
either the Note Purchase Agreement, the Note or any Attachments thereto, and
executed by the Debtor with or in favor of the Secured Party. All of the
documents and instruments referred to in this paragraph are hereinafter referred
to collectively as the "Debtor Agreements." Unless otherwise specified, all
capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Note Purchase Agreement.
WHEREAS, as collateral security for the Company's performance of
certain of its obligations under the Note dated September 28, 1998, the Company
is granting to the Investor a security interest in, and a second lien on, the
rights to all real assets including, but not limited, to liquor licenses, land,
buildings, equipment, furniture and fixtures, accounts receivable, inventory,
subsidiary shares, either currently existing or acquired in the future as long
as the Note, or any portion thereof, is outstanding.
WHEREAS, the Debtor shall grant the Secured Party a first lien or
mortgage where such security interest is unencumbered, and the Company shall
grant the purchaser a second lien or mortgage where such security interest has
prior and pre-existing claims.
WHEREAS, the Debtor agrees to file and perfect all UCC, mortgage and
other documentation to perfect the Secured Party's security interest in all of
the real assets (as defined herein) of the Debtor concurrently with the Closing
of the Paragon Transaction.
Section 1. The Security Interests.
(a) In order (i) to secure the due and punctual fulfillment of its
obligations under the Debtor Agreements, and (ii) to secure
any and all other obligations of the Debtor to the Secured
Party whether now existing or hereafter arising (all of the
foregoing hereinafter called "Obligations"), the Debtor hereby
grants to the Secured Party a continuing security interest in
the following described property and any proceeds thereof
(hereinafter collectively called the "Collateral"):
and all accessions, additions or improvements to, all replacements,
substitutions and parts for, and all proceeds and products of the foregoing; all
books, records and documents relating to the foregoing located at the principal
place of business or any other place of business of the Debtor, or at such other
location as the business may hereafter be located, or held by any agent,
representative or bailee of the Debtor wherever located.
(b) The security interests granted pursuant to this Section 1 (the
"Security Interests") are granted as security only and shall
not subject the Secured Party to, or transfer or in any way
affect or modify, any obligation or liability of the Debtor
under any of the Collateral or any transaction which gave rise
thereto.
Section 2. Filing; Further Assurances. The Debtor will, at its expense,
execute, deliver, file and record (in such manner and form as the Secured Party
may require), or permit the Secured Party to file and record, any financing
statements, any carbon, photographic or other reproduction of a financing
statement or this Security Agreement (which shall be sufficient as a financing
statement hereunder), any specific assignments or other paper that may be
reasonably necessary or desirable, or that the Secured Party may request, in
order to create, preserve, perfect or validate any Security Interest or to
enable the Secured Party to exercise and enforce its rights hereunder with
respect to any of the Collateral. The Debtor hereby appoints Secured Party as
Debtor's attorney-in-fact to execute in the name and behalf of Debtor such
additional financing statements as Secured Party may request.
Section 3. Representations and Warranties of Debtor. The Debtor hereby
represents and warrants to the Secured Party that, except as detailed on
Attachment A hereto,
(a) the Debtor is, or to the extent that certain of the Collateral is
to be acquired after the date hereof, will be, the owner of the Collateral free
from any adverse lien, security interest or encumbrance;
(b) no financing statement covering the Collateral is on file in any
public office, other than the financing statements filed pursuant to this
Security Agreement;
(c) no other person or entity has any beneficial or security interest in
any of the Collateral; and
(d) all additional information, representations and warranties
contained in Exhibit 2 attached hereto and made a part hereof are true, accurate
and complete on the date hereof.
Section 4. Covenants of Debtor. The Debtor hereby covenants and agrees
with the Secured Party that the Debtor,
(a) will, at the Debtor's sole cost and expense, defend the Collateral
against all claims and demands of all persons at any time claiming any interest
therein junior to the Secured Party's interest;
(b) will provide the Secured Party with prompt written notice of (i)
any change in the chief executive officer of the Debtor or the office where the
Debtor maintains its books and records pertaining to the Collateral; (ii) the
movement or location of any part of the Collateral to or at any address other
than as set forth herein; and (iii) any facts which constitute an Event of
Default, or which, with the giving of notice and/or the passage of time, could
or would constitute an Event of Default (as defined below);
(c) will promptly pay any and all taxes, assessments and governmental
charges upon the Collateral prior to the date penalties are attached thereto,
except to the extent that such taxes, assessments and charges shall be contested
in good faith by the Debtor;
(d) will immediately notify the Secured Party of any event causing a
substantial loss or diminution in the value of all or any material part of the
Collateral and the amount or an estimate of the amount of such loss or
diminution;
(e) will not sell or offer to sell or otherwise assign, transfer or
dispose of the Collateral or any interest therein, without the prior written
consent of the Secured Party, and
(f) will keep the Collateral free from any adverse lien, security
interest or encumbrance, and will not waste or destroy the Collateral or any
part thereof.
Section 5. Records Relating To Collateral. The Debtor will keep its
records concerning the Collateral at its principal offices designated in the
caption of this Security Agreement or at such other place or places of business
of which the Secured Party shall have been notified in writing no less than ten
(10) days prior thereto. The Debtor will hold and preserve such records and
chattel paper and will permit representatives of the Secured Party at any time
during normal business hours upon reasonable notice to examine and inspect the
Collateral and to make abstracts from such records and chattel paper, and will
furnish to the Secured Party such information and reports regarding the
Collateral as the Secured Party may from time to time reasonably request.
Section 6. General Authority. The Debtor hereby appoints the Secured
Party the Debtor's lawful attorney, with full power of substitution, in the name
of the Debtor, for the sole use and benefit of the Secured Party, but at the
Debtor's expense, to exercise, all or any of the following powers with respect
to all or any of the Collateral during the existence of any Event of Default:
(a) to demand, xxx for, collect, receive and give acquittance for any and
all monies due or to become due;
(b) to receive, take, endorse, assign and deliver all checks, notes,
drafts, documents and other negotiable and non- negotiable instruments and
chattel paper taken or received by the Secured Party;
(c) to settle, compromise, prosecute or defend any action or proceeding
with respect thereto;
(d) to sell, transfer, assign or otherwise deal in or with the same or
the proceeds thereof or the related goods securing the Collateral, as fully and
effectually as if the Secured Party were the sole and absolute owner thereof;
(e) to extend the time of payment of any or all thereof and to make any
allowance and other adjustments with reference thereto; and
(f) to discharge any taxes, liens, security interests or other
encumbrances at any time placed thereon;
provided that the Secured Party shall give the Debtor not less than five (5)
business days' prior written notice of the time and place of any sale or other
intended disposition of any of the Collateral.
Section 7. Events of Default. The Debtor shall be in default under this
Security Agreement upon the occurrence of any of the following events (an
"Event of Default"):
(A) if any representation or warranty made by the Debtor in this
Security Agreement or in any other document delivered by Debtor to the Secured
Party shall be false or misleading in any material respect;
(B) if the Debtor fails to duly observe or perform any covenant,
condition or agreement contained in this Security Agreement on the Debtor's part
to be observed or performed, which default continues unremedied for five (5)
days after the earlier to occur of (i) the Debtor's discovery of such default or
(ii) written notice thereof from the Secured Party to the Debtor;
(C) the occurrence of an Event of Default, as defined in the Note,
after giving effect to any relevant grace periods provided therein;
(D) the occurrence of an default under any of the Debtor Agreements
other than the Debenture, after giving effect to any relevant grace periods
provided therein;
(E) if the Debtor shall (i) apply for or consent to the appointment of
a receiver, trustee, custodian or liquidator of the Debtor or any of its
property, (ii) admit in writing its inability to pay its debts as they mature,
(iii) make a general assignment for the benefit of creditors, (iv) be
adjudicated a bankrupt or insolvent or be the subject of an order for relief
under Title 11 of the United States Code, (v) file a voluntary petition in
bankruptcy, or a petition or an answer seeking reorganization or an arrangement
with creditors or to take advantage of any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or liquidation law or statute, or
an answer admitting the material allegations of a petition filed against the
Debtor in any proceeding under any such law, or (vi) if corporate action shall
be taken by the Debtor, its shareholder or directors for the purpose of
effecting any of the foregoing;
(F) if an order, judgment or decree shall be entered, without the
application, approval or consent of the Debtor by any court of competent
jurisdiction, approving a petition seeking reorganization of the Debtor or
appointing a receiver, trustee, custodian or liquidator of the Debtor or of all
or a substantial part of the assets of the Debtor, and such order, judgment or
decree shall continue unstayed and in effect for any period of thirty (30) days.
Section 8. Remedies Upon Event of Default. If any Event of Default
shall have occurred, the Secured Party may exercise all the rights and remedies
of a Secured Party under the Uniform Commercial Code. The Secured Party may
require the Debtor to assemble all or any part of the Collateral and make it
available to the Secured Party at a place to be designated by the Secured Party
which is reasonably convenient. The Secured Party shall give the Debtor five (5)
days' prior written notice of the Secured Party's intention to make any public
or private sale or sale, at a broker's board or on a securities exchange or
otherwise, of the Collateral. At any such sale the Collateral may be sold in one
lot as an entirety or in separate parcels, as the Secured Party, in its sole
discretion, may determine. The Secured Party shall not be obligated to make any
such sale pursuant to any such notice. The Secured Party may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same may be
adjourned. The Secured Party, instead of exercising the power of sale herein
conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the Security Interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
Section 9. Application of Collateral and Proceeds. The proceeds of any
sale of, or other realization upon, all or any part of the Collateral shall be
applied in the following order of priorities: (a) first, to pay the reasonable
expenses of such sale or other realization, including, without limitation,
reasonable attorneys' fees, and all expenses, liabilities and advances
reasonably incurred or made by the Secured Party in connection therewith, and
any other unreimbursed expenses for which the Secured Party is to be reimbursed
pursuant to Section 10 of this Security Agreement or the provision of any of the
Debtor Agreements; (b) second, to the payment of the Obligations first to
accrued but unpaid interest and then to principal on the Debentures or in such
order of priority as the Secured Party, in its sole discretion, shall determine;
and (c) finally, to pay to the Debtor, or its successors or assigns, or as a
court of competent jurisdiction may direct, any surplus then remaining from such
proceeds.
Section 10. Expenses; Secured Party's Lien. The Debtor will forthwith
upon demand pay to the Secured Party: (a) the amount of any taxes which the
Secured Party may have been required to pay by reason of the Security Interests
(including, without limitation, any applicable transfer taxes) or to free any of
the Collateral from any lien thereon; and (b) the amount of any and all
reasonable out-of-pocket expenses, including, without limitation, the reasonable
fees and disbursements of its counsel, and of any agents not regularly in its
employ, which the Secured Party may incur in connection with (i) the preparation
of any amendments or modifications of this Security Agreement, (ii) the
collection, sale or other disposition of any of the Collateral; (iii) the
exercise by the Secured Party of any of the powers conferred upon it hereunder,
or (iv) any default by the Debtor hereunder.
Section 11. Termination of Security Interests; Release of Collateral.
Upon the repayment and performance in full of all the Obligations, the Security
Interests shall terminate and all rights to the Collateral shall revert to the
Debtor. Upon any such termination of the Security Interests or release of
Collateral, the Secured Party will, at the Debtor's expense, to the extent
permitted by law, execute and deliver to the Debtor such documents as the Debtor
shall reasonably request to evidence the termination of the Security Interests
or the release of such Collateral, as the case may be. The Security Interest and
this Security Agreement shall become and be void, and the security interest in
the items listed in Section 3 shall be deemed null and void, ad initio, without
any further action on the part of the Company, the Investor or any affiliate of
any such person if all of the following conditions are sequentially and
cumulatively met:
(i) The registration statement covering the Notes, as set
out in Exhibit A of the Exchangeable Secured Note
becomes effective; And
(ii) The Common Stock of Galveston's Steakhouse Corp. closes at or
above ten ($10) dollars or more for ten (10) consecutive
trading days; And
(iii) The Common Stock of Galveston's Steakhouse Corp. (ticker symbol
"SIZL") trades greater than or equal to 25,000 shares for sixty
(60) consecutive trading days according to Bloomberg, L.P.
("Bloomberg").
Section 12. Notices. Any notice required or permitted hereunder shall
be given in writing (unless otherwise specified herein) and shall be deemed
effectively given upon personal delivery or seven business days after deposit in
the United States Postal Service, by fax, by express courier or by postage
prepaid mail (with return receipt requested or its equivalent), addressed to
each of the other parties thereunto entitled at its address at found in the Note
Purchase Agreement.
Section 13. Miscellaneous.
(A) No failure on the part of the Secured Party to exercise, and no
delay in exercising, and no course of dealing with respect to, any right, power
or remedy under this Security Agreement shall operate as a waiver thereof; nor
shall any single or partial exercise by the Secured Party of any right, power or
remedy under this Security Agreement preclude the exercise, in whole or in part,
of any other right, power or remedy. The remedies in this Security Agreement are
cumulative and are not exclusive of any other remedies provided by law. Neither
this Security 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.
(B) This Security Agreement shall be governed by, and construed,
interpreted and enforced in accordance with, the laws of the State of Delaware
except as otherwise required by mandatory provisions of law. Unless otherwise
defined herein, or unless the context otherwise requires, all terms used herein
which are defined in the Delaware Uniform Commercial Code have the meanings
therein stated. For purposes of settling any dispute or controversy hereunder or
in connection herewith, the Debtor hereby consents to the jurisdiction of any
court, federal or state, sitting in the State of Delaware, as well as to the
jurisdiction of all courts from which an appeal may be taken from the aforesaid
courts, and hereby expressly waives any and all objections the Debtor may now or
hereafter have as to the venue in any such courts. The Debtor also waives trial
by jury in any such action or proceeding.
Section 14. Separability. If any provision of this Agreement is held invalid or
unenforceable, either in its entirety or by virtue of its scope or application
to given circumstances, such provision shall thereupon be deemed modified only
to the extent necessary to render same valid, or not applicable to given
circumstances, or exercised from this Agreement, as the situation may require,
this Agreement shall be construed and enforced as if such provision had been
included herein as so modified in scope or application, or had not been included
herein, as the case may be.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute this Agreement as of the date first set forth
above.
GALVESTON'S STEAKHOUSE CORP.
By:______________________________________
TALISMAN CAPITAL OPPORTUNITY FUND LTD.
By:______________________________________
STATE OF ________________
COUNTY OF
On the ______ day of ________, 1998, before me personally came
_________________________, to me known, who being by me duly sworn, did depose
and say that he resides at _____________________________________,
__________________; that he is the _______________ of GALVESTON'S STEAKHOUSE
CORP. the corporation described in and which executed the foregoing instrument;
that he was authorized to execute the foregoing instrument on behalf of said
corporation by the Board of Directors of said corporation; and that he executed
the foregoing instrument voluntarily and of his own free will on behalf of said
corporation.
--------------------------------------
Notary Public
My commission expires:
EXHIBIT 10.26
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE ON EXERCISE OF THIS
WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY OTHER SECURITIES
LAWS (THE "ACTS"). NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK
PURCHASABLE HEREUNDER MAY BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THIS WARRANT OR COMMON
STOCK PURCHASABLE HEREUNDER, AS APPLICABLE, UNDER THE ACTS, OR (B) AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT REGISTRATION IS NOT
REQUIRED UNDER SUCH ACTS.
GALVESTON'S STEAKHOUSE CORP.
WARRANT AGREEMENT
Issue Date: July ____, 1998
Basic Terms. This Warrant Agreement (the "Warrant") certifies that,
for value received, the registered holder specified below or its registered
assigns ("Holder"), is entitled, subject to the terms and conditions of this
Warrant, including adjustments as provided herein, to purchase one thousand six
hundred (1,600) shares of the Common Stock (the "Common Stock")of the
Corporation from the Corporation at the price per share shown below (the
"Exercise Price").
Holder: _______________
Exercise Price per share: Five Dollars ($5.00) per share
Except as specifically provided otherwise, all references in this Warrant to the
Exercise Price and the number of shares of Common Stock purchasable hereunder
shall be to the Exercise Price and number of shares after any adjustments are
made thereto pursuant to this Warrant.
2. Corporation's Representations/Covenants. The Corporation represents
and covenants that the shares of Common Stock issuable upon the exercise of this
Warrant shall at delivery be fully paid and non-assessable and free from taxes,
liens, encumbrances and charges with respect to their purchase. The Corporation
shall take any necessary actions to assure that the par value per share of the
Common Stock is at all times equal to or less than the then current Exercise
Price per share of Common Stock issuable pursuant to this Warrant. The
Corporation shall at all times reserve and hold available sufficient shares of
Common Stock to satisfy all conversion and purchase rights of outstanding
convertible securities, options and warrants of the Corporation, including this
Warrant.
3. Method of Exercise; Fractional Shares. This Warrant is exercisable
at the option of the Holder in whole at any time or in part from time to time by
surrendering this Warrant, on any business day during the period (the "Exercise
Period") beginning on the issue date of this Warrant specified above and ending
at 5:00 p.m. (New York time) five (5) years after the issue date. To exercise
this Warrant, the Holder shall surrender this Warrant at the principal office of
the Corporation or that of the duly authorized and acting transfer agent for its
Common Stock, together with the executed exercise form (substantially in the
form of that attached hereto) and together with payment for the Common Stock
purchased under this Warrant. The principal office of the Corporation is located
at the address specified on the signature page of this Warrant; provided,
however, that the Corporation may change its principal office upon notice to the
Holder. At the option of the Holder payment shall be made either by check
payable to the order of the Corporation or by wire transfer, or the Holder may
elect to receive shares of Common Stock calculated pursuant to paragraph ____.
Upon the partial exercise of this Warrant, the Corporation shall issue to the
Holder a new Warrant of the same tenor and date, and for the balance of the
number of shares of Common Stock not purchased upon such partial exercise and
any previous exercises. This Warrant is not exercisable with respect to a
fraction of a share of Common Stock. In lieu of issuing a fraction of a share
remaining after exercise of this Warrant as to all full shares covered by this
Warrant, the Corporation shall either at its option (a) pay for the fractional
share cash equal to the same fraction at the fair market price for such share;
or (b) issue scrip for the fraction in the registered or bearer form which shall
entitle the Holder to receive a certificate for a full share of Common Stock on
surrender of scrip aggregating a full share.
4. Cashless Exercise.
(a) If the Corporation consents, the Holder may, upon any full
or partial exercise of this Warrant, pay the Exercise Price applicable to such
exercise by delivering this Warrant and receiving from the Corporation in return
therefor the number of shares of Common Stock as to which the Warrant is being
exercised which have a fair market value on the date of exercise equal to the
fair market value of the Warrant as established in paragraph 4(b).
(b) The fair market value of this Warrant shall mean the fair
market value of the Common Stock purchasable under this Warrant minus the
Exercise Price of this Warrant.
(c) The fair market value of the Common Stock is, if the
Common Stock is traded on a national securities exchange or in the
over-the-counter market as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ"), the average of the daily market
prices of such stock on the ten (10) trading days immediately preceding the date
as of which such value is to be determined. The market price for each such
trading day shall be average of the closing prices on such day of the Common
Stock on all domestic exchanges on which the Common Stock is then listed, or if
there have not been sales on any such exchange on such day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if the Common Stock is not so listed, the average of the high and low
bid and asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization. If at any time the Common Stock is not listed on any
domestic exchange or quoted in the NASDAQ System or the domestic
over-the-counter market, the fair market value shall be the higher of (i) the
book value thereof, as determined by any firm of independent public accountants
of recognized standing selected by the Corporation (which may be the
Corporation's regular independent accountants), as of the last day of any month
ending within sixty days preceding the date as of which the determination is to
be made; or (ii) the fair market value thereof, which shall be reasonably
determined by the Corporation and the Holder as of a date which is within
fifteen days of the date as of which the determination is to be made.
5. Protection Against Dilution. The number of shares of Common Stock
purchasable under this Warrant, and the Exercise Price, shall be adjusted as set
forth as follows. If at any time or from time to time after the date of this
Warrant, the Corporation:
(i) takes a record of the holders of its outstanding shares of
Common Stock for the purposes of entitling them to receive a dividend payable
in, or other distribution of, Common Stock, or
(ii) subdivides its outstanding shares of Common Stock into a
larger number of shares of Common Stock. or
(iii) combines its outstanding shares of Common Stock into a
smaller number of shares of Common Stock;
then, and in each such case, the Exercise Price shall be adjusted to that price
determined by multiplying the Exercise Price in effect immediately prior to such
event by a fraction (A) the numerator of which is the total number of
outstanding shares of Common Stock immediately prior to such event and (B) the
denominator of which is the total number of outstanding shares of Common Stock
immediately after such event.
Upon each adjustment in the Exercise Price under this Warrant
such number of shares of Common Stock purchasable under this Warrant shall be
adjusted by multiplying the number of shares of Common Stock by a fraction, the
numerator of which is the Exercise Price immediately prior to such adjustment
and the denominator of which is the Exercise Price in effect upon such
adjustment.
6. Adjustment for Reorganization, Consolidation, Merger, Etc.
(a) During the Exercise Period, the Corporation shall, prior to
consummation of a consolidation with or merger into another corporation, or
conveyance of all or substantially all of its assets to any other corporation or
corporations, whether affiliated or unaffiliated (any such corporation being
included within the meaning of the term "successor corporation"), or agreement
to so consolidate, merge or convey assets, require the successor corporation to
assume, by written instrument delivered to the Holder, the obligation to issue
and deliver to such Holder such shares of stock, securities or property as, in
accordance with the provisions of paragraph 6(b), the Holder shall be entitled
to purchase or receive.
(b) In the case of any capital reorganization or reclassification of
the Common Stock of the Corporation (or any other corporation the stock or other
securities of which are at the time receivable on the exercise of this Warrant)
during the Exercise Period or in case, during the Exercise Period, the
Corporation (or any such other corporation) shall consolidate with or merge into
another corporation or convey all or substantially all its assets to another
corporation, the Holder, upon exercise, at any time after the consummation of
such reorganization, consolidation, merger or conveyance, shall be entitled to
receive, in lieu of the Common Stock of the Corporation (or such other
corporation), the proportionate share of all stock, securities or other property
issued, paid or delivered for or on all of the Common Stock of the Corporation
(or such other corporation) as is allocable to the shares of Common Stock then
called for by this Warrant as if the Holder had exercised the Warrant
immediately prior thereto, all subject to further adjustment as provided in
paragraph 5 of this Warrant.
7. Notice of Adjustment. On the happening of an event requiring an
adjustment of the Exercise Price or the shares purchasable under this Warrant,
the Corporation shall immediately give written notice to the Holder stating the
adjusted Exercise Price and the adjusted number and kind of securities or other
property purchasable under this Warrant resulting from the event and setting
forth in reasonable detail the method of calculation and the facts upon which
the calculation is based.
8. Dissolution, Liquidation. In case the voluntary or involuntary
dissolution, liquidation or winding up of the Corporation (other than in
connection with a reorganization, consolidation, merger, or other transaction
covered by paragraph 6 above) is at any time proposed, the Corporation shall
give at least thirty days prior written notice to the Holder. Such notice shall
contain: (a) the date on which the transaction is to take place; (b) the record
date (which shall be at least thirty (30) days after the giving of the notice)
as of which holders of Common Stock will be entitled to receive distributions as
a result of the transaction; (c) a brief description of the transaction, (d) a
brief description of the distributions to be made to holders of Common Stock as
a result of the transaction; and (d) an estimate of the fair value of the
distributions. On the date of the transaction, if it actually occurs, this
Warrant and all rights under this Warrant shall terminate.
9. Rights of Holder. The Corporation shall deliver to the Holder all
notices and other information provided to its holders of shares of Common Stock
or other securities which may be issuable hereunder concurrently with the
delivery of such information to the holders. This Warrant does not entitle the
Holder to any voting rights or, except for the foregoing notice provisions, any
other rights as a shareholder of the Corporation. No dividends are payable or
will accrue on this Warrant or the Shares purchasable under this Warrant until,
and except to the extent that, this Warrant is exercised. Upon the surrender of
this Warrant and payment of the Exercise Price as provided above, the person or
entity entitled to receive the shares of Common Stock issuable upon such
exercise shall be treated for all purposes as the record holder of such shares
as of the close of business on the date of the surrender of this Warrant for
exercise as provided above. Upon the exercise of this Warrant, the Holder shall
have all of the rights of a shareholder in the Corporation.
10. Exchange for Other Denominations. This Warrant is exchangeable, on
its surrender by the Holder to the Corporation, for a new Warrant of like tenor
and date representing in the aggregate the right to purchase the balance of the
number of shares purchasable under this Warrant in denominations and subject to
restrictions on transfer contained herein, in the names designated by the Holder
at the time of surrender.
11. Substitution. Upon receipt by the Corporation of evidence
satisfactory (in the exercise of reasonable discretion) to it of the ownership
of and the loss, theft or destruction or mutilation of the Warrant, and (in the
case or loss, theft or destruction) of indemnity satisfactory (in the exercise
of reasonable discretion) to it, and (in the case of mutilation) upon the
surrender and cancellation thereof, the Corporation will issue and deliver, in
lieu thereof, a new Warrant of like tenor.
12. Restrictions on Transfer. Neither this Warrant nor the shares of
Common Stock issuable on exercise of this Warrant have been registered under
the Securities Act or any other securities laws (the "Acts"). Neither this
Warrant nor the shares of Common Stock purchasable hereunder may be sold,
transferred, pledged or hypothecated in the absence of (a) an effective
registration statement for this Warrant or Common Stock purchasable hereunder,
as applicable, under the Acts, or (b) an opinion of counsel reasonably
satisfactory to the Corporation that registration is not required under such
Acts. If the Holder seeks an opinion as to transfer without registration from
Holder's counsel, the Corporation shall provide such factual information to
Holder's counsel as Holder's counsel reasonably request for the purpose of
rendering such opinion. Each certificate evidencing shares of Common Stock
purchased hereunder will bear a legend describing the restrictions on transfer
contained in this paragraph unless, in the opinion of counsel reasonably
acceptable to the Corporation, the shares need no longer to be subject to the
transfer restrictions.
13. Transfer. Except as otherwise provided in this Warrant, this
Warrant is transferable only on the books of the Corporation by the Holder in
person or by attorney, on surrender of this Warrant, properly endorsed.
14. Recognition of Holder. Prior to due presentment for registration of
transfer of this Warrant, the Corporation shall treat the Holder as the person
exclusively entitled to receive notices and otherwise to exercise rights under
this Warrant. All notices required or permitted to be given to the Holder shall
be in writing and shall be given by first class mail, postage prepaid, addressed
to the Holder at the address of the Holder appearing in the records of the
Corporation.
15. Payment of Taxes. The Corporation shall pay all taxes and other
governmental charges, other than applicable income taxes, that may be imposed
with respect to the issuance of shares of Common Stock pursuant to the exercise
of this Warrant.
16. Headings. The headings in this Warrant are for purposes of
convenience in reference only, shall not be deemed to constitute a part of this
Warrant and shall not affect-the meaning or construction of any of the
provisions of this Warrant.
17. Miscellaneous. This Warrant may not be changed, waived, discharged
or terminated except by an instrument in writing signed by the Corporation and
the Holder. This Warrant shall inure to the benefit of and shall be binding upon
the successors and assigns of the Corporation and the Holder.
18. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to its
principles governing conflicts of law.
GALVESTON'S STEAKHOUSE CORP.
a Delaware corporation
By:________________________________________
Authorized Officer
Printed Name:______________________________
Title:_______________________________________
000 X. Xxxxxxxxxx Xxxx.
Xxxxxxxxx, Xxxxxxxxxx 00000
GALVESTON'S STEAKHOUSE CORP.
Form of Transfer
(To be executed by the Holder to transfer the Warrant)
For value received the undersigned registered holder of the attached Warrant
hereby sells, assigns, and transfers the Warrant to the Assignee(s) named
below:
Names of Number of shares
Assignee Address Taxpayer ID No. subject to transferred
Warrant
The undersigned registered holder further irrevocably appoints ----------------
-------------------------- attorney (with full power of substitution) to
transfer this Warrant as aforesaid on the books of the Corporation.
Date: ------------------------- ---------------------------------
Signature
GALVESTON'S STEAKHOUSE CORP.
Exercise Form
(To be executed by the Holder to purchase
Common Stock pursuant to the Warrant)
The undersigned holder of the attached Warrant hereby: (1) irrevocably
elects to exercise purchase rights represented by such Warrant for, and to
purchase, ___________ shares of Common Stock of Galveston's Steakhouse Corp., a
Delaware corporation, and encloses a check or has wired payment of
$___________________________ therefor; (2) requests that a certificate for the
shares be issued in the name of the undersigned; and (3) if such number of
shares is not all of the shares purchasable under this Warrant, that a new
Warrant of like tenor for the balance of the remaining shares purchasable under
this Warrant be issued.
Date: ------------------------- ---------------------------------
Signature
