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EXHIBIT 2.2
AMENDMENT NO. 1 TO
ASSET PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT (the "Amendment") is
made as of September 29, 1997 by and between NORTH'S RESTAURANTS, INC., an
Oregon corporation (the "Seller") and STAR BUFFET, INC., a Delaware corporation
and successor in interest to CKE Restaurants, Inc. (the "Buyer").
R E C I T A L S:
A. CKE Restaurants, Inc., a Delaware corporation ("CKE") and Seller
entered into that certain Asset Purchase Agreement, dated as of July 24, 1997
(the "Purchase Agreement"), and CKE has assigned all of its rights and delegated
all of its duties under the Purchase Agreement to Buyer (unless otherwise
defined herein or the context otherwise requires, capitalized terms appearing in
this Amendment shall have the respective meanings ascribed to such term in the
Purchase Agreement); and
B. Buyer has entered into an Underwriting Agreement, dated as of
September 24, 1997 (the "Underwriting Agreement") with Equitable Securities
Corporation, EVEREN Securities Corp. and Cruttenden ▇▇▇▇ Incorporated, pursuant
to which Buyer intends to complete an initial public offering of its common
stock (the "Offering") on September 30, 1997; and
C. Buyer and Seller have agreed to amend the Agreement in certain
respects relating to the Seller's outstanding indebtedness to U.S. Bank under
the Seller Credit Agreement and relating to the Purchased Restaurant located in
Olympia, Washington (the "Olympia Restaurant").
NOW, THEREFORE, the parties hereby agree as follows:
1. Seller's Indebtedness to U.S. Bank. As of the date of this
Amendment, Seller remains in default of its obligations to U.S. Bank under the
Seller Credit Agreement. Pursuant to a Loan Modification Agreement, dated as of
even date herewith (the "Modification Agreement"), entered into by and among
Seller, U.S. Bank and ▇▇▇▇ ▇. North, ▇▇▇ ▇. North, ▇▇▇▇▇ ▇. North and ▇▇▇▇▇ ▇.
North (collectively, the "Norths"), U.S. Bank has agreed to forgive a portion of
the indebtedness of Seller under the Seller Credit Agreement in order to reduce
the outstanding principal amount of Seller's indebtedness to U.S. Bank under the
Seller Credit Agreement, to restructure Seller's obligations thereunder, and to
release Seller and the Norths from their respective obligations thereunder,
conditioned upon (a) the payment by Seller of all accrued and unpaid interest
and certain other amounts specified in the Modification Agreement, and (b) the
receipt by U.S. Bank of cash from Buyer in the amount of Seven Million Dollars
($7,000,000) (the "Payment"). Seller acknowledges that the Payment would be made
by Buyer to U. S. Bank pursuant to an Assignment Agreement, dated as of even
date herewith (the "Assignment Agreement"), between Buyer and U.S. Bank in
consideration for the assignment by U.S. Bank to Buyer of the Existing Loan
Documents (as such term is defined in the Assignment Agreement) and the
obligations of Seller thereunder, as modified and restructured pursuant to the
Modification Agreement, which assignment shall be deemed to occur immediately
prior to the Closing.
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2. Purchase Price. Buyer and Seller acknowledge and agree that,
immediately prior to the time of Closing and after giving effect to the
transactions contemplated by the Modification Agreement and the Assignment
Agreement, the Existing Loan Documents will evidence Seller's indebtedness to
Buyer, in Buyer's capacity as a successor in interest to U.S. Bank, in an
aggregate outstanding principal amount of Seven Million Dollars ($7,000,000) and
Buyer's commitment to advance to Seller from time to time after the Closing Date
additional funds in an aggregate principal amount at any time outstanding not to
exceed Seven Hundred Fifty Thousand Dollars ($750,000). Section 4.2(a) of the
Purchase Agreement is hereby amended to read, in its entirety, as follows:
"At the closing (as defined below) Buyer shall pay a total of
Four Million Four Hundred Fifty Thousand Dollars ($4,450,000) of
the Purchase Price by (i) cancellation of Four Million Dollars
($4,000,000) principal amount of Seller's indebtedness to Buyer
under the Existing Loan Documents, and (b) by wire transfer of
immediately available funds to an account designated by Seller
the sum of Four Hundred Fifty Thousand Dollars ($450,000). The
balance of the Purchase Price, as adjusted in accordance with
Section 4.1 above, shall be paid to Seller by wire transfer
within ten (10) days after the determination of the adjustment
required by Section 4.1 above. If the adjustments required by
Section 4.1 above are determined to reduce the Purchase Price by
more than Fifty Thousand Dollars ($50,000), Seller shall remit
the excess to Buyer in cash within ten (10) days after the
determination thereof. Seller shall use the portion of the
Purchase Price which is paid in the form of cash to pay trade
payables and payroll obligations not otherwise assumed by Buyer
at the Closing and the accrued interest on and other amounts
payable to U.S. Bank pursuant to the Modification Agreement.
Seller and Buyer acknowledge and agree that neither the
assumption nor the purchase by Buyer of Seller's indebtedness to
U.S. Bank shall constitute payment of any portion of the Purchase
Price payable to Seller for the Purchased Assets."
3. Amendment and Restatement of Existing Loan Documents. At the
Closing, and after giving effect to the consummation of the Modification
Agreement, the Assignment Agreement and the cancellation of indebtedness
contemplated by Section 4.2 of the Purchase Agreement (as amended by this
Amendment), Seller and Buyer shall amend and restate the Existing Loan Documents
in their entirety by executing and delivering the following documents and
instruments:
(a) Amended and Restated Credit Agreement, in substantially the
form attached hereto as Exhibit A (the "Restated Credit Agreement"), to be
executed and delivered by Seller and Buyer;
(b) Amended and Restated Secured Term Promissory Note in the
original principal amount of Three Million Dollars ($3,000,000), in the form
attached hereto as Exhibit B (the "Restated Term Note");
(c) Amended and Restated Secured Revolving Promissory Note in
the original principal amount of Seven Hundred Fifty Thousand Dollars
($750,000), in the form attached hereto as Exhibit C (the "Restated Revolving
Note");
(d) Amended and Restated Security Agreement, in the form
attached hereto as Exhibit D (the "Restated Security Agreement");
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(e) Subordination Agreement, in the form attached hereto as
Exhibit E (the "Subordination Agreement" and, collectively with the Restated
Credit Agreement, the Restated Term Note, the Restated Revolving Note and the
Restated Security Agreement, the "Restated Loan Documents"); and
(f) such other agreements, documents and instruments as Buyer
may request to carry out the foregoing matters relating to U.S. Bank.
4. Satisfaction of Certain Obligations. Buyer and Seller acknowledge
and agree that Buyer's purchase from U.S. Bank of the Existing Loan Documents
and Seller's obligations thereunder, Buyer's cancellation of indebtedness as
provided in Section 4.2 of the Agreement, as amended hereby, and Buyer's
execution and delivery of the Restated Loan Documents shall constitute (a)
satisfaction in full of Buyer's obligations under the Seller financing
provisions set forth in Section 9.8 of the Agreement, and (b) satisfaction in
full of the condition precedent set forth in Section 11.4 of the Agreement.
Section 9.6 of the Agreement is hereby amended to delete the last sentence
thereof and to insert the following:
"Seller agrees that Buyer shall have the right, at its option, to
pay all or any part of the consideration required to be paid as a
result of the exercise of the Option for the purchase of
Additional Restaurants by cancellation of indebtedness (whether
for accrued and unpaid interest, principal or otherwise) owing to
Buyer under the Restated Loan Documents; provided, however, that
Buyer shall negotiate in good faith and cooperate with Seller to
arrange for the settlement of Seller's trade payables relating to
the Additional Restaurants to be so purchased, which cooperation
may include the payment of a portion of the purchase price for
such Additional Restaurants by either assuming the obligation to
pay such trade payables or to pay an equivalent amount of the
purchase price, net of reasonable transaction expenses, in cash
to permit Seller to pay such trade payables."
For purposes of Section 9.13 of the Agreement, references to "Section
9.8" shall be deemed from and after the Closing Date to be references to the
Restated Loan Documents
5. Olympia, Washington Restaurant. Buyer and Seller acknowledge
that, as of the date of this Amendment, The ▇▇▇▇▇▇ Northwest Partnership, an
Ohio general partnership dba "Target Place" ("▇▇▇▇▇▇") (the "Landlord") has not
delivered a consent to the assignment of that certain Lease, dated April 21,
1994 by and between ▇▇▇▇▇▇ and Seller (the "Olympia Lease") which would
otherwise occur upon the Closing. In the event that such consent is not received
by Seller or Buyer at or prior to the Closing and on terms and conditions
reasonably acceptable to Buyer, the parties agree that the Restaurant located in
Olympia, Washington which is occupied by Seller pursuant to the Olympia Lease
(the "Olympia Restaurant") shall not be acquired by Buyer at the Closing and, as
a result, the Olympia Lease and the Fixed Assets, Inventory, Personal Property
Leases, and Assigned Contracts which are used in connection with or required for
the operation of the Olympia Restaurant shall not be included within the
Purchased Assets, all of which shall become Excluded Assets, and the Purchased
Restaurants shall be deemed to exclude the Olympia Restaurant. Seller
acknowledges that Buyer shall not be required to accept any conditions to
assignment imposed by ▇▇▇▇▇▇, whether provided or required by the Olympia Lease
or otherwise (including, without limitation, adjustments to the amounts of rent
payments required thereunder), which could reasonably be expected to have a
Material Adverse
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Effect on the operating results of the Olympia Restaurant. Without limiting the
generality of the foregoing, none of Seller's rights under the Olympia Lease
shall be assigned to Buyer at the Closing, and nothing in this Amendment, the
Purchase Agreement or any agreement or other document executed and delivered by
any party pursuant hereto or in connection with the transactions contemplated
hereby shall be construed as an assumption of any obligation of Seller under the
Olympia Lease, unless and until such consent to assignment is obtained on terms
and conditions reasonably acceptable to Buyer.
(a) Deposit; Option to Purchase. If the Olympia Restaurant is
not transferred at Closing pursuant to this Section 5, Buyer shall have the
exclusive right and option (the "Olympia Option") to purchase from Seller all of
the assets used in connection with or required for the operation of the Olympia
Restaurant, for an aggregate purchase price (the "Olympia Purchase Price") of
One Million Thirty Six Thousand Dollars ($1,036,000) (which amount shall be
subject to adjustment as of the Closing Date in the manner described in Section
4.1 of the Agreement, to the extent any such adjustment would relate to the
Olympia Restaurant if the Olympia Restaurant were a Purchased Restaurant).
Nothing in this Section 5 shall affect the calculation of the amount of cash to
be paid and indebtedness of Seller to be cancelled by Buyer at the Closing as
described in Section 4.2 of the Purchase Agreement (as amended hereby);
provided, that the Purchase Price for the Purchased Restaurants (ie., excluding
the Olympia Restaurant) shall be deemed to have been reduced by the amount of
the Olympia Purchase Price. Accordingly, and as consideration for the grant of
the Olympia Option, the parties acknowledge and agree that (i) Buyer shall be
deemed to have deposited with Seller at the Closing an amount equal to the
Olympia Purchase Price, which deposit shall be applied against the Olympia
Purchase Price upon the exercise of the Olympia Option, and (ii) the Purchase
Price for the Purchased Restaurants shall be reallocated among the Purchased
Assets in a manner reasonably consistent with Exhibit C attached to the Purchase
Agreement.
(b) Management Agreement. If the Olympia Restaurant is not
transferred at Closing pursuant to this Section 5, Buyer and Seller shall
execute and deliver at the Closing a Management Agreement, in substantially the
form attached hereto as Exhibit F (the "Olympia Management Agreement").
6. Offer to Purchase Warrants. Pursuant to the provisions of
Section 9.7 of the Agreement, Buyer hereby offers to Buyer, upon consummation of
the Offering, the right to purchase 150,000 Warrants, each such Warrant
representing the right to purchase one (1) share of common stock of Buyer at an
exercise price of Twelve Dollars ($12.00), for a purchase price per Warrant
equal to Three and 50/100 Dollars ($3.50) and otherwise on the terms and
conditions set forth in the Stock Purchase Warrant. In order to exercise such
right, Seller must execute and deliver to Buyer an Investment Representation
Letter in the form attached as Exhibit E to the Purchase Agreement, together
with a cashier's check for the aggregate purchase price of the Warrants to be
purchased, no later than five (5) days after consummation of the Offering.
7. Certain Conditions to Closing. Section 11.3 of the Purchase
Agreement is hereby amended to read, in its entirety, as follows: "Buyer shall
have executed and delivered each of the Related Agreements, each of the Restated
Loan Documents to which it is a party and, if required by Section 5 of Amendment
No. 1 to this Agreement, the Management Agreement." Section 12.9 of the Purchase
Agreement is hereby amended to read, in its entirety, as follows: "Seller shall
have executed and delivered each of the Related Agreements, each of the Restated
Loan Documents to which it is a
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party and, if required by Section 5 of Amendment No. 1 to this Agreement, the
Management Agreement."
8. Boise Idaho Restaurant. In the event that ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (collectively, "▇▇▇▇▇▇"), as Landlord under that certain Lease
Agreement dated December 20, ▇▇▇▇ (▇▇▇ "▇▇▇▇▇ Lease"), between Seller and
▇▇▇▇▇▇, exercise their rights under Section 28 of the Boise Lease to require
▇▇▇▇ ▇▇▇▇▇ and/or ▇▇▇ North (collectively, the "Shareholders") or Seller to
purchase the premises leased thereunder, Buyer, if requested by the Shareholders
or Seller, shall satisfy and discharge the obligation to purchase such leased
premises from ▇▇▇▇▇▇, on the terms and subject to the conditions set forth in
Section 28 of the Boise Lease, and shall indemnify and hold the Shareholders and
Seller harmless from and against all Liabilities that result from any failure of
Buyer to perform the obligations of the Shareholders and Seller arising under
Section 28 of the Boise Lease.
9. Effect of Amendment. Except as amended hereby, the Purchase
Agreement remains in full force and effect.
IN WITNESS WHEREOF, the undersigned parties have caused this Amendment
No. 1 to Asset Purchase Agreement to be executed and delivered by their
respective authorized officers as of the date first above written.
STAR BUFFET, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
Chief Financial Officer
NORTH'S RESTAURANTS, INC.
By: /s/ ▇▇▇▇ ▇. NORTH, JR.
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▇▇▇▇ ▇. North Jr., President
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