<DOCUMENT>
<TYPE>EX-10.23
<SEQUENCE>23
<FILENAME>a2039903zex-10_23.txt
<DESCRIPTION>EXHIBIT 10.23
<TEXT>
<PAGE>
EXHIBIT 10.23
EXECUTION COPY
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$10,000,000
SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT
Dated as of June 29, 1999
Between
THE NEW YORK RESTAURANT GROUP, INC.
and
MAGNETITE ASSET INVESTORS L.L.C.
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TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
1.1 Defined Terms ................................................ 1
1.2 Accounting Terms; UCC Terms .................................. 14
1.3 Certain Matters of Construction .............................. 14
ARTICLE II
AUTHORIZATION, SALE, PURCHASE
AND PREPAYMENT OF NOTES
2.1 Authorization of Notes ....................................... 14
2.2 Sale and Purchase of Notes ................................... 14
2.3 Prepayment of Notes .......................................... 15
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Financial Condition .......................................... 17
3.2 Due Existence and Authority; Compliance with Law ............. 17
3.3 Power and Authority; Authorization; Enforceable Obligations .. 18
3.4 Legal Bar .................................................... 18
3.5 No Material Litigation ....................................... 18
3.6 No Default ................................................... 18
3.7 No Burdensome Restrictions ................................... 19
3.8 Taxes ........................................................ 19
3.9 Federal Regulations .......................................... 19
3.10 Liens on Properties .......................................... 19
3.11 Ownership; Leasehold Interests and Liens ..................... 19
3.12 Information .................................................. 19
3.13 Tradenames ................................................... 20
3.14 Solvency ..................................................... 20
3.15 Brokers ...................................................... 20
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3.16 Management Agreements; Material Contracts .................... 20
3.17 Leases ....................................................... 20
3.18 Environmental Compliance ..................................... 20
3.19 No Material Adverse Change ................................... 22
3.20 No Default under Senior Debt ................................. 23
3.21 Year 2000 Compliance ......................................... 23
3.22 Private Offering by the Company .............................. 24
3.23 Use of Proceeds; Margin Regulations .......................... 24
3.24 Status under Certain Statutes ................................ 25
3.25 Organization and Ownership of Shares of Subsidiaries;
Affiliates ................................................... 25
3.26 Outstanding Indebtedness ..................................... 26
ARTICLE IV
REPRESENTATIONS OF THE PURCHASER
4.1 Purchase for Investment ...................................... 26
4.2 Source of Funds .............................................. 26
ARTICLE V
CONDITIONS TO CLOSING
5.1 Notes ........................................................ 28
5.2 Subsidiaries' Guaranty ....................................... 28
5.3 Warrants ..................................................... 28
5.4 Legal Opinion ................................................ 28
5.5 Resolutions and Certificates ................................. 28
5.6 Environmental Reports ........................................ 28
5.7 Appraisals ................................................... 28
5.8 Payment of Special Counsel Fees .............................. 29
5.9 Representations and Warranties ............................... 29
5.10 Additional Matters ........................................... 29
ARTICLE VI
AFFIRMATIVE COVENANTS
6.1 Compliance with Laws, Etc .................................... 29
6.2 Preservation of Existence .................................... 29
6.3 Financial Information and Compliance Certificates ............ 29
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6.4 Defaults ..................................................... 30
6.5 Insurance .................................................... 31
6.6 Preservation of Properties ................................... 31
6.7 Taxes ........................................................ 31
6.8 Notice of Litigation ......................................... 31
6.9 Alan Stillman ................................................ 31
6.10 Subsidiaries' Guaranty ....................................... 31
6.11 New Restaurants .............................................. 31
6.12 Inspection of Property; Books and Records; Discussions ....... 32
6.13 Environmental Laws ........................................... 32
6.14 Payment of Obligations ....................................... 32
6.15 Further Assurances ........................................... 32
ARTICLE VII
FINANCIAL COVENANTS
7.1 Covenants .................................................... 33
ARTICLE VIII
NEGATIVE
8.1 Indebtedness ................................................. 34
8.2 Mergers and Sales of Assets .................................. 34
8.3 Loans; Investments ........................................... 34
8.4 Liens ........................................................ 35
8.5 Contingent Liabilities ....................................... 35
8.6 Sales of Receivables; Sale - Leasebacks ...................... 35
8.7 Nature of Business ........................................... 35
8.8 Accounting Changes ........................................... 35
8.9 Transactions with Affiliates ................................. 35
8.10 Dividends and Distributions and Investments .................. 35
8.11 Subsidiaries ................................................. 36
ARTICLE IX
EVENTS OF DEFAULT; REMEDIES
9.1 Events of Default ............................................ 36
9.2 Acceleration ................................................. 39
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9.3 Other Remedies ............................................... 39
9.4 Rescission ................................................... 40
9.5 No Waivers or Election of Remedies, Expenses, etc ............ 40
ARTICLE X
SUBORDINATION
10.1 Agreement to Subordinate ..................................... 40
10.2 Liquidation, Dissolution, Bankruptcy ......................... 40
10.3 Default on Senior Indebtedness ............................... 42
10.4 Acceleration of Payment of Notes ............................. 42
10.5 Distributions to Noteholders ................................. 43
10.6 Subrogation .................................................. 43
10.7 Relative Rights .............................................. 43
10.8 Subordination May Not Be Impaired by Company ................. 43
10.9 Distribution or Notice to Representative ..................... 43
10.10 Article 10 Not to Prevent Events of Default or Limit Right
to Accelerate ................................................ 43
10.11 Reliance by Holders of Senior Indebtedness on
Subordination Provisions ..................................... 44
ARTICLE XI
MISCELLANEOUS
11.1 Notices ...................................................... 44
11.2 No Waiver; Cumulative Remedies ............................... 45
11.3 Survival of Representations and Warranties ................... 45
11.4 Payment of Expenses; Examination ............................. 45
11.5 Waiver of Jury Trial, Setoff and Counterclaim ................ 45
11.6 Waiver of Automatic Stay ..................................... 46
11.7 Modification and Waiver; Voting .............................. 46
11.8 Severability ................................................. 47
11.9 Successors and Assigns ....................................... 47
11.10 Governing Law; Consent to Jurisdiction ....................... 47
11.11 Entire Agreement ............................................. 47
11.12 Interest Adjustment .......................................... 48
11.13 Section Titles ............................................... 48
11.14 Counterparts ................................................. 48
11.15 Indemnities .................................................. 48
11.16 Transfer and Exchange of Notes ............................... 49
11.17 Place of Payment ............................................. 50
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11.18 Cooperation as to Certain Matters ............................ 50
Table of Exhibits and Schedules:
EXHIBIT 5.1 Form of Note
EXHIBIT 5.2 Form of Subsidiaries' Guaranty
EXHIBIT 5.3 Form of Warrant Agreement
EXHIBIT 5.4 Form of Opinion of Hutchins, Wheeler & Dittmar
SCHEDULE 3.1 Contingent Obligations
SCHEDULE 3.10 Liens
SCHEDULE 3.13 Trademarks
SCHEDULE 3.16 Management Agreements and Material Contracts
SCHEDULE 3.17 Leases
SCHEDULE 3.25 Subsidiaries and Affiliates
SCHEDULE 3.26 Outstanding Indebtedness
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SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT, dated as of June 29, 1999,
between THE NEW YORK RESTAURANT GROUP, INC., a Delaware corporation (the
"Company"), with its principal place of business at 1114 First Avenue, New York,
New York 10021, and MAGNETITE ASSET INVESTORS L.L.C., a Delaware limited
liability company (the "Purchaser"), with its principal place of business at 345
Park Avenue, 29th Floor, New York, New York 10154.
In consideration of the mutual covenants hereinafter contained, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by the parties, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. In addition to the defined terms appearing above or
defined in subsequent Sections of this Agreement, as used herein the following
terms shall have the following meanings:
"Acquired Indebtedness" shall mean Indebtedness of a Person (a) existing
at the time such Person becomes a Subsidiary or (b) assumed in connection with
the acquisition of assets, in each case not Incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Subsidiary or such acquisition. Acquired Indebtedness shall be deemed to be
Incurred on the date the acquired Person becomes a Subsidiary or the date of the
acquisition of such assets.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Agreement" shall mean this Senior Subordinated Note Purchase Agreement,
as the same from time to time may be amended, supplemented or modified, and any
appendices, exhibits or schedules hereto.
"Asset Acquisition" shall mean (a) an Investment by the Company or any
Subsidiary in any other Person pursuant to which such Person shall become a
Subsidiary, or shall be
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merged with or into the Company or any Subsidiary, or (b) the acquisition by the
Company or any Subsidiary of the assets of any Person (other than a Subsidiary)
which constitute all or substantially all of the assets of such Person or
comprises any division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary course of
business.
"Asset Construction" shall mean the construction by the Company or any
Subsidiary of a new restaurant owned and operated by the Company or any
Subsidiary, which restaurant has been open for business and fully operational
for at least three months prior to the relevant Transaction Date (as such term
is defined in the definition of "Pro Forma Consolidated Fixed Charge Coverage
Ratio").
"Blockage Notice" shall have the meaning given in Section 10.3.
"Business Day" shall mean a day other than a Saturday, Sunday or other day
on which commercial banks in New York City are required or permitted by law to
remain closed.
"Capitalized Lease" shall mean any lease the obligations to pay rent or
other amounts under which constitute Capitalized Lease Obligations.
"Capitalized Lease Obligations" shall mean as to any Person, the
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real and/or personal property which
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"Cash Flow Positive" shall have the meaning given in Section 6.11
"CERCLA" shall have the meaning given in Section 3.18(a).
"Change of Control" means the occurrence of one or more of the following
events:
(a) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the
assets of the Company and its Subsidiaries taken as a whole to any
Person or group of related Persons for purposes of Section 13(d) of
the Exchange Act (a "Group"), together with any Affiliates thereof
(whether or not otherwise in compliance with the provisions of this
Agreement) other than to a wholly-owned Subsidiary of the Company;
(b) the liquidation or dissolution of the Company;
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(c) any Person or Group shall become the owner, directly or indirectly,
beneficially or of record, of shares representing more than 50% of
the aggregate ordinary voting power represented by the issued and
outstanding capital stock of the Company; provided that this clause
shall not applied to any Person or Group that owns as of the date
hereof, directly or indirectly, beneficially or of record, 10% of
the aggregate ordinary voting power represented by the issued and
outstanding capital stock of the Company; or
(d) the replacement of a majority of the Board of Directors of the
Company over a two-year period from the directors who constituted
the Board of Directors of the Company at the beginning of such
period, and such replacement shall not have been approved by a vote
of at least a majority of the Board of Directors of the Company then
still in office who either were members of such Board of Directors
at the beginning of such period or whose election as a member of
such Board of Directors was previously so approved;
(e) Alan Stillman and/or his wife, executor or heirs shall fail to own,
directly or indirectly, at least 75% of the voting interests of the
Company owned by Alan Stillman as of the date hereof.
"Charges" shall have the meaning given in Section 11.12.
"Closing Date" shall mean the date of this Agreement.
"Consolidated EBITDA" shall mean for any period, Consolidated Net Income
for such period plus, without duplication and to the extent reflected as a
charge in the statement of such Consolidated Net Income for such period, the sum
of (a) Federal, state and local income tax expense, (b) interest expense,
amortization or writeoff of debt discount and debt issuance costs and
commissions, discounts and other fees and charges associated with Indebtedness,
(c) depreciation and amortization expense, (d) amortization of intangibles
(including, but not limited to, goodwill) and organization costs, (e) any
extraordinary, unusual or non-recurring expenses or losses (including, whether
or not otherwise includable as a separate item in the statement of such
Consolidated Net Income for such period, losses on sales of assets outside of
the ordinary course of business) and (f) any other non-cash charges (including
any amortization of deferred rent) and minus, to the extent included in the
statement of such Consolidated Net Income for such period, the sum of (a)
interest income, (b) any extraordinary, unusual or non-recurring income or gains
(including, whether or not otherwise includable as a separate item in the
statement of such Consolidated Net Income for such period, gains on the sales of
assets outside of the ordinary course of business), any gains
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resulting from the effect of inflationary accounting and (c) any other non-cash
income, all as determined on a consolidated basis.
"Consolidated Fixed Charge Coverage Ratio" shall mean for any period, the
ratio of (a) Consolidated EBITDA plus Consolidated Lease Expense (to the extent
actually paid) for such period to (b) Consolidated Fixed Charges for such
period.
"Consolidated Fixed Charges" means, for any period the sum of: (a)
Consolidated Interest Expense; (b) scheduled amortization of Indebtedness,
determined on a consolidated basis in accordance with GAAP, for the period
involved and discount or premium relating to any such Indebtedness for any
period involved, whether expensed or capitalized; and (c) Consolidated Lease
Expense, determined without duplication of items included in Consolidated
Interest Expense, in each case of the Company and its Subsidiaries.
"Consolidated Interest Expense" means, for any period the amount of
interest expense, both expensed and capitalized, of the Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP, for
such period on the aggregate principal amount of their Indebtedness, determined
on a consolidated basis in accordance with GAAP; provided, however, that there
shall be excluded any interest attributable to the original issue discount
attributable to the Notes.
"Consolidated Lease Expense" means, for any period, the aggregate amount
of fixed and contingent rentals payable by the Company and its Subsidiaries,
determined on a consolidated basis in accordance with GAAP, for such period with
respect to leases of real and personal property.
"Consolidated Leverage Ratio" shall mean as of the date of determination,
the ratio of Consolidated Total Debt less cash on hand as of the date of such
determination to Consolidated EBITDA for the four consecutive fiscal quarters
immediately preceding the date of such determination.
"Consolidated Net Income" shall mean for any period, net income of the
Company and its Subsidiaries, determined on a consolidated basis in accordance
with GAAP.
"Consolidated Total Debt" shall mean as of the date of determination, all
Indebtedness of the Company and its Subsidiaries determined on a consolidated
basis in accordance with GAAP.
"Contractual Obligations" shall mean as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
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"Default" shall mean the occurrence of any of the events specified in this
Agreement which would give rise to an "Event of Default", whether or not any
requirement for the giving of notice, the lapse of time, or both, has been
satisfied.
"Designated Senior Indebtedness" shall mean (i) the Senior Loan and (ii)
any other Senior Indebtedness that, at the date of determination, has an
aggregate principal amount equal to or under which, at the date of
determination, the holders thereof are committed to lend up to, at least
$1,000,000 and is specifically designated by the Company in an agreement or
instrument evidencing or governing such Senior Indebtedness as "Designated
Senior Indebtedness" for purposes of this Agreement.
"Disputed Taxes" shall mean taxes the validity and amount of which are
being contested in good faith, and as to which no executable lien has been
entered, or if such a lien has been entered, the Company has established
reasonable segregated reserves with respect thereto.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"Environmental Engineer" shall mean a firm of independent professional
engineers or other scientists generally recognized as expert in the detection,
analysis and remediation of Hazardous Substances and related environmental
matters.
"Environmental Laws" shall have the meaning given in Section 3.18(a).
"EPA" shall have the meaning given in Section 3.18(b).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" shall mean any of the events specified in this
Agreement under "Events of Default"; provided, that, any requirement for the
giving of notice, the lapse of time, or both, or any other condition, has been
satisfied.
"Financing Documents" shall mean this Agreement and each document,
agreement and instrument executed in connection herewith or pursuant hereto,
including, without limitation, the Note, the Subsidiaries' Guarantees, the
Warrants and the Warrant Agreement.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as in effect from time to time, applied on a consistent basis.
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"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled (through
stock or capital ownership or otherwise) by any of the foregoing.
"Guarantee" of or by any Person shall mean any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other person (the "primary obligor") in any
manner, whether directly or indirectly, and including any obligation of such
Person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness, (b) to purchase property, securities or services for the purpose
of assuring the owner of such Indebtedness of the payment of such Indebtedness,
or (c) to maintain working capital, equity capital or other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness; provided, however, that the term "Guarantee"
shall not include endorsements for collection or deposit, in either case in the
ordinary course of business.
"Hazardous Substances" shall have the meaning given in Section 3.18(b).
"Immaterial Vendors" shall have the meaning given in Section 3.21(a).
"Incur" shall have the meaning given in Section 8.1(a).
"Indebtedness" shall mean, with respect to any Person, (a) all obligations
of such Person for borrowed money or with respect to deposits or advances of any
kind, (b) all obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments, (c) except items in dispute, all obligations of
such Person for the deferred purchase price of property or services, except
current accounts payable arising in the ordinary course of business and not
overdue beyond 120 days, (d) all obligations of such Person under conditional
sale or other title retention agreements relating to property purchased by such
Person, (e) all payment obligations of such Person with respect to interest rate
or currency protection agreements, (f) all obligations of such Person as an
account party under any letter of credit or in respect of bankers' acceptances,
(g) all obligations of any third party secured by property or assets of such
Person (regardless of whether or not such Person is liable for repayment of such
obligations), (h) all Guarantees of such Person, and (i) all obligations of such
Person upon which interest charges are customarily paid.
"Investment" means any investment, made in cash or by delivery of
property, by the Company or any of Subsidiaries (a) in any Person, whether by
acquisition of stock,
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Indebtedness or other obligation or security, or by loan, Guarantee, advance,
capital contribution or otherwise, or (b) in any property.
"Las Vegas Property" shall mean the leasehold interest in the Real
Property more particularly described on Schedule 2(A) to the Senior Loan as the
"Las Vegas Property."
"Leases" shall mean the leases, licenses and agreements, whether written
or oral, relating to the use or occupancy of the space in or on the Mortgaged
Property.
"Lien" shall mean any mortgage, pledge, security interest, hypothecation,
assignment, deposit arrangement, encumbrance, or preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under the UCC or
comparable law of any jurisdiction), except for protective filings of financing
statements under the UCC or comparable law of any jurisdiction with respect to
any true leases of property by the Company or any of its Subsidiaries.
"March Financial Statements" shall have the meaning given in Section 3.1.
"Material Adverse Effect" shall mean an event, occurrence or fact that
could reasonably be expected to have a material adverse effect on the assets,
business, operation or financial condition or other condition of the Company,
individually, or of the Company and its Subsidiaries, taken as a whole.
"Material Contracts" shall mean any contract pursuant to which the Company
or any Subsidiary could reasonably be expected to receive or pay at least
$500,000 over the term thereof, any contract pursuant to which the Company or
any Subsidiary is restricted from competing, or any other contract which is
material to the business of the Company and its Subsidiaries, taken as a whole.
"Maximum Rate" shall have the meaning given in Section 11.12.
"Mortgaged Property" shall mean collectively, the New Orleans Property,
the Las Vegas Property and the Washington Property, which is conveyed to and
accepted by the Senior Lender as security for the obligations in connection with
the Senior Loan.
"NAIC Annual Statement" shall have the meaning given in Section 4.2(g).
"Net Proceeds of Capital Stock" shall mean, with respect to any period,
cash proceeds (net of all costs and out-of-pocket expenses in connection
therewith, including,
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without limitation, placement, underwriting and brokerage fees and expenses),
received by the Company during such period, from the sale of all capital stock
(other than Redeemable capital stock) of the Company, including in such net
proceeds: (a) the net amount paid upon issuance and exercise during such period
of any right to acquire any capital stock, or paid during such period to convert
a convertible debt security to capital stock (but excluding any amount paid to
the Company upon issuance of such convertible debt security); and (b) any amount
paid to the Company upon issuance of any convertible debt security issued after
March 31, 1999, and thereafter converted to capital stock during such period.
"New Orleans Property" shall mean the Real Property more particularly
described on Schedule 2(B) to the Senior Loan as the "New Orleans Property".
"Notes(s)" shall have the meaning given in Section 2.1.
"Noteholder(s)" shall mean the holder(s) of any of the Note(s) from time
to time.
"Obligations" shall have the meaning given under the Senior Loan.
"Officer's Certificate" shall mean a certificate of the Chief Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.
"Payment Blockage Period" shall have the meaning given in Section 10.3.
"Permitted Indebtedness" shall mean, without duplication, each of the
following: (a) Indebtedness of the Company under this Agreement; (b)
Indebtedness which existed on the date of this Agreement and is set forth on
Schedule 3.26, reduced by the amount of any scheduled amortization payments or
mandatory prepayments when actually paid or permanent reductions therein; (c)
the incurrence by the Company or any of its Subsidiaries of intercompany
Indebtedness between or among the Company and any such Subsidiaries; provided,
however, that: (i) such Indebtedness is expressly subordinated to the prior
payment in full in cash of all amounts due with respect to the Notes and (ii)
(A) any subsequent issuance or transfer of capital stock that results in any
such Indebtedness being held by a Person other than the Company or a Subsidiary
thereof and (B) any sale or other transfer of any such Indebtedness to a Person
that is not either the Company or a Subsidiary thereof shall be deemed, in each
case, to constitute an Incurrence of such Indebtedness by the Company or such
Subsidiary, as the case may be, that was not permitted by this clause (c); (d)
Purchase Money Indebtedness; (e) Refinancing Indebtedness of the Company or any
Subsidiary; (f) all Obligations under the Senior Loan not to exceed at any time
$16,500,000 in aggregate principal amount outstanding; and (g) Indebtedness of
the Company or any Subsidiary arising from the honoring by a bank or other
financial institution of a check, draft or similar
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instrument inadvertently (except in the case of daylight overdrafts) drawn
against insufficient funds in the ordinary course of business; provided,
however, that such Indebtedness is extinguished within five Business Days of
Incurrence.
"Permitted Liens" shall mean (a) Liens for taxes not yet due and payable,
and tax Liens relating to taxes due and payable, the validity and amount of
which are being diligently contested in good faith and as to which the Company
has segregated adequate reserves; provided, that, any Liens for any amount in
excess of $500,000 arising from the failure of the Company or any Subsidiary to
pay or withhold any employment related tax obligations shall not be "Permitted
Liens", (b) mechanic's, worker's, materialmen's or other Liens arising in the
ordinary course of business, (c) Liens securing Purchase Money Indebtedness,
provided that (i) such Liens shall be created simultaneously with the incurrence
of such Purchase Money Indebtedness, (ii) such Liens do not at any time encumber
any property other than the property financed by such Purchase Money
Indebtedness, (iii) such Liens are not modified to secure other Indebtedness and
the amount of such Purchase Money Indebtedness is not increased and (iv) the
principal amount of Purchase Money Indebtedness secured by any such Lien shall
at no time exceed 80% of the original price of such property; provided such
obligations arise in the ordinary course of business on ordinary and customary
terms, (d) Liens described in Schedule 3.10, securing Indebtedness permitted by
clause (b) of the definition of Permitted Indebtedness (including Liens in favor
of the Senior Lender), provided that no such Lien is amended after the Closing
Date to cover any additional property or to secure additional Indebtedness, (e)
Liens existing on the personal property of any Subsidiary prior to it becoming a
Subsidiary of the Company, securing Acquired Indebtedness, provided that (i)
such Liens existed at the time such Person became a Subsidiary and were not
created in anticipation thereof, (ii) any such Lien does not by its terms cover
any property or assets after the time such Person becomes a Subsidiary which
were not covered immediately prior thereto and (iii) any such Lien does not by
its terms secure any Indebtedness other than Indebtedness existing immediately
prior to the time such Person becomes a Subsidiary, (f) Liens in favor of the
holders under the Senior Loan, and (g) Liens and encumbrances in favor of any
one or more landlord covering the machinery, equipment, furniture, furnishings,
fixtures, tools and motor vehicles related to the specific restaurant leased
from such landlord, but which Liens and encumbrances do not cover any wine
inventory or art of the Company or any Subsidiary.
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, trust, unincorporated organization or any
other juridical entity, or a government or state or any agency or political
subdivision thereof.
"Plan" shall mean any plan of a type described in Section 4021(a) of
ERISA, and/or such other Sections of ERISA applicable to entities of a type such
as the Company, in respect
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of which the Company is an "employer" as defined in Section 3(5) of ERISA,
and/or such other Sections of ERISA applicable to the Company.
"Post Default Rate" shall mean at any time the rate of interest which
would otherwise be applicable to the Notes plus two percent (2%) per annum.
"Pro Forma Consolidated Interest Coverage Ratio" shall mean, with respect
to any Person, the ratio of (x) Consolidated EBITDA of such Person during the
four full fiscal quarters (the "Four Quarter Period") ending on or prior to the
date of the transaction giving rise to the need to calculate the Pro Forma
Consolidated Interest Coverage Ratio (the "Transaction Date") to (y)
Consolidated Interest Expense of such Person for such Four Quarter Period. In
addition to and without limitation of the foregoing, for purposes of this
definition only, "Consolidated EBITDA" and "Consolidated Interest Expense" shall
be calculated after giving effect on a pro forma basis for the period of such
calculation to (i) the Incurrence, repayment, repurchase, defeasement or other
discharge of any Indebtedness of such Person or any of its Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and any Incurrence, repayment, repurchase, defeasement or other
discharge of other Indebtedness (and the application of the proceeds thereof)
(except that, in making such computation, the amount of Indebtedness under any
revolving credit facility shall be computed based upon the average daily balance
of such Indebtedness during such four-quarter period), occurring during the Four
Quarter Period or at any time subsequent to the last day of the Four Quarter
Period and on or prior to the Transaction Date, as if such Incurrence,
repayment, repurchase, defeasement or other discharge, as the case may be (and
the application of the proceeds thereof), occurred on the first day of the Four
Quarter Period, and (ii) any asset sales, discontinuance of operations (as
determined in accordance with GAAP), Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Subsidiaries (including any
Person who becomes a Subsidiary as a result of the Asset Acquisition) Incurring,
assuming or otherwise being liable for Acquired Indebtedness and also including
any Consolidated EBITDA (including any pro forma expense and cost reductions as
determined in accordance with Regulation S-X under the Exchange Act)
attributable to the assets which are the subject of the Asset Acquisition, asset
sale or Asset Construction during the Four Quarter Period) occurring during the
Four Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date, as if such asset sale,
discontinuance, Asset Acquisition or Asset Construction (including the
Incurrence, assumption or liability for any such Acquired Indebtedness) occurred
on the first day of the Four Quarter Period. If such Person or any of its
Subsidiaries directly or indirectly guarantees Indebtedness of a third Person,
the preceding sentence shall give effect to the incurrence of such guaranteed
Indebtedness as if such Person or any Subsidiary of such Person had directly
incurred or otherwise assumed such guaranteed Indebtedness. If since the
beginning of such period any Person (that subsequently became a Subsidiary or
was merged with or into the
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Company or any Subsidiary since the beginning of such period) shall have made
any Asset Acquisition, Asset Construction or asset sale that would have required
adjustment pursuant to this definition, then the Pro Forma Consolidated Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect thereto as if
such Asset Acquisition, Asset Construction or asset sale had occurred at the
beginning of the applicable Four Quarter Period. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1)
interest on outstanding Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall be
deemed to have accrued at a fixed rate per annum equal to the rate of interest
on such Indebtedness in effect on the Transaction Date; provided that, to the
extent such interest is covered by agreements relating to Interest Rate
Agreements, interest thereon shall be deemed to accrue at the rate per annum
resulting after giving effect to the operation of such agreements and (2) if it
bears, at the option of the Company or the relevant Subsidiary, a fixed or
floating rate of interest, interest thereon will be computed by applying, at the
option of the Company, either the fixed or floating rate. If any Indebtedness
which is being given pro forma effect was Incurred under a revolving credit
facility, the interest expense on such Indebtedness shall be computed based upon
the average daily balance of such Indebtedness during the applicable period. For
purposes of this definition, whenever pro forma effect is to be given to a
transaction, the pro forma calculation shall be made in good faith by the Chief
Financial Officer of the Company, provided that whenever pro forma effect is to
be given to an Asset Construction, the pro forma calculation will be made based
on good faith estimated projections ratified by the Board of Directors of the
Company, and provided further that in no event shall the projections with
respect to the Consolidated EBITDA attributable to an Asset Construction reflect
an annual internal rate of return in excess of 30% on the related Investment nor
shall there be any pro forma inclusion of any Consolidated EBITDA for any
restaurant that has not been fully operational for at least 3 months prior to
such Transaction Date.
"PTE" shall have the meaning given in Section 4.2(b).
"Purchase Money Indebtedness" shall mean any Indebtedness incurred or
assumed to pay all or any part of the purchase price or cost of construction, of
property (or any improvement thereon) acquired or constructed by the Company or
a Subsidiary after the date of the Closing in an aggregate principal amount not
exceeding $500,000 at any time outstanding.
"Purchase Price" shall have the meaning given in Section 2.2
"Qualified Offering" shall mean a public or private offering of securities
of the Company.
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"RCRA" shall have the meaning given in Section 3.18(a).
"Real Properties" shall mean the real properties listed on Schedule 2(D)
and all other real property and interests in real property now owned or
hereafter acquired by the Company or the Subsidiaries. Real Property shall
include, without limitation, (i) land, (ii) any and all rights, easements,
licenses and privileges appurtenant thereto, (iii) any and all improvements from
time to time located thereon, (iv) any and all fixtures, equipment, machinery,
appliances, furniture, furnishings and other tangible personal property now or
hereafter attached thereto, installed therein or used or intended to be used in
connection therewith (other than personal property of tenants) and (v) in the
case of a Real Property held in whole or in part pursuant to a ground lease,
such leasehold estate.
"Redeemable" shall mean, with respect to the capital stock of any Person,
each share of such Person's capital stock that is: (a) redeemable, payable or
required to be purchased or otherwise retired or extinguished, or convertible
into Debt of such Person (i) at a fixed or determinable date, whether by
operation of sinking fund or otherwise, (ii) at the option of any Person other
than such Person, or (iii) upon the occurrence of a condition not solely within
the control of such Person; or (b) convertible into other Redeemable capital
stock.
"Refinancing Indebtedness" shall mean any refinancing, modification,
replacement, restatement, refunding, deferral, extension, substitution,
supplement, reissuance or resale of existing or future Indebtedness (other than
intercompany Indebtedness), including any additional Indebtedness incurred to
pay interest or premiums required by the instruments governing such existing or
future Indebtedness as in effect at the time of issuance thereof ("Required
Premiums") and fees in connection therewith; provided that any such event shall
not (i) directly or indirectly result in an increase in the aggregate principal
amount of Permitted Indebtedness (except to the extent such increase is a result
of a simultaneous incurrence of additional Indebtedness (A) to pay Required
Premiums and related fees or (B) otherwise permitted to be incurred under this
Agreement) of the Company and its Subsidiaries; or (ii) create Indebtedness with
a Weighted Average Life to Maturity at the time such Indebtedness is Incurred
that is less than the Weighted Average Life to Maturity at such time of the
Indebtedness being refinanced, modified, replaced, renewed, restated, refunded,
deferred, extended, substituted, supplemented, reissued or resold.
"Release" shall have the meaning given in Section 3.18(c)(iii).
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
"Requirements of Law" shall mean as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law,
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treaty, rule or regulation, or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.
"SARA" shall have the meaning given in Section 3.18(a).
"Securities Act" shall mean the Securities Act of 1933, as amended and
regulations and rulings promulgated thereunder.
"Senior Indebtedness" means, with respect to the Company, the following
obligations, whether outstanding on the date of this Agreement or thereafter
issued, without duplication: (a) the Senior Loan, and (b) all obligations
consisting of the principal of and premium, if any, and accrued and unpaid
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company regardless of whether
post-filing interest is allowed in such proceeding) on, and fees and other
amounts owing in respect of, all other Indebtedness of the Company, unless, in
the instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is expressly provided that the obligations in respect of such
Indebtedness are not senior in right of payment to the Notes; provided, however,
that Senior Indebtedness shall not include (i) any obligation of the Company to
any Subsidiary, (ii) any liability for Federal, state, foreign, local or other
taxes owed or owing by the Company, (iii) any accounts payable or other
liability to trade creditors (including Guarantees thereof or instruments
evidencing such liabilities), (iv) any Indebtedness of the Company (or Guarantee
by the Company of any Indebtedness) that is expressly subordinated in right of
payment to any other Indebtedness of the Company (or Guarantee by the Company of
any Indebtedness), (v) any capital stock of the Company, (vi) that portion of
any Indebtedness of the Company that is Incurred by the Company in violation of
Section 8.1 or (vii) any other liability not constituting Indebtedness. If any
Senior Indebtedness is disallowed, avoided or subordinated pursuant to the
provisions of Section 548 of Title 11 of the United States Code or any
applicable state fraudulent conveyance law, such Senior Indebtedness
nevertheless will constitute Senior Indebtedness.
"Senior Lender" shall mean Fleet Bank, N.A., a national banking
association, as lender under the Senior Loan, and any Lender with respect to
Refinancing Indebtedness thereof.
"Senior Loan" shall mean all Obligations under the Loan Agreement, dated
as of September 1, 1998, as has been amended and may be amended from time to
time, between the Company and the Senior Lender and any Refinancing Indebtedness
incurred with respect thereto.
"Source" shall have the meaning given in Section 4.2.
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"Subsidiaries' Guaranty" shall mean the jointly and severally,
unconditional Guaranty by the Company's Subsidiaries which are parties thereto
of the Company's obligations with respect to the Notes, substantially in the
form attached hereto as Exhibit 5.2.
"Subsidiary" shall mean as of any date each of the Company's then
existing, direct or indirect, corporate, limited liability company or
partnership subsidiaries.
"UCC" shall mean the Uniform Commercial Code of the jurisdiction with
respect to which such term is used, as in effect from time to time.
"Warrant Agreement" shall mean the warrant agreement to be entered between
the Company and the Purchaser with respect to the issuance of warrants for the
benefit of the Purchaser, substantially in the form attached hereto as Exhibit
5.3.
"Warrants" shall have the meaning given in Section 2.4.
"Washington Property" shall mean the leasehold interest in the Real
Property more particularly described on Schedule 2(C) to the Senior Loan as the
"Washington Property".
"Weighted Average Life to Maturity" shall mean, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the then
outstanding aggregate principal amount of such Indebtedness into (ii) the sum of
the total of the products obtained by multiplying (A) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof by (B) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
1.2 Accounting Terms; UCC Terms. As used herein and in any certificate or
other document made or delivered pursuant hereto, accounting terms not
specifically defined herein shall have the respective meanings given to them
under GAAP. All other undefined terms contained in this Agreement shall, unless
the context indicates otherwise, have the meanings provided for by the UCC as in
effect in the State of New York, to the extent the same are used or defined
therein.
1.3 Certain Matters of Construction. The words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a
whole, including the Exhibits and Schedules hereto, as the same may from time to
time be amended, modified or supplemented, and not to any particular section,
subsection or clause contained in this Agreement. Any reference to a "Section",
"Exhibit" or "Schedule" shall refer to the relevant Section of, or Exhibit or
Schedule to, this Agreement, unless specifically indicated to the contrary.
Wherever from the context it appears appropriate, each term stated in either the
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singular or plural shall include the singular and plural, and pronouns stated in
the masculine, feminine or neuter gender shall include the masculine, the
feminine and the neuter. The term "including" shall not be limiting or
exclusive, unless specifically indicated to the contrary.
ARTICLE II
AUTHORIZATION, SALE, PURCHASE
AND PREPAYMENT OF NOTES
2.1 Authorization of Notes. The Company will authorize the issue of
$10,000,000 aggregate principal amount of its 12 1/2% Senior Subordinated Notes
due June 29, 2006 (the "Notes").
2.2 Sale and Purchase of Notes. Subject to the terms and conditions of
this Agreement, the Company will sell to the Purchaser, and the Purchaser will
purchase from the Company, Notes in the principal amount of $10,000,000. The
sale and purchase of the Notes to be purchased by the Purchaser shall occur at
the offices of Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022,
at 10:00 a.m., Eastern Daylight Time, at a closing (the "Closing") on June 29,
1999, or such other Business Day thereafter on or prior to July 2, 1999 as may
be agreed upon by the Company and the Purchaser. At the Closing the Company will
deliver to the Purchaser Notes in the aggregate principal amount of $10,000,000,
against delivery by the Purchaser to the Company or its order of immediately
available funds in the amount of $10,000,000 (the "Purchase Price") by wire
transfer for the account of the Company to Fleet Bank, N.A., 1185 Avenue of the
Americas, New York, New York 10036, ABA No. 021200339, Account No. 9405777935.
If at the Closing the Company shall fail to tender such Notes to the Purchaser
as provided above in this Section 2.2, or any of the conditions specified in
Article V shall not have been fulfilled to the Purchaser's satisfaction, the
Purchaser shall, at its election, be relieved of all further obligations under
this Agreement, without thereby waiving any rights the Purchaser may have by
reason of such failure or such nonfulfillment.
2.3 Prepayment of Notes. (a) Voluntary Payment. (i) Prior to June 29,
2002, the Notes will not be prepayable, except pursuant to clause (ii) of this
Section 2.3(a) or pursuant to Section 2.3(b). The Company may, at its option,
upon notice as provided below, prepay the Notes, in whole or in part, at any
time after June 29, 2002, at the principal amount so prepaid, plus the premium
(a percentage of such principal amount) applicable in accordance with the
following table, depending on the date such prepayment occurs:
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Period Premium
------ -------
June 29, 2002 to June 28, 2003 6.25%
June 29, 2003 to June 28, 2004 4.6875%
June 29, 2004 to June 28, 2005 3.125%
June 29, 2005 to June 28, 2006 1.5625%
(ii) The Company may, at its option, upon notice as provided below,
prepay the Notes, in whole (but not in part), at any time on or prior to
June 29, 2002, with the Net Proceeds of Capital Stock of a Qualified
Offering at the principal amount so prepaid, provided, however, that no
prepayment may be made unless the Senior Loan existing on the date hereof
shall have been satisfied on or prior to the date of such prepayment, plus
the premium (a percentage of such principal amount) applicable in
accordance with the following table, depending on the date such prepayment
occurs:
Period Premium
------ -------
June 29, 1999 through December 31, 1999 1%
January 1, 2000 through June 28, 2000 4%
June 29, 2000 through June 28, 2001 3%
June 29, 2001 through June 28, 2002 2%
(iii) All prepayments shall be accompanied by payment of accrued
interest on the amount being prepaid through the date of prepayment and
any other amounts then due to the Noteholders. Partial prepayments shall
be in an aggregate principal amount of $1,000,000 or a whole multiple of
$100,000 in excess thereof.
In the case of each partial prepayment of the Notes, the principal amount
of the Notes to be prepaid shall be allocated among all of the Notes at the time
outstanding in proportion, as nearly as practicable, to the respective unpaid
principal amounts thereof not theretofore called for prepayment.
(b) Mandatory Prepayment. Upon the consummation of a Change in Control,
the Company shall give prompt written notice thereof to the Noteholders, which
notice shall contain a written, irrevocable offer by the Company to prepay, on a
date specified in such
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notice (which date shall be not less than 30 days and not more than 60 days
after the date of such notice), the Notes, either all or in part (at the option
of each Noteholder), such prepayment to be made at the principal amount of the
Notes so prepaid, plus a premium equal to 1% of such principal amount and
accrued and unpaid interest thereon, if any, to the date of such prepayment,
upon the acceptance of such offer by each Noteholder mailed to the Company at
least five days prior to the date of prepayment specified in the Company's
offer. Any offer by the Company to prepay the Notes pursuant to this Section
2.3(b) shall be accompanied by an Officers' Certificate certifying that the
foregoing conditions have been fulfilled and specifying the particulars of such
fulfillment.
2.4 Allocation of Purchase Price. The parties agree to allocate $972,000
of the Purchase Price to the warrants issued under the Warrant Agreement (the
"Warrants"). The remaining amount ($9,028,000) shall be allocated to the
issuance and sale of the Notes.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Purchaser to enter into this Agreement, the other
financial Documents and to purchase the Notes, the Company hereby covenants,
represents and warrants to the Purchaser that:
3.1 Financial Condition. The Company has previously furnished to the
Purchaser true and complete copies of the consolidated balance sheets as at
December 30, 1996, December 29, 1997 and December 28, 1998 and the related
combined statements of income and owners' equity for the fifty-two-week period
ended December 30, 1996, December 29, 1997 and December 28, 1998, respectively,
of the Company and its Subsidiaries, certified, with respect to the December 30,
1996 financial statements, by Goldstein Golub Kessler & Company, P.C., and with
respect to the December 29, 1997 and December 28, 1998 financial statements,
certified and audited by KPMG LLP. The Company also has furnished to the
Purchaser certain unaudited financial statements of the Company as follows: a
consolidated and consolidating balance sheet of the Company and its Subsidiaries
as of March 29, 1999, and consolidated and consolidating statements of
operations of the Company and its Subsidiaries for the three month period then
ended (collectively, the "March Financial Statements"). Except as set forth in
Schedule 3.1 and except for the absence of footnotes, the March Financial
Statements fairly present in all material respects, in accordance with GAAP, the
financial position and results of operations of the Company and its Subsidiaries
as of the date and for the fiscal period shown therein on a basis consistent
with prior periods, subject to year-end audit adjustments. Except as provided in
Schedule 3.1 and the other Schedules to this Agreement, none of the Company or
its Subsidiaries has any material
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contingent obligations, contingent liabilities or liabilities for taxes,
long-term leases or unusual forward or long-term commitments, which are not
reflected in the foregoing statements or in the notes thereto.
3.2 Due Existence and Authority; Compliance with Law. The Company and its
Subsidiaries (a) are duly organized, validly existing and in good standing under
the laws of the jurisdiction of their formation, (b) have the power and
authority and the legal right to own and operate their property, and to conduct
the business in which they are currently engaged, (c) are duly qualified as a
foreign entity and in good standing under the laws of each jurisdiction where
their ownership or operation of property or the conduct of their business
require such qualification, and (d) are in compliance with all Requirements of
Law, except to the extent that the failure to so qualify as a foreign entity as
required by clause (c) of this Section or to comply with all Requirements of Law
as required by clause (d) of this Section could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect, and could not
materially adversely affect the ability of the Company or any of its
Subsidiaries to perform their obligations under this Agreement or any of the
other Financing Documents.
3.3 Power and Authority; Authorization; Enforceable Obligations. The
Company and its Subsidiaries have the power and authority and the legal right to
make, execute, deliver and perform their obligations under this Agreement and
the other Financing Documents to which they are a party, and to borrow
hereunder, and have taken all necessary action to authorize the sale of the
Notes on the terms and conditions of this Agreement and the other Financing
Documents to which they are a party, and to authorize the execution, delivery
and performance of this Agreement and the other Financing Documents to which
they are a party. No consent or authorization of, filing with, or other act by
or in respect of any other Person (including stockholders and creditors of the
Company or any of its Subsidiaries) or any Governmental Authority is required in
connection with the sale of Notes hereunder or with the execution, delivery,
performance, validity or enforceability of this Agreement or any of the other
Financing Documents. This Agreement and the other Financing Documents will be
duly executed and delivered on behalf of the Company and each of its
Subsidiaries which is a party thereto, and this Agreement and the other
Financing Documents, when executed and delivered, will each constitute the
legal, valid and binding obligations of the Company and each of its Subsidiaries
which is a party thereto, enforceable against the Company and its Subsidiaries
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally.
3.4 Legal Bar. The execution, delivery and performance of this Agreement
and the other Financing Documents, and the sale of Notes hereunder and the use
of the proceeds thereof by the Company or its Subsidiaries, will not violate any
Requirement of Law or any Contractual Obligation of the Company or any of its
Subsidiaries, and will not result in, or
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require, the creation or imposition of any Lien on any properties or revenues of
the Company or any of its Subsidiaries pursuant to any Requirement of Law or
Contractual Obligation.
3.5 No Material Litigation. No litigation, investigation or proceeding of
or before any arbitrator or Governmental Authority is pending by or against the
Company or any of its Subsidiaries or against any of their respective properties
or revenues (a) with respect to this Agreement, any of the other Financing
Documents or any of the transactions contemplated hereby or thereby, or (b)
which, if adversely determined, would have a Material Adverse Effect.
3.6 No Default. Neither the Company nor any of its Subsidiaries is in
default under or with respect to any Contractual Obligation in any respect which
could have a Material Adverse Effect, or which could materially and adversely
affect the ability of the Company or its Subsidiaries to perform their
respective obligations under this Agreement or any of the other Financing
Documents. No Default or Event of Default has occurred and is continuing.
3.7 No Burdensome Restrictions. No Contractual Obligation of the Company
or any of its Subsidiaries and no Requirement of Law materially adversely
affects the Company or any of its Subsidiaries, or insofar as the Company may
reasonably foresee could reasonably be expected to have a Material Adverse
Effect.
3.8 Taxes. The Company and its Subsidiaries have filed or caused to be
filed all tax returns which, to the knowledge of the Company and its
Subsidiaries, are required to be filed by the Company or any of its
Subsidiaries, and have paid all taxes shown to be due and payable by the Company
or any of its Subsidiaries on said returns or on any assessments made against
them or any of their property, except for Disputed Taxes.
3.9 Federal Regulations. Neither the Company nor any of its Subsidiaries
is engaged nor will they engage, principally or as one of their important
activities, in the business of extending credit for the purpose of "purchasing"
or "carrying" any "margin stock" (as such terms are defined in Regulation U of
the Board of Governors of the Federal Reserve System as now and from time to
time hereafter in effect). No part of the proceeds of the Notes hereunder will
be used for "purchasing" or "carrying" "margin stock" (as so defined) or for any
purpose which violates the provisions of the Regulations of such Board of
Governors.
3.10 Liens on Properties. There are no Liens of any nature whatsoever on
any Real Property, property or asset of the Company or any of its Subsidiaries,
except for Permitted Liens (all Liens pursuant to clause (d) of such definition
are listed on Schedule 3.10). Neither the Company nor any Subsidiary is a party
to any contract, agreement, lease
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or instrument the performance of which, either unconditionally or upon the
happening of an event, will result in or require the creation of any Lien on the
property or assets of the Company or any of its Subsidiaries or otherwise result
in a violation of any Financing Document, except for Permitted Liens.
3.11 Ownership; Leasehold Interests and Liens. The Company and/or its
Subsidiaries has good, marketable and insurable fee simple title (or good,
marketable and insurable leasehold interest in the case of any leasehold
properties), and good title (or valid leasehold interests in the case of any
leasehold properties) in all of the Real Property, and none of such Real
Properties is subject to any Lien, except for Permitted Liens.
3.12 Information. Neither the draft registration statement of the Company,
dated June 18, 1999, nor this Agreement or any other Financing Document is
inaccurate in any material respect as of the date it is or will be dated or
(except as otherwise disclosed to the Purchaser, as the case may be, at such
time) as of the date so furnished, contains any material misstatement of fact,
or omits to state a material fact or any fact necessary to make the statements
contained therein not materially misleading in the light of the circumstances
under which they were made, in each case, considered in light of all of the
information furnished to the Purchaser at or prior to such time. Any financial
projections furnished to the Purchaser or contained in either such draft
registration statement, or this Agreement or any other Financing Document are,
or will have been, based on good faith projections of, and assumptions believed
to be reasonable by, the management of the Company as of the date such
statements were prepared and as of the date hereof; provided that the Company
can give no assurance that such assumptions will prove to have been correct.
3.13 Tradenames. Neither the Company nor any Subsidiary has any
tradenames, fictitious names, assumed names or "doing business as" names, except
as set forth on Schedule 3.13.
3.14 Solvency. Both before and after giving effect to the transactions
contemplated by this Agreement: (i) neither the Company nor any Subsidiary will
have an unreasonably small amount of capital for the operation of the business
in which it is engaged and is proposed to be engaged, and (ii) each of the
Company and its Subsidiaries anticipates that it will be able to pay its
Indebtedness as it or any part thereof becomes due.
3.15 Brokers. Except for Bear Stearns & Co. Inc., no broker or finder has
acted on behalf of the Company or its Subsidiaries to obtain, make or close this
Agreement or the purchase of the Notes, and the neither the Company nor any
Subsidiary has any obligation to any Person in respect of any finder's or
brokerage fees or commissions in connection with any of the foregoing. The
Company and its Subsidiaries indemnify and agree to hold harmless the Purchaser
against and from any and all claims by any Person for any such fees or
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commissions. Any finder's or brokerage fees or commissions owing to Bear Stearns
& Co. Inc. arising out of the sale and purchase of the Notes will be paid in
full at Closing.
3.16 Management Agreements; Material Contracts. Neither the Company nor
any of its Subsidiaries is a party to any management, consulting or similar
agreement with any other Person with respect to the business, operations or
other assets of the Company or any of its Subsidiaries, or any other Material
Contract, in each case except for the management agreements or any Material
Contracts listed on Schedule 3.16 or 3.17.
3.17 Leases. Neither the Company nor any of its Subsidiaries is a party to
any real property leases, except for the leases listed on Schedule 3.17.
3.18 Environmental Compliance. The Company or an Affiliate or agent
thereof has conducted or caused to be conducted Phase I environmental site
assessments with respect to the past usage and condition of the Mortgaged
Property and the operations conducted thereon, and is familiar with the present
condition and usage of the Mortgaged Property and the operations conducted
thereon and, based upon such reports and knowledge, makes the following
representations and warranties:
(a) With respect to the Real Properties, none of the Company or any
Subsidiary, or any operations at such Real Properties is in
violation, or alleged violation, of any judgment, decree, order,
law, license, rule or regulation pertaining to environmental
matters, including, without limitation, those arising under the
Resource Conservation and Recovery Act ("RCRA"), the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 as
amended ("CERCLA"), the Superfund Amendments and Reauthorization Act
of 1986 ("SARA"), the Federal Clean Water Act, the Federal Clean Air
Act, the Toxic Substances Control Act, or any state or local
statute, regulation, ordinance, order or decree relating to the
environment (hereinafter "Environmental Laws"), which violation
involves the Mortgaged Property, and would have a material adverse
effect on the environment or the continued operation of the Real
Properties or the business, assets or financial condition of the
Company and its Subsidiaries, taken as a whole, or materially impair
the fair saleable value of such Real Properties.
(b) Neither the Company nor any Subsidiary has received any notice from
any third party, including, without limitation, any federal, state
or local governmental authority, (i) that it has been identified by
the United States Environmental Protection Agency ("EPA") as a
potentially responsible party under CERCLA with respect to a site
listed on the National Priorities List, 40 C.F.R. Part 300 Appendix
B (1986); (ii) that any hazardous waste, as defined
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by 42 U.S.C. ss.9601(5), any hazardous substances as defined by 42
U.S.C. ss.9601(14), any pollutant or contaminant as defined by 42
U.S.C. ss.9601(33) or any toxic substances, oil or hazardous
materials or other chemicals or substances regulated by any
Environmental Laws ("Hazardous Substances") which it has generated,
transported or disposed of have been found at any site at which a
federal, state or local agency or other third party has conducted or
has ordered that such Person conduct a remedial investigation,
removal or other response action pursuant to any Environmental Law;
or (iii) that it is or shall be a named party to any claim, action,
cause of action, complaint, or legal or administrative proceeding
(in each case, contingent or otherwise) arising out of any third
party's incurrence of costs, expenses, losses or damages of any kind
whatsoever in connection with the release of Hazardous Substances.
(c) With respect to the Real Properties: (i) no portion of the Real
Properties has been used for the handling, processing, storage or
disposal of Hazardous Substances except in accordance with
applicable Environmental Laws, and no underground tank or other
underground storage receptacle for Hazardous Substances is located
on any portion of the Real Properties; (ii) in the course of any
activities conducted by the Company, any Subsidiary or the operators
of such Real Properties, no Hazardous Substances have been generated
or are being used on any Real Properties except in the ordinary
course of business and in accordance with applicable Environmental
Laws; (iii) to the best of the Company's and each Subsidiary's
knowledge, there has been no past or present releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, disposing or dumping (a "Release") or
threatened Release of Hazardous Substances on, upon, into or from
the Real Properties, which Release would have a material adverse
effect on the value of any of the Real Properties or adjacent
properties or the environment; (iv) to the best of the Company's and
each Subsidiary's knowledge, there have been no Releases on, upon,
from or into any real property in the vicinity of any of the Real
Properties which, through soil or groundwater contamination, may
have come to be located on, and which would have a material adverse
effect on the value of, the Real Properties; and (v) to the best of
the Company's and each Subsidiary's knowledge and belief, any
Hazardous Substances that have been generated on any of the
Mortgaged Property have been transported off-site only by carriers
having an identification number issued by the EPA or approved by a
state or local environmental regulatory authority having
jurisdiction regarding the transportation of such substance and, to
the best knowledge of the Company and each Subsidiary without
independent investigation, treated or disposed of only by treatment
or disposal facilities maintaining valid permits as required under
all applicable Environmental Laws, which transporters and facilities
have
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been and are, to the best of the Company's and each Subsidiary's
knowledge, operating in compliance with such permits and applicable
Environmental Laws.
(d) Neither the Company, any Subsidiary nor any of the Real Properties
is required by any applicable Environmental Law to perform Hazardous
Substances site assessments, or remove or remediate Hazardous
Substances, or give notice to any governmental agency or to record
or deliver to other Persons an environmental disclosure document or
statement by virtue of the transactions set forth herein and
contemplated hereby.
3.19 No Material Adverse Change. Except as set forth on Schedule 3.19
since December 28, 1998, there has occurred no materially adverse change in the
business, operations, assets or financial condition or other condition of the
Company and its Subsidiaries taken as a whole, as shown on or reflected in the
balance sheet of the Company and its Subsidiaries, as of December 28, 1998, or
its consolidated statement of operations or cash flows for the fiscal year then
ended.
3.20 No Default under Senior Debt. No default or event of default exists
under any Senior Indebtedness, and there has been no payment default by the
Company or any Subsidiary under any Senior Indebtedness.
3.21 Year 2000 Compliance. To the Company's knowledge, all of the Internal
MIS Systems of the Company and its Subsidiaries are Year 2000 Compliant, except
for such Internal MIS Systems that the failure to be Year 2000 Compliant would
not have a Material Adverse Effect.
(a) To the Company's knowledge, all vendors of products or services to
the Company, its Subsidiaries and their respective products,
services and operations, are Year 2000 Compliant, except for vendors
whose failure to be Year 2000 Compliant would not have a material
adverse effect on the business, operations, property or financial or
other condition of the Company or its Subsidiaries ("Immaterial
Vendors").
(b) The Company and its Subsidiaries agree to furnish any Noteholder
with a true, correct and complete copy of any internal
investigations, memoranda, budget plans, forecasts or reports
concerning the Year 2000 Compliance of the products, services,
operations, systems, supplies and facilities of the Company, its
Subsidiaries and their vendors.
(c) For purposes of this Section 3.21, the following terms shall have the
meanings specified below:
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"Internal MIS Systems" means any computer software and systems (including
hardware, firmware, operating system software, utilities and applications
software) used in the ordinary course of the business of the Company and its
Subsidiaries by or on behalf of the Company and its Subsidiaries, including
payroll, accounting, billing/receivables, inventory, asset tracking, customer
service, human resources and e-mail systems of the Company and its Subsidiaries.
"Year 2000 Compliant" means that (1) the products, services or other
item(s) at issue accurately process, provide and/or receive all date/time data
(including calculating, comparing, sequencing, processing and outputting)
within, from, into and between centuries (including leap year calculations), and
(2) neither the performance nor the functionality nor the provision by the
Company and its Subsidiaries of products, services and other item(s) will be
affected by any dates/times prior to, on, after or spanning January 1, 2000. The
design of the products, services and other item(s) at issue to ensure compliance
with the foregoing warranties and representations includes proper date/time data
century recognition and recognition of 1999 and 2000, calculations that
accommodate single century and multi-century formulae and date/time values
before, on, after and spanning January 1, 2000, and date/time data interface
values that reflect the century, 1999 and 2000. In particular, but without
limitation, (i) no value for current date/time will cause any error,
interruption, or decreased performance in or for such product(s), service(s) and
other item(s), (ii) all manipulations of date and time related data (including
calculating, comparing, sequencing, processing and outputting) will produce
correct results for all valid dates and times when used independently or in
combination with other products, services, and/or items, (iii) date/time
elements in interfaces and data storage will specify the century to eliminate
date ambiguity without human intervention, including leap year calculations,
(iv) where any date/time element is represented without a century, the correct
century will be unambiguous for all manipulations involving that element, (v)
authorization codes, passwords and zaps (purge functions) will function normally
and in the same manner during, prior to, on and after January 1, 2000, including
the manner in which they function with respect to expiration dates and CPU
serial numbers, and (vi) the Company's and each Subsidiary's supply of the
product(s), service(s) and other item(s) will not be interrupted, delayed,
decreased or otherwise affected by the advent of the year 2000.
3.22 Private Offering by the Company. Neither the Company nor anyone
acting on its behalf has directly or indirectly offered the Notes or any part
thereof or any similar securities for sale to, or solicited any offer to buy any
of the same from, or otherwise approached or negotiated in respect thereof with,
anyone other than the Purchaser and not more than two (2) other institutional
investors. Neither the Company nor anyone acting on its behalf has taken or will
take any action which would subject the issuance and sale of the
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Notes to the registration and prospectus delivery provisions of the Securities
Act of 1933, as amended.
3.23 Use of Proceeds; Margin Regulations. The Company will apply the
proceeds of the Notes to repay outstanding advances under the Senior Loan used
to meet working capital requirements and no part of the proceeds of the Note
will be used, directly or indirectly, for the purpose of "purchasing" or
"carrying" any margin stock within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System, or for the purpose of buying or
carrying or trading in any securities under such circumstances as to involve the
Company or any Subsidiary in a violation of Regulation X of said Board (12 CFR
224) or to involve any broker or dealer in a violation of Regulation T of said
Board (12 CFR 220). Margin stock does not constitute more than 5% of the value
of the consolidated assets of the Company and its Subsidiaries and the Company
does not have any present intention that margin stock will constitute more than
5% of the value of such assets. As used in this Section, the terms "margin
stock" and "purchasing" or "carrying" shall have the meanings assigned to them
in said Regulation U.
3.24 Status under Certain Statutes. Neither the Company nor any Subsidiary
is subject to regulation under the Investment Company Act of 1940, as amended,
the Public Utility Holding Company Act of 1935, as amended, the Interstate
Commerce Act, as amended, or the Federal Power Act, as amended.
3.25 Organization and Ownership of Shares of Subsidiaries; Affiliates.
Schedule 3.25 contains (except as noted therein) complete and correct lists of
(i) the Company's Subsidiaries, showing, as to each Subsidiary, the correct name
thereof, the jurisdiction of its organization, and the percentage of shares of
each class of its capital stock or similar equity interests outstanding owned by
the Company and each other Subsidiary, (ii) the Company's Affiliates, other than
Subsidiaries, and (iii) the Company's directors and senior officers.
(a) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 3.25 as being owned
by the Company and its Subsidiaries have been validly issued, are
fully paid and nonassessable and are owned by the Company or another
Subsidiary free and clear of any Lien (except as otherwise disclosed
in Schedule 3.25).
(b) Each Subsidiary identified in Schedule 3.25 is a corporation or
other legal entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, and is
duly qualified as a foreign corporation or other legal entity and is
in good standing in each jurisdiction in which such qualification is
required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not,
individually or in the
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aggregate, reasonably be expected to have a material adverse effect.
Each such Subsidiary has the corporate or other power and authority
to own or hold under lease the properties it purports to own or hold
under lease and to transact the business it transacts and proposes
to transact.
(c) No Subsidiary is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Agreement, the
agreements listed on Schedule 3.25 and customary limitations imposed
by corporate law statutes) restricting the ability of such
Subsidiary to pay dividends out of profits or make any other similar
distributions of profits to the Company or any of its Subsidiaries
that owns outstanding shares of capital stock or similar equity
interests of such Subsidiary.
3.26 Outstanding Indebtedness. Except as described therein, Schedule 3.26
sets forth a complete and correct list of all outstanding Indebtedness of the
Company and its Subsidiaries as of the date hereof. Neither the Company nor any
Subsidiary is in default and no waiver of default is currently in effect, in the
payment of any principal or interest on any Indebtedness of the Company or such
Subsidiary and no event or condition exists with respect to any Indebtedness of
the Company or any Subsidiary that would permit (or that with notice or the
lapse of time, or both, would permit) one or more Persons to cause such
Indebtedness to become due and payable before its stated maturity or before its
regularly scheduled dates of payment.
ARTICLE IV
REPRESENTATIONS OF THE PURCHASER
4.1 Purchase for Investment. The Purchaser represents that it is
purchasing the Notes for its own account or for one or more separate accounts
maintained by it or for the account of one or more pension or trust funds and
not with a view to the distribution thereof, provided that the disposition of
the Purchaser's or their property shall at all times be within the Purchaser's
or their control. The Purchaser understands that the Notes have not been
registered under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes.
4.2 Source of Funds. The Purchaser represents that at least one of the
following statements is an accurate representation as to each source of funds (a
"Source") to be used by it to pay the purchase price of the Notes to be
purchased by it hereunder:
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(a) if you are an insurance company, the Source does not include assets
allocated to any separate account maintained by you in which any
employee benefit plan (or its related trust) has any interest, other
than a separate account that is maintained solely in connection with
your fixed contractual obligations under which the amounts payable,
or credited, to such plan and to any participant or beneficiary of
such plan (including any annuitant) are not affected in any manner
by the investment performance of the separate account; or
(b) the Source is either (i) an insurance company pooled separate
account, within the meaning of Prohibited Transaction Exemption
("PTE") 90-1 (issued January 29, 1990), or (ii) a bank collective
investment fund, within the meaning of the PTE 91-38 (issued July
12, 1991) and, except as you have disclosed to the Company in
writing pursuant to this paragraph (b), no employee benefit plan or
group of plans maintained by the same employer or employee
organization beneficially owns more than 10% of all assets allocated
to such pooled separate account or collective investment fund; or
(c) the Source constitutes assets of an "investment fund" (within the
meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V
of the QPAM Exemption), no employee benefit plan's assets that are
included in such investment fund, when combined with the assets of
all other employee benefit plans established or maintained by the
same employer or by an affiliate (within the meaning of Section
V(c)(1) of the QPAM Exemption) of such employer or by the same
employee organization and managed by such QPAM, exceed 20% of the
total client assets managed by such QPAM, the conditions of Part
1(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM
nor a person controlling or controlled by the QPAM (applying the
definition of "control" in Section V(e) of the QPAM Exemption) owns
a 5% or more interest in the Company and (i) the identity of such
QPAM and (ii) the names of all employee benefit plans whose assets
are included in such investment fund have been disclosed to the
Company in writing pursuant to this paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit
plans, each of which has been identified to the Company in writing
pursuant to this paragraph (e); or
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(f) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA.
(g) the funds to be used by the Purchaser for purchase of the Notes
directly or indirectly constitute general account assets of an
insurance company, and the amount of the reserves and liabilities
for the general account contract(s) held by or on behalf of any
Benefit Plan (as defined by the annual statement for life insurance
companies approved by the National Association of Insurance
Commissioners (the "NAIC Annual Statement")) together with the
amount of the reserves and liabilities for the general account
contract(s) held by or on behalf of any other Benefit Plans
maintained by the same employer (or affiliate thereof as defined in
PTCE-95-60) or by the same employee organization (as defined by the
NAIC Annual Statement) in the general account do not exceed 10% of
the total reserves and liabilities of the general account (exclusive
of separate account liabilities) plus surplus as set forth in the
NAIC Annual Statement filed with the state of domicile of the
insurance company.
As used in this Section 4.2, the terms "employee benefit plan", "governmental
plan", "party in interest" and "separate account" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
ARTICLE V
CONDITIONS TO CLOSING
The obligation of the Purchaser to purchase and pay for the Notes at the
Closing is subject to the fulfillment to the satisfaction of the Purchaser,
prior to or at the Closing, of the following conditions:
5.1 Notes. The Purchaser shall have received the Notes substantially in
the form of Exhibit 5.1, duly executed and delivered by the Company.
5.2 Subsidiaries' Guaranty. The Purchaser shall have received the
Subsidiaries' Guaranty substantially in the form of Exhibit 5.2, duly executed
and delivered by each of its Subsidiaries which is a party thereto.
5.3 Warrants. The Purchaser shall have received the (i) Warrant Agreement
substantially in the form of Exhibit 5.3, duly executed by parties thereto, and
(ii) the Warrants substantially in the form of Exhibit A to the Warrant
Agreement, duly executed and delivered by the Company.
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5.4 Legal Opinion. The Purchaser shall have received the legal opinion of
Hutchins, Wheeler & Dittmar, A Professional Corporation, substantially in the
form of Exhibit 5.4.
5.5 Resolutions and Certificates. The Purchaser shall have received (i)
copies of the resolutions of the manager of the Company and of the members or
other appropriate authority of its Subsidiaries authorizing the execution,
delivery and performance of this Agreement and the other Financing Documents,
certified by the Secretary or an Assistant Secretary of each such entity; (ii) a
certificate of the Secretary or an Assistant Secretary of the Company and its
Subsidiaries certifying the names and true signatures of the officers and
authorized signatories of each such entity authorized to sign any and all
documents to be delivered by each such entity or as required or contemplated
hereunder; and (iii) an Officer's Certificate, dated the Closing Date,
certifying that the conditions specified herein have been fulfilled.
5.6 Environmental Reports. The Purchaser shall have received (i) any
environmental site assessment report for the Mortgaged Property prepared by an
Environmental Engineer and which has been delivered to the Senior Lender under
the Senior Loan, and (ii) an Officer's Certificate indicating that, to his/her
knowledge, there has been no material adverse change in the environmental
condition of the Mortgaged Property and such other properties and any buildings
thereon since the date of such environmental site assessment report.
5.7 Appraisals. The Purchaser shall have received any Appraisal of the
Mortgaged Property delivered to the Senior Lender under the Senior Loan.
5.8 Payment of Special Counsel Fees. Without limiting the provisions of
Section 11.4, the Company shall have paid on or before the Closing the fees,
charges and disbursements of special counsel to the Purchaser to the extent
reflected in a statement of such counsel rendered to the Company at least one
Business Day prior to the Closing.
5.9 Representations and Warranties. The representations and warranties
made by the Company herein, in the other Financing Documents or which are
contained in any certificate, document or financial or other statement furnished
at any time under or in connection herewith, shall be correct in all material
respects on and as of the date of the Closing as if made on and as of such date,
except to the extent expressly made with respect to another date.
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5.10 Additional Matters. All other documents and legal matters in
connection with the transactions contemplated by this Agreement and the other
Financing Documents shall be satisfactory in form and substance to the Purchaser
and its counsel.
ARTICLE VI
AFFIRMATIVE COVENANTS
The Company hereby agrees that, so long as any of the Notes remain
outstanding and unpaid the Company will and (except in the case of delivery of
financial information, reports and notices) shall cause each of its Subsidiaries
to:
6.1 Compliance with Laws, Etc. Comply in all material respects with all
applicable laws, rules, regulations and orders with respect to its business and
properties (including, without limitation, any fiscal and accounting rules and
regulations) and maintain all licenses, permits, charters and registrations
which are material to the conduct of its business.
6.2 Preservation of Existence. Observe in all material respects all
procedures required to preserve and maintain its legal existence, and all
rights, franchises and privileges in the jurisdiction of its organization, and
qualify and remain qualified to do business and in good standing in each
jurisdiction where the nature of its business requires it to do so, except where
the failure to be so qualified and in good standing would not have a Material
Adverse Effect or materially and adversely affect the Company's ability to
perform its obligations under this Agreement or any other Financing Document to
which it is a party.
6.3 Financial Information and Compliance Certificates. (a) Keep their
books of account in accordance with good accounting practices and furnish to
each Noteholder, within 120 days after the last day of each fiscal year,
consolidated balance sheets of the Company and its Subsidiaries as at such last
day of the fiscal year and statements of income and retained earnings and cash
flows for such fiscal year each prepared in accordance with GAAP and certified
by a firm of independent certified public accountants of recognized national
reputation; and, within 45 days after the close of each of the first three
quarters of each fiscal year, consolidated and consolidating balance sheets,
statements of income and retained earnings and cash flows of the Company and its
Subsidiaries as of the last day of and for such quarter and for the period of
the fiscal year ended as of the close of the particular quarter, all such
quarterly statements to be in reasonable detail and certified by the chief
financial or accounting officer of the Company as having been prepared in
accordance with GAAP (subject to year-end adjustments and the absence of
footnotes). The Company will also furnish, within forty-five days after the end
of a calendar month, monthly profit and loss statements of each existing and new
restaurant owned or managed by the Company or any
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of its Subsidiaries, internally prepared and certified by the chief financial
officer of the Company. The Company will, with reasonable promptness, furnish
such other data as may be reasonably requested by the Noteholders, including,
without limitation, copies of all material contracts and agreements. The Company
agrees that (i) at the Noteholders' expense, at any time but not exceeding once
in a calendar year, or (ii) after an Event of Default has occurred and is
continuing, at the Company's expense, at any time and from time to time, the
Noteholders by or through any of its officers, agents, employees, attorneys or
accountants may, upon reasonable notice to the Company, conduct an examination
and make extracts of the Company's books and records.
(b) At the same time as it delivers the financial statements called for by
Section 6.3(a), the Company shall deliver a certificate of the chief executive
officer and the chief financial or accounting officer of the Company evidencing
a computation of compliance with the provisions of Article VII and stating that
in each case except as disclosed in such certificate, the person making such
certificate has no knowledge of any Default or Event of Default. To the extent
delivered to the Senior Lender under the Senior Loan, the Company's certified
public accountants shall deliver, together with their delivery of the annual
certified financial statements, a certificate stating that such accountants have
no knowledge of any Default or Event of Default, which shall be addressed to the
Company and the Noteholders.
6.4 Defaults. Promptly notify the Noteholders of (a) any Default or Event
of Default and (b) any default or event of default under any Senior
Indebtedness or any other material Contractual Obligation, which if not cured
could reasonably be expected to cause a Material Adverse Effect, setting forth
the details of such defaults or event of defaults and the actions which the
Company is taking or proposes to be taken with respect thereto.
6.5 Insurance. Maintain policies of hazard, general liability insurance,
business interruption insurance and other insurance with responsible and
reputable insurance companies or associations in such amounts and covering such
risks as is usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Company
operates.
6.6 Preservation of Properties. Maintain and preserve all of their
respective properties which are used or which are useful in the conduct of their
respective businesses in good working order and condition, ordinary wear and
tear excepted.
6.7 Taxes. Duly pay and discharge all taxes or other claims which might
become a Lien upon any of their respective properties, except to the extent that
any thereof are being in good faith appropriately contested with adequate
reserves provided therefor, and so long as the failure to pay such taxes would
not give rise to a Lien which is not a Permitted Lien.
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6.8 Notice of Litigation. Promptly notify the Noteholders of any
litigation, legal proceeding or dispute affecting the Company or any of its
Subsidiaries (other than (i) disputes in the ordinary course of business
involving amounts less than $500,000 in any single instance or (ii) litigation
arising in the ordinary course of business which the Company reasonably believes
to be covered by insurance and not reasonably likely, even if adversely
determined, to have a Material Adverse Effect) whether or not fully covered by
insurance, and regardless of the subject matter thereof (excluding, however, any
actions relating to workers' compensation claims or negligence claims relating
to use of motor vehicles, if fully covered by insurance, subject to
deductibles).
6.9 Alan Stillman. Employ and continue to employ Alan Stillman as a key
officer of the Company and maintain in force a $5,000,000 life insurance policy
on the life of Alan Stillman.
6.10 Subsidiaries' Guaranty. Cause each future Subsidiary of the Company
to execute and deliver a counterpart of the Subsidiaries' Guaranty promptly upon
the formation of such Subsidiary.
6.11 New Restaurants. Cause each new restaurant established by Company or
its Subsidiaries to have a positive monthly Consolidated EBITDA for at least one
full month no later than the twelfth month after such new restaurant's opening
("Cash Flow Positive"), such positive Consolidated EBITDA to be demonstrated by
the new restaurant's monthly profit and loss statement provided to the
Noteholders in accordance with Section 6.3, provided that the Company and its
Subsidiaries may have at any point in time one such new restaurant that is not
Cash Flow Positive.
6.12 Inspection of Property; Books and Records; Discussions. Keep proper
books of records and accounts in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and permit, and
cause its Subsidiaries to permit upon reasonable notice to the Company (i) at
the Noteholders' expense, at any time but not exceeding once in a calendar year,
or (ii) after an Event of Default has occurred and is continuing, at the
Company's expense, at any time and from time to time, the Noteholders by or
through any of its officers, agents, employees, attorneys or accountants to
visit and inspect any of its properties and examine and make abstracts from any
of its books and records and discuss the business, operations, properties and
financial and other condition of the Company and its Subsidiaries with officers
and employees of the Company and its Subsidiaries and with its independent
certified public accountants.
6.13 Environmental Laws. (a) Comply with and provide for compliance by all
tenants and subtenants, if any, with, all applicable Environmental Laws and
obtain and comply
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in all material respects with and maintain, and ensure that all tenants and
subtenants obtain and comply in all material respects with and maintain, any and
all licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws except to the extent that any such failure to do
so could not be reasonably expected to have a Material Adverse Effect; and
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws, (i) except where non-compliance with any such order or directive could not
reasonably be expected to have a Material Adverse Effect or (ii) other than any
such order or directive as to which an appeal or other appropriate contest is or
has been timely and properly taken, is being diligently pursued in good faith,
and as to which appropriate reserves have been established in accordance with
GAAP, and, if the effectiveness of such order or directive has not been stayed,
the pendency of such appeal or other appropriate contest does not give rise to a
Material Adverse Effect.
6.14 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith or where the failure to do so would not
have a Material Adverse Effect.
6.15 Further Assurances. From time to time execute and deliver, or cause
to be executed and delivered, such additional instruments, certificates or
documents, and take all such actions, as the Noteholders may reasonably request,
for the purposes of implementing or effectuating the provisions of this
Agreement and the other Financing Documents. Upon the exercise by the Noteholder
of any power, right, privilege or remedy pursuant to this Agreement or the other
Financing Documents which requires any consent, approval, recording,
qualification or authorization of any Governmental Authority, the Company will
execute and deliver, or will cause the execution and delivery of all
applications, certifications, instruments and other documents and papers that
the Noteholders may be required to obtain from the Company or any of its
Subsidiaries for such governmental consent, approval, recording, qualification
or authorization.
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ARTICLE VII
FINANCIAL COVENANTS
7.1 Covenants. So long as any of the Notes remain outstanding and unpaid:
(a) Consolidated Fixed Charge Coverage Ratio. The Company and its
Subsidiaries on a consolidated basis will maintain a Consolidated
Fixed Charge Coverage Ratio, calculated on a rolling four-quarter
basis, of not less than 1.1 to 1.0 from the date of Closing through
September 30, 1999; and of 1.30 to 1.0 thereafter.
(b) Consolidated EBITDA. The Consolidated EBITDA of the Company and its
Subsidiaries shall be not less than: $1,275,000 for the second
fiscal quarter of 1999; $0 for the third fiscal quarter of 1999;
$2,338,000 for the fourth fiscal quarter of 1999; $2,338,000 for the
first fiscal quarter of 2000; $2,000,000 for the second fiscal
quarter of 2000; $850,000 for the third fiscal quarter of 2000;
$3,740,000 for the fourth fiscal quarter of 2000; $3,000,000 for the
first fiscal quarter of 2001 and for each first fiscal quarter
thereafter; $2,700,000 for the second fiscal quarter of 2001 and for
each second fiscal quarter thereafter; $1,300,000 for the third
fiscal quarter and for each third fiscal quarter thereafter; and
$4,700,000 for the fourth fiscal quarter and for each fourth fiscal
quarter thereafter.
(c) Consolidated Leverage Ratio. The Company and its Subsidiaries on a
consolidated basis will maintain a Consolidated Leverage Ratio,
calculated on a rolling four-quarter basis, of not less than 8.50 to
1.0 through September 30, 1999; 5.50 to 1.0 through December 31,
1999; 4.50 to 1.0 through March 30, 2000; 4.00 to 1.0 through June
30, 2000 and 3.50 to 1.0 thereafter.
ARTICLE VIII
NEGATIVE COVENANTS
The Company hereby agrees that, so long as any of the Notes remain
outstanding and unpaid neither the Company nor any Subsidiary will:
8.1 Indebtedness. Create, issue, assume, enter into any guarantee of or in
any manner become directly or indirectly liable for the payment of, or otherwise
incur (collectively, "Incur"), any Indebtedness (including any Acquired
Indebtedness) other than, so long as no Event of Default has occurred and is
continuing, Permitted Indebtedness; provided that,
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if no Event of Default shall have occurred and be continuing at the time of, or
will occur as a result of, the incurrence of any such Indebtedness, the Company
may Incur such Indebtedness (whether or not constituting Permitted Indebtedness)
if at the time of such Incurrence, and after giving effect to the Incurrence
thereof, the Pro Forma Consolidated Interest Coverage Ratio is at least equal to
3.5 to 1.0. Acquired Indebtedness shall be considered Incurred at the time the
obligor or guarantor thereof becomes a Subsidiary of the Company.
8.2 Mergers and Sales of Assets. Enter into any merger or consolidation or
liquidate, wind up or dissolve the Company or any Subsidiary (other than
pursuant to a merger with the Company) or sell, transfer or lease or otherwise
dispose of all or any substantial part of their respective assets (other than
sales of inventory and obsolete equipment in the ordinary course of business) or
acquire by purchase or otherwise the business or assets of, or stock of, another
business entity.
8.3 Loans; Investments. Lend or advance money, credit or property to or
invest in (by capital contribution, loan, purchase or otherwise) any other
Person, except (a) Investments in United States Government obligations,
certificates of deposit or money market funds of any banking institution with
combined capital and surplus of at least $200,000,000; (b) capital contributions
or loans or advances to Subsidiaries; (c) reasonable loans to any employee of
the Company or its Subsidiaries not exceeding $75,000 per employee and not
exceeding in the aggregate $250,000 outstanding at any time; (d) reasonable and
customary expense advances made to employees of the Company and its Subsidiaries
in the ordinary course of their business; (e) Investments in any Person other
than a wholly-owned Subsidiary, provided that no Default or Event of Default
would exist and, immediately after giving effect to such action, the Company
shall be in compliance with Section 8.10; and (f) Investments by the Company in
a wholly-owned Subsidiary or by a wholly-owned Subsidiary in another
wholly-owned Subsidiary or in the Company.
8.4 Liens. Create, incur, assume or permit to exist any Lien (other than
Permitted Liens) on any property or assets (including stock or other securities
of any Person, including any Subsidiary) now owned or hereafter acquired by it
or on any income or revenues or rights in respect of any thereof.
8.5 Contingent Liabilities. Assume, endorse, be or become liable for or
guarantee any obligation of (a) any Person which is not an Affiliate of the
Company and a member of the Company's consolidated group for financial reporting
purposes, excluding, however, the endorsement of negotiable instruments for
deposit or collection in the ordinary course of business, or (b) an Affiliate of
the Company which is a member of the Company's consolidated group for financial
reporting purposes, without the prior written consent of the Noteholders, which
consent will not be unreasonably withheld so long as such proposed action would
not
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(i) result in a violation by the Company of any financial covenant set forth in
this Agreement or any of the other Financing Documents, or (ii) otherwise result
in any Default or Event of Default. Notwithstanding the foregoing, so long as
such guarantee does not cause the Company to violate any financial covenant
contained in the Financing Documents, the Company or any of its Subsidiaries may
guarantee Indebtedness that is otherwise permissible under Section 8.1.
8.6 Sales of Receivables; Sale - Leasebacks. Sell, discount or otherwise
dispose of notes, accounts receivable or other obligations owing to the Company
or any Subsidiary, with or without recourse, except for the purpose of
collection in the ordinary course of business; or sell any asset pursuant to an
arrangement to thereafter lease such asset from the purchaser thereof.
8.7 Nature of Business. Materially alter the nature of their business.
8.8 Accounting Changes. Make any change in their accounting treatment or
financial reporting practices, except as required or permitted by GAAP.
8.9 Transactions with Affiliates. Except as otherwise specifically set
forth in this Agreement, directly or indirectly purchase, acquire or lease any
property or assets from, or sell, transfer or lease any property or assets to,
or enter into any other transaction with, any Affiliate, except that the Company
or any Subsidiary may engage in any of the foregoing transactions in the
ordinary course of business at prices and on terms and conditions not less
favorable to it than those which would have been obtained in an arm's-length
transaction with a non-affiliated third party.
8.10 Dividends and Distributions and Investments. Declare or pay, or incur
any liability to declare or pay, directly or indirectly, any dividend or
distribution to any shareholder, member or partner, or make an Investment in any
Person other than a wholly-owned Subsidiary, unless immediately after giving
effect to such action:
(i) the aggregate amount of such dividends, distributions or
Investments declared, paid or made by the Company and its Subsidiaries
during the period commencing on March 31, 1999, and ending on the date
such dividend, distribution or Investment is declared, paid or made,
inclusive, would not exceed the sum of (A) 50% of Consolidated Net Income
for such period, plus (B) the aggregate amount of Net Proceeds of Capital
Stock for such period; and
(ii) no Default or Event of Default would exist;
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provided, however, that any wholly-owned Subsidiary of the Company may
declare and pay dividends or distributions to the Company, or authorize a
dividend or distribution that is not payable within 60 days of
authorization.
8.11 Subsidiaries. Own any Subsidiaries that are not wholly-owned,
directly or indirectly, by the Company.
ARTICLE IX
EVENTS OF DEFAULT; REMEDIES
9.1 Events of Default. An "Event of Default" shall exist if any one of the
following conditions or events shall occur and be continuing:
(a) the Company shall fail to pay any principal of the Note when due, or
shall fail to pay interest or any other amount payable hereunder or
under any other Financing Document, and such failure to pay interest
or any other amount other than principal continues for three
Business Days; or
(b) any representation or warranty made or deemed made by the Company
herein or in any of the other Financing Documents or which is
contained in any certificate, document or financial or other
statement furnished at any time under or in connection with this
Agreement or any of the other Financing Documents shall prove to
have been false in any material respect on or as of the date made or
deemed made; or
(c) the Company shall breach any other covenant or default in the
observance or performance of any other provision contained in this
Agreement or any other Financing Document; provided, however, that,
except for a breach of the covenants set forth in Section 7.1, 8.1,
8.2, 8.4, or 8.10 of this Agreement, if such breach or default is
susceptible of cure, such breach or default shall not constitute an
Event of Default unless such default shall continue unremedied for a
period of 30 days after written notice thereof is given to the
Company by the Noteholders; provided, further, that if such default
is susceptible of cure, and the Company is diligently proceeding to
effectuate such cure, but such cure can not be completed within such
30 day period, such period may be extended, at the reasonable
discretion of the Noteholders, for such reasonable period (not to
exceed an aggregate of 120 days) as the Noteholders may permit so
long as the Company continues to diligently pursue such cure; or
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(d) the Company or any of its Subsidiaries shall commence any case,
proceeding or other action (A) under any existing or future law of
any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its
assets, or the Company or any of its Subsidiaries shall make a
general assignment for the benefit of its creditors; or
(i) there shall be commenced against the Company or any of its
Subsidiaries any case, proceeding or other action of a nature
referred to in clause (i) above which (A) results in the entry
of an order for relief or any such adjudication or appointment
and (B) remains undismissed, undischarged or unbonded for a
period of 60 days; or
(ii) there shall be commenced against the Company or any of its
Subsidiaries any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its
assets which results in the entry of an order for any such
relief which shall have not been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry
thereof; or
(iii) the Company or any of its Subsidiaries shall take any action
in furtherance of, or indicating its consent to, approval of,
or acquiescence in, any of the acts set forth in clause (i),
(ii) or (iii) of this Section 8(d); or
(iv) the Company or any of its Subsidiaries shall generally not, or
shall be unable to, or shall admit in writing its inability
to, pay its debts as they become due; or
(e) the Company or any of its Subsidiaries shall engage in any
"prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Internal Revenue Code) involving any Plan, (ii)
any "accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived, shall exist with respect to any Plan,
(iii) a Reportable Event shall occur with respect to, or proceedings
shall commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate, any Plan, which Reportable
Event or institution of proceedings is, in the reasonable opinion of
the Noteholders, likely to result in the termination of such Plan
for purposes of
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Title IV of ERISA, and, in the case of a Reportable Event, such
Reportable Event shall continue unremedied for ten days after notice
of such Reportable Event pursuant to Section 4043(a), (c) or (d) of
ERISA is given or such proceedings shall continue for ten days after
commencement thereof, as the case may be, (iv) any Plan shall
terminate for purposes of Title IV of ERISA, and in each case in
clauses (i) - (iv) above, such event or condition could reasonably
be expected to subject the Company and any of its Subsidiaries to
any tax, penalty or other liabilities in the aggregate material in
relation to the business, operations or property of the Company and
its Subsidiaries, considered as a whole; or
(f) the rendition by any court of a final judgment against the Company
or any of its Subsidiaries in an amount in excess of $500,000 which
shall not be satisfactorily stayed, discharged, vacated, bonded or
set aside within 60 days of the making thereof; or the attachment of
any property of the Company or any of its Subsidiaries which has not
been released or provided for to the reasonable satisfaction of the
Noteholders within 60 days after the making thereof; or
(g) the Subsidiaries' Guaranty shall cease to be in full force and
effect as to any Subsidiary which is a party thereto; or
(h) the Company or any Subsidiary shall breach or default in its
obligations under any Indebtedness with respect to which the damages
for such breach or default might reasonably be expected to exceed
$1,000,000, and as a result of such breach or default the holder of
such Indebtedness accelerates such Indebtedness before it shall
become due and payable; or
(i) the Company or any Subsidiary shall fail to pay any due and unpaid
taxes, except for Disputed Taxes the existence of which does not
cause the Company to violate any other covenant in this Agreement;
9.2 Acceleration. If an Event of Default with respect to the Company or
any Subsidiary described in Sections 9.1(d)(i), (ii) or (iii) occurred, all the
Notes then outstanding shall automatically become immediately due and payable.
(a) If any other Event of Default has occurred and is continuing, any
holder or holders of more than 51% in principal amount of the Notes
at the time outstanding may at any time at its or their option, by
notice or notices to the Company, declare all the Notes then
outstanding to be immediately due and payable.
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(b) If any Event of Default described in Section 9.1(a) has occurred and
is continuing, any holder or holders of Notes at the time
outstanding affected by such Event of Default may at any time, at
its or their option, by notice or notices to the Company, declare
all the Notes held by it or them to be immediately due and payable.
(c) Upon any Notes becoming due and payable under this Section 9.2,
whether automatically or by declaration, such Notes will forthwith
mature and the entire unpaid principal amount of such Notes, plus
(x) all accrued and unpaid interest thereon and (y) the Make-Whole
Amount determined in respect of such principal amount as if such
Notes were prepaid pursuant to Section 2.3(a)(i) as of the date of
acceleration (with a premium of 12 1/2% due upon an acceleration
prior to June 29, 2002) (to the full extent permitted by applicable
law), shall all be immediately due and payable, in each and every
case without presentment, demand, protest or further notice, all of
which are hereby waived. The Company acknowledges, and the parties
hereto agree, that each Noteholder has the right to maintain its
investment in the Notes free from repayment by the Company (except
as herein specifically provided for) and that the provision for
payment of a premium by the Company in the event that the Notes are
prepaid or are accelerated as a result of an Event of Default, is
intended to provide compensation for the deprivation of such right
under such circumstances.
9.3 Other Remedies. If any Default or Event of Default has occurred and is
continuing, and irrespective of whether any Notes have become or have been
declared immediately due and payable under Section 9.2, the holder of any Note
at the time outstanding may proceed to protect and enforce the rights of such
Noteholder by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in any
Note, or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or by
law or otherwise.
9.4 Rescission. At any time after any Notes have been declared due and
payable pursuant to clause (b) or (c) of Section 9.2 the holders of not less
than 51% in principal amount of the Notes then outstanding, by written notice to
the Company, may rescind and annul any such declaration and its consequences if
(a) the Company has paid all overdue interest on the Notes, (b) all Events of
Default and Defaults, other than non-payment of amounts that have become due
solely by reason of such declaration, have been cured or have been waived, and
(c) no judgment or decree has been entered for the payment of any monies due
pursuant hereto or to the Notes. No rescission and annulment under this Section
9.4 will extend to or affect any subsequent Event of Default or Default or
impair any right consequent thereon.
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9.5 No Waivers or Election of Remedies, Expenses, etc. No course of
dealing and no delay on the part of any Noteholder in exercising any right,
power or remedy shall operate as a waiver thereof or otherwise prejudice such
Noteholder's rights, powers or remedies. No right, power or remedy conferred by
this Agreement or by any Note upon any Noteholder thereof shall be exclusive of
any other right, power or remedy referred to herein or therein or now or
hereafter available at law, in equity, by statute or otherwise. Without limiting
the obligations of the Company under Section 11.4, the Company will pay to each
Noteholder on demand such further amount as shall be sufficient to cover all
costs and expenses of such Noteholder incurred in any enforcement or collection
under this Section 9, including, without limitation, reasonable attorneys' fees,
expenses and disbursements.
ARTICLE X
SUBORDINATION
10.1 Agreement to Subordinate. The Noteholders agree that the Indebtedness
evidenced by the Notes is subordinated in right of payment, to the extent and in
the manner provided in this Article 10, to the prior payment of all Senior
Indebtedness and that the subordination is for the benefit of and enforceable by
any holder of Senior Indebtedness.
10.2 Liquidation, Dissolution, Bankruptcy. (a) Upon any payment or
distribution of all or any of the assets of the Company to creditors upon a
total or partial liquidation or a total or partial dissolution of the Company or
in a bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property or upon a general assignment for the
benefit of creditors or any other marshalling of the assets and liabilities of
the Company:
(i) the holders of Senior Indebtedness shall be entitled to receive
payment in full of the Senior Indebtedness before the Noteholders shall be
entitled to receive any payment of principal of or interest on the Notes;
and
(ii) until the Senior Indebtedness is paid in full, any payment or
distribution to which the Noteholders would be entitled but for this
Article 10 shall be made to the holders of Senior Indebtedness as their
interests may appear, except that the Noteholders may receive shares of
stock and any debt securities that are subordinated to at least the same
extent as the Notes ("Permitted Junior Securities").
(b) All payments or distributions upon or with respect to the Notes, other
than Permitted Junior Securities, which are received by any Noteholder contrary
to the provisions
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of this Article 10 shall be received in trust for the benefit of the holders of
the Senior Indebtedness, shall be segregated from other funds and property held
by the recipient in the same form as so received (with any necessary
indorsement) to be applied to the payment or prepayment in full of the Senior
Indebtedness in accordance with their terms.
(c) The holders of the Senior Indebtedness are hereby authorized to demand
specific performance of this Agreement, whether or not the Company shall have
complied with any of the provisions hereof applicable to it, at any time when
the Company shall have failed to comply with any of the provisions of this
Agreement applicable to it. Purchaser hereby irrevocably waives any defense
based on the adequacy of a remedy at law, which might be asserted as a bar to
such remedy of specific performance.
(d) Unless otherwise agreed by the holders of the Senior Indebtedness,
Purchaser, any transferee of Purchaser and the Company will cause each Note and
each other instrument evidencing the Notes to be endorsed with the following
legend:
"This Note is expressly subordinated in right of payment, to the extent
and in the manner provided in Article 10 of the Note Purchase Agreement,
to the prior payment in full of all Senior Indebtedness (as defined
therein)."
(e) Purchaser will not:
(i) sell, assign, pledge, encumber or otherwise dispose of the
Notes or any Interest therein unless such sale, pledge,
encumbrance or disposition is made expressly subject to this
Article 10; or
(ii) permit this Article 10 to be amended.
(f) This Agreement shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any of the Obligations is rescinded
or must otherwise be returned by Lender upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, all as though such payment had not
been made.
10.3 Default on Senior Indebtedness. The Company may not pay the principal
of, premium (if any) or interest on the Notes if (i) any Senior Indebtedness is
not paid when due or (ii) any other default on Senior Indebtedness occurs and
the maturity of such Senior Indebtedness is accelerated in accordance with its
terms unless, in either case, (x) the default has been cured or waived and any
such acceleration has been rescinded or (y) such Senior Indebtedness has been
paid in full; provided, however, that the Company may repay the Notes without
regard to the foregoing if the Company receives written notice approving such
payment from an authorized representative for the Designated Senior Indebtedness
with
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respect to which such default has occurred and is continuing. During the
continuance of any default (other than a default described in clause (i) or (ii)
of the preceding sentence) with respect to any Senior Indebtedness pursuant to
which the maturity thereunder may be accelerated immediately without further
notice (except such notice as may be required to effect such acceleration) or
the expiration of any applicable grace periods, the Company may not repay the
Notes for a period (a "Payment Blockage Period") commencing upon the receipt by
the Company of written notice (a "Blockage Notice") of such default from an
authorized representative for such Designated Senior Indebtedness specifying an
election to effect a Payment Blockage Period and ending 179 days thereafter (or
earlier if such Payment Blockage Period is terminated (i) by written notice to
the Company from the Person or Persons who gave such Blockage Notice, (ii)
because such Designated Senior Indebtedness has been repaid in full or (iii)
because the default giving rise to such Blockage Notice is no longer
continuing). Notwithstanding the provisions described in the immediately
preceding sentence (but subject to the provisions contained in the first
sentence of this Section 10.3), unless the holders of such Designated Senior
Indebtedness or an authorized representative of such holders shall have
accelerated the maturity of such Designated Senior Indebtedness, the Company may
resume payments on the Notes after the end of such Payment Blockage Period,
including any missed payments. Not more than one Blockage Notice may be given in
any consecutive 360-day period, irrespective of the number of defaults with
respect to Designated Senior Indebtedness during such period; provided, however,
that in no event may the total number of days during which any Payment Blockage
Period or Periods is in effect exceed 179 days in the aggregate during any 360
consecutive day period.
10.4 Acceleration of Payment of Notes. If payment of the Notes is
accelerated because of an Event of Default, the Company shall promptly notify
the holders of the Designated Senior Indebtedness (or the authorized
representatives of such holders) of the acceleration. The Company shall not pay
the Notes until ten Business Days after such holders or the authorized
representatives of such holders receive notice of such acceleration and,
thereafter, may pay the Notes only if permitted under this Article 10.
10.5 Distributions to Noteholders. If a distribution is made to the
Noteholders that because of this Article 10 should not have been made to such
Noteholders, the Noteholders shall hold it in trust for the holders of Senior
Indebtedness and pay it over to such holders of Senior Indebtedness as such
holders' interests may appear.
10.6 Subrogation. After all Senior Indebtedness is paid in full and until
the Notes are paid in full, the Noteholders shall be subrogated to the rights of
the holders of Senior Indebtedness to receive distributions applicable to such
Senior Indebtedness. A distribution made under this Article 10 to the holders of
Senior Indebtedness which otherwise would have been made to the Noteholders is
not, as between the Company, its creditors other than the
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holders of such Senior Indebtedness and the Noteholders, a payment by the
Company on such Senior Indebtedness.
10.7 Relative Rights. Nothing in this Agreement shall:
(a) impair, as between the Company and the Noteholders, the obligation
of the Company, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their
terms; or
(b) prevent the Noteholders from exercising their available remedies
upon a Default, subject to the rights of the holders of Senior
Indebtedness to receive distributions otherwise payable to the
Noteholders.
10.8 Subordination May Not Be Impaired by Company. No right of any holder
of Senior Indebtedness to enforce the subordination of the Notes shall be
impaired by any act or failure to act by the Company or by its failure to comply
with this Agreement.
10.9 Distribution or Notice to Representative. Whenever a distribution is
to be made or a notice given to holders of Senior Indebtedness, the distribution
may be made and the notice given to their authorized representatives (if any).
10.10 Article 10 Not to Prevent Events of Default or Limit Right to
Accelerate. The failure to make a payment pursuant to the Note Purchase
Agreement by reason of any provision in this Article 10 shall not be construed
as preventing the occurrence of a Default. Nothing in this Article 10 shall have
any effect on the right of the Noteholders to accelerate the maturity of the
Notes.
10.11 Reliance by Holders of Senior Indebtedness on Subordination
Provisions. The Noteholders acknowledge and agree that the foregoing
subordination provisions are, and are intended to be, an inducement and a
consideration to each holder of any Senior Indebtedness of the Company, whether
such Senior Indebtedness was created or acquired before or after the Closing
Date, to acquire and continue to hold, or to continue to hold, such Senior
Indebtedness and such holders of Senior Indebtedness shall be deemed
conclusively to have relied on such subordination provisions in acquiring and
continuing to hold, or in continuing to hold, such Senior Indebtedness.
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ARTICLE XI
MISCELLANEOUS
11.1 Notices. All notices, requests and demands to or upon the respective
parties hereto shall be in writing (unless otherwise expressly provided herein)
and shall be deemed to have been duly given or made when delivered by hand, or
by telecopy, receipt acknowledged, or five (5) calendar days after having been
deposited in the mail addressed as follows, or to such address as may be
hereafter notified in writing by the respective parties hereto and any future
holders of any Note:
The Company: The New York Restaurant Group, Inc.
1114 First Avenue
New York, New York 10021
Attn: Mr. Mark K. Levine, Executive Vice President
with a copy to: Hutchins, Wheeler & Dittmar, A Professional Corporation
101 Federal Street
Boston, Massachusetts 02110
Attn: James Westra, Esq.
The Noteholders: Magnetite Asset Investors L.L.C.
c/o BlackRock Financial Management, Inc.
345 Park Avenue, 29th Floor
New York, New York 10154
Attn: Dennis M. Schaney
with copies to: Kelso & Company
320 Park Avenue, 24th Floor
New York, New York 10022
Attn: James J. Connors, II, Esq.
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attn: John M. Vasily, Esq.
11.2 No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of the Noteholders, any right, remedy, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy,
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power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right.
11.3 Survival of Representations and Warranties. All representations and
warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement, the Notes and the other Financing Documents.
11.4 Payment of Expenses; Examination. (a) The Company agrees to pay or
reimburse each Noteholder promptly for all its reasonable out-of-pocket costs
and expenses incurred in connection with (i) the preparation of, or any
amendment, modification or waiver of, or consent with respect to, or any payment
under or termination of, any or all of the Financing Documents, including,
without limitation, the reasonable fees and disbursements of one firm of
attorneys for the Noteholders, (ii) the enforcement or preservation of any
rights under this Agreement, the Note, any of the other Financing Documents or
any other instrument or agreement entered into in connection herewith or
therewith, including, without limitation, the reasonable fees and disbursements
of one firm of attorneys for the Noteholders, (iii) any claim or action brought
successfully against the Noteholders arising out of or relating to any extent to
this Agreement, the Note, any of the other Financing Documents or any instrument
or agreement entered into in connection with the transactions contemplated
hereby or thereby, including, without limitation, the reasonable fees and
disbursements of one firm of attorneys for the Noteholders, and (iv) the
transactions contemplated hereby, including, without limitation, search fees,
recording and filing fees and fees and costs of one firm of attorneys, or other
experts retained by the Noteholders or (iv) any inspection of the Company's
properties, books and records pursuant to Sections 6.3 and 6.12 hereof.
(b) The obligations set forth in this Section 11.4 shall be in addition to
any other obligations or liabilities of the Company to the Noteholders hereunder
or at common law or otherwise. The provisions of this Section 11.4 shall survive
the payment of the Notes and the termination of this Agreement.
11.5 Waiver of Jury Trial, Setoff and Counterclaim. THE COMPANY AND THE
NOTEHOLDERS IN ANY LITIGATION (WHETHER OR NOT ARISING OUT OF OR RELATING TO THIS
AGREEMENT) IN WHICH THEY SHALL BE ADVERSE PARTIES WAIVE THE RIGHT OF TRIAL BY
JURY AND THE COMPANY WAIVES THE RIGHT TO INTERPOSE ANY SETOFF OR COUNTERCLAIM OF
ANY KIND OR DESCRIPTION IN ANY SUCH LITIGATION.
11.6 Waiver of Automatic Stay. THE COMPANY AGREES THAT, IN THE EVENT THAT
THE COMPANY SHALL (I) FILE WITH ANY BANKRUPTCY COURT OF COMPETENT JURISDICTION
OR BE THE SUBJECT OF ANY PETITION UNDER
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TITLE 11 OF THE U.S. CODE, AS AMENDED ("BANKRUPTCY CODE"), (II) BE THE SUBJECT
OF ANY ORDER FOR RELIEF ISSUED UNDER THE BANKRUPTCY CODE, (III) FILE OR BE THE
SUBJECT OF ANY PETITION SEEKING ANY REORGANIZATION, ARRANGEMENT, COMPOSITION,
READJUSTMENT, LIQUIDATION, DISSOLUTION, OR SIMILAR RELIEF UNDER ANY PRESENT OR
FUTURE FEDERAL OR STATE ACT OR LAW RELATING TO BANKRUPTCY, INSOLVENCY, OR OTHER
RELIEF FOR DEBTORS, (IV) HAVE SOUGHT OR CONSENTED TO OR ACQUIESCED IN THE
APPOINTMENT OF ANY TRUSTEE, RECEIVER, CONSERVATOR OR LIQUIDATOR, OR (V) BE THE
SUBJECT OF ANY ORDER, JUDGMENT, OR DECREE ENTERED BY ANY COURT OF COMPETENT
JURISDICTION APPROVING A PETITION FRED AGAINST SUCH PARTY FOR ANY
REORGANIZATION, ARRANGEMENT, COMPOSITION, READJUSTMENT, LIQUIDATION,
DISSOLUTION, OR SIMILAR RELIEF UNDER ANY PRESENT OR FUTURE FEDERAL OR STATE ACT
OR LAW RELATING TO BANKRUPTCY, INSOLVENCY, OR RELIEF FOR DEBTORS, THE
NOTEHOLDERS SHALL THEREUPON BE ENTITLED AND THE COMPANY IRREVOCABLY CONSENTS TO
IMMEDIATE AND UNCONDITIONAL RELIEF FROM ANY AUTOMATIC STAY IMPOSED BY SECTION
362 OF THE BANKRUPTCY CODE, OR OTHERWISE, ON OR AGAINST THE EXERCISE OF THE
RIGHTS AND REMEDIES OTHERWISE AVAILABLE TO THE NOTEHOLDERS AS PROVIDED FOR
HEREIN, IN THE NOTE, OR ANY OTHER FINANCING DOCUMENTS DELIVERED IN CONNECTION
HEREWITH AND AS OTHERWISE PROVIDED BY LAW, AND THE COMPANY HEREBY IRREVOCABLY
WAIVES ANY RIGHT TO OBJECT TO SUCH RELIEF AND WILL NOT CONTEST ANY MOTION BY THE
NOTEHOLDERS SEEKING RELIEF FROM THE AUTOMATIC STAY AND THE COMPANY WILL
COOPERATE WITH THE NOTEHOLDERS, IN ANY MANNER REQUESTED BY THE NOTEHOLDERS, IN
ITS EFFORTS TO OBTAIN RELIEF FROM ANY SUCH STAY OR OTHER PROHIBITION.
11.7 Modification and Waiver; Voting. (a) This Agreement and the Notes may
be amended, and the observance of any term hereof or of the Notes may be waived
(either retroactively or prospectively), with (and only with) the written
consent of the Company and the Required Holders, except that no such amendment
or waiver may, without the written consent of the holder of each Note at the
time outstanding affected thereby, (i) subject to the provisions of Article IX
relating to acceleration or rescission, change the amount or time of any
prepayment or payment of principal of, or reduce the rate or change the time of
payment or method of computation of interest or of premium on, the Notes, (ii)
change the percentage of the principal amount of the Notes the holders of which
are required to consent to any such amendment or waiver, or (iii) amend any of
Sections 2.3, 9.1(a), 9.2, 9.3, 9.4 or 11.7.
47
<PAGE>
(b) Except as otherwise provided herein, all actions to be taken by the
Noteholders shall be in accordance with the instructions of the holders of 51%
of the aggregate outstanding principal amounts of the Notes (the "Required
Holders").
11.8 Severability. In the event any one or more of the provisions
contained in this Agreement or in any other Financing Document should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby. The parties shall endeavor in
good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
11.9 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Company, the Noteholders, all future holders of the
Notes and their respective successors and assigns, except that the Company may
not assign or transfer any of its rights under this Agreement without the prior
written consent of the Noteholders, and any attempt at such assignment without
such consent shall be void, and at the option of the Noteholders, be deemed a
Default under this Agreement. The term "Noteholders" as used in this Agreement
shall be deemed to include the Purchaser and its successors, endorsees and
assigns, and the Notes connected with or contemplated by this transaction may be
assigned, serviced and/or participated in (either in whole or in part) by the
Noteholders and/or their successors and assigns.
11.10 Governing Law; Consent to Jurisdiction. This Agreement, the Note
and any documents and instruments delivered in connection herewith and therewith
and the rights and duties of the parties hereunder and thereunder shall be
governed by, and construed and interpreted in accordance with, the laws of the
State of New York, and the Company consents to the non-exclusive jurisdiction of
the courts of the State of New York in any action brought to enforce any rights
of the Noteholders under this Agreement, the Note and any document and
instrument related hereto.
11.11 Entire Agreement. This Agreement and any other agreements,
documents and instruments executed and delivered pursuant to or in connection
with the Notes contain the entire agreement between the parties relating to the
subject matter hereof and thereof. The Company expressly acknowledges that the
Noteholders have not made and the Company is not relying on any oral
representations, agreements or commitments of the Noteholders or any officer,
employee, agent or representative thereof.
11.12 Interest Adjustment. Notwithstanding anything to the contrary
contained in this Agreement or in the Note, if at any time the applicable rate
of interest payable on the Note, together with all fees and charges which are
treated as interest under applicable law
48
<PAGE>
(collectively, the "Charges"), as provided for in this Agreement, the Notes or
in any other document executed in connection herewith or therewith, or otherwise
contracted for, charged, received, taken or reserved by the Noteholders, shall
exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for,
charged, taken, received or reserved by the Noteholders in accordance with
applicable law, the rate of interest payable under the Notes held by the
Noteholders, together with all Charges payable to the Noteholders, shall be
limited to the Maximum Rate. The Company hereby agrees to give the Noteholders
prior written notice in the event that any interest payment made to the
Noteholders with respect to the Note will cause the total interest payments
collected in any one year to be illegal under applicable law. In the event that
the interest referred to hereunder or the Notes would be illegal in the
Noteholders' opinion, the Noteholders reserve the right to reduce the interest
payable by the Company or apply any sum in excess of the maximum collectible
interest in reduction of principal.
11.13 Section Titles. The Section titles contained in this Agreement are
and shall be without substantive meaning or content of any kind whatsoever, and
are not a part of the agreement among the parties hereto.
11.14 Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument.
11.15 Indemnities. (a) The Company hereby indemnifies and agrees to hold
harmless each Noteholder and its officers, directors, employees and agents
against and from any and all suits, actions, proceedings, claims, damages,
losses, liabilities and expenses (including reasonable attorneys' fees and
expenses) which may be instituted or asserted against or incurred by such
indemnified Person arising out of, in any way connected with, or as a
consequence of any of the following:
(i) the use of any proceeds of the Notes; or
(ii) this Agreement, any of the other Financing Documents, the performance
by the parties hereto and thereto of their respective obligations
hereunder and thereunder, and consummation of the transactions
contemplated hereby and thereby; or
(iii) default in payment of the principal amount of the Notes or any part
thereof or interest accrued thereon, or any other amount due in connection
with any of the Financing Documents; or
(iv) the occurrence of any other Default or Event of Default under this
Agreement; or
49
<PAGE>
(v) any claim, litigation, investigation or proceeding relating to any of
the foregoing, whether or not such indemnified Person is a party thereto.
(b) A certificate as to any additional amounts payable pursuant to this
Section 11.15 setting forth the basis and method of determining such amounts
shall be conclusive, absent manifest error, as to the determination by such
Noteholder or such other indemnified Person set forth therein if made reasonably
and in good faith. The Company shall pay any amounts so certified to it by such
Noteholder or such other indemnified Person within ten (10) days of receipt of
any such certificate. The provisions of this Section 11.15 shall remain
operative and in full force and effect regardless of the expiration of the term
of this Agreement, the consummation of the transactions contemplated hereby, the
repayment of any or all of the Notes, the invalidity or unenforceability of any
term of this Agreement or any of the other Financing Documents, or any
investigation made by or on behalf of the Noteholders or any other indemnified
Person.
11.16 Transfer and Exchange of Notes. Upon surrender of any Note at the
principal executive office of the Company for registration of transfer or
exchange (and in the case of a surrender for registration of transfer, duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered holder of such Note or his attorney duly authorized in writing and
accompanied by the address for notices of each transferee of such Note or part
thereof), the Company shall execute and deliver, at the Company's expense
(except as provided below), one or more new Notes (as requested by the holder
thereof) in exchange therefor, in an aggregate principal amount equal to the
unpaid principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such holder may request and shall be substantially in
the form of Exhibit 5.1. Each such new Note shall be dated and bear interest
from the date to which interest shall have been paid on the surrendered Note or
dated the date of the surrendered Note if no interest shall have been paid
thereon. The Company may require payment of a sum sufficient to cover any stamp
tax or governmental charge imposed in respect of any such transfer of Notes.
Notes shall not be transferred in denominations of less than $100,000, provided
that if necessary to enable the registration of transfer by a holder of its
entire holding of Notes, one Note may be in a denomination of less than
$100,000. Any transferee, by its acceptance of a Note registered in its name (or
the name of its nominee), shall be deemed to have made the representation set
forth in Section 6.2 or shall make a comparable representation with respect to
the source of funds used to purchase the Note.
11.17 Place of Payment. The Company will pay all sums becoming due on such
Note by wire transfer of immediately available funds to Chase Bank Texas, NA
Houston, Texas, ABA Routing No. 113000609, Wire Clearing - Asset Backed, Account
No. 00102619468, for further credit to Magnetite Asset Investors L.L.C., Account
No. 2303901, or by such other method or at such other address as any Noteholder
shall have from time to
50
<PAGE>
time specified to the Company in writing for such purpose as to its Note(s),
without the presentation or surrender of such Note or the making of any notation
thereon, except that upon written request of the Company made concurrently with
or reasonably promptly after payment or prepayment in full of any Note, each
Noteholder shall surrender such Note for cancellation, reasonably promptly after
any such request, to the Company at its principal executive office or at the
place of payment most recently designated by the Company. Prior to any sale or
other disposition of any Note held by any Noteholder will, at its election,
either endorse thereon the amount of principal paid thereon and the last date to
which interest has been paid thereon or surrender such Note to the Company in
exchange for a new Note or Notes pursuant to Section 11.17 The Company will
afford the benefits of this Section 11.17 to any Person that is the direct or
indirect transferee of any Note purchased by any Noteholder under this Agreement
and that has made the same agreement relating to such Note as such Noteholder
have made in this Section 11.17. All payments with respect to any Note shall be
made by the Company from within the United States.
11.18 Cooperation as to Certain Matters. The Noteholders shall reasonably
cooperate with the Company, upon written request, in order to enable it or any
underwriter of the Company's securities to respond to any inquiries made by the
Securities and Exchange Commission and the National Association of Securities
Dealers, Inc. and take commercially reasonable remedial steps, if any,
necessitated by any action thereby, provided that such remedial steps shall not,
taken as a whole, reduce the economic benefit to the Noteholders of the
transactions contemplated hereby and by the Warrant Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in New York, New York by their proper and duly
authorized officers as of the day and year first above written.
THE NEW YORK RESTAURANT GROUP, INC.
By: /s/ Mark K. Levine
-----------------------------------------
Name: Mark K. Levine
Title: Executive Vice President
MAGNETITE ASSET INVESTORS L.L.C.
By: BLACKROCK FINANCIAL MANAGEMENT, INC.,
as Managing Member
By:
-----------------------------------------
Name: Dennis M. Schaney
Title: Managing Director
52
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in New York, New York by their proper and duly
authorized officers as of the day and year first above written.
THE NEW YORK RESTAURANT GROUP, INC.
By:
-----------------------------------------
Name: Mark K. Levine
Title: Executive Vice President
MAGNETITE ASSET INVESTORS L.L.C.
By: BLACKROCK FINANCIAL MANAGEMENT, INC.,
as Managing Member
By: /s/ Dennis M. Schaney
-----------------------------------------
Name: Dennis M. Schaney
Title: Managing Director
52
<PAGE>
EXHIBIT 5.1
THE NEW YORK RESTAURANT GROUP INC.
12 1/2% Senior Subordinated Note due June 29, 2006 (the "Note")
No. 1 New York, N.Y.
$10,000,000 June 29, 1999
THE NEW YORK RESTAURANT GROUP INC., a Delaware corporation (the
"Company"), for value received, hereby promises to pay to Magnetite Asset
Investors L.L.C., a Delaware limited company ("Magnetite"), or registered
assigns the principal sum of ten million Dollars ($10,000,000) on June 29, 2006;
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the unpaid principal balance hereof from the date of this Note at the
rate of 12 1/2% per annum, semiannually on January 1 and July 1 of each year,
commencing on January 1, 2000, until the principal amount hereof shall become
due and payable (whether on maturity or at a date fixed for prepayment or by
declaration or otherwise); and to pay any interest on any overdue principal
(including any overdue prepayment of principal) and premium, if any, and (to the
extent permitted by applicable law) on any overdue payment of interest, at the
rate of 2% per annum until paid, payable semiannually as aforesaid or, at the
option of the holder hereof, on demand.
Payments of principal, premium, if any, and interest on this Note shall be
made in such coin or currency of the United States of America as at the time of
payment is legal tender for the payment of public and private debts by check
mailed and addressed to the holder hereof at the address shown in the register
maintained by the Company for such purpose, or, at the option of the holder
hereof, in such manner and at such other place in the United States of America
as the holder hereof shall have designated to the Company in writing.
This Note is one of the Company's 12 1/2% Senior Subordinated Notes due
June 29, 2006 (the "Notes"), originally issued in the aggregate principal amount
of ten million Dollars ($10,000,000.00) pursuant to the Company's Senior
Subordinated Note Purchase Agreement with Magnetite, dated June 29, 1999, as
from time to time amended (the "Note Purchase
<PAGE>
Agreement"). The holder of this Note is entitled to the benefits of such Note
Purchase Agreement and may enforce the agreements of the Company contained
therein and exercise the remedies provided thereby or otherwise available in
respect thereof. As provided in such Note Purchase Agreement, this Note is
subject to payment, in whole or in part, in certain cases without premium and in
other cases with a premium as specified in said Note Purchase Agreement. The
Company agrees to make required payments on account of the Notes in accordance
with the provisions of such Note Purchase Agreement.
This Note is expressly subordinated in right of payment, to the extent and
in the manner provided in Article 10 of the Note Purchase Agreement, to the
prior payment in full of all Senior Indebtedness (as defined therein).
This Note is a registered Note and is transferable only upon surrender of
this Note for registration of transfer, duly endorsed, or accompanied by a
written instrument of transfer duly executed by the registered holder of this
Note or his attorney duly authorized in writing.
THIS NOTE WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID"). THE COMPANY
WILL MAKE AVAILABLE TO EACH HOLDER, UPON REASONABLE REQUEST THEREOF DIRECTED TO
THE COMPANY'S CHIEF FINANCIAL OFFICER, MARK LEVINE, AT (212) 838-2061, RELEVANT
OLD CALCULATIONS WITH RESPECT TO THIS NOTE.
In case an Event of Default (as defined in the Note Purchase Agreement)
shall occur and be continuing, the unpaid balance of the principal of this Note
may be declared due and payable in the manner and with the effect provided in
such Note Purchase Agreement, subject to the subordination provisions referenced
above.
This Note is made and delivered in New York, New York, and shall be
governed by and construed in accordance with the laws of the State of New York.
THE NEW YORK RESTAURANT GROUP INC.
By /s/ Mark Levine
--------------------------------------
Name:
Title:
(CORPORATE SEAL)
2
<PAGE>
EXHIBIT 5.2
================================================================================
SUBSIDIARIES' GUARANTY
June 29, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS ...........................................................2
2. GUARANTY ..............................................................2
2.1 The Guaranty .................................................2
2.2 Guaranty Absolute ............................................2
2.3 Continuing Guaranty ..........................................5
2.4 Waivers ......................................................5
2.5 Several Obligations ..........................................7
2.6 Stay of Acceleration .........................................7
2.7 Subrogation ..................................................7
2.8 General Limitation on Guaranteed Obligations .................8
3. REPRESENTATIONS AND WARRANTIES ........................................9
3.1 Representations and Warranties of Guarantors .................9
4. COVENANTS OF GUARANTORS ..............................................11
4.1 Covenants of Guarantors .....................................11
4.2 Subordination of Subsidiaries' Subordinated Indebtedness ....12
4.3 Subordination to Senior Guaranteed Obligations ..............13
5. MISCELLANEOUS ........................................................14
5.1 Notices .....................................................14
5.2 No Waiver ...................................................14
5.3 Amendments and Waivers ......................................15
5.4 Costs, Expenses and Taxes; Indemnity ........................15
5.5 Severability ................................................15
5.6 Captions ....................................................15
5.7 Continuing Guarantee; Transfer of Obligations ...............15
5.8 Limitation by Law ...........................................16
5.9 Waiver ......................................................16
5.10 Submission to Jurisdiction ..................................16
<PAGE>
5.11 Governing Law ...............................................17
Schedules
SCHEDULE 3.1(d) -- Required Authorizations
<PAGE>
EXHIBIT 5.2
THIS SUBSIDIARIES' GUARANTY, dated as of June 29, 1999, made by The
Manhattan Ocean Club Associates, LLC, La Cite Associates, L.L.C., Atlantic &
Pacific Grill Associates, L.L.C., Mrs. Park Sub, LLC, New York RGI Sub, LLC,
Restaurant Group Management Service, LLC, S&W Chicago, L.L.C., S&W of Miami,
L.L.C., S&W of Las Vegas, L.L.C., S&W D.C., L.L.C., MOC D.C., L.L.C., S&W New
Orleans, L.L.C. and MOC of Miami, L.L.C. (collectively, the "Guarantors") in
favor of the Purchaser (as hereinafter defined) under the Senior Subordinated
Note Agreement described below, and the holders, including the Purchaser, from
time to time of the Notes (as hereinafter defined) issued pursuant thereto;
W I T N E S S E T H:
WHEREAS, The New York Restaurant Group Inc., a Delaware corporation
(the "Company"), has entered into a Senior Subordinated Note Purchase Agreement,
dated as of June 29, 1999 (as amended, modified or supplemented from time to
time, the "Note Purchase Agreement") with Magnetite Asset Investors L.L.C., a
Delaware limited liability company (the "Purchaser"), pursuant to which the
Company will sell the 12 1/2% Senior Subordinated Notes due June 29, 2006 (the
"Notes") to the Purchaser from time to time; and
WHEREAS, to induce the Purchaser to purchase the Notes and in
consideration of the purchase of the Notes, the Guarantors are executing and
delivering this Subsidiaries' Guaranty; and
WHEREAS, the sale of the Notes by the Company under the Note
Purchase Agreement is of material benefit to the Guarantors; and
WHEREAS, as of the date of this Subsidiaries' Guaranty, the proceeds
of the sale of the Notes by the Company under the Note Purchase Agreement will
be used by the Company to repay outstanding advances under the Senior Loan (as
defined hereinafter), the proceeds of which were, directly or indirectly, used
for the benefit of, among the others, the Guarantors, and for other general
working capital purposes; and
WHEREAS, each Guarantor has determined, reasonably and in good
faith, that it has adequate capital to conduct its business as presently
conducted and as proposed
<PAGE>
to be conducted and that it will be able to meet its obligations hereunder and
in respect of its other existing and future indebtedness and liabilities as and
when the same shall become due and payable; and
WHEREAS, each Guarantor has determined that the execution and
delivery of this Subsidiaries' Guaranty is in furtherance of its corporate
purposes and is in its best interests, having regard to all relevant facts and
circumstances;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the Guarantors, the Guarantors hereby agree as follows:
1. DEFINITIONS.
Terms defined in the Note Purchase Agreement and not otherwise
defined herein are used herein as therein defined.
2. GUARANTY.
2.1 The Guaranty.
Each Guarantor hereby unconditionally and irrevocably guarantees to
the Purchaser and to the holders from time to time of the Notes, the due,
punctual, complete and irrevocable payment of all present and future amounts
payable by the Company to such Purchaser and to such holders evidenced by or
arising out of the Note Purchase Agreement and the Notes, including, but not
limited to, the payment of principal of and premium, if any, and interest on the
Notes and of all other sums now or hereafter owed by the Company to such
Purchaser and to such holders under the Note Purchase Agreement or the Notes or
under any other Financing Document, as and when the same shall become due and
payable, whether at maturity or by required or optional prepayment or by
declaration or otherwise, according to the terms thereof (the "Guaranteed
Obligations").
2.2 Guaranty Absolute.
This Subsidiaries' Guaranty is a guaranty of payment and not of
collectability and is in no way conditioned or contingent upon any attempt to
collect from or enforce performance or compliance by the Company or upon any
other event, contingency or circumstance whatsoever. If for any reason
whatsoever the Company shall fail or be unable duly, punctually, fully and
irrevocably to pay such amounts to the Purchaser hereunder as and
2
<PAGE>
when the same shall become due and payable, even if such failure or inability
shall not constitute an "Event of Default" under any Financing Document, the
Guarantors, without demand, presentment, protest or notice of any kind, will
forthwith pay or cause to be paid such amounts (together with interest to the
extent provided for under such Financing Document) to such Purchaser and to the
holders of the Notes or other Persons entitled thereto under the terms of such
Financing Document, in lawful money of the United States, at the place specified
in the Note Purchase Agreement; and each Guarantor hereby independently promises
to pay to such Purchaser and to each holder of the Notes all amounts when due
with respect to the Guaranteed Obligations to the extent not theretofore
irrevocably duly paid by the Company. The obligations of each Guarantor
hereunder are independent of the obligations of the Company under the Note
Purchase Agreement and the Notes, and a separate action or proceeding may be
brought and prosecuted against any Guarantor whether or not action is brought
against the Company and whether or not the Company is joined in any such action
or proceeding. Each Guarantor hereby agrees that, to the fullest extent
permitted by applicable law, the liability of such Guarantor under this
Subsidiaries' Guaranty shall be absolute and unconditional, and shall not be
affected or released in any way, irrespective of:
(a) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of the Company under any Financing
Document;
(b) any modification or amendment of, or supplement to, any
Financing Document;
(c) any adjustment, waiver, amendment, consent to departure,
settlement, indulgence, forbearance, termination, release or compromise
that might be granted or given by the holders of the Notes to the Company
or any Guarantor or any other Person liable on the Guaranteed Obligations;
(d) the insolvency, bankruptcy, suspension of payments, arrangement,
adjustment, composition, liquidation, disability or lack of power of the
Company or any Guarantor or any other Person at any time liable for the
payment of all or part of the Guaranteed Obligations or any dissolution of
the Company, any Guarantor or any other Person liable for payment of the
Guaranteed Obligations or any sale, lease or transfer of any or all of the
assets of the Company, any Guarantor or any other Person liable for
payment of the Guaranteed Obligations, or any changes in the shareholders,
partners or any reorganization of the Company, any Guarantor or any other
Person liable for payment of the Guaranteed Obligations;
3
<PAGE>
(e) any change in the corporate existence, structure or ownership of
the Company or any Guarantor or any other Person, or any insolvency,
bankruptcy, suspension of payments, reorganization or other similar
proceeding affecting the Company, any Guarantor or any other Person or its
assets;
(f) the existence of any claim, set-off or other rights that any
Guarantor may have at any time against the Company, the holders of the
Notes or any other Person, whether or not arising in connection with this
Subsidiaries' Guaranty, or any Financing Document; provided, however, that
nothing herein shall prevent the assertion of any such claim by separate
suit or compulsory counterclaim;
(g) any invalidity or unenforceability relating to or against the
Company for any reason under any Financing Document, or any provision of
applicable law or any regulation purporting to prohibit the payment by the
Company of any Guaranteed Obligation;
(h) any act or omission to act or delay of any kind by the Company,
any holder of a Note or any other Person or any other circumstance
whatsoever that might, but for the provisions of this paragraph,
constitute a legal or equitable discharge of any Guaranteed Obligation;
(i) any failure, omission or delay on the part of the Company to
conform or comply with any term of any Financing Agreement, or any
failure, omission or delay on the part of the holder of any of the Notes
to enforce, assert or exercise any right, power or remedy conferred on it
in this Subsidiaries' Guaranty;
(j) any limitation on the liability or obligations of the Company or
any other Person under any Financing Document, or any discharge,
termination, cancellation, frustration, irregularity, invalidity or
unenforceability, in whole or in part, of any Financing Document; or
(k) any other occurrence, circumstance, happening or event
whatsoever, whether similar or dissimilar to the foregoing, whether
foreseen or unforeseen, and any other circumstance that might otherwise
constitute a legal or equitable defense or discharge of the liabilities of
a guarantor or surety or that might otherwise limit recourse against any
Guarantor.
This Subsidiaries' Guaranty shall continue to be effective or be
automatically reinstated, as the case may be, if at any time any payment of any
Guaranteed Obligation, or
4
<PAGE>
any part thereof, is rescinded or reduced in amount or must otherwise be
restored or returned by the holders of the Notes upon the insolvency,
bankruptcy, suspension of payments or reorganization of the Company, or any
Guarantor or any other Person or otherwise, all as though such payment had not
been made. The obligations of each Guarantor under this guaranty shall not be
affected by the amount of credit that may be extended to the Company, the number
of transactions with the Company, any repayment by the Company to the holders of
the Notes other than the full and final payment of all of the Guaranteed
Obligations, allocation by the holders of the Notes of any repayment, any
compromise or discharge of the Guaranteed Obligation, or any further advances to
the Company, or for any other reason. Each Guarantor agrees that this
Subsidiaries' Guaranty shall not be discharged except by complete performance of
the Guaranteed Obligations.
2.3 Continuing Guaranty.
This is a continuing guaranty, and all extensions of credit and
financial accommodations heretofore, concurrently herewith or hereafter made by
the holders of the Notes to the Company and all indebtedness of the Company now
owned or hereafter acquired by the holders of the Notes shall be conclusively
presumed to have been made or acquired in acceptance hereof.
2.4 Waivers.
Each Guarantor hereby unconditionally and irrevocably waives, to the
fullest extent permitted by applicable law:
(a) notice of any of the matters referred to in Section 2.2;
(b) notice to such Guarantor of the incurrence of any of the
Guaranteed Obligations, notice to such Guarantor or the Company of any
breach or default by the Company with respect to any of the Guaranteed
Obligations or any other notice that may be required, by statute, rule of
law or otherwise, to preserve any rights of any holder of any of the Notes
against such Guarantor;
(c) presentment to or demand of payment from the Company or such
Guarantor with respect to any Note or protest for nonpayment or dishonor;
(d) any right to the enforcement, assertion or exercise by any
holder of any of the Notes of any right, power, privilege or remedy
conferred in the Note Purchase Agreement or any other Financing Document
or otherwise;
5
<PAGE>
(e) any requirement of diligence on the part of any holder of any of
the Notes;
(f) any requirement to exhaust any remedies or to mitigate the
damages resulting from any default under any Financing Document;
(g) any notice of any sale, transfer or other disposition of any
right, title to or interest in any Note by any holder thereof or in any
other Financing Document;
(h) any release of such Guarantor from its obligations hereunder
resulting from any loss by it of its rights of subrogation hereunder;
(i) any requirement of acceptance of this Subsidiaries' Guaranty by
or on behalf of any beneficiary hereof;
(j) any benefit of any statute of limitations affecting such
Guarantor's liabilities hereunder or the enforcement hereof; and
(k) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge, release or defense of a
guarantor or surety or which might otherwise limit recourse against such
Guarantor.
Each Guarantor authorizes the holders of the Notes, without notice
or demand and without affecting any of such Guarantor's liability hereunder, to
take and hold security for the payment of this guaranty and/or the indebtedness
guaranteed hereby and to exchange, enforce, waive and release any such security
and to apply such security and direct the order or manner of sale thereof as the
holders of the Notes in their discretion may determine; and to obtain a guaranty
of the Guaranteed Obligations from any one or more Persons and at any time or
times to enforce, waive, rearrange, modify, limit or release any of such other
Persons from their obligations under such guaranties. If the holders of the
Notes seek to enforce the obligations of any Guarantor by action in any court,
such Guarantor waives any necessity, substantive or procedural, that a judgment
previously be rendered against the Company, such Guarantor, any other Guarantor
or any other Person, or that any action be brought against the Company or any
other Person, or that the Company, such Guarantor, any other Guarantor or any
other Person should be joined in such cause. Such waiver shall be without
prejudice to the holders of the Notes at their option to proceed against the
Company, such Guarantor, any other Guarantor or any other Person, whether by
separate action or by joinder. The holders of the Notes shall not be required to
mitigate damages or take any action to reduce, collect or enforce the Guaranteed
Obligations.
6
<PAGE>
2.5 Several Obligations.
The obligations of each Guarantor hereunder are several from the
Company, any other Guarantor or any other Person, and are primary obligations
concerning which such Guarantor is the principal obligor, and are not subject to
any counterclaim, set-off, deduction, diminution, abatement, recoupment,
suspension, deferment or defense based upon any claim such Guarantor or any
other Person may have against the Company, the holders of the Notes, any other
Guarantor or any other Person, and shall remain in full force and effect without
regard to, and shall not be released, discharged or in any way affected by, any
circumstance or condition whatsoever (whether or not such Guarantor or the
Company shall have any knowledge or notice thereof).
2.6 Stay of Acceleration.
If an event permitting the acceleration of any of the Guaranteed
Obligations shall at any time have occurred and be continuing and such
acceleration shall at such time be prevented by reason of the pendency against
the Company of a case or proceeding under any bankruptcy or insolvency law, each
Guarantor agrees that, for purposes of this Subsidiaries' Guaranty and its
obligations hereunder, the Guaranteed Obligations shall be deemed to have been
accelerated and such Guarantor shall forthwith pay such Guaranteed Obligations
(including, without limitation, interest that but for the filing of a petition
in bankruptcy, suspension of payments or reorganization with respect to the
Company, would accrue on such Guaranteed Obligations), and the other obligations
hereunder, without any further notice or demand.
2.7 Subrogation.
Upon the making by any Guarantor of any payment hereunder for the
account of the Company, such Guarantor shall be subrogated to the rights of the
payee against the Company with respect to such payment; provided, that such
Guarantor shall not enforce any right or receive any payment by way of
subrogation, reimbursement or indemnity until all Guaranteed Obligations shall
have been paid in full.
2.8 General Limitation on Guaranteed Obligations.
(a) In any action or proceeding involving any foreign or state
corporate law, or any foreign, state or Federal bankruptcy, insolvency,
suspension of payments, reorganization or other law affecting the rights
of creditors generally, if the Guaranteed Obligations would otherwise,
taking into account the provisions of
7
<PAGE>
Section 2.7 hereof, be held or determined to be void, invalid or
unenforceable, or subordinated to the claims of any other creditors, on
account of the amount of any Guarantor's liability for the Guaranteed
Obligations, then, notwithstanding any other provision hereof to the
contrary, the amount of such liability shall, without any further action
by such Guarantor, any holders of Notes or any other Person, be
automatically limited and reduced to the highest amount that is valid and
enforceable and not subordinated to the claims of other creditors as
determined in such action or proceeding.
(b) Without in any way modifying or affecting any Guarantor's
obligations hereunder, to the extent such Guarantor makes any payment
hereunder that, when added to all preceding payments made by such
Guarantor hereunder would result in the aggregate payments hereunder by
such Guarantor exceeding its Percentage (as hereinafter defined) of all
payments then or theretofore made by all Guarantors under this
Subsidiaries' Guaranty, such Guarantor shall have a right of contribution
against each other Guarantor whose aggregate payments under this
Subsidiaries' Guaranty at any time of determination are less than its
Percentage of all payments made by all the other Guarantors, in an amount,
and with the effect, that after giving effect to any such contribution
rights, such Guarantor will be responsible only for its Percentage of all
payments made by all the other Guarantors under this Subsidiaries'
Guaranty. As used in this Section 2.8, such Guarantor's "Percentage" shall
mean the percentage obtained by dividing (i) the amount of such
Guarantor's obligation hereunder, as such amount would be determined
pursuant to subsection (a) of this Section 2.8 without taking into account
its subrogation and contribution rights, by (ii) the aggregate of the
amounts of all the other Guarantors' obligations under this Subsidiaries'
Guaranty, as such amounts would be determined pursuant to subsection (a)
of this Section 2.8 without taking into account the subrogation and
contribution rights of any such other Guarantors under this Subsidiaries'
Guaranty.
(c) To the extent set forth in Section 2.8(a), but only to the
extent that the obligations of any Guarantor would otherwise be subject to
avoidance under Section 2.8(a) if such Guarantor is not deemed to have
received valuable consideration, fair value, fair consideration or
reasonably equivalent value for such transfers or obligations, or if such
transfers or obligations of such Guarantor hereunder would render such
Guarantor insolvent, or leave such Guarantor with an unreasonably small
capital or unreasonably small assets to conduct its business, or cause
such Guarantor to have incurred debts (or to have intended to have
incurred debts) beyond its ability to pay such debts as they mature, in
each case as of the time any of the obligations of such Guarantor are
deemed to have been incurred and
8
<PAGE>
transfers are made under Section 2.8(a), then the obligations of such
Guarantor hereunder shall be reduced to that amount that, after giving
effect thereto, would not cause the obligations of such Guarantor
hereunder (or any other obligations of such Guarantor to the Purchaser or
any other Person holding any of the Notes), as so reduced, to be subject
to avoidance.
3. REPRESENTATIONS AND WARRANTIES.
3.1 Representations and Warranties of Guarantors.
Each Guarantor hereby represents and warrants as follows:
(a) Organization; Power and Authority. Each Guarantor is duly
organized, validly existing and in good standing under the laws of its
formation and is duly qualified to transact business and is in good
standing in each foreign jurisdiction in which such qualification is
required by law, other than those jurisdictions as to which the failure to
be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Each
Guarantor has the power and authority to own or hold under lease the
properties it purports to own or hold under lease, to transact the
business it transacts and proposes to transact, to execute and deliver
this Subsidiaries' Guaranty and to perform the provisions hereof and
thereof.
(b) Authorization, etc.. This Subsidiaries' Guaranty has been duly
authorized by all necessary action on the part of each Guarantor, and this
Subsidiaries' Guaranty constitutes, a legal, valid and binding obligation
of such Guarantor enforceable against such Guarantor in accordance with
its terms, except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, fraudulent conveyance, suspension of payments,
reorganization, moratorium or other similar laws affecting the enforcement
of creditors' rights generally and (ii) general principles of equity.
(c) Compliance with Laws, Other Instruments, etc.. The execution,
delivery and performance by each Guarantor of this Subsidiaries' Guaranty
will not (i) contravene, result in any breach of, or constitute a default
under, or result in the creation of any Lien in respect of any property of
such Guarantor under, any indenture, mortgage, deed of trust, loan,
purchase or credit agreement, lease, corporate charter, partnership
agreement, constituting agreement or by-laws, or any other agreement or
instrument to which such Guarantor is bound or by which such Guarantor or
any of its properties may be bound or affected, (ii) conflict with or
result in a breach of any
9
<PAGE>
of the terms, conditions or provisions of any order, judgment, decree, or
ruling of any Governmental Authority applicable to such Guarantor or (iii)
violate any provision of any statute or other rule or regulation of any
Governmental Authority applicable to such Guarantor.
(d) Governmental Authorizations, etc.. Except as disclosed in
Schedule 3.1(d), no consent, approval or authorization of, or
registration, filing or declaration with, any Governmental Authority is
required to be made or obtained by any Guarantor in connection with the
execution, delivery or performance by such Guarantor of this Subsidiaries'
Guaranty.
(e) Changes, Etc. Since December 28, 1998, (i) there has been no
change in the assets, liabilities or financial condition of any Guarantor,
other than changes which do not, either in any case or in the aggregate,
constitute a Material Adverse Effect, (b) there has been no material
change in the assets, liabilities or financial condition of any Guarantor,
other than changes in the ordinary course of business, and (c) the
business, operations or affairs or any of the properties or assets of each
Guarantor have not been affected by any occurrence or development (whether
or not insured against) which constitutes, either in any case or in the
aggregate, a Material Adverse Effect.
(f) Litigation, Etc. There is no action, proceeding or investigation
pending or threatened in writing against any Guarantor which questions the
validity of this Subsidiaries' Guaranty. There is no action, proceeding or
investigation pending or threatened in writing which might, if adversely
determined, qould have a Material Adverse Effect, or in any liability on
the part of such Guarantor, which would be material to such Guarantor.
(g) Compliance with Other Instruments, Etc. Any Guarantor is in
violation of any term of its charter documents, constituting agreements or
by-laws, and any Guarantor is in violation in any material respect of any
term of any agreement or instrument to which it is a party or by which it
is bound or any term of any applicable law, ordinance, rule or regulation
of any governmental authority or any term of any applicable order,
judgment or decree of any court, arbitrator or governmental authority, the
consequences of which violation might have a Material Adverse Effect; the
execution and delivery by such Guarantor of, and performance of the
obligations of such Guarantor under, this Subsidiaries' Guaranty will not
result in any violation of or be in conflict with or constitute a default
under any such term or result in the
10
<PAGE>
creation of (or impose any obligation on such Guarantor to create) any
lien upon any of the properties or assets of such Guarantor pursuant to
any such term, which violation, conflict, default or lien might have a
Material Adverse Effect or upon the ability of such Guarantor to perform
its obligations under this Subsidiaries' Guaranty; and there is no such
term which might have a Material Adverse Effect.
4. COVENANTS OF GUARANTORS.
4.1 Covenants of Guarantors.
Each Guarantor hereby agrees that, so long as it remains obligated
hereunder:
(a) Information. Each Guarantor will deliver to each of the holders
of the Notes from time to time such information regarding its financial
position or business as any such holder may reasonably request.
(b) Covenants. Each Guarantor hereby covenants and agrees that it
shall comply with all of the obligations, requirements and restrictions in
the covenants contained in Sections 6, 7 and 8 of the Note Purchase
Agreement, to the extent they are expressly applicable to such Guarantor,
except that, if compliance with any such obligation, requirement or
restriction has been waived by the holders of the Notes before or after a
default with respect thereto, such waiver shall relieve such Guarantor
from such obligation, requirement or restriction hereunder only to the
extent of such waiver.
(c) Further Assurances. Each Guarantor hereby agrees to execute and
deliver all such instruments and take all such action as the Purchaser or
the holders of the Notes may from time to time reasonably request in order
to effectuate fully the purposes of this Subsidiaries' Guarantee and to
establish and perfect the rights and remedies intended to be created in
favor of the holders of the Notes hereunder or under any of the Financing
Documents. Each Guarantor shall cooperate with the Purchaser and the
holders of the Notes to procure the due payment by the Company of the
Guaranteed Obligations.
4.2 Subordination of Subsidiaries' Subordinated Indebtedness.
(a) Each Guarantor hereby agrees that until such time as all of the
Guaranteed Obligations shall be paid and performed in full, the
Subsidiaries' Subordinated Indebtedness (as hereinafter defined) is and
shall be expressly subordinated, to the
11
<PAGE>
extent and in the manner hereinafter set forth, in right of payment to the
prior payment of the Guaranteed Obligations.
(b) The term "Subsidiaries' Subordinated Indebtedness" shall mean,
at any time, the then outstanding aggregate principal amount of all
indebtedness of the Company to any Guarantor, in each case in respect of
borrowed money, fees, royalties or other intercompany advance or
arrangement (including any subrogation rights with respect to this
Subsidiaries' Guaranty), all accrued and unpaid interest and premium, if
any, thereon and all expenses incurred by and all indemnities payable to
such Guarantor pursuant to any agreement between the Company and such
Guarantor, in respect of any such indebtedness or otherwise.
(c) Upon the happening of an "Event of Default" under the Note
Purchase Agreement, unless and until such Event of Default shall have been
remedied or waived, no direct or indirect payment (in cash, property or
securities or by set-off or otherwise) shall be made or agreed to be made
on account of the Subsidiaries' Subordinated Indebtedness and any
Guarantor shall demand, collect or receive any payment on account of the
Subsidiaries' Subordinated Indebtedness.
(d) In the event of any insolvency, bankruptcy, receivership,
liquidation, suspension of payments, reorganization or other similar
proceedings relating to the Company, or in the event of any proceedings
for the voluntary or involuntary liquidation, dissolution or other
winding-up of the Company, whether or not involving insolvency, bankruptcy
or suspension of payments proceedings, all of the Guaranteed Obligations
(including any interest accruing at the legal rate after the commencement
of any such proceedings and any additional interest that would have
accrued but for the commencement of such proceedings) shall first be paid
in full before any payment or distribution, whether in cash, securities or
other property, shall be made to any Guarantor on account of any
Subsidiaries' Subordinated Indedebtedness. Any payment or distribution,
whether in cash, securities or other property, that would otherwise (but
for these subordination provisions) be payable or deliverable in respect
of Subsidiaries' Subordinated Indebtedness shall be paid or delivered
directly to the holders of the Notes (or to a banking institution selected
by the court or designated by the holders of the Notes) and to the holders
of all other senior indebtedness of the Company then outstanding in
accordance with the priorities then existing among such holders until all
of the Guaranteed Obligations shall have been paid in full.
(e) If any payment or distribution of any character, whether in
cash, property or otherwise, shall be received by any Guarantor in
contravention of any of the terms
12
<PAGE>
of these subordination provisions, such payment or distribution shall be
paid over to the holders of the Notes. Upon payment in full of all of the
Guaranteed Obligations, such Guarantor shall be subrogated to such holders
to receive payments or distributions of assets made with respect to the
Guaranteed Obligations to the extent of amounts payable to such Guarantor
that, pursuant to these subordination provisions, were paid to such
holders and, for the purposes of such subrogation, no payments to the
holders of the Notes of any character to which such Guarantor would be
entitled except for the provisions hereof shall, as between the Company
and their creditors other than such holders, on the one hand, and such
Guarantor, on the other, be deemed to be a payment or distribution by the
Company to or on account of the Guaranteed Obligations.
4.3 Subordination to Senior Guaranteed Obligations.
(a) Each Guarantor hereby agrees that until such time as all of the
Senior Guaranteed Obligations (as defined hereinafter) shall be paid and
performed in full, the Guaranteed Obligations hereunder are and shall be
expressly subordinated in right of payment to such Senior Guaranteed
Obligations, to the same extent and in the same manner set forth in
Article 10 of the Note Purchase Agreement, as if each Guarantor were a
party thereunder.
(b) The term "Senior Guaranteed Obligations" shall mean, the
guaranty by each Guarantor of the payment of all amounts payable by the
Company to the Senior Lender (as hereinafter defined) evidenced by or
arising out of the Loan Agreement, dated October 31, 1997, as amended (the
"Senior Loan"), between the Company and Fleet Bank, N.A. (the "Senior
Lender"), including, but not limited to, the payment of principal of and
premium, if any, and interest on the notes issued pursuant thereto and of
all other sums now or hereafter owed by the Company to such Senior Lender,
as and when the same shall become due and payable, whether at maturity or
by required or optional prepayment or by declaration or otherwise,
according to the terms thereof
5. MISCELLANEOUS.
5.1 Notices.
All notices and communications provided for hereunder shall be in writing
and sent (a) by telecopy if the sender on the same day sends a confirming copy
of such notice by a recognized overnight delivery service (charges prepaid), or
(b) by registered or certified mail
13
<PAGE>
with return receipt requested (postage prepaid), or (c) by a recognized
overnight delivery service (with charges prepaid). Any such notice must be sent:
(a) if to the Purchaser or its nominee, to such Purchaser or nominee
at the address specified in the Note Purchase Agreement, or at such other
address as such Purchaser or such nominee shall have specified to the
Company in writing,
(b) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing,
(c) if to the Company, to the address specified in the Note Purchase
Agreement or at such other address as the Obligor shall have specified to
the holder of each Note in writing,
(d) if to any Guarantor to the address set forth below such
Guarantor's signature herein or at such other address as such Guarantor
shall have specified to the holder of each Note in writing.
Notices under this Section 5.1 will be deemed given only when actually
received.
5.2 No Waiver.
No course of dealing and no delay on the part of any holder of any
Note in exercising any right, power or remedy under any Financing Document shall
operate as a waiver thereof or otherwise prejudice such holder's rights, powers
or remedies. No right, power or remedy conferred by any Financing Document or
any Note upon any holder thereof shall be exclusive of any other right, power or
remedy referred to herein or therein or now or hereafter available at law, in
equity, by statute or otherwise. The Guarantors will pay to the holder of each
Note on demand such further amount as shall be sufficient to cover all
reasonable costs and expenses of such holder incurred in any enforcement or
collection under this Section 5.2, including, without limitation, reasonable
attorneys' fees, expenses and disbursements.
5.3 Amendments and Waivers.
This Subsidiaries' Guaranty may be amended, and the observance of
any term hereof may be waived (either retroactively or prospectively), with (and
only with) the written consent of all the Guarantors and the holder or holders
of at least 66 2/3% in principal amount
14
<PAGE>
of the Notes at such time outstanding. Such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
5.4 Costs, Expenses and Taxes; Indemnity.
The Guarantors agree to pay, and cause to be paid, on demand all
reasonable costs and expenses actually incurred by the holders of the Notes in
connection with the preparation, execution, delivery and administration of this
Subsidiaries' Guaranty, including, without limitation, the reasonable fees and
out-of-pocket expenses of outside counsel for the holders of the Notes with
respect thereto and with respect to advising the holders of the Notes as to
their rights and responsibilities under this Subsidiaries' Guaranty, and all
reasonable costs and expenses, if any (including reasonable counsel fees and
expenses), in connection with the enforcement of this Subsidiaries' Guaranty.
The Guarantors agree to pay interest on any expenses or other sums due to the
holders of the Notes under this Section 5.4 that are not paid when due at a rate
per annum equal to the Post Default Rate with respect to the Notes.
5.5 Severability.
Any provision of this Subsidiaries' Guaranty that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition shall (to the fullest
extent permitted by law) not invalidate or render unenforceable such provision
in any other jurisdiction.
5.6 Captions.
The captions in this Subsidiaries' Guaranty have been inserted for
convenience only and shall be given no substantive meaning or significance
whatever in construing the terms and provisions of this Subsidiaries' Guaranty.
5.7 Continuing Guarantee; Transfer of Obligations.
This Subsidiaries' Guaranty is a continuing guaranty and shall (a)
remain in full force and effect until payment in full of the Guaranteed
Obligations and all other amounts payable under this Subsidiaries' Guaranty; (b)
be binding upon each Guarantor, its successors and assigns; and (c) inure to the
benefit of and be enforceable by the holders of the Notes and their respective
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (c), the holders of the Notes may assign or otherwise transfer
the
15
<PAGE>
Guaranteed Obligations to any other Person or entity and such other Person or
entity shall thereupon become vested with all the rights and benefits in respect
thereof granted to the holders of the Notes herein or otherwise. Any Guarantor
may assign its rights or delegate its obligations hereunder without the prior
written consent of all of the holders of the Notes.
5.8 Limitation by Law.
All rights, remedies and powers provided in this Subsidiaries'
Guaranty may be exercised only to the extent that the exercise thereof does not
violate any applicable provision of law, and all the provisions of this
Subsidiaries' Guaranty are intended to be subject to all applicable mandatory
provisions of law that may be controlling and to be limited to the extent
necessary so that they will not render this guaranty invalid, unenforceable, in
whole or in part, or not entitled to be recorded, registered or filed under the
provisions of any applicable law.
5.9 Waiver.
Each Guarantor hereby waives to the fullest extent allowable by law
any right to require or request a bank guaranty or similar instrument or
security in connection with any action or proceeding in connection with this
Subsidiaries' Guaranty.
5.10 Submission to Jurisdiction.
Each Guarantor hereby irrevocably agrees that any legal action, suit
or proceeding brought by or against it with respect to any matter under or
arising out of or in any way connected with this Subsidiaries' Guaranty or any
document delivered pursuant hereto or thereto or for recognition or enforcement
of any judgment rendered in any such action, suit or proceeding (a "Proceeding")
may be brought in the courts of the State of New York or in the District Court
for the Southern District of New York, at the election of the party bringing
suit. By execution and delivery of this Subsidiaries' Guaranty, each Guarantor
hereby irrevocably accepts and submits to the non-exclusive jurisdiction of the
aforesaid courts in person, generally and unconditionally, with respect to any
Proceeding for itself and in respect of any of its property, assets and
revenues. Each Guarantor hereby irrevocably and unconditionally waives, to the
fullest extent permitted by law, any objection that it may now or hereafter have
to the laying of venue of any Proceeding brought in any such court, and hereby
further irrevocably and unconditionally waives and agrees, to the fullest extent
permitted by law, not to plead or claim that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum, or any
right to require the proceeding to be conducted in any other jurisdiction by
reason of its present or future domicile. Each
16
<PAGE>
Guarantor agrees that a final judgment in any such Proceeding brought in such a
court shall be conclusive and binding upon it and may be enforced in any court
to the jurisdiction of which it is subject by a suit upon such judgment. Each
Guarantor waives personal service of process upon it may be made by certified or
registered mail, return receipt requested, at its address specified or
determined in accordance with the provisions of Section 5.1, and service so made
shall be deemed completed on the third business day after mailing. Nothing
contained in this Section 5.10 shall be deemed to affect the right of the
Purchaser or any subsequent holder of a Note to serve process in any other
manner permitted by law or to commence legal proceedings or otherwise proceed
against any Guarantor in any jurisdiction.
5.11 Governing Law.
THIS SUBSIDIARIES' GUARANTY SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH
STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER
THAN SUCH STATE.
17
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Subsidiaries' Guaranty
to be duly executed as of the date first above written.
THE MANHATTAN OCEAN CLUB
ASSOCIATES, L.L.C.
By /s/ Mark K. Levine
-----------------------------------------
Name:
Title:
LA CITE ASSOCIATES, L.L.C.
By /s/ Mark K. Levine
-----------------------------------------
Name:
Title:
ATLANTIC & PACIFIC GRILL
ASSOCIATES, L.L.C.
By /s/ Mark K. Levine
-----------------------------------------
Name:
Title:
MRS. PARK SUB, L.L.C.
By /s/ Mark K. Levine
-----------------------------------------
Name:
Title:
18
<PAGE>
NEW YORK RGI SUB, L.L.C.
By /s/ Mark K. Levine
-----------------------------------------
Name:
Title:
RESTAURANT GROUP MANAGEMENT
SERVICE, L.L.C.
By /s/ Mark K. Levine
-----------------------------------------
Name:
Title:
S&W CHICAGO, L.L.C.
By /s/ Mark K. Levine
-----------------------------------------
Name:
Title:
S&W OF MIAMI, L.L.C.
By /s/ Mark K. Levine
-----------------------------------------
Name:
Title:
19
<PAGE>
S&W OF LAS VEGAS, L.L.C.
By /s/ Mark K. Levine
-----------------------------------------
Name:
Title:
S&W D.C., L.L.C.
By /s/ Mark K. Levine
-----------------------------------------
Name:
Title:
MOC D.C., L.L.C.
By /s/ Mark K. Levine
-----------------------------------------
Name:
Title:
S&W NEW ORLEANS, L.L.C.
By /s/ Mark K. Levine
-----------------------------------------
Name:
Title:
20
<PAGE>
MOC OF MIAMI, L.L.C.
By /s/ Mark K. Levine
-----------------------------------------
Name:
Title:
21
<PAGE>
EXHIBIT 5.3
================================================================================
WARRANT AGREEMENT
Dated as of
June 29, 1999
among
THE NEW YORK RESTAURANT GROUP, INC.
and
MAGNETITE ASSET INVESTORS L.L.C.
------------------------------------
Warrants for
Common Stock of
THE NEW YORK RESTAURANT GROUP, INC.
------------------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1.
Defined Terms
SECTION 1.1 Definitions ..................................................... 1
SECTION 1.2 Other Definitions ............................................... 4
SECTION 1.3 Rules of Construction ........................................... 5
ARTICLE 2.
Warrant Certificates
SECTION 2.1 Form and Dating of Warrant Certificates ......................... 5
SECTION 2.2 Execution of Warrant Certificates ............................... 6
SECTION 2.3 Certificate Register ............................................ 6
SECTION 2.4 Transfer and Exchange of Warrant Certificates ................... 6
SECTION 2.5 Replacement Warrant Certificates ................................ 7
SECTION 2.6 Temporary Warrant Certificates .................................. 8
SECTION 2.7 Cancellation of Warrant Certificates ............................ 8
ARTICLE 3.
Exercise Terms
SECTION 3.1 Exercise Price .................................................. 8
SECTION 3.2 Exercise Periods ................................................ 8
SECTION 3.3 Expiration ...................................................... 8
SECTION 3.4 Manner of Exercise .............................................. 9
SECTION 3.5 Issuance of Warrant Shares ...................................... 9
SECTION 3.6 Fractional Warrant Shares .......................................10
SECTION 3.7 Reservation of Warrant Shares ...................................10
SECTION 3.8 Compliance with Law .............................................11
i
<PAGE>
Page
----
ARTICLE 4.
Antidilution Provisions
SECTION 4.1 Changes in Common Stock .........................................11
SECTION 4.2 Cash Dividends and Other Distributions ..........................11
SECTION 4.3 [Intentionally omitted.] ........................................12
SECTION 4.4 Combination; Liquidation ........................................12
SECTION 4.5 Tender Offers: Exchange Offers ..................................13
SECTION 4.6 Other Events ....................................................13
SECTION 4.7 Superseding Adjustment ..........................................13
SECTION 4.8 Minimum Adjustment ..............................................14
SECTION 4.9 Notice of Adjustment ............................................14
SECTION 4.10 Notice of Certain Transactions .................................15
SECTION 4.11 Adjustment to Warrant Certificate ..............................15
ARTICLE 5.
Tag-Along Rights
SECTION 5.1 Tag-Along Rights on Transfers ...................................15
ARTICLE 6.
Certain Agreements of the Company
SECTION 6.1 Reporting and Inspection Covenants ..............................16
SECTION 6.2 Nature of Business ..............................................17
SECTION 6.3 Transactions with Affiliates ....................................17
SECTION 6.4 Issuance of Additional Classes of Stock .........................17
SECTION 6.5 Waiver of Preemptive Rights .....................................17
ARTICLE 7.
Registration Rights
SECTION 7.1 Registration Rights .............................................18
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Page
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ARTICLE 8.
Transferability
SECTION 8.1 Legend ..........................................................18
SECTION 8.2 Lock-Ups ........................................................19
ARTICLE 9.
Miscellaneous
SECTION 9.1 Financial Information ...........................................19
SECTION 9.2 Persons Benefitting .............................................19
SECTION 9.3 Indemnity .......................................................20
SECTION 9.4 Rights of Holders ...............................................20
SECTION 9.5 Amendment .......................................................20
SECTION 9.6 Notices .........................................................20
SECTION 9.7 Governing Law ...................................................22
SECTION 9.8 Successors ......................................................22
SECTION 9.9 Multiple Originals ..............................................22
SECTION 9.10 Table of Contents ..............................................22
SECTION 9.11 Severability ...................................................22
SECTION 9.12 Termination ....................................................22
EXHIBIT A - Form of Warrant Certificate
EXHIBIT B - Certificate to be Delivered Upon Exchange or Registration of
Transfer of Warrant Certificates
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WARRANT AGREEMENT, dated as of June 29, 1999 (this "Agreement"), among THE
NEW YORK RESTAURANT GROUP, INC., a Delaware corporation (the "Company"), and
MAGNETITE ASSET INVESTORS L.L.C., a Delaware limited liability company
("Magnetite").
W I T N E S S E T H :
WHEREAS, the Company has agreed to issue to Magnetite, and Magnetite has
agreed to purchase, warrants (the "Warrants") from the Company, each Warrant
initially entitling the holder thereof to purchase one share of Common Stock (as
defined below) of the Company representing in the aggregate 1 1/2 % of the
Common Stock of the Company or, upon the occurrence of certain events, one and
one-third shares of Common Stock of the Company representing in the aggregate 2%
of the Common Stock of the Company, subject to adjustment as provided herein;
and
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto hereby agree as follows:
ARTICLE 1.
Defined Terms
SECTION 1.1 Definitions. All terms defined in the Senior Subordinated Note
Purchase Agreement, dated as of June 29, 1999, between the Company and Magnetite
(the "Note Purchase Agreement") shall have such defined meanings when used
herein unless otherwise defined herein. As used in this Agreement, the following
terms shall have the following meanings:
"Affiliate" means, as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. For purposes of this definition,
"control" of a Person means the power, directly or indirectly, either to (a)
vote 10% or more of the securities having ordinary voting power for the election
of directors of such Person or (b) direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.
"Board" means the Board of Directors of the Company or any committee
thereof duly authorized to act on behalf of such Board of Directors.
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"Business Day" a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to close.
"Cashless Exercise Ratio" means a fraction, the numerator of which is the
excess of the Current Market Value per share of Common Stock on the date of
exercise over the Exercise Price per share as of the date of exercise and the
denominator of which is the Current Market Value per share of the Common Stock
on the date of exercise.
"Closing Date" means the date of the Note Purchase Agreement.
"Combination" means an event in which the Company consolidates with,
merges with or into, or sells all or substantially all its property and assets
to another Person.
"Common Stock" means the common stock of the Company with $.O1 par value
per share issued or issuable upon exercise of the Warrants.
"Current Market Value" per share of Common Stock or any other security at
any date means (i) if the security is not registered under the Exchange Act, the
value of the security as determined in good faith by the Board not taking into
account the absence of an active trading market or the minority nature of the
investment; or (ii) if the security is registered under the Exchange Act, the
average of the daily closing bid prices for each Business Day during the period
commencing 15 Business Days before such date and ending on the date one day
prior to such date, or if the security has been registered under the Exchange
Act for less than 15 consecutive Business Days before such date, then the
average of the daily closing bid prices for all of the Business Days before such
date for which daily closing bid prices are available. The Company shall pay the
reasonable fees and expenses of any investment bank referred to in Article 4
involved in the determination of Current Market Value.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expiration Date" means the tenth anniversary of the Closing Date.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, applied on a consistent basis.
"Holder" means the duly registered holder of a Warrant under the terms of
this Warrant Agreement.
"Initial Public Offering" or "IPO" means the first time a Registration
Statement (other than Registration Statements on Form S-4 or Form S-8) filed
under the Securities Act with the SEC respecting an offering, whether primary or
secondary, of Common Stock (or securities
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convertible into, or exchangeable for, Common Stock, or rights to acquire Common
Stock or such securities), which is underwritten on a firmly committed basis, is
declared effective and the securities so registered are issued and sold.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer, the Secretary or the Controller of the Company.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Prospectus" means the prospectus included in any Registration Statement,
as amended or supplemented by any prospectus supplement with respect to the
terms of the offering of any of the Warrants, Warrant Shares or other
Registrable Securities covered by such Registration Statement and by all other
amendments and supplements to the prospectus, including post-effective
amendments and all material incorporated by reference in such prospectus.
"Registrable Securities" means (a) any Warrant Shares or other securities
issued or issuable upon exercise of any Warrants (which shall be deemed, for the
purposes of this definition, to have been issued to, and to be held by, the
Holders of such Warrants) and (b) any securities issued or issuable with respect
to any such Warrant Shares or other securities by way of stock dividend or stock
split or in connection with a combination of Shares of Common Stock of the
Company, recapitalization, merger, consolidation, reorganization or otherwise.
As to any such Registrable Securities, once issued such Shares of Common Stock
or securities shall cease to be Registrable Securities when (i) a Registration
Statement with respect to the sale of such Registrable Securities shall have
been declared effective and such securities shall have been disposed of in
accordance with such Registration Statement, (ii) they shall have been or
thereafter can be offered and sold by a person that is not an affiliate of the
Company pursuant to Rule 144 without compliance with the provisions of Rule
144(e)(2), (iii) they shall have been otherwise transferred, new certificates
for them not bearing a legend restricting further transfer shall have been
delivered by the Company and subsequent disposition of them shall not require
registration under the Securities Act or qualification of them under state blue
sky laws, or (iv) they shall have ceased to be outstanding.
"Registration Statement" means a registration statement that is in
compliance with the Securities Act.
"Requirements of Law" shall mean as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents or such
Person, and any law, treaty, rule or regulation, or determination of an
arbitrator or a court or other governmental authority, in each
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case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Subordinated Notes" means the 12 1/2 % Senior Subordinated Notes issued
pursuant to the Note Purchase Agreement.
"Transfer" means any sale, assignment, gift, bequest, transfer,
distribution, pledge, hypothecation or other encumbrance or disposition.
"Transfer Restricted Securities" means the Warrants and the Common Stock
which may be issued to Holders upon exercise of the Warrants, whether or not
such exercise has been effected. Each such security shall cease to be a Transfer
Restricted Security when (i) it has been disposed of pursuant to a registration
statement of the Company filed with the SEC and declared effective by the SEC
that covers the disposition of such Transfer Restricted Security, (ii) it has
been distributed pursuant to Rule 144 (or any similar provisions under the
Securities Act then in effect) or (iii) it has been otherwise transferred and
may be resold without registration under the Securities Act.
"Underlying Securities" means the Warrant Shares and other securities
issuable or issued upon exercise of the Warrants.
"Warrant Shares" means the shares of Common Stock of the Company received,
or issued and received, as the case may be, upon exercise of the Warrants.
SECTION 1.2 Other Definitions
Defined in
Term Section
---- -------
"Agreement" ................................ Introductory Paragraph
"Cashless Exercise" ........................ 3.4
"Certificate Register" ..................... 2.3
"Company" .................................. Introductory Paragraph
"Exercise Price" ........................... 3.1
"Fair Value" ............................... 4.2
"Letter Agreement" ......................... 9.5(b)
"Magnetite" ................................ Introductory Paragraph
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"Note Purchase Agreement" .................. 1.1
"QIB" ...................................... 2.4(a)
"Registrar" ................................ 2.7
"Shareholders" ............................. 5.1
"Successor Company" ........................ 4.4(a)
"THL Shareholders' Agreement" .............. 5.1
"Transfer Agent" ........................... 3.5
"Warrants" ................................. Introductory Paragraph
"Warrant Certificates" ..................... 2.1
SECTION 1.3 Rules of Construction. Unless the text otherwise required.
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned to
it in accordance with generally accepted accounting principles as in effect from
time to time;
(iii) "or" is not exclusive;
(iv) "including" means including, without limitation; and
(v) words in the singular include the plural and words in the plural
include the singular.
ARTICLE 2.
Warrant Certificates
SECTION 2.1 Form and Dating of Warrant Certificates. The Warrant
Certificates shall be substantially in the form of Exhibit A, the terms of which
are hereby incorporated in and expressly made a part of this Agreement. The
Warrant Certificates may have notations, legends or endorsements required by
law, stock exchange rule, agreements to which the Company is subject, if any, or
usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Company) and shall bear the legend required by Section 8.1.
Each Warrant Certificate shall be dated the date of its countersignature.
The Warrants shall be issued initially in definitive form represented by a
Warrant Certificate (such certificate and all other certificates representing
physical delivery of Warrants in definitive form being called "Warrant
Certificates"), representing Warrants to purchase 1 1/2% of the Common Stock of
the Company, increasing to 2% of the Common Stock of the Company
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(as outstanding on the date hereof) if the Subordinated Notes shall not have
been paid in full by June 29, 2001, which shall be issued and delivered to
Magnetite.
SECTION 2.2 Execution of Warrant Certificates. Two Officers shall sign the
Warrant Certificates for the Company by manual or facsimile signature. The
Company's seal shall be impressed, affixed, imprinted or reproduced on the
Warrant Certificate and may be in facsimile form.
SECTION 2.3 Certificate Register. The Company shall keep a register
("Certificate Register") of the Warrant Certificates and of their transfer and
exchange. The Certificate Register shall show the names and addresses of the
respective Holders and the date and number of Warrants evidenced on the face of
each of the Warrant Certificates. The Company may deem and treat the Person in
whose name a Warrant Certificate is registered as the absolute owner of such
Warrant Certificate for all purposes whatsoever and the Company shall not be
affected by notice to the contrary.
SECTION 2.4 Transfer and Exchange of Warrant Certificates. (a) Transfer
and Exchange of Warrant Certificates. When Warrant Certificates are presented to
the Company with a request to register the transfer of such Warrant Certificates
or to exchange such Warrant Certificates for an equal number of Warrant
Certificates of other authorized denominations, the Company shall register the
transfer or make the exchange as requested if its reasonable requirements for
such transaction are met; provided, however, that the Warrant Certificates
surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company, duly executed by the
Holder thereof or his attorney duly authorized in writing; and
(ii) in the case of Warrant Certificates that are Transfer Restricted
Securities, shall be accompanied by the following additional information and
documents:
(1) a certificate from such Holder in substantially the form of
Exhibit B hereto certifying that:
(A) such securities are being delivered for registration in
the name of such Holder without transfer;
(B) such securities are being transferred to the Company;
(C) such securities are being transferred pursuant to an
effective registration statement under the Securities Act; or
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(D) such securities are being transferred (w) to a "qualified
institutional buyer" ("QIB") as defined in Rule 144A under the Securities Act
pursuant to such Rule 144A, (x) in an offshore transaction in accordance with
Rule 904 under the Securities Act, (y) in a transaction meeting the requirements
of Rule 144 under the Securities Act or (z) pursuant to another available
exemption from the registration requirements of the Securities Act; and
(2) in the case of any transfer described under clause
(a)(ii)(1)(D)(x), (y) and (z) of this Section 2.4, evidence reasonably
satisfactory to the Company as to compliance with the restrictions set forth in
the legend in Section 8.1.
(b) Obligations with Respect to Transfers and Exchanges of Warrant
Certificates. (i) To permit registrations of transfers and exchanges, the
Company shall execute Warrant Certificates as required pursuant to the
provisions of this Section 2.4.
(ii) All Warrant Certificates shall be the valid obligations of the
Company, entitled to the same benefits under this Agreement, as the Warrant
Certificates surrendered upon such registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of any
Warrant Certificate, the Company may deem and treat the Person in whose name
such Warrant Certificate is registered as the absolute owner of such Warrant
Certificate and the Company shall not be affected by notice to the contrary.
(iv) No service charge shall be made to a Holder for any
registration of transfer or exchange upon surrender of any Warrant Certificate.
However, the Company may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Warrant Certificates.
(v) Upon any sale or transfer of Warrant Certificates pursuant to an
effective registration statement under the Securities Act, pursuant to Rule 144
under the Securities Act or pursuant to an opinion of counsel reasonably
satisfactory to the Company that no legend is required, the Company shall permit
the Holder thereof to exchange such Warrant Certificates for new Warrant
Certificates not bearing the legend set forth in Section 8.1 and shall rescind
any restriction on the transfer of such new Warrant Certificates.
SECTION 2.5 Replacement Warrant Certificates. If a mutilated Warrant
Certificate is surrendered to the Company or if the Holder of a Warrant
Certificate claims that the Warrant Certificate has been lost, destroyed or
wrongfully taken, the Company shall issue a replacement Warrant Certificate if
the reasonable requirements of Section 8-405 of the Uniform Commercial Code as
in effect in the State of New York are met. If required by the Company, such
Holder
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<PAGE>
shall furnish an indemnity bond sufficient in the judgment of the Company to
protect the Company from any loss which the Company may suffer if a Warrant
Certificate is replaced. The Company may charge the Holder for its expenses in
replacing a Warrant Certificate. Every replacement Warrant Certificate is an
additional obligation of the Company.
SECTION 2.6 Temporary Warrant Certificates. Until definitive Warrant
Certificates are ready for delivery, the Company may prepare temporary Warrant
Certificates. Temporary Warrant Certificates shall be substantially in the form
of definitive Warrant Certificates but may have variations that the Company
considers appropriate for temporary Warrant Certificates. Without unreasonable
delay, the Company shall prepare definitive Warrant Certificates and deliver
them in exchange for temporary Warrant Certificates.
SECTION 2.7 Cancellation of Warrant Certificates. (a) In the event the
Company shall purchase or otherwise acquire Warrant Certificates, the same shall
be cancelled.
(b) The Company shall cancel and destroy all Warrant Certificates
surrendered for transfer, exchange, replacement, exercise or cancellation. The
Company may not issue new Warrant Certificates to replace Warrant Certificates
to the extent they evidence Warrants which have been exercised or Warrants which
the Company has purchased or otherwise acquired.
ARTICLE 3.
Exercise Terms
SECTION 3.1 Exercise Price. Each Warrant shall initially entitle the
Holder thereof to purchase one share of Common Stock, provided, however, that if
the Subordinated Notes shall not have been paid in full by June 29, 2001, each
Warrant shall entitle the Holder thereof to purchase one and exactly one-third
shares of Common Stock, in each case for a per share exercise price (the
"Exercise Price") of $0.01, in each case subject to adjustment pursuant to the
terms of this Agreement.
SECTION 3.2 Exercise Periods. (a) Subject to the terms and conditions set
forth herein, the Warrants shall be exercisable at any time or from time to time
on or after the Closing Date.
(b) No Warrant shall be exercisable after the Expiration Date.
SECTION 3.3 Expiration. A Warrant shall terminate and become void as of
the earlier of (i) the close of business on the Expiration Date or (ii) the time
and date such Warrant is exercised. The Company shall give notice not less than
90, and not more than 120, days prior
8
<PAGE>
to the Expiration Date to the Holders of all then outstanding Warrants to the
effect that the Warrants will terminate and become void as of the close of
business on the Expiration Date. The Warrants shall terminate and become void
after the Expiration Date, notwithstanding the Company's failure to give such
notice.
SECTION 3.4 Manner of Exercise. Warrants may be exercised upon (i)
surrender to the Company of the Warrant Certificates, together with the form of
election to purchase Warrant Shares in the form of Exhibit 1 to the Warrant
Certificate duly filled in and signed by the Holder thereof and (ii) payment to
the Company, of the Exercise Price for the number of Warrant Shares in respect
of which such Warrant is then exercised. Such payment shall be made (i) in cash
or by certified or official bank check payable to the order of the Company or by
wire transfer of funds to an account designated by the Company for such purpose
or (ii) by the surrender (which surrender shall be evidenced by cancellation of
the number of Warrants represented by any Warrant Certificate presented in
connection with a Cashless Exercise) of a Warrant or Warrants (represented by
one or more relevant Warrant Certificates), and without the payment of the
Exercise Price in cash, in exchange for the issuance of such number of shares of
Common Stock equal to the product of (1) the number of shares of Common Stock
for which such Warrant would otherwise then be nominally exercised if payment of
the Exercise Price as of the date of exercise were being made in cash and (2)
the Cashless Exercise Ratio. An exercise of a Warrant in accordance with the
immediately preceding sentence is herein called a "Cashless Exercise". All
provisions of this Agreement shall be applicable with respect to an exercise of
Warrant Certificates pursuant to a Cashless Exercise for less than the full
number of Warrants represented thereby. If, pursuant to the Securities Act, the
Company is not permitted to effect the registration under the Securities Act of
the issuance and sale of the Warrant Shares by the Company to the Holders of the
Warrants upon the exercise of the Warrants, the Holders of the Warrants will be
required, if the Company is not then able to rely on an exemption from the
registration requirements of the Securities Act in connection with the issuance
and sale of the Warrant Shares upon exercise of the Warrants, to effect the
exercise of the Warrants solely pursuant to the Cashless Exercise option.
Subject to Section 3.2, the rights represented by the Warrants shall be
exercisable at the election of the Holders thereof either in full at any time or
from time to time in part and in the event that a Warrant Certificate is
surrendered for exercise in respect of less than all the Warrant Shares
purchasable on such exercise at any time prior to the Expiration Date a new
Warrant Certificate exercisable for the remaining Warrant Shares will be issued.
SECTION 3.5 Issuance of Warrant Shares. Subject to Section 2.5, upon the
surrender of Warrant Certificates and payment of the per share Exercise Price or
pursuant to a Cashless Exercise, as set forth in Section 3.4, the Company shall
issue and cause, if appointed, a transfer agent for the Common Stock ("Transfer
Agent") to countersign and deliver to or upon the written order of the Holder
and in such name or names as the Holder may designate, a certificate or
certificates for the number of full Warrant Shares so purchased upon the
exercise of such Warrants or other securities or property to which it is
entitled, registered or otherwise to the Person or
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Persons entitled to receive the same, together with cash as provided in Section
3.6 in respect of any fractional Warrant Shares otherwise issuable upon such
exercise. Such certificate or certificates shall be deemed to have been issued
and any Person so designated to be named therein shall be deemed to have become
a holder of record of such Warrant Shares as of the date of the surrender of
such Warrant Certificates and payment of the per share Exercise Price or
pursuant to a Cashless Exercise, as set forth in Section 3.4.
SECTION 3.6 Fractional Warrant Shares. The Company shall not be required
to issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be exercised in full at the same time by the same Holder, the
number of full Warrant Shares which shall be issuable upon such exercise shall
be computed on the basis of the aggregate number of Warrant Shares purchasable
pursuant thereto. If any fraction of a Warrant Share would, except for the
provisions of this Section 3.6, be issuable on the exercise of any Warrant (or
specified portion thereof), the Company shall pay an amount in cash equal to the
Current Market Value for one Warrant Share on the date the Warrant is exercised,
multiplied by such fraction, computed to the nearest whole cent.
SECTION 3.7 Reservation of Warrant Shares. The Company shall at all times
keep reserved out of its authorized shares of Common Stock a number of shares of
Common Stock sufficient to provide for the exercise of all outstanding Warrants.
The registrar for the Common Stock (the "Registrar") shall at all times until
the Expiration Date, or the time at which all Warrants have been exercised or
canceled, reserve such number of authorized shares as shall be required for such
purpose. The Company will keep a copy of this Agreement on file with the
Transfer Agent. The Company covenants that all Warrant Shares which may be
issued upon exercise of Warrants shall, upon issue, be fully paid,
nonassessable, free of preemptive rights and free from all taxes, liens, charges
and security interests, created by or through the Company, with respect to the
issue thereof. The Company will supply such Transfer Agent with duly executed
stock certificates for such purpose and will itself provide or otherwise make
available any cash which may be payable as provided in Section 3.6. The Company
will furnish to such Transfer Agent a copy of all notices of adjustments and
certificates related thereto transmitted to each Holder.
Before taking any action which would cause an adjustment pursuant to
Article 4 to reduce the Exercise Price below the then par value (if any) of the
Common Stock, the Company shall take any and all corporate action which may, in
the opinion of its counsel, be necessary in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares.
SECTION 3.8 Compliance with Law. Notwithstanding anything in this
Agreement to the contrary, in no event shall a Holder be entitled to exercise a
Warrant unless (i) a registration statement filed under the Securities Act in
respect of the issuance of the Warrant Shares is then
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effective or (ii) an exemption from the registration requirements is available
under the Securities Act at the time of such exercise.
ARTICLE 4.
Antidilution Provisions
SECTION 4.1 Changes in Common Stock. In the event that at any time or from
time to time after the date hereof the Company shall (i) pay a dividend or make
a distribution on its Common Stock in shares of its Common Stock or other shares
of capital stock, (ii) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock or (iv) increase or
decrease the number of shares of Common Stock outstanding by reclassification of
its Common Stock, then the number of shares of Common Stock purchasable upon
exercise of each Warrant immediately after the happening of such event shall be
adjusted so that, after giving affect to such adjustment, the Holder of each
Warrant shall be entitled to receive the number of shares of Common Stock upon
exercise that such holder would have owned or have been entitled to receive had
such Warrants been exercised immediately prior to the happening of the events
described above (or, in the case of a dividend or distribution of Common Stock,
immediately prior to the record date therefor), and the Exercise Price for each
Warrant shall be adjusted in inverse proportion. An adjustment made pursuant to
this Section 4.1 shall become effective immediately after the effective date,
retroactive to the record date therefor in the case of a dividend or
distribution in shares of Common Stock, and shall become effective immediately
after the effective date in the case of a subdivision, combination or
reclassification.
SECTION 4.2 Cash Dividends and Other Distributions. In case at any time or
from time to time after the date hereof the Company shall distribute to holders
of Common Stock (i) any dividend or other distribution of cash, evidences of its
indebtedness, or any other properties or securities or (ii) any options,
warrants or other rights to subscribe for or purchase any of the foregoing
(other than, in each case set forth in (i) and (ii), (x) any dividend or
distribution described in Section 4.1, or (y) any rights, options, warrants or
securities described in Section 4.3 then the number of shares of Common Stock
purchasable upon the exercise of each Warrant shall be increased to a number
determined by multiplying the number of shares of Common Stock purchasable upon
the exercise of such Warrant immediately prior to the record date for any such
dividend or distribution by a fraction, the numerator of which shall be the
Current Market Value per share of Common Stock on the record date for such
distribution, and the denominator of which shall be such Current Market Value
per share of Common Stock less the sum of (x) any cash distributed per share of
Common Stock and (y) the fair value (the "Fair Value") (as determined in good
faith by the Board, whose determination shall be evidenced by a Board
resolution, a copy of which will be sent to Holders upon request) of the
portion, if any, of the
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distribution applicable to one share of Common Stock consisting of evidences of
indebtedness, shares of stock, securities, other property, warrants, options or
subscription of purchase rights (notwithstanding the foregoing, if the Fair
Value in the above formula equals or exceeds the Current Market Value per share
of Common Stock in the above formula, then the Current Market Value per share of
Common Stock shall be equal to the fair value per share of the Common Stock on
the record date as determined in good faith by the Board and described in a
Board resolution); and the Exercise Price shall be adjusted to a number
determined by dividing the Exercise Price immediately prior to such record date
by the above fraction. Such adjustments shall be made whenever any distribution
is made and shall become effective as of the date of distribution, retroactive
to the record date for any such distribution; provided, however, that the
Company is not required to make an adjustment pursuant to this Section 4.2 if at
the time of such distribution the Company makes the same distribution to Holders
of Warrants as it makes to holders of Common Stock pro rata based on the number
of shares of Common Stock for which such Warrants are exercisable (whether or
not currently exercisable). No adjustment shall be made pursuant to this Section
4.2 which shall have the effect of decreasing the number of shares of Common
Stock purchasable upon exercise of each Warrant or increasing the Exercise
Price.
SECTION 4.3 [Intentionally omitted.]
SECTION 4.4 Combination; Liquidation. (a) Except as provided in Section
4.4(b), in the event of a Combination, the Holders shall have the right to
receive upon exercise of the Warrants such number of shares of Common Stock or
other securities or property which such Holder would have been entitled to
receive upon or as a result of such Combination had such Warrant been exercised
immediately prior to such event. Unless paragraph (b) is applicable to a
Combination, the Company shall provide that the surviving or acquiring Person
(the "Successor Company") in such Combination will enter into an agreement with
the Company confirming the Holders' rights pursuant to this Section 4.4(a) and
providing for adjustments, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 4. The provisions of
this Section 4.4(a) shall similarly apply to successive Combinations involving
any Successor Company.
(b) In the event of (i) a Combination in which consideration to holders of
Common Stock in exchange for their shares is payable solely in cash, or (ii) the
dissolution, liquidation or winding-up of the Company, then the Holders of the
Warrants will be entitled to receive distributions on an equal basis with the
holders of Common Stock or other securities issuable upon exercise of the
Warrants, as if the Warrants had been exercised immediately prior to such event,
less the Exercise Price.
In case of any Combination described in this Section 4.4(b), the surviving
or acquiring Person and, in the event of any dissolution, liquidation or
winding-up of the Company, the Company, shall make available promptly the funds,
if any, necessary to pay to the Holders of the
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Warrants the amounts to which they are entitled as described above. After such
funds and the surrendered Warrant Certificates are received, the Company shall
make payment to the Holders by delivering a check in such amount as is
appropriate (or, in the case of consideration other than cash, such other
consideration as is appropriate) to such Person or Persons as it may be directed
in writing by the Holders surrendering such Warrants.
SECTION 4.5 Tender Offers; Exchange Offers. In the event that the Company
or any subsidiary of the Company shall purchase shares of Common Stock pursuant
to a tender offer or an exchange offer for a price per share of Common Stock
that is greater than the then Current Market Value per share of Common Stock in
effect at the end of the trading day immediately following the day on which such
tender offer or exchange offer expires, then the Company, or such subsidiary of
the Company, shall offer to purchase Warrants for comparable consideration per
share of Common Stock based on the number of shares of Common Stock which the
Holders of such Warrants would receive upon exercise of such Warrants; provided,
however, if a tender offer is made for only a portion of the outstanding shares
of Common Stock, then such offer shall be made for Warrants in the same pro rata
proportion.
SECTION 4.6 Other Events. If any event occurs as to which the foregoing
provisions of this Article 4 are not strictly applicable or, if strictly
applicable, would not fairly and adequately protect the purchase rights of the
Warrants in accordance with the essential intent and principles of such
provisions, then there shall be made such adjustments in the application of such
provisions, in accordance with such essential intent and principles, as shall be
reasonably necessary to protect such purchase rights as aforesaid, but in no
event shall any such adjustment have the effect of increasing the Exercise Price
or decreasing the number of shares of Common Stock subject to purchase upon
exercise of this Warrant.
SECTION 4.7 Superseding Adjustment. Upon the expiration of any rights,
options, warrants or conversion or exchange privileges which resulted in the
adjustments pursuant to this Article 4, if any thereof shall not have been
exercised, the number of Warrant Shares purchasable upon the exercise of each
Warrant shall be readjusted as if (a) the only shares of Common Stock issuable
upon exercise of such rights, options, warrants, conversion or exchange
privileges were the shares of Common Stock, if any, actually issued upon the
exercise of such rights, options, warrants or conversion or exchange privileges
and (b) shares of Common Stock actually issued, if any, were issuable for the
consideration actually received by the Company upon such exercise plus the
aggregate consideration, if any, actually received by the Company for the
issuance, sale or grant of all such rights, options, warrants or conversion or
exchange privileges whether or not exercised and the Exercise Price shall be
readjusted inversely; provided, however, that no such readjustment shall (except
by reason of an intervening adjustment under Section 4.1) have the effect of
decreasing the number of Warrant Shares purchasable upon the exercise of each
Warrant or increase the Exercise Price by an amount in excess of the amount of
the adjustment initially
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made in respect of the issuance, sale or grant of such rights, options, warrants
or conversion or exchange privileges.
SECTION 4.8 Minimum Adjustment. The adjustments required by the preceding
Sections of this Article 4 shall be made whenever and as often as any specified
event requiring an adjustment shall occur, except that no adjustment of the
Exercise Price or the number of shares of Common Stock purchasable upon exercise
of Warrants that would otherwise be required shall be made (except in the case
of a subdivision or combination of shares of Common Stock, as provided for in
Section 4.1) unless and until such adjustment either by itself or with other
adjustments not previously made increases or decreases by at least 1% the
Exercise Price or the number of shares of Common Stock purchasable upon exercise
of Warrants immediately prior to the making of such adjustment. Any adjustment
representing a change of less than such minimum amount shall be carried forward
and made as soon as such adjustment, together with other adjustments required by
this Article 4 and not previously made, would result in a minimum adjustment.
For the purpose of any adjustment, any specified event shall be deemed to have
occurred at the close of business on the date of its occurrence. In computing
adjustments under this Article 4, fractional interests in Common Stock shall be
taken into account to the nearest one-hundredth of a share.
SECTION 4.9 Notice of Adjustment. Whenever the Exercise Price or the
number of shares of Common Stock and other property, if any, purchasable upon
exercise of Warrants is adjusted, as herein provided, the Chief Financial
Officer of the Company shall prepare a certificate setting forth, in reasonable
detail, the event requiring the adjustment and the method by which such
adjustment was calculated (including a description of the basis on which the
Board determined the Fair Value of any evidences of indebtedness, other
securities or property or warrants or other subscription or purchase rights),
and specifying the Exercise Price and the number of shares of Common Stock
purchasable upon exercise of Warrants after giving effect to such adjustment.
The Company shall promptly mail a copy of such certificate to each Holder in
accordance with Section 9.6. The Company shall exhibit such certificate from
time to time, to any Holder desiring an inspection thereof during reasonable
business hours. The Company shall not at any time be under any duty or
responsibility to any Holder to determine whether any facts exist which may
require any adjustment of the Exercise Price or the number of shares of Common
Stock or other stock or property, purchasable on exercise of the Warrants, or
with respect to the nature or extent of any such adjustment when made, or with
respect to the method employed in making such adjustment or the validity or
value of any shares of Common Stock.
SECTION 4.10 Notice of Certain Transactions. In the event that the Company
shall propose (a) to pay any dividend payable in securities of any class to the
holders of its Common Stock or to make any other distribution to the holders of
its Common Stock, (b) to offer the holders of its Common Stock rights to
subscribe for or to purchase any securities convertible into shares of Common
Stock or shares of Common Stock or shares of stock of any class or any other
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securities, rights or options, (c) to effect any capital reorganization,
consolidation or merger, (d) to effect the voluntary or involuntary dissolution,
liquidation or winding-up of the Company, or (e) to offer any securities the
return on which is measured in whole or in part by reference to the Common
Stock, or in the event of a tender offer or exchange offer described in Section
4.5, the Company shall within 5 days send to Magnetite and shall within 5 days
send to the Holders (other than Magnetite) a notice of such proposed action or
offer, such notice to be mailed by the Company to the Holders in accordance with
Section 9.6, which shall specify the record date for the purposes of such
dividend, distribution or rights, or the date such issuance or event is to take
place and the date of participation therein by the holders of Common Stock, if
any such date is to be fixed, and shall briefly indicate the effect of such
action on the Common Stock and on the number and kind of any other shares of
stock and on other property, if any, and the number of shares of Common Stock
and other property, if any, purchasable upon exercise of each Warrant and the
Exercise Price after giving effect to any adjustment which will be required as a
result of such action. Such notice shall be given by the Company at least 10
days prior to the record date for determining holders of the Common Stock for
purposes of such action.
SECTION 4.11 Adjustment to Warrant Certificate. The form of Warrant
Certificate need not be changed because of any adjustment made pursuant to this
Article 4, and Warrant Certificates issued after such adjustment may state the
same Exercise Price and the same number of shares of Common Stock as are stated
in any Warrant Certificates issued prior to the adjustment. The Company,
however, may at any time in its sole discretion make any change in the form of
Warrant Certificate that it may deem appropriate to give effect to such
adjustments and that does not affect the substance of the Warrant Certificate,
and any Warrant Certificate thereafter issued, whether in exchange or
substitution for an outstanding Warrant Certificate or otherwise, may be in the
form as so changed.
ARTICLE 5.
Tag-Along Rights
SECTION 5.1 Tag-Along Rights on Transfers. The Company acknowledges that,
except as otherwise provided in this Agreement, the Holders shall have the "tag
along" rights set forth in Section 3 of the Shareholders' Agreement, dated as of
October 31, 1997 (the "THL Shareholders' Agreement"), by and among the Company,
Alan Stillman, Thomas H. Lee Equity Partners, L.P., THL-CCI Limited Partnership
and those Persons listed as Shareholders on the counterpart signature pages
thereto (the "Shareholders"), which Section 3 shall apply to each Holder of any
Warrant or Warrant Share as if such Holder were a "Shareholder" thereunder and
as if such Warrants or Warrant Shares were "Shares" thereunder; provided that
all other defined terms applicable to such "tag along" rights shall have the
meanings ascribed to them under the THL Shareholders' Agreement; and provided,
further that the Holders shall have such "tag along"
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rights until consummation of the Company's Initial Public Offering or the
earlier termination of this Agreement in accordance herewith.
ARTICLE 6.
Certain Agreements of the Company
The Company hereby agrees that, until the first to occur of (i) the
consummation of the Company's IPO or (ii) the date on which no Transfer
Restricted Securities remain outstanding:
SECTION 6.1 Reporting and Inspection Covenants. (a) Financial Information
and Compliance Certificates. The Company shall, and shall cause each of its
Subsidiaries to, keep its books of account in accordance with good accounting
practices; the Company shall furnish to each Holder, within 120 days after the
last day of each fiscal year, consolidated balance sheets of the Company and its
Subsidiaries as at such last day of the fiscal year and statements of income and
retained earnings and cash flows for such fiscal year each prepared in
accordance with GAAP and certified by a firm of independent certified public
accountants of recognized national reputation; and, within 45 days after the
close of each of the first three quarters of each fiscal year, consolidated and
consolidating balance sheets, statements of income and retained earnings and
cash flows of the Company and its Subsidiaries as of the last day of and for
such quarter and for the period of the fiscal year ended as of the close of the
particular quarter, all such quarterly statements to be in reasonable detail and
certified by the chief financial or accounting officer of the Company as having
been prepared in accordance with GAAP (subject to year-end adjustments and the
absence of footnotes). The Company will also furnish, within forty-five days
after the end of a calendar month, monthly profit and loss statements of each
existing and new restaurant owned or managed by the Company or any of its
Subsidiaries, internally prepared and certified by the chief financial officer
of the Company. The Company will, with reasonable promptness, furnish such other
data as may be reasonably requested by the Holders, including, without
limitation, copies of all material contracts and agreements. The Company shall
(i) at the Holders' expense, at any time and from time to time (but not
exceeding once in a calendar year) or (ii) after an Event of Default under the
Note Purchase Agreement has occurred and is continuing, at the Company's
expense, at any time and from time to time, permit any Holder by or through any
of its Officers, agents, employees, attorneys or accountants to conduct, upon
reasonable notice, an examination of, and make extracts from, the Company's
books and records.
(b) Inspection of Property; Books and Records; Discussions. The Company
shall, and shall cause each Subsidiary to, keep proper books of records and
accounts in which full, true and correct entries in conformity with GAAP and all
Requirements of Law shall be made of all dealings and transactions in relation
to its business and activities; and permit, and cause its
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Subsidiaries to permit, upon reasonable notice thereof (i) at the Holders'
expense, at any time and from time to time (but not exceeding once in a calendar
year), or (ii) after an Event of Default under the Note Purchase Agreement has
occurred and is continuing, at the Company's expense, at any time and from time
to time, any Holder by or through any of its Officers, agents, employees,
attorneys or accountants to visit and inspect any of its properties and examine
and make abstracts from any of its books and records and discuss the business,
operations, properties and financial and other condition of the Company and its
Subsidiaries with Officers and employees of the Company and its Subsidiaries and
with its independent certified public accountants.
SECTION 6.2 Nature of Business. Neither the Company nor any Subsidiary
will materially alter the nature of its business.
SECTION 6.3 Transactions with Affiliates. Except as otherwise specifically
set forth in the Note Purchase Agreement, neither the Company nor any Subsidiary
will, directly or indirectly, purchase, acquire or lease any property or assets
from, or sell, transfer or lease any property or assets to, or enter into any
other transaction with, including without limitation any issuance or sale of
stock, rights, options, warrants or securities exchangeable into stock, any
Affiliate, except in the ordinary course of business at prices and on terms and
conditions not less favorable to it than those which would have been obtained in
an arm's-length transaction with a non-affiliated third party.
SECTION 6.4 Issuance of Additional Classes of Stock. The Company shall not
create any additional classes of capital stock (other than the Common Stock)
including preferred stock and any rights, options, warrants or any other
securities the return of which is measured in whole or in part by reference to
the Common Stock unless the Company shall have given the Holders at least 10
Business Days prior notice of such issuance and demonstrated to the reasonable
satisfaction of each Holder, that the requirements of Sections 4.6 and 6.3 have
been met.
SECTION 6.5 Waiver of Preemptive Rights. The Company represents and
warrants that the Shareholders under the THL Shareholders' Agreement have waived
their preemptive rights under Section 4 thereof to acquire from the Company any
Warrants or Warrant Shares issued as a result of the exercise of Warrant by a
Holder hereunder.
ARTICLE 7.
Registration Rights
SECTION 7.1 Registration Rights. (a) The Company acknowledges that, except
as provided below, the Holders shall have the registration rights set forth in
Sections 6, 7 and 8 of the THL Shareholders' Agreement which Sections 6.7 and 8
shall apply to each Holder of any
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Warrant or Warrant Share as if such Holder were a "Shareholder" thereunder and
as if such Warrants or Warrant Shares were "Shares" thereunder, provided that
all defined terms therein shall have the meanings ascribed to them in such THL
Shareholders' Agreement, except that "Registrable Securities" shall have the
meaning set forth in this Agreement; and provided, further that such Sections 6,
7 and 8 of the THL Shareholders' Agreement shall apply to the Holders until
termination of this Agreement in accordance herewith. Notwithstanding the
foregoing, the Holders' rights under such Sections 6, 7 and 8 shall be modified
as follows: (i) the Holders shall have no piggyback registration rights in an
Initial Public Offering occurring prior to December 31, 1999, (ii) the Holders
shall have piggyback registration rights in connection with any filing of a
registration statement under the Securities Act described in Section 6(a) of the
THL Shareholders' Agreement occurring after the Initial Public Offering, and in
any Initial Public Offering occurring after December 31, 1999, and (iii) the
Holders shall be treated for purposes of Sections 6, 7 and 8 as if they were
shareholders holding Registrable Securities (i.e. for purposes of cut-backs,
notices, payment of expenses, indemnification, Form S-3 registration and other
matters under such Sections).
(b) For clarity, the Holders shall have no demand registration rights at
any time under Sections 5 of the THL Shareholders' Agreement.
ARTICLE 8.
Transferability
SECTION 8.1 Legend. Except for Warrant Certificates delivered pursuant to
Section 2.4(b)(v) of this Agreement, each Warrant Certificate and Warrant Share
shall bear a legend in substantially the following form (with any appropriate
modification for the Warrant Shares):
"THE WARRANT CERTIFICATES AND THE WARRANT SHARES (THE "SECURITIES") HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION AND
SUBJECT TO COMPLIANCE WITH OTHER APPLICABLE LAWS. THE HOLDER HEREOF, BY ITS
ACCEPTANCE HEREOF, AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, UNLESS PREVIOUSLY REGISTERED UNDER THE SECURITIES ACT, ONLY (A) TO
THE COMPANY; (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144
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THEREUNDER (IF AVAILABLE); (C) TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE
IN RELIANCE ON RULE 144A; (D) PURSUANT TO AN OFFSHORE TRANSACTION COMPLYING
WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT; OR (E) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT."
SECTION 8.2 Lock-Ups. For so long as the Warrants or the Warrant Shares
are not eligible for resale under Rule 144, the Holders shall not sell such
Warrants or Warrant Shares under the circumstances contemplated by Section
9(b)(i) of the THL Shareholders' Agreement in connection with the Initial Public
Offering. Otherwise, and except as otherwise expressly provided in this
Agreement, there shall be no other restrictions with respect to any sales by the
Holders under Rule 144.
ARTICLE 9.
Miscellaneous
SECTION 9.1 Financial Information. As soon as any Warrant becomes
outstanding, the Company shall promptly deliver to the Holders any annual,
quarterly or other financial statements and such other information as is
provided to any holders of equity or debt securities (excluding holders of
senior bank debt) of the Company in their capacity as holders of such
securities.
SECTION 9.2 Persons Benefitting. Nothing in this Agreement is intended or
shall be construed to confer upon any Person other than the Company and the
Holders any right, remedy or claim under or by reason of this Agreement or any
part hereof.
SECTION 9.3 Indemnity. The Company hereby agrees to indemnify and hold
harmless each beneficial owner of a Warrant (whether or not it is, at the time
the indemnity provided for in this Section 9.3 is sought, such a beneficial
owner) against all losses, damages or liabilities which such beneficial owner
suffers as a result of any breach, on the date of any exercise of a Warrant by
such beneficial owner, of the representations, warranties or agreements
contained herein.
SECTION 9.4 Rights of Holders. Except as otherwise specifically required
herein, holders of unexercised Warrants are not entitled (i) to receive
dividends or other distributions, (ii)
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to receive notice of or vote at any meeting of the stockholders, (iii) to
consent to any action of the stockholders, (iv) to receive notice of any other
proceedings of the Company or (v) to exercise any other rights as stockholders
of the Company.
SECTION 9.5 Amendment. (a) This Agreement may be amended by the parties
hereto without the consent of any Holder for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective provision
contained herein or making any other provisions with respect to matters or
questions arising under this Agreement as the Company may deem necessary or
desirable; provided, however, that such action shall not affect adversely the
rights of the Holders. Any amendment or supplement to this Agreement that has an
adverse effect on the interests of the Holders shall require the written consent
of the Holders of a majority of the then outstanding Warrants. The consent of
each Holder affected shall be required for any amendment pursuant to which the
Exercise Price would be increased or the number of Warrant Shares purchasable
upon exercise of Warrants would be decreased (other than pursuant to adjustments
provided herein). In determining whether the Holders of the required number of
Warrants have concurred in any direction, waiver or consent, Warrants owned by
the Company or by any Person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company shall be disregarded
and deemed not to be outstanding.
(b) Pursuant to the Letter Agreement dated June 29, 1999 (the "Letter
Agreement"), the Holders have become party to the THL Shareholders' Agreement
solely for purposes of Sections 3, 6, 7 and 8 thereof, and the defined terms
used in such sections, as modified by this Agreement. In connection with any
proposed amendment, waiver or modification of such sections, the Holders shall
have the same voting rights as the Shareholders thereunder and shall be bound by
any amendment, waiver or consent to such Sections 3, 6, 7 or 8 (as to the
subject matter existing on the date hereof) approved by the requisite number of
Shareholders as if the Holders were signatories thereto; provided that if the
Shareholders receive any remuneration or compensation in respect of any
amendment, waiver or modification, the Holders shall be entitled to share
therein as if they were Shareholders thereunder.
SECTION 9.6 Notices. All notices, requests and demands to or upon the
respective parties hereto shall be in writing (unless otherwise expressly
provided herein) and shall be deemed to have been duly given or made when
delivered by hand, or by telecopy, receipt acknowledged, or five (5) calendar
days after having been deposited in the mail addressed as follows:
The Company: The New York Restaurant Group, Inc.
1114 First Avenue
New York, New York 10021
Attn: Mr. Mark K. Levine, Executive Vice President
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with a copy to: Hutchins, Wheeler & Dittmar, A Professional Corporation
101 Federal Street
Boston, Massachusetts 02110
Attn: James Westra, Esq.
Magnetite: Magnetite Asset Investors L.L.C.
c/o BlackRock Financial Management, Inc.
345 Park Avenue, 29th Floor
New York, NY 10154
Attn: Dennis M. Schaney
with copies to: Kelso & Company
320 Park Avenue, 24th Floor
New York, New York 10022
Attn: James J. Connors, II, Esq.
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attn: John M. Vasily, Esq.
The Company by notice to the other parties hereto may designate additional
or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder shall be mailed to the
Holder at the Holder's address as it appears on the Certificate Register and
shall be sufficiently given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders. If a notice or
communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.
SECTION 9.7 Governing Law. The laws of the State of New York shall govern
this Agreement and the Warrant Certificates.
SECTION 9.8 Successors. All agreements of the Company in this Agreement
and the Warrant Certificates shall bind its successors.
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SECTION 9.9 Multiple Originals. The parties may sign any number of copies
of this Agreement. Each signed copy shall be an original, but all of them
together represent the same Agreement. One signed copy is enough to prove this
Agreement.
SECTION 9.10 Table of Contents. The table of contents and headings of the
Articles and Sections of this Agreement have been inserted for convenience of
reference only, are not intended to be considered a part hereof and shall not
modify or restrict any of the terms or provisions hereof.
SECTION 9.11 Severability. The provisions of this Agreement are severable,
and if any clause or provision shall be held invalid, illegal or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
SECTION 9.12 Termination. Unless otherwise expressly stated herein, this
Agreement shall terminate if no Transfer Restricted Securities are outstanding.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
THE NEW YORK RESTAURANT GROUP, INC.
By: /s/ Mark K. Levine
-----------------------------------------
Name: Mark K. Levine
Title: Executive V.P.
MAGNETITE ASSET INVESTORS L.L.C.
By: BLACKROCK FINANCIAL MANAGEMENT, INC.,
as Managing Member
By: /s/ Dennis M. Schaney
-----------------------------------------
Name: Dennis M. Schaney
Title: Managing Director
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EXHIBIT A TO WARRANT AGREEMENT
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS AND THE WARRANT SHARES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION AND SUBJECT TO COMPLIANCE WITH
OTHER APPLICABLE LAWS. THE HOLDER HEREOF, BY ITS ACCEPTANCE HEREOF, AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, UNLESS PREVIOUSLY REGISTERED
UNDER THE SECURITIES ACT, ONLY (A) TO THE COMPANY; (B) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE); (C) TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A; (D) PURSUANT
TO AN OFFSHORE TRANSACTION COMPLYING WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT; OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
No. 1 Certificate for 107,983 Warrants
WARRANTS TO PURCHASE COMMON STOCK OF
THE NEW YORK RESTAURANT GROUP, INC.
THIS CERTIFIES THAT, Magnetite Asset Investors L.L.C., a Delaware limited
liability company, or its registered assigns, is the registered holder of the
number of Warrants set forth above (the "Warrants"). Each Warrant entitles the
holder thereof (the "Holder"), at its option and subject to the provisions
contained herein and in the Warrant Agreement referred to below, to purchase
from The New York Restaurant Group, Inc., a Delaware corporation (the
"Company"), one share of Common Stock, par value of $0.01 per share, of the
Company (the "Common Stock") at the per share exercise price of $0.01 (the
"Exercise Price"), or by Cashless Exercise referred to below. This Warrant
Certificate shall terminate and become void as of the close of business on June
29, 2009 (the "Expiration Date") or upon the exercise hereof as to all the
shares of Common Stock subject hereto. The number of shares purchasable upon
exercise of the
A-1
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Warrants and the Exercise Price per share shall be as provided in and subject to
adjustment from time to time as set forth in Sections 3 and 4 of the Warrant
Agreement.
This Warrant Certificate is issued under and in accordance with a Warrant
Agreement dated as of June 29, 1999 (the "Warrant Agreement"), among the Company
and Magnetite Asset Investors L.L.C., and is subject to the terms and provisions
contained in the Warrant Agreement, to all of which terms and provisions the
Holder of this Warrant Certificate consents by acceptance hereof. The Warrant
Agreement is hereby incorporated herein by reference and made a part hereof.
Reference is hereby made to the Warrant Agreement for a full statement of the
respective rights, limitations of rights, duties and obligations of the Company
and the Holders of the Warrants. Capitalized terms used but not defined herein
shall have the meanings ascribed thereto in the Warrant Agreement. A copy of the
Warrant Agreement may be obtained for inspection by the Holder hereof upon
written request to the Company at 1114 First Avenue, New York, New York 10021.
Subject to the terms of the Warrant Agreement, the Warrants may be
exercised in whole or in part (i) by surrender of this Warrant Certificate with
the form of election to purchase Warrant Shares attached hereto as Exhibit 1
duly executed and with the simultaneous payment of the Exercise Price in cash
(subject to adjustment) to the Company or (ii) by Cashless Exercise. Payment of
the Exercise Price in cash shall be made in cash or by certified or official
bank check payable to the order of the Company or by wire transfer of funds to
an account designated by the Company for such purpose. Payment by Cashless
Exercise shall be made by the surrender of a Warrant or Warrants represented by
one or more Warrant Certificates and without payment of the Exercise Price in
cash, in exchange for the issuance of such number of shares of Common Stock
equal to the product of (1) the number of shares of Common Stock for which such
Warrant would otherwise then be nominally exercised if payment of the Exercise
Price were being made in cash and (2) the Cashless Exercise Ratio.
As provided in the Warrant Agreement and subject to the terms and
conditions therein set forth, the Warrants shall be exercisable at any time or
from time to time on or after the Closing Date. No Warrant shall be exercisable
after the Expiration Date.
In the event the Company enters into a Combination, the Holder hereof
will be entitled to receive upon exercise of the Warrants the shares of
Common Stock or other securities or other property of such surviving entity
as such Holder would have been entitled to receive upon or as the result of
such Combination had the Holder exercised its Warrants immediately prior to
such Combination; provided, however, that in the event that, in connection
with such Combination, consideration to holders of Common Stock in exchange
for their shares is payable solely in cash or in the event of the
dissolution, liquidation or winding-up of the Company, the Holder hereof will
be entitled to receive distributions on an equal basis with the holders of
Common Stock or
A-2
<PAGE>
other securities issuable upon exercise of the Warrants, as if the Warrants
had been exercised immediately prior to such events, less the Exercise Price.
The Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with the transfer or
exchange of the Warrant Certificates pursuant to Section 2.4 of the Warrant
Agreement but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates, the exercise of the
Warrants or the Warrant Shares.
Upon any partial exercise of the Warrants, there shall be issued to the
Holder hereof a new Warrant Certificate in respect of the shares of Common Stock
as to which the Warrants shall not have been exercised. This Warrant Certificate
may be exchanged by presenting this Warrant Certificate to the Company properly
endorsed with a request to exchange this Warrant Certificate for other Warrant
Certificates evidencing an equal number of Warrants. No fractional Warrant
Shares will be issued upon the exercise of the Warrants, but the Company shall
pay an amount in cash equal to the Current Market Value for one Warrant Share on
the date the Warrant is exercised, multiplied by such fraction, computed to the
nearest whole cent.
THIS WARRANT CERTIFICATE WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID").
THE COMPANY WILL MAKE AVAILABLE TO EACH HOLDER, UPON REASONABLE REQUEST THEREOF
DIRECTED TO THE COMPANY'S CHIEF FINANCIAL OFFICER, MARK LEVINE, AT (212)
838-2061, RELEVANT OID CALCULATIONS WITH RESPECT TO THIS WARRANT CERTIFICATE.
All shares of Common Stock issuable by the Company upon the exercise of
the Warrants shall, upon such issue, be duty and validly issued and fully paid
and non-assessable.
The Holder in whose name the Warrant Certificate is registered may be
deemed and treated by the Company as the absolute owner of the Warrant
Certificate for all purposes whatsoever and the Company shall not be affected by
notice to the contrary.
Except as otherwise specifically required in the Warrant Agreement, the
Warrants do not entitle any Holder hereof to any of the rights of a shareholder
of the Company.
THE NEW YORK RESTAURANT GROUP, INC.
By /s/ Mark Levine
----------------------------------------
[SEAL]
A-3
<PAGE>
Attest: [ILLEGIBLE]
--------------------------------
Secretary
DATED:
A-4
<PAGE>
EXHIBIT 1 TO WARRANT CERTIFICATE
FORM OF ELECTION TO PURCHASE WARRANT SHARES
(to be executed only upon exercise of Warrants)
THE NEW YORK RESTAURANT GROUP, INC.
The undersigned hereby irrevocably elects to exercise [ ] Warrants at an
exercise price per Warrant (subject to adjustment) of $.O1 to acquire an equal
number of shares of Common Stock, par value $.01 per share, of The New York
Restaurant Group, Inc., on the terms and conditions specified in the Warrant
Certificate and the Warrant Agreement therein referred to, surrenders this
Warrant Certificate and all right, title and interest therein to The New York
Restaurant Group, Inc., and directs that the shares of Common Stock deliverable
upon the exercise of such Warrants be registered or placed in the name and at
the address specified below and delivered thereto.
Date:
--------------------------
--------------------------------(1)
(Signature of Owner)
--------------------------------
(Street Address)
--------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
--------------------------------
----------
1. The signature must correspond with the name as written upon the face of
the within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a national
bank or trust company or by a member firm of any national securities
exchange.
A-5
<PAGE>
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised Warrants evidenced by the within Warrant Certificate to be
issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
A-6
<PAGE>
EXHIBIT B TO WARRANT AGREEMENT
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION
OF TRANSFER OF WARRANT CERTIFICATES
Re: 107,983 Warrants to Purchase Common Stock (the "Warrants") of THE NEW
YORK RESTAURANT GROUP, INC.
This Warrant Certificate relates to 107,983 Warrants held in definitive
form by ________ (the "Transferor").
The Transferor*:
|_| has requested the Company by written order to exchange or register the
transfer of a Warrant Certificate
|_| In connection with such request and in respect of such Warrant
Certificate, the Transferor does hereby certify that the Transferor is familiar
with the Warrant Agreement relating to the above captioned Warrants and that the
transfer of this Warrant Certificate does not require registration under the
Securities Act of 1933, as amended (the "Securities Act") because:
|_| Such Warrant Certificate is being acquired for the Transferor's own
account without transfer (in satisfaction of Section 4 of the Warrant
Agreement).
|_| Such Warrant Certificate is being transferred (i) to a qualified
institutional buyer (as defined in Rule 144A under the Securities Act), in
reliance on Rule 144A or (ii) pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act (and, in the case of clause
(ii), based on an opinion of counsel if the Company so requests).
|_| Such Warrant Certificate is being transferred (i) in accordance with
Rule 144 under the Securities Act (and based on an opinion of counsel if the
Company so requests) or (ii) pursuant to an effective registration statement
under the Securities Act.
|_| Such Warrant Certificate is being transferred to an institutional
accredited investor within the meaning of Rule 501(a)(1), (2), (3) or (7) under
the Securities Act pursuant to a private placement exemption from the
registration requirements of the Securities Act (together with a certification).
----------
* Check applicable box.
B-1
<PAGE>
|_| Such Warrant Certificate is being transferred in reliance on and in
compliance with another exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel if the Company so requests).
[INSERT NAME OF TRANSFEROR]
By:
-----------------------
Date:
----------
* Check applicable box.
B-2
<PAGE>
EXHIBIT 5.4
Opinion of Counsel for the Company
June 29, 1999
To Magnetite Asset Investors L.L.C.
c/o BlackRock Financial Management, Inc.
345 Park Avenue, 29th Floor
New York, New York 10154
The New York Restaurant Group Inc.
12 1/2% Senior Subordinated Notes due June 29, 2006
Dear Sirs:
We are counsel to The New York Restaurant Group Inc., a Delaware
corporation (the "Company"), and have acted in such capacity in connection with
the issue and sale today by the Company of $10,000,000.00 aggregate principal
amount of its 12 1/2% Senior Subordinated Notes due June 29, 2006 (the "Notes")
pursuant to the Senior Subordinated Note Purchase Agreement (the "Note Purchase
Agreement"), dated June 29, 1999, between the Company and you. Capitalized terms
used in this opinion without definition have the respective meanings specified
in the Note Purchase Agreement.
In so acting, we have participated in the preparation of the Note
Purchase Agreement, the Notes, the Subsidiaries' Guaranty, dated June 29, 1999
(the "Subsidiaries' Guarantee"), the Warrant Agreement, dated June 29, 1999 (the
"Warrant Agreement") and the Warrants issued pursuant to the Warrant Agreement
(the "Warrants" and together with the Note Purchase Agreement, the Notes, the
Subsidiaries' Guarantee and the Warrant
<PAGE>
Agreement, the "Financing Documents"). We have also examined and relied upon the
representations and warranties as to factual matters contained in or made
pursuant to the Note Purchase Agreement and the other Financing Documents and
examined and relied upon the originals, or copies certified or otherwise
identified to our satisfaction, of such records, documents, certificates and
other instruments, and have made such other investigations, as in our judgment
are necessary or appropriate to enable us to render the opinion expressed below.
We are of the following opinion:
1. Incorporation, Standing, etc. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority to own and
operate its properties, to carry on its business as now conducted, to enter into
the Note Purchase Agreement and the other Financing Documents, to issue and sell
the Notes and to carry out the terms of the Note Purchase Agreement, the Notes
and the other Financing Documents.
2. Subsidiaries. Each Subsidiary is a corporation or limited
liability company duly formed, validly existing and in good standing under the
laws of the jurisdiction of its formation and has all requisite power and
authority to own and operate its properties and to carry on its business as now
conducted. All the outstanding shares of capital stock or all the membership
interests of each Subsidiary are validly issued, fully paid and nonassessable
and all such shares or membership interests shown in Schedule 3.25 to the Note
Purchase Agreement as owned by the Company or by any other Subsidiary are owned
beneficially and of record by the Company or by such other Subsidiary free and
clear of any Lien, except as otherwise disclosed in Schedule 3.25 to the Note
Purchase Agreement.
3. Litigation. To our knowledge, there is no litigation, proceeding
or investigation pending by or against the Company or any of its Subsidiaries
which questions the validity of the Note Purchase Agreement, the Notes or any
other Financing Document or any action taken or to be taken pursuant to the Note
Purchase Agreement, the Notes or any other Financing Document, or, which, if
adversely determined, would have a material adverse effect on the business,
operations, property or financial or other condition of the Company, considered
individually, or of the Company and its Subsidiaries, considered as a whole.
2
<PAGE>
4. Compliance with Other Instruments, etc. To our knowledge, neither
the Company nor any of its Subsidiaries is in violation of any term of its
certificate or articles of incorporation, partnership agreement, other
constituency agreements, or by-laws, and neither the Company nor any of its
Subsidiaries is in violation of any term of the Loan Agreement, dated as of
September 1, 1998, between the Company and Fleet Bank, N.A. (the "Senior Loan
Agreement") or the Shareholders' Agreement, dated October 31, 1997, between the
Company, Alan Stillman, Thomas H. Lee Equity Partners, L.P. THL-CCI Limited
Partnership and those Persons listed as Shareholders on the counterpart
signature pages thereto (the "THL Shareholders' Agreement"), or any other
agreement in connection with either the Senior Loan Agreement or the
Shareholders' Agreement to which it is a party or by which it is bound. Neither
the execution and delivery nor the performance of the Note Agreement, the Notes
and the other Financing Documents will result in any violation of or be in
conflict with or constitute a default under any such term or result in the
creation of (or impose any obligation on the Company or any of its Subsidiaries
to create) any Lien (except for Permitted Liens) upon any of the properties or
assets of the Company or any of its Subsidiaries pursuant to any such term or
will result in a violation of or be in conflict with or constitute a default
under the Senior Loan Agreement or the THL Shareholders' Agreement.
5. Governmental Consent. No consent, approval or authorization of,
or declaration or filing with, or other act by or in respect of any other person
(including stockholders and creditors of the Company or any of its Subsidiaries)
or any governmental authority on the part of the Company or any of its
Subsidiaries is required in connection with the execution, delivery,
performance, validity and enforceability of the Note Purchase Agreement, the
Notes or any of the other Financing Documents or the valid offer, issue, sale
and delivery of the Notes pursuant to the Note Purchase Agreement.
6. Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company," or a company "controlled by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
7. Public Utility Holding Company Act; Federal Power Act. Neither
the company nor any of its Subsidiaries is a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company", as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended, and is not a "public
utility", as such term is defined in the Federal Power Act, as amended.
8. Note Purchase Agreement, the Notes and Other Financing Documents.
The Note Purchase Agreement, the Notes and the other Financing Documents have
been duly authorized by all necessary action on the part of the Company or its
Subsidiaries, as the case
3
<PAGE>
may be, and do not require any shareholder approval. The Note Purchase Agreement
and the other Financing Documents between the Company and you, the Notes and
Warrants purchased by you today have been duly executed and delivered by the
Company and constitute legal, valid and binding obligations of the Company,
enforceable against the Company or its Subsidiaries, as the case may be, in
accordance with their respective terms, except that such enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws of general application relating to
or affecting the rights and remedies of creditors.
9. Securities Act and Trust Indenture Act. The offer, issue, sale
and delivery of the Notes under the circumstances contemplated by the Note
Purchase Agreement constitute exempted transactions under the registration
provisions of the Securities Act of 1933, as amended, and neither the
registration of the Notes thereunder nor the qualification of an indenture in
respect of the Notes under the Trust Indenture Act of 1939, as amended, is
required in connection with such offer, issue, sale and delivery.
10. Regulations T, X and U. The issue and sale of the Notes do not
violate Regulations T, X or U of the Board of Governors of the Federal Reserve
System.
Very truly yours,
4
<PAGE>
SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT
SCHEDULE 3.1(A)
variation from GAAP in March Financial Statements (Company and Subsidiaries):
None.
<PAGE>
SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT
SCHEDULE 3.10
Permitted Liens, clause (d) (Company and Subsidiaries):
1. S&W of Miami, L.L.C. ("S&W Miami"), a Subsidiary of the Borrower, funded
the joint Chapter 11 plan of reorganization (the "Plan") of South Pointe
Hospitality, Inc. ("South Point") and 1 Washington Avenue Corporation ("1
Washington") (collectively, the "Debtors"). Upon consummation of the Plan,
S&W Miami acquired 100% of the newly issued shares of common stock of each
of the Debtors, as reorganized, and the existing equity interests in the
Debtors were cancelled. As consideration for S&W Miami's acquisition of
the new common stock, S&W Miami provided funding for distributions under
the Plan in the form of cash and the assumption, by the reorganized
Debtors, of certain existing liabilities. Following consummation of the
Plan, the Debtors are obligated under the agreements described below,
which obligations are secured by substantially all of the assets of the
Debtors.
a. The Ocean Bank Loan Agreement
Pursuant to a Leasehold First Mortgage and Security Agreement, dated as of
April 12, 1994, by and between the Debtors and Ocean Bank (the
"Mortgage"), the Debtors gave Ocean Bank a mortgage in a lease and a
ground lease and purchase option, and on fixtures, subleases, rents and
personal property. The Mortgage secured a claim held by Ocean Bank in the
amount of $1.2 million. Under the Plan, and in full settlement of the
Ocean Bank claims, the reorganized Debtors assumed such obligations to
Ocean Bank (with certain modifications), and S&W Miami and the Borrower
guaranteed such obligations.
b. SBA
Pursuant to a Loan Agreement, dated April 12, 1994, by and between the
Debtors and the United States Small Business Administration (the "SBA"),
the SBA loaned South Pointe $1,000,000. Such loan is secured by a second
lien on a portion of the collateral for the Ocean Bank Mortgage. The SBA
asserted a $970,000 claim against the Debtors. The reorganized Debtors
assumed the SBA loan, and S&W Miami and the Borrower guaranteed such loan.
SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT
<PAGE>
SCHEDULE 3.13
trade names, fictitious names, d/b/a's of Company and Subsidiaries:
1. The Company and its Subsidiaries use the following trade names and/or
"doing business as" names:
a. "Cite"
b. "Cite Grill"
c. "Maloney & Porcelli"
d. "Mrs. Park's Tavern"
e. "Park Avenue Cafe"
f. "Manhattan Ocean Club"
2. Pursuant to the License Agreement, dated August 16, 1996, between the
Company and St. James Associates, L.P., the Company licensed the right to
use the trademark "Smith & Wollensky" and "Wollensky's Grill" and related
marks in certain geographic areas.
<PAGE>
SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT
SCHEDULE 3.16
management agreements and Material Contracts (Company and Subsidiaries):
1. Restaurant Management Agreement, dated January 24, 1993, among Nabil
Chartouni and Fouad Chartouni and The New York Restaurant Group, Inc., as
amended by First Amendment to Restaurant Management Agreement, dated
December 6, 1994, between Post House Investors, L.P. and The New York
Restaurant Group, Inc. and Second Amendment to Restaurant Management
Agreement, dated October 29, 1996, between Post House Investors, L.P. and
The New York Restaurant Group, L.L.C.
2. Restaurant Management Agreement, dated April 18, 1996, between 37 East
50th Street Corp. and Restaurant Group Management Services, L.L.C.
3. Submanagement Agreement dated June 9, 1995, between Doubletree Partners
and Mrs. Parks Management Company, L.L.C.
4. Management Agreement, dated as of January 1, 1996, between Thomas H. Lee
Capital, LLC and The New York Restaurant Group, L.L.C., as amended.
<PAGE>
SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT
SCHEDULE 3.17
real property leases (Company and Subsidiaries):
Leases
1. Agreement of Lease, dated as of November 1, 1991, between Beekman Tenants
Corporation and White & Witkowsky, Inc., for space at 575 Park Avenue, New
York, New York, as modified by Letter Agreement, dated November 21, 1991,
between Beekman Tenants Corporation and White & Witkowsky, Inc. and
Assignment and Assumption of Lease, dated September 9, 1992, between White
& Witkowsky, Inc. as assignor, and Atlantic & Pacific Grill Associates,
L.P., as assignee.
2. Agreement of Lease, dated as of August 31, 1983, between Holrod Associates
and Thursday's Supper Pub, Inc., for space at 7 West 58th Street, New
York, New York, as modified by Supplemental Agreement and First Amendment
to Lease, dated as of May 3, 1993, among Holrod Associates, Manhattan
Ocean Club Associates and Thursday's Supper Pub, Inc., Second Amendment to
Lease, dated as of April 1, 1995, between Holrod Associates and Manhattan
Ocean Club Associates and Letter of Consent, dated January 10, 1996,
between Thursday's Supper Pub, Inc. and Holrod Associates.
3. Lease, dated June 21, 1988, between Rockefeller Center North, Inc. and
White & Witkowsky, Inc., for space at 111 West 50th Street, New York, New
York, as modified by Assignment and Assumption of Lease, dated as of June
7, 1990, among La Cite, Inc. (formerly White & Witkowsky, Inc.), as
assignor, La Cite Associates, L.P., as assignee and Rockefeller Center
North, Inc., as landlord, Supplemental Indenture, dated as of January 1,
1991, between Rockefeller Center North, Inc. and La Cite Associates, L.P.
and Supplemental Indenture, dated as of January 1, 1992, between
Rockefeller Center North, Inc. and La Cite Associates, L.P.
4. Lease, dated October 19, 1988, between First 61 Partners and The New York
Restaurant Group, Inc., for 1114 First Avenue, 6th Floor, New York, New
York, as amended by Agreement, dated May 1, 1992, between First 61
Partners and The New York Restaurant Group, Inc. and Assignment and
Assumption of Lease, dated January 10, 1996, between The New York
Restaurant Group, L.L.C., as assignor, and New York RGI Sub, L.L.C., as
assignee.
5. Lease, dated May, 1997, between Marina City Hotel Enterprises, L.L.C. and
S&W Chicago, L.L.C., for space at Marina City, Chicago, Illinois.
<PAGE>
6. Lease With an Option to Purchase dated February 9, 1998 between S&W of Las
Vegas, L.L.C. and The Somphone Limited Partnership for space located at
3767 Las Vegas Boulevard South, Las Vegas, Nevada.
7. Lease between S&W D.C., L.L.C. and 1112 Nineteenth Street Associates for
space located at 1112 Nineteenth Street, N.W., Washington, D.C.
8. Lease between M.O.C. of Miami, L.L.C. and Pennsylvania Plaza Associates
dated April 7, 1999 for space located at 601 Pennsylvania Avenue, N.W.,
North Building, Washington, D.C.
9. Lease between 1 Washington Avenue Corp. and The City of Miami Beach dated
February 8, 1985 and amended June 1, 1997 for space located in Dade
County, Florida.
<PAGE>
SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT
SCHEDULE 3.19
materially adverse changes since December 28, 1998 in financial condition or
business (Company and Subsidiaries):
None.
<PAGE>
SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT
SCHEDULE 3.25
complete and correct lists of:
(i) Subsidiaries
--------------------------------------------------------------------------------
Name Jurisdiction Ownership
--------------------------------------------------------------------------------
The Manhattan Ocean Club Associates, LLC Delaware 100% by Company
--------------------------------------------------------------------------------
La Cite Associates, L.L.C. Delaware 100% by Company
--------------------------------------------------------------------------------
Atlantic & Pacific Grill Associates, L.L.C. Delaware 100% by Company
--------------------------------------------------------------------------------
Mrs. Park Sub, LLC Delaware 100% by Company
--------------------------------------------------------------------------------
New York RGI Sub, LLC Delaware 100% by Company
--------------------------------------------------------------------------------
Restaurant Group Management Service, LLC Delaware 100% by Company
--------------------------------------------------------------------------------
S&W Chicago, L.L.C. Delaware 100% by Company
--------------------------------------------------------------------------------
S&W of Miami, L.L.C. Delaware 100% by Company
--------------------------------------------------------------------------------
S&W of Las Vegas, L.L.C. Delaware 100% by Company
--------------------------------------------------------------------------------
S&W D.C., L.L.C. Delaware 100% by Company
--------------------------------------------------------------------------------
MOC D.C., L.L.C. Delaware 100% by Company
--------------------------------------------------------------------------------
S&W New Orleans, L.L.C. Delaware 100% by Company
--------------------------------------------------------------------------------
MOC of Miami, L.L.C. Delaware 100% by Company
--------------------------------------------------------------------------------
(ii) Company's Affiliates
1 Washington Avenue Corporation
South Pointe Hospitality, Inc.
<PAGE>
(iii) Company's directors and senior officers
Alan N. Stillman Chief Executive Officer
Director
James Dunn President
Director
Mark K. Levine Chief Financial Officer
Executive Vice President of Finance
Treasurer
Director
Eugene M. Byrne Vice President of Operations
Eugene Zuriff Director of Strategic Planning
Director
James Gerston Director of New Operations
Thomas H. Lee Director
C. Hunter Boll Director
Richard LeFrak Director
<PAGE>
SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT
SCHEDULE 3.25(c)
agreements restricting the ability of any Subsidiary to pay dividends out of
profits or make distributions of profits to Company or other Subsidiaries
holding stock in Subsidiary:
None.
<PAGE>
SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT
SCHEDULE 3.26
complete and correct list of all outstanding Indebtedness of Company and
Subsidiaries
1. The Senior Loan
2. In 1995, the IRS agreed with the Company and its Subsidiaries and their
employees that all employees will report all the tips they receive. The
IRS has stated separately that, so long as employees start reporting their
tips accurately, the IRS will not make further assessments on the Company
and its Subsidiaries with respect to FICA relating to under reported tips
for prior periods. However, as of December 30, 1996, employees of the
Company and its Subsidiaries were still under reporting their tips, and
the Company continues to accrue 7.65% of the under reported amount (the
amount of FICA tax the Company and its Subsidiaries would owe on those
amounts). The Company accrued $392,000, in the aggregate, as of December
28, 1998.
3. Obligations assumed by S&W of Miami, L.L.C.:
a. One Washington Avenue Corporation:
i. Dade County 1995 and 1996 property taxes
ii. Muskat Group
iii. Ocean Bank loan described in Schedule 3.10
iv. SBA loan described in Schedule 3.10
b. South Pointe Hospitality, Inc.
i. Florida state taxes
ii. Federal taxes
iii. Miscellaneous obligations to trade creditors
4. Letter of Credit No. PB-284294, dated March 7, 1994, issued by Morgan
Guaranty Trust Company of New York in favor of Beekman Tenants Corporation
for the account of Atlantic & Pacific Grill Associates, L.P., for up to an
aggregate amount of $50,000, as amended.
<PAGE>
EXECUTION COPY
================================================================================
WARRANT AGREEMENT
Dated as of
June 29, 1999
among
THE NEW YORK RESTAURANT GROUP, INC.
and
MAGNETITE ASSET INVESTORS L.L.C.
------------------------------------------
Warrants for
Common Stock of
THE NEW YORK RESTAURANT GROUP, INC.
------------------------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1.
Defined Terms
SECTION 1.1 Definitions.....................................................1
SECTION 1.2 Other Definitions...............................................4
SECTION 1.3 Rules of Construction...........................................5
ARTICLE 2.
Warrant Certificates
SECTION 2.1 Form and Dating of Warrant Certificates.........................5
SECTION 2.2 Execution of Warrant Certificates...............................6
SECTION 2.3 Certificate Register............................................6
SECTION 2.4 Transfer and Exchange of Warrant Certificates...................6
SECTION 2.5 Replacement Warrant Certificates................................7
SECTION 2.6 Temporary Warrant Certificates..................................8
SECTION 2.7 Cancellation of Warrant Certificates............................8
ARTICLE 3.
Exercise Terms
SECTION 3.1 Exercise Price..................................................8
SECTION 3.2 Exercise Periods................................................8
SECTION 3.3 Expiration......................................................8
SECTION 3.4 Manner of Exercise..............................................9
SECTION 3.5 Issuance of Warrant Shares......................................9
SECTION 3.6 Fractional Warrant Shares......................................10
SECTION 3.7 Reservation of Warrant Shares..................................10
SECTION 3.8 Compliance with Law............................................11
i
<PAGE>
Page
----
ARTICLE 4.
Antidilution Provisions
SECTION 4.1 Changes in Common Stock........................................11
SECTION 4.2 Cash Dividends and Other Distributions.........................11
SECTION 4.3 [Intentionally omitted.].......................................12
SECTION 4.4 Combination; Liquidation.......................................12
SECTION 4.5 Tender Offers: Exchange Offers.................................13
SECTION 4.6 Other Events...................................................13
SECTION 4.7 Superseding Adjustment.........................................13
SECTION 4.8 Minimum Adjustment.............................................14
SECTION 4.9 Notice of Adjustment...........................................14
SECTION 4.10 Notice of Certain Transactions................................15
SECTION 4.11 Adjustment to Warrant Certificate.............................15
ARTICLE 5.
Tag-Along Rights
SECTION 5.1 Tag-Along Rights on Transfers..................................15
ARTICLE 6.
Certain Agreements of the Company
SECTION 6.1 Reporting and Inspection Covenants.............................16
SECTION 6.2 Nature of Business.............................................17
SECTION 6.3 Transactions with Affiliates...................................17
SECTION 6.4 Issuance of Additional Classes of Stock........................17
SECTION 6.5 Waiver of Preemptive Rights....................................17
ARTICLE 7.
Registration Rights
SECTION 7.1 Registration Rights............................................18
ii
<PAGE>
Page
----
ARTICLE 8.
Transferability
SECTION 8.1 Legend.........................................................18
SECTION 8.2 Lock-Ups.......................................................19
ARTICLE 9.
Miscellaneous
SECTION 9.1 Financial Information..........................................19
SECTION 9.2 Persons Benefitting............................................19
SECTION 9.3 Indemnity......................................................20
SECTION 9.4 Rights of Holders..............................................20
SECTION 9.5 Amendment......................................................20
SECTION 9.6 Notices........................................................20
SECTION 9.7 Governing Law..................................................21
SECTION 9.8 Successors.....................................................21
SECTION 9.9 Multiple Originals.............................................22
SECTION 9.10 Table of Contents.............................................22
SECTION 9.11 Severability..................................................22
SECTION 9.12 Termination...................................................22
EXHIBIT A - Form of Warrant Certificate
EXHIBIT B - Certificate to be Delivered Upon Exchange or Registration of
Transfer of Warrant Certificates
iii
<PAGE>
WARRANT AGREEMENT, dated as of June 29, 1999 (this "AGREEMENT"), among
THE NEW YORK RESTAURANT GROUP, INC., a Delaware corporation (the "COMPANY"), and
MAGNETITE ASSET INVESTORS L.L.C., a Delaware limited liability company
("MAGNETITE").
W I T N E S S E T H :
WHEREAS, the Company has agreed to issue to Magnetite, and Magnetite has
agreed to purchase, warrants (the "WARRANTS") from the Company, each Warrant
initially entitling the holder thereof to purchase one share of Common Stock (as
defined below) of the Company representing in the aggregate 1 1/2% of the Common
Stock of the Company or, upon the occurrence of certain events, one and
one-third shares of Common Stock of the Company representing in the aggregate 2%
of the Common Stock of the Company, subject to adjustment as provided herein;
and
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto hereby agree as follows:
ARTICLE 1.
DEFINED TERMS
SECTION 1.1 DEFINITIONS. All terms defined in the Senior Subordinated
Note Purchase Agreement, dated as of June 29, 1999, between the Company and
Magnetite (the "NOTE PURCHASE AGREEMENT") shall have such defined meanings when
used herein unless otherwise defined herein. As used in this Agreement, the
following terms shall have the following meanings:
"AFFILIATE" means, as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. For purposes of this definition,
"control" of a Person means the power, directly or indirectly, either to (a)
vote 10% or more of the securities having ordinary voting power for the election
of directors of such Person or (b) direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.
"BOARD" means the Board of Directors of the Company or any committee
thereof duly authorized to act on behalf of such Board of Directors.
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"BUSINESS DAY" a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to close.
"CASHLESS EXERCISE RATIO" means a fraction, the numerator of which is
the excess of the Current Market Value per share of Common Stock on the date of
exercise over the Exercise Price per share as of the date of exercise and the
denominator of which is the Current Market Value per share of the Common Stock
on the date of exercise.
"CLOSING DATE" means the date of the Note Purchase Agreement.
"COMBINATION" means an event in which the Company consolidates with,
merges with or into, or sells all or substantially all its property and assets
to another Person.
"COMMON STOCK" means the common stock of the Company with $.01 par value
per share issued or issuable upon exercise of the Warrants.
"CURRENT MARKET VALUE" per share of Common Stock or any other security
at any date means (i) if the security is not registered under the Exchange Act,
the value of the security as determined in good faith by the Board not taking
into account the absence of an active trading market or the minority nature of
the investment; or (ii) if the security is registered under the Exchange Act,
the average of the daily closing bid prices for each Business Day during the
period commencing 15 Business Days before such date and ending on the date one
day prior to such date, or if the security has been registered under the
Exchange Act for less than 15 consecutive Business Days before such date, then
the average of the daily closing bid prices for all of the Business Days before
such date for which daily closing bid prices are available. The Company shall
pay the reasonable fees and expenses of any investment bank referred to in
Article 4 involved in the determination of Current Market Value.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXPIRATION DATE" means the tenth anniversary of the Closing Date.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, applied on a consistent basis.
"HOLDER" means the duly registered holder of a Warrant under the terms
of this Warrant Agreement.
"INITIAL PUBLIC OFFERING" or "IPO" means the first time a Registration
Statement (other than Registration Statements on Form S-4 or Form S-8) filed
under the Securities Act with the SEC respecting an offering, whether primary or
secondary, of Common Stock (or securities
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convertible into, or exchangeable for, Common Stock, or rights to acquire
Common Stock or such securities), which is underwritten on a firmly committed
basis, is declared effective and the securities so registered are issued and
sold.
"OFFICER" means the Chairman of the Board, the President, any Vice
President, the Treasurer, the Secretary or the Controller of the Company.
"PERSON" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"PROSPECTUS" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any of the Warrants, Warrant Shares or other
Registrable Securities covered by such Registration Statement and by all other
amendments and supplements to the prospectus, including post-effective
amendments and all material incorporated by reference in such prospectus.
"REGISTRABLE SECURITIES" means (a) any Warrant Shares or other
securities issued or issuable upon exercise of any Warrants (which shall be
deemed, for the purposes of this definition, to have been issued to, and to
be held by, the Holders of such Warrants) and (b) any securities issued or
issuable with respect to any such Warrant Shares or other securities by way
of stock dividend or stock split or in connection with a combination of
Shares of Common Stock of the Company, recapitalization, merger,
consolidation, reorganization or otherwise. As to any such Registrable
Securities, once issued such Shares of Common Stock or securities shall cease
to be Registrable Securities when (i) a Registration Statement with respect
to the sale of such Registrable Securities shall have been declared effective
and such securities shall have been disposed of in accordance with such
Registration Statement, (ii) they shall have been or thereafter can be
offered and sold by a person that is not an affiliate of the Company pursuant
to Rule 144 without compliance with the provisions of Rule 144(e)(2), (iii)
they shall have been otherwise transferred, new certificates for them not
bearing a legend restricting further transfer shall have been delivered by
the Company and subsequent disposition of them shall not require registration
under the Securities Act or qualification of them under state blue sky laws,
or (iv) they shall have ceased to be outstanding.
"REGISTRATION STATEMENT" means a registration statement that is in
compliance with the Securities Act.
"REQUIREMENTS OF LAW" shall mean as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents or such
Person, and any law, treaty, rule or regulation, or determination of an
arbitrator or a court or other governmental authority, in each
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case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SUBORDINATED NOTES" means the 12 1/2% Senior Subordinated Notes issued
pursuant to the Note Purchase Agreement.
"TRANSFER" means any sale, assignment, gift, bequest, transfer,
distribution, pledge, hypothecation or other encumbrance or disposition.
"TRANSFER RESTRICTED SECURITIES" means the Warrants and the Common Stock
which may be issued to Holders upon exercise of the Warrants, whether or not
such exercise has been effected. Each such security shall cease to be a Transfer
Restricted Security when (i) it has been disposed of pursuant to a registration
statement of the Company filed with the SEC and declared effective by the SEC
that covers the disposition of such Transfer Restricted Security, (ii) it has
been distributed pursuant to Rule 144 (or any similar provisions under the
Securities Act then in effect) or (iii) it has been otherwise transferred and
may be resold without registration under the Securities Act.
"UNDERLYING SECURITIES" means the Warrant Shares and other securities
issuable or issued upon exercise of the Warrants.
"WARRANT SHARES" means the shares of Common Stock of the Company
received, or issued and received, as the case may be, upon exercise of the
Warrants.
SECTION 1.2 OTHER DEFINITIONS
Defined in
Term Section
"Agreement"................................. Introductory Paragraph
"Cashless Exercise"......................... 3.4
"Certificate Register"...................... 2.3
"Company"................................... Introductory Paragraph
"Exercise Price"............................ 3.1
"Fair Value"................................ 4.2
"Letter Agreement".......................... 9.5(b)
"Magnetite"................................. Introductory Paragraph
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"Note Purchase Agreement"................... 1.1
"QIB"....................................... 2.4(a)
"Registrar"................................. 2.7
"Shareholders".............................. 5.1
"Successor Company"......................... 4.4(a)
"THL Shareholders' Agreement"............... 5.1
"Transfer Agent"............................ 3.5
"Warrants".................................. Introductory Paragraph
"Warrant Certificates"...................... 2.1
SECTION 1.3 RULES OF CONSTRUCTION. Unless the text otherwise required.
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles as in effect
from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including, without limitation; and
(v) words in the singular include the plural and words in the plural
include the singular.
ARTICLE 2.
WARRANT CERTIFICATES
SECTION 2.1 FORM AND DATING OF WARRANT CERTIFICATES. The Warrant
Certificates shall be substantially in the form of Exhibit A, the terms of which
are hereby incorporated in and expressly made a part of this Agreement. The
Warrant Certificates may have notations, legends or endorsements required by
law, stock exchange rule, agreements to which the Company is subject, if any, or
usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Company) and shall bear the legend required by Section 8.1.
Each Warrant Certificate shall be dated the date of its countersignature.
The Warrants shall be issued initially in definitive form represented by
a Warrant Certificate (such certificate and all other certificates representing
physical delivery of Warrants in definitive form being called "WARRANT
CERTIFICATES"), representing Warrants to purchase 1 1/2% of the Common Stock of
the Company, increasing to 2% of the Common Stock of the Company
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(as outstanding on the date hereof) if the Subordinated Notes shall not have
been paid in full by June 29, 2001, which shall be issued and delivered to
Magnetite.
SECTION 2.2 EXECUTION OF WARRANT CERTIFICATES. Two Officers shall sign
the Warrant Certificates for the Company by manual or facsimile signature. The
Company's seal shall be impressed, affixed, imprinted or reproduced on the
Warrant Certificate and may be in facsimile form.
SECTION 2.3 CERTIFICATE REGISTER. The Company shall keep a register
("CERTIFICATE REGISTER") of the Warrant Certificates and of their transfer and
exchange. The Certificate Register shall show the names and addresses of the
respective Holders and the date and number of Warrants evidenced on the face of
each of the Warrant Certificates. The Company may deem and treat the Person in
whose name a Warrant Certificate is registered as the absolute owner of such
Warrant Certificate for all purposes whatsoever and the Company shall not be
affected by notice to the contrary.
SECTION 2.4 TRANSFER AND EXCHANGE OF WARRANT CERTIFICATES. (a)
TRANSFER AND EXCHANGE OF WARRANT CERTIFICATES. When Warrant Certificates are
presented to the Company with a request to register the transfer of such
Warrant Certificates or to exchange such Warrant Certificates for an equal
number of Warrant Certificates of other authorized denominations, the Company
shall register the transfer or make the exchange as requested if its
reasonable requirements for such transaction are met; PROVIDED, HOWEVER, that
the Warrant Certificates surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company, duly executed by the
Holder thereof or his attorney duly authorized in writing; and
(ii) in the case of Warrant Certificates that are Transfer Restricted
Securities, shall be accompanied by the following additional information and
documents:
(1) a certificate from such Holder in substantially the form of
Exhibit B hereto certifying that:
(A) such securities are being delivered for registration in the
name of such Holder without transfer;
(B) such securities are being transferred to the Company;
(C) such securities are being transferred pursuant to an
effective registration statement under the Securities Act; or
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(D) such securities are being transferred (w) to a "qualified
institutional buyer" ("QIB") as defined in Rule 144A under the Securities Act
pursuant to such Rule 144A, (x) in an offshore transaction in accordance with
Rule 904 under the Securities Act, (y) in a transaction meeting the requirements
of Rule 144 under the Securities Act or (z) pursuant to another available
exemption from the registration requirements of the Securities Act; and
(2) in the case of any transfer described under clause
(a)(ii)(1)(D)(x), (y) and (z) of this Section 2.4, evidence reasonably
satisfactory to the Company as to compliance with the restrictions set forth in
the legend in Section 8.1.
(b) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF WARRANT
CERTIFICATES. (i) To permit registrations of transfers and exchanges, the
Company shall execute Warrant Certificates as required pursuant to the
provisions of this Section 2.4.
(ii) All Warrant Certificates shall be the valid obligations of
the Company, entitled to the same benefits under this Agreement, as the
Warrant Certificates surrendered upon such registration of transfer or
exchange.
(iii) Prior to due presentment for registration of transfer of any
Warrant Certificate, the Company may deem and treat the Person in whose name
such Warrant Certificate is registered as the absolute owner of such Warrant
Certificate and the Company shall not be affected by notice to the contrary.
(iv) No service charge shall be made to a Holder for any registration
of transfer or exchange upon surrender of any Warrant Certificate. However, the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration of
transfer or exchange of Warrant Certificates.
(v) Upon any sale or transfer of Warrant Certificates pursuant to an
effective registration statement under the Securities Act, pursuant to Rule 144
under the Securities Act or pursuant to an opinion of counsel reasonably
satisfactory to the Company that no legend is required, the Company shall permit
the Holder thereof to exchange such Warrant Certificates for new Warrant
Certificates not bearing the legend set forth in Section 8.1 and shall rescind
any restriction on the transfer of such new Warrant Certificates.
SECTION 2.5 REPLACEMENT WARRANT CERTIFICATES. If a mutilated Warrant
Certificate is surrendered to the Company or if the Holder of a Warrant
Certificate claims that the Warrant Certificate has been lost, destroyed or
wrongfully taken, the Company shall issue a replacement Warrant Certificate if
the reasonable requirements of Section 8-405 of the Uniform Commercial Code as
in effect in the State of New York are met. If required by the Company, such
Holder
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shall furnish an indemnity bond sufficient in the judgment of the Company to
protect the Company from any loss which the Company may suffer if a Warrant
Certificate is replaced. The Company may charge the Holder for its expenses
in replacing a Warrant Certificate. Every replacement Warrant Certificate is
an additional obligation of the Company.
SECTION 2.6 TEMPORARY WARRANT CERTIFICATES. Until definitive Warrant
Certificates are ready for delivery, the Company may prepare temporary Warrant
Certificates. Temporary Warrant Certificates shall be substantially in the form
of definitive Warrant Certificates but may have variations that the Company
considers appropriate for temporary Warrant Certificates. Without unreasonable
delay, the Company shall prepare definitive Warrant Certificates and deliver
them in exchange for temporary Warrant Certificates.
SECTION 2.7 CANCELLATION OF WARRANT CERTIFICATES. (a) In the event the
Company shall purchase or otherwise acquire Warrant Certificates, the same shall
be cancelled.
(b) The Company shall cancel and destroy all Warrant Certificates
surrendered for transfer, exchange, replacement, exercise or cancellation. The
Company may not issue new Warrant Certificates to replace Warrant Certificates
to the extent they evidence Warrants which have been exercised or Warrants which
the Company has purchased or otherwise acquired.
ARTICLE 3.
EXERCISE TERMS
SECTION 3.1 EXERCISE PRICE. Each Warrant shall initially entitle the
Holder thereof to purchase one share of Common Stock, PROVIDED, however, that if
the Subordinated Notes shall not have been paid in full by June 29, 2001, each
Warrant shall entitle the Holder thereof to purchase one and exactly one-third
shares of Common Stock, in each case for a per share exercise price (the
"EXERCISE PRICE") of $0.01, in each case subject to adjustment pursuant to the
terms of this Agreement.
SECTION 3.2 EXERCISE PERIODS. (a) Subject to the terms and conditions
set forth herein, the Warrants shall be exercisable at any time or from time to
time on or after the Closing Date.
(b) No Warrant shall be exercisable after the Expiration Date.
SECTION 3.3 EXPIRATION. A Warrant shall terminate and become void as of
the earlier of (i) the close of business on the Expiration Date or (ii) the time
and date such Warrant is exercised. The Company shall give notice not less than
90, and not more than 120, days prior
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to the Expiration Date to the Holders of all then outstanding Warrants to the
effect that the Warrants will terminate and become void as of the close of
business on the Expiration Date. The Warrants shall terminate and become void
after the Expiration Date, notwithstanding the Company's failure to give such
notice.
SECTION 3.4 MANNER OF EXERCISE. Warrants may be exercised upon (i)
surrender to the Company of the Warrant Certificates, together with the form
of election to purchase Warrant Shares in the form of Exhibit 1 to the
Warrant Certificate duly filled in and signed by the Holder thereof and (ii)
payment to the Company, of the Exercise Price for the number of Warrant
Shares in respect of which such Warrant is then exercised. Such payment shall
be made (i) in cash or by certified or official bank check payable to the
order of the Company or by wire transfer of funds to an account designated by
the Company for such purpose or (ii) by the surrender (which surrender shall
be evidenced by cancellation of the number of Warrants represented by any
Warrant Certificate presented in connection with a Cashless Exercise) of a
Warrant or Warrants (represented by one or more relevant Warrant
Certificates), and without the payment of the Exercise Price in cash, in
exchange for the issuance of such number of shares of Common Stock equal to
the product of (1) the number of shares of Common Stock for which such
Warrant would otherwise then be nominally exercised if payment of the
Exercise Price as of the date of exercise were being made in cash and (2) the
Cashless Exercise Ratio. An exercise of a Warrant in accordance with the
immediately preceding sentence is herein called a "CASHLESS EXERCISE". All
provisions of this Agreement shall be applicable with respect to an exercise
of Warrant Certificates pursuant to a Cashless Exercise for less than the
full number of Warrants represented thereby. If, pursuant to the Securities
Act, the Company is not permitted to effect the registration under the
Securities Act of the issuance and sale of the Warrant Shares by the Company
to the Holders of the Warrants upon the exercise of the Warrants, the Holders
of the Warrants will be required, if the Company is not then able to rely on
an exemption from the registration requirements of the Securities Act in
connection with the issuance and sale of the Warrant Shares upon exercise of
the Warrants, to effect the exercise of the Warrants solely pursuant to the
Cashless Exercise option. Subject to Section 3.2, the rights represented by
the Warrants shall be exercisable at the election of the Holders thereof
either in full at any time or from time to time in part and in the event that
a Warrant Certificate is surrendered for exercise in respect of less than all
the Warrant Shares purchasable on such exercise at any time prior to the
Expiration Date a new Warrant Certificate exercisable for the remaining
Warrant Shares will be issued.
SECTION 3.5 ISSUANCE OF WARRANT SHARES. Subject to Section 2.5, upon the
surrender of Warrant Certificates and payment of the per share Exercise Price or
pursuant to a Cashless Exercise, as set forth in Section 3.4, the Company shall
issue and cause, if appointed, a transfer agent for the Common Stock ("TRANSFER
AGENT") to countersign and deliver to or upon the written order of the Holder
and in such name or names as the Holder may designate, a certificate or
certificates for the number of full Warrant Shares so purchased upon the
exercise of such Warrants or other securities or property to which it is
entitled, registered or otherwise to the Person or
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Persons entitled to receive the same, together with cash as provided in
Section 3.6 in respect of any fractional Warrant Shares otherwise issuable
upon such exercise. Such certificate or certificates shall be deemed to have
been issued and any Person so designated to be named therein shall be deemed
to have become a holder of record of such Warrant Shares as of the date of
the surrender of such Warrant Certificates and payment of the per share
Exercise Price or pursuant to a Cashless Exercise, as set forth in Section
3.4.
SECTION 3.6 FRACTIONAL WARRANT SHARES. The Company shall not be required
to issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be exercised in full at the same time by the same Holder, the
number of full Warrant Shares which shall be issuable upon such exercise shall
be computed on the basis of the aggregate number of Warrant Shares purchasable
pursuant thereto. If any fraction of a Warrant Share would, except for the
provisions of this Section 3.6, be issuable on the exercise of any Warrant (or
specified portion thereof), the Company shall pay an amount in cash equal to the
Current Market Value for one Warrant Share on the date the Warrant is exercised,
multiplied by such fraction, computed to the nearest whole cent.
SECTION 3.7 RESERVATION OF WARRANT SHARES. The Company shall at all
times keep reserved out of its authorized shares of Common Stock a number of
shares of Common Stock sufficient to provide for the exercise of all outstanding
Warrants. The registrar for the Common Stock (the "REGISTRAR") shall at all
times until the Expiration Date, or the time at which all Warrants have been
exercised or canceled, reserve such number of authorized shares as shall be
required for such purpose. The Company will keep a copy of this Agreement on
file with the Transfer Agent. The Company covenants that all Warrant Shares
which may be issued upon exercise of Warrants shall, upon issue, be fully paid,
nonassessable, free of preemptive rights and free from all taxes, liens, charges
and security interests, created by or through the Company, with respect to the
issue thereof. The Company will supply such Transfer Agent with duly executed
stock certificates for such purpose and will itself provide or otherwise make
available any cash which may be payable as provided in Section 3.6. The Company
will furnish to such Transfer Agent a copy of all notices of adjustments and
certificates related thereto transmitted to each Holder.
Before taking any action which would cause an adjustment pursuant to
Article 4 to reduce the Exercise Price below the then par value (if any) of the
Common Stock, the Company shall take any and all corporate action which may, in
the opinion of its counsel, be necessary in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares.
SECTION 3.8 COMPLIANCE WITH LAW. Notwithstanding anything in this
Agreement to the contrary, in no event shall a Holder be entitled to exercise a
Warrant unless (i) a registration statement filed under the Securities Act in
respect of the issuance of the Warrant Shares is then
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effective or (ii) an exemption from the registration requirements is
available under the Securities Act at the time of such exercise.
ARTICLE 4.
ANTIDILUTION PROVISIONS
SECTION 4.1 CHANGES IN COMMON STOCK. In the event that at any time or
from time to time after the date hereof the Company shall (i) pay a dividend or
make a distribution on its Common Stock in shares of its Common Stock or other
shares of capital stock, (ii) subdivide its outstanding shares of Common Stock
into a larger number of shares of Common Stock, (iii) combine its outstanding
shares of Common Stock into a smaller number of shares of Common Stock or (iv)
increase or decrease the number of shares of Common Stock outstanding by
reclassification of its Common Stock, then the number of shares of Common Stock
purchasable upon exercise of each Warrant immediately after the happening of
such event shall be adjusted so that, after giving affect to such adjustment,
the Holder of each Warrant shall be entitled to receive the number of shares of
Common Stock upon exercise that such holder would have owned or have been
entitled to receive had such Warrants been exercised immediately prior to the
happening of the events described above (or, in the case of a dividend or
distribution of Common Stock, immediately prior to the record date therefor),
and the Exercise Price for each Warrant shall be adjusted in inverse proportion.
An adjustment made pursuant to this Section 4.1 shall become effective
immediately after the effective date, retroactive to the record date therefor in
the case of a dividend or distribution in shares of Common Stock, and shall
become effective immediately after the effective date in the case of a
subdivision, combination or reclassification.
SECTION 4.2 CASH DIVIDENDS AND OTHER DISTRIBUTIONS. In case at any time
or from time to time after the date hereof the Company shall distribute to
holders of Common Stock (i) any dividend or other distribution of cash,
evidences of its indebtedness, or any other properties or securities or (ii) any
options, warrants or other rights to subscribe for or purchase any of the
foregoing (other than, in each case set forth in (i) and (ii), (x) any dividend
or distribution described in Section 4.1, or (y) any rights, options, warrants
or securities described in Section 4.3 then the number of shares of Common Stock
purchasable upon the exercise of each Warrant shall be increased to a number
determined by multiplying the number of shares of Common Stock purchasable upon
the exercise of such Warrant immediately prior to the record date for any such
dividend or distribution by a fraction, the numerator of which shall be the
Current Market Value per share of Common Stock on the record date for such
distribution, and the denominator of which shall be such Current Market Value
per share of Common Stock less the sum of (x) any cash distributed per share of
Common Stock and (y) the fair value (the "FAIR VALUE") (as determined in good
faith by the Board, whose determination shall be evidenced by a Board
resolution, a copy of which will be sent to Holders upon request) of the
portion, if any, of the
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distribution applicable to one share of Common Stock consisting of evidences
of indebtedness, shares of stock, securities, other property, warrants,
options or subscription of purchase rights (notwithstanding the foregoing, if
the Fair Value in the above formula equals or exceeds the Current Market
Value per share of Common Stock in the above formula, then the Current Market
Value per share of Common Stock shall be equal to the fair value per share of
the Common Stock on the record date as determined in good faith by the Board
and described in a Board resolution); and the Exercise Price shall be
adjusted to a number determined by dividing the Exercise Price immediately
prior to such record date by the above fraction. Such adjustments shall be
made whenever any distribution is made and shall become effective as of the
date of distribution, retroactive to the record date for any such
distribution; PROVIDED, HOWEVER, that the Company is not required to make an
adjustment pursuant to this Section 4.2 if at the time of such distribution
the Company makes the same distribution to Holders of Warrants as it makes to
holders of Common Stock pro rata based on the number of shares of Common
Stock for which such Warrants are exercisable (whether or not currently
exercisable). No adjustment shall be made pursuant to this Section 4.2 which
shall have the effect of decreasing the number of shares of Common Stock
purchasable upon exercise of each Warrant or increasing the Exercise Price.
SECTION 4.3 [Intentionally omitted.]
SECTION 4.4 COMBINATION; LIQUIDATION. (a) Except as provided in Section
4.4(b), in the event of a Combination, the Holders shall have the right to
receive upon exercise of the Warrants such number of shares of Common Stock or
other securities or property which such Holder would have been entitled to
receive upon or as a result of such Combination had such Warrant been exercised
immediately prior to such event. Unless paragraph (b) is applicable to a
Combination, the Company shall provide that the surviving or acquiring Person
(the "SUCCESSOR COMPANY") in such Combination will enter into an agreement with
the Company confirming the Holders' rights pursuant to this Section 4.4(a) and
providing for adjustments, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 4. The provisions of
this Section 4.4(a) shall similarly apply to successive Combinations involving
any Successor Company.
(b) In the event of (i) a Combination in which consideration to holders
of Common Stock in exchange for their shares is payable solely in cash, or (ii)
the dissolution, liquidation or winding-up of the Company, then the Holders of
the Warrants will be entitled to receive distributions on an equal basis with
the holders of Common Stock or other securities issuable upon exercise of the
Warrants, as if the Warrants had been exercised immediately prior to such event,
less the Exercise Price.
In case of any Combination described in this Section 4.4(b), the
surviving or acquiring Person and, in the event of any dissolution,
liquidation or winding-up of the Company, the Company, shall make available
promptly the funds, if any, necessary to pay to the Holders of the
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Warrants the amounts to which they are entitled as described above. After
such funds and the surrendered Warrant Certificates are received, the Company
shall make payment to the Holders by delivering a check in such amount as is
appropriate (or, in the case of consideration other than cash, such other
consideration as is appropriate) to such Person or Persons as it may be
directed in writing by the Holders surrendering such Warrants.
SECTION 4.5 TENDER OFFERS: EXCHANGE OFFERS. In the event that the
Company or any subsidiary of the Company shall purchase shares of Common Stock
pursuant to a tender offer or an exchange offer for a price per share of Common
Stock that is greater than the then Current Market Value per share of Common
Stock in effect at the end of the trading day immediately following the day on
which such tender offer or exchange offer expires, then the Company, or such
subsidiary of the Company, shall offer to purchase Warrants for comparable
consideration per share of Common Stock based on the number of shares of Common
Stock which the Holders of such Warrants would receive upon exercise of such
Warrants; PROVIDED, HOWEVER, if a tender offer is made for only a portion of the
outstanding shares of Common Stock, then such offer shall be made for Warrants
in the same pro rata proportion.
SECTION 4.6 OTHER EVENTS. If any event occurs as to which the foregoing
provisions of this Article 4 are not strictly applicable or, if strictly
applicable, would not fairly and adequately protect the purchase rights of the
Warrants in accordance with the essential intent and principles of such
provisions, then there shall be made such adjustments in the application of such
provisions, in accordance with such essential intent and principles, as shall be
reasonably necessary to protect such purchase rights as aforesaid, but in no
event shall any such adjustment have the effect of increasing the Exercise Price
or decreasing the number of shares of Common Stock subject to purchase upon
exercise of this Warrant.
SECTION 4.7 SUPERSEDING ADJUSTMENT. Upon the expiration of any
rights, options, warrants or conversion or exchange privileges which resulted
in the adjustments pursuant to this Article 4, if any thereof shall not have
been exercised, the number of Warrant Shares purchasable upon the exercise of
each Warrant shall be readjusted as if (a) the only shares of Common Stock
issuable upon exercise of such rights, options, warrants, conversion or
exchange privileges were the shares of Common Stock, if any, actually issued
upon the exercise of such rights, options, warrants or conversion or exchange
privileges and (b) shares of Common Stock actually issued, if any, were
issuable for the consideration actually received by the Company upon such
exercise plus the aggregate consideration, if any, actually received by the
Company for the issuance, sale or grant of all such rights, options, warrants
or conversion or exchange privileges whether or not exercised and the
Exercise Price shall be readjusted inversely; PROVIDED, HOWEVER, that no such
readjustment shall (except by reason of an intervening adjustment under
Section 4.1) have the effect of decreasing the number of Warrant Shares
purchasable upon the exercise of each Warrant or increase the Exercise Price
by an amount in excess of the amount of the adjustment initially
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made in respect of the issuance, sale or grant of such rights, options,
warrants or conversion or exchange privileges.
SECTION 4.8 MINIMUM ADJUSTMENT. The adjustments required by the
preceding Sections of this Article 4 shall be made whenever and as often as any
specified event requiring an adjustment shall occur, except that no adjustment
of the Exercise Price or the number of shares of Common Stock purchasable upon
exercise of Warrants that would otherwise be required shall be made (except in
the case of a subdivision or combination of shares of Common Stock, as provided
for in Section 4.1) unless and until such adjustment either by itself or with
other adjustments not previously made increases or decreases by at least 1% the
Exercise Price or the number of shares of Common Stock purchasable upon exercise
of Warrants immediately prior to the making of such adjustment. Any adjustment
representing a change of less than such minimum amount shall be carried forward
and made as soon as such adjustment, together with other adjustments required by
this Article 4 and not previously made, would result in a minimum adjustment.
For the purpose of any adjustment, any specified event shall be deemed to have
occurred at the close of business on the date of its occurrence. In computing
adjustments under this Article 4, fractional interests in Common Stock shall be
taken into account to the nearest one-hundredth of a share.
SECTION 4.9 NOTICE OF ADJUSTMENT. Whenever the Exercise Price or the
number of shares of Common Stock and other property, if any, purchasable upon
exercise of Warrants is adjusted, as herein provided, the Chief Financial
Officer of the Company shall prepare a certificate setting forth, in
reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated (including a description of the basis on which
the Board determined the Fair Value of any evidences of indebtedness, other
securities or property or warrants or other subscription or purchase rights),
and specifying the Exercise Price and the number of shares of Common Stock
purchasable upon exercise of Warrants after giving effect to such adjustment.
The Company shall promptly mail a copy of such certificate to each Holder in
accordance with Section 9.6. The Company shall exhibit such certificate from
time to time, to any Holder desiring an inspection thereof during reasonable
business hours. The Company shall not at any time be under any duty or
responsibility to any Holder to determine whether any facts exist which may
require any adjustment of the Exercise Price or the number of shares of
Common Stock or other stock or property, purchasable on exercise of the
Warrants, or with respect to the nature or extent of any such adjustment when
made, or with respect to the method employed in making such adjustment or the
validity or value of any shares of Common Stock.
SECTION 4.10 NOTICE OF CERTAIN TRANSACTIONS. In the event that the
Company shall propose (a) to pay any dividend payable in securities of any class
to the holders of its Common Stock or to make any other distribution to the
holders of its Common Stock, (b) to offer the holders of its Common Stock rights
to subscribe for or to purchase any securities convertible into shares of Common
Stock or shares of Common Stock or shares of stock of any class or any other
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securities, rights or options, (c) to effect any capital reorganization,
consolidation or merger, (d) to effect the voluntary or involuntary dissolution,
liquidation or winding-up of the Company, or (e) to offer any securities the
return on which is measured in whole or in part by reference to the Common
Stock, or in the event of a tender offer or exchange offer described in Section
4.5, the Company shall within 5 days send to Magnetite and shall within 5 days
send to the Holders (other than Magnetite) a notice of such proposed action or
offer, such notice to be mailed by the Company to the Holders in accordance with
Section 9.6, which shall specify the record date for the purposes of such
dividend, distribution or rights, or the date such issuance or event is to take
place and the date of participation therein by the holders of Common Stock, if
any such date is to be fixed, and shall briefly indicate the effect of such
action on the Common Stock and on the number and kind of any other shares of
stock and on other property, if any, and the number of shares of Common Stock
and other property, if any, purchasable upon exercise of each Warrant and the
Exercise Price after giving effect to any adjustment which will be required as a
result of such action. Such notice shall be given by the Company at least 10
days prior to the record date for determining holders of the Common Stock for
purposes of such action.
SECTION 4.11 ADJUSTMENT TO WARRANT CERTIFICATE. The form of Warrant
Certificate need not be changed because of any adjustment made pursuant to this
Article 4, and Warrant Certificates issued after such adjustment may state the
same Exercise Price and the same number of shares of Common Stock as are stated
in any Warrant Certificates issued prior to the adjustment. The Company,
however, may at any time in its sole discretion make any change in the form of
Warrant Certificate that it may deem appropriate to give effect to such
adjustments and that does not affect the substance of the Warrant Certificate,
and any Warrant Certificate thereafter issued, whether in exchange or
substitution for an outstanding Warrant Certificate or otherwise, may be in the
form as so changed.
ARTICLE 5.
TAG-ALONG RIGHTS
SECTION 5.1 TAG-ALONG RIGHTS ON TRANSFERS. The Company acknowledges
that, except as otherwise provided in this Agreement, the Holders shall have the
"tag along" rights set forth in Section 3 of the Shareholders' Agreement, dated
as of October 31, 1997 (the "THL SHAREHOLDERS' AGREEMENT"), by and among the
Company, Alan Stillman, Thomas H. Lee Equity Partners, L.P., THL-CCI Limited
Partnership and those Persons listed as Shareholders on the counterpart
signature pages thereto (the "SHAREHOLDERS"), which Section 3 shall apply to
each Holder of any Warrant or Warrant Share as if such Holder were a
"Shareholder" thereunder and as if such Warrants or Warrant Shares were "Shares"
thereunder; PROVIDED that all other defined terms applicable to such "tag along"
rights shall have the meanings ascribed to them under the THL Shareholders'
Agreement; and PROVIDED, FURTHER that the Holders shall have such "tag along"
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rights until consummation of the Company's Initial Public Offering or the
earlier termination of this Agreement in accordance herewith.
ARTICLE 6.
CERTAIN AGREEMENTS OF THE COMPANY
The Company hereby agrees that, until the first to occur of (i) the
consummation of the Company's IPO or (ii) the date on which no Transfer
Restricted Securities remain outstanding:
SECTION 6.1 REPORTING AND INSPECTION COVENANTS. (a) FINANCIAL
INFORMATION AND COMPLIANCE CERTIFICATES. The Company shall, and shall cause
each of its Subsidiaries to, keep its books of account in accordance with
good accounting practices; the Company shall furnish to each Holder, within
120 days after the last day of each fiscal year, consolidated balance sheets
of the Company and its Subsidiaries as at such last day of the fiscal year
and statements of income and retained earnings and cash flows for such fiscal
year each prepared in accordance with GAAP and certified by a firm of
independent certified public accountants of recognized national reputation;
and, within 45 days after the close of each of the first three quarters of
each fiscal year, consolidated and consolidating balance sheets, statements
of income and retained earnings and cash flows of the Company and its
Subsidiaries as of the last day of and for such quarter and for the period of
the fiscal year ended as of the close of the particular quarter, all such
quarterly statements to be in reasonable detail and certified by the chief
financial or accounting officer of the Company as having been prepared in
accordance with GAAP (subject to year-end adjustments and the absence of
footnotes). The Company will also furnish, within forty-five days after the
end of a calendar month, monthly profit and loss statements of each existing
and new restaurant owned or managed by the Company or any of its
Subsidiaries, internally prepared and certified by the chief financial
officer of the Company. The Company will, with reasonable promptness, furnish
such other data as may be reasonably requested by the Holders, including,
without limitation, copies of all material contracts and agreements. The
Company shall (i) at the Holders' expense, at any time and from time to time
(but not exceeding once in a calendar year) or (ii) after an Event of Default
under the Note Purchase Agreement has occurred and is continuing, at the
Company's expense, at any time and from time to time, permit any Holder by or
through any of its Officers, agents, employees, attorneys or accountants to
conduct, upon reasonable notice, an examination of, and make extracts from,
the Company's books and records.
(b) INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. The Company
shall, and shall cause each Subsidiary to, keep proper books of records and
accounts in which full, true and correct entries in conformity with GAAP and all
Requirements of Law shall be made of all dealings and transactions in relation
to its business and activities; and permit, and cause its
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Subsidiaries to permit, upon reasonable notice thereof (i) at the Holders'
expense, at any time and from time to time (but not exceeding once in a
calendar year), or (ii) after an Event of Default under the Note Purchase
Agreement has occurred and is continuing, at the Company's expense, at any
time and from time to time, any Holder by or through any of its Officers,
agents, employees, attorneys or accountants to visit and inspect any of its
properties and examine and make abstracts from any of its books and records
and discuss the business, operations, properties and financial and other
condition of the Company and its Subsidiaries with Officers and employees of
the Company and its Subsidiaries and with its independent certified public
accountants.
SECTION 6.2 NATURE OF BUSINESS. Neither the Company nor any Subsidiary
will materially alter the nature of its business.
SECTION 6.3 TRANSACTIONS WITH AFFILIATES. Except as otherwise
specifically set forth in the Note Purchase Agreement, neither the Company nor
any Subsidiary will, directly or indirectly, purchase, acquire or lease any
property or assets from, or sell, transfer or lease any property or assets to,
or enter into any other transaction with, including without limitation any
issuance or sale of stock, rights, options, warrants or securities exchangeable
into stock, any Affiliate, except in the ordinary course of business at prices
and on terms and conditions not less favorable to it than those which would have
been obtained in an arm's-length transaction with a non-affiliated third party.
SECTION 6.4 ISSUANCE OF ADDITIONAL CLASSES OF STOCK. The Company
shall not create any additional classes of capital stock (other than the
Common Stock) including preferred stock and any rights, options, warrants or
any other securities the return of which is measured in whole or in part by
reference to the Common Stock unless the Company shall have given the Holders
at least 10 Business Days prior notice of such issuance and demonstrated to
the reasonable satisfaction of each Holder, that the requirements of Sections
4.6 and 6.3 have been met.
SECTION 6.5 WAIVER OF PREEMPTIVE RIGHTS. The Company represents and
warrants that the Shareholders under the THL Shareholders' Agreement have waived
their preemptive rights under Section 4 thereof to acquire from the Company any
Warrants or Warrant Shares issued as a result of the exercise of Warrant by a
Holder hereunder.
ARTICLE 7.
REGISTRATION RIGHTS
SECTION 7.1 REGISTRATION RIGHTS. (a) The Company acknowledges that,
except as provided below, the Holders shall have the registration rights set
forth in Sections 6, 7 and 8 of the THL Shareholders' Agreement which Sections
6.7 and 8 shall apply to each Holder of any
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Warrant or Warrant Share as if such Holder were a "Shareholder" thereunder
and as if such Warrants or Warrant Shares were "Shares" thereunder, PROVIDED
that all defined terms therein shall have the meanings ascribed to them in
such THL Shareholders' Agreement, except that "Registrable Securities" shall
have the meaning set forth in this Agreement; and PROVIDED, FURTHER that such
Sections 6, 7 and 8 of the THL Shareholders' Agreement shall apply to the
Holders until termination of this Agreement in accordance herewith.
Notwithstanding the foregoing, the Holders' rights under such Sections 6, 7
and 8 shall be modified as follows: (i) the Holders shall have no piggyback
registration rights in an Initial Public Offering occurring prior to December
31, 1999, (ii) the Holders shall have piggyback registration rights in
connection with any filing of a registration statement under the Securities
Act described in Section 6(a) of the THL Shareholders' Agreement occurring
after the Initial Public Offering, and in any Initial Public Offering
occurring after December 31, 1999, and (iii) the Holders shall be treated for
purposes of Sections 6, 7 and 8 as if they were shareholders holding
Registrable Securities (i.e. for purposes of cut-backs, notices, payment of
expenses, indemnification, Form S-3 registration and other matters under such
Sections).
(b) For clarity, the Holders shall have no demand registration rights at
any time under Sections 5 of the THL Shareholders' Agreement.
ARTICLE 8.
TRANSFERABILITY
SECTION 8.1 LEGEND. Except for Warrant Certificates delivered pursuant
to Section 2.4(b)(v) of this Agreement, each Warrant Certificate and Warrant
Share shall bear a legend in substantially the following form (with any
appropriate modification for the Warrant Shares):
"THE WARRANT CERTIFICATES AND THE WARRANT SHARES (THE "SECURITIES") HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION AND
SUBJECT TO COMPLIANCE WITH OTHER APPLICABLE LAWS. THE HOLDER HEREOF, BY ITS
ACCEPTANCE HEREOF, AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, UNLESS PREVIOUSLY REGISTERED UNDER THE SECURITIES ACT, ONLY (A) TO
THE COMPANY; (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144
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THEREUNDER (IF AVAILABLE); (C) TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER
IS BEING MADE IN RELIANCE ON RULE 144A; (D) PURSUANT TO AN OFFSHORE
TRANSACTION COMPLYING WITH RULE 904 OF REGULATION S UNDER THE SECURITIES
ACT; OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT."
SECTION 8.2 LOCK-UPS. For so long as the Warrants or the Warrant Shares
are not eligible for resale under Rule 144, the Holders shall not sell such
Warrants or Warrant Shares under the circumstances contemplated by Section
9(b)(i) of the THL Shareholders' Agreement in connection with the Initial Public
Offering. Otherwise, and except as otherwise expressly provided in this
Agreement, there shall be no other restrictions with respect to any sales by the
Holders under Rule 144.
ARTICLE 9.
MISCELLANEOUS
SECTION 9.1 FINANCIAL INFORMATION. As soon as any Warrant becomes
outstanding, the Company shall promptly deliver to the Holders any annual,
quarterly or other financial statements and such other information as is
provided to any holders of equity or debt securities (excluding holders of
senior bank debt) of the Company in their capacity as holders of such
securities.
SECTION 9.2 PERSONS BENEFITTING. Nothing in this Agreement is intended
or shall be construed to confer upon any Person other than the Company and the
Holders any right, remedy or claim under or by reason of this Agreement or any
part hereof.
SECTION 9.3 INDEMNITY. The Company hereby agrees to indemnify and hold
harmless each beneficial owner of a Warrant (whether or not it is, at the time
the indemnity provided for in this Section 9.3 is sought, such a beneficial
owner) against all losses, damages or liabilities which such beneficial owner
suffers as a result of any breach, on the date of any exercise of a Warrant by
such beneficial owner, of the representations, warranties or agreements
contained herein.
SECTION 9.4 RIGHTS OF HOLDERS. Except as otherwise specifically required
herein, holders of unexercised Warrants are not entitled (i) to receive
dividends or other distributions, (ii)
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to receive notice of or vote at any meeting of the stockholders, (iii) to
consent to any action of the stockholders, (iv) to receive notice of any
other proceedings of the Company or (v) to exercise any other rights as
stockholders of the Company.
SECTION 9.5 AMENDMENT. (a) This Agreement may be amended by the
parties hereto without the consent of any Holder for the purpose of curing
any ambiguity, or of curing, correcting or supplementing any defective
provision contained herein or making any other provisions with respect to
matters or questions arising under this Agreement as the Company may deem
necessary or desirable; PROVIDED, HOWEVER, that such action shall not affect
adversely the rights of the Holders. Any amendment or supplement to this
Agreement that has an adverse effect on the interests of the Holders shall
require the written consent of the Holders of a majority of the then
outstanding Warrants. The consent of each Holder affected shall be required
for any amendment pursuant to which the Exercise Price would be increased or
the number of Warrant Shares purchasable upon exercise of Warrants would be
decreased (other than pursuant to adjustments provided herein). In
determining whether the Holders of the required number of Warrants have
concurred in any direction, waiver or consent, Warrants owned by the Company
or by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company shall be disregarded and
deemed not to be outstanding.
(b) Pursuant to the Letter Agreement dated June 28, 1999 (the "LETTER
AGREEMENT"), the Holders have become party to the THL Shareholders' Agreement
solely for purposes of Sections 3, 6, 7 and 8 thereof, and the defined terms
used in such sections, as modified by this Agreement. In connection with any
proposed amendment, waiver or modification of such sections, the Holders shall
have the same voting rights as the Shareholders thereunder and shall be bound by
any amendment, waiver or consent to such Sections 3, 6, 7 or 8 (as to the
subject matter existing on the date hereof) approved by the requisite number of
Shareholders as if the Holders were signatories thereto; PROVIDED that if the
Shareholders receive any remuneration or compensation in respect of any
amendment, waiver or modification, the Holders shall be entitled to share
therein as if they were Shareholders thereunder.
SECTION 9.6 NOTICES. All notices, requests and demands to or upon the
respective parties hereto shall be in writing (unless otherwise expressly
provided herein) and shall be deemed to have been duly given or made when
delivered by hand, or by telecopy, receipt acknowledged, or five (5) calendar
days after having been deposited in the mail addressed as follows:
The Company: The New York Restaurant Group, Inc.
1114 First Avenue
New York, New York 10021
Attn: Mr. Mark K. Levine, Executive Vice President
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with a copy to: Hutchins, Wheeler & Dittmar, A Professional Corporation
101 Federal Street
Boston, Massachusetts 02110
Attn: James Westra, Esq.
Magnetite: Magnetite Asset Investors L.L.C.
c/o BlackRock Financial Management, Inc.
345 Park Avenue, 29th Floor
New York, NY 10154
Attn: Dennis M. Schaney
with copies to: Kelso & Company
320 Park Avenue, 24th Floor
New York, New York 10022
Attn: James J. Connors, II, Esq.
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attn: John M. Vasily, Esq.
The Company by notice to the other parties hereto may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder shall be mailed to the
Holder at the Holder's address as it appears on the Certificate Register and
shall be sufficiently given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
SECTION 9.7 GOVERNING LAW. The laws of the State of New York shall
govern this Agreement and the Warrant Certificates.
SECTION 9.8 SUCCESSORS. All agreements of the Company in this Agreement
and the Warrant Certificates shall bind its successors.
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SECTION 9.9 MULTIPLE ORIGINALS. The parties may sign any number of
copies of this Agreement. Each signed copy shall be an original, but all of them
together represent the same Agreement. One signed copy is enough to prove this
Agreement.
SECTION 9.10 TABLE OF CONTENTS. The table of contents and headings of
the Articles and Sections of this Agreement have been inserted for convenience
of reference only, are not intended to be considered a part hereof and shall not
modify or restrict any of the terms or provisions hereof.
SECTION 9.11 SEVERABILITY. The provisions of this Agreement are
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity
or unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
SECTION 9.12 TERMINATION. Unless otherwise expressly stated herein, this
Agreement shall terminate if no Transfer Restricted Securities are outstanding.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
THE NEW YORK RESTAURANT GROUP, INC.
By: /s/ Mark Levine
Name: Mark Levine
Title: Executive V.P.
MAGNETITE ASSET INVESTORS L.L.C.
By: BLACKROCK FINANCIAL MANAGEMENT, INC.,
as Managing Member
By: /s/ Dennis M. Schaney
Name: Dennis M. Schaney
Title: Managing Director
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EXHIBIT A TO WARRANT AGREEMENT
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS AND THE WARRANT SHARES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION AND SUBJECT TO COMPLIANCE WITH
OTHER APPLICABLE LAWS. THE HOLDER HEREOF, BY ITS ACCEPTANCE HEREOF, AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, UNLESS PREVIOUSLY REGISTERED
UNDER THE SECURITIES ACT, ONLY (A) TO THE COMPANY; (B) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE); (C) TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A; (D) PURSUANT
TO AN OFFSHORE TRANSACTION COMPLYING WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT; OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
No. 1 Certificate for 107,983 Warrants
WARRANTS TO PURCHASE COMMON STOCK OF
THE NEW YORK RESTAURANT GROUP, INC.
THIS CERTIFIES THAT, Magnetite Asset Investors L.L.C., a Delaware
limited liability company, or its registered assigns, is the registered
holder of the number of Warrants set forth above (the "WARRANTS"). Each
Warrant entitles the holder thereof (the "HOLDER"), at its option and subject
to the provisions contained herein and in the Warrant Agreement referred to
below, to purchase from The New York Restaurant Group, Inc., a Delaware
corporation (the "COMPANY"), one share of Common Stock, par value of $0.01
per share, of the Company (the "COMMON STOCK") at the per share exercise
price of $0.01 (the "EXERCISE PRICE"), or by Cashless Exercise referred to
below. This Warrant Certificate shall terminate and become void as of the
close of business on June 29, 2009 (the "EXPIRATION DATE") or upon the
exercise hereof as to all the shares of Common Stock subject hereto. The
number of shares purchasable upon exercise of the
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Warrants and the Exercise Price per share shall be as provided in and subject to
adjustment from time to time as set forth in Sections 3 and 4 of the Warrant
Agreement. (Pursuan to Section 3.1 thereof, if the Subordinated Notes shall not
have been paid in full by June 29, 2001, the number of Warrants evidenced by the
Warrant Certificate shall be 143,977 Warrants, as subject to adjustment from
time to time as set forth in Section 3 and 4 of the Warrant Agreement.)
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of June 29, 1999 (the "WARRANT AGREEMENT"), among the
Company and Magnetite Asset Investors L.L.C., and is subject to the terms and
provisions contained in the Warrant Agreement, to all of which terms and
provisions the Holder of this Warrant Certificate consents by acceptance hereof.
The Warrant Agreement is hereby incorporated herein by reference and made a part
hereof. Reference is hereby made to the Warrant Agreement for a full statement
of the respective rights, limitations of rights, duties and obligations of the
Company and the Holders of the Warrants. Capitalized terms used but not defined
herein shall have the meanings ascribed thereto in the Warrant Agreement. A copy
of the Warrant Agreement may be obtained for inspection by the Holder hereof
upon written request to the Company at 1114 First Avenue, New York, New York
10021.
Subject to the terms of the Warrant Agreement, the Warrants may be
exercised in whole or in part (i) by surrender of this Warrant Certificate with
the form of election to purchase Warrant Shares attached hereto as Exhibit 1
duly executed and with the simultaneous payment of the Exercise Price in cash
(subject to adjustment) to the Company or (ii) by Cashless Exercise. Payment of
the Exercise Price in cash shall be made in cash or by certified or official
bank check payable to the order of the Company or by wire transfer of funds to
an account designated by the Company for such purpose. Payment by Cashless
Exercise shall be made by the surrender of a Warrant or Warrants represented by
one or more Warrant Certificates and without payment of the Exercise Price in
cash, in exchange for the issuance of such number of shares of Common Stock
equal to the product of (1) the number of shares of Common Stock for which such
Warrant would otherwise then be nominally exercised if payment of the Exercise
Price were being made in cash and (2) the Cashless Exercise Ratio.
As provided in the Warrant Agreement and subject to the terms and
conditions therein set forth, the Warrants shall be exercisable at any time or
from time to time on or after the Closing Date. No Warrant shall be exercisable
after the Expiration Date.
In the event the Company enters into a Combination, the Holder hereof
will be entitled to receive upon exercise of the Warrants the shares of
Common Stock or other securities or other property of such surviving entity
as such Holder would have been entitled to receive upon or as the result of
such Combination had the Holder exercised its Warrants immediately prior to
such Combination; PROVIDED, HOWEVER, that in the event that, in connection
with such Combination, consideration to holders of Common Stock in exchange
for their shares is payable solely in cash
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or in the event of the dissolution, liquidation or winding-up of the Company,
the Holder hereof will be entitled to receive distributions on an equal basis
with the holders of Common Stock or other securities issuable upon exercise
of the Warrants, as if the Warrants had been exercised immediately prior to
such events, less the Exercise Price.
The Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with the transfer or
exchange of the Warrant Certificates pursuant to Section 2.4 of the Warrant
Agreement but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates, the exercise of the
Warrants or the Warrant Shares.
Upon any partial exercise of the Warrants, there shall be issued to the
Holder hereof a new Warrant Certificate in respect of the shares of Common Stock
as to which the Warrants shall not have been exercised. This Warrant Certificate
may be exchanged by presenting this Warrant Certificate to the Company properly
endorsed with a request to exchange this Warrant Certificate for other Warrant
Certificates evidencing an equal number of Warrants. No fractional Warrant
Shares will be issued upon the exercise of the Warrants, but the Company shall
pay an amount in cash equal to the Current Market Value for one Warrant Share on
the date the Warrant is exercised, multiplied by such fraction, computed to the
nearest whole cent.
All shares of Common Stock issuable by the Company upon the exercise of
the Warrants shall, upon such issue, be duty and validly issued and fully paid
and non-assessable.
The Holder in whose name the Warrant Certificate is registered may be
deemed and treated by the Company as the absolute owner of the Warrant
Certificate for all purposes whatsoever and the Company shall not be affected by
notice to the contrary.
Except as otherwise specifically required in the Warrant Agreement, the
Warrants do not entitle any Holder hereof to any of the rights of a shareholder
of the Company.
THE NEW YORK RESTAURANT GROUP, INC.
By /s/ Mark Levine
----------------------------------------
[SEAL]
Attest: [ILLEGIBLE]
----------------------------
Secretary
DATED:
A-3
<PAGE>
EXHIBIT 1 TO WARRANT CERTIFICATE
FORM OF ELECTION TO PURCHASE WARRANT SHARES
(to be executed only upon exercise of Warrants)
THE NEW YORK RESTAURANT GROUP, INC.
The undersigned hereby irrevocably elects to exercise [ ] Warrants at
an exercise price per Warrant (subject to adjustment) of $.01 to acquire an
equal number of shares of Common Stock, par value $.01 per share, of The New
York Restaurant Group, Inc., on the terms and conditions specified in the
Warrant Certificate and the Warrant Agreement therein referred to, surrenders
this Warrant Certificate and all right, title and interest therein to The New
York Restaurant Group, Inc., and directs that the shares of Common Stock
deliverable upon the exercise of such Warrants be registered or placed in the
name and at the address specified below and delivered thereto.
Date: ______________________
(1)
-------------------------------------
(Signature of Owner)
--------------------------------------
(Street Address)
--------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
--------------------------------------
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(1) The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a national
bank or trust company or by a member firm of any national securities
exchange.
A-4
<PAGE>
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised Warrants evidenced by the within Warrant Certificate to be
issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
A-5
<PAGE>
EXHIBIT B TO WARRANT AGREEMENT
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION
OF TRANSFER OF WARRANT CERTIFICATES
Re: 107,983 Warrants to Purchase Common Stock (the "WARRANTS") of THE
NEW YORK RESTAURANT GROUP, INC.
This Warrant Certificate relates to 107,983 Warrants held in definitive
form by _________ (the "TRANSFEROR").
The Transferor*:
|_| has requested the Company by written order to exchange or register
the transfer of a Warrant Certificate
|_| In connection with such request and in respect of such Warrant
Certificate, the Transferor does hereby certify that the Transferor is
familiar with the Warrant Agreement relating to the above captioned Warrants
and that the transfer of this Warrant Certificate does not require
registration under the Securities Act of 1933, as amended (the "SECURITIES
ACT") because:
|_| Such Warrant Certificate is being acquired for the Transferor's own
account without transfer (in satisfaction of Section 4 of the Warrant
Agreement).
|_| Such Warrant Certificate is being transferred (i) to a qualified
institutional buyer (as defined in Rule 144A under the Securities Act), in
reliance on Rule 144A or (ii) pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act (and, in the case of clause
(ii), based on an opinion of counsel if the Company so requests).
|_| Such Warrant Certificate is being transferred (i) in accordance
with Rule 144 under the Securities Act (and based on an opinion of counsel if
the Company so requests) or (ii) pursuant to an effective registration
statement under the Securities Act.
|_| Such Warrant Certificate is being transferred to an institutional
accredited investor within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act pursuant to a private placement exemption from the
registration requirements of the Securities Act (together with a
certification).
----------
* Check applicable box.
B-1
<PAGE>
|_| Such Warrant Certificate is being transferred in reliance on and in
compliance with another exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel if the Company so
requests).
[INSERT NAME OF TRANSFEROR]
By: ___________________________
Date:
B-2
</TEXT>
</DOCUMENT>