EXHIBIT 10.3
▇▇▇▇▇'▇ RESTAURANTS, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
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March 28, 1996
TABLE OF CONTENTS
PAGE
1. Purchase and Sale of Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Sale and Issuance of Series C Preferred Stock. . . . . . . . . . . . . . 1
1.2 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Subsequent Sale of Series C Preferred Stock. . . . . . . . . . . . . . . 1
2. Representations and Warranties of the Company . . . . . . . . . . . . . . . . 2
2.1 Organization, Good Standing and Qualification. . . . . . . . . . . . . . 2
2.2 Capitalization and Voting Rights . . . . . . . . . . . . . . . . . . . . 2
2.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Valid Issuance of Preferred and Common Stock . . . . . . . . . . . . . . 4
2.6 Governmental Consents. . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.8 Proprietary Information. . . . . . . . . . . . . . . . . . . . . . . . . 5
2.9 Patents and Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.10 Compliance with Other Instruments. . . . . . . . . . . . . . . . . . . . 6
2.11 Agreements; Action . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.12 Related-Party Transactions . . . . . . . . . . . . . . . . . . . . . . . 7
2.13 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.14 Environmental and Safety Laws. . . . . . . . . . . . . . . . . . . . . . 8
2.15 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.16 Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.17 Title to Property and Assets . . . . . . . . . . . . . . . . . . . . . . 8
2.18 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.19 Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.20 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.21 Tax Returns, Payments and Elections. . . . . . . . . . . . . . . . . . . 10
2.22 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.23 Minute Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.24 Labor Agreements and Actions . . . . . . . . . . . . . . . . . . . . . . 11
2.25 Manufacturing and Marketing Rights . . . . . . . . . . . . . . . . . . . 11
2.26 Real Property Holding Company. . . . . . . . . . . . . . . . . . . . . . 11
3. Representations and Warranties of the Investors . . . . . . . . . . . . . . . 11
3.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Purchase Entirely for Own Account. . . . . . . . . . . . . . . . . . . . 11
3.3 Disclosure of Information. . . . . . . . . . . . . . . . . . . . . . . . 12
3.4 Investment Experience. . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.5 Accredited Investor. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.6 Restricted Securities. . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.7 Further Limitations on Disposition . . . . . . . . . . . . . . . . . . . 12
3.8 Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4. California Commissioner of Corporations . . . . . . . . . . . . . . . . . . . 13
4.1 Corporate Securities Law . . . . . . . . . . . . . . . . . . . . . . . . 13
5. Conditions of Investors' Obligations at Closing . . . . . . . . . . . . . . . 14
5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 14
5.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.3 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . 14
(i)
5.4 California Qualification . . . . . . . . . . . . . . . . . . . . . . . . 14
5.5 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.6 Opinion of Company Counsel . . . . . . . . . . . . . . . . . . . . . . . 14
5.7 Investors' Rights and Stock Restriction Agreements . . . . . . . . . . . 14
5.8 Restated Articles. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6. Conditions of the Company's Obligations at Closing. . . . . . . . . . . . . . 15
6.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 15
6.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.3 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . 15
6.4 California Qualification . . . . . . . . . . . . . . . . . . . . . . . . 15
6.5 Investors' Rights and Stock Restriction Agreement. . . . . . . . . . . . 15
6.6 Restated Articles. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.1 Survival of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.3 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.5 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.7 Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.9 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.11 Aggregation of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.12 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SCHEDULE A - Schedule of Investors
EXHIBIT A - Restated Articles of Incorporation
EXHIBIT B - Schedule of Series A Preferred and Common
Shareholders
EXHIBIT C - Schedule of Series B Preferred
Shareholders
SCHEDULE OF EXCEPTIONS
(ii)
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES C PREFERRED STOCK PURCHASE AGREEMENT is made as of the 28th day
of March, 1996, by and between ▇▇▇▇▇'▇ Restaurants, Inc., a California
corporation (the "Company"), and the investors listed on Schedule A hereto, each
of which is herein referred to as an "Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF SERIES C PREFERRED STOCK.
(a) The Company shall adopt and file with the Secretary of State
of California on or before the Closing (as defined below) Amended and Restated
Articles of Incorporation ("Restated Articles") in the form attached hereto as
EXHIBIT A.
(b) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally and not jointly, to purchase at the Closing and the
Company agrees to sell and issue to each Investor at the Closing, that number of
shares of the Company's Series C Preferred Stock set forth opposite each
Investor's name on SCHEDULE A hereto for the purchase price set forth thereon.
Such purchase shall be payable by Investor either by delivery to Company by
Investor of a check in the amount of the purchase price payable to the Company's
order (or by wire transfer of funds in such amount to the Company's designated
bank account).
1.2 CLOSING. The purchase and sale of the Series C Preferred Stock
shall take place at the offices of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ "▇"
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, at 10:00 A.M., on March 28, 1996, or
at such other time and place as the Company and Investors acquiring in the
aggregate more than half the shares of Series C Preferred Stock sold pursuant
hereto mutually agree upon orally or in writing (which time and place are
designated as the "Closing"). At the Closing the Company shall deliver to each
Investor a certificate representing the Series C Preferred Stock which such
Investor is purchasing against delivery to the Company by such Investor of a
check in the amount of the purchase price therefor payable to the Company's
order or by wire transfer of funds in such amount to the Company's designated
bank account.
1.3 SUBSEQUENT SALE OF SERIES C PREFERRED STOCK. To the extent that
less than 775,058 shares of Series C Preferred Stock are sold at the Closing,
the Company may sell any remaining shares of Series C Preferred Stock at a price
not less than $5.38126 per share to such other purchaser(s) as the Company's
Board of Directors shall select. Any purchaser in a subsequent closing
occurring within sixty days following the Closing shall execute a counterpart
signature page to this Agreement and Amendment Number Two to the Investors'
Rights Agreement, the Stock Restriction Agreement and any additional sales of
Series C
Preferred Stock to Investors shall be deemed to be made hereunder. The sale of
any additional shares of Series C Preferred Stock under this Section 1.3
occurring within sixty days following the Closing shall not be subject to the
Investor's right of first offer contained in Section 2.4 of the Investors'
Rights Agreement dated February 1, 1995, as amended, or the Amendment Number Two
to the Investors' Rights Agreement to be executed contemporaneously with this
Agreement (collectively, the "Investors' Rights Agreement"); otherwise, such
shares shall be subject to the Investors' right of first offer under the
Investors' Rights Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Investor that, except as set forth on a Schedule
of Exceptions furnished to each Investor and special counsel for the Investors,
specifically identifying the relevant subparagraph hereof, which exceptions
shall be deemed to be representations and warranties as if made hereunder:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California and has all requisite corporate power and authority
to carry on its business as now conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on its business,
prospects, properties or financial condition.
2.2 CAPITALIZATION AND VOTING RIGHTS. The authorized capital of the
Company consists, or will consist prior to the Closing, of:
(i) PREFERRED STOCK. 3,917,026 shares of Preferred Stock (the
"Preferred Stock"), of which (a) 2,000,000 shares have been designated Series A
Preferred Stock of which 26,605 are to be redeemed concurrently with the
issuance of the Series C Preferred Shares with the result that 1,973,395 will be
issued and outstanding and are owned by the persons, and in the numbers
specified in EXHIBIT B hereto), (b) 1,092,026 shares of which have been
designated Series B Preferred Stock, of which 1,092,007 are currently issued and
outstanding; and (c) 825,000 shares of which have been designated Series C
Preferred Stock, none of which are currently issued or outstanding and up to
775,058 of which may be sold pursuant to this Agreement. The rights, privileges
and preferences of the Series C Preferred Stock will be as stated in the
Restated Articles attached hereto as EXHIBIT A.
(ii) COMMON STOCK. 6,082,974 shares of common stock ("Common
Stock"), of which 1,004,500 shares are issued and outstanding and are owned by
the persons, and in the numbers specified in EXHIBIT B hereto.
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(iii) The outstanding shares of Common Stock have been issued in
accordance with the registration or qualification provisions of the Act (as
defined below) and any applicable state securities laws or pursuant to a valid
exemption therefrom.
(iv) Except for (A) the conversion privileges of the Series A
Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock
to be issued under this Agreement, (B) the rights provided in paragraph 2.4 of
the Investors' Rights Agreement dated February 1, 1995, which is attached hereto
as EXHIBIT B, (C) the rights provided in Amendment Number One to the Investors'
Rights Agreement dated of even date herewith, (D) the rights provided in that
certain Shareholders' Agreement among the current shareholders of the Company
and the Stock Restriction Agreement dated February 1, 1995 by and among the
Company, the Investors and current shareholders of the Company, (E) currently
authorized options to purchase 220,500 shares of Common Stock of which 121,460
have been granted to employees, and (F) warrants to purchase 50,000 shares of
Common Stock issued to ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, Inc., there are not outstanding any
options, warrants, rights (including conversion or preemptive rights and rights
of first refusal) or agreements for the purchase or acquisition from the Company
of any shares of its capital stock. The Company is not a party or subject to
any agreement or understanding, and, to the Company's knowledge, there is no
agreement or understanding between any persons and/or entities, which affects or
relates to the voting or giving of written consents with respect to any security
or by a director of the Company.
2.3 SUBSIDIARIES. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association or
other business entity. The Company is not a participant in any joint venture,
partnership or similar arrangement.
2.4 AUTHORIZATION. All corporate action on the part of the Company,
its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, the Investors' Rights Agreement, and
any other agreement to which the Company is a party, the execution and delivery
of which is contemplated hereby (collectively, the "Ancillary Agreements"), the
performance of all obligations of the Company hereunder and thereunder and the
authorization, issuance (or reservation for issuance) and delivery of the Series
C Preferred Stock being sold hereunder and the Common Stock issuable upon
conversion of the Series C Preferred Stock has been taken or will be taken prior
to the Closing, and this Agreement, the Investors' Rights Agreement, and any
Ancillary Agreements constitute valid and legally binding obligations of the
Company, enforceable in accordance with their respective terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
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performance, injunctive relief or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Investors' Rights
Agreement may be limited by applicable federal or state securities laws.
2.5 VALID ISSUANCE OF PREFERRED AND COMMON STOCK.
(a) The Series C Preferred Stock which is being purchased by the
Investors hereunder, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable and, based in part upon the representations
of the Investors in this Agreement, will be issued in compliance with all
applicable federal and state securities laws. The shares of Series C Preferred
Stock are being issued free of restrictions on transfer other than restrictions
on transfer set forth in this Agreement, the Investors' Rights Agreement or any
Ancillary Agreement and other than pursuant to federal or state securities laws.
The Common Stock issuable upon conversion of the Series C Preferred Stock
purchased under this Agreement has been duly and validly reserved for issuance
and, upon issuance in accordance with the terms of the Restated Articles of
Incorporation, shall be duly and validly issued, fully paid and nonassessable,
and issued in compliance with all applicable securities laws, as then in effect,
of the United States and each of the states whose securities laws govern the
issuance of any of the Series C Preferred Stock hereunder.
(b) The outstanding shares of Series A Preferred Stock, Series B
Preferred Stock, and Common Stock are all duly and validly authorized and
issued, fully paid and nonassessable, and were issued in compliance with all
applicable federal and state securities laws. The Common Stock issuable upon
conversion of the Series A Preferred Stock and Series B Preferred Stock will be
issued free of restrictions on transfer other than restrictions on transfer set
forth in this Agreement, the Investors' Rights Agreement, the Stock Restriction
Agreement or any Ancillary Agreement and other than pursuant to federal or state
securities laws.
2.6 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority on
the part of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement, except for (a) the filing of the
Restated Articles with the Secretary of State of the State of California, and
(b) the filing pursuant to Section 25102(f) of the California Corporate
Securities Law of 1968, as amended, and the rules thereunder, which filing will
be effected within 15 days of the sale of the Series C Preferred Stock
hereunder.
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2.7 LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company which
questions the validity of this Agreement, the Investors' Rights Agreement or any
Ancillary Agreements, or the right of the Company to enter into any of them, or
to consummate the transactions contemplated hereby or thereby, or which might
result, either individually or in the aggregate, in any material adverse changes
in the assets, financial condition, business affairs or prospects of the
Company, financially or otherwise, taken as a whole or any change in the current
equity ownership of the Company. The foregoing includes, without limitation,
any action, suit, proceeding or investigation pending or threatened involving
the prior employment of any of the Company's employees, their use in connection
with the Company's business of any information or techniques allegedly
proprietary to any of their former employers, or their obligations under any
agreements with prior employers or negotiations by the Company with potential
investors in the Company or its proposed business. The Company is not a party
or subject to the provisions of any order, writ, injunction, judgment or decree
of any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
2.8 PROPRIETARY INFORMATION. Each key employee, officer and
consultant of the Company has executed an Employment Relationship and
Confidentiality Agreement in the form provided to special counsel to the
Investors. The Company, after reasonable investigation, is not aware that any
of its employees, officers or consultants are in violation thereof, and the
Company will use its best efforts to prevent any such violation.
2.9 PATENTS AND TRADEMARKS. The Company has sufficient title and
ownership of all patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, proprietary rights and processes necessary
for its business as now conducted and as proposed to be conducted without any
conflict with or infringement of the rights of others. There are no outstanding
options, licenses or agreements of any kind relating to the foregoing, nor is
the Company bound by or a party to any options, licenses or agreements of any
kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, proprietary rights and
processes of any other person or entity. The Company has not received any
communications alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary rights of
any other person or entity. The Company is not aware that any of its employees
is obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his
best efforts to promote the interests of the Company or
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that would conflict with the Company's business as proposed to be conducted.
Neither the execution nor delivery of this Agreement, the Investors' Rights
Agreement and any Ancillary Agreements nor the carrying on of the Company's
business by the employees of the Company, nor the conduct of the Company's
business as proposed, will conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated. The
Company does not believe it is or will be necessary to utilize any inventions of
any of its employees (or people it currently intends to hire) made prior to
their employment by the Company.
2.10 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any provisions of its Articles of Incorporation (as
amended) or Bylaws or of any material provision of any instrument, judgment,
order, writ, decree, mortgage, indenture, agreement, lease or contract to which
it is a party or by which it is bound or, to its knowledge, of any provision of
federal or state statute, rule or regulation applicable to the Company. To the
Company's best knowledge, the other party or parties to such instruments,
mortgages, indentures, agreements, leases or contracts are not in default in any
material respect of any provisions contained therein. The execution, delivery
and performance of this Agreement, the Investors' Rights Agreement and any
Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby does not require the consent of any third party to, and will
not result in any such violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a default under any
such provision, instrument, judgment, order, writ, decree, mortgage, indenture,
agreement, lease or contract or an event which results in the creation of any
lien, charge or encumbrance upon any assets of the Company, or the suspension,
revocation, impairment, forfeiture or nonrenewal of any material permit,
license, authorization, or approval applicable to the Company, its business or
operations or any of its assets or properties.
2.11 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby and by
the Investors' Rights Agreement or any Ancillary Agreement, there are no
commitments, agreements, understandings or proposed transactions between the
Company and any of its officers, directors, affiliates or any affiliate thereof.
(b) There are no commitments, agreements, understandings,
instruments, contracts, proposed transactions, judgments, orders, writs or
decrees to which the Company is a party or by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $50,000, or (ii) the license of any patent, copyright,
trade secret or other proprietary right to or from the Company or
(iii) provisions restricting or affecting the development,
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manufacture or distribution of the Company's products or services.
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities individually in excess of $50,000 or, in the case of
indebtedness and/or liabilities individually less than $50,000, in excess of
$200,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under its
Articles of Incorporation (as amended) or Bylaws, which adversely affects its
business as now conducted or as proposed to be conducted, its properties or its
financial condition.
(f) The Company is not a party to any employment or consulting
agreements that are not terminable at will by the Company on no more than thirty
(30) days' notice without cost or liability to the Company.
2.12 RELATED-PARTY TRANSACTIONS. No employee, officer, or director
of the Company or member of his or her immediate family is indebted to the
Company, nor is the Company indebted (or committed to make loans or extend or
guarantee credit) to any of them. To the best of the Company's knowledge, none
of such persons has any direct or indirect ownership interest or act as an
officer or director in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation that competes with the Company, except that employees, officers or
directors of the Company and members of their immediate families may own not
more than 5% of the outstanding stock in publicly-traded companies that may
compete with the Company. Other than as a participant in Company benefit plans,
no form of compensation, remuneration or financial interest is due or promised
to any officer or director, or member of the immediate family of any officer or
director of the Company, for 1994, 1995 and 1996, except as set forth on the
Schedule of Exceptions. No officer or director, or member of the immediate
family of any officer or director, of the
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Company has a direct or indirect financial interest in any material contract of
the Company.
2.13 PERMITS. The Company has all franchises, permits, licenses and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects or financial condition of the Company, taken as
a whole, and believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be conducted.
The Company is not in default in any material respect under any of such
franchises, permits, licenses or other similar authority.
2.14 ENVIRONMENTAL AND SAFETY LAWS. To the best of its knowledge,
the Company is not in violation of, and the Company has not received any
communications alleging that the Company has violated, or by conducting its
business as proposed, would violate any applicable statute, law or regulation
relating to the environment or occupational health and safety and, to the best
of its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation.
2.15 DISCLOSURE. The Company has fully provided each Investor with
all the information which such Investor has requested for deciding whether to
purchase the Series C Preferred Stock and all information which the Company
believes is reasonably necessary to enable such Investor to make such decision.
Neither this Agreement, the Investors' Rights Agreement and any Ancillary
Agreements nor any other statements or certificates made or delivered in
connection herewith or therewith contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
or therein not misleading.
2.16 REGISTRATION RIGHTS. Except as provided in the Investors'
Rights Agreement, the Company has not granted or agreed to grant any
registration rights, including piggyback rights, to any person or entity.
2.17 TITLE TO PROPERTY AND ASSETS. The Company owns its property and
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens which arise in the ordinary course of business and
do not materially impair the Company's ownership or use of such property or
assets. With respect to the property and assets it leases, the Company is in
compliance with such leases and, to the best of its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances, except such
encumbrances and liens which arise in the ordinary course of business and do not
materially impair the Company's use of such property or assets.
-8-
2.18 FINANCIAL STATEMENTS. The Company has delivered to each
Investor its audited financial statements (balance sheet, statements of
operations, retained earnings and of cash flows) at December 31, 1995 and for
the fiscal year then ended (the "Financial Statements"). The Financial
Statements are complete and correct in all material respects and accurately set
out and describe the financial condition and operating results of the Company as
of the date, and for the period, indicated therein. The Financial Statements
have been prepared in accordance with generally accepted accounting principles
("GAAP"). Except as set forth in the Financial Statements, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business subsequent to December 31, 1995, which in the
aggregate do not exceed Fifty Thousand Dollars ($50,000) and (ii) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under generally accepted accounting principles to be reflected in
the Financial Statements, which, in both cases, individually or in the
aggregate, are not material to the financial condition or operating results of
the Company. Except as disclosed in the Financial Statements, the Company is
not a guarantor or indemnitor of any indebtedness of any other person, firm or
corporation. The Company maintains and will continue to maintain a standard
system of accounting established and administered in accordance with generally
accepted accounting principles.
2.19 CHANGES. Since December 31, 1995, there has not been:
(a) any change in the assets, liabilities, financial condition
or operating results of the Company, except changes in the ordinary course of
business which have not been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results, prospects or business of the Company (as such
business is presently conducted and as it is proposed to be conducted);
(c) any waiver or compromise by the Company of a valuable right
or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and which is not material to the assets, properties,
financial condition, operating results or business of the Company (as such
business is presently conducted and as it is proposed to be conducted);
(e) any change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
subject;
-9-
(f) any material change in any compensation arrangement or
agreement with any employee; or
(g) to the Company's knowledge, any other event or condition of
any character which might materially and adversely affect the assets,
properties, financial condition, operating results or business of the Company
(as such business is presently conducted and as it is proposed to be conducted).
2.20 EMPLOYEE BENEFIT PLANS. The Company does not have any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974,
as amended.
2.21 TAX RETURNS, PAYMENTS AND ELECTIONS. The Company has filed all
tax returns and reports as required by law. These returns and reports are true
and correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith which are listed in
the Schedule of Exceptions. The provision for taxes of the Company is adequate
for taxes due or accrued as of the date thereof. The Company has not elected
pursuant to the Internal Revenue Code of 1986, as amended ("Code"), to be
treated as a Subchapter S corporation or a collapsible corporation pursuant to
Section 341(f) or Section 1362(a) of the Code, nor has it made any other
elections pursuant to the Code (other than elections which relate solely to
methods of accounting, depreciation or amortization) which would have a material
effect on the Company, its financial condition, its business as presently
conducted or proposed to be conducted or any of its properties or material
assets. The Company has never had a tax deficiency or tax audit and the Company
has made all withholdings for all income tax of its employees.
2.22 INSURANCE. The Company has in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed. The Company has in full force and effect
products liability and errors and omissions insurance in amounts customary for
companies similarly situated.
2.23 MINUTE BOOKS. The minute books of the Company, access to which
has been provided to the Investors, contain a complete summary of all meetings
of directors and shareholders and all actions by written consent without a
meeting of directors and shareholders since the time of incorporation and
reflect all transactions referred to in such minutes accurately in all material
respects.
2.24 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company,
-10-
has sought to represent any of the employees, representatives or agents of the
Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees. The Company is not
aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, nor does the Company
have a present intention to terminate the employment of any of the foregoing.
Subject to general principles related to wrongful termination of employees, the
employment of each officer and employee of the Company is terminable at the will
of the Company.
2.25 MANUFACTURING AND MARKETING RIGHTS. The Company has not granted
rights to manufacture, produce, assemble, license, market or sell its products
to any other person and is not bound by any agreement that affects the Company's
exclusive rights to develop, manufacture, assemble, distribute and sell its
products.
2.26 REAL PROPERTY HOLDING COMPANY. The Company is not a real
property holding company within the meaning of the Internal Revenue Code Section
897.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor hereby
represents and warrants that:
3.1 AUTHORIZATION. This Agreement constitutes its valid and legally
binding obligation, enforceable in accordance with its terms.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
each Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Series C Preferred Stock to be received by such Investor and
the Common Stock issuable upon conversion thereof (collectively, the
"Securities") will be acquired for investment for such Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, each Investor (other than Rosewood Capital, L.P.) further
represents that such Investor does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Securities. Each
Investor represents that it has full power and authority to enter into this
Agreement.
-11-
3.3 DISCLOSURE OF INFORMATION. Each Investor believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Securities. Each Investor further represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Securities. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 2 of this Agreement or the right of the Investors to
rely thereon.
3.4 INVESTMENT EXPERIENCE. Each Investor is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Securities.
If other than an individual, Investor also represents it has not been organized
for the purpose of acquiring the Securities.
3.5 ACCREDITED INVESTOR. Each Investor is an "accredited investor"
within the meaning of SEC Rule 501 of Regulation D, as presently in effect.
3.6 RESTRICTED SECURITIES. Each Investor understands that the
Securities it is purchasing are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act of 1933, as amended (the "Act"), only in certain limited
circumstances. In this connection, each Investor represents that it is familiar
with SEC Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
3.7 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, each Investor further agrees not to make
any disposition of all or any portion of the Securities unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3, provided and to the extent such sections are then applicable,
and the Investors' Rights Agreement and any applicable Ancillary Agreement and:
(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement or an exemption from such
Registration is available; or
(b)(i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably
-12-
requested by the Company, such Investor shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Act. It is
agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, or any legend on certificates representing the Securities pursuant to
Section 3.8 below, no such registration statement or opinion of counsel shall be
necessary for a transfer by an Investor which is a partnership to a partner of
such partnership or a retired partner of such partnership who retires after the
date hereof, or to the estate of any such partner or retired partner or the
transfer by gift, will or intestate succession of any partner to his spouse or
to the siblings, lineal descendants or ancestors of such partner or his spouse,
if the transferee agrees in writing to be subject to the terms hereof to the
same extent as if he were an original Investor hereunder.
3.8 LEGENDS. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY
STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE ACT, OR PURSUANT TO
RULE 144 UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT."
(b) Any legend required by the laws of the State of California,
including any legend required by the California Department of Corporations and
Sections 417 and 418 of the Code.
4. CALIFORNIA COMMISSIONER OF CORPORATIONS.
4.1 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
5. CONDITIONS OF INVESTORS' OBLIGATIONS AT CLOSING. The obligations of
each Investor under subsection 1.1(b) of this
-13-
Agreement are subject to the fulfillment on or before the Closing of each of the
following conditions, the waiver of which shall not be effective against any
Investor which does not consent thereto:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
5.2 PERFORMANCE. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to each Investor at the Closing a certificate certifying that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled and stating
that there shall have been no adverse change in the business, affairs,
operations, properties, assets or condition of the Company since December 31,
1995.
5.4 CALIFORNIA QUALIFICATION. The Commissioner of Corporations of
the State of California shall have issued a permit qualifying the offer and sale
of the Securities to the Investors pursuant to this Agreement, or such offer and
sale shall be exempt from such qualification under the California Corporate
Securities Law of 1968, as amended.
5.5 BOARD OF DIRECTORS. Immediately upon Closing, the board of
directors of the Company shall be comprised of ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇.
5.6 OPINION OF COMPANY COUNSEL. Each Investor shall have received
from ▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇, counsel for the Company, an opinion, dated as
of the Closing, in form and substance satisfactory to the special counsel to the
Investors.
5.7 INVESTORS' RIGHTS AND STOCK RESTRICTION AGREEMENTS. The
Company, each Investor and the parties to the Investors' Rights Agreement shall
have entered into the Amendment Number Two to the Investors' Rights Agreement,
and the Company, each Investor and the holders of outstanding shares of the
Company's Common Stock and Series A Preferred Stock shall have entered into
Amendment Number One to the Stock Restriction Agreement.
5.8 RESTATED ARTICLES. The Restated Articles shall have been filed
with the Secretary of State of the State of California and shall be in full
force and effect on the Closing Date.
-14-
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Investor:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investor contained in Section 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.
6.2 PERFORMANCE. The Investors shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by them on or before the Closing.
6.3 PAYMENT OF PURCHASE PRICE. The Investors shall have delivered
the purchase price specified in Section 1.2.
6.4 CALIFORNIA QUALIFICATION. The Commissioner of Corporations of
the State of California shall have issued a permit qualifying the offer and sale
to the Investors of the Series C Preferred Stock and the Common Stock issuable
upon the conversion thereof or such offer and sale shall be exempt from such
qualification under the California Corporate Securities Law of 1968, as amended.
6.5 INVESTORS' RIGHTS AND STOCK RESTRICTION AGREEMENT. The Company,
each Investor and the parties to the Investor Rights Agreement shall have
entered into Amendment Number Two to the Investors' Rights Agreement and the
Company, each Investor and the holders of outstanding shares of the Company's
Common Stock and Series A Preferred Stock shall have entered into Amendment
Number One to the Stock Restriction Agreement.
6.6 RESTATED ARTICLES. The Restated Articles shall have been filed
with the Secretary of State of the State of California and shall be in full
force and effect on the Closing Date.
7. MISCELLANEOUS.
7.1 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.
-15-
7.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Securities. Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.3 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
7.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.
7.7 FINDER'S FEE. Each party represents that it neither is nor will
be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, partners,
employees or representatives is responsible. The Company agrees to indemnify
and hold harmless each Investor from any liability for any commission or
compensation in the nature of a finders' fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.
7.8 EXPENSES. Irrespective of whether the Closing is effected, the
Company shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If the
Closing is effected, the Company shall, at the Closing, reimburse the reasonable
fees of a
-16-
single special counsel for the Investors hereunder (not to exceed $10,000 and
shall, upon receipt of a ▇▇▇▇ therefor, reimburse the out-of-pocket expenses of
such counsel. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement or the Restated Articles, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
7.9 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Series C Preferred Stock and the Common Stock issued or
issuable upon conversion of the Series C Preferred Stock. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any securities purchased under this Agreement at the time outstanding
(including securities into which such securities are convertible), each future
holder of all such securities and the Company.
7.10 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
7.11 AGGREGATION OF STOCK. All shares of Series C Preferred Stock
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
7.12 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-17-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
▇▇▇▇▇'▇ RESTAURANTS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇▇▇▇▇, President
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
INVESTORS:
ROSEWOOD CAPITAL, L.P.
By: Rosewood Capital Associates, L.P.,
General Partner
By: /s/ [ILLEGIBLE]
-------------------------------
Address: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
BROPHAR INVESTOR PARTNERS
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------
General Partner
Address: c/o ▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ "▇" ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ R. ▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
R. ▇▇▇▇ ▇▇▇▇▇▇▇▇
Address:
[SIGNATURE PAGE TO
SERIES C PREFERRED STOCK PURCHASE AGREEMENT]
/s/ ▇▇▇ ▇▇▇▇▇▇
-----------------------------------
▇▇▇ ▇▇▇▇▇▇
Address: ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
T. ▇▇▇▇▇ AND ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/ T. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------
T. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
UMB BANK, N.A., TRUSTEE OF THE ▇▇▇▇▇▇▇,
PHLEGER & ▇▇▇▇▇▇▇▇ SAVINGS PLAN f/b/o
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
By: /s/ [ILLEGIBLE]
-------------------------------
Vice President
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
P. O. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
[SIGNATURE PAGE TO
SERIES C PREFERRED STOCK PURCHASE AGREEMENT]
UNITED MISSOURI BANK, N.A., TRUSTEE OF
THE ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ SAVINGS
PLAN f/b/o ▇▇▇▇ ▇. ▇▇▇▇▇
By: /s/ [ILLEGIBLE]
-------------------------------
Vice President
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
P. O. Box 419692
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Address: ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
Address: c/o Rubio's Restaurants, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇ ▇▇▇▇▇▇▇
Address: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
PRUDENTIAL SECURITIES, CUSTODIAN FOR
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇
By:
--------------------------------
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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Address: c/o Prudential Securities
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[SIGNATURE PAGE TO
SERIES C PREFERRED STOCK PURCHASE AGREEMENT]
SCHEDULE A
SCHEDULE OF INVESTORS
Rosewood Capital, L.P.
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T. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ &
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R. ▇▇▇▇ ▇▇▇▇▇▇▇▇
UMB Bank, n.a., Trustee of
the ▇▇▇▇▇▇▇, Phleger &
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UMB Bank, n.a., Trustee of
the ▇▇▇▇▇▇▇, Phleger &
▇▇▇▇▇▇▇▇ Savings Plan f/b/o
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Brophar Investor Partners
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EXHIBIT A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
A-1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF ▇▇▇▇▇'▇ RESTAURANTS, INC.
a California Corporation
The undersigned ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇ hereby certify that:
ONE: They are the duly elected and acting President and Secretary,
respectively, of said Corporation.
TWO: The Articles of Incorporation of said Corporation shall be amended and
restated to read in full as follows:
ARTICLE I
The name of this Corporation is ▇▇▇▇▇'▇ RESTAURANTS, INC.
ARTICLE II
The purpose of this Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
A. CLASSES OF STOCK. This Corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the Corporation is authorized to issue is Ten
Million (10,000,000) shares. Six Million Eighty Two Thousand Nine Hundred and
Seventy-Four (6,082,974) shares shall be Common Stock and Three Million Nine
Hundred Seventeen Thousand and Twenty-Six (3,917,026) shares shall be Preferred
Stock, of which Two Million (2,000,000) shares shall be Series A Preferred
Stock, One Million Ninety-Two Thousand and Twenty-Six (1,092,026) shares shall
be Series B Preferred Stock, and Eight Hundred Twenty Five Thousand (825,000)
shares shall be Series C Preferred Stock.
B. RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The rights,
preferences, restrictions and other matters relating to the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock are as follows:
1. DIVIDEND PROVISIONS.
(a) Subject to the rights of series of Preferred Stock which may
from time to time come into existence, holders of shares of Series B Preferred
Stock and Series C Preferred Stock shall be entitled to receive dividends, out
of any assets legally
available therefor, prior and in preference to any declaration or payment of any
dividend (payable other than in Common Stock or other securities and rights
convertible into or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock of this Corporation) on the Series
A Preferred Stock or the Common Stock of this Corporation, at the rate of $0.26
per share of Series B Preferred Stock per annum and $0.43 per share on the
Series C Preferred Stock per annum (subject to appropriate adjustments for stock
splits, stock dividends, combinations or other recapitalizations) payable when,
as and if declared by the Board of Directors. Such dividends shall not be
cumulative.
(b) No distribution or dividend of cash or property shall be
paid on shares of Common Stock or Series A Preferred Stock unless a distribution
or dividend of the same amount per share (on an as-converted basis) is
simultaneously paid on both the shares of Series B Preferred Stock and the
shares of Series C Preferred Stock.
(c) No distribution or dividend of cash or property shall be
paid on shares of Common Stock unless a distribution or dividend of the same
amount per share (on an as-converted basis) is simultaneously paid on the shares
of Series A Preferred Stock.
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up
of this Corporation, either voluntary or involuntary, subject to the rights of
series of Preferred Stock which may from time to time come into existence, the
holders of Series B Preferred Stock and Series C Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of any of the
assets of this Corporation to the holders of Series A Preferred Stock or Common
Stock by reason of their ownership thereof, an amount per share equal to the sum
of (i) $3.20511 for each outstanding share of Series B Preferred Stock (subject
to appropriate adjustments for stock splits, stock dividends, combinations or
other recapitalizations and hereafter referred to as the "Original Series B
Issue Price"), plus declared but unpaid dividends and (ii) $5.38126 for each
outstanding share of Series C Preferred Stock (subject to appropriate
adjustments for stock splits, stock dividends, combinations or other
recapitalizations and hereafter referred to as the "Original Series C Issue
Price") plus declared but unpaid dividends and (iii) an amount equal to eight
percent (8%) compounded per annum on the Original Series B Issue Price and on
the Original Series C Issue Price calculated from the date of the initial
issuance and sale of shares of Series B Preferred Stock and Series C Preferred
Stock, respectively, and on declared but unpaid dividends from the date of
declaration through the effective date of the liquidation, dissolution or
winding up of this Corporation. If upon the occurrence of such event, the
assets and funds thus distributed among the holders of the Series B Preferred
Stock and Series C
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Preferred Stock shall be insufficient to permit the payment to such holders of
the full aforesaid preferential amount, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among the holders of the Series B Preferred Stock and Series C Preferred Stock
in proportion to the amount of such stock owned by each such holder.
(b) Upon the completion of the distribution required by
subparagraph (a) of this Section 2, if assets remain in this Corporation the
holders of Series A Preferred Stock and Common Stock shall receive all of the
remaining assets of this Corporation. The entire assets and funds of the
Corporation legally available for distribution (after giving effect to the
distribution referred to in Section 2(a) hereof) shall be distributed ratably
among the holders of the Series A Preferred Stock and Common Stock in proportion
to the amount of such stock owned by each such holder (determined on an
as-converted basis).
(c) A consolidation or merger of this Corporation with or into
any other corporation or corporations, or a sale, conveyance or disposition of
all or substantially all of the assets of this Corporation or the effectuation
by the Corporation of a transaction or series of related transactions in which
more than 50% of the voting power of the Corporation is disposed of (excluding
the issuance of up to 1,092,026 shares of Series B Preferred Stock and the
issuance of up to 825,000 shares of Series C Preferred Stock), shall be deemed
to be a liquidation, dissolution or winding up within the meaning of this
Section 2. The amount being distributed to the holders of capital stock upon
any such merger or consolidation shall be the cash or the value of the property,
rights or securities distributed to such holders by the acquiring person, firm
or other entity. The value of such property, rights or other securities shall
be determined in good faith by the Board of Directors of the Corporation.
3. REDEMPTION.
(a) The holders of a majority of the outstanding Series B and
Series C Preferred Stock ("Moving Investors") may request redemption of their
shares at any time on or after July 1, 2000 at a price equal to the greater (i)
of $3.20511 per share with respect to the Series B Preferred Stock and at a
price of $5.38126 with respect to the Series C Preferred Stock or (ii) the fair
market value of such shares ("Redemption Price"). If such request is made,
Corporation shall have the option to redeem all of the outstanding shares of
Series B and Series C Preferred Stock. The Corporation may pay the Redemption
Price in up to four equal annual installments commencing six months after
receipt of notice from the Moving Investors and on each anniversary date
thereafter; provided, however, that any balance due on all of the Redemption
Price shall be paid in full on or before January 1, 2004. If the Moving
Investors and the Corporation are unable to agree upon the Redemption Price and
are unable to agree upon the identity of a single business appraiser to value of
the Corporation, then the Moving Investors shall hire
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one business appraiser experienced in restaurant valuations and Rubio's shall
hire a second business appraiser experienced in restaurant valuations. The two
business appraisers that have been selected shall select a third business
appraiser experienced in restaurant valuations. All three business appraisers
shall independently determine the value of the Corporation and render a written
appraisal ("Appraisal"). The Redemption Price shall be the average of the two
closest Appraisals. The cost of all of the business appraisers shall be borne
50% by the Corporation and 50% by the Moving Investors whose shares are
redeemed. Any deferred payments shall bear interest at the annual rate of prime
(the most favorable rate available to the Corporation for its borrowing from
time to time) plus 1%.
(b) With respect to any redemption to be conducted in
installments pursuant to subsection 3(a), the Corporation shall effect such
redemption pro rata according to the number of shares of Series B Preferred
Stock and Series C Preferred Stock held by each holder.
(c) At least 20 but no more than 60 days prior to the date fixed
for any redemption of Series B Preferred Stock and Series C Preferred Stock (the
"Redemption Date"), written notice shall be mailed, first class postage prepaid,
to each holder of record (at the close of business on the business day next
preceding the day on which notice is given) of the Series B and Series C
Preferred Stock as applicable to be redeemed, at the address last shown on the
records of this Corporation for such holder or given by the holder to this
Corporation for the purpose of notice or if no such address appears or is given
at the place where the principal executive office of this Corporation is
located, notifying such holder of the redemption to be effected, specifying the
number of shares to be redeemed from such holder, the Redemption Date, the
Series B Redemption Price and Series C Redemption Price as applicable, the place
at which payment may be obtained and the date on which such holder's Conversion
Rights (as hereinafter defined) as to such shares terminate and calling upon
such holder to surrender to this Corporation, in the manner and at the place
designated, his certificate or certificates representing the shares to be
redeemed (the "Redemption Notice"). Except as provided in subsection 3(d) and
except as prohibited by applicable California corporate law, on or after the
Redemption Date, each holder of Series B and Series C Preferred Stock as
applicable to be redeemed shall surrender to this Corporation the certificate or
certificates representing such shares, in the manner and at the place designated
in the Redemption Notice, and thereupon the Series B Redemption Price and the
Series C Redemption Price as applicable of such shares shall be payable to the
order of the person whose name appears on such certificate or certificates as
the owner thereof and each surrendered certificate shall be cancelled. In the
event less than all the shares represented by any such certificate are redeemed,
a new certificate shall be issued representing the unredeemed shares.
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(d) From and after the Redemption Date, unless there shall have
been a default in payment of the Series B Redemption Price or the Series C
Redemption Price as applicable, all rights of the holders of such shares as
holders of Series B Preferred Stock to be redeemed on the Redemption Date
(except the right to receive the Series B Redemption Price and the Series C
Redemption Price as applicable including any interest due pursuant to subsection
3(a) upon surrender of their certificate or certificates) shall cease with
respect to such shares, and such shares shall not thereafter be transferred on
the books of this Corporation or be deemed to be outstanding for any purpose
whatsoever. If the funds of the Corporation legally available for redemption of
shares of Series B or Series C Preferred Stock on any Redemption Date are
insufficient to redeem the total number of shares of Series B or Series C
Preferred Stock to be redeemed on such date, those funds which are legally
available will be used to redeem the maximum possible number of such shares
ratably among the holders of such shares to be redeemed. Any shares of Series B
and Series C Preferred Stock not redeemed shall remain outstanding and entitled
to all the rights and preferences provided herein. At any time thereafter when
additional funds of the Corporation are legally available for the redemption of
the Series B and Series C Preferred Stock, such funds will immediately be used
to redeem the balance of the shares which the Corporation has become obligated
to redeem on any Redemption Date but which it has not redeemed.
4. CONVERSION. The holders of the Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock and shall have conversion rights
as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT.
i) Subject to subsection 4(c), each share of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share and prior to the close of business on any Redemption Date
as may have been fixed in any Redemption Notice with respect to such share, at
the office of this Corporation or any transfer agent for the particular series
of Preferred Stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing, with respect to Series A Preferred
Stock, $2.00 per share (subject to appropriate adjustments for stock splits,
stock dividends, combinations or other recapitalizations and hereafter referred
to as the "Original Series A Issue Price") or, with respect to Series B
Preferred Stock, the Original Series B Issue Price plus all declared but unpaid
dividends on such share of Series B Preferred Stock by the applicable Conversion
Price at the time in effect for such share or with respect to Series C Preferred
Stock, the Original Series C Issue Price plus all declared but unpaid dividends
on such share of Series C Preferred Stock by the applicable Conversion Price at
the time in effect for such share. The initial
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Conversion Price per share for shares of Series A Preferred Stock shall be the
Original Series A Issue Price, the initial Conversion Price per share for shares
of Series B Preferred Stock shall be the Original Series B Issue Price and the
initial Conversion Price per share for share of Series C Preferred Stock shall
be the Original Series C Issue Price; provided, however, that the Conversion
Price for the Series A Preferred Stock, Series B Preferred Stock and the Series
C Preferred Stock shall be subject to adjustment as set forth in subsection
4(c).
ii) In the event of a call for redemption of any shares of
Series B or Series C Preferred Stock pursuant to Section 3 hereof, the
Conversion Rights shall terminate as to the shares designated for redemption at
the close of business on the Redemption Date, unless default is made in payment
of the Series B Redemption Price or the Series C Redemption Price as applicable,
in which case the Conversion Rights shall terminate on the date such Redemption
Price is paid in full for the Series B Preferred Stock and for the Series C
Preferred Stock, as applicable.
iii) Each share of Preferred Stock shall automatically be
converted into shares of Common Stock based on the Conversion Price at the time
in effect for such shares immediately upon the earlier of (A) the closing of the
Corporation's sale of its Common Stock in a bona fide, firm commitment
underwriting pursuant to a registration statement under the Securities Act of
1933, as amended (the "Securities Act"), in which the Corporation and any
selling shareholders receive not less than $15,000,000 aggregate net proceeds,
or (B) the date upon which the Corporation obtains the consent of the holders of
66 2/3% of the then outstanding shares of Series B Preferred Stock and Series C
Preferred Stock for conversion of the Preferred Stock into Common Stock.
(b) MECHANICS OF CONVERSION. Before any holder of Preferred
Stock shall be entitled to convert the same into shares of Common Stock, he
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of this Corporation or of any transfer agent for the particular series of
Preferred Stock and shall give written notice by mail, postage prepaid, to this
Corporation at its principal corporate office, of the election to convert the
same and shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. This Corporation
shall, as soon as practicable thereafter, issue and deliver at such office to
such holder of Preferred Stock or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares of Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common
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Stock as of such date. If the conversion is in connection with an underwritten
offer of securities registered pursuant to the Securities Act, the conversion
may, at the option of any holder tendering Preferred Stock for conversion, be
conditioned upon the effectiveness of a registration statement under the
Securities Act and the closing of the sale and purchase of shares pursuant to
such offering, in which event the person(s) entitled to receive the Common Stock
issuable upon such conversion of the Preferred Stock shall not be deemed to have
converted such Preferred Stock until immediately prior to the closing of such
offering.
(c) CONVERSION PRICE ADJUSTMENTS OF PREFERRED STOCK. The
Conversion Price of the Series A Preferred Stock, the Series B Preferred Stock
and the Series C Preferred Stock shall be subject to adjustment from time to
time as follows:
i) A. Upon each issuance by the Corporation of any
Additional Stock (as defined below) after the date upon which any shares of
Series B Preferred Stock or the Series C Preferred Stock were first issued (the
"Purchase Date"), without consideration or for a consideration per share less
than the applicable Conversion Price for the Series B Preferred Stock in effect
immediately prior to the issuance of such Additional Stock, the applicable
Conversion Price for the Series B Preferred Stock and the Series C Preferred
Stock in effect immediately prior to each such issuance shall forthwith (except
as otherwise provided in this clause (i)) be adjusted to a price determined by
multiplying such Conversion Price by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of Common Stock which the aggregate
consideration received by the Corporation for such issuance would purchase at
such Conversion Price; and the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issuance plus the
number of shares of such Additional Stock.
B. No adjustment of the Conversion Price for the
Series B Preferred Stock or the Series C Preferred Stock shall be made in an
amount less than one cent per share, provided that any adjustments which are not
required to be made by reason of this sentence shall be carried forward and
shall be either taken into account in any subsequent adjustment made prior to
three (3) years from the date of the event giving rise to the adjustment being
carried forward, or shall be made at the end of three (3) years from the date of
the event giving rise to the adjustment being carried forward, whichever occurs
first. Except to the limited extent provided for in subsections (E)(3) and
(E)(4), no adjustment of such Conversion Price pursuant to this subsection
4(c)(i) shall have the effect of increasing the Conversion Price above the
Conversion Price in effect immediately prior to such adjustment.
C. In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or
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incurred by this Corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
D. In the case of the issuance of the Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined by the
Board of Directors irrespective of any accounting treatment.
E. In the case of the issuance (whether before, on or
after the Purchase Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply for all
purposes of this subsection 4(c)(i) and subsection 4(c)(ii):
1. The aggregate maximum number of shares of
Common Stock deliverable upon exercise (assuming the satisfaction of
any conditions to exercisability, including, without limitation, the
passage of time, but without taking into account potential
antidilution adjustments) of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal
to the consideration (determined in the manner provided in subsections
4(c)(i)(C) and (c)(i)(D)), if any, received by the Corporation upon
the issuance of such options or rights plus the exercise price
provided in such options or rights (without taking into account
potential antidilution adjustments) for the Common Stock covered
thereby.
2. The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange (assuming
the satisfaction of any conditions to convertibility or
exchangeability, including, without limitation, the passage of time,
but without taking into account potential antidilution adjustments)
for any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent conversion or
exchange thereof shall be deemed to have been issued at the time such
securities were issued or such options or rights were issued and for a
consideration equal to the consideration, if any, received by the
Corporation for any such securities and related options or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the additional consideration, if any, to be received
by the Corporation (without taking into account potential antidilution
adjustments) upon the conversion or
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exchange of such securities or the exercise of any related options or
rights (the consideration in each case to be determined in the manner
provided in subsections 4(c)(i)(C) and (c)(i)(D)).
3. In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to
this Corporation upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or exchangeable
securities, including, without limitation, a change resulting from the
antidilution provisions thereof, the Conversion Price of the
applicable Preferred Stock to the extent in any way affected by or
computed using such options, rights or securities, shall be recomputed
to reflect such change, but no further adjustment shall be made for
the actual issuance of Common Stock or any payment of such
consideration upon the exercise of any such options or rights or the
conversion or exchange of such securities.
4. Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the applicable Conversion Price of the
Preferred Stock to the extent in any way affected by or computed using
such options, rights or securities or options or rights related to
such securities, shall be recomputed to reflect the issuance of only
the number of shares of Common Stock (and convertible or exchangeable
securities which remain in effect) actually issued upon the exercise
of such options or rights, upon the conversion or exchange of such
securities or upon the exercise of the options or rights related to
such securities.
5. The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to
subsections 4(c)(i)(E)(1) and (2) shall be appropriately adjusted to
reflect any change, termination or expiration of the type described in
either subsection 4(c)(i)(E)(3) or (4).
ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 4(c)(i)(E))
by this Corporation after the Purchase Date other than
A. shares of Common Stock issued pursuant to a
transaction described in subsection 4(c)(iii) hereof,
B. shares of Common Stock issued upon conversion of
the applicable Preferred Stock,
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C. to employees, consultants or directors of this
Corporation, or to vendors, suppliers, customers or other persons or
organizations with which the Corporation has a commercial
relationship, at any time when the total number of shares of Common
Stock so issuable or issued (and not repurchased at cost by the
Corporation in connection with the termination of employment or the
commercial relationship) does not exceed 220,500 (subject to
appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations) subsequent to the Purchase
Date, or
D. shares of Common Stock issued or issuable (I) in a
public offering before or in connection with which all outstanding
shares of Preferred Stock will be converted to Common Stock or (II)
upon exercise of warrants or rights granted to underwriters in
connection with such a public offering, or
E. by way of dividend or other distribution on shares
excluded from the definition of Additional Stock by virtue of clauses
(A) through (D),
iii) In the event the Corporation should at any time or from
time to time after the Purchase Date fix a record date for the effectuation of a
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the applicable
Conversion Price of the Series A, Series B Preferred Stock or Series C Preferred
Stock shall be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of each share of such series shall be increased in
proportion to such increase of the aggregate of shares of Common Stock
outstanding and those issuable with respect to such Common Stock Equivalents.
iv) If the number of shares of Common Stock outstanding at
any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the applicable Conversion Price for the Series A, Series B
Preferred Stock or Series C Preferred Stock shall be appropriately increased so
that the number of shares of Common Stock issuable on conversion of
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each share of such series shall be decreased in proportion to such decrease in
outstanding shares.
(d) OTHER DISTRIBUTIONS. In the event this Corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this Corporation or other persons, or assets (excluding
cash dividends) or options or rights not referred to in subsection 4(c)(iii),
then, in each such case for the purpose of this subsection 4(d), the holders of
the Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the Corporation into which their shares of Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
(e) RECAPITALIZATIONS. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4), provision shall be made so that the holders of the Preferred
Stock shall thereafter be entitled to receive upon conversion of the Preferred
Stock, the number of shares of stock or other securities or property of the
Company or otherwise, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 4 with respect to the rights of the holders of the Preferred Stock
after the recapitalization to the end that the provisions of this Section 4
(including adjustment of the Conversion Price then in effect for each series and
the number of shares purchasable upon conversion of the Preferred Stock) shall
be applicable after that event as nearly equivalent as may be practicable.
(f) NO IMPAIRMENT. This Corporation shall not, by amendment of
its Articles of Incorporation or through any reorganization, recapitalization,
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 this
Corporation, but shall at all times in good faith assist in the carrying out of
all the provisions of this Section 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Preferred Stock against impairment.
(g) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
i) No fractional shares shall be issued upon conversion of
the Preferred Stock and the number of shares of Common Stock to be issued shall
be rounded to the nearest whole share. Whether or not fractional shares are
issuable upon
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such conversion shall be determined on the basis of the total number of shares
of Preferred Stock the holder is at the time converting into Common Stock and
the number of shares of Common Stock issuable upon such aggregate conversion.
ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Preferred Stock pursuant to this Section 4, this
Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. This Corporation shall, upon the written request at any
time of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (A) such adjustment and readjustment,
(B) the applicable Conversion Price at the time in effect, and (C) the number of
shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of Preferred Stock.
(h) NOTICES OF RECORD DATE. In the event of any taking by this
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
Corporation shall mail to each holder of Preferred Stock, at least 20 days prior
to the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right.
(i) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. This
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Preferred Stock, in addition to
such other remedies as shall be available to the holder of such Preferred Stock,
this Corporation shall take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.
(j) NOTICES. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder
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of record at his address appearing on the books of this Corporation.
5. VOTING RIGHTS.
(a) GENERAL VOTING RIGHTS. The holder of each share of the
Preferred Stock shall have the right to one vote for each share of Common Stock
into which such Preferred Stock could then be converted (with any fractional
share determined on an aggregate conversion basis being rounded to the nearest
whole share), and with respect to such vote, such holder shall have full voting
rights and powers equal to the voting rights and powers of the holders of Common
Stock, and shall be entitled, notwithstanding any provision hereof, to notice of
any shareholders' meeting in accordance with the Bylaws of this Corporation, and
shall be entitled to vote, together as a single class with holders of Common
Stock, with respect to any question upon which holders of Common Stock have the
right to vote, except for the election of directors as provided in Section 5(b)
below.
(b) ELECTION OF DIRECTORS. Notwithstanding 5(a) above, the
holders of Series C Preferred Stock and the holders of Series B Preferred Stock,
voting as a single class together, shall be entitled to elect one (1) director
of the Corporation. The holders of Series A Preferred Stock and Common Stock,
voting together as a class, shall be entitled to elect the remaining directors
of the Corporation. At any meeting held for the purpose of electing or
nominating directors, the presence in person or by proxy of the holders of a
majority of the Series B Preferred Stock then outstanding and a majority of the
Series C Preferred Stock then outstanding shall constitute a quorum of the
Series B and Series C Preferred Stock for the election or nomination of
directors to be elected or nominated solely by the holders of Series B and
Series C Preferred Stock voting together as a single class. A vacancy in any
directorship elected by the holders of Series B and Series C Preferred Stock
shall be filled only by vote of the holders of Series B and Series C Preferred
Stock.
6. PROTECTIVE PROVISIONS. Subject to the rights of series of
Preferred Stock which may from time to time come into existence, so long as
shares of Preferred Stock are outstanding, this Corporation shall not without
first obtaining the approval (by vote or written consent, as provided by law) of
the holders of at least a majority of the then outstanding shares of Series B
Preferred Stock and holders of at least a majority of the then outstanding
shares of Series C Preferred Stock, voting together as a single class:
(a) sell, convey, or otherwise dispose of or encumber (other
than pursuant to a credit arrangement in the ordinary course of business) all or
substantially all of its property or business or merge into or consolidate with
any other Corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which
-13-
more than 50% of the voting power of the Corporation is disposed of or effect
any voluntary liquidation, dissolution or winding up of the Corporation or any
reorganization or recapitalization of the Corporation (any such event
hereinafter referred to as a "Corporate Transaction"); or
(b) alter or change the rights, preferences or privileges of the
shares of Series B Preferred Stock or Series C Preferred Shares so as to
adversely affect the shares; or
(c) create any new class or series of stock or any other
securities convertible into equity securities of the corporation having a
preference over, or being on a parity with, the Series B Preferred Stock or
Series C Preferred Stock with respect to voting, dividends or preferences upon
liquidation; or
(d) amend the Corporation's Articles of Incorporation; or
(e) amend the Corporation's Bylaws, including, without
limitation, any amendment to increase the authorized number of directors to more
than five; or
(f) repurchase shares of the Corporation's Common Stock or
Preferred Stock; or
(g) permit any subsidiary to issue stock to any entity other
than the Corporation.
7. STATUS OF CONVERTED OR REDEEMED STOCK. In the event any shares
of Preferred Stock shall be redeemed or converted pursuant to Section 3 or
Section 4 hereof, the shares so converted or redeemed shall be cancelled and
shall not be issuable by the Corporation. The Articles of Incorporation of this
Corporation shall be appropriately amended to effect the corresponding reduction
in the Corporation's authorized capital stock.
8. REPURCHASE OF SHARES. In connection with repurchases by this
Corporation of its Common Stock pursuant to its agreements with certain of the
holders thereof, Sections 502 and 503 of the California General Corporation Law
shall not apply in whole or in part with respect to such repurchases.
C. COMMON STOCK.
1. DIVIDEND RIGHTS. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the Corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
-14-
2. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation shall be
distributed as provided in Section 2 of Division (B) of this Article III.
3. REDEMPTION. The Common Stock is not redeemable.
4. VOTING RIGHTS. The holder of each share of Common Stock shall
have the right to one vote, and shall be entitled to notice of any shareholders'
meeting in accordance with the Bylaws of this Corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law and
Section 5(b) of Division (B) of this Article III.
ARTICLE IV
A. The liability of the directors of this Corporation for monetary damages
for breach of fiduciary duties shall be eliminated to the fullest extent
permissible under California law.
B. This Corporation is authorized to indemnify the directors and officers
of this Corporation to the fullest extent permissible under California law.
C. This Corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) through bylaw
provisions, agreements with the agents, vote of shareholders or disinterested
directors, or otherwise in excess of the indemnification otherwise permitted by
Section 317 of the California Corporations Code, subject only to applicable
limits set forth in Section 204 of the California Corporations Code with respect
to actions for breach of duty to the Corporation and its shareholders.
D. Any amendment or repeal of this Article IV shall not reduce or
eliminate the effect of this Article IV with respect to actions taken prior to
such amendment or repeal.
* * *
THREE The foregoing amendment and restatement has been approved by the
Board of Directors of said Corporation.
FOUR The foregoing amendment and restatement of the articles of
incorporation was approved by the holders of the requisite number of shares of
said Corporation in accordance with Sections 902 and 903 of the California
Corporations Code; the total number of outstanding shares of each class entitled
to vote with respect to the foregoing amendment was 1,004,500 shares of Common
Stock, 2,000,000 shares of Series A Preferred Stock and 1,092,007 shares of
Series B Preferred Stock. The number of
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shares voting in favor of the foregoing amendment equaled or exceeded the vote
required, such required vote being (i) more than fifty percent (50%) of the
Common Stock and Series A Preferred Stock voting together, (ii) more than 50% of
the Common Stock voting as a separate class, (iii) more than fifty percent (50%)
of the Series A Preferred Stock voting as a separate class, and (iv) more than
fifty percent (50%) of the Series B Preferred Stock voting as a separate class.
-16-
IN WITNESS WHEREOF, the undersigned have executed this certificate on March
22, 1996.
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇, President
------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇, Secretary
The undersigned certify under penalty of perjury that they have read the
foregoing Restated Articles of Incorporation and know the contents thereof, and
that the statements therein are true.
Executed at San Diego, California, on March 22, 1996.
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇, President
------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇, Secretary
[SIGNATURE PAGE TO AMENDED AND RESTATED
ARTICLES OF INCORPORATION]
-17-
EXHIBIT B
SCHEDULE OF COMMON AND SERIES A PREFERRED SHAREHOLDERS
NAME SHARES
----- ------
COMMON SHAREHOLDERS
-------------------
▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ as Trustees of
the ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ Family Trust 400,000
▇▇▇▇▇▇ ▇▇▇▇▇ 400,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as
Trustees of the ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ Trust 50,000
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ as
Trustees or Successors of the ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Trust 50,000
▇▇▇▇▇▇ ▇▇▇▇▇ as Trustee of the ▇▇▇▇▇▇ ▇▇▇▇▇ Trust 50,000
▇▇▇▇▇▇ ▇▇▇▇▇▇ as Trustee of the Trust FBO
▇▇▇▇▇ ▇▇▇▇▇ 50,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 4,100
▇▇▇▇▇ ▇▇▇▇▇ 300
▇▇▇▇ ▇▇▇▇▇▇ 100
----------
Total 1,004,500(1)
SERIES A PREFERRED SHAREHOLDERS
-------------------------------
▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ as Trustees of
the ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ Family Trust 784,400
▇▇▇▇▇▇ ▇▇▇▇▇ 784,400
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as
Trustees of the ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ Trust 100,000
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ as
Trustees or Successors of the ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Trust 100,000
▇▇▇▇▇▇ ▇▇▇▇▇ as Trustee of the ▇▇▇▇▇▇ ▇▇▇▇▇ Trust 100,000
▇▇▇▇▇▇ ▇▇▇▇▇▇ as Trustee of the Trust FBO
▇▇▇▇▇ ▇▇▇▇▇ 100,000
▇▇▇▇▇▇▇ Family Trust dated December 8, 1988 31,200
----------
Total 2,000,000(2)
--------------------
(1) There are 50,000 warrants outstanding in favor of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, Inc.;
there is an authorized option pool remaining of 220,500 shares, of which
121,460 have been granted.
(2) Simultaneously with this Series C Preferred Stock issuance, the Company
will be repurchasing 26,605 Series A shares from ▇▇▇▇▇▇ ▇▇▇▇▇▇, Trustee
EXHIBIT C
SCHEDULE OF SERIES B PREFERRED SHAREHOLDERS
Purchase Number
Name and Address Price of Shares
----------------------------------------- ------------------- ----------
Rosewood Capital, L.P. 936,005
▇▇▇▇▇▇▇ Family Trust dated December 8,
1988 46,800
Brophar Investor Partners 29,641
Prudential Securities, Custodian for
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇ 7,800
R. ▇▇▇▇ ▇▇▇▇▇▇▇▇ 7,800
▇▇▇ ▇▇▇▇▇▇ 7,800
T. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 7,800
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. 7,800
▇▇▇▇ ▇▇▇▇▇ 7,800
Prudential Securities, Custodian for
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇ 3,120
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 4,680
UMB Bank, n.a., Trustee of the ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Retirement Savings
Plan f/b/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 7,800
UMB Bank, n.a., Trustee of the ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Retirement Savings
Plan f/b/o ▇▇▇▇ ▇. ▇▇▇▇▇ 7,800
UMB Bank, n.a., Trustee of the ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Retirement Savings
Plan f/b/o ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 6,241
UMB Bank, n.a., Trustee of the ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Retirement Savings
Plan f/b/o ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 1,560
UMB Bank, n.a., Trustee of the ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Retirement Savings
Plan f/b/o ▇▇▇ ▇▇ ▇▇▇▇▇ 1,560
Total: 1,092,007
C-1