EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of acceptance
set forth below, is entered into by and between XXXXXX'X RESTAURANT GROUP, INC.,
a Texas corporation, with headquarters located at 0000 Xxxxxxxx Xxxxxxx, Xxxxx
000, Xxxxxxxx, XX 00000 (the "Company"), and each entity named on Schedule A
hereto (each, a "Buyer") (each agreement with a Buyer being deemed a separate
and independent agreement between the Company and such Buyer, except that each
Buyer acknowledges and consents to the rights granted to each other Buyer under
such agreement and the Transaction Agreements, as defined below, referred to
therein).
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded by Section 4(2) of the 1933 Act; and
WHEREAS, as of the date of this Agreement, the Company is, by virtue
of its direct obligations to a Buyer or by virtue of its assumption of certain
debts owed to a Buyer, indebted to certain Buyers, all as provided in Schedule A
annexed hereto, and the Company desires to have such debt ("Existing Debt to
Buyer") canceled or restated on the terms provided or contemplated below; and
WHEREAS, each Buyer wishes to purchase, upon the terms and subject to
the conditions of this Agreement, 6% Secured Convertible Debentures of the
Company which will be convertible into shares of Common Stock, $.01 par value
per share of the Company (the "Common Stock"), upon the terms and subject to the
conditions of such Secured Convertible Debentures, and subject to acceptance of
this Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase.
(i) For the consideration specified for the Buyer in Schedule A, the
undersigned hereby agrees to purchase from the Company 6% Secured Convertible
Debentures in the principal amount set forth on the Buyer's signature page of
this Agreement (the "Debentures"), out of a total offering of $4,553,652 of such
Debentures (the "Aggregate Offering Amount"), and having the terms and
conditions and being in the form attached hereto as Annex I.
(ii) The Buyer's purchase price for the Debentures (the "Purchase
Price") shall be as set forth on Schedule A hereto and shall consist of one or
more of the following, as provided in said Schedule A: (i) cancellation or
restatement of the Existing Debt to Buyer ("Debt Portion of the Purchase Price")
and (ii) cash, payable in United States Dollars ("Cash Portion of the Purchase
Price").
b. Certain Definitions. As used herein, each of the following terms
has the meaning set forth below, unless the context otherwise requires:
(i) "Securities" means the Debentures and the Converted Shares (as
defined below).
(ii) "Converted Shares" means the shares of Common Stock issuable upon
conversion of the Debentures.
(iii) "Shares" means the shares of Common Stock representing the
Converted Shares.
(iv) "Certificates" means the Debentures, duly executed by the Company
and issued in the name of the Buyer in the principal amount of the Purchase
Price of the Buyer.
(v) "Closing Date" means the date of the closing of the purchase and
sale of the Debentures, as provided herein.
(vi) "Effective Date" means the effective date of the Registration
Statement covering the Registrable Securities (as those terms are defined in the
Registration Rights Agreement defined below).
(vii) "Market Price of the Common Stock" means the average closing bid
price of the Common Stock for the five (5) trading days ending on the trading
day immediately before the date indicated in the relevant provision hereof, as
reported by Bloomberg, LP or, if not so reported, as reported on the
over-the-counter market.
(viii) "Person" means any living person or any entity, such as, but
not necessarily limited to, a corporation, partnership or trust.
(ix) "Affiliate" means, with respect to a specific Person referred to
in the relevant provision, another Person who or which controls or is controlled
by or is under common control with such specified Person.
(x) "Pledge Agreement" means the Pledge and Security Agreement
substantially in the form attached as Annex VI hereto.
(xi) "Transaction Agreements" means the Securities Purchase Agreement,
the Debentures, the Registration Rights Agreement, the Pledge Agreement, and the
Joint Escrow Instructions (as defined below).
(xii) "Escrow Funds" means the Purchase Price delivered to the Escrow
Agent as contemplated by Section 1(d) hereof.
(xiii) "Escrow Property" means the Escrow Funds and the Certificates
delivered to the Escrow Agent as contemplated by Section 1(c) hereof.
(xiv) "Buyer's Allocable Share" means the fraction of which the
numerator is the Purchase Price of the Buyer specified on the Buyer's signature
page of this Agreement and the denominator is the Aggregate Offering Amount.
(xv) "Last Audited Date" means December 26, 1999.
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(xvi) "Acquisition Transaction" means the transaction pursuant to
which the Company, which may be after the date hereof, acquired or will acquire
all of the outstanding capital stock (all such shares, the "Fone Shares") of
Xxxx.xxx Limited , a corporation organized under the laws of England and Wales
(the name of which entity is anticipated to be changed to B4B Communications,
Inc.; "Fone").
(xvii) "Acquisition Date" means the date the Acquisition Transaction
is consummated.
c. Form of Payment; Delivery of Certificates.
(i) (A) The Buyer shall pay the Cash Portion of the Purchase Price, if
any, by delivering immediately available good funds in United States Dollars to
the escrow agent (the "Escrow Agent") identified in the Joint Escrow
Instructions attached hereto as Annex II (the "Joint Escrow Instructions") on
the date prior to the Closing Date.
(B) The Buyer agrees that, upon release of the Certificates from
escrow as provided herein and in the Joint Escrow Instructions, the Existing
Debt to Buyer shall be repayable in accordance with the terms of the Debenture,
without regard to the terms of the Existing Debt to Buyer as in effect prior to
the Closing Date, except that any security interest previously granted to the
Buyer shall be deemed to continue and remain in effect as and to the extent such
security interest is contemplated by the Transaction Agreements.
(ii) No later than the Closing Date, but in any event promptly
following payment by the Buyer to the Escrow Agent of the Cash Portion of the
Purchase Price, if any, the Company shall deliver the Certificates to the Escrow
Agent.
(iii) By signing this Agreement, each of the Buyer and the Company,
subject to acceptance by the Escrow Agent, agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.
d. Method of Payment. Payment into escrow of the Cash Portion
the Purchase Price, if any, shall be made by wire transfer of funds to:
Bank of New York
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA# 000000000
For credit to the account of Xxxxxxx & Xxxxxx LLP
Account No.: [To be provided to the Buyer by Xxxxxxx & Prager
LLP]
Re: Xxxxxx'x Transaction
Not later than 5:00 p.m., New York time, on the date which is two (2) New York
Stock Exchange trading days after the Company shall have accepted this Agreement
and returned a signed counterpart of this Agreement to the Escrow Agent by
facsimile, the Buyer shall deposit with the Escrow Agent the Cash Portion of the
Purchase Price, if any, for the Debentures in currently available funds. Time is
of the essence with respect to such payment, and failure by the Buyer to make
such payment, shall allow the Company to cancel this Agreement.
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2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
a. Without limiting Buyer's right to sell the Common Stock pursuant to
the Registration Statement, the Buyer is purchasing the Debentures and will be
acquiring the Shares for its own account for investment only and not with a view
towards the public sale or distribution thereof and not with a view to or for
sale in connection with any distribution thereof.
b. The Buyer is (i) an entity in which all of the equity owners are
"accredited investor" as that term is defined in Rule 501 of the General Rules
and Regulations under the 1933 Act by reason of Rule 501(a)(3), (ii) experienced
in making investments of the kind described in this Agreement and the related
documents, (iii) able, by reason of the business and financial experience of its
officers and professional advisors (who are not affiliated with or compensated
in any way by the Company or any of its affiliates or selling agents), to
protect its own interests in connection with the transactions described in this
Agreement, and the related documents, and (iv) able to afford the entire loss of
its investment in the Securities.
c. All subsequent offers and sales of the Securities by the Buyer
shall be made pursuant to registration of the Shares under the 1933 Act or
pursuant to an exemption from registration.
d. The Buyer understands that the Securities are being offered and
sold to it in reliance on specific exemptions from the registration requirements
of United States federal and state securities laws and that the Company is
relying upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the Securities.
e. The Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Debentures and the offer of the
Shares which have been requested by the Buyer, including Annex V hereto. The
Buyer and its advisors, if any, have been afforded the opportunity to ask
questions of the Company and have received complete and satisfactory answers to
any such inquiries. Without limiting the generality of the foregoing, the Buyer
has also had the opportunity to obtain and to review the Company's (1) Annual
Report on Form 10-KSB for the fiscal year ended December 26, 1999, and (2)
Quarterly Report on Form 10-QSB for the fiscal quarter ended April 16, 2000 (the
"Company's SEC Documents").
f. The Buyer understands that its investment in the Securities
involves a high degree of risk.
g. The Buyer understands that no United States federal or state agency
or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities.
h. This Agreement and the other Transaction Agreements to which the
Buyer is a party have been duly and validly authorized, executed and delivered
on behalf of the Buyer and are valid and binding agreements of the Buyer
enforceable in accordance with their respective terms, subject as to
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enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer as of the date hereof
and as of the Closing Date that, except as provided in Annex V hereto:
a. Concerning the Debentures and the Shares. There are no preemptive
rights of any stockholder of the Company, as such, to acquire the Securities. No
party has a currently exercisable right of first refusal which would be
applicable to any or all of the transactions contemplated by the Transaction
Agreements.
b. Reporting Company Status. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and has the requisite corporate power to own its properties and to carry
on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business, operations
or financial condition or results of operations of the Company and its
subsidiaries taken as a whole. The Company has registered its Common Stock
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the
"1934 Act"). The Company has filed all material required to be filed pursuant to
all reporting obligations under either Section 13(a) or 15(d) of the 1934 Act
for a period of at least twelve (12) months immediately preceding the offer or
sale of the Debentures. The Common Stock is listed and traded on The Over The
Counter/Bulletin Board Market. To the Company's knowledge, the Company has
received no notice, either oral or written, with respect to the continued
eligibility of the Common Stock for such listing, and the Company has maintained
all requirements for the continuation of such listing.
c. Authorized Shares. The authorized capital stock of the Company
consists of (i) 200,000,000 shares of Common Stock, $.01 par value per share, of
which 63,823,328 are outstanding as of the date hereof. All issued and
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable. The Converted Shares, when issued upon
conversion of, or as interest on, the Debentures in accordance with the terms of
the Debentures, will be duly and validly issued, fully paid and non-assessable
and will not subject the holder thereof to personal liability by reason of being
such holder.
d. Securities Purchase Agreement; Registration Rights Agreement and
Stock. This Agreement, the Registration Rights Agreement, the form of which is
attached hereto as Annex IV (the "Registration Rights Agreement") and the other
Transaction Agreements, and the transactions contemplated thereby, have been
duly and validly authorized by the Company. This Agreement has been duly
executed and delivered by the Company and this Agreement is, and each of the
other Transaction Agreements, when executed and delivered by the Company, will
be, a valid and binding agreement of the Company enforceable in accordance with
its respective terms, subject as to enforceability to general principles of
equity and to bankruptcy, insolvency, moratorium, and other similar laws
affecting the enforcement of creditors' rights generally.
e. Non-contravention. The execution and delivery of this Agreement and
the other Transaction Agreements by the Company, the issuance of the Securities,
and the consummation by the Company of the other transactions contemplated by
the Transaction Agreements do not and will not conflict with or result in a
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breach by the Company of any of the terms or provisions of, or constitute a
default under (i) the articles of incorporation or by-laws of the Company, each
as currently in effect, (ii) to the knowledge of the Company, any indenture,
mortgage, deed of trust, or other material agreement or instrument to which the
Company is a party or by which it or any of its properties or assets are bound,
including any listing agreement for the Common Stock except as herein set forth,
(iii) to its knowledge, any existing applicable law, rule, or regulation or any
applicable decree, judgment, or order of any court, United States federal or
state regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, or (iv) the
Company's listing agreement for its Common Stock, except such conflict, breach
or default which would not have a material adverse effect on the business,
operations or financial condition or results of operations of the Company and
its subsidiaries taken as a whole.
f. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyer as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
g. SEC Filings. None of the Company's SEC Documents contained, at the
time they were filed, any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements made therein in light of the circumstances under which they were
made, not misleading. The Company has since May 1, 1999 timely filed all
requisite forms, reports and exhibits thereto with the SEC.
h. Full Disclosure. There is no fact known to the Company (other than
general economic conditions known to the public generally or as disclosed in the
Company's SEC Documents) that has not been disclosed in writing to the Buyer
that (i) would reasonably be expected to have a material adverse effect on the
business, operations or financial condition or results of operations of the
Company and its subsidiaries taken as a whole, (ii) would reasonably be expected
to materially and adversely affect the ability of the Company to perform its
obligations pursuant to any of the Transaction Agreements, or (iii) would
reasonably be expected to materially and adversely affect the value of the
rights granted to the Buyer in the Transaction Agreements.
i. Absence of Litigation. Except as set forth in the Company's SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board or body pending or, to the knowledge of the
Company, threatened against or affecting the Company, wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
properties, business or financial condition, or results of operation of the
Company and its subsidiaries taken as a whole or the transactions contemplated
by any of the Transaction Agreements or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, any of the Transaction Agreements.
j. Absence of Events of Default. Except as set forth in Section 3(e)
hereof, no Event of Default (or its equivalent term), as defined in the
respective agreement to which the Company is a party, and no event which, with
the giving of notice or the passage of time or both, would become an Event of
Default (or its equivalent term) (as so defined in such agreement), has occurred
and is continuing, which would have a material adverse effect on the business,
operations or financial condition or results of operations of the Company and
its subsidiaries taken as a whole.
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k. No Undisclosed Proposals. There are no proposals currently under
consideration or currently anticipated to be under consideration by the Board of
Directors or the executive officers of the Company which proposal would (x)
change the certificate of incorporation or other charter document or by-laws of
the Company, each as currently in effect, with or without stockholder approval,
which change would reduce or otherwise adversely affect the rights and powers of
the stockholders of the Common Stock or (y) materially or substantially change
the business, assets or capital of the Company, including its interests in
subsidiaries.
l. No Default. The Company is not in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust or other material instrument
or agreement to which it is a party or by which it or its property is bound.
m. Dilution. The number of Shares issuable upon conversion of the
Debentures may increase substantially in certain circumstances, including, but
not necessarily limited to, the circumstance wherein the trading price of the
Common Stock declines prior to the conversion of the Debentures. The Company's
executive officers and directors have studied and fully understand the nature of
the Securities being sold hereby and recognize that they have a potential
dilutive effect. The board of directors of the Company has concluded, in its
good faith business judgment, that such issuance is in the best interests of the
Company.
n. Brokers, Finders. Except for payment of fees to Greenfield Capital
Partners (the "Placement Agent"), payment of which is the sole responsibility of
the Company, the Company has taken no action which would give rise to any claim
by any person for brokerage commission, finder's fees or similar payments by
Buyer relating to the Transaction Agreements or the transactions contemplated
hereby. Buyer shall have no obligation with respect to such fees or with respect
to any claims made by or on behalf of other persons for fees of a type
contemplated in this Section 3(n) that may be due in connection with the
transactions contemplated by any of the Transaction Agreements. The Company
shall indemnify and hold harmless each of Buyer, its employees, officers,
directors, agents, and partners, and their respective affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as and when incurred.
o. Ownership of Fone. After the consummation of the Acquisition
Transaction, the Company will own all of the outstanding shares of Fone, free
and clear of any lien or encumbrance of any party other than a Buyer.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Buyer acknowledges that (1) the
Debentures have not been and are not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Agreement, the
Securities have not been and are not being registered under the 1933 Act, and
may not be transferred unless (A) subsequently registered thereunder or (B) the
Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
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thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Securities (other than pursuant to the Registration
Rights Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder.
b. Restrictive Legend. The Buyer acknowledges and agrees that the
Debentures and , until such time as the Common Stock has been registered under
the 1933 Act as contemplated by the Registration Rights Agreement and sold in
accordance with an effective Registration Statement, certificates and other
instruments representing any of the Securities shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of any such Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED
FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR
OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.
c. Registration Rights Agreement. The parties hereto agree to enter
into the Registration Rights Agreement on or before the Closing Date.
d. Filings. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Securities to the Buyer under any
United States laws and regulations applicable to the Company, or by any domestic
securities exchange or trading market, and to provide a copy thereof to the
Buyer promptly after such filing.
e. Reporting Status. So long as the Buyer beneficially owns any of the
Securities, the Company shall file all reports required to be filed by the
Company with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, shall take
all reasonable action under its control to ensure that adequate current public
information with respect to the Company, as required in accordance with Rule
144(c)(2) of the 1933 Act, is publicly available, and shall not voluntarily
terminate its status as an issuer required to file reports under the 1934 Act,
even if the 1934 Act or the rules and regulations thereunder would permit such
termination. The Company will take all reasonable action under its control to
obtain, if necessary, and to continue the listing and trading of its Common
Stock (including, without limitation, all Registrable Securities) on The Over
The Counter/Bulletin Board Market and will comply in all material respects with
the Company's reporting, filing and other obligations under the by- laws or
rules of the National Association of Securities Dealers, Inc. ("NASD") or The
Over The Counter/Bulletin Board Market applicable to the Company.
f. Use of Proceeds. The Company has advised the Buyer that it
anticipates using the proceeds from the Cash Portion of the Purchase Price
received from the sale of the Debentures for the purposes identified in Annex
III annexed hereto. Unless otherwise consented by the Buyer, the Company shall
not use the proceeds from the Cash Portion of the Purchase Price received from
the sale of the Debentures (excluding amounts paid by the Company for legal
fees, finder's fees and escrow fees in connection with the sale of the
Debentures) for any other purposes other than internal working capital purposes,
and, except as expressly contemplated in Annex III or as otherwise expressly
provided herein, shall not, directly or indirectly, use such proceeds for any
loan to or investment in any other corporation, partnership, enterprise or other
person, including any of its affiliates, or to repay any debt to any of its
affiliates.
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g. Certain Agreements. (i) The Company covenants and agrees that from
the date hereof through the date which is one hundred twenty (120) days after
the Effective Date, the Company will not, without the prior written consent of
the Buyer in each instance, offer or enter into a Subsequent Sale (as defined
below) with any party other than all of the Buyers. A "Subsequent Sale" is a
subsequent or further offer or sale of Common Stock or securities convertible
into Common Stock, where the fixed purchase price or the conversion or exercise
price per share of Common Stock is below the lower of (x) the Fixed Conversion
Price (as defined in the Debentures) or (y) the Market Price of the Common Stock
as of the date of such agreement or the closing date, whichever is lower.
(ii) In the event the Company breaches the provisions of this Section
4(g), the Conversion Price (as defined in the Debentures) shall be amended to be
equal to (x) 90% of (y) the amount determined in accordance with the provisions
of the Debentures without regard to this provision.
h. Available Shares; Conversions to Be Honored.
(i) The Company will take all steps necessary, including but not
necessarily limited to, having a vote of shareholders to amend the charter
documents of the Company, so that, effective beginning no later than (x) five
(5) business days after the earlier of the Company's Annual Meeting to be held
in calendar year 2000 or any earlier special meeting of shareholders or (y) two
hundred ten (210) days after the Closing Date,
(I) the Company shall have at all times authorized and
reserved for issuance, free from preemptive rights, shares
of Common Stock sufficient to yield one hundred percent
(100%) of the aggregate number of shares of Common Stock
issuable at conversion as may be required to satisfy the
conversion rights of the Buyer pursuant to the terms and
conditions of the Debentures, including, for such purposes
any shares that may be issued in lieu of interest thereon;
and
(II) the issuance of the Converted Shares shall have been
duly authorized by all necessary corporate action.
(ii) The Company specifically acknowledges that its obligation to
issue the Shares upon conversion of the Debentures is binding upon the Company
and enforceable regardless of the dilution such issuance may have on the
ownership interests of other stockholders of the Company, and the Company will
honor every Notice of Conversion (as defined in the Debentures) relating to the
conversion of the Debentures unless the Company is subject to an injunction
(which injunction was not sought by the Company) prohibiting the Company from
doing so.
x. Xxxxx of Security Interest to Buyers.
(i) To secure its obligations to the Buyers and to all direct and
indirect permitted transferees and assignees of their interests in this
Agreement and the other Transaction Agreements, including, but not necessarily
limited to, the Debentures (any one or more of the Buyers and such transferees
and assignees individually and collectively referred to as the "Secured Party"),
the Company (sometimes referred to as the "Debtor") hereby grants, conveys,
transfers and assigns to the Secured Party a security interest in and to the
Collateral (as defined in Annex VI hereto) to the fullest extent permissible
under the Uniform Commercial Code or other governing security interests granted
by debtors or obligors to creditors or obligees as in effect in each
jurisdiction in which the Debtor's property may be found or deemed situate.
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(ii) Solely for administrative convenience and not for any other
purpose, each Secured Party has designated Xxxxxxx & Prager LLP as agent for the
Secured Party for purposes of execution of and identification on any financing
statement or similar instrument referring to or describing the Collateral and to
maintain possession of the Collateral as agent of and on behalf of the Secured
Party. Such designation shall remain in effect until canceled by such Secured
Party; provided, however, that such cancellation shall not affect the validity
of any action theretofore taken by such agent pursuant to this provision. The
Debtor acknowledges and agrees to honor such designation.
(iii) The Company agrees that it will take all steps necessary to
ensure that no shares of Fone (other than the shares included in the Collateral)
will be issued to any party for as long as the Fone Shares remain part of the
Collateral. The Company will cause the stock transfer books and ledgers of Fone
to reflect the security interest in the Fone Shares held by the Secured Party.
(iv) Additional terms relating to the grant of this security interest
are specified in Annex VI annexed hereto, the terms of which are incorporated
herein by reference as if set forth herein in full.
5. TRANSFER AGENT INSTRUCTIONS.
a. No later than five (5) business days after the Closing Date, the
Company will irrevocably instruct its transfer agent (the "Transfer Agent") to
issue Common Stock from time to time upon conversion of the Debentures in such
amounts as specified from time to time by the Company to the Transfer Agent,
bearing the restrictive legend specified in Section 4(b) of this Agreement prior
to registration of the Shares under the 1933 Act, registered in the name of the
Buyer or its nominee and in such denominations to be specified by the Buyer in
connection with each conversion of the Debentures. The Company warrants that no
instruction other than such instructions referred to in this Section 5 and stop
transfer instructions to give effect to Section 4(a) hereof prior to
registration and sale of the Shares under the 1933 Act will be given by the
Company to the Transfer Agent and that the Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement, and applicable
law. Nothing in this Section shall affect in any way the Buyer's obligations and
agreement to comply with all applicable securities laws upon resale of the
Securities. If the Buyer provides the Company with an opinion of counsel
reasonably satisfactory to the Company that registration of a resale by the
Buyer of any of the Securities in accordance with clause (1)(B) of Section 4(a)
of this Agreement is not required under the 1933 Act, the Company shall (except
as provided in clause (2) of Section 4(a) of this Agreement) permit the transfer
of the Securities and, in the case of the Converted Shares, promptly instruct
the Transfer Agent to issue one or more certificates for Common Stock without
legend in such name and in such denominations as specified by the Buyer.
b. Subject to the provisions of this Agreement, the Company will
permit the Buyer to exercise its right to convert the Debentures in the manner
contemplated by the Debentures.
c. The Company understands that a delay in the issuance of the
Shares of Common Stock beyond the Delivery Date (as defined in the Debentures)
could result in economic loss to the Buyer. As compensation to the Buyer for
such loss, the Company agrees to pay late payments to the Buyer for late
issuance of Shares upon Conversion in accordance with the following schedule
(where "No. Business Days Late" is defined as the number of business days which
is two business days beyond the Delivery Date):
10
Late Payment For Each $10,000
of Debenture Principal or Interest
No. Business Days Late Amount Being Converted
---------------------- ----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
greater than 10 $1,000 + $200 for each Business
Day Late beyond 10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Furthermore, in the event that the Company fails
for any reason to effect delivery of such shares of Common Stock by close of
business on the Delivery Date, the Buyer will be entitled to revoke the relevant
Notice of Conversion by delivering a notice to such effect to the Company,
whereupon the Company and the Buyer shall each be restored to their respective
positions immediately prior to delivery of such Notice of Conversion.
d. If, by the relevant Delivery Date, the Company fails for any reason
to deliver the Shares to be issued upon conversion of a Debenture and after such
Delivery Date, the holder of the Debentures being converted (a "Converting
Holder") purchases, in an open market transaction or otherwise, shares of Common
Stock (the "Covering Shares") in order to make delivery in satisfaction of a
sale of Common Stock by the Converting Holder (the "Sold Shares"), which
delivery such Converting Holder anticipated to make using the Shares to be
issued upon such conversion (a "Buy-In"), at the option of the Converting
Holder, the Company shall pay to the Converting Holder, in lieu of the amount
contemplated by the immediately preceding Section 5(d) hereof, the Buy-In
Adjustment Amount (as defined below). The "Buy-In Adjustment Amount" is the
amount equal to the excess, if any, of (x) the Converting Holder's total
purchase price (including brokerage commissions, if any) for the Covering Shares
over (y) the net proceeds (after brokerage commissions, if any) received by the
Converting Holder from the sale of the Sold Shares. The Company shall pay the
Buy-In Adjustment Amount to the Company in immediately available funds
immediately upon demand by the Converting Holder. By way of illustration and not
in limitation of the foregoing, if the Converting Holder purchases shares of
Common Stock having a total purchase price (including brokerage commissions) of
$11,000 to cover a Buy-In with respect to shares of Common Stock it sold for net
proceeds of $10,000, the Buy-In Adjustment Amount which Company will be required
to pay to the Converting Holder will be $1,000.
f. In lieu of delivering physical certificates representing the Common
Stock issuable upon conversion, provided the Transfer Agent is participating in
the Depository Trust Company ("DTC") Fast Automated Securities Transfer program,
upon request of the Buyer and its compliance with the provisions contained in
this paragraph, so long as the certificates therefor do not bear a legend and
the Buyer thereof is not obligated to return such certificate for the placement
of a legend thereon, the Company may use its best efforts to cause the Transfer
Agent to electronically transmit the Common Stock issuable upon conversion to
the Buyer by crediting the account of Buyer's Prime Broker with DTC through its
Deposit Withdrawal Agent Commission system.
11
g. If, at any time (i) the Company challenges, disputes or denies the
right of a holder of Debentures to effect any conversion of the Debentures into
Common Stock or otherwise dishonors or rejects any Conversion Notice delivered
in accordance with the terms of this Agreement or the Debentures (each, a
"Debenture Conversion"), or (ii) any third party who is not and has never been
an Affiliate of such holder commences any lawsuit or proceeding or otherwise
asserts any claim before any court or public or governmental authority, which
lawsuit, proceeding or claim seeks to challenge, deny, enjoin, limit, modify,
delay or dispute the right of such holder to effect the Debenture Conversion and
the Company refuses to honor any such Conversion Notice, then such holder shall
have the right, by written notice to the Company, to require the Company to
promptly redeem the Debentures for cash at a redemption price (the "Mandatory
Purchase Amount") equal to one hundred fifty percent (150%) of (x) the principal
of the outstanding Debentures of such holder, plus (y) all accrued but unpaid
interest on the Debentures through the date of payment of the Mandatory Purchase
Amount. Under any of the circumstances set forth above, the Company shall be
responsible for the payment of all costs and expenses of such holder, including,
but not necessarily limited to, reasonable legal fees and expenses, as and when
incurred in connection with such holder's disputing any such action or pursuing
such holder's rights hereunder (in addition to any other rights such holder may
have hereunder or otherwise). The Mandatory Purchase Amount will be payable to
such holder in cash within five (5) business days from the date such holder
gives the Company written notice that it is exercising its rights under this
paragraph.
h. The holder of any Debentures shall be entitled to exercise its
conversion privilege with respect to the Debentures notwithstanding the
commencement of any case under 11 U.S.C.ss.101 et seq. (the "Bankruptcy Code").
In the event the Company is a debtor under the Bankruptcy Code, the Company
hereby waives, to the fullest extent permitted, any rights to relief it may have
under 11 U.S.C.ss.362 in respect of such holder's conversion privilege. The
Company hereby waives, to the fullest extent permitted, any rights to relief it
may have under 11 U.S.C.ss.362 in respect of the conversion of the Debentures.
The Company agrees, without cost or expense to such holder, to take or to
consent to any and all action necessary to effectuate relief under 11
U.S.C.ss.362.
i. The Company will authorize the Transfer Agent to give information
relating to the Company directly to the Buyer or the Buyer's representatives
upon the request of the Buyer or any such representative , to the extent such
information relates to (i) the status of shares of Common Stock issued or
claimed to be issued to the Buyer in connection with a Debenture Conversion, or
(ii) the number of outstanding shares of Common Stock of all stockholders as of
a current or other specified date. The Company will provide the Buyer with a
copy of the authorization so given to the Transfer Agent.
6. CLOSING DATE.
a. The Closing Date shall occur on the date which is the first NYSE
trading day after the fulfillment or waiver of all closing conditions pursuant
to Sections 7 and 8 hereof or such other date and time as is mutually agreed
upon by the Company and the Buyer. Notwithstanding the foregoing, the Closing
Date shall not be before the Acquisition Date and the consummation of the
Acquisition Transaction in which the Company has acquired ownership of the Fone
Shares.
b. The closing of the purchase and issuance of Debentures shall occur
on the Closing Date at the offices of the Escrow Agent and shall take place no
later than 12:00 Noon, New York time, on such day or such other time as is
mutually agreed upon by the Company and the Buyer.
12
(c) Notwithstanding anything to the contrary contained herein, the
Escrow Agent will be authorized to release the Escrow Property only upon
satisfaction of the conditions set forth in Sections 7 and 8 hereof.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the
Debentures to the Buyer pursuant to this Agreement on the Closing Date is
conditioned upon:
a. The execution and delivery of this Agreement and the other
Transaction Agreements by the Buyer;
b. Delivery by the Buyer to the Escrow Agent of good funds as payment
in full of an amount equal to the Cash Portion of the Purchase Price, if any,
for the Debentures in accordance with this Agreement;
c. The accuracy on such Closing Date of the representations and
warranties of the Buyer contained in this Agreement, each as if made on such
date, and the performance by the Buyer on or before such date of all covenants
and agreements of the Buyer required to be performed on or before such date; and
d. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Debentures on the Closing Date is conditioned upon:
a. The execution and delivery of this Agreement and the other
Transaction Agreements by the Company and the execution and delivery of the
Debentures and the Pledge Agreement by Fone;
b. Delivery by the Company to the Escrow Agent of the relevant
Certificates in accordance with this Agreement;
c. The accuracy in all material respects on such Closing Date of the
representations and warranties of the Company contained in this Agreement, each
as if made on such date, and the performance by the Company on or before such
date of all covenants and agreements of the Company required to be performed on
or before such date;
d. On such Closing Date, the Registration Rights Agreement shall be in
full force and effect and the Company shall not be in default thereunder;
e. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained; and
13
f. From and after the date hereof to and including the Closing Date,
the trading of the Common Stock shall not have been suspended by the SEC or the
NASD, and trading in securities generally on the Over The Counter/Bulletin Board
Market shall not have been suspended or limited, nor shall there be any outbreak
or escalation of hostilities involving the United States or any material adverse
change in any financial market that in either case in the reasonable judgment of
the Buyer makes it impracticable or inadvisable to purchase the Debentures.
9. GOVERNING LAW: MISCELLANEOUS.
a. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York for contracts to be wholly performed in
such state and without giving effect to the principles thereof regarding the
conflict of laws. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the City of New York or the
state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. To the extent determined by such court, the Company shall
reimburse the Buyer for any reasonable legal fees and disbursements incurred by
the Buyer in enforcement of or protection of any of its rights under any of the
Transaction Agreements.
b. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
c. This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties hereto.
d. All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
e. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto.
f. This Agreement may be signed in one or more counterparts, each of
which shall be deemed an original.
g. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
h. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
i. This Agreement may be amended only by an instrument in writing
signed by the party to be charged with enforcement thereof.
j. In no event, except as specifically contemplated by the terms of
any of the Transaction Agreements, shall either party be liable under any of the
Transaction Agreements or otherwise for any consequential, incidental, indirect,
punitive or special damages of any nature whatsoever (including, without
limitation, any damages arising out of or in connection with any loss of profit,
loss of business or anticipatory profits), even if the other party has been
advised of the likelihood of such damages occurring to the non-defaulting party;
14
provided, however, that the difference between the Market Price of the Common
Stock and the Conversion Price shall not be deemed to be consequential damages.
The provisions of this Section 9(j) shall not limit the direct obligations of
either party to the other party pursuant to a specific provision of any of the
Transaction Agreements.
k. This Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof.
10. NOTICES. Any notice required or permitted hereunder shall be given
in writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of
(a) the date delivered, if delivered by personal delivery as against
written receipt therefor or by confirmed facsimile transmission,
(b) the seventh business day after deposit, postage prepaid, in the
United States Postal Service by registered or certified mail, or
(c) the third business day after mailing by international express
courier, with delivery costs and fees prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: XXXXXX'X RESTAURANT GROUP, INC.
At its address at the head of this Agreement
Attn: Xxxxx Xxxxxxxx, President,
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxx & Xxxxxxxxxxx, L.L.P.
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
BUYER: At the address set forth on the signature page of this Agreement.
with a copy to:
Xxxxxxx & Xxxxxx LLP
00 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Xxx.
Xxx Xxxx, Xxx Xxxx 00000
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
15
ESCROW AGENT: Xxxxxxx & Xxxxxx LLP.
00 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Xxx.
Xxx Xxxx, Xxx Xxxx 00000
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and the
Buyer's representations and warranties herein shall survive the execution and
delivery of this Agreement and the delivery of the Certificates and payment of
the Purchase Price, and shall inure to the benefit of the Buyer and the Company
and their respective successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
16
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer
or one of its officers thereunto duly authorized as of the date set forth below.
AMOUNT AND PURCHASE PRICE OF DEBENTURES: $4,353,652
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this 7th day of June, 2000.
Address:
--------
Corporate Centre
Windward Xxx
Xxxx Xxx Xxxx Xxxxxxx LLC
X.X. Xxx 00000 SMB ------------------------------------
Grand Cayman Islands Printed Name of Subscriber
Telecopier No. 000 000 0000 By:
------------ ------------------------------------
(Signature of Authorized Person)
Cayman Islands
----------------------------- Navigator Management, Ltd., Director
Jurisdiction of Incorporation ------------------------------------
or Organization Printed Name and Title
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
XXXXXX'X RESTAURANT GROUP, INC.
By: /s/ Xxxxx Xxxxxxxx
Title: President
Date: 6/7/00
Grand Cayman, Cayman Islands
AMOUNT AND PURCHASE PRICE OF DEBENTURES: $200,000
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this 7th day of June, 2000.
Address:
--------
000 X. Xxxxxx Xxxxxx Private Equities Fund, LPX
Suite 220 ------------------------------------
Xxxxxxx, XX 00000 Printed Name of Subscriber
Telecopier No. 000 000-0000 By: /s/ Xxxx X. Xxxxxxx
------------ ------------------------------------
(Signature of Authorized Person)
Delaware
----------------------------- Xxxx X. Xxxxxxx
Jurisdiction of Incorporation ------------------------------------
or Organization Printed Name and Title
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
XXXXXX'X RESTAURANT GROUP, INC.
By: /s/ Xxxxx Xxxxxxxx
Title: President
Date: 6/7/00
17
SCHEDULE A BUYERS
ANNEX I FORM OF DEBENTURE
ANNEX II JOINT ESCROW INSTRUCTIONS
ANNEX III USE OF PROCEEDS
ANNEX IV REGISTRATION RIGHTS AGREEMENT
ANNEX V COMPANY DISCLOSURE MATERIALS
ANNEX VI SECURITY INTEREST AND PLEDGE PROVISIONS
SCHEDULE A
TO
SECURITIES PURCHASE AGREEMENT
BUYERS
NAME: Xxxxxxx LLC
CASH PORTION OF
THE PURCHASE PRICE: $3,005,047.00
Of this amount, the following will be paid
by satisfying the following notes and
obligations
Sovereign 952,523.50
Dominion 952,523.50
Bonham 100,000.00
Bonham note from Fone 100,000.00
and the balance of $900,000 will be paid to
the Company
DEBT PORTION OF
THE PURCHASE PRICE: $1,348,605.00
TOTAL PURCHASE PRICE: $4,353,652.00
NAME: Triton Private Equities Fund, L.P.
CASH PORTION OF
THE PURCHASE PRICE: $--
DEBT PORTION OF
THE PURCHASE PRICE: $200,000.00
TOTAL PURCHASE PRICE: $200,000.00
ANNEX I
TO
SECURITIES PURCHASE AGREEMENT
FORM OF DEBENTURE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES ARE RESTRICTED
AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION OR SAFE
HARBOR THEREFROM.
No. 00- US $
-------------
XXXXXX'X RESTAURANT GROUP, INC.
6% SECURED CONVERTIBLE DEBENTURE DUE __________, 2002
THIS DEBENTURE is one of a duly authorized issue of up to $4,553,652
in Debentures of XXXXXX'X RESTAURANT GROUP, INC., a Texas corporation (the
"Company") designated as its 6% Secured Convertible Debentures. Such Debentures
may be issued in series, each of which may have a different maturity date, but
which otherwise have substantially similar terms. Capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Securities Purchase Agreement, dated June , 2000 (the "Securities Purchase
Agreement"), by and among the Company and the Buyers (as that term is defined
therein).
FOR VALUE RECEIVED, the Company promises to pay to , the
registered holder hereof (the "Holder"), the principal sum of and
00/100 Dollars (US $ ) on , 2002,2 (the "Maturity Date") and to
pay interest on the principal sum outstanding from time to time in arrears
(i) prior to the Maturity Date, semi-annually, on the last day of June and
December of each year, (ii) upon conversion as provided herein or (iii) on the
Maturity Date, at the rate of 6% per annum accruing from , 2000,3
the date of initial issuance of this Debenture (the "Issue Date"). Accrual of
-------------------------------
1) Insert date which is second anniversary of Closing Date
("Maturity Date").
2) Insert the Maturity Date per fn 1.
3) Insert Closing Date.
interest shall commence on the first such business day to occur after the date
hereof and shall continue to accrue on a daily basis until payment in full of
the principal sum has been made or duly provided for.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Ten Thousand
Dollars (US$10,000) and integral multiples thereof. The Debentures are
exchangeable for an equal aggregate principal amount of Debentures of different
authorized denominations, as requested by the Holder surrendering the same. No
service charge will be made for such registration or transfer or exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws or
other applicable laws at the time of such payments, and Holder shall execute and
deliver all required documentation in connection therewith.
3. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged only in compliance with the Securities Act of 1933, as amended (the
"Act"), and other applicable state and foreign securities laws. In the event of
any proposed transfer of this Debenture, the Company may require, prior to
issuance of a new Debenture in the name of such other person, that it receive
reasonable transfer documentation, including legal opinions of counsel
reasonably satisfactory to the Company, that the transfer of the Debenture to
such other persons does not and will not cause a violation of the Act or any
applicable state or foreign securities laws. Prior to due presentment for
transfer of this Debenture, the Company and any agent of the Company may treat
the person in whose name this Debenture is duly registered on the Company's
Debenture Register as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, whether or not this Debenture be
overdue, and neither the Company nor any such agent shall be affected by notice
to the contrary.
4. A. The Holder of this Debenture is entitled, at its option, subject
to the following provisions of this Section 4, to convert all or a portion of
this Debenture into shares of Common Stock of the Company, $.01 par value per
share ("Common Stock") of the Company at any time until the Maturity Date, at a
conversion price for each share of Common Stock (the "Conversion Price") equal
to the lower of (x) $0.75 per share (which amount is subject to adjustment as
hereinafter provided; the "Fixed Conversion Price"), or (y) the Variable
Conversion Price (as defined below).
B. For purposes of this Debenture, the following terms have the
meanings indicated below:
(i) "Market Price of the Common Stock" means the closing bid price
of the Common Stock for the period indicated in the relevant provision, as
reported by Bloomberg, LP or, if not so reported, as reported on the
over-the-counter market.
(ii) "Variable Conversion Price" means (x) seventy-five percent
(75%) of (y) the average of the five (5) lowest Market Price of the Common Stock
during the twenty (20) trading days immediately preceding the relevant
Conversion Date (as defined below), except that, to the extent any such trading
day occurs prior to the effectuation of a stock split or similar transaction
occurring after the date hereof and on or prior to the relevant Conversion Date,
the Market Price of the Common Stock used in determining the Variable Conversion
Price will be equitably adjusted to reflect such transaction. In no event,
however, shall the Variable Conversion Price be less than $.01 per share.
C. Conversion shall be effectuated by faxing a Notice of Conversion
(as defined below) to the Company as provided in this paragraph. The Notice of
Conversion shall be executed by the Holder of this Debenture and shall evidence
such Holder's intention to convert this Debenture or a specified portion hereof
in the form annexed hereto as Exhibit A. Interest accrued or accruing from the
date of issuance to the date of conversion or to the Maturity Date, as the case
may be, shall be paid, at the option of the Company, in cash or, subject to the
provisions of Section 4(D) hereof, in Common Stock at the Conversion Price then
applicable as of the Conversion Date. No fractional shares of Common Stock or
scrip representing fractions of shares will be issued on conversion, but the
number of shares issuable shall be rounded to the nearest whole share. The date
on which notice of conversion is given (the "Conversion Date") shall be deemed
to be the date on which the Holder faxes or otherwise delivers the conversion
notice ("Notice of Conversion") to the Company so that it is received by the
Company on or before such specified date, provided that, if such conversion
would convert the entire remaining principal of this Debenture, the Holder shall
deliver to the Company the original Debenture being converted no later than five
(5) business days thereafter. Facsimile delivery of the Notice of Conversion
shall be accepted by the Company at facsimile number (000) 000-0000;Attn: Xxxxx
Xxxxxxxx, President . Certificates representing Common Stock upon conversion
will be delivered to the Holder at the address specified in the Notice of
Conversion (which may be the Buyer's address for notices as contemplated by the
Securities Purchase Agreement or a different address), via express courier, by
electronic transfer or otherwise, within three (3) business days (such third
business day, the "Delivery Date") after the date on which the Notice of
Conversion is delivered to the Company as contemplated in this Section 4(C).
D. Notwithstanding any other provision hereof or of any of the
other Transaction Agreements, in no event (except (i) with respect to a
Redemption Notice Conversion [as defined below], (ii) as specifically provided
in this Debenture as an exception to this provision, or (iii) while there is
outstanding a tender offer for any or all of the shares of the Company's Common
Stock) shall the Holder be entitled to convert any Debenture or shall the
Company have the obligation to convert all or any portion of this Debenture (and
the Company shall not have the right to pay interest on this Debenture) to the
extent that, after such conversion, the sum of (1) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through the
ownership of the unconverted portion of the Debentures), and (2) the number of
shares of Common Stock issuable upon the conversion of the Debentures with
respect to which the determination of this proviso is being made, would result
in beneficial ownership by the Holder and its affiliates of more than 4.9% of
the outstanding shares of Common Stock (after taking into account the shares to
be issued to the Holder upon such conversion). For purposes of the proviso to
the immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), except as otherwise provided in clause (1) of such sentence.
The Holder, by its acceptance of this Debenture, further agrees that if the
Holder transfers or assigns any of the Debentures to a party who or which would
not be considered such an affiliate, such assignment shall be made subject to
the transferee's or assignee's specific agreement to be bound by the provisions
of this Section 4(D) as if such transferee or assignee were the original Holder
hereof.
E. Anything herein to the contrary notwithstanding, in the event
the Company breaches the provisions of Section 4(g) of the Securities Purchase
Agreement, the Conversion Price shall be amended to be equal to (i) 90% of (ii)
the Conversion Price determined in accordance with the other provisions of this
Debenture without regard to this Section 4(E), and the Holder may require the
Company to immediately redeem the outstanding portion of this Debenture in
accordance with clause (y) of Section 6 hereof.
5. A. (i) Notwithstanding any other provision hereof to the
contrary, at any time prior to the Conversion Date, the Company shall have the
right to redeem (a "Redemption") all or any portion of the then outstanding
principal amount of the Debentures then held by the Holder in cash for an amount
(the "Redemption Amount") equal to (x) the Applicable Redemption Provision (as
defined below) of the outstanding principal of such Debenture being redeemed
(ii) plus all accrued but unpaid interest thereon through the date the
Redemption Amount is paid to the Holder (the "Redemption Payment Date").
(ii) If the Company elects to make a Redemption, the Company shall
give written notice thereof to the Holder (the "Notice of Redemption"). The
Redemption Payment Date shall be the date which is seven (7) business days after
the Holder's receipt of the Notice of Redemption. Anything in the other
provisions of this Debenture, including, but not limited to the preceding
provisions of this Section 5, to the contrary notwithstanding, with respect to
any Debentures for which a Notice of Redemption is given, the Holder shall have
the right, exercisable by giving a Notice of Conversion submitted to the Company
within five (5) business days of the Holder's receipt of the Company's Notice of
Redemption, to convert any or all of the Debentures sought to be redeemed (a
"Redemption Notice Conversion") and the Redemption Notice Conversion shall take
precedence over the redemption contemplated by the Notice of Redemption. Such
Debentures shall be converted in accordance with the terms hereof.
(iii) The Redemption Amount shall, unless otherwise agreed to in
writing by the Holder after receiving the Notice of Redemption, be paid to the
Holder by wire transfer of good funds on the Redemption Payment Date.
(iv) In the event payment of the Redemption Amount is not timely
made, the Holder shall have the right, in the Holder's sole discretion, to
determine that (i) any rights of the Company to redeem outstanding Debentures
shall terminate, and/or (ii) the Notice of Redemption shall be null and void.
(v) The "Applicable Redemption Percentage" means, if the Redemption
Payment Date is (x) not more than one hundred twenty (120) days after the
Closing Date, one hundred twenty-three and thirty-three one hundredths percent
(123.33%); (y) more than one hundred twenty (120) but not more than one hundred
eighty (180) days after the Closing Date, one hundred twenty-eight and
thirty-three one hundredths percent (128.33%); and (z) more than one hundred
eighty (180) days after the Closing Date, one hundred thirty-three and
thirty-three one hundredths percent (133.33%).
B. (i) Notwithstanding any other provision hereof to the contrary,
this Debenture shall be subject to prepayment on the terms provided in this
Section 5(B).
(ii) During the term of this Debenture, Holder shall have the
option to obtain repayment of this Debenture by issuing a Payment Demand under
the VAT Alternatives (as those terms are defined below). All amounts received by
the Holder pursuant to Payment Demands shall be applied (x) first to any other
obligations of the Company to the Holder, (ii) second, to accrued but unpaid
interest on the principal of this Debenture and (z) then, to principal of this
Debenture.
(iii) Subject to availability of proceeds for repayment as
hereinafter described in connection with the VAT Alternative, the Holder shall
have the right, from time to time, to provide a written demand (a " Payment
Demand") to the Company. The Payment Demand shall (x) specifically set forth (i)
the amount of repayment demanded, (ii) the alternative elected for such
repayment from those hereinafter set forth in this Section 5(B), and (iii) a
date, not less than eight (8) business days from the date of the Company's
receipt of such Payment Demand, on which such repayment payment must be made.
The Holder may only make a Payment Demand for payment under this Debenture in
the event and to the extent there remains principal amount of this Note
outstanding.
(iv) The Company or Fone (as defined below) will give a written
report to the Holder (the "Monthly VAT Report") on or before the tenth calendar
day of any calendar month after the month in which the Issue Date occurs, which
report will specify the amount of cash available for repayment arising from (i)
Value Added Tax ("VAT") refunds paid into escrow in connection with agreements
entered into by the Company or the Company's wholly-owned subsidiary, Xxxx.xxx
Limited , a corporation organized under the laws of England and Wales (the name
of which entity is anticipated to be changed to B4B Communications, Inc.;
"Fone") from the United Kingdom government, and (ii) minute bonuses due to Fone
and paid into escrow in connection as provided in agreements entered into by the
Company or Fone (the cash available from the sources referred to in clauses (i)
and (ii) are collectively referred to as the "VAT Alternatives"). Such VAT
refunds and minute bonuses shall be administered by Xxxxxx Xxxxx, Esq., 00
Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxx, XX0X 0XX as contemplated by the terms of an
escrow agreement [reference]. To the extent of such VAT refund and/or minute
bonuses are actually deposited in escrow, the Holder may demand payment of such
amounts. A Payment Demand must be made by the Holder no later than ten (10)
business days after the Holder receives the Monthly VAT Report. Any VAT refunds
and minute bonuses not claimed by a timely issued Payment Demand shall be
available for use by Fone.
(v) Amounts available for VAT Alternatives shall be allocated pro
rata among the Holders of all still outstanding Debentures issued in this series
of 6% Secured Convertible Debentures based on the relative original principal
amounts of such outstanding Debentures as issued on the Issue Date to each such
Holder or such Holder's predecessor in interest.
(vi) By its signature at the foot of this Debenture, Fone agrees to
be bound by the provisions of this Section 5(b) and to the security interest of
the Holder in the VAT Alternative contemplated by Section 8 hereof. Nothing
herein shall be construed to represent a recourse obligation of Fone with
respect to any obligations of the Company under this Debenture except to the
extent provided in this Section 5(b).
6. The Holder recognizes that the Company may be limited in the number of
shares of Common Stock it may issue by (X) reason of its authorized shares, or
(Y) the applicable rules and regulations of the principal securities market on
which the Common Stock is listed or traded (collectively, the "Cap
Regulations"). Without limiting the other provisions hereof, (i) the Company
will take all steps reasonably necessary to be in a position to issue shares of
Common Stock on conversion of the Debentures without violating the Cap
Regulations and (ii) if, despite taking such steps, the Company still can not
issue such shares of Common Stock without violating the Cap Regulations, the
Holder of this Debenture (to the extent the same can not be converted in
compliance with the Cap Regulations (an "Unconverted Debenture"), shall have the
option, exercisable in the Holder's sole and absolute discretion, to elect any
one of the following remedies:
(x) if permitted by the Cap Regulations, require the Company to issue
shares of Common Stock in accordance with such Holder's Notice of
Conversion relating to the Unconverted Debenture at a conversion purchase
price equal to the average of the closing bid price per share of Common
Stock for any five (5) consecutive trading days (subject to the equitable
adjustments for certain events occurring during such period as provided in
this Debenture) during the sixty (60) trading days immediately preceding
the date of the Notice of Conversion; or
(y) require the Company to redeem each Unconverted Debenture for an
amount (the "Redemption Amount"), payable in cash, equal to the sum of (i)
one hundred thirty-three and thirty-three one hundredths percent (133.33%)
of the principal of an Unconverted Debenture, plus (ii) any accrued but
unpaid interest thereon through and including the date (the "Redemption
Date") on which the Redemption Amount is paid to the Holder.
The holder of an Unconverted Debenture may elect one of the above remedies with
respect to a portion of such Unconverted Debenture and the other remedy with
respect to other portions of the Unconverted Debenture. Anything herein or in
the Certificate of Designations to the contrary notwithstanding, the remedy
contained in clause (x) or (y) of this Section 6 shall not be available to the
Holder until after the earlier of (i) the Company's Annual Meeting of
Shareholders during calendar year 2000 or earlier special meeting of
shareholders held after the Initial Closing Date, (ii) two hundred ten (210)
days after the Initial Closing Date, or (iii) the expiration of sixty (60) days
from the date a holder of any of the Debentures in this series has exercised a
right pursuant to which the last share of Common Stock issuable under the Cap
Regulations is to be issued. If prior to such date, the Cap Regulations no
longer apply to limit the Company's issuance of shares of Common Stock in
connection with the Securities or the transactions contemplated by the
Transaction Agreements, the remedies contained clauses (x) and (y) of this
Section 6 shall not be exercisable by the Holder.
7. Subject to the terms of the Securities Purchase Agreement, no provision
of this Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, and interest on, this
Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed. This Debenture and all other Debentures now or hereafter issued of
similar terms are direct obligations of the Company.
8. A. The obligations of the Company under this Debenture are secured under
the terms of the Securities Purchase Agreement, including, but not necessarily
limited to, the provisions of Section 4(i) thereof and Annex VII thereto.
B. No recourse shall be had for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, officer or director, as
such, past, present or future, of the Company, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance hereof and as
part of the consideration for the issue hereof, expressly waived and released.
This Debenture is a recourse obligation of the Company.
9. If the Company merges or consolidates with another corporation or sells
or transfers all or substantially all of its assets to another person and the
holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee agree that the Debenture may thereafter be
converted on the terms and subject to the conditions set forth above into the
kind and amount of stock, securities or property receivable upon such merger,
consolidation, sale or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before
such merger, consolidation, sale or transfer, subject to adjustments which shall
be as nearly equivalent as may be practicable. In the event of any proposed
merger, consolidation or sale or transfer of all or substantially all of the
assets of the Company (a "Sale"), the Holder hereof shall have the right to
convert by delivering a Notice of Conversion to the Company within fifteen (15)
days of receipt of notice of such Sale from the Company. In the event the Holder
hereof shall elect not to convert, the Company may prepay all outstanding
principal and accrued interest on this Debenture by paying the Redemption Amount
contemplated by Section 5(A) hereof, less all amounts required by law to be
deducted, upon which tender of payment following such notice, the right of
conversion shall terminate.
10. If, for any reason, prior to the Conversion Date or the Redemption
Payment Date, the Company spins off or otherwise divests itself of a part of its
business or operations or disposes all or of a part of its assets in a
transaction (the "Spin Off") in which the Company does not receive compensation
for such business, operations or assets, but causes securities of another entity
(the "Spin Off Securities") to be issued to security holders of the Company,
then the Company shall cause (i) to be reserved Spin Off Securities equal to the
number thereof which would have been issued to the Holder had all of the
Holder's Debentures outstanding on the record date (the "Record Date") for
determining the amount and number of Spin Off Securities to be issued to
security holders of the Company (the "Outstanding Debentures") been converted as
of the close of business on the trading day immediately before the Record Date
(the "Reserved Spin Off Shares"), and (ii) to be issued to the Holder on the
conversion of all or any of the Outstanding Debentures, such amount of the
Reserved Spin Off Shares equal to (x) the Reserved Spin Off Shares multiplied by
(y) a fraction, of which (I) the numerator is the principal amount of the
Outstanding Debentures then being converted, and (II) the denominator is the
principal amount of the Outstanding Debentures.
11. If, at any time while any portion of this Debenture remains
outstanding, the Company effectuates a stock split (but not a reverse stock
split) of its Common Stock or issues a dividend on its Common Stock consisting
of shares of Common Stock, the Fixed Conversion Price shall be equitably
adjusted to reflect such action. By way of illustration, and not in limitation,
of the foregoing, (i) if the Company effectuates a 2:1 split of its Common
Stock, thereafter, with respect to any conversion for which the Company issues
the shares after the record date of such split, the Fixed Conversion Price shall
be deemed to be one-half of what it had been calculated to be immediately prior
to such split; and (ii) if the Company declares a stock dividend of one share of
Common Stock for every 10 shares outstanding, thereafter, with respect to any
conversion for which the Company issues the shares after the record date of such
dividend, the Fixed Conversion Price shall be deemed to be the amount of such
Fixed Conversion Price calculated immediately prior to such record date
multiplied by a fraction, of which the numerator is the number of shares (10)
for which a dividend share will be issued and the denominator is such number of
shares plus the dividend share(s) issuable or issued thereon (11).
12. All payments contemplated hereby to be made "in cash" shall be made in
immediately available good funds in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts. All payments of cash and each delivery of shares of Common Stock
issuable to the Holder as contemplated hereby shall be made by wire transfer to
the account designated by the Holder or, if no such account is designated, at
the address last appearing on the Debenture Register of the Company as
designated in writing by the Holder from time to time; except that the Holder
can designate, by notice to the Company, a different account or delivery address
for any one or more specific or for all remaining payments or deliveries.
13. The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the Shares of Common Stock
issuable upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky or foreign
laws or similar laws relating to the sale of securities.
14. This Debenture shall be governed by and construed in accordance with
the laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Debenture and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non coveniens, to the bringing of any such
proceeding in such jurisdictions. To the extent determined by such court, the
Company shall reimburse the Holder for any reasonable legal fees and
disbursements incurred by the Holder in enforcement of or protection of any of
its rights under any of this Debenture.
15. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal or interest
on this Debenture and same shall continue for a period of five
(5) days after notice thereof from or on behalf of the Holder; or
b. Any of the representations or warranties made by the Company
herein, in the Securities Purchase Agreement, or in any of the
other Transaction Agreements or in any certificate or financial
or other written statements heretofore or hereafter furnished by
the Company in connection with the execution and delivery of this
Debenture or the Securities Purchase Agreement shall be false or
misleading in any material respect at the time made; or
c. The Company fails to issue shares of Common Stock to the Holder
or to cause its Transfer Agent to issue shares of Common Stock
upon exercise by the Holder of the conversion rights of the
Holder in accordance with the terms of this Debenture, fails to
transfer or to cause its Transfer Agent to transfer any
certificate for shares of Common Stock issued to the Holder upon
conversion of this Debenture and when required by this Debenture
or the Registration Rights Agreement, and such transfer is
otherwise lawful, or fails to remove any restrictive legend or to
cause its Transfer Agent to transfer on any certificate or any
shares of Common Stock issued to the Holder upon conversion of
this Debenture as and when required by this Debenture, the
Securities Purchase Agreement or the Registration Rights
Agreement and such legend removal is otherwise lawful, and any
such failure shall continue uncured for five (5) business days
after written notice from the Holder of such failure; or
d. The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition,
agreement or obligation of any Debenture in this series and such
failure shall continue uncured for a period of thirty (30) days
after written notice from the Holder of such failure; or
e. The Company shall fail to perform or observe, in any material
respect, any covenant, term, provision, condition, agreement or
obligation of the Company under the Securities Purchase Agreement
or the Registration Rights Agreement and such failure shall
continue uncured for a period of thirty (30) days after written
notice from the Holder of such failure (other than a failure to
cause the Registration Statement to become effective no later
than the Required Effective Date, as defined and provided in the
Registration Rights Agreement, as to which no such cure period
shall apply); or
f. The Company shall (1) admit in writing its inability to pay its
debts generally as they mature; (2) make an assignment for the
benefit of creditors or commence proceedings for its dissolution;
or (3) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its
property or business; or
g. A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business
without its consent and shall not be discharged within sixty (60)
days after such appointment; or
h. Any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties
or assets of the Company and shall not be dismissed within sixty
(60) days thereafter; or
i. Any money judgment, writ or warrant of attachment, or similar
process in excess of Fifty Thousand ($50,000) Dollars in the
aggregate shall be entered or filed against the Company or any of
its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of sixty (60) days
or in any event later than five (5) days prior to the date of any
proposed sale thereunder; or
j. Bankruptcy, reorganization, insolvency or liquidation proceedings
or other proceedings for relief under any bankruptcy law or any
law for the relief of debtors shall be instituted by or against
the Company and, if instituted against the Company, shall not be
dismissed within sixty (60) days after such institution or the
Company shall by any action or answer approve of, consent to, or
acquiesce in any such proceedings or admit the material
allegations of, or default in answering, a petition filed in any
such proceeding; or
k. The Company shall have its Common Stock suspended or delisted
from an exchange or over-the-counter market from trading for in
excess of five (5) trading days.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kinds, all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately enforce any and all of the Holder's rights and
remedies provided herein or any other rights or remedies afforded by law.
16. Nothing contained in this Debenture shall be construed as conferring
upon the Holder the right to vote or to receive dividends or to consent or
receive notice as a shareholder in respect of any meeting of shareholders or any
rights whatsoever as a shareholder of the Company, unless and to the extent
converted in accordance with the terms hereof.
17. In the event for any reason, any payment by or act of the Company or
the Holder shall result in payment of interest which would exceed the limit
authorized by or be in violation of the law of the jurisdiction applicable to
this Debenture, then ipso facto the obligation of the Company to pay interest or
perform such act or requirement shall be reduced to the limit authorized under
such law, so that in no event shall the Company be obligated to pay any such
interest, perform any such act or be bound by any requirement which would result
in the payment of interest in excess of the limit so authorized. In the event
any payment by or act of the Company shall result in the extraction of a rate of
interest in excess of a sum which is lawfully collectible as interest, then such
amount (to the extent of such excess not returned to the Company) shall, without
further agreement or notice between or by the Company or the Holder, be deemed
applied to the payment of principal, if any, hereunder immediately upon receipt
of such excess funds by the Holder, with the same force and effect as though the
Company had specifically designated such sums to be so applied to principal and
the Holder had agreed to accept such sums as an interest-free prepayment of this
Debenture. If any part of such excess remains after the principal has been paid
in full, whether by the provisions of the preceding sentences of this Section 17
or otherwise, such excess shall be deemed to be an interest-free loan from the
Company to the Holder, which loan shall be payable immediately upon demand by
the Company. The provisions of this Section 17 shall control every other
provision of this Debenture.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: , 2000
----------------------
XXXXXX'X RESTAURANT GROUP, INC.
By:
(Print Name)
(Title)
The undersigned acknowledges its agreement to the provisions of Section 5(b) of
this Debenture.
XXXX.XXX LIMITED
By:
(Print Name)
---------------------------------------
(Title)
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $________________of
the principal amount of the Secured Convertible Debenture No. (the "Debenture")
of XXXXXX'X RESTAURANT GROUP, INC. (the "Company") into Shares of Common Stock
of the Company according to the conditions of the Debenture, as of the date
written below.
Conversion Date*
Applicable Conversion Price
Signature
[Name]
Address:
*If this conversion converts the entire remaining principal of this Debenture,
the original Debenture must be received by the Company by the fifth business
date following the Conversion Date.
ANNEX II
TO
SECURITIES PURCHASE AGREEMENT
JOINT ESCROW INSTRUCTIONS
Dated as of the date of the
Securities Purchase Agreement to
Which These Joint Escrow
Instructions Are Attached
Xxxxxxx & Prager LLP
00 Xxxxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Dear Xx. Xxxxxxx:
As escrow agent for both Xxxxxx'x Restaurant Group, Inc., a Texas
corporation (the "Company"), and one or more Buyers (each, a "Buyer") of 6%
Secured Convertible Debentures (the "Debentures") of the Company, who is named
in the Securities Purchase Agreement between the Company and the Buyer to which
a copy of these Joint Escrow Instructions is attached as Annex II (the
"Agreement"; capitalized terms used herein and not otherwise defined herein
shall have the respective meanings provided in the Agreement), you (hereafter,
the "Escrow Agent") are hereby authorized and directed to hold the documents and
funds (together with any interest thereon, the "Escrow Funds") delivered to the
Escrow Agent pursuant to the terms of the Agreement in accordance with the
following instructions:
1. The Escrow Agent shall, as promptly as feasible, notify
the Company orally or in writing of receipt of the Purchase
Price for the Debentures from or on behalf of each Buyer and
notify the Buyer orally or in writing of receipt of the
Certificates. As promptly as feasible upon the Escrow
Agent's receipt of the Purchase Price and Certificates (or,
with respect to any one or more of them, receipt of notice,
whether oral or in written form, from the Company or a Buyer
that the respective conditions precedent to the purchase and
sale have been satisfied; collectively, the "Release
Conditions"), the Escrow Agent shall, after reduction by the
amounts referred to in the next succeeding sentences of this
paragraph, release the Escrow Funds to or upon the order of
the Company, and shall release the Certificates to the
Buyer. After receipt of Release Conditions, subject to the
terms of the immediately succeeding sentence, an aggregate
of $25,000 in legal and escrow fees to the Escrow Agent (the
"Escrow Agent Fees") shall be released to or upon the order
of the Escrow Agent. If the Certificates are not deposited
with the Escrow Agent within ten (10) days after receipt by
the Company of notice of receipt by the Escrow Agent of the
Purchase Price funds from the Buyer, the Escrow Agent shall
notify the Buyer and the Buyer shall be entitled to cancel
the purchase and demand repayment of the funds. If the
Purchase Price funds are not deposited with the Escrow Agent
within ten (10) days after receipt by the Buyer of notice of
receipt by the Escrow Agent of the Certificates from the
Company, the Escrow Agent shall notify the Company and the
Company shall be entitled to cancel the purchase and demand
return of such Certificates. Notwithstanding the Escrow
Agent's receipt of the Release Conditions, if the Company or
the Buyer notifies the Escrow Agent before the release of
the Escrow Property that the conditions precedent to the
obligations of the Company or the Buyer, as the case may be,
under the Agreement with respect to the purchase and sale of
Debentures to be effected on the Closing Date were not
satisfied or waived, then the Escrow Agent shall return the
Escrow Funds to the Buyer and shall return the Certificates
to the Company. Prior to return of any Escrow Funds to the
Buyer, the Buyer shall furnish such tax reporting or other
information as shall be appropriate for the Escrow Agent to
comply with applicable United States laws. The Escrow Agent
shall deposit all funds received hereunder in the Escrow
Agent's attorney escrow account at The Bank of New York.
2. The Escrow Agent's duties hereunder may be altered, amended, modified or
revoked only by a writing signed by the party to be charged therewith.
3. The Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth herein and may rely and shall be protected
in relying or refraining from acting on any instrument reasonably believed by
the Escrow Agent to be genuine and to have been signed or presented by the
proper party or parties. The Escrow Agent shall not be personally liable for any
act the Escrow Agent may do or omit to do hereunder as the Escrow Agent while
acting in good faith, and any act done or omitted by the Escrow Agent pursuant
to the advice of the Escrow Agent's attorneys-at-law shall be conclusive
evidence of such good faith.
4. The Escrow Agent is hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree, the Escrow Agent shall not be liable to any of the parties hereto or
to any other person, firm or corporation by reason of such decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
5. The Escrow Agent shall not be liable in any respect on account of the
identity, authorities or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or papers
deposited or called for hereunder.
6. The Escrow Agent shall be entitled to employ such legal counsel and
other experts as the Escrow Agent may deem necessary properly to advise the
Escrow Agent in connection with the Escrow Agent's duties hereunder, may rely
upon the advice of such counsel, and may pay such counsel reasonable
compensation therefor. The Escrow Agent has acted as legal counsel for the
Buyer, and may continue to act as legal counsel for such party, from time to
time, notwithstanding its duties as the Escrow Agent hereunder. The Company
consents to the Escrow Agent acting in such capacity as legal counsel for the
Buyer and waives any claim that such representation represents a conflict of
interest on the part of the Escrow Agent. The Company understands that the Buyer
and the Escrow Agent are relying explicitly on the foregoing provision in
entering into these Joint Escrow Instructions.
7. The Escrow Agent's responsibilities as escrow agent hereunder shall
terminate if the Escrow Agent shall resign by written notice to the Company and
the Buyer. In the event of any such resignation, the Buyer and the Company shall
appoint a successor Escrow Agent.
8. If the Escrow Agent reasonably requires other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
2
9. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the documents or the
Escrow Funds held by the Escrow Agent hereunder, the Escrow Agent is authorized
and directed in the Escrow Agent's sole discretion (1) to retain in the Escrow
Agent's possession without liability to anyone all or any part of said documents
or the Escrow Funds until such disputes shall have been settled either by mutual
written agreement of the parties concerned or by a final order, decree or
judgment of a court of competent jurisdiction after the time for appeal has
expired and no appeal has been perfected, but the Escrow Agent shall be under no
duty whatsoever to institute or defend any such proceedings or (2) to deliver
the Escrow Funds and any other property and documents held by the Escrow Agent
hereunder to a state or federal court having competent subject matter
jurisdiction and located in the State and City of New York in accordance with
the applicable procedure therefor.
10. The Company and the Buyer agree jointly and severally to indemnify and
hold harmless the Escrow Agent from any and all claims, liabilities, costs or
expenses in any way arising from or relating to the duties or performance of the
Escrow Agent hereunder other than any such claim, liability, cost or expense to
the extent the same shall (a) have been tax obligations in connection with
Escrow Agent's fee hereunder, or (b) have been determined by final, unappealable
judgment of a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of the Escrow Agent, or (c) be a liability, or
arise from liability, to either the Company or the Buyer.
11. Any notice required or permitted hereunder shall be given in manner
provided in the Section headed "NOTICES" in the Agreement, the terms of which
are incorporated herein by reference.
12. By signing these Joint Escrow Instructions, the Escrow Agent becomes a
party hereto only for the purpose of these Joint Escrow Instructions; the Escrow
Agent does not become a party to the Agreement. The Company and the Buyer have
become parties hereto by their execution and delivery of the Agreement, as
provided therein.
13. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns and shall
be governed by the laws of the State of New York without giving effect to
principles governing the conflicts of laws. A facsimile transmission of these
instructions signed by the Escrow Agent shall be legal and binding on all
parties hereto.
14. The rights and obligations of any party hereto are not assignable
without the written consent of the other parties hereto. These Joint Escrow
Instructions constitute the entire agreement amongst the parties with respect to
the subject matter hereof.
ACCEPTED BY ESCROW AGENT:
XXXXXXX & XXXXXX LLP
By: _______________________________________
Date:
3
ANNEX III
TO
SECURITIES PURCHASE AGREEMENT
USE OF PROCEEDS
Satisfaction of following notes and obligations
Xxxxxxx $1,348,605.00
Sovereign 952,523.50
Dominion 952,523.50
Triton 200,000.00
Bonham 100,000.00
Bonham note from Fone 100,000.00
----------------
Subtotal $3,653,652.00
Legal $ 20,000.00
Corp. set-up (incl rent deposit, etc.) 45,000.00
E1 Line deposits 200,000.00
Marketing 100,000.00
Deposits for private label brands 100,000.00
Set up branded wholesale ISP 200,000.00
Xxxxxx'x clean up 100,000.00
Working Capital 135,000.00
-------------
Total $4,553,652.00
=============
ANNEX IV
TO
SECURITIES PURCHASE
AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of June 7 , 2000 (this
"Agreement"), is made by and between XXXXXX'X RESTAURANT GROUP, INC., a Texas
corporation, with headquarters located at 0000 Xxxxxxxx Xxxxxxx, Xxxxx 000,
Xxxxxxxx, XX 00000 (the "Company"), and each entity named on a signature page
hereto (each, an "Initial Investor") (each agreement with an Initial Investor
being deemed a separate and independent agreement between the Company and such
Initial Investor, except that each Initial Investor acknowledges and consents to
the rights granted to each other Initial Investor under such agreement).
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement, dated as of June 7, 2000, between the Initial Investor and
the Company (the "Securities Purchase Agreement"; terms not otherwise defined
herein shall have the meanings ascribed to them in the Securities Purchase
Agreement), the Company has agreed to issue and sell to the Initial Investor one
or more 6% Convertible Debentures of the Company, in an aggregate principal
amount not exceeding $4,553,652 (the "Debentures"); and
WHEREAS, the Debentures are convertible into shares of Common Stock (the
"Conversion Shares"; which term, for purposes of this Agreement, shall include
shares of Common Stock of the Company issuable in lieu of accrued interest on
conversion as contemplated by the Debentures) upon the terms and subject to the
conditions contained in the Debentures; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), with respect to the Conversion Shares;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial
Investor hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have
the following meanings:
(a) "Investor" means the Initial Investor and any permitted transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof and who holds Debentures or Registrable
Securities.
(b) "Potential Material Event" means any of the following: (i) the
possession by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such information in
the registration statement would be detrimental to the business and affairs of
the Company; or (ii) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely affected by disclosure in a registration statement at such time,
which determination shall be accompanied by a good faith determination by the
Board of Directors of the Company that the registration statement would be
materially misleading absent the inclusion of such information.
(c) "Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
(d) "Registrable Securities" means the Conversion Shares applicable to the
Debentures, and, if issued, Periodic Amount Shares (as defined below), except to
the extent any such shares may be resold in accordance with Rule 144.
(e) "Registration Statement" means a registration statement of the Company
under the Securities Act covering Registrable Securities on Form S-3, if the
Company is then eligible to file using such form, and if not so eligible, on
Form SB-2 or other appropriate form.
(f) "Required Effective Date" means the relevant Initial Required Effective
Date or Increased Required Effective Date (as those terms are defined below).
2. Registration.
(a) Mandatory and Other Registration.
(i) The Company shall prepare and file with the SEC, as soon as possible
after the Closing Date but no later than a date (the "Required Filing Date")
which is one hundred fifty (150) days following the Closing Date, either a
Registration Statement or an amendment to an existing Registration Statement, in
either event registering for resale by the Investor a sufficient number of
shares of Common Stock for the Initial Investors to sell the Registrable
Securities, but in no event less than the aggregate of (x) two hundred percent
(200%) of the aggregate number of shares into which the Debentures and all
interest thereon through their respective Maturity Dates would be convertible at
the time of filing of such Registration Statement (assuming for such purposes
that all such Debentures were eligible to be converted, and had been converted,
into Conversion Shares in accordance with their terms, whether or not such
accrual of interest, eligibility or conversion had in fact occurred as of such
date) (or such lesser number as may be required by the SEC), plus (y) all
Periodic Amount Shares actually issued. The Registration Statement (W) shall
include only the Registrable Securities and the shares referred in Exhibit
1attached hereto and (X) shall also state that, in accordance with Rule 416 and
457 under the Securities Act, it also covers such indeterminate number of
additional shares of Common Stock as may become issuable upon conversion of the
Debentures or issuance of Periodic Amount Shares to prevent dilution resulting
from stock splits or stock dividends. The Company will use its reasonable best
efforts to cause such Registration Statement to be declared effective on a date
(the "Initial Required Effective Date") which is no later than is the earlier of
(Y) five (5) days after notice by the SEC that it may be declared effective or
(Z) two hundred ten (210) days after the Closing Date.
(ii) If at any time (an "Increased Registered Shares Date"), the number of
shares of Common Stock represented by the Registrable Shares, issued or to be
issued as contemplated by the Transaction Agreements, exceeds the aggregate
number of shares of Common Stock then registered, the Company shall either (X)
amend the relevant Registration Statement filed by the Company pursuant to the
preceding provisions of this Section 2, if such Registration Statement has not
been declared effective by the SEC at that time, to register two hundred percent
(200%) of such Registrable Shares, computed as contemplated by the immediately
preceding subparagraph (i) hereof (or such lesser number as may be required by
the SEC), or (Y) if such Registration Statement has been declared effective by
the SEC at that time, file with the SEC an additional Registration Statement (an
"Additional Registration Statement") to register two hundred percent (200%) of
the shares of Common Stock represented by the Registrable Shares, computed as
contemplated by the immediately preceding subparagraph (i) hereof (or such
lesser number as may be required by the SEC), that exceed the aggregate number
of shares of Common Stock already registered. The Company will use its
reasonable best efforts to cause such Registration Statement to be declared
effective on a date (each, an "Increased Required Effective Date") which is no
later than (Q) with respect to a Registration Statement under clause (X) of this
subparagraph (ii), the Initial Required Effective Date contemplated by the
immediately preceding subparagraph (i) and (R) with respect to an Additional
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Registration Statement, the earlier of (I) five (5) days after notice by the SEC
that it may be declared effective or (II) thirty (30) days after the Increased
Registered Shares Date.
(b) Payments by the Company.
(i) If the Registration Statement covering the Registrable Securities
is not filed in proper form with the SEC by the Required Filing Date, the
Company will make payment to the Investor in such amounts and at such times as
shall be determined pursuant to this Section 2(b).
(ii) If the Registration Statement covering the Registrable Securities
is not effective by the relevant Required Effective Date or if the Investor is
restricted from making sales of Registrable Securities covered by any previously
effective Registration Statement at any time (the date such restriction
commences, a "Restricted Sale Date") after the relevant Effective Date other
than during a Permitted Suspension Period (as defined below), then the Company
will make payments to the Investor in such amounts and at such times as shall be
determined pursuant to this Section 2(b).
(iii) The amount (the "Periodic Amount") to be paid by the Company to
the Initial Investor shall be determined as of each Computation Date (as defined
below) and such amount shall be equal to the Periodic Amount Percentage (as
defined below) of the Purchase Price for all Debentures for the period from the
date following the relevant Required Filing Date, Required Effective Date or
Restricted Sale Date, as the case may be, to the first relevant Computation
Date, and thereafter to each subsequent Computation Date. The "Periodic Amount
Percentage" means (A) two percent (2%) of the Purchase Price for all the
Debentures previously purchased for the period from the date following the
relevant Required Filing Date, Required Effective Date or Restricted Sale Date,
as the case may be, to the first relevant Computation Date, and (B) two percent
(2%) of the Purchase Price of all Debentures to each Computation Date
thereafter. Anything in the preceding provisions of this paragraph (iii) to the
contrary notwithstanding, after the Effective Date the Purchase Price shall be
deemed to refer to the sum of (X) the principal amount of all Debentures
previously purchased but not yet converted and (Y) the Held Shares Value (as
defined below). The "Held Shares Value" means, for shares acquired by the
Investor upon a conversion within the thirty (30) days preceding the Restricted
Sale Date, but not yet sold by the Investor, the principal amount of the
Debentures converted into such Conversion Shares; provided, however, that if the
Investor effected more than one conversion during such thirty (30) day period
and sold less than all of such shares, the sold shares shall be deemed to be
derived first from the conversions in the sequence of such conversions (that is,
for example, until the number of shares from the first of such conversions have
been sold, all shares shall be deemed to be from the first conversion;
thereafter, from the second conversion until all such shares are sold). By way
of illustration and not in limitation of the foregoing, if the Registration
Statement for the Registrable is timely filed but is not declared effective
until two hundred eighty-five (285) days after the Closing Date, the Periodic
Amount will aggregate six percent (6%) of the Purchase Price of the Debentures
(2% for days 211-240, plus 2% for days 241-270, plus 2% for days 271-285).
(iv) Each Periodic Amount will be payable by the Company to the
Investor monthly, without requiring demand therefor by the Investor and shall be
payable, at the option of the Company either (x) in cash or other immediately
available funds or (y) subject to the provisions of this subparagraph (iv), in
shares of Common Stock ("Periodic Amount Shares"). The number of Periodic Amount
Shares shall be equal to the relevant Periodic Amount divided by the Conversion
Price which would have been applicable to the first day after the relevant
Computation Date, but only to the extent that the Investor would have been
entitled to effect a conversion into such number of shares in accordance with
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the terms of the Debentures. If the Company elects to pay the Periodic Amount by
delivery of Periodic Amount Shares, such Periodic Amount Shares must be received
by the Investor within five (5) business days after the relevant Computation
Date, unless otherwise agreed to in writing by the Investor in each instance. If
the Periodic Amount Shares are not delivered by such date, the Investor shall
have the right to demand that the Periodic Amount be paid in cash as
contemplated herein. On issuance, Periodic Amount Shares are deemed to be
Registrable Securities.
(v) The parties acknowledge that the damages which may be incurred by
the Investor if the Registration Statement is not filed by the Required Filing
Date or if the Registration Statement has not been declared effective by a
Required Effective Date, including if the right to sell Registrable Securities
under a previously effective Registration Statement is suspended, may be
difficult to ascertain. The parties agree that the Periodic Amounts represent a
reasonable estimate on the part of the parties, as of the date of this
Agreement, of the amount of such damages.
(vi) Notwithstanding the foregoing, the amounts payable by the Company
pursuant to this provision shall not be payable to the extent any delay in the
effectiveness of the Registration Statement occurs because of an act of, or a
failure to act or to act timely by the Investor or its counsel, or in the event
all of the Registrable Securities may be sold pursuant to Rule 144 or another
available exemption under the Act without volume or other restrictions or
limits.
(vii) "Computation Date" means (A) the date which is the earlier of (1)
thirty (30) days after the Required Filing Date, any relevant Required Effective
Date or a Restricted Sale Date, as the case may be, or (2) the date after the
Required Filing Date, such Required Effective Date or Restricted Sale Date on
which the Registration Statement is filed (with respect to payments due as
contemplated by Section 2(b)(i) hereof) or is declared effective or has its
restrictions removed (with respect to payments due as contemplated by Section
2(b)(ii) hereof), as the case may be, and (B) each date which is the earlier of
(1) thirty (30) days after the previous Computation Date or (2) the date after
the previous Computation Date on which the Registration Statement is filed (with
respect to payments due as contemplated by Section 2(b)(i) hereof) or is
declared effective or has its restrictions removed (with respect to payments due
as contemplated by Section 2(b)(ii) hereof), as the case may be.
3. Obligations of the Company. In connection with the registration of the
Registrable Securities, the Company shall do each of the following:
(a) Prepare promptly, and file with the SEC by the Required Filing Date a
Registration Statement with respect to not less than the number of Registrable
Securities provided in Section 2(a) above, and thereafter use its reasonable
best efforts to cause such Registration Statement relating to Registrable
Securities to become effective by the Required Effective Date and keep the
Registration Statement effective at all times during the period (the
"Registration Period") continuing until the earliest of (i) the date that is two
(2) years after the last day of the calendar month following the month in which
the Effective Date occurs, (ii) the date when the Investors may sell all
Registrable Securities under Rule 144 without volume or other restrictions or
limits or (iii) the date the Investors no longer own any of the Registrable
Securities, which Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading;
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(b) Prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Registration Statement effective at all times during the Registration
Period, and, during the Registration Period, comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities of
the Company covered by the Registration Statement until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statement;
(c) Permit a single firm of counsel designated by the Initial Investors to
review the Registration Statement and all amendments and supplements thereto a
reasonable period of time (but not less than three (3) business days) prior to
their filing with the SEC, and not file any document in a form to which such
counsel reasonably objects.
(d) Notify each Investor, such Investor's legal counsel identified to the
Company (which, until further notice, shall be deemed to be Xxxxxxx & Xxxxxx
LLP, ATTN: Xxxxxx Xxxxxxx, Esq.; each, an "Investor's Counsel"), and any
managing underwriters immediately (and, in the case of (i)(A) below, not less
than five (5) days prior to such filing) and (if requested by any such Person)
confirm such notice in writing no later than one (1) business day following the
day (i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement including changes in the provisions
relating to the Investor, the Registrable Securities, or the transactions
reflected in the Transaction Agreements (collectively, "Investor Matters") is
proposed to be filed; (B) whenever the SEC notifies the Company whether there
will be a "review" of such Registration Statement; (C) whenever the Company
receives (or a representative of the Company receives on its behalf) any oral or
written comments from the SEC in respect of a Registration Statement (copies or,
in the case of oral comments, summaries of such comments shall be promptly
furnished by the Company to the Investors); and (D) with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the SEC or any other Federal or state
governmental authority for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of the issuance by
the SEC of any stop order suspending the effectiveness of the Registration
Statement covering any or all of the Registrable Securities or the initiation of
any proceedings for that purpose; (iv) if at any time any of the representations
or warranties of the Company contained in any agreement (including any
underwriting agreement) contemplated hereby ceases to be true and correct in all
material respects; (v) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose; and (vi) of the
occurrence of any event that to the best knowledge of the Company makes any
statement made in the Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to the Registration Statement,
Prospectus or other documents so that, in the case of the Registration Statement
or the Prospectus, as the case may be, it will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. In addition, the
Company shall furnish to the Investor's Counsel copies of all intended written
responses to the comments contemplated in clause (C) of this Section 3(d) to the
extent such responses relate to Investor Matters not later than one (1) business
day in advance of the filing of such responses with the SEC so that the
Investors shall have the opportunity to comment thereon.
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(e) Furnish to each Investor and such Investor's Counsel (i) promptly after
the same is prepared and publicly distributed, filed with the SEC, or received
by the Company, one (1) copy of the Registration Statement, each preliminary
prospectus and prospectus, and each amendment or supplement thereto, and (ii)
such number of copies of a prospectus, and all amendments and supplements
thereto and such other documents, as such Investor may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
Investor;
(f) As promptly as practicable after becoming aware thereof, notify each
Investor of the happening of any event of which the Company has knowledge, as a
result of which the prospectus included in the Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement or other appropriate filing with the SEC
to correct such untrue statement or omission, and deliver a number of copies of
such supplement or amendment to each Investor as such Investor may reasonably
request;
(g) As promptly as practicable after becoming aware thereof, notify each
Investor who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance by the SEC of
a Notice of Effectiveness or any notice of effectiveness or any stop order or
other suspension of the effectiveness of the Registration Statement at the
earliest possible time;
(h) Notwithstanding the foregoing, if at any time or from time to time
after the date of effectiveness of the Registration Statement, the Company
notifies the Investors in writing of the existence of a Potential Material
Event, the Investors shall not offer or sell any Registrable Securities, or
engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of notice with respect to a Potential
Material Event until such Investor receives written notice from the Company that
such Potential Material Event either has been disclosed to the public or no
longer constitutes a Potential Material Event; provided, however, that the
Company may not so suspend the right to such holders of Registrable Securities
during the periods the Registration Statement is required to be in effect other
than during a Permitted Suspension Period (and the applicable provisions of
Section 2(b) shall apply with respect to any such suspension other than during a
Permitted Suspension Period). The term "Permitted Suspension Period" means one
or two suspension periods during any consecutive 12-month period, provided,
however, that no one such suspension period shall either (i) be for more than
twenty (20) days or (ii) begin less than ten (10) business days after the last
day of the preceding suspension (whether or not such last day was during or
after a Permitted Suspension Period).
(i) Use its reasonable efforts to secure and maintain the designation of
all the Registrable Securities covered by the Registration Statement "OTC
Bulletin Board Market" of the National Association of Securities Dealers
Automated Quotations System ("NASDAQ") within the meaning of Rule 11Aa2-1 of the
SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the quotation of the Registrable Securities on The NASDAQ Bulletin Board
Market; and, without limiting the generality of the foregoing, to arrange for at
least two market makers to register with the National Association of Securities
Dealers, Inc. as such with respect to such Registrable Securities;;
(j) Provide a transfer agent and registrar, which may be a single entity,
for the Registrable Securities not later than the Effective Date;
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(k) Cooperate with the Investors to facilitate the timely preparation and
delivery of certificates for the Registrable Securities to be offered pursuant
to the Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as the
Investors may reasonably request, and, within three (3) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the transfer agent for the Registrable
Securities (with copies to the Investors whose Registrable Securities are
included in such Registration Statement) an appropriate instruction and opinion
of such counsel; and
(l) Take all other reasonable actions necessary to expedite and facilitate
disposition by the Investor of the Registrable Securities pursuant to the
Registration Statement.
4. Obligations of the Investors. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it, and the intended method of disposition of the Registrable Securities
held by it, as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least ten (10) days prior
to the first anticipated filing date of the Registration Statement, the Company
shall notify each Investor of the information the Company requires from each
such Investor (the "Requested Information") if such Investor elects to have any
of such Investor's Registrable Securities included in the Registration
Statement. If at least two (2) business days prior to the filing date the
Company has not received the Requested Information from an Investor (a
"Non-Responsive Investor"), then the Company may file the Registration Statement
without including Registrable Securities of such Non-Responsive Investor;
(b) Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(f) or 3(g),
above, such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
5. Expenses of Registration. (a) All reasonable expenses (other than
underwriting discounts and commissions of the Investor) incurred in connection
with registrations, filings or qualifications pursuant to Section 3, but
including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
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the Company and a fee for a single counsel for the Investors (as a group and not
individually)equal to $3,500 for the initial Registration Statement covering the
Registrable Securities applicable to the Debentures issued on the Closing Date
and $2,500 for each Additional Registration Statement (or a post-effective
amendment to the initial Registration Statement if such amendment relates to
Investor Matters) required to be filed pursuant to the terms of this Agreement,
shall be borne by the Company.
(b) Except as disclosed in the Company's SEC Documents, (i) neither the
Company nor any of its subsidiaries has, as of the date hereof, nor shall the
Company nor any of its subsidiaries, on or after the date of this Agreement,
enter into any agreement with respect to its securities that is inconsistent
with the rights granted to the Investors in this Agreement or otherwise
conflicts with the provisions hereof and (ii) neither the Company nor any of its
subsidiaries has previously entered into any agreement granting any registration
rights with respect to any of its securities to any Person. Without limiting the
generality of the foregoing, without the written consent of the Investors
holding a majority of the Registrable Securities, the Company shall not grant to
any person the right to request the Company to register any securities of the
Company under the Securities Act unless the rights so granted are subject in all
respects to the prior rights in full of the Investors set forth herein, and are
not otherwise in conflict or inconsistent with the provisions of this Agreement
and the other Transaction Agreements.
6. Indemnification. In the event any Registrable Securities are included in
a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person" or "Indemnified Party"), against any
losses, claims, damages, liabilities or expenses (joint or several) incurred
(collectively, "Claims") to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations in the Registration Statement, or any post-effective amendment
thereof, or any prospectus included therein: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any post-effective amendment thereof or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission to state
therein any material fact necessary to make the statements made therein, in
light of the circumstances under which the statements therein were made, not
misleading or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state securities
law (the matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to clause (b) of this Section 6, the Company shall
reimburse the Investors, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a) shall not (I) apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of any
Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto, if
such prospectus was timely made available by the Company pursuant to Section
3(c) hereof; (II) be available to the extent such Claim is based on a failure of
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the Investor to deliver or cause to be delivered the prospectus made available
by the Company; or (III) apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Each Investor will indemnify
the Company and its officers, directors and agents (each, an "Indemnified
Person" or "Indemnified Party") against any claims arising out of or based upon
a Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company, by or on behalf of such Investor, expressly
for use in connection with the preparation of the Registration Statement,
subject to such limitations and conditions as are applicable to the
Indemnification provided by the Company to this Section 6. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
(b) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be. In case any
such action is brought against any Indemnified Person or Indemnified Party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, assume the defense
thereof, subject to the provisions herein stated and after notice from the
indemnifying party to such Indemnified Person or Indemnified Party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such Indemnified Person or Indemnified Party under this Section 6 for
any legal or other reasonable out-of-pocket expenses subsequently incurred by
such Indemnified Person or Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation, unless the indemnifying
party shall not pursue the action to its final conclusion. The Indemnified
Person or Indemnified Party shall have the right to employ separate counsel in
any such action and to participate in the defense thereof, but the fees and
reasonable out-of-pocket expenses of such counsel shall not be at the expense of
the indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the Indemnified Person or
Indemnified Party. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The
indemnification required by this Section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable.
7. Contribution. To the extent any indemnification by an indemnifying party
is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation; and (c)
9
contribution by any seller of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. Reports under Exchange Act. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act; and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144 and the Exchange
Act, (ii) a copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company and (iii) such
other information as may be reasonably requested to permit the Investors to sell
such securities pursuant to Rule 144 without registration.
9. Assignment of the Registration Rights. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of the Registrable
Securities (or all or any portion of any unconverted Debenture) only if: (a) the
Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name and address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein. In the event of any delay in filing or
effectiveness of the Registration Statement as a result of such assignment, the
Company shall not be liable for any damages arising from such delay, or the
payments set forth in Section 2(b) hereof arising from such delay.
10. Amendment of Registration Rights. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors who hold, in the aggregate, an
eighty (80%) percent interest of the Registrable Securities. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
10
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
(b) Notices required or permitted to be given hereunder shall be given in
the manner contemplated by the Securities Purchase Agreement, (i) if to the
Company or to the Initial Investor, to their respective address contemplated by
the Securities Purchase Agreement, and (ii) if to any other Investor, at such
address as such Investor shall have provided in writing to the Company, or at
such other address as each such party furnishes by notice given in accordance
with this Section 11(b).
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York for contracts to be wholly performed in such
state and without giving effect to the principles thereof regarding the conflict
of laws. Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the City of New York or the state courts
of the State of New York sitting in the City of New York in connection with any
dispute arising under this Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum non
coveniens, to the bringing of any such proceeding in such jurisdictions. To the
extent determined by such court, the Company shall reimburse the Investor for
any reasonable legal fees and disbursements incurred by the Investor in
enforcement of or protection of any of its rights under this Agreement.
(e) If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
(f) Subject to the requirements of Section 9 hereof, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
(j) The Company acknowledges that any failure by the Company to perform its
obligations under Section 3(a) hereof, or any delay in such performance could
result in loss to the Investors, and the Company agrees that, in addition to any
other liability the Company may have by reason of such failure or delay, the
Company shall be liable for all direct damages caused by any such failure or
delay, unless the same is the result of force majeure. Neither party shall be
liable for consequential damages.
11
(k) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
12
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
COMPANY:
XXXXXX'X RESTAURANT GROUP, INC.
By:
Name:
Title:
INITIAL INVESTOR:
[Print Name]
By:
Name:
Title:
13
EXHIBIT 1
Shares Permitted to Be Included in Registration Statement
---------------------------------------------------------
Shares of Common Owned/Description of Right to
Shareholder Name Stock Aquire
---------------- ----- ----------------------------
Greenfield Capital Partners 4,000,000 To be issued by the Company
Greenfield Capital Partners 1,000,000 Warrants, dated June 7, 2000
ANNEX V
TO
SECURITIES PURCHASE AGREEMENT
COMPANY DISCLOSURE
To be provided by Company
ANNEX VI
TO
SECURITIES PURCHASE AGREEMENT
SECURITY INTEREST AND PLEDGE PROVISIONS
For purposes of this Annex VI, the terms "Debtor" and "Secured Party" have
the meanings ascribed to them in the Securities Purchase Agreement to which this
Annex VI is attached.
Unless otherwise specified, all capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Securities Purchase
Agreement.
These Security Interest and Pledge Provisions are sometimes referred to as
the "Pledge Agreement."
Section 1. The Security Interests.
(a) In order to secure the due and punctual fulfillment of the Obligations
(as defined below) its obligations under, the Debtor hereby grants, conveys,
transfers and assigns to the Secured Party a continuing security interest in the
following described fixtures and personal property, whether now owned or
hereafter acquired, together with all additions, substitutions, replacements and
proceeds and all income interest, dividends and other distributions thereon
(hereinafter collectively called the "Collateral"):
(1) all right, title and interest in and to the shares of common stock and
any other securities of Xxxx.xxx Limited , a corporation organized under
the laws of England and Wales (the name of which entity is anticipated to
be changed to B4B Communications, Inc.; "Fone") now or hereafter owned
directly or beneficially by Debtor (the "Fone Securities");
(2) all assets and properties of whatever kind and description, excluding
intellectual property, now or hereafter owned by the Debtor and all
accessions, additions or improvements to, all replacements, substitutions
and parts for, and all proceeds and products of the foregoing; all bank and
securities accounts of any kind or nature; all books, records and documents
relating to the foregoing located at the principal place of business or any
other place of business of the Debtor, or at such other location as the
business may hereafter be located , or held by any agent, representative or
bailee of the Debtor wherever located; and
(3) all right, title and interest in and to the VAT Alternatives (as
defined in the Debentures).
(b) The security interests granted pursuant to this Section 1 (the
"Security Interests") are granted as security only and shall not subject the
Secured Party to, or transfer or in any way affect or modify, any obligation or
liability of the Debtor under any of the Collateral or any transaction which
gave rise thereto.
(c) If the Collateral includes certificated securities, documents or
instruments, such certificates are herewith delivered to the Secured Party or to
the Agent (as defined below) or the Agent's designee, accompanied by duly
executed blank stock or bond powers or assignments, as applicable. The Debtor
hereby authorizes the transfer of possession of all certificates, instruments,
documents and other evidence of the Collateral to the Secured Party or the Agent
or the Agent's designee. Notwithstanding anything to the contrary contained
herein, this Pledge Agreement evidences a present and absolute pledge of the
Collateral to the Secured Party, which shall be effective upon the execution of
this Pledge Agreement.
(d) The term " Obligations" means the due and punctual fulfillment and
performance of all of the Debtor's obligations to the Secured Party whether now
existing or hereafter arising (i) under each of the Securities Purchase
Agreement, the Registration Rights Agreement, the Debentures, or any other
Transaction Agreements and all other documentation and instruments reflecting
the obligations of the Debtor to the Secured Party (collectively, the "Debtor
Agreements") and (ii) any and all other obligations as may be incurred or
assumed by the Debtor to the Secured Party from time to time; all of the
foregoing whether arising under any agreement, instrument or document, whether
or not for the payment of money, whether arising by reason of an extension of
credit, opening a letter of credit, loan or guarantee or in any other manner,
whether direct or indirect (including those acquired by assignment or
participation), absolute or contingent, joint or several, due or to become due,
whether now existing or hereafter arising, and any amendments, extensions,
renewals or increases, and all costs and expenses of the Secured Party incurred
in the documentation, negotiation, modification, enforcement, collection or
otherwise in connection with any of the foregoing, including reasonable
attorneys' fees and expenses.
(e) By its signature in the space provided below, Fone, the wholly-owned
subsidiary of the Debtor, hereby agrees and consents to all of the terms of this
Pledge Agreement which run in favor of the Secured Party as if Fone were the
Debtor named herein; provided, however, that such agreement by Fone is limited
exclusively to (i) Fone's acknowledgment of the Secured Party's security
interest in and the Debtor's pledge of the Fone Securities and (ii) Fone's grant
of a security interest in, and Fone's pledge of, the VAT Alternatives to the
Secured Party. Nothing herein shall be construed to represent a recourse
obligation of Fone with respect to any Obligations of the Company under this
Debenture except to the extent provided in this Section 1(e).
Section 2. Filing; Further Assurances.
(a) The Debtor will deliver the Fone Securities, together with multiple
copies of duly executed and otherwise completed stock powers sufficient to
proceed with the transfer of such securities without any substantial action on
the part of the Secured Party, to the Secured Party or the Agent or the designee
of the Agent.
(b) The Debtor will, at its expense, execute, deliver, file and record (in
such manner and form as the Secured Party may require), or permit the Secured
Party to file and record, any financing statements, any carbon, photographic or
other reproduction of a financing statement or this Security Agreement (which
shall be sufficient as a financing statement hereunder), any specific
assignments or other paper that may be reasonably necessary or desirable, or
2
that the Secured Party may request, in order to create, preserve, perfect or
validate any Security Interest or to enable the Secured Party to exercise and
enforce its rights hereunder with respect to any of the Collateral. Effective
upon the existence of an Debtor Event of Default (as defined below), the Debtor
hereby appoints Secured Party as Debtor's attorney-in-fact to execute in the
name and behalf of Debtor such additional financing statements as Secured Party
may request.
(c) Solely for administrative convenience and not for any other purpose,
each Secured Party has designated Xxxxxxx & Xxxxxx XX agent for the Secured
Party (the "Agent") for purposes of taking possession, as agent for and on
behalf of, the Secured Party of the Fone Securities, and for execution of and
identification on any financing statement or similar instrument referring to or
describing the Collateral. Such designation shall remain in effect until
canceled by such Secured Party; provided, however, that such cancellation shall
not affect the validity of any action theretofore taken by such agent pursuant
to this provision. The Debtor acknowledges and agrees to honor such designation
and acknowledges that the Agent is acting as the agent of the Secured Party and
not as a principal..
Section 3. Representations and Warranties of Debtor. The Debtor hereby
represents and warrants to the Secured Party as follows:
(a) There are no restrictions on the pledge or transfer of any of the
Collateral, other than restrictions referenced on the face of any certificates
evidencing the Collateral.
(b) The Debtor is the legal, beneficial and record owner of the Collateral,
which is registered in the name of the Debtor as of the date hereof.
(c) The Fone Securities represent one hundred percent (100%) of the equity
shares of Fone.
(d) Except as specified on Exhibit A attached hereto, the Collateral is
free and clear of any security interests, pledges, liens, encumbrances charges,
agreements, claims or other arrangements or restrictions of any kind; and the
Debtor will not incur, create, assume or permit to exist and pledge, security
interest, lien, charge or other encumbrance of any nature whatsoever on any of
the Collateral or assign, pledge or otherwise encumber any right to receive
income from the Collateral. Except for such financing statements as may be
described on Exhibit A attached hereto and made a part hereof, no financing
statement covering the Collateral is on file in any public office, other than
the financing statements filed pursuant to this Security Agreement.
(e) The Debtor (or, with respect to the VAT Alternatives, Fone) has the
right to transfer the Collateral free of any encumbrances and the Debtor (or,
with respect to the VAT Alternatives, Fone) will defend the Debtor's title to
the Collateral against the claims of all persons, and any registration with, or
consent or approval to or action by, any federal, state or other governmental
authority or regulatory body which was or is necessary for the validity of the
pledge and grant of the security interest in the Collateral has been obtained.
3
(f) Upon the occurrence of a Debtor Event of Default, no third party has
any rights to receive notice of such default or the sale of the Collateral or
any portion thereof, and no third party has rights to purchase all or any
portion of the Collateral.
(g) All additional information, representations and warranties contained in
Exhibit B attached hereto and made a part hereof are true, accurate and complete
on the date hereof.
Section 4. Covenants of Debtor. The Debtor hereby covenants and agrees with
the Secured Party that the Debtor (a) will, at the Debtor's sole cost and
expense, defend the Collateral against all claims and demands of all persons at
any time claiming any interest therein junior to the Secured Party's interest;
(b) will provide the Secured Party with prompt written notice of (i) any change
in the chief executive officer of the Debtor or the office where the Debtor
maintains its books and records pertaining to the Collateral; (ii) the movement
or location of all or a material part of the Collateral to or at any address
other than as set forth in said Exhibit B; and (iii) any facts which constitute
an Debtor Event of Default, or which, with the giving of notice and/or the
passage of time, could or would constitute an Debtor Event of Default, pursuant
to Section 7 below; (c) will promptly pay any and all taxes, assessments and
governmental charges upon the Collateral prior to the date penalties are
attached thereto, except to the extent that such taxes, assessments and charges
shall be contested in good faith by the Debtor; (d) will immediately notify the
Secured Party of any event causing a substantial loss or diminution in the value
of all or any material part of the Collateral and the amount or an estimate of
the amount of such loss or diminution; (e) will have and maintain adequate
insurance at all times with respect to the Collateral against risks of fire
(including so-called extended coverage) and theft, and such other risks as are
customary in the Debtor's industry for the respective items included in the
Collateral, such insurance to be payable to the Secured Party and the Debtor as
their respective interests may appear, and shall provide for a minimum of ten
(10) days prior written notice of cancellation to the Secured Party, and Debtor
shall furnish the Secured Party with certificates or other evidence satisfactory
to the Secured Party of compliance with the foregoing insurance provisions; (f)
will not sell or offer to sell or otherwise assign, transfer or dispose of the
Collateral or any interest therein, without the prior written consent of the
Secured Party, except in the ordinary course of business; (g) will keep the
Collateral free from any adverse lien, security interest or encumbrance (except
for encumbrances specified in Exhibit A attached hereto) and in good order and
repair, reasonable wear and tear excepted, and will not waste or destroy the
Collateral or any part thereof; (h) will not use the Collateral in material
violation of any statute or ordinance the violation of which could materially
and adversely affect the Debtor's business; and (i) will not permit the issuance
of any other equity shares in Fone without the express written consent of the
Secured Party in each instance..
Section 5. Records Relating To Collateral. The Debtor will keep its records
concerning the Collateral at its offices designated in Exhibit B or at such
other place or places of business of which the Secured Party shall have been
notified in writing no less than ten (10) days prior thereto. The Debtor will
hold and preserve such records and chattel paper and will permit representatives
of the Secured Party at any time during normal business hours upon reasonable
notice to examine and inspect the Collateral and to make abstracts from such
records and chattel paper, and will furnish to the Secured Party such
information and reports regarding the Collateral as the Secured Party may from
time to time reasonably request.
4
Section 6. General Authority. The Debtor hereby appoints the Secured Party
the Debtor's lawful attorney, with full power of substitution, in the name of
the Debtor, for the sole use and benefit of the Secured Party, but at the
Debtor's expense, to exercise, all or any of the following powers with respect
to all or any of the Collateral during the existence of any Debtor Event of
Default:
(a) to demand, xxx for, collect, receive and give acquittance for any and
all monies due or to become due;
(b) to receive, take, endorse, assign and deliver all checks, notes,
drafts, documents and other negotiable and non- negotiable instruments and
chattel paper taken or received by the Secured Party;
(c) to settle, compromise, prosecute or defend any action or proceeding
with respect thereto;
(d) to sell, transfer, assign or otherwise deal in or with the same or the
proceeds thereof or the related goods securing the Collateral, as fully and
effectually as if the Secured Party were the sole and absolute owner thereof;
(e) to extend the time of payment of any or all thereof and to make any
allowance and other adjustments with reference thereto; and
(f) to discharge any taxes, liens, security interests or other encumbrances
at any time placed thereon;
provided that the Secured Party shall give the Debtor not less than ten (10)
days prior written notice of the time and place of any sale or other intended
disposition of any of the Collateral.
Section 7. Debtor Events of Default. The Debtor shall be in default under
this Security Agreement upon the occurrence of any of the following events (a
"Debtor Event of Default"):
(a) if any representation or warranty made by the Debtor in this Annex VI
or in any of the Transaction Agreements shall be false or misleading in any
material respect; or
(b) the occurrence of a default by the Debtor in the Debenture or any of
the other Transaction Agreements.
Section 8. Remedies Upon Debtor Event of Default.
(a) If any Debtor Event of Default shall have occurred, the Secured Party
may exercise all the rights and remedies of a Secured Party under the Uniform
Commercial Code. The Secured Party may require the Debtor to assemble all or any
part of the Collateral and make it available to the Secured Party at a place to
be designated by the Secured Party which is reasonably convenient. The Secured
Party shall give the Debtor ten (10) days prior written notice of the Secured
Party's intention to make any public or private sale or sale at a broker's board
or on a securities exchange of the Collateral. At any such sale the Collateral
5
may be sold in one lot as an entirety or in separate parcels, as the Secured
Party, in its sole discretion, may determine. The Secured Party shall not be
obligated to make any such sale pursuant to any such notice. The Secured Party
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to which the
same may be adjourned. The Secured Party, instead of exercising the power of
sale herein conferred upon it, may proceed by a suit or suits at law or in
equity to foreclose the Security Interests and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
(b) (i) At any bona fide public sale the Secured Party shall be free to
purchase all or any part of the Collateral. Any such sale may be on cash or
credit. The Secured Party shall be authorized at any such sale (if deems it
advisable to do so) to restrict the prospective bidders or purchasers to persons
who will represent and agree that they are purchasing the Collateral for their
own account in compliance with Regulation D of the Securities Act of 1933, as
amended (the "1933 Act") or any other applicable exemption available under the
1933 Act. The Secured Party will not be obligated to make any sale and may sell
at the time and place to which the sale is adjourned. If the Collateral is
customarily sold on a recognized market or threatens to decline speedily in
value, the Secured Party may sell such Collateral at any time without giving
prior notice to the Debtor. Whenever notice is otherwise required by law to be
sent by the Secured Party to the Debtor of any sale or other disposition of the
Collateral, three (3) days' written notice sent to the Debtor at the notice
address specified below will be reasonable.
(ii) The Debtor recognizes that the Secured Party may be unable to
effect or cause to be effected a public sale of the Collateral by reason of
certain prohibitions contained in the of 1933 Act, so that the Secured Party may
be compelled to resort to one or more private sales to a restricted group of
purchasers who will be obligated to agree, among other things, to acquire the
Collateral for resale thereof. The Debtor understands that private sales so made
may be at prices and on other terms less favorable to the seller than if the
Collateral were sold at public sales, and agrees that the Secured Party has no
obligation to delay or agree to delay the sale of any of the Collateral from the
period of time necessary to permit the issuer of the securities which are part
of the Collateral (even if the issuer would agree), to register such securities
for sale under the 1933 Act. The Debtor agrees that private sales made under the
foregoing circumstances shall be deemed to have been made in a commercially
reasonable manner.
Section 9. Application of Collateral and Proceeds.
(a) The proceeds of any sale of, or other realization upon, all or any part
of the Collateral shall be applied in the following order of priorities: (i)
first, to the payment of all of the reasonable expenses of such sale or other
realization, including, without limitation, reasonable attorneys' fees, and all
expenses, liabilities and advances reasonably incurred or made by the Secured
Party in connection therewith, and of any other unreimbursed expenses for which
the Secured Party is to be reimbursed pursuant to the terms of any of the
Transaction Agreements; (ii) second, to the payment of the Obligations in such
order of priority as the Secured Party, in its sole discretion, shall determine;
and (iii) finally, to the payment to the Debtor, or its successors or assigns,
or as a court of competent jurisdiction may direct, of any surplus then
6
remaining from such proceeds after payments of the character referred to in
subsections (i) and (ii) of this Section 9(a) shall have been made.
(b) If any demand is made at any time upon the Secured Party for the
repayment or recovery of any amount received by it in payment or on account of
any of the Obligations from the disposition of the Collateral and if the Secured
Party repays all or any party of such amount the Debtor, will be and remain
liable for the amounts so repaid or recovered to the same extends as if never
originally received by the Secured Party.
(c) In furtherance of the foregoing, and not in limitation thereof:
(i) The Secured Party, as attorney-in-fact pursuant to the terms of this
Pledge Agreement, may, in the name and stead of the Debtor, make and
execute all conveyances, assignments and transfers of the Collateral sold
pursuant to the terms of this Pledge Agreement. The Debtor shall, if so
requested by the Secured Party or representatives or agents of the Secured
Party, ratify and confirm any sale or sales by executing and delivering to
the Secured Party or its designees, or to such purchaser or purchasers, all
such instruments as may, in the judgment of the Secured Party, be advisable
for such purpose.
(ii) The receipt of the Secured Party for the purchase money paid at any
such sale made by it shall be a sufficient discharge therefor to any
purchaser of the Collateral, or any portion thereof, sold as aforesaid; and
no such purchaser (or his or its representatives or assigns), after paying
such purchase money and receiving such receipt, shall be bound to see to
the application of such purchase money or any part thereof or in any manner
whatsoever be answerable for any loss, misapplication, necessity,
expediency or regularity of any such sale.
Section 10. Voting Rights and Transfer.
(a) Prior to the occurrence of a Debtor Event of Default, the Debtor will
have the right to exercise all voting rights with respect to the Collateral. At
any time after the occurrence of a Debtor Event of Default, the Secured Party
may transfer any or all of the Collateral into its name or that of its nominee
and may exercise all voting rights with respect to the Collateral, but no such
transfer shall constitute a taking of such Collateral in satisfaction of any or
all of the Obligations unless the Secured Party expressly so indicates by
written notice to the Debtor.
(b) Notwithstanding the foregoing provisions of this Section 10, the Debtor
agrees that, without the prior express written consent of the Secured Party in
each instance, (i) it will not directly vote its shares to permit the issuance
of additional shares of Fone or the sale, encumbrance or disposition of a
substantial portion of Fone's assets and (ii) it will take all steps reasonably
necessary to prevent any other party from taking any action which would result
in the issuance of additional shares of Fone or the sale, encumbrance or
disposition of a substantial portion of Fone's assets.
Section 11. Dividends, Interest and Premiums. The Debtor will have the
right to receive all cash dividends, interest and premiums declared and paid on
the Collateral prior to the occurrence of a Debtor Event of Default, other than
7
(x) any of the foregoing applicable to the Fone Securities, and
(y) any VAT Alternatives, until either the time for the Secured Party's
making a Payment Demand (as defined in the Debentures) with respect thereto
has expired or the Secured Party's earlier written waiver of its right to
make a Payment Demand with respect thereto,
each of which shall be deemed to be part of the Collateral to the same extent as
the original Collateral. In the event any additional shares are issued to the
Debtor as a stock dividend or in lieu of interest on any of the Collateral, as a
result of any split of any of the Collateral by reclassification or otherwise,
any certificates evidencing any such additional shares will be immediately
delivered to the Secured Party and such shares will be subject to this Pledge
Agreement and a part of the Collateral to the same extent as the original
Collateral. At any time after the occurrence of a Debtor Event of Default, the
Secured Party shall be entitled to receive all cash or stock dividends, interest
and premiums declared or paid on the Collateral, all of which shall be subject
to the Secured Party's rights hereunder.
Section 12. Further Assurances. At any time and from time to time, upon
demand of the Secured Party, the Debtor will give, execute, file and record any
notice, financing statement, continuation statement, instrument, document or
agreement that the Secured Party may consider necessary or desirable to create,
preserve, continue, perfect or validate any security interest granted hereunder
or to enable the Secured Party to inform its rights hereunder with respect to
such security interest. Without limiting the generality of the foregoing, the
Debtor hereby irrevocably appoints the Secured Party as the Debtor's
attorney-in-fact to do all acts and things in the Debtor's name that the Secured
Party may deem necessary or desirable, which appointment is deemed to be coupled
with an interest. The Secured Party is authorized to file financing statements,
continuation statements and other documents under the Uniform Commercial Code
relating to the Collateral without the Debtor's signature, naming the Debtor as
debtor and the Secured Party (or the Agent as agent of the Secured Party) as
secured party.
Section 13. Expenses; Secured Party's Lien. The Debtor will forthwith upon
demand pay to the Secured Party: (a) the amount of any taxes which the Secured
Party may have been required to pay by reason of the Security Interests
(including, without limitation, any applicable transfer taxes) or to free any of
the Collateral from any lien thereon; and (b) the amount of any and all
reasonable out-of-pocket expenses, including, without limitation, the reasonable
fees and disbursements of its counsel, and of any agents not regularly in its
employ, which the Secured Party may incur in connection with (i) the preparation
of any amendments or modifications of this Security Agreement, (ii) the
collection, sale or other disposition of any of the Collateral; (iii) the
exercise by the Secured Party of any of the powers conferred upon it hereunder,
or (iv) any default by the Debtor hereunder.
Section 14. Termination of Security Interests; Release of Collateral. Upon
the repayment and performance in full of all the Obligations, the Security
Interests shall terminate and all rights to the Collateral shall revert to the
Debtor. Upon any such termination of the Security Interests or release of
Collateral, the Secured Party will, at the Debtor's expense, to the extent
permitted by law, execute and deliver to the Debtor such documents as the Debtor
8
shall reasonably request to evidence the termination of the Security Interests
or the release of such Collateral, as the case may be.
Section 15. Notices. Any notice required or permitted hereunder shall be
given in the manner contemplated by the Securities Purchase Agreement.
Section 16. Miscellaneous.
(a) No failure on the part of the Secured Party to exercise, and no delay
in exercising, and no course of dealing with respect to, any right, power or
remedy under this Security Agreement shall operate as a waiver thereof; nor
shall any single or partial exercise by the Secured Party of any right, power or
remedy under this Security Agreement preclude the exercise, in whole or in part,
of any other right, power or remedy. The remedies in this Security Agreement are
cumulative and are not exclusive of any other remedies provided by law. Neither
this Security Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally but only by a statement in writing signed by the
party against which enforcement of the change, waiver, discharge or termination
is sought.
(b) Unless otherwise defined herein, or unless the context otherwise
requires, all terms used herein which are defined in the Delaware Uniform
Commercial Code have the meanings therein stated.
Section 17. Separability. If any provision hereof shall prove invalid or
unenforceable in any jurisdiction whose laws shall be deemed applicable, the
other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Secured Party.
Acknowledged:
XXXXXX'X RESTAURANT GROUP, INC., Debtor
By:______________________________________
Its
Subject to the provisions of Section 1(e) of this Pledge Agreement, the
undersigned acknowledges its agreement to the terms hereof XXXX.XXX LIMITED
By:
(Print Name)
-----------------------------------------
(Title)
9
STATE OF ________________
COUNTY OF ______________
On the ______ day of ________, 2000, before me personally came
_________________________, to me known, who being by me duly sworn, did depose
and say that he resides at _____________________________________,
__________________; that he is the _______________ of XXXXXX'X RESTAURANT GROUP,
INC., the corporation described in and which executed the foregoing instrument
as Debtor; that he was authorized to execute the foregoing instrument on behalf
of said corporation by the Board of Directors of said corporation; and that he
executed the foregoing instrument voluntarily and of his own free will on behalf
of said corporation.
-------------------------------------
Notary Public
My commission expires:
10
EXHIBIT A
FINANCING STATEMENTS ON FILE ON DATE HEREOF
-------------------------------------------
1. Financing Statement on Form UCC-1, naming Debtor, as debtor, and
___________ , as secured party, as filed in the office of the
Secretary of State of the State of on _____________, and in the office
of on______________ , ______________ . Covered collateral:
Debtor represents that, except for the security interest referred to in
paragraph 1 above, there are no security interests in the Collateral in favor of
any other party.
EXHIBIT B
ADDITIONAL REPRESENTATIONS AND WARRANTIES
-----------------------------------------
1. The exact title of the Debtor is Xxxxxx'x Restaurant Group, Inc.
2. The Debtor does business under the names:
3. The Debtor was incorporated on _________ under the laws of the State of
Texas and is in good standing under those laws.
4. The President of the Debtor is _______________________ .
5. The Debtor is qualified to transact business in: Georgia
6. The Debtor's only place(s) of business is/are at:
0000 Xxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxxx, XX 00000
----------------------------------------------------.
7. The Debtor owns or has an interest in personal property or fixtures at
the following locations:
Address Record Owner of Real Estate
