-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AS3w3vvWbtEyj6/2xBzm0hTz6FNxoBCC6nIlAx933NdyrYscQ0v3bzJU6CAPd/MH cn9psx0ScCIFVQ3Iwu5ToA== 0000949353-97-000003.txt : 19970222 0000949353-97-000003.hdr.sgml : 19970222 ACCESSION NUMBER: 0000949353-97-000003 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970214 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLASSIC RESTAURANTS INTERNATIONAL INC /CO/ CENTRAL INDEX KEY: 0000861058 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 841122431 STATE OF INCORPORATION: CO FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-28704 FILM NUMBER: 97535417 BUSINESS ADDRESS: STREET 1: 3091 GOVERNORS LAKE DR BLDG 100 STE 500 CITY: NORCROSS STATE: GA ZIP: 30071 BUSINESS PHONE: 7707299010 FORMER COMPANY: FORMER CONFORMED NAME: CLASSIC RESTAURANTS INC/CO DATE OF NAME CHANGE: 19960604 FORMER COMPANY: FORMER CONFORMED NAME: CASINOS INTERNATIONAL INC/CO DATE OF NAME CHANGE: 19960604 FORMER COMPANY: FORMER CONFORMED NAME: REGIONAL EQUITIES CORP DATE OF NAME CHANGE: 19930328 10QSB 1 FORM 10-QSB U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [x] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: December 31, 1996 [ ] TRANSITION REPORT PURSUANT SECTION 13 OF 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to ________ Commission file number 0-28704 CLASSIC RESTAURANTS INTERNATIONAL, INC. (Exact name of small business issuer as specified in its charter) COLORADO 84-1122431 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 3500 PARKWAY LANE, SUITE 435, NORCROSS, GEORGIA 30092 (Address of principal executive offices) (770)729-9010 (Issuer's telephone number) NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes___X___ No______ State the number of shares outstanding of each of the issuer's classes of common equity, as of the last practicable date: 3,498,851 SHARES OF CLASS A COMMON STOCK, NO PAR VALUE 200,000 SHARES OF CLASS B COMMON STOCK, NO PAR VALUE AS OF DECEMBER 31, 1996 Transitional Small Business Disclosure Format (check one): Yes_____ No ___X__ Exhibit index on page 13 Page 1 of 42 pages CLASSIC RESTAURANTS INTERNATIONAL, INC. TABLE OF CONTENTS PART I. FINANCIAL INFORMATION PAGE Item 1. Financial Statements Balance Sheet - December 31, 1996 (unaudited) 3 Statement of Operations - for the three months ended December 31, 1996 (unaudited) 4 Statement of Cash Flows - for the three months ended December 31, 1996 (unaudited) 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 PART II. OTHER INFORMATION 9 CLASSIC RESTAURANTS INTERNATIONAL, INC BALANCE SHEET DECEMBER 31, 1996 (UNAUDITED) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 75,351 Accounts receivable 15,144 Inventory 21,237 Due from affiliates 169,713 Prepaid and other current assets 297,242 -------- Total current assets 578,687 PROPERTY AND EQUIPMENT: Furniture and equipment 287,108 Leasehold improvements 520,321 Vehicles 6,228 ------ Total property and equipment 813,657 Accumulated depreciation (396,470) 417,187 OTHER ASSETS: Deposits 39,119 Organization costs, net of accumulated amortization of $8,388 21,612 ------- 60,731 TOTAL ASSETS $ 1,056,605 ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 222,792 Accrued expenses 25,322 Taxes payable 44,624 Other current liabilities 141,984 -------- Total current liabilities 434,722 NOTES AND LOANS PAYABLE 295,449 STOCKHOLDERS' EQUITY: Preferred stock, Series A, 20 shares at $25,000 stated value authorized, issued and outstanding 500,000 Common stock, Class A, no par value, 1,800,000,000 shares authorized, 3,501,769 shares issued and outstanding 3,422,545 Common stock, Class B, no par value, 200,000,000 shares authorized, 200,000 shares issued and outstanding 200 Accumulated deficit (3,596,311) Total stockholders' equity 326,434 -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,056,605 ========== The accompanying notes are an integral part of this balance sheet. CLASSIC RESTAURANTS INTERNATIONAL, INC STATEMENTS OF LOSS (UNAUDITED)
For the three months For the six months ended December 31, ended December 31, 1996 1996 Net Sales $ 703,959 $1,115,833 Operating Expenses: Operating and maintenance 547,639 921,604 General and administrative 444,310 694,941 Depreciation and amortization 35,899 71,789 ------- ------- Total Operating Expenses 1,027,848 1,688,334 ---------- ---------- Loss From Operations (323,889) (572,501) ---------- ---------- Other Income (expense): Other income - 7,000 Interest income 201 410 Interest Expense (22,676) (28,902) --------- --------- (22,475) (21,492) --------- --------- Net Loss $ (346,364) $ (593,993) ========== =========== Per share information: Weighted average shares outstanding Primary 3,249,512 3,135,719 ========= ========= Fully Diluted 3,527,289 3,274,607 ========= ========= Net loss per share: Primary $ (0.11) $ (0.19) ====== ====== Fully Diluted $ (0.10) $ (0.18) ====== ======
The accompanying notes are an integral part of these statements. CLASSIC RESTAURANTS INTERNATIONAL, INC STATEMENTS OF CASH FLOWS (UNAUDITED)
For the three months For the six months ended December 31, ended December 31, 1996 1996 ---------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (346,363) $ (593,993) ------------ ----------- Adjustments to reconcile net earnings to net cash provided by (used in) operating activities - Depreciation and amortization 35,899 71,789 Net changes in assets and liabilities - Increase in accounts receivable (13,948) (11,459) Increase in inventory (3,610) (5,157) Increase in prepaid expenses (282,984) (283,297) (Decrease) and increase in trade accounts payable (33,393) 35,698 Decrease in accrued expenses (10,516) (125,697) (Decrease) and increase in taxes payable (5,010) 44,624 Increase in other current liabilities 14,848 54,483 ------ ------- Total adjustments (298,714) (219,016) ---------- ---------- Net cash used in operating activities (645,077) (813,009) ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (5,962) (10,821) -------- --------- Net cash used in investing activities (5,962) (10,821) -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment of deposits (180) (1,701) Advances to affiliates (113,325) (117,625) Payment of advances from stockholders (472,642) (320,641) Payment of long-term debt (42,999) (42,999) Proceeds from stock issuance 1,339,388 1,359,388 --------- ---------- Net cash provided by financing activities 710,242 876,422 -------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS 59,203 52,592 CASH AND CASH EQUIVALENTS, beginning of period 16,148 22,759 ------- ------- CASH AND CASH EQUIVALENTS, end of period $ 75,351 $ 75,351 ======= ======== The accompanying notes are an integral part of these statements.
CLASSIC RESTAURANTS INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and Item 310(b) of Regulation SB. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. For further information, refer to the financial statements of the Company as of June 30, 1996, and the notes thereto, included in the Company's Form 10-KSB. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION LIQUIDITY AND CAPITAL RESOURCES At December 31, 1996 the Company had a working capital surplus of $143,965, compared to a working capital deficiency $976,147 on June 30, 1996. On December 31, 1996, and June 30, 1996, the Company had cash and cash equivalents of $75,351, and $22,759, respectively. The increase in working capital can be attributed to a number of items. In October 1996, the Company completed a private placement of stock for gross proceeds of $500,000. The proceeds of this offering resulted in an increase in both cash and working capital. The Company has entered into consulting agreements with Cambria Investment Group, Ltd. and Continental Capital and Equity Corporation to assist the Company with its shareholder and public relations. The Company prepaid these agreements, with cash and stock, which contributed to the increase in current assets, and working capital. The stock issued under these agreements was valued at $258,750, which will be amortized over the life of the agreements. Of the $50,000 in cash which was paid under the agreements, $23,000 has been included in general and administrative expenses for the 6 months ended December 31, 1996. Also, an increase in the amount payable from affiliates increased current assets and working capital. A portion of the amount due from affiliates is attributed to the $60,000 earnest money deposits made under the Stock Purchase Agreement described below under Results of Operations. A note which was due to an affiliate of the Company, in the amount of $426,141, was converted into Class A Common Stock, resulting in a reduction of current liabilities and an increase in working capital and stockholders' equity. Current liabilities were $434,722 and $1,084,704 on December 31, 1996 and June 30, 1996, respectively. On December 31, 1996, and June 30, 1996, total liabilities were $730,171 and $1,084,704, respectively. 6 The differences in current liabilities and total liabilities between June 30, 1996 and December 31, 1996, are attributable to the reclassification of certain debts, from current liabilities to notes and loans payable, and the conversion of the note due to a stockholder into Class A Common Stock. On December 31, 1996, the Company had total stockholders' equity of $326,434, contrasted with a stockholders' deficit of $438,961 on June 30, 1996. The private placement for $500,000, along with the conversion into equity of a note due to a shareholder and the stock issued under the consulting agreements, contributed to the increase in stockholders' equity. Also, the Company has sold subscriptions for Series B Convertible Preferred Stock which, until the Company is authorized to issue this stock, has been accounted for as equity investments in Class A Common Shares. Currently, the Company is dependent upon advances from shareholders and the sale of stock to meet its financing needs. There is no guaranty that the Company will be able to obtain additional financing from these sources. RESULTS OF OPERATIONS The financial statements of the Company as of December 31, 1996, are not comparable to the Company's financial statements on December 31, 1995. The financial statements dated December 31, 1996, are those of the Company and its wholly-owned operating subsidiary, Classic Restaurants International, Inc., a Florida corporation, while the financial statements dated December 31, 1995 were those of what was formerly known as Casinos International, Inc. and its wholly-owned subsidiary, Great American Casinos, Inc. For the three and six months ended December 31, 1996, the Company had net sales of $703,959 and $1,115,833, respectively. In contrast, net sales for the six months ended June 30, 1996 were $1,372,352. For the six months ended December 31, 1996, operating expenses were $1,688,334, as compared to $1,800,238 for the six months ended June 30, 1996. The Company experienced a loss from operations of $572,501 and a net loss of $593,993, for the six months ended December 31, 1996. In contrast, for the six months ended June 30, 1996, the Company had a loss from operations of $427,886 and a net loss of $446,467. Operating expenses for the six months ended December 31, 1996, were $921,604, in contrast to $1,247,567 for the six months ended June 30, 1996. The Company's general and administrative expenses were $694,941 and $480,960 for the six months ended December 31, 1996 and June 30, 1996, respectively. Interest expense for the six months ended December 31, 1996, was $28,902, compared to $18,881 for the six months ended June 30, 1996. Due to the seasonality of the Company's business, and the changes which the Company has undergone during the past year, the Company does not believe that expenses for the the six months ending December 31, 1996 and the six months ending June 30, 1996 are comparable. 7 On October 18, 1996, the Company entered into a Stock Purchase Agreement with Joseph Rollins to purchase a 67.5% interest in Jocks & Jills Prado, Inc. ("Prado") and a 60.75% interest in Divine Events, Inc. ("Divine"). Prado does business under the name Frankie's Food - Sports - Spirits, a sports bar located in Atlanta, Georgia. The Company made an earnest money deposit of $50,000 and made an additional $10,000 deposit for an extension of the Closing Date. 8 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Not Applicable. ITEM 2. CHANGES IN SECURITIES. October 10, 1996, the Company's Board of Directors authorized the creation of a Series A Convertible Preferred Stock, and the issuance of 20 shares of the Series A Convertible Preferred Stock along with a Common Stock Purchase Warrant for an aggregate price of $500,000. The terms of the Series A Convertible Preferred Stock, require the Company to redeem the shares twelve (12) months after issuance, and entitle the holder to a $25,000 liquidation preference over the holders of the Company's equity securities. The Series A Preferred Stock holders are entitled to vote with the Class A Common Stock holders, and are entitled to the number of votes equal to the number of shares of Class A Common Stock into which the Series A Preferred Stock could be converted at the record date for such a vote, or if no record date is determined, the date of the vote or the date the written consent of shareholders is solicited. The Series A Convertible Preferred Stock may be converted into Class A Common Stock 45 days after issuance. The number of shares into which the Series A Convertible Preferred Stock may be converted is calculated by dividing $25,000 by the "conversion price," which is the lesser of the closing bid price on the date of subscription, or sixty percent (60%) of the average closing bid price for a period of three (3) trading days immediately preceding the date of conversion. The conversion price may be adjusted from time to time by the Board of Directors as set forth in the Articles of Incorporation. No fractional shares will be issued upon conversion, instead the Company will pay cash equal to the fair value of the Class A Common Stock as determined by the Board of Directors. Pursuant to the terms of the Series A Convertible Preferred Stock, the Company may not amend its Articles of Incorporation in any manner which would materially alter or change the powers, preferences, or special rights of the Series A Convertible Preferred shareholders, without the approval of such amendment by two-thirds (2/3) of the outstanding shares of Series A Convertible Preferred Stock, voting together as a class. Also, the Company is limited in its redemption, retirement, purchase, or acquisition of any class or series of common stock, and the issuance of any class or equity securities. The Company's Articles of Incorporation, which describe in detail the provisions applicable to the Series A Convertible Preferred Stock, are attached as an exhibit to this report. The purchaser of the Series A Convertible Preferred Stock, Ocean Funding (BVI), Ltd., is not a U.S. citizen, therefore, the Company issued these securities pursuant to the exemption provided by Regulation S. Pursuant to the terms of the Common Stock Purchase Warrant and the Series A Convertible Preferred Stock, the Company has set aside and reserved 446,000 shares of the Company's Class A Common Stock. 9 The Common Stock Purchase Warrant entitles the holder to purchase up to 295,000 shares of the Company's Class A Common Stock. The terms of the Common Stock Purchase Warrant (the "Warrant") provide that the Company will reserve 295,000 shares of the Class A Common Stock for issuance upon exercise of the warrant. The Warrant could be exercised, until December 15, 1996, at a price of $1.70 per share, and thereafter at a price of either $1.70 per share or sixty percent (60%) of the closing bid for the Class A Common Stock. The terms of the Warrant also provide for an adjustment in the number of shares the holder is entitled to purchase, and the purchase price, in the event the Company subdivides or combines its outstanding shares of common stock. Subsequent to December, 1996, the holder exercised its option to purchase 95,238 shares of the Company's common stock for $ 0.525 per share ($49,999.95). This stock was issued pursuant to the registration exemption provided by Regulation S. The Board of Directors, on October 28, 1996, authorized the issuance of 130,000 shares of the Corporation's Class A Common Stock to Continental Capital & Equity Corporation ("CCEC"), in consideration for CCEC's services. Eighty thousand (80,000) of these shares were registered on a Form S-8 filed with the Securities and Exchange Commission. The other 50,000 shares were not registered, based on the exemption provided by Section 4(2) of the Securities Act. Management relied upon this exemption because of the non-public nature of the sale and the sophistication of CCEC and its directors. On December 16, 1996, the Company issued 30,000 shares of Class A Common Stock to Dale McMackin, a shareholder of the Company, at a price of $2.00 per share. The Company relied on the registration exemption provided by Section 4(2) of the Securities Act, due to the non-public nature of the offering. On December 20, 1996, the Company's Board of Directors authorized the issuance of 247,759 shares of Class A Common Stock. These shares were issued as follows: Employees received 2,250 shares as an annual bonus in recognition of loyal service and as an incentive to continue with the Company. These employees were Arthur Barnes, Ruth Barlow, Joe Camper, Gary Wyatt, Leo Heitzman, Linda Ruth, and Dawn DeCarlo. Crown Resources, Inc. ("Crown") received 243,509 shares in payment of $426,140.82 of debt. Crown is controlled by James Robert Shaw, a director of the Company. Jerry W. Carter, a director of the Company, was issued 2,000 shares of Class A Common Stock, and 1,000 shares of Series B Convertible Preferred Stock, when authorized, for services rendered to the Corporation, valued at $18,500. 10 All of the Class A Common Stock shares were valued at a $1.75 per share, which was 70% of the current bid price of $2.50 per share. The Series B Convertible Preferred Stock will be valued at $15.00 per share. The Company issued these shares without registration, based upon the exemption provided by Section 4(2) of the Securities Act. Management believed this exemption was available because of the non-public nature of the transactions and the shares were issued to employees and directors. On December 10, 1996, the Board of Directors authorized the issuance of 10,000 shares of Series B Convertible Preferred Stock, for an aggregate price of $150,000. As of December 31, 1996, subscriptions and payments for 2,918 shares of Series B Convertible Preferred Stock had been received by the Company, including the 1,000 shares which were issued to Jerry W. Carter, as previously mentioned. However, as of December 31, 1996, the Company had not filed an amendment to the Articles of Incorporation to authorize the Series B Convertible Preferred Stock. The payments which were received for the Series B Convertible Preferred Stock have been accounted for as equity investments in Class A Common Shares, until such time as the Company is authorized to issue the Series B Convertible Preferred Stock. The Company intends to offer and sell the Series B Convertible Preferred Stock under the terms of Rule 506 of Regulation D. The Company believes that the sales prior to December 31, 1996, may qualify for the registration exemption provided by Section 4(2) given the non-public nature of the offering and that the subscribers are current shareholders of the Company, with the exception of Jerry W. Carter, who is a director of the Company. Pursuant to the terms of the Series B Convertible Preferred Stock, the Company has set aside and reserved 100,000 shares of Class A Common Stock. 11 ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not Applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not Applicable. ITEM 5. OTHER INFORMATION. Not Applicable. 12 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A) EXHIBITS
REGULATION SEQUENTIAL S-B NUMBER EXHIBIT PAGE NUMBER 2 PLAN OF PURCHASE, SALE, REORGANIZATION, ARRANGEMENT, N/A LIQUIDATION, SUCCESSION 3.1 ARTICLES OF INCORPORATION, AS AMENDED 14 3.2 BYLAWS, AS AMENDED (1) N/A 4.1 ARTICLES OF INCORPORATION (2) N/A 10.1 STOCK PURCHASE AGREEMENT WITH JOCKS & JILLS PRADO, INC. 33 AND DIVINE EVENTS, INC. 10.2 Client Service Agreement with Continental Capital & N/A Equity Corporation dated October 11, 1996 (3) 10.3 Consulting Agreement with Cambria Investment Group, N/A Ltd. (3) 11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (4) N/A 15 LETTER ON UNAUDITED FINANCIAL INFORMATION (4) N/A 18 LETTER ON CHANGE IN ACCOUNTING PRINCIPLES N/A 19 REPORT FURNISHED TO SECURITY HOLDERS N/A 22 PUBLISHED REPORT REGARDING MATTERS SUBMITTED TO VOTE OF N/A SECURITY HOLDERS 23 CONSENTS OF EXPERTS AND COUNSEL N/A 24 POWER OF ATTORNEY N/A 27 FINANCIAL DATA SCHEDULE 41 - ------------
(1) INCORPORATED BY REFERENCE TO THE EXHIBITS FILED WITH THE COMPANY'S ANNUAL REPORTS ON FORM 10-KSB FOR THE FISCAL YEARS ENDED JUNE 30, 1995 AND JUNE 30, 1994 AND THE COMPANY'S CURRENT REPORT ON FORM 8-K DATED JANUARY 31, 1996, COMMISSION FILE NUMBER 033-33556-D. (2) THE APPLICABLE PROVISIONS OF THE ARTICLES OF INCORPORATION WHICH HAVE BEEN CHANGED MAY BE FOUND IN EXHIBIT 3.1. (3) INCORPORATED BY REFERENCE TO THE EXHIBITS FILED WITH THE FORM S-8 FILED ON NOVEMBER 11, 1996, WITH THE SECURITIES AND EXCHANGE COMMISSION, FILE NUMBER 333-1609. (4) SEE PART I - FINANCIAL STATEMENTS. 13 B) REPORTS ON FORM 8-K: None. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CLASSIC RESTAURANTS INTERNATIONAL, INC. (Registrant) Date: February 14, 1996 By:/s/Caroline P. Anderson Caroline P. Anderson Executive Vice President and Chief Financial Officer 123196.10Q 14 EX-3.(I) 2 ARTICLES OF INCORPORATION, AS AMENDED EXHIBIT 3.1 ARTICLES OF INCORPORATION, AS AMENDED 15 [Stamps and notations from the Colorado Secretary of State's Office] AMENDED AND RESTATED ARTICLES OF INCORPORATION [Colorado Secretary of State file stamp] OF REGIONAL EQUITIES CORPORATION KNOW ALL MEN BY THESE PRESENTS: That these Amended and Restated Articles of Incorporation, which supersede the original Articles of Incorporation, were adopted by the vote of a number of shares of Regional Equities Corporation sufficient for approval on January 5, 1990. ARTICLE I NAME The name of the corporation shall be: Regional Equities Corporation ARTICLE II CAPITAL The total number of shares of all classes of capital stock which the corporation shall have authority to issue is 2,100,000,000 shares, of which 100,000,000 shares shall be shares of Preferred Stock, no par value per share and 2,000,000,000 shares shall be shares of Common Stock, no par value per share. (a) PREFERRED STOCK. The designations and the powers, preferences and rights, and the qualifications, limitations or restrictions of the Preferred Stock, the establishment of different series of Preferred Stock, and variations in the relative rights and preferences as between different series shall be established in accordance with the Colorado Corporation Code by the Board of Directors. Except for such voting powers with respect to the election of directors or other matters as may be stated in the resolutions of the Board of Directors creating any series of Preferred Stock, the holders of any such series shall have no voting power whatsoever. (b) COMMON STOCK. The holders of Common Stock shall have and possess all rights as shareholders of the corporation, including such rights as may be granted elsewhere by these Articles of Incorporation, except as such rights may be limited by the preferences, privileges and voting powers, and the restrictions and limitations of the Preferred Stock. Subject to preferential dividend rights, if any, of the holders of Preferred Stock, dividends upon the Common Stock may be declared by the Board of Directors and paid out of any funds legally available therefor at such times and in such amounts as the Board of Directors shall determine. The capital stock, after the amount of the subscription price has been paid in, shall not be subject to assessment to pay the debts of the corporation. Any stock of the corporation may be issued for money, property, services rendered, labor done, cash advances for the corporation, or for any other assets of value in accordance with the action of the Board of Directors, whose judgment as to value received in return therefor shall be conclusive and said stock, when issued, shall be fully paid and nonassessable. ARTICLE III NO PREEMPTIVE RIGHTS A shareholder of the corporation shall not be entitled to a preemptive right to purchase, subscribe for, or otherwise acquire any unissued or treasury shares of stock of the corporation, or any options or warrants to purchase, subscribe for or otherwise acquire any such unissued or treasury shares, or any shares, bonds, notes, debentures, or other securities convertible into or carrying options or warrants to purchase, subscribe for or otherwise acquire any such unissued or treasury shares. ARTICLE IV CUMULATIVE VOTING A shareholder of the corporation shall not be entitled to cumulative voting. ARTICLE V REGISTERED OFFICE AND AGENT The initial registered office of the corporation shall be at 5290 DTC Parkway, Suite 150, Englewood, Colorado 80111, and the name of the initial registered agent at such address is Larry D. Harvey. Either the registered office or the registered agent may be changed in the manner provided by law. Part of all of the business of said corporation may be carried on in the State of Colorado or beyond the limits of the State of Colorado, in other states or territories of the United States and in foreign countries. -2- ARTICLE VI BOARD OF DIRECTORS The business and affairs of this Corporation shall be managed by a Board of Directors which shall have all authority granted to it by the Colorado Corporation Code. The number of directors may from time to time be increased or decreased in such manner as shall be provided by the Bylaws of this corporation. So long as the number of directors shall be less than three, no shares of this corporation may be issued and held of record by more shareholders than there are directors. Any shares issued in violation of this paragraph shall be null and void. In the event there are less than three directors, this provision shall also constitute a restriction on the transfer of shares. The initial board of directors of the corporation shall consist of three directors, and the names and addresses of the persons who shall serve as directors until the first annual meeting of shareholders or until their successors are elected and shall qualify are: M. James Herbic 1210 South Parker Road, Suite 200 Denver, Colorado 80231 James A Hesman 1210 South Parker Road, Suite 200 Denver, Colorado 80231 Larry D. Harvey 5290 DTC Parkway, Suite 150 Englewood, Colorado 80111 ARTICLE VII INDEMNIFICATION The corporation shall indemnify any person who is or was a director to the maximum extent provided by statute. The corporation shall indemnify any person who is or was an officer, employee or agent of the corporation who is not a director to the maximum extent provided by law, or to a greater extent if consistent with law and if provided by resolution of the corporation's shareholders or directors, or in a contract. The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, fiduciary or agent of the corporation and who while a director, officer, employee, fiduciary or agent of the corporation, is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, fiduciary or agent of any other foreign or domestic corporation, partnership, joint venture, trust, other enterprise or employee benefit plan against any liability asserted -3- against or incurred by him in any such capacity or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under provisions of the statute. ARTICLE VIII LIMITATION OF DIRECTOR LIABILITY A director of the corporation shall not be personally liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or to its shareholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for acts specified under Section 7-5-114 of the Colorado Corporation Code or any amended or successor provision thereof, or (iv) for any transaction from which the directors derived an improper personal benefit. If the Colorado Corporation Code is amended after this Article is adopted to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the Colorado Corporation Code, as so amended. Any repeal or modification of the foregoing paragraph by the shareholders of the corporation shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification. ARTICLE IX CORPORATE OPPORTUNITIES The officers, directors and other members of management of this corporation shall be subject to the doctrine of corporate opportunities only insofar as it applies to business opportunities in which this corporation has expressed an interest as determined from time to time by the corporation's Board of Directors as evidenced by resolutions appearing in the corporation's minutes. When such areas of interest are delineated, all such business opportunities within such areas of interest which come to the attention of the officers, directors and other members of management of this corporation shall be disclosed promptly to this corporation and made available to it. The Board of Directors may reject any business opportunity presented to it and thereafter any officer, director or other member of management may avail himself of such opportunity. Until such time as this corporation, through its Board of Directors, has designated an area of interest, the officers, directors and other members of management of this corporation shall be free to engage in such areas of interest on their own and the provisions hereof shall not limit the rights of any officer, director or other member of management of this -4- corporation to continue a business existing prior to the time that such area of interest is designated by this corporation. This provision shall not be construed to release any employee of the corporation (other than an officer, director or member of management) from any duties which he may have to the corporation. ARTICLE X COMPROMISES WITH CREDITORS Whenever a compromise or arrangement is proposed by the corporation between it and its creditors or any class of them, and/or between said corporation and its shareholders or any class of them, any court of equitable jurisdiction may, on the application in a summary way by said corporation, or by a majority of its stock, or on the application of any receiver or receivers appointed for said corporation, or on the application of trustees in dissolution, order a meeting of the creditors or class of creditors and/or of the shareholders or class of shareholders of said corporation, as the case may be, to be notified in such manner as the said court decides. If a majority in number, representing at least three-fourths in amount of the creditors or class of creditors, and/or the holders of the majority of the stock or class of stock of said corporation, as the case may be, agree to any compromise or arrangement and/or to any reorganization of said corporation, as a consequence of such compromise or arrangement, the said compromise or arrangement and/or the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding upon all the creditors or class of creditors, and/or on all the shareholders or class of shareholders of said corporation, as the case may be, and also on said corporation. ARTICLE XI MEETINGS OF SHAREHOLDERS Meetings of shareholders shall be held at such time and place as provided in the Bylaws of the corporation. At all meetings of the shareholders, one-third of all shares entitled to vote at the meeting shall constitute a quorum. ARTICLE XII VOTING OF SHAREHOLDERS With respect to any action to be taken by shareholders of this corporation which pursuant to statute requires the vote of two-thirds of the outstanding shares entitled to vote thereon, a vote or concurrence of the holders of a majority of the outstanding shares entitled to vote thereon, or of any class or series, shall be required. IN WITNESS WHEREOF, the undersigned each certify under penalty of perjury that the execution of this instrument is his act and -5- deed, that he had read these Amended and Restated Articles of Incorporation and knows the contents thereof and the facts stated therein are true. Date: January 5, 1990 /s/M. James Herbic M. James Herbic, President Date: January 5, 1990 /s/Larry D. Harvey Larry D. Harvey, Secretary 8465:000ART01.MTM -6- [This page includes various markings from the Colorado Secretary of State's Office] ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF REGIONAL EQUITIES CORPORATION Pursuant to the provisions of Colorado Corporation Code, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation: FIRST: The name of the corporation is Regional Equities Corporation. SECOND: On October 28, 1994, in the manner provided by the Colorado Corporation Code, the directors of the corporation passed a resolution to amend the Articles of Incorporation to change the name of the corporation to Casinos International, Inc. THIRD: The amendment does not provide for the exchange of any issued shares or for a change in the stated capital of the corporation. Dated this 31st day of October, 1994. Attest: REGIONAL EQUITIES CORPORATION /s/Teresa A. Bates BY: /s/Edward L. Bates Teresa A. Bates, Secretary Edward L. Bates, President [Markings from the Colorado Secretary of State's Office] ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF CASINOS INTERNATIONAL, INC. Pursuant to the provisions of Colorado Corporation Code, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation: [Markings from the Colorado Secretary of State's Office] FIRST: The name of the corporation is Casinos International, Inc. SECOND: The following amendment was adopted by the shareholders of the corporation on September 30, 1994, in the manner prescribed by the Colorado Corporation Code: ARTICLE II was amended to read, in its entirety, as follows: ARTICLE II CAPITAL The total number of shares of all classes of capital stock which the corporation shall have authority to issue is 2,100,000,000 shares, of which 100,000,000 shares shall be shares of Preferred Stock, no par value per share, 1,800,000,000 shares shall be shares of Class A Common Stock, no par value per share, and 200,000,000 shares shall be shares of Class B Common Stock, no par value per share. (a) PREFERRED STOCK. The designations and the powers, preferences and rights, and the qualifications, limitations or restrictions of the Preferred Stock, the establishment of different series of Preferred Stock, and variations in the relative rights and preferences as between different series shall be established in accordance with the Colorado Corporation Code by the Board of Directors. Except for such voting powers with respect to the election of directors or other matters as may be stated in the resolutions of the Board of Directors creating any series of Preferred Stock, the holders of any such series shall have no voting power whatsoever. (b) COMMON STOCK. The holders of Common Stock shall have and possess all rights as shareholders of the corporation, including such rights as may be granted elsewhere by these Articles of Incorporation, except as such rights may be limited by the preferences, privileges and voting powers, and the restrictions and limitations of the Preferred Stock. Subject to preferential dividend rights, if any, of the holders of Preferred Stock, dividends upon the Common Stock may be declared by the Board of Directors and paid out of any funds legally available therefor at such times and in such amounts as the Board of Directors shall determine. The capital stock, after the amount of the subscription price has been paid in, shall not be subject to assessment to pay the debts of the corporation. Any stock of the corporation may be issued for money, property, services rendered, labor done, cash advances for the corporation, or for any other assets of value in accordance with the action of the Board of Directors, whose judgment as to value received in return therefor shall be conclusive and said stock, when issued, shall be fully paid and nonassessable. The shares of all classes of common stock shall be equally entitled to receive the net assets of the corporation upon dissolution and shall have unlimited voting rights, provided, however that each share of Class A Common Stock shall only be entitled to one (1) vote in each matter voted upon by the shareholders and each share of Class B Common Stock shall be entitled to forty (40) votes for each matter voted upon by the shareholders; and further provided, however, that in the event there is outstanding any Class B Common Stock, the holders thereof shall have the exclusive right to elect the following number of total directors: (a) if there are an even number of total directors, one-half of the total number of directors plus one; (b) if there are an odd number of directors, one-half of the total number of directors plus one-half. Each class of common stock shall be entitled to receive distributions from time to time, from legally available funds, as determined by the Board of Directors. THIRD: All of the corporation's issued and outstanding common stock as of the date of this amendment shall be considered Class A Common Stock after the amendment. FOURTH: The amendment does not provide for the exchange of any issued shares or for a change in the stated capital of the corporation. Dated this 1st day of October, 1994. Attest: CASINOS INTERNATIONAL, INC. /s/Teresa A. Bates BY:/s/Edward L. Bates Teresa A. Bates, Secretary Edward L. Bates, President MAIL TO: SECRETARY OF STATE FOR OFFICE USE ONLY 002 CORPORATIONS SECTION 1560 BROADWAY, SUITE 200 [box for Colorado DENVER, CO 80202 Secretary of (303) 894-2251 State's Office MUST BE TYPED FAX (303) 894-2242 Markings] FILING FEE: $25.00 MUST SUBMIT TWO COPIES ARTICLES OF AMENDMENT PLEASE INCLUDE A TYPED TO THE SELF-ADDRESSED ENVELOPE ARTICLES OF INCORPORATION Pursuant to the provisions of the Colorado Business Corporation Act, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation: FIRST: The name of the corporation is CASINOS INTERNATIONAL, INC. SECOND: The following amendment to the Articles of Incorporation was adopted on JANUARY 24, 1996 ,as prescribed by the Colorado Business Corporation Act, in the manner marked with an X below: _____ No shares have been issued or Directors Elected - Action by Incorporators _____ No shares have been issued but Directors Elected - Action by Directors _____ Such amendment was adopted by the board of directors where shares have been issued and shareholder action was not required. __X__ Such amendment was adopted by a vote of the shareholders. The number of shares voted for the amendment was sufficient for approval. THIRD: If changing corporate name, the new name of the corporation is Classic Restaurants International, Inc. FOURTH: The manner, if not set forth in such amendment, in which any exchange, reclassification, or cancellation of issued shares provided for in the amendment shall be effected, is as follows: Not applicable If these amendments are to have a delayed effective date, please list that date: JANUARY 31, 1996 (Not to exceed ninety (90) days from the date of filing) CASINOS INTERNATIONAL, INC. Signature /s/Edward L. Bates Title EDWARD L. BATES, PRESIDENT REVISED 7/95 [Stamp from Colorado Secretary of State's Office] ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF CLASSIC RESTAURANTS INTERNATIONAL, INC. [Colorado Secretary of State file stamp] Pursuant to the provisions of the Colorado Business Corporation Act, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation: FIRST: The name of the corporation is Classic Restaurants International, Inc. SECOND: The amendment to the Articles of Incorporation set forth on Exhibit A was adopted on October 10, 1996, as prescribed by the Colorado Business Corporation Act. Such amendment was duly adopted by the board of directors without shareholder action; shareholder action was not required. THIRD: This amendment is to be effective upon filing . CLASSIC RESTAURANTS INTERNATIONAL, INC. By: /s/James R. Shaw James R. Shaw, President EXHIBIT A Classic Restaurants International, Inc. (the "Corporation") adds to Article II of its Articles of Incorporation the following: SERIES A CONVERTIBLE PREFERRED STOCK The Corporation designates twenty (20) shares of its Preferred Stock as Series A Convertible Preferred Stock (the "Series A Preferred Stock"), stated value $25,000 per share, with the following rights, preferences, and limitations: Section 1. NUMBER. The number of shares constituting the Series A Preferred Stock shall be twenty (20). Section 2. DIVIDENDS. Holders of the Series A Preferred Stock shall not be entitled to receive dividends. Section 3. REDEMPTION. The Series A Preferred Stock shall be redeemable by the Corporation twelve (12) months after issuance (the "Redemption Date") for $25,000 per share. Section 4. LIQUIDATION RIGHTS. In the event of any voluntary or involuntary liquidations, dissolution, or winding up of the Corporation, the holders of Series A Preferred Stock shall be entitled to receive from the assets of the Corporation $25,000 per share, which shall be paid or set apart for payment before the payment or setting apart for payment of any amount for, or the distribution of any assets of the Corporation to, the holders of common stock or any other class of equity securities in connection with such liquidation, dissolution, or winding up. Each share of Series A Preferred Stock shall rank on a parity with each other share of Series A Preferred Stock, with respect to the respective preferential amounts fixed for such series payable upon any distribution of assets by way of liquidation, dissolution, or winding up of the Corporation. After the payment or the setting apart of payment to the holders of Series A Preferred Stock of the preferential amount so payable to them, the holders of common shares shall be entitled to receive all remaining assets of the Corporation. The Corporation covenants and agrees that so long as the Series A Preferred Stock is outstanding, the Corporation shall not issue any equity securities with a liquidation preference senior to the Series A Preferred Stock. Section 5. VOTING RIGHTS. The holders of the Series A Preferred Stock shall be entitled to vote with the holders of the Class A Common Stock. The holder of each share of Series A Preferred Stock shall be entitled to the number of votes equal to the number of shares of Class A Common Stock into which such share of Series A Preferred Stock could be converted at the record date for determination of the shareholders entitled to vote on such matters, or, if no such record date is established, at the date such vote is taken or any written consent of shareholders is solicited, such votes to be counted together with all other shares of the Corporation having general voting power and not separately as a class. Except as otherwise provided by law or provided herein, the holders of the Series A Preferred Stock shall not be entitled to vote separately as a class. A-1 Section 6. CONVERSION RIGHTS. The holders of the Series A Preferred Stock shall have conversion rights as follows (the "Conversion Rights"): (a) RIGHT TO CONVERT. Each share of Series A Preferred Stock shall be convertible without the payment of any additional consideration by the holder thereof and, at the option of the holder thereof, at any time following the expiration of the Restrictive Period, as herein defined below. The Restrictive Period shall be a period of forty-five (45) days following the date of issuance of the Series A Preferred Stock, which date shall be the same as the Closing Date as that term is defined in the Subscription Agreement by and between the Corporation and the holder thereof (the "Subscription Agreement"). Each share of Series A Preferred Stock shall be convertible into such number of fully paid and nonassessable shares of Class A Common Stock as will be determined by dividing the amount of $25,000 by the Conversion Price. The Conversion Price is defined as the lesser of (i) the closing bid price of the Corporation's Class A Common Stock on the date of signing of the Subscription Agreement (the "Signing Date," as defined in the Subscription Agreement) or (ii) sixty percent (60%) of the average closing bid price for a period of three (3) trading days immediately preceding the date of conversion. The Conversion Price of the Series A Preferred Stock shall be subject to adjustment from time to time as provided below. (b) MECHANICS OF CONVERSION. Before any holder of the Series A Preferred Stock shall be entitled to convert the same into shares of Class A Common Stock, he shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for the Series A Preferred Stock and shall give written notice (the "Notice of Conversion") to the Corporation at such office that he elects to convert the same. The Corporation shall, as soon as practicable thereafter, but not later than 5 days, issue and deliver at such office to such holder of the Series A Preferred Stock a certificate or certificates for the number of shares of Class A Common Stock to which he shall be entitled. The conversion date on the Notice of Conversion submitted to the Corporation shall be the date of conversion; however, if the Corporation does not receive the Notice of Conversion from the holder within five (5) business days of the conversion date on the Notice of Conversion, the date of conversion shall be deemed to have been the date on which the Corporation received the Notice of Conversion. The person or persons entitled to receive the shares of Class A Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Class A Common Stock on such date. (c) FRACTIONAL SHARES. In lieu of any fractional shares to which the holder of Series A Preferred Stock would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair value of one share of Class A Common Stock as determined by the board of directors of the Corporation. The number of whole shares issuable to each holder upon such conversion shall be determined on the basis of the number of shares of Class A Common Stock issuable upon conversion of the total number of shares of Series A Preferred Stock of each holder at the time of converting into Class A Common Stock. (d) ADJUSTMENT OF CONVERSION PRICE. The Conversion Price of the Series A Preferred Stock shall be subject to adjustment from time to time as follows: (i) If the Corporation shall issue any Class A Common Stock other than "Excluded Stock," as defined below, for a consideration per share less than the Conversion Price in effect immediately prior to the issuance of such Class A Common Stock (excluding stock dividends, subdivisions, split-ups, combinations, dividends, or recapitalizations which are covered by subsections 6(d)(iii), (iv), (v), and (vi) below), then, and in each such case, the Conversion Price in effect immediately after each such issuance shall forthwith (except as provided in this Section 6(d) be adjusted to a price equal to the quotient obtained by dividing: A-2 (AA) an amount equal to the sum of (xx) the total number of shares of Class A Common Stock outstanding (including any shares of Class A Common Stock issuable upon conversion of the Series A Preferred Stock, or deemed to have been issued pursuant to subdivision (C)(2), (3), and (4) of this clause (i) but excluding shares issuable upon the exercise of outstanding options or warrants otherwise deemed to be outstanding pursuant to subdivision (C)(1) of this clause (i)) immediately prior to such issuance multiplied by the Conversion Price in effect immediately prior to such issuance, plus (yy) the consideration received by the Corporation upon such issuance, by (BB) the total number of shares of Class A Common Stock outstanding (including any shares of Class A Common Stock issuable upon conversion of the Series A Preferred Stock or deemed to have been issued pursuant to subdivision (C)(2), (3), and (4) of this clause (i) but excluding shares issuable upon the exercise of outstanding options or warrants otherwise deemed to be outstanding pursuant to subdivision (C)(1) of this clause (i)) immediately after the issuance of such Class A Common Stock. Except to the limited extent provided for in clauses (C)(3) and (C)(4) below, no adjustment of any Conversion Price pursuant to this subsection 6(d)(i) shall have the effect of increasing such Conversion Price above the Conversion Price in effect immediately prior to such adjustment. For the purposes of this subsection 6(d)(i), the following provisions shall be applicable: (A) In the case of the issuance of Class A Common Stock for cash, the consideration shall be deemed to be the amount of cash paid therefor after deducting any discounts or commissions paid or incurred by the Corporation in connection with the issuance and sale thereof. (B) In the case of the issuance of Class A Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair value thereof as determined by the board of directors of the Corporation, in accordance with generally accepted accounting treatment; PROVIDED, HOWEVER, that if, at the time of such determination, the Corporation's Class A Common Stock is traded in the over-the-counter market or on a national or regional securities exchange, such fair market value as determined by the board of directors of the Corporation shall not exceed the aggregate "Current Market Price" (as defined below) of the shares of Class A Common Stock being issued. (C) In the case of the issuance of (i) options to purchase or rights to subscribe for Class A Common Stock (other than Excluded Stock), (ii) securities by their terms convertible into or exchangeable for Class A Common Stock (other than Excluded Stock), or (iii) options to purchase or rights to subscribe for such convertible or exchangeable securities (other than Excluded Stock): (1) the aggregate maximum number of shares of Class A Common Stock deliverable upon exercise of such options to purchase or rights to subscribe for Class A Common Stock shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration (determined in the manner provided in clauses (A) and (B) above), A-3 if any, received by the Corporation upon the issuance of such options or rights plus the minimum purchase price provided in such options or rights for the Class A Common Stock covered thereby; (2) the aggregate maximum number of shares of Class A Common Stock deliverable upon conversion of or in exchange for any such convertible or exchangeable securities, or upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof, shall be deemed to have been issued at the time such securities were issued or such options or rights were issued and for a consideration equal to the consideration received by the Corporation for any such securities and related options or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the additional consideration, if any, to be received by the Corporation upon the conversion or exchange of such securities or the exercise of any related options or rights (the consideration in each case to be determined in the manner provided in clauses (A) and (B) above); (3) upon any change in the number of shares of Class A Common Stock deliverable upon exercise of any such options or rights or conversion of or exchange for such convertible or exchangeable securities, or upon any change in the minimum purchase price of such options, rights, or securities, other than a change resulting from the anti-dilution provisions of such options, rights, or securities, the Conversion Price shall forthwith be recomputed to reflect such change; and (4) on the expiration date of any such options or rights, the termination of any such rights to convert or exchange or the expiration of any options or right related to such convertible or exchangeable securities, the Conversion Price shall forthwith be readjusted to such Conversion Price as would have obtained had the adjustment made upon the issuance of such options, rights, convertible or exchangeable securities or options or rights related to such convertible or exchangeable securities, as the case may be, been made upon the basis of the issuance of only the number of shares of Class A Common Stock (and convertible or exchangeable securities which remain in effect) actually issued upon the exercise of such options or rights, upon the conversion or exchange of such convertible or exchangeable securities or upon the exercise of the options or rights related to such convertible or exchangeable securities, as the case may be. (ii) "Excluded Stock" shall mean: (A) all shares of Class A Common Stock issued and outstanding on the date this document is filed with the Colorado Secretary of State; (B) all shares of Series A Preferred Stock and the Class A Common Stock into which such shares are convertible; (C) any shares reissued after repurchase by the Corporation from officers, employees, directors, or consultants upon termination of services as provided by the terms of stock repurchase agreements approved by the board of directors provided such shares are reissued to officers, employees, directors, or consultants pursuant to approval by the board of directors of the Corporation; and (D) all shares of Class A Common Stock issued or issuable in connection with capital asset leases or borrowings for the acquisition of capital assets pursuant to approval by the board of directors of the Corporation. A-4 (iii) If the number of shares of Class A Common Stock outstanding at any time after the date hereof is increased by a stock dividend payable in shares of Class A Common Stock or by a subdivision or split-up of shares of Class A Common Stock, then, on the date such payment is made or such change is effective, the Conversion Price of the Series A Preferred Stock shall be appropriately decreased so that the number of shares of Class A Common Stock issuable on conversion of any shares of the Series A Preferred Stock shall be increased in proportion to such increase of outstanding shares. (iv) If the number of shares of Class A Common Stock outstanding at any time after the date hereof is decreased by a combination of the outstanding shares of Class A Common Stock, then, on the effective date of such combination, the Conversion Price of the Series A Preferred Stock shall be appropriately increased so that the number of shares of Class A Common Stock issuable on conversion of any shares of the Series A Preferred Stock shall be decreased in proportion to such decrease in outstanding shares. (v) In case the Corporation shall declare a cash dividend upon its Class A Common Stock payable otherwise than out of retained earnings or shall distribute to holders of its Class A Common Stock shares of its capital stock (other than Class A Common Stock), stock, or other securities of other persons, evidences of indebtedness issued by the Corporation or other persons, assets (excluding cash dividends) or options or rights (excluding options to purchase and rights to subscribe for Class A Common Stock or other securities of the Corporation convertible into or exchangeable for Class A Common Stock), then, in each such case, the holders of shares of the Series A Preferred Stock shall concurrent with the distribution to holders of Class A Common Stock, receive a like distribution based upon the number of shares of Class A Common Stock into which such Series A Preferred Stock is then convertible. (vi) In case, at any time after the date hereof, of any capital reorganization or any reclassification of the stock of the Corporation (other than as a result of a stock dividend or subdivision, split-up or combination of shares), or the consolidation or merger of the Corporation with or into another person (other than a consolidation or merger in which the Corporation is the continuing entity and which does not result in any change in the Class A Common Stock), or of the sale or other disposition of all or substantially all the properties and assets of the Corporation, the shares of Series A Preferred Stock shall, after such reorganization, reclassification, consolidation, merger, sale, or other disposition, be convertible into the kind and number of shares of stock or other securities or property of the Corporation or otherwise to which such holder would have been entitled if immediately prior to such reorganization, reclassification, consolidation, merger, sale, or other disposition he had converted his shares of such Series A Preferred Stock into Class A Common stock. The provisions of this clause (vi) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales, or other dispositions. (vii) All calculations under this Section 6 shall be made to the nearest whole cent or to the nearest one hundredth (1/100) of a share, as the case may be. (viii) For the purpose of any computation pursuant to this Section 6(d), the "Current Market Price" at any date of one share of Class A Common Stock shall be deemed to be the average of the highest reported bid and the lowest reported offer prices on the preceding business day as furnished by the National Quotation Bureau, Incorporated (or equivalent recognized source of quotations); PROVIDED, HOWEVER, that if the Class A Common Stock is not traded in such manner that the quotations referred to in this clause (viii) are available for the period required hereunder, Current Market Price shall be determined in good faith by the board of directors of the Corporation, but if challenged by the holders of more than 50% of the outstanding Series A Preferred Stock, then as determined by an independent appraiser selected by the A-5 board of directors of the Corporation, the cost of such appraisal to be borne equally by the Corporation and the challenging parties. (e) MINIMAL ADJUSTMENTS. No adjustment in the Conversion Price need be made if such adjustment would result in a change in the Conversion Price of less than $0.01. Any adjustment of less than $0.01 which is not made shall be carried forward and shall be made at the time of and together with any subsequent adjustment which, on a cumulative basis, amounts to an adjustment of $0.01 or more in the Conversion Price. (f) NO IMPAIRMENT. The Corporation will not through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 6 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of Series A Preferred Stock against impairment. (g) CERTIFICATE AS TO ADJUSTMENT. Upon the occurrence of each adjustment or readjustment of the Conversion Rate pursuant to this Section 6, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series A Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the acts upon which such adjustment or readjustment is based. The Corporation shall, upon written request at any time of any holder of Series A Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Rate of such series at the time in effect, and (iii) the number of shares of Class A Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of such holder's shares of Series A Preferred Stock. (h) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock solely for the purpose of effecting the conversion of the shares of Series A Preferred Stock such number of its shares of Class A Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series A Preferred Stock; and if at any time the number of authorized but unissued shares of Class A Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series A Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Class A Common Stock to such number of shares as shall be sufficient for such purpose. (i) NO REISSUANCE OF CONVERTED SHARES. No shares of Series A Preferred Stock which have been converted into Class A Common Stock after the original issuance thereof shall ever again be reissued and all such shares so converted shall upon such conversion cease to be a part of the authorized shares of the Corporation. (j) NOTICES OF RECORD DATE. In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any rights to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property or to receive any other right, the Corporation shall mail to each holder of Series A Preferred Stock at least twenty (20) days prior to such record date, a notice specifying the date on which any such record is to be taken for A-6 the purpose of such dividend or distribution or right, and the amount and character of such dividend, distribution, or right. (k) NOTICES. Any notice required by the provisions of this Section 6 to be given to holders of shares of Series A Preferred Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at his address appearing on the books of the Corporation. Section 7. REACQUIRED SHARES. Any shares of Series A Preferred Stock acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof and may not be reissued. Section 8. RANK. The Series A Preferred Stock shall rank, with respect to the distribution of assets, senior to any and all other series of any other class of Preferred Stock. Section 9. AMENDMENT. The Articles of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences, or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds (2/3) of the outstanding shares of Series A Preferred Stock, voting together as a single class. Section 10. PROTECTIVE PROVISIONS. In addition to any other rights provided by law, so long as shares of Series A Preferred Stock shall be outstanding, the Corporation shall not, without obtaining the vote or written consent of the holders of a majority of the outstanding shares of Series A Preferred Stock: (a) amend or repeal any provision of, or add any provision to, the Corporation's Articles of Incorporation or bylaws if such action would materially alter or change the rights, preferences, privileges, or powers of, or the restrictions provided for the benefit of, the Series A Preferred Stock; (b) authorize or issue any class or series of equity securities having any preference or priority as to voting or distribution of assets upon liquidation, merger or otherwise which is superior to or on a parity with any such preference or priority of the Series A Preferred Stock; or (c) apply any of its assets to the redemption, retirement, purchase, or acquisition, directly or indirectly, of any shares of any class or series of common stock, except pursuant to Section 4 and except from employees, advisors, officers, directors, and consultants of, and persons performing services for, this Corporation or its subsidiaries on terms approved by the board of directors upon termination of employment or association. Section 11. EQUITY SECURITIES. "Equity Securities" shall mean securities of any class of stock, whether preferred or common, and any debt securities which are convertible into security of any class of stock, whether preferred or common. 3:seriesa.prf A-7 EX-10.1 3 STOCK PURCHASE AGREEMENT EXHIBIT 10.1 STOCK PURCHASE AGREEMENT WITH JOCKS & JILLS PRADO, INC. AND DIVINE EVENTS, INC. 33 STOCK PURCHASE AGREEMENT THIS AGREEMENT entered into on the 18th day of October, 1996 (the "Agreement Date"), by and among Joseph Rollins (the "Seller"), Jocks & Jills Prado, Inc. ("Prado"), Divine Events, Inc. ("Divine"), and Classic Restaurants International, Inc. ("Purchaser"). WHEREAS, the Seller owns 67.5% of the issued and outstanding common stock of Prado (the "Prado Stock") and 60.75% of the issued and outstanding common stock of Divine (the "Divine Stock" and with the Prado Stock, the "Stock"); and WHEREAS, the Seller has agreed to sell all of the Stock to the Purchaser, and the Purchaser has agreed to purchase all of the Stock from the Seller, on the terms and conditions set forth herein; and NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which is acknowledged by the parties, and in consideration of the mutual covenants set forth herein, the parties hereby agree as follows: 1. PURCHASE AND SALE OF STOCK. Subject to the terms and conditions set forth in this Agreement, Seller agrees to sell, convey, transfer, assign and deliver to Purchaser, and Purchaser agrees to purchase from Seller, all of the Stock. 2. PURCHASE PRICE. The purchase price for the Stock shall be $1,800,000 (the "Purchase Price"). The Purchaser shall pay the Purchase Price at Closing in cash. 3. EARNEST MONEY DEPOSIT. Within two days of execution of this Agreement, the Purchaser shall deposit $50,000 (the "Earnest Deposit") in with the Seller. In addition, each time the Purchaser requests a thirty day extension of the Closing Date pursuant to Paragraph 7 herein, the Purchaser shall simultaneously pay to the Seller an additional $10,000 as an additional Earnest Deposit. In the event Closing occurs, the Earnest Deposit shall be applied to the Purchase Price. In the event Closing does not occur, then the Earnest Deposit shall be disposed of pursuant to Paragraph 11 herein. 4. BROKER'S FEE. The parties acknowledge that National Restaurant Brokers, Inc. ("Broker") has acted as a broker in this transaction and will be due a brokerage fee in the event Closing occurs under this Agreement. The Seller shall be responsible for $112,500 of the Broker's fee, and the Purchaser shall be responsible for any amount over $112,500. Other than Broker, there are no brokers involved in this transaction. Seller represents to Purchase that, other than the Broker, neither Seller, Prado nor Divine have engaged any broker or agent in regard hereto or to the sale and purchase of the Property or the Stock, and Seller hereby agrees to indemnify Purchaser and hold Purchaser harmless against all liability, loss, cost, damage and expense (including, without limitation, attorneys' fees and cost of litigation) Purchaser shall ever suffer or incur because of any claim by any broker or agent claiming by, through or under Seller, Prado or Divine, whether or not meritorious, for any fee, commission or other compensation with respect hereto or to the sale and purchase of the Property or the Stock provided herein.Purchaser represents to Seller that it has not engaged any broker or agent in regard hereto or to the sale and purchase of the Property or the Stock, and Purchaser hereby agrees to indemnify Seller and hold Seller harmless against all liability, loss, cost, damage and expense (including, without limitation, attorneys' fees and cost of litigation) [initials and date] [initials and date] Seller shall ever suffer or incur because of any claim by any broker or agent claiming by, through or under Purchaser, whether or not meritorious, for any fee, commission or other compensation with respect hereto or to the sale and purchase of the Property or the Stock provided herein. 5. CLOSING COSTS. The Seller shall pay all normal and customary closing costs, including the fees of Broker and all recording costs and transfer taxes, if applicable. Each party shall bear their own legal, accounting and auditing costs, and in particular any costs incurred by the Purchaser to obtain an audit of the financial statements of Prado or Divine, as well as any other costs incurred by the Purchaser for due diligence, shall be borne exclusively by the Purchaser. 6. DUE DILIGENCE BY PURCHASER. Promptly after execution of this Agreement, the Seller, Prado and Divine shall provide the Purchaser, and its engineers, accountants, attorneys, agents and representatives with: a) unaudited financial statements for Prado and Divine (which include a balance sheet, statement of income and expenses, and statement of cash flows) for the years ended December 31, 1995, and December 31, 1994, and for the six months ended June 30, 1996; b) copies of any liens, claims, encumbrances or lease agreements affecting the assets of Prado or Divine; c) access to all corporate books and records of Prado and Divine on reasonable notice during normal business hours; d) access to all other books and records of Prado and Divine on reasonable notice during normal business hours; e) access to inspect all physical locations at which Prado and Divine conduct business on reasonable notice during normal business hours. The Purchaser shall have the right until November 30, 1996 to terminate this Agreement in the event its due diligence indicates that the Seller has materially breached any of the representations and warranties contained in paragraph 9 of this Agreement. 7. CLOSING DATE. The transactions contemplated by this Agreement shall occur on or before November 30, 1996 (the "Closing Date"), in the offices of Mottern & Van Gelderen, 2200 Century Parkway, Suite 200, Atlanta, Georgia 30345 (hereinafter, the "Closing"), unless another date and time is subsequently agreed to by the parties; provided, however, that the Purchaser shall have the right to extend the Closing for three thirty (30) day periods upon written notice to Seller and payment of $10,000 as an additional Earnest Deposit pursuant to Paragraph 3 herein. 8. UNDERTAKINGS BY PRADO AND DIVINE PRIOR TO THE CLOSING DATE. Between the Agreement Date and the Closing Date, Prado and Divine shall not and the Seller shall not cause Prado and Divine to: a) transfer any assets, incur any obligation or engage in any transaction other than in the ordinary course of business; 2 [initials and date] [initials and date] b) change the compensation or benefits of, or pay any bonus to, any officer, director or employee other than in the normal course of business; c) terminate any registration or license, or allow any such registration or license to lapse; d) declare or pay any dividend, or redeem any capital stock; provided that Prado and Divine may declare one or more dividends provided their combined net worth is not less than $1,323,467.01 as of the Closing Date. 9. REPRESENTATIONS AND WARRANTIES OF THE SELLER, PRADO AND DIVINE. The Seller, Prado and Divine warrant and represent, to the best of their knowledge after due investigation, as of the Agreement Date and the Closing Date, that: a) Prado is a validly formed corporation in good standing under the laws of the State of Georgia, and all franchise taxes and fees required to maintain it in good standing have been paid; b) Divine is a validly formed corporation in good standing under the laws of the State of Georgia, and all franchise taxes and fees required to maintain it in good standing have been paid; c) the Seller, Prado and Divine are authorized to execute, deliver and perform this Agreement according to its terms; d) the Prado Stock constitutes 67.5% of the issued and outstanding capital stock of Prado; e) the Divine Stock constitutes 60.75% of the issued and outstanding capital stock of Divine; f) the Stock is not encumbered by any lien, claim or encumbrance, and will be sold, assigned, conveyed and transferred to the Purchaser free of any lien, claim, debt, or obligation whatsoever; g) Prado and Divine are operating in full compliance with the laws, rules and regulations of any and all regulatory agencies having jurisdiction over Prado and Divine; h) there is no claim, judgment, complaint or lawsuit pending or threatened against Prado, Divine or the Seller, except as disclosed on Exhibit "A" attached hereto; i) Prado and Divine are not in default or past due with respect to an obligation except as disclosed on Exhibit "A" attached or local agency; j) the Seller, Prado or Divine have not filed bankruptcy under Title 11. U.S. Code. or any other debt relief law, have not had a receiver appointed, have not made an assignment for the benefit of creditors, and have not been found or adjudicated insolvent by any court or tribunal; 3 [initials and date] [initials and date] k) the financial statements provided to the Purchaser pursuant to Paragraph 6(a) of this Agreement are prepared according to GAAP and accurately reflect the assets, liabilities and financial condition of Prado and Divine as of the date(s) thereof. 10. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser represents and warrants as of the date of this Agreement, and as the Closing Date, the following: a) the Purchaser is a validly formed corporation in good standing under the laws of the State of Colorado, and all franchise taxes and fees required to maintain the Purchaser in good standing have been paid; b) the Purchaser is authorized to execute, deliver and perform this Agreement according to its terms. 11. TERMINATION OF AGREEMENT. In the event of a termination of this Agreement due to the exercise by Purchaser of its right to terminate the Agreement in paragraph 6 herein, then neither party shall have any liability to the other, including particularly for any incidental or consequential damages which each may have incurred or suffer as consequence of the party's entry into this Agreement, and the Earnest Deposit shall be promptly refunded to the Purchaser in full. In view of the difficulty of determining Seller's damages in the event of default by Purchaser if Closing does not occur because of Purchaser's default (as distinguished from the exercise by Purchaser of an express right to cancel or terminate as provided in paragraph 6 herein or the failure of any of the conditions to Closing to be satisfied or waived), Seller shall be entitled to retain the Earnest Deposit as full and complete liquidated damages, and not as a penalty and, thereupon, no party shall have any further obligation or liability hereunder nor any other remedy at law or in equity. If the Closing does not occur on account of Seller's default by (i) failing to provide any documents reasonably necessary to effectuate the transactions contemplated by this Agreement, (ii) voluntarily encumbering or causing title defects to occur after the Agreement Date and failing to remove or satisfy such encumbrances or title defects on or before Closing, or (iii) breaching any warranty or representation set forth herein in a material respect, then the Earnest Deposit shall be promptly refunded to the Purchaser and the Purchaser shall be entitled to pursue any and all remedies afforded by law or in equity, including but not limited to: (1) the right to have this Agreement specifically enforced against Seller, and (2) the right to sue Seller for damages resulting to Purchaser. 12. MISCELLANEOUS PROVISIONS. a) NO WAIVERS. No failure or delay on the part of any party in exercising any right, power, privilege or remedy arising hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power, privilege or remedy preclude any other or future exercise thereof or the exercise of any other right, power, privilege or remedy. No notice to or demand on any party in any case shall entitle it to any other or further notice or demand in similar or other circumstances. b) MULTIPLE COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall constitute an original. c) HEADINGS; INTERPRETATION. Section headings have been inserted in this Agreement as a matter of convenience and for reference only and it is agreed that such section headings are 4 [initials and date] [initials and date] not a part of this Agreement and shall not be used in the interpretation of any provision of this Agreement. Whenever used herein, the singular shall include the plural, the plural shall include the singular. d) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall incur to the benefit of the parties hereto and their respective successors and assigns, except as otherwise provided herein. Except as provided in the preceding sentence, there are no third party beneficiaries. e) GOVERNING LAW. This Agreement and the rights and obligations of the parties hereunder shall be governed by and interpreted in accordance with the laws of Georgia. f) MODIFICATIONS. No modification, amendment or waiver of any provision of this Agreement, nor any consent to any departure by any party from the terms hereof, shall be effective unless the same be in writing and signed by all parties hereto. g) ENTIRE AGREEMENT. This Agreement constitutes the entire and complete agreement between the parties hereto and all prior agreements, understandings, obligations or statements by and between the parties concerning the subject matter hereof will be merged into and be superseded by this Agreement and shall be of no further force and effect. There are no third-party beneficiaries to this Agreement, either intended or unintended. h) SURVIVAL. This Agreement and the representations, warranties and covenants contained herein shall survive consununation of the transactions herein contemplated for a period of four (4) years. i) ATTORNEY'S FEES. In the event any party hereto files a lawsuit in connection with this Agreement, then the party which prevails in such action shall be entitled to recover, in addition to all other remedies and damages, reasonable attorney's fees and costs of court incurred in such lawsuit. j) NOTICES. All notices required or permitted hereunder, and under any instrument delivered pursuant hereto, shall be given in writing, and shall be deemed to have been given and received upon the earlier to occur of: (a) the actual receipt of any such notice by the intended recipient; and (b) the third business day following deposit of any such notice enclosed in a wrapper with postage prepaid, properly addressed to the intended recipient at its address set forth below, as a certified item, return receipt requested, in an official depository of and under the care and custody of the United States Postal Service. The parties' address for notice shall be as follows: If to the Purchaser: James Robert Shaw Classic Restaurants International, Inc. 3500 Parkway Lane, Suite 435 Norcross, Georgia 30092 (770) 729-9010 5 [initials and date] [initials and date] and Robert J. Mottern Mottern & Van Gelderen 2200 Century Parkway Suite 200 Atlanta, Georgia 30345 (404) 329-0606 If to Seller, Prado or Divine: Joseph R. Rollins Rollins & Associates, P.C. 1201 Peachtree Street, N.E. 400 Colony Square, Suite 1500 Atlanta, Georgia 30361 (404) 692-7967 Any party hereto may change its address for notice set forth herein by giving the other parties at least 10 days advance written notice of such change of address. IN WITNESS WHEREOF, the parties have set their hands and seals the date set forth above. /s/Joseph R. Rollins By: Joseph Rollins, Individually JOCKS & JILLS PRADO, INC., a Georgia corporation /s/Joseph R. Rollins By: Joseph R. Rollins Its: President DIVINE EVENTS, INC., a Georgia corporation /s/Joseph R. Rollins By: Joseph R. Rollins Its: President 6 [initials and date] [initials and date] CLASSIC RESTAURANTS INTERNATIONAL INC., a Colorado corporation /s/James Robert Shaw By: James Robert Shaw, Chairman 7 [initials and date] [initials and date] EX-27 4 FDS --
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET, INCOME STATEMETN, STATEMENT OF CASH FLOW, AND THE NOTES THERETO, FOUND ON PAGES 3 THROUGH 6 OF THE COMPANY'S FORM 10-QSB DATED DECEMBER 31, 1996. 1 U.S. DOLLARS 6-MOS JUN-30-1997 JUL-01-1996 DEC-31-1996 1 75,351 0 15,144 0 21,237 547,187 813,657 396,470 1,025,105 434,722 0 500,000 0 3,391,045 (3,596,311) 1,025,105 0 1,115,833 0 1,688,334 0 0 28,902 (593,993) 0 (593,993) 0 0 0 (593,993) (0.19) (0.18)
-----END PRIVACY-ENHANCED MESSAGE-----